I was asked a question in a Closed Facebook Group this morning asking,

How Can A Genuine Default Get Removed?

and when I tried to answer the question, my post kept crashing my browser, so I decided to post it here and share the link instead.

Fiona’s [actual] Question:

Fiona's Question to Graham Doessel - How Can A Genuine Default Get Removed
“How does it [a default] get removed from the credit file if it was a genuine default and not fraud? I understand if it is an error etc.”

Here’s the answer I tried to post but the browser kept crashing, I guess the post was too detailed.

Hi Fiona,
That’s a great question and the answer is really quite straight forward

As you know the legislation protecting consumers is very tight, especially around finances and privacy.

If the Credit Provider (CP) hasn’t afforded the consumer all of her legal consumer rights as required Prior to listing the default, then quite simply the default has probably been placed unlawfully and will require immediate removal.

Example:

Sally has a good job, plenty of surplus income (serviceability), the loan is not unsuitable, all the I’s and T’s are in the right places… She is given a loan and all is going well.

She gets a pay rise and life is sweet so sally and her husband decide the time is right to have a baby.

A little time passes and Sally get’s pregnant and starts to feel a little unwell, but she’s a power-player and she’ll soldier on!

The doctor tells Sally that she has complications and needs to take some ‘me time’, so Sally organises with her employer to work part-time (reduced hours). She’s fine as even at part-time, she is still making more money than when she took out the loan.

CRASH, BANG, BIFF, BOP

The Sky starts to fall.

That afternoon, Sally’s husband comes home in an absolute state. He is near breaking point, close to tears, in fact when she looks into his eyes, she can see he is breaking inside…

Sally: “What’s wrong honey?”
Hubby: (minor player, doesn’t deserve a name) “I’m so sorry babe, I just lost my job. I know the timing is really bad, I’ll get another one straight away, I promise, you know I will…”

Unfortunately, the Royal Commission (RC) has just landed and not only did the impact of the #RC cause Hubby to lose his job (retrenched – but no payout as it was a new job), but his industry is tightening it’s belt for the unknown, for what Might still happen…

Hubby can’t find a job in his industry.

He does take on low paid work to make sure there is money coming in, but things are now REALLY TIGHT!

Sally’s complications mean she can do less and less work.
Reserves are almost gone and the baby is due.

Sally goes on Maternity leave and her income is reduced even further.

Sally realised they were in serious trouble so she contacts her CP to see if they can do anything to help. She explains her dire situation and asks about reduced payments, a payment holiday and for advice on other options that may be open to her. She’s not even sure if she can make the next payment.

The credit provider is nice on the phone and reassures her that if things worse to call back up and they’ll see what they can do.

Sally feels a little deflated but the girl on the phone was nice and seemed to understand.

Complications…

Sally has the baby that same week and there are some complications (The baby is OKAY!). The complications mean that Sally is in a hospital for an additional 10 days.

Hubby was by her side the whole time so no income from him at all.

The next loan payment is missed completely, partly because they were focused on more important matters Sally and the new bub), and had they realised it was due, probably didn’t have the money anyway.

Out of hospital and back at home, six weeks down the track and Sally is doing well and Bubby is growing, is happy, the perfect baby…

Hubby has a new full time job in a new industry at a starting salary. (At least it’s a start)

It’s now that Sally gets a phone call form the CP saying she’s missed two payments.

Sally says that’s impossible. They know they missed one payment but they have been making part payments and there is now a direct credit (auto transfer set up in internet banking) to cover this and future payments.

The CP is very firm that the payment was due two weeks ago and didn’t happen.

Sally jumps on to internet banking to have a look…
“bloody slow internet….

aah finally…
looking through transactions…
baby stuff,
more baby stuff
Doctor’s visits,
There it is, hmmm… nope, that’s just one of the part payments…”

“What date was it due?”

Sally looks through and realises that because of a direct debit payment that came out the day before, there wasn’t quite enough to cover the scheduled transfer.
Nope, the payment wasn’t made.
The part payments have only caught up less than half of the first payment, and now she’s missed another one.

As the tears well up in Sally’s eyes, her bub starts to cry. Sally has to rush the call and finally has to say she’ll speak to her husband, just to get the CP of the phone so she can attend to her crying baby.

Still making part payments, she and Hubby are trying, desperately trying to make ends meet. Times are really tough.

They keep struggling through for the next four months, never quite catching up.

Then Sally goes back to work full time.

She’s not sure how she’ll go leaving Bubby but they NEED the money…

Her income is restored and they can finally get back on top of their bills.

Hubby is recognised in his new role, finishes probation and gets a small promotion, only about $5k per year, but hey, that’s $100 per week or so. BIG Help!

Another six months go by. Now Sally and Hubby decide to get a new car.
They are both in stable employment, Sally is the main income earner, easily service the new loan, all the hard times are behind them.

They go car shopping.

Aah, the perfect car, We’ll Take It! (Someone needs to teach Sally how to haggle).

They do finance at the dealership as they are the perfect car buyer.

DECLINED!

“Why declined?” Sally demands!

“You have a default from 10 months ago with (CP).” explains the F&I guy.

“A default, but we caught that up.” she says.
Sally has a look at the credit file the F&I guy pulled after the finance was declined and yep, there it was…

Sally explains her situation with the finance dude.

The F&I guy suggests they talk to MyCRA (Specialist Credit Repair) Lawyers.

13 days later the MyCRA Lawyers receives confirmation the default is scheduled for removal.

So, How Can A Genuine Default Get Removed?

There are so many reasons to call this a genuine default.

  • The loan was correctly set up in the first place.
  • The client knew her obligations
  • The lender called the client to chase payment etc.
  • She knew she was behind
  • She never disputed the loan
  • She never paid it on time and was more than 60 days behind when the default was placed.
  • This sounds like a genuine default…

BUT

There are so many errors I can see (since I created them based on a typical situation) here’s just a few…

  1. Sally called her CP originally to seek help when she knew she was going to be in trouble.
  2. The CP was required to provide assistance or tell her in writing within 21 days in writing why hardship was refused.
  3. That alone is probably enough to get the default removed.
  4. Hardship was also flagged when Sally started to make part payments, but there was no enquiry from the CP as to hardship
  5. When the CP called up, clearly Sally was in hardship, no enquiry was made or offers/options presented by the CP.

Upon investigation, it was determined that Sally wasn’t sent the correct (or any) default notices (there is a specific set of documents that need to be sent to alert the consumer that a default is pending, and what needs to be done to remedy the breach and avoid a default).

This default would be removed in this case and in many cases, we find up to 14 individual breaches of the individual’s rights.

Imagine if Sally had been offered hardship.

She could have had a payment holiday for a short time (3 to 6 months), and possibly reduced payments until she returned to full-time work. That alone would have avoided the default.

We find two common situations:

  1. If the CP had done what the CP is legally required to do before defaulting then it is highly unlikely that most defaults would be there.
  2. If the client was aware of the gravity of the situation (by being sent the appropriate notices etc) , most would have taken a different path and found a way to avoid the default.

Understanding the legislation to the level that we do at MyCRA Lawyers is the reason we get virtually all defaults removed and your client gets a second chance.

We stand up for your client’s rights, and that’s How Can A ‘Genuine’ Default Gets Removed!

I know this was a little longer than initially intended and I hope it paints a clearer picture for you and your clients.

Please call my team and I on 1300 667 218 for a free consult about your client’s situation

Graham.

P.S. Here’s a link to our default removal matrix

https://www.mycralawyers.com.au/removal-matrix