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STANDING COMMITTEE OF OFFICIALS OF CONSUMER AFFAIRS
CONSUMER CREDIT CODE
STATEMENT OF ENFORCEMENT POLICY
STATEMENT IN COMPARISON RATE SCHEDULES OF THE REPAYMENT FREQUENCY
USED TO CALCULATE A COMPARISON RATE
The Consumer Credit (Queensland) Amendment Act 2002 inserts into the
Consumer Credit Code a new Part 9A, which provides for the mandatory disclosure
of comparison rates:
- in advertisements for fixed term credit which feature an annual percentage
rate, and
- in comparison rate schedules which are to be made available to consumers.
Section 146M of the Act provides that comparison rate schedules are required
to list comparison rates for the consumer credit product concerned, calculated
for each of the amounts of credit and terms prescribed for the purposes of that
section.
The Act also sets out a number of other items of information that must be included
in a comparison rate schedule and section 146P(3) provides that a comparison
rate schedule is not contain any information other than that required or permitted
by or under the Consumer Credit Code.
The Consumer Credit Amendment Regulation (No.1) 2003 sets out the formula
to be used to calculate comparison rates. The formula provides that the calculation
is to be based on the repayment frequency which is required by the relevant
credit contract.
If the credit contract does not require a particular repayment frequency, the
credit provider may choose a repayment frequency for use in calculating comparison
rates.
Increasing the repayment frequency can produce a lower comparison rate. Therefore,
for two identical loans, the credit provider who uses a weekly repayment interval
will produce a slightly lower comparison rate than the credit provider who uses
a fortnightly repayment interval. The consumer would, however, be unaware that
the difference was caused by a different repayment frequency, and the latter
credit provider may be at a competitive disadvantage.
In order to address this issue, the Standing Committee of Officials of Consumer
Affairs (SCOCA) has agreed that the Consumer Credit Regulation 1995 should
be amended to allow a comparison rate schedule to state the repayment frequency
which has been used as the basis for a comparison rate calculation.
Until this amendment is made SCOCA has endorsed the following agreed enforcement
approach by government consumer agencies in relation to this issue:
A comparison rate schedule may contain information about the repayment
frequency which has been used to calculate a comparison rate or rates contained
in the schedule.
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