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Credit law toolkit

External dispute resolution

Main Points

  • EDR is the main form of dispute resolution for consumers under the Credit Law (although EDR is not available for all matters).
  • EDR is free to the consumer and they do not lose any of their rights to go to court if they are dissatisfied with the result.
  • Consumers do not need legal representation to go to EDR, however, financial counsellors and lawyers may advocate for the consumer.
  • EDR schemes can vary the credit contract (make repayment arrangements ) under the Credit Law.
  • Consumers can go to EDR even after legal proceedings have commenced, but usually not after judgment.
  • All credit providers and credit assistants must be members of an EDR scheme.

What is EDR?

EDR is a service for resolving disputes between consumers and members of the EDR Scheme. EDR is funded by the members of the EDR Scheme (the credit providers and credit assistants/representatives). The funding is a combination of membership fees and complaint handling fees. Both EDR Schemes are independent and have equal numbers of consumer and industry representatives on the Board.

All credit providers, finance brokers, mortgage managers and mortgage originators who arrange or provide credit under the Credit Law from 1 July 2010 must be members of an ASIC–approved EDR scheme as a condition of the licence (or registration). Credit representatives must also be members of an EDR scheme.

This should mean that most credit providers and intermediaries in the credit industry should be members of an EDR Scheme. Some exclusions will be:

  • Where the credit provider is not lending anymore (although some may choose to remain members of EDR)
  • Where the credit provider only lends for business purposes (including commercial equipment/vehicle leasing arrangements for business purposes)
  • Where the credit representative or credit assistance provider (broker) only arranges or manages loans/leases for business purposes
  • Where the credit provider only lends for investment purposes (but not including investment loans for real property)
  • Where the credit representative or credit assistance provider (broker) only arranges or manages loans for investment purposes (but not including investment loans for real property)

There are two EDRs available for credit disputes in Australia. They are:

  1. Financial Ombudsman Service Australia (FOS) – www.fos.org.au
  2. Credit and Investments Ombudsman (CIO) – www.cio.org.au

Both FOS and CIO have been approved by ASIC. There are different members in each scheme.

The consumer must direct their complaint to the scheme of which the person or organisation complained about is a member. This can be determined by:

  • ringing 1800 367 287 or
  • checking the Member Lists on both the FOS and CIO web sites above

Sometimes there will be two relevant schemes, for example, where there is a broker and a credit provider involved in the same complaint. In those situations, a complaint should be made to both schemes with each scheme being notified that this has been done.


You must actually lodge in EDR to have the consumer’s dispute considered in EDR. It is not enough just to ring EDR You will know you have lodged successfully when you get confirmation from EDR and a case number.

Why EDR is important

EDR has several important benefits:

  1. It is free for consumers
  2. It is independent (despite being funded by industry)
  3. All enforcement stops (including Court proceedings) while EDR considers the dispute
  4. It encourages negotiation between the parties
  5. A decision will (usually) be made by the EDR if the parties cannot negotiate a solution
  6. EDR can decide on repayment arrangements due to financial hardship (“hardship variations”) under the Credit Law
  7. Disputes can be lodged in EDR before and after court proceedings3 have been issued but usually not after Court judgment (See below under the heading “After Judgment and EDR” for information about the limited circumstances in which EDR can assist after judgment has been obtained)
  8. There are no costs payable to use EDR
  9. The consumer does not have to accept the decision of EDR on a dispute; the consumer can still go to court (as long as the time limits to go to court have not expired)
  10. The Credit Law will mean that EDR will be the main way to resolve disputes if negotiation does not work.

EDR is one of the key tools for caseworkers assisting consumers with resolving a problem. For this reason, all of the How to Guides in this toolkit will focus on applying to EDR if a dispute is unresolved.

3 There are limitations on going to EDR after court proceedings have commenced –see page 18 If legal proceedings have commenced.


The credit provider or credit assistant/representative will be charged at each level of the dispute in EDR. This can be an incentive to negotiate a settlement to avoid further cost (particularly if the amount in dispute is small). So be prepared to try to negotiate to obtain a quick and fair outcome for your client.

EDR and financial hardship

Both EDR Schemes can make determinations on financial hardship under the Credit Law. This is an enormously important tool for caseworkers. This right has only recently been achieved (2010) and was a hard fought for right.

Importantly, when it comes to financial hardship, the EDR Schemes consider the value of the dispute or claim, not the value of the contract. This means that even if your client has a large home loan, the amount in dispute will be interpreted as, for example, the amount of the repayments sought to be postponed. This means that very few hardship disputes will be excluded from EDR threshold.

Both EDR Schemes have streamlined procedures for hardship. This means that hardship disputes are a high priority and are dealt with accordingly. This means that if you lodge a dispute in EDR you (and your client) must be ready and prepared to negotiate and exchange information.

The reason hardship is urgent is that arrears are usually accumulating so it is essential that an arrangement is made as soon as possible. This is also in the interests of your client.

Your client may be required to:

  • Fill out a questionnaire about themselves and the dispute
  • Fill out a statement of financial position for the EDR Scheme
  • Attend telephone conciliations
  • Provide further information and evidence of income and expenses.
  • Explain why the repayment arrangement proposed is both affordable and reasonable

The EDR Scheme will encourage your client to continue to make repayments to the debt. This is good advice. If your client is having trouble making repayments because the credit provider will not change the direct debit or provide your client with another way to make the loan repayments you should complain about this to the credit provider (and if necessary to EDR) and request details of a way to pay. It is recommended you keep encouraging your client to make repayments.

EDR Schemes prefer to settle disputes so there will be a great deal of pressure to settle. Some hints:

  • Never agree to a repayment arrangement your client cannot afford. Credit providers will often want bulk payments and this is usually unworkable.
  • Keep making offers to settle. Don’t give up; just keep trying to come to an arrangement. Support your proposals with reasons as to why the proposal is both reasonable and affordable.
  • Make sure your client is making regular repayments, as this will help show they are trying.
  • Always respond to requests for information from the EDR Scheme.
  • Make sure any settlement covers all of the dispute, makes sense and is in writing.

See Financial hardship for more information about financial hardship and EDR.

Problem solving and EDR

EDR presents a great opportunity to negotiate a fair outcome for your client.

Some hints:

  1. Always lodge your complaint in writing (either on–line or by mail or fax). Don’t be deterred by a telephone conversation that suggests your complaint may not have merit.
  2. Be persistent. Don’t give up.
  3. Always be courteous, professional, and friendly with EDR staff. They are always trying to help. It can also be very helpful to you to understand how the complaint is going. Don’t be afraid to ring and chat about your case and the procedure for resolving the complaint.
  4. Keep a copy of the FOS Terms of Reference and the CIO Rules on your desk or PC. EDR have to follow their own rules.
  5. Keep up to date with EDR position statements and information, as it may be relevant to issues you have.

There are some traps to look out for.

You must always respond within the required deadlines

If you do not respond within the required deadlines, the EDR Scheme will close your client’s file! Therefore, it is essential you have a diary system in place to make sure these deadlines are met. If you know there is a good reason why you cannot meet a deadline ask for an extension of time. These are usually granted if you have a good reason (and sometimes even when you don’t). Ring up and get an extension before the deadline expires and confirm this in writing.

The “close file” problem

Even if you respond within the required deadlines, a problem with EDR is for the client’s file to be closed as the EDR Scheme has decided there is no merit in the dispute BEFORE the matter has even been determined.

It is important that you always get legal advice about this as it may be that the EDR Scheme has not understood the dispute or there is further evidence you need to provide (See Financial hardship, How to Guides and Sample letters: Financial hardship.)

The evidence problem

EDR Schemes cannot take evidence under oath or examine witnesses. For this reason, your best evidence in EDR will be documents. If it becomes a question of “he says, she says” with no other compelling evidence available the EDR scheme will either find against your client or decide that EDR is not the most appropriate forum for your dispute.

The EDR scheme is often helpful in telling you what evidence to get. It is strongly suggested that if the EDR Scheme asks for evidence you should try to obtain that evidence.

Therefore, if you are having trouble with getting sufficient evidence together for your dispute – get legal advice.

If legal proceedings have commenced


If legal proceedings have commenced you need to lodge a dispute in EDR urgently. You or the client should lodge the dispute online immediately. Once judgment is obtained access to EDR is severely limited if not completely unavailable for the dispute.

If legal proceedings have already commenced (and court judgment has not been obtained by the credit provider), the consumer can still complain to EDR provided they have not taken a step in the legal proceedings beyond lodging a defence (and cross–claim). Just attending a directions hearing or pre–trial review would not be a significant step.

If legal proceedings have commenced, you should encourage and assist the consumer to lodge an urgent complaint in the relevant EDR Scheme immediately.

You need to:

  • As soon as you become aware of the court proceedings work out–
    • When the consumer was served
    • How long they have before judgment can be obtained (usually 21 or 28 days)
  • Make sure you lodge in EDR immediately. You should do this online.
  • Your client (or you as representative) will get an email acknowledging the successful lodgment of the dispute immediately. If you do not get an email lodge the dispute again.
  • Ring the EDR Scheme and make sure they received the complaint if time is running out and the credit provider may be able to obtain judgment soon.

If you lodge online in EDR a copy of the complaint will automatically be sent to the credit provider or credit representative. If lodging by mail or fax send a copy of the dispute to the credit provider or credit representative Get legal advice if there are any problems with the court.

When resolving a dispute in EDR after court proceedings have commenced, you need to:

  • Make sure the settlement includes an agreement that court proceedings are discontinued. This is usually done by either–
    • Filing consent orders saying the matter is settled and discontinued
    • The credit provider filing a notice of discontinuance
  • The credit provider (or their lawyers) have not added their costs of defending the matter at EDR to the loan (as EDR is free).
  • The consumer understands whether they have to pay the legal costs of the credit provider commencing court proceedings. You should try to resolve the matter on the basis the consumer does not have to pay these costs.

Get legal advice on this if you are not clear on what is happening.

DO NOT agree to the credit provider having judgment in settling the dispute. This compromises your client’s situation and possibly deprives your client access to EDR.

After judgment and EDR

EDR Schemes have very limited jurisdiction to consider disputes after judgment has been obtained.

Financial Ombudsman Service

FOS can only consider the exercise of the power of sale (a mortgagee sale) in home mortgage matters. This would include disputes about enforcement costs. Also, see Home repossession for a more detailed discussion on this aspect of the FOS jurisdiction.

Credit & Investments Ombudsman

For financial hardship matters, CIO can direct a Member not to enforce a default judgment in appropriate circumstances, where for example:

  • the consumer wishes to sell the security property and has a contract for sale available and an agent appointed
  • the consumer is able to demonstrate that there is a reasonable prospect of refinancing the loan or
  • the immediate execution of the writ of possession will cause physical hardship (eg, a person with significant illness or disabilities needs to time to find alternative accommodation with appropriate modification/support)

For other matters (not financial hardship), CIO can, in appropriate circumstances, direct a Member not to enforce a default judgment if the Complainant indicates that they want to set aside the default judgment on the basis of a substantive defence, such as for example, unconscionability, duress, unjustness, undue influence or a breach of the responsible lending provisions.

Problems with jurisdiction

EDR Schemes have a limited jurisdiction defined by the Terms of Reference/Rules. This means there are some complaints an EDR Scheme will not consider. Some reasons EDR may not consider a dispute are:

  • The amount in dispute is more than the maximum compensation that can be given (FOS and CIO $309,000 as at 1/1/15 ). If the amount in dispute is less than $500,000 but more than the compensation limit the consumer can still apply to EDR and agree not to seek more in compensation than the limit. Remember that for the hardship claims the amount in dispute will usually be much, much lower than the value of the contract.
  • That EDR is not the most appropriate place to hear the dispute (a very wide power).
  • Where another EDR is considering the dispute.
  • Where a court decision has been made on the dispute.
  • The dispute is lacking in substance.
  • The consumer is out of time to lodge a dispute in EDR.

The time limits for FOS and CIO are:

For disputes involving financial hardship, unjustness and/or unconscionable interest/charges under the National Credit Code must be lodged before the later of:

  • Within two years of the date when the Credit Contract is rescinded, discharged or otherwise comes to an end; or
  • Where, prior to lodging the Dispute with FOS, the Applicant received an IDR Response in relation to the Dispute from the Financial Services Provider – within 2 years of the date of that IDR Response.

In all other situations the dispute must be lodged before the earlier of:

  • Within 6 years of the applicant first became aware of (or reasonably should have become aware of) the loss; and
  • Where, prior to lodging the dispute, the Applicant received an IDR Response in relation to the Dispute from the Financial Services Provider – within 2 years of the date of that IDR Response.

If a consumer’s dispute is rejected on the grounds of a lack of jurisdiction you may be able to appeal the EDR decision to the EDR Scheme. This appeal would be referred to the Ombudsman. Remember that if the EDR Scheme has decided the complaint is not within its jurisdiction, then:

  • Legal action can commence and is no longer stayed
  • The credit provider can get judgment if you lodged in EDR after court proceedings had commenced (although your client will be given 14 days to file a defence)

Get advice immediately if your client’s EDR case has been closed