If you are slow to pay a debt, the creditor is likely to inform a credit reporting agency (see: "Credit reporting" in Chapter 13, Credit and Finance). Briefly, under section 18E of the Privacy Act 1988 (Cth) ("PA 1988"), the most common circumstances in which a credit provider (creditor) can make a default listing on your credit report are when:

Even if these circumstances are met, a credit provider cannot make a default listing in relation to a statute barred debt (see: "Statute barred debts", below). This is the case under paragraph 2.8 of the Credit Reporting Code of Conduct, a legally binding Code issued by the Privacy Commissioner.

Under section 18E of the PA 1988, a credit provider can also lodge a default listing on your credit report if you dishonour the same cheque for not less than $100 twice.

It is important to note that lodgment of a default listing on your credit report is not part of the court process for recovery of a debt. This means that a credit provider does not have to automatically lodge a default listing even if it has the right to. If you contact a credit provider when you have failed to pay a debt, you may be able to avoid having a default listing lodged if you enter into an arrangement to repay the debt.

However, once a default listing is lodged, the only way you can get it deleted from your credit report is to prove to the credit reporting agency that the credit provider did not validly list you under section 18E of the PA 1988 or that the debt was statute barred at the time it was listed. If this cannot be done, the best you can do is get a note attached to your credit report saying that you have paid off the debt; a default listing cannot be removed just because the debt has subsequently been paid. Default listings stay on your credit report for five years from the date of listing, unless the default is classified as a "serious credit infringement", in which case the listing will remain for seven years. The most common instance of such a classification is termed a "clearout", where the debtor has moved house without notifying the creditor, who is thus unable to contact the debtor.

The most common credit reporting agency used by financial institutions is Veda Advantage (VA), previously known as Baycorp Advantage. When you apply for a loan, most financial institutions will run a "credit check" on you by accessing your credit file at VA. If default listings are on your report, it may become harder for you to obtain credit in the future. Dun & Bradstreet (D&B) is another important credit reporting agency for consumers.

Listings are made on your credit report automatically if:

While court judgments are held on your credit file for five years, bankruptcies remain there for seven years.

If you have a query about your credit report, or wish to obtain a copy of your credit report from VA or D&B, contact the following:

On 1 July 2010, the Australian Securities & Investments Commission (ASIC) assumed responsibility for regulating consumer credit from the state-based Consumer Affairs Victoria.

On 1 November 2010, the Office of the Privacy Commissioner was integrated into the new Office of the Australian Information Commissioner (OAIC). The PA 1988 continues to operate and the position of the Privacy Commissioner continues but the privacy functions previously carried out by the Office of the Privacy Commissioner have been transferred to the OAIC.

If you fail to pay a debt after receiving an account, a creditor will often send more formal notices or letters to encourage you to pay.

If the debt is still owing after the time periods in the statutory notices (if applicable) have expired, a letter of demand may be sent to you by the creditor, their solicitors or a debt collection agency. A letter of demand usually warns that if you do not pay the debt within a certain time period (often seven days), you will be sued in a court for payment of the debt.

Under the Limitation of Actions Act 1958 (Vic) ("Limitations Act"), a creditor only gets a limited amount of time to sue a debtor for a "simple contract". Most debts arise from simple contracts. If judgment has not been entered against you in a court (see: "Court procedure", below), the time limit is six years. If a creditor does not bring court action against you within the relevant time limit, the debt becomes "statute barred" and you have a complete defence to any court action brought against you.

Time under the Limitations Act starts to run from:

You should go to the most recent of these events and count six years. If six years has expired, the debt is statute barred. While this does not mean that the creditor cannot ask you to pay the debt, it does mean that if the creditor seeks to sue you in court for payment, you will have a complete defence.

Note that in Collection House Limited v Taylor [2004] VSC 49 a debt collector was held to have engaged in unconscionable conduct in breach of section 7 of the Fair Trading Act 1999 (Vic) ("FTA") (see section 20 of the Australian Consumer Law now) when pursuing a statute barred debt (see: Chapter 12*3 Consumer Protection Legislation, for more information about unconscionable conduct). This entitled the debtor to be repaid $5,000 that she had paid to the debt collector using her credit card to settle the debt. At the time of accepting the $5,000, the debt collector knew or at least suspected that the debtor was ignorant of the limitation period, impecunious and suffering from emotional difficulties.

Collection House, Australia's largest consumer debt collection agency, later stated in a media release that it and its subsidiary Lion Finance would no longer pursue collection of statute barred debts.

If your debt is statute barred, it is recommended that you write to the creditor and request that they stop contacting you for payment because the debt is statute barred. In any letter to the creditor on this basis, it is vital to include a sentence such as "I deny that I am liable for the amount demanded".

If judgment has been entered against you, the relevant time limit is 15 years, not six years, from the date of judgment. That is, after 15 years a creditor cannot bring a new action on a judgment (e.g. some bankruptcy proceedings), but can still commence proceedings enforcing that judgment (e.g. a warrant of seizure and sale), although in the latter case the court's consent may be required before the creditor can take action: Dennehy v Reasonable Endeavours Pty Ltd [2003] FCAFC 158.

If you have given a mortgage for payment of the debt (e.g. over a house or a car), the relevant time limit is 15 years from the date of the end of the term of the mortgage. However, the Limitations Act states that this time period only relates to the recovery of the principal lent by the creditor, not the interest. It is likely that action for interest on a mortgage must be brought within six years.