It is easy to get into debt but remember there is always help available. The sooner you address your debt problem the easier it will be to sort it out.


Julie Zhou


Contact from the creditor to try to make you pay

Last updated

1 July 2022

If you fail to pay a debt after receiving an account, a creditor will often send more formal notices or letters to encourage you to pay.

Statutory notices

If the debt is covered by legislation, that legislation might require the creditor to send you particular notices before it can take further action to force you to pay the debt.

For example, if your debt is a loan covered by the National Credit Code (NCC), a creditor will almost always have to send you a default notice under section 88 of the NCC, giving you 30 days to bring the loan account up to date before the creditor can take further action

For more information about the NCC, see Chapter 5.7: Understanding credit and finance.

Letter of demand – final notice

If the debt is still owing after the time periods in the statutory notices (if applicable) have expired, a letter of demand may be sent to you by the creditor, their solicitors or a debt collection agency.

A letter of demand usually warns that if you do not pay the debt within a certain time period (often seven days), you will be sued in a court for payment of the debt.

Costs or fees on a letter of demand

Letters of demand are not court documents. While debt collection agencies or solicitors may attempt to add a fee to the alleged debt, often referred to as ‘costs’, it is legally questionable as to whether they are entitled to such a fee. Therefore, unless there is evidence that the terms of the contract between you and the creditor entitle the creditor to this payment, it is recommended that you do not pay this fee.

In Australian Competition and Consumer Commission v Sampson [2011] FCA 1165, a Victorian solicitor admitted engaging in misleading or deceptive conduct in breach of section 52 of the Trade Practices Act 1974 (Cth). This conduct is also likely to be considered to be a breach of the current equivalent provision, which is section 18 of the Australian Consumer Law (which is a schedule in the Competition and Consumer Act 2010 (Cth)). The conduct in that case was claiming – in letters and notices sent on behalf of video rental stores to customers making demands for the payment of small debts for video rentals – that the video store was entitled to recover an extra $30 (or other amount specified) in solicitor’s costs, in addition to the claimed debt, despite the store having no necessary entitlement to recover such a cost.

What do you do when you have received a letter of demand?

As a letter of demand is often the last letter a creditor will send you before suing you, it is important that you make yourself aware of your legal rights and clarify whether you actually owe the creditor at all, and whether you owe the amount being demanded. Therefore, you should decide whether you actually owe the creditor.

Decide whether you actually owe the creditor

In order to do this, it might be necessary to contact the creditor to obtain a copy of any contracts allegedly made between you and the creditor. Make any request for documentation in writing, and keep a copy of your letter. When requesting documentation from the creditor in writing, it is recommended that you include a sentence such as, ‘Please note that in requesting the above documents, I do not acknowledge liability for any agreement, contract or account’.

When you receive the contract from the creditor, check it carefully. If you are unsure whether the contract is a valid or enforceable agreement, seek advice from a solicitor or financial counsellor. See Chapter 5.4: Financial counselling services, and Chapter 2.4: Legal services that can help.

If you decide you do owe the creditor

If you decide that you do owe the creditor, you should do the following things to check that you owe the debt claimed:

  • Check the amount that the creditor claims is owed. This is especially important in credit payment situations, or where the creditor has been sold (‘assigned’) the right to recover the debt from you by your original creditor.
  • If you do not agree with the amount being claimed, write to the creditor asking for a detailed statement of individual items, interest (if appropriate), terms, charges, etc. Keep a copy of this letter.
  • If you then receive a letter of demand from a debt collection agency or the creditor’s solicitors, write to them explaining that a request has been made to the creditor for a more detailed statement, and enclose a copy of that earlier letter.
  • When you receive the statement, check it carefully. 
  • If there appears to be errors or areas of doubt, write to the creditor requesting either clarification or correction of the statement.

If you have difficulty checking the details of a statement provided by the creditor or if you don’t get a satisfactory response, seek advice from a solicitor or financial counsellor. See Chapter 5.4: Financial counselling services, for details of how to contact a financial counsellor, and Chapter 2.4: Legal services that can help.

Check that the creditor has not run out of time to sue you for the debt (see ‘Statute-barred debts’).

Make yourself aware of your rights and options (see ‘Your rights and options’).

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