An Australian Notice to Guarantor is a formal written communication issued by a creditor (or their authorised representative) to a guarantor, notifying the guarantor of a default by the principal debtor, making a demand for payment under the guarantee, or informing the guarantor of a variation or extension of the underlying credit arrangement. Depending on the regulatory regime applicable to the underlying credit contract, the Notice to Guarantor may be a statutory requirement under the National Consumer Credit Protection Act 2009 (Cth) (NCCP Act), the National Credit Code (Schedule 1), or the Personal Property Securities Act 2009 (Cth) (PPSA), or it may be a contractual obligation under the terms of the guarantee itself.

A Notice to Guarantor serves multiple functions. It formally puts the guarantor on notice of the principal debtor's default and the creditor's intention to enforce the guarantee. It discloses the current amount owing and the deadline for payment or response. Where required by statute, it gives the guarantor the minimum notice period to exercise rights of redemption, hardship variation, or objection before enforcement action is taken. It informs the guarantor of their statutory rights under the applicable legislation and recommends that the guarantor seek independent legal advice.

Under the National Credit Code, before a credit provider can commence enforcement action against a guarantor, the credit provider must generally first give a default notice to the principal debtor under section 88 of the Credit Code and allow the prescribed period (at least 30 days) for the debtor to remedy the default. The guarantor also has the right to request information about the credit contract and statement of account under sections 185 and 186 of the Credit Code, and the right to apply for a hardship variation under section 72 of the Credit Code if the guarantor is experiencing financial difficulty.

Under the PPSA, where enforcement involves the disposal of secured collateral, the secured party (creditor) must generally give the grantor (and, where applicable, the guarantor) at least 10 Business Days' notice of the proposed disposal method before proceeding, to allow the guarantor an opportunity to redeem the collateral under section 142 of the PPSA.

An Australian Notice to Guarantor is needed in the following circumstances.

Default by the principal debtor. When the principal debtor fails to meet their payment obligations under the underlying credit or finance arrangement, the creditor may wish to formally notify the guarantor of the default and demand payment under the guarantee. A written Notice is important to create a clear record of when the guarantor was first notified and what information was provided.

Pre-enforcement notice under the PPSA. Before enforcing a PPSA security interest by disposing of collateral (such as repossessing and selling goods that are the subject of a registered security interest), the secured party must give notice of the proposed enforcement action to the grantor and, where applicable, to the guarantor. The Notice to Guarantor provides this statutory notice and sets out the guarantor's rights under Chapter 4 of the PPSA.

Pre-enforcement notice under the National Credit Code. Where the guarantee is regulated under the National Credit Code, the credit provider must serve a default notice on the debtor before commencing enforcement. A separate Notice to Guarantor ensures the guarantor is also formally informed of the default and their rights.

Variation or extension of the underlying credit arrangement. Where a creditor and the principal debtor propose to vary the terms of the underlying credit arrangement (for example, by increasing the credit limit, extending the repayment period, or changing the interest rate), the creditor should notify the guarantor of the proposed variation so that the guarantor can decide whether to consent to remaining liable under the extended or varied arrangement, or to withdraw from the guarantee.

Informing the guarantor of their rights. Even where no immediate enforcement action is being taken, a creditor may issue a Notice to Guarantor as a matter of good practice to inform the guarantor of the current status of the debt, the guarantor's rights and obligations, and the availability of independent legal advice and financial counselling services.

A well-drafted Australian Notice to Guarantor should contain the following key provisions.

Identification of parties. The Notice must clearly identify the creditor issuing the Notice (with ABN or ACN) and the guarantor to whom it is addressed, with full legal names and addresses.

Description of the guarantee and underlying obligation. The Notice must describe the guarantee instrument (including its date and the parties) and the underlying credit or finance arrangement being guaranteed, together with the current amount owing.

Purpose of the Notice. The Notice must state clearly whether it is a demand for payment, a notice of default, a notice of variation of the underlying arrangement, a PPSA enforcement notice, or a general information notice regarding the guarantor's rights.

Deadline for response or payment. The Notice should specify the date by which the guarantor must respond, make payment, or exercise any right (such as the right to redeem collateral under section 142 of the PPSA).

PPSA enforcement provisions. Where enforcement involves a registered PPSA security interest, the Notice must describe the secured collateral, the proposed enforcement action, and the guarantor's rights under Chapter 4 of the PPSA (including the rights to object to the disposal method under section 137, to redeem the collateral under section 142, and to receive any surplus proceeds under section 140).

National Credit Code rights. Where the guarantee is regulated under the National Credit Code, the Notice must set out the guarantor's rights to request information about the credit contract and statement of account, to apply for a hardship variation, and to complain to the Australian Financial Complaints Authority (AFCA).

Variation notice provisions. Where the Notice relates to a proposed variation of the underlying credit arrangement, the Notice should explain the nature of the variation and advise the guarantor of their right to withdraw from the guarantee if they do not consent.

Independent legal advice reminder. The Notice should strongly recommend that the guarantor seek independent legal advice from a qualified Australian solicitor before responding, and provide information about free financial counselling services such as the National Debt Helpline.

Contact details and governing law. The Notice should provide clear contact details for the creditor and specify the governing law (state or territory).