Solving disputes with creditors

Complain to the creditor

A consumer should first complain to the creditor.Every credit licensee must have an internal dispute resolution process to handle complaints (s 47(j) National Consumer Credit Protection Act 2009 (Cth) (“NCCP Act”)). If that fails, a complaint can be made to an ombudsman.

Ombudsman services

If you can’t resolve your dispute with the creditor, you can complain to an ombudsman, also known as an external dispute resolution scheme. Currently, the Financial Ombudsman Service (FOS) and the Credit and Investments Ombudsman (CIO) can receive complaints about creditors.

As part of the 2017 federal budget, the Australian Government proposed that an Australian Financial Complaints Authority (AFCA) replace the FOS and CIO from 1 July 2018. It is proposed that AFCA have more powers and jurisdiction than FOS or CIO. At the time of writing (30 June 2017), legislation enacting the AFCA has not been drafted. It is anticipated that there will be a transition period whereby complaints already made to FOS and CIO would continue to be processed through those services.

It is free for consumers to complain to FOS or CIO (and to the proposed AFCA).

Although their rules differ, both services are intended to provide an easily accessible method for unrepresented consumers to have their disputes heard and determined by a fair and independent decision-maker. Decisions made by FOS or CIO are binding on the creditor but not on the consumer. If the consumer doesn’t agree with the decision, they can take their case to a court (see “Going to court”).

To find out whether a credit provider is a member of FOS or CIO, or to lodge a dispute (disputes can be lodged online with both services), contact FOS or CIO directly (seeContacts”).

Under both the Terms of Reference of the Financial Ombudsman Service and the Credit and Investments Ombudsman Rules, once a dispute is lodged, the member credit provider must not (unless FOS or CIO agrees in writing):

commence legal proceedings against the consumer in relation to any aspect of the dispute;

continue legal proceedings it had already commenced when the dispute was lodged except to the minimum extent necessary to preserve its legal rights; or

take any action to recover a debt that is the subject of a dispute, protect assets securing the debt or assign the debt while FOS or CIO is dealing with the dispute.

Going to court

Disputes arising in Victoria under the NCCP Act can be dealt with by the Federal Court, the Federal Circuit Court, or the Supreme, County or Magistrates’ Court.

For some applications under the National Credit Code, the applicant can choose to have their proceeding dealt with as a “small claims proceedings” in the Magistrates’ or Federal Circuit Court. Small claims proceedings are conducted in a more informal manner, without regard to legal forms and technicalities, and without lawyers (except with the court’s permission). In addition, there is a presumption in small claims proceedings that the court will not award legal costs against the unsuccessful party.

The details of the national jurisdictional framework are set out at division 2 of part 4–3 of the NCCP Act. Section 199 lists causes of action that may be brought within the small claims jurisdiction.