David Johnston (WA, Liberal Party, Shadow Minister for Defence) Share this | Link to this | Hansard source

asked the Minister representing the Minister for Financial Services and Superannuation, upon notice, on 28 September 2010:

When receiving funds from a prime borrowing, how is the decision to apply funds recovered to loans permitted to be made.

Nick Sherry (Tasmania, Australian Labor Party, Minister Assisting the Minister for Tourism) Share this | Link to this | Hansard source

The Minister for Financial Services and Superannuation has provided the following answer to the honourable senator's question:

Generally, payments made to a loan are applied in accordance with the credit contract.

For credit contracts regulated by the National Credit Code (the Code) (which is Schedule 1 of the National Consumer Credit Protection Act 2009), Division 4 of the Code regulates funds recovered from the sale of mortgaged goods. Specifically, after a sale of goods under a mortgage, the credit provider must credit the mortgagor with a payment equivalent to the proceeds of the sale less any amounts they are entitled to deduct. (subsection 104(2) of the Code)

A credit provider that sells mortgaged goods is entitled to deduct:

A court, on application by a mortgagor, may compensate a mortgagor if the credit provider did not exercise its power of sale in accordance with the Code. (section 106 of the Code).