It can be a difficult and ongoing battle between Creditors and Debtors in relation to outstanding payments and payment disputes. An Agent or Lawyer acting for a Creditor often acts on instructions from their client in relation to an unpaid debt and therefore must adhere to a set of rules, policies and guidelines in order to recover any unpaid amounts.
If an invoice or outstanding amount remains unpaid, and the Creditor has met the requirements outlined below, a default can be noted on a person’s or a company’s credit rating. This can have a drastic impact on that person’s or company’s ability to obtain new credit. Further to this, if a credit default is registered against a company, it has the potential to purport that company as becoming insolvent or bankrupt. It is a general rule of thumb that once a default has been registered against a person or company’s credit rating, it cannot be removed. However, as discussed below, in certain circumstances, a default can be removed from a person or company’s credit rating if requirements are met and can be proved.
In order for a Creditor to validly register a default against a Debtor, the following requirements must be met:
- the payment must be overdue for no less than 60 days;
- the overdue payment must be equal to or more than $150.00;
- a notice from the Creditor must be sent to the Debtor’s last known address (or via electronic communications) to inform the Debtor of the overdue payment and requesting the overdue payment to be made;
- a second notice must be sent no less than 30 days later informing the Debtor that if payment is not made, the Creditor intends to disclose the relevant information to a credit reporting body (such as Equifax or Illion);
- the Creditor must then wait no less than 14 days after issuing the second notice before listing the default.
If, however, a Creditor waits more than 3 months after issuing a Debtor with the second notice to list the default, they must then begin the process again.
If a Creditor registers a Default against a Debtor’s credit rating, this default will remain on the Debtor’s credit rating for a period of 5 years, and cannot be removed unless it is proved to be an error, or alternatively, meets one of the criteria listed below, and the appropriate course of action to remedy said default has been taken.
In order for a Credit Default to removed from a person or company’s credit rating, at least one of the following must be met:
- the Debtor does not owe the debt that is listed; or
- the loan was not overdue for 60 days or the Debtor did not receive the required notices; or
- the amount of the debt listed is incorrect; or
- the debt is an old debt; or
- the same overdue account has been default listed twice; or
- the Debtors repayment history information shows several missed payments, but the Debtor has been paying on time every month; or
- the Debtor entered a financial hardship agreement; or
- the Debtor were forced or pressured into the loan; or
- the Debtor advised the Creditor the debt was in dispute.
If it is the case that the Creditor has been advised the debt is in dispute, all further action (including the action of registering a Credit Default) should be stopped until the dispute is resolved.
However, if it is the case that although a Debtor has established there is a valid dispute over the unpaid amount being claimed, and the Creditor registered a Default against the Debtors credit rating, there are courses of action that the Debtor can take in an attempt to have the Default removed.
Should you have any queries in respect of the above, or any concerns in respect to Credit Defaults that are not referred to here, please do not hesitate to contact Skye Jones on (07) 5570 9360.
