Default notices

If the borrower does not do what they promised to do in the credit contract (eg not repaying the debt) this is called a default. A lender must give a borrower written notice before they take legal action if the borrower defaults. This notice is called a default notice.

The types of legal action that lenders can take include:

• repossessing the mortgaged property;
• applying to the Court for it to decide how much the borrower owes the lender. (This is called a judgement). Refer to dot point

‘What happens when legal action is taken’.

The default notice must set out what you, the borrower, have not done and what you must do for the lender not to take legal action. The lender must give you 30 days to fix your default. When you receive a default notice you should contact the lender immediately and try to come to some arrangement.

The lender does not have to give any notice that it intends to take legal action when:

• the Court has given permission;
• the lender cannot find the borrower;
• the lender believes the borrower:
• deliberately gave false information when entering into the credit contract; or
• no longer has the mortgaged property.

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