Credit Ombudsman will stay default orders

The Credit Ombudsman will put itself in the position of a court when reviewing applications to delay default orders, using the same criteria a court would apply in such cases.

The Ombudsman's view is that not many people exercise their right to apply to a court for a stay of execution of a default order. This may be because they are not aware of their rights, do not have legal representation, cannot afford court costs or are located in a remote area where it is difficult to bring a matter to court.

So, yesterday, the Ombudsman issued a position statement setting out how it will deal with complaints where a borrower seeks a stay of the lender's execution of a default order.

"While we cannot interfere with or overturn default judgement orders, we have identified instances where the Credit Ombudsman Service may determine that execution of the orders may be stayed for a particular period of time," it said.

The Ombudsman said it would follow what it saw as court practice. Stays may be granted where: borrowers can demonstrate that they can sell the security property within a reasonable time; borrowers can show that they will be able to refinance the loan; borrowers can demonstrate hardship and should be given time to organise their affairs; or there are legal grounds for setting aside the default judgement.

The Ombudsman said: "We will expect borrowers to be able to demonstrate their good faith by having already taken substantial steps towards achieving the outcome they are seeking before asking COSL to assist.

"We are unlikely to offer assistance to a borrower who comes to us saying that they are considering the possibility of selling their property themselves but has taken no practical steps to prepare the property for sale."

The Ombudsman said that in reviewing a complaint it would look at whether the financial position of the lender was fully protected and whether the borrower was maintaining the property in a manner that preserved the lender's interests.