If you are reading about Australian credit law, there is a good chance something already feels wrong with your loan, your credit report or the way a lender or debt collector is treating you. This guide is here to show you, in plain language, what power you actually have and how to use it.
You are not the first person to fall behind, feel misled, or see a “black mark” on a credit report and panic. The rules are built for situations like yours, and when you understand them, you stop feeling trapped and start having options.
Key takeaways
- You are not powerless: lenders must check affordability and suitability, and you can challenge them if they approve a loan you clearly could not afford.
- You do not have to suffer in silence: if repayments are crushing you, you can formally request hardship help and ask to change how and when you pay.
- A “black mark” is not the end: defaults and negative listings have strict rules and time limits, and wrong or unfair entries can be challenged and removed.
- Debt collectors cannot bully you: they must follow clear rules on contact, language and behaviour, and you can tell them to slow down and put things in writing.
- Contracts are not sacred: unfair, confusing or one‑sided terms in credit contracts can be challenged and, in some cases, struck out.
- The law is on your side more than you think: responsible lending rules, hardship protections and complaint pathways exist because problems like yours are common.
- Complaints are normal: lenders are required to handle disputes, and AFCA exists to step in when internal processes fail.
- You can rebuild control: by checking licences, understanding your rights and tightening how you use credit, you can move from reacting to leading.
Introduction
Australian credit law is not written only for lawyers and banks. It is meant to protect people who are stressed, confused, or already in trouble with credit cards, personal loans, car finance, home loans or Buy Now Pay Later accounts.
This guide walks through your rights when a loan is unaffordable, when you are being chased by debt collectors, when your credit report looks worse than it should, and when a lender has stepped over the line. The goal is simple: you finish reading this with a clearer sense of “here is exactly what I can do next.”
Your rights when something goes wrong with credit
When repayments become hard to manage
Struggling with repayments is not a personal failure. It is a situation the law expects and plans for. If you cannot keep up with a credit card, personal loan, car loan or mortgage, you have the right to ask for financial hardship assistance.
You can:
- Tell the lender your situation has changed.
- Ask to reduce, pause or restructure repayments.
- Request a formal variation of your contract.
You do not have to wait until you are months behind. The earlier you speak up, the more options you usually have. A proper hardship request is not begging. It is using a process that credit providers are required to have.
When a lender changes terms or applies unexpected fees
If a lender increases your interest rate, adds new fees or changes how your account works without clear notice, you are allowed to question it. They must be able to show:
- Where the contract gives them that right
- What changed
- When and how they told you
If their answers do not line up with your contract or statements, you can lodge a written complaint and ask for those charges to be reversed. If they will not fix it, you are entitled to take the issue to AFCA for an independent decision.
When you feel pressured or misled
If you were rushed, pressured or misled into taking credit, that matters. High‑pressure sales calls, promises of no risk, or hiding important fees are all red flags.
You can:
- Write down what was said and by whom
- Keep screenshots, emails or ads that influenced you.
- Tell the lender you believe you were misled and want the loan reviewed.
You are not “making a fuss”. These are exactly the kinds of cases complaint bodies see every day.
When a loan never should have been approved
If a lender barely checked your income and expenses, ignored obvious signs you were already stretched or quickly increased your limits, there is a real chance the loan was never suitable.
In that situation, you can:
- Ask the lender to provide a copy of their assessment.
- Point out specific facts they ignored or downplayed.
- Claim that the lending was irresponsible and ask for a fair fix.
That fix might include refunds of some interest and fees, changes to the contract or, in strong cases, writing off part of the debt. Lenders know these outcomes are possible, which is why a clear, confident complaint matters.
Credit reports, defaults and black marks explained.
What appears on your credit report
Your credit report is simply a record. It usually includes:
- Who you are
- What credit have you applied for
- What accounts do you have and have had
- Whether you pay on time or late
- Any defaults, serious issues or hardship codes
- Bankruptcy or court information
Lenders use it, but it does not define your worth. It is data, and like any data, it can be wrong, outdated or open to challenge.
How defaults get listed
A default is not just a late payment. It is a serious listing that should only appear when:
- You are significantly overdue.
- The amount passes the minimum threshold.
- You have been clearly warned in writing that a default may be listed.
If a default appears without proper notice, wrong amounts, or after you had already reached a hardship agreement, you have strong grounds to challenge it.
How long do negative listings stay
Negative entries feel permanent, but they are not. Most defaults last about five years. Serious infringements and bankruptcies can last longer, but they also have defined limits. Hardship codes, in most cases, are short-term.
Knowing these timeframes helps you plan. You can focus on what you can fix now and what will drop off later, instead of assuming one bad period has ruined everything forever.
Your rights to access and correct information
You do not have to accept your credit report at face value. You can:
- Request a free copy
- Highlight entries that look wrong, duplicated, outdated or unfair.
- Ask both the credit reporter and the credit provider to investigate
If they refuse to correct a clear error, you can complain. Many listings are changed or removed every year because consumers speak up and push back.
Debt collection rules and how to protect yourself
What debt collectors are legally allowed to do
Debt collectors are allowed to contact you about a real debt. They can explain the amount, ask for payment and discuss options. That is it. They are not allowed to scare you into panic decisions or treat you as if you have no rights.
Contact limits and communication rules
You are allowed to have boundaries. Collectors should:
- Contact you only at reasonable times.
- Not ring or message so often that it feels relentless
- Respect your request to change how they contact you, where reasonable.
You can tell them to communicate in writing if calls are causing anxiety. You can involve a representative, such as a financial counsellor, and ask the collector to deal with that person instead.
What counts as harassment or intimidation
If calls make your heart race or you dread picking up the phone, that is a sign that something may not be right. Harassment can look like:
- Frequent calls are designed to wear you down.
- Abusive or shaming language
- Exaggerated threats about legal action
- Turning up at your home or work to pressure you
You are allowed to say, “This behaviour is not acceptable. I want this in writing.” You can then complain to the creditor and AFCA if it continues.
What to do if debt collection crosses the line
If you feel scared or cornered by a collector:
- Keep a log of every contact.
- Tell them clearly how you want to be contacted.
- Ask for written proof of the debt and their authority to collect.
- Get help from a free financial counsellor or legal service.
- Lodge a complaint if the behaviour does not improve.
You do not need to be “tough enough” to handle this alone. There are systems and people whose whole job is to back you up.
What must lenders do before giving you credit?
Information lenders must give you upfront.
Before you sign anything, you are entitled to see:
- The credit limit or how it will be set
- The interest rate and how it can change
- All fees and charges
- When and how you must repay
- How you can complain and who to complain to
If this is not clear, you can pause the process. Signing without understanding the basics gives lenders all the advantage.
Interest rates, fees and full cost disclosure
Your cost of credit is not just the headline rate. It includes fees, charges, and how interest is calculated. You can ask for a comparison rate and a worked example of what your repayments and total cost will look like.
If a lender hesitates to provide this or brushes you off, that is a warning sign. A provider that expects to be challenged usually has nothing to hide.
Contract clarity and transparency requirements
You do not need a law degree to read your contract. If the language feels dense or slippery, push for clarity. Ask:
- “When exactly can you charge this fee?”
- “How will I know if this rate changes?”
- “What happens if I miss one payment?”
If the answers are vague, you are being asked to absorb risk without a full understanding. You are allowed to walk away.
Cooling off and cancellation rights
Some products have a short cooling‑off window. Others can be closed early by paying what you owe plus reasonable exit costs. Always ask:
- “If I change my mind in a week or a month, what happens?”
- “How much would it cost to close this account completely?”
Knowing the exit route before you enter gives you more control later.
Responsible lending and unaffordable loans
Affordability and suitability checks
Responsible lending is not a slogan. It is a legal obligation. Lenders must check that a loan is not unsuitable for you. That means they must test whether you can repay without serious hardship and whether the product actually matches your needs.
If they did not ask basic questions or ignored clear signs of strain, that is not your mistake. That is their failure.
Income and expense verification
Quick approvals may feel convenient, but if a lender barely looks at your income, expenses and debts, they are cutting corners. You are the one who pays for that later.
If you can see, in hindsight, that the numbers never added up, you are allowed to go back and say, “This should never have been approved.”
Warning signs of irresponsible lending
Red flags include:
- Approval based on very rough estimates
- No questions about existing loans or Buy Now Pay Later
- Encouragement to “round up” your income or ignore certain expenses
- Frequent limit increases without fresh checks
If your gut tells you that the lender wanted the sale more than they cared about your situation, you are probably right.
Your rights if a loan was unaffordable
When a loan is clearly unaffordable, you can:
- Formally claimed it was unsuitable at the time of approval.
- Ask for a detailed review and remedy.
- Take the matter to AFCA if the lender will not fix it.
Many borrowers have had interest and fees wiped, contracts reset, or debts reduced after pushing this issue. The process is there to be used.
Financial hardship support and default protection
What qualifies as financial hardship
Hardship is not only an extreme crisis. It includes:
- Reduced income
- Sudden expenses
- Health issues
- Caring responsibilities
- Relationship breakdown
If your budget no longer fits your repayments, you are in a hardship zone. That is enough to ask for help.
How to request hardship assistance
A strong hardship request usually:
- Explains what changed and when
- States what you can realistically pay now
- Proposes an arrangement, even if temporary
You do not need perfect paperwork, but the more honest and specific you are, the easier it is for the lender to say yes.
Repayment changes, pauses and variations
If a lender offers a hardship plan, ask:
- “How long does this last?”
- “What happens at the end?”
- “How will this show on my credit report?”
You are entitled to know the trade‑offs. Saying yes without clarity often leads to surprise later.
What must happen before a default is listed?
Defaults are serious, so the rules for listing them are strict. If you think a default was listed too quickly, without enough notice, or while you were trying to sort hardship, that is worth challenging. You can say, plainly, “This listing is not fair, and I want it reviewed.”
Unfair credit contracts and unlawful terms
What makes a credit contract unfair
Unfair terms are not just annoying. They can be legally unenforceable. If a clause gives a lender a big advantage, is not needed to protect them and causes you harm, it is open to attack.
Common unfair terms and conditions
Watch for:
- Wide powers to change rates or fees at will
- Punishing default fees that look like penalties, not costs
- Vague default triggers
- Clauses that try to block your right to complain
If a term looks like it only exists to tilt the table in the lender’s favour, that is not something you have to quietly accept.
How consumers can challenge unfair contracts
You can:
- Call out specific terms in writing.
- Ask the lender not to rely on them in your case.
- Raise them in complaints to AFCA or legal advisers.
Single people challenging single contracts is how many unfair terms are eventually removed from the system entirely.
Possible outcomes and remedies
When unfair terms or conduct are proven, results can include:
- Cancelling the term
- Refunding money charged under it
- Changing how and when you repay
- Reducing what you owe
You are not asking for a favour. You are asking for the law to be applied properly.
Which laws actually protect consumers in Australia
National Consumer Credit Protection Act
This Act, along with the National Credit Code, is the backbone of consumer credit protection. It covers licensing, responsible lending, disclosure, hardship and enforcement. If a lender is licensed, it lives under these rules.
Australian Consumer Law
Australian Consumer Law backs you when it comes to misleading conduct, unfair contract terms and harsh, exploitative behaviour. It does not stop at retail shops. It reaches into credit, too.
Credit licensing rules
If a business offers consumer credit without the right licence, that is a major warning sign. Licensed providers must meet standards, belong to AFCA and maintain proper complaint and hardship processes. You can and should check this.
Role of ASIC in enforcement
ASIC is there to deal with patterns of bad behaviour. When multiple consumers raise similar issues, ASIC can act. Your complaint helps build that bigger picture, even while you are focused on fixing your own case.
Disputes, complaints and getting help
Raising issues directly with a lender
Your first step is usually a written complaint to the lender. Set out:
- What happened
- Why is it wrong or unfair
- What you want them to do
You are not asking politely. You are lodging a formal complaint in a system that exists for exactly this reason.
Internal dispute resolution requirements
Lenders cannot just ignore you or drag things out forever. They must handle complaints within set timeframes and give you a clear answer. If they do not, that failure itself becomes part of your case.
AFCA complaints process
AFCA is where you go when internal processes hit a wall. It is free, independent and used to dealing with scared, frustrated people. AFCA can force member firms to fix things. That is real leverage, not theory.
When legal or consumer help is needed
If you feel out of your depth, that is normal. Free financial counsellors and community legal centres deal with these issues daily. Reaching out is not a sign you have failed. It is a sign you are taking your situation seriously.
How to protect yourself before using credit again
Checking if a lender is licensed
Before you borrow again, slow the process down. Ask for the licence details, check membership of AFCA and do a quick independent search. If anything does not match, walk away.
Red flags to watch for
Be wary of:
- Sales pressure
- “Guaranteed approval”
- Refusal to explain costs in detail
- Reluctance to share documents
If a lender behaves badly before they get your signature, it rarely improves afterwards.
Smarter borrowing habits
Stronger habits include:
- Using credit only for clear purposes
- Avoiding multiple overlapping debts
- Keeping limits modest
- Reviewing your budget before every new credit decision
The aim is not to avoid credit forever, but to use it on your terms.
Ongoing credit management practices
Practical habits that help:
- Paying on time or talking to the lender before you miss a payment
- Checking your credit report once or twice a year
- Cutting back limits or closing unused accounts
- Responding early when you see trouble, rather than waiting for a crisis.
Small actions taken early are often more powerful than big actions taken late.
Frequently asked questions
What can I do if a lender approved a loan I could not afford?
You can claim the lender breached responsible lending duties. Tell them, in writing, that the loan was unsuitable, explain your income and expenses at the time and ask for a remedy. If they refuse, take the case to AFCA.
Can a debt collector contact me every day?
Constant daily contact is not reasonable. If calls or messages feel relentless, write to the collector, set contact limits and ask for written communication. If they keep pushing, complain to the creditor and AFCA.
How long do defaults stay on my credit report in Australia?
Most defaults remain for about five years from the date they are listed. That feels long, but it is not life‑long. You can still improve your report in other ways while you wait.
Can I stop a default from being listed?
You can often avoid a default by acting early, asking for hardship and negotiating. If a default is listed without proper notice or in error, you can demand that it be corrected or removed.
What should I do if my credit report is wrong?
Get a copy, mark what is wrong and ask both the credit reporter and credit provider to fix it. If they do not, complain. Many errors only disappear because someone was persistent.
What rights do I have if I cannot repay my loan?
You can request hardship help, propose a new repayment plan and get support from a financial counsellor. If your lender dismisses you, that can be challenged.
Can a lender in Australia change my interest rate or fees without telling me?
They can only change them within the rules of your contract and with proper notice. If you see unexplained changes on your statement, challenge them immediately.
What protections do consumers have against unfair credit contracts in Australia?
You are protected by rules on unfair terms, misleading conduct and harsh dealing. If a contract feels stacked against you, you have every right to question it and seek review.
Are Buy Now Pay Later services covered by the credit law?
New rules bring many Buy Now Pay Later products under credit regulation. That means licensing, responsible lending and complaint rights increasingly apply here too.
Who regulates lenders in Australia, and how can I lodge a complaint?
ASIC oversees credit providers, and AFCA handles disputes. You complain to the lender first. If they do not fix it, you go to AFCA. That is the standard path; you are not “overreacting” by using it.
Conclusion
Australian credit law does more than list your rights on paper. Used properly, it gives you leverage when loans are unaffordable, when collectors push too hard and when your credit report does not reflect the truth. You are allowed to question, to demand explanations and to ask for change.
If you are reviewing credit‑related products or planning a purchase, you can check out our products and choose what genuinely fits your situation, not what adds pressure.
Disclaimer: All information in this article is based on general research and views only and is not legal or financial advice. If you have questions about your specific situation, please reach out to us.
About the Author
Kuldeep Singh is the Founder of Easy Credit Repair and an Australian Credit Representative (Credit Representative Number 552536). He is a member of the Australian Financial Complaints Authority (AFCA Membership Number 102217). His work focuses on assisting consumers across Australia with credit report disputes, unaffordable lending issues, defaults, and debt-related complaints, helping individuals understand and exercise their rights under Australian credit law.
