What's New
-
Passage of the National Consumer Credit Protection laws
The National Consumer Credit Protection Bill 2009 (Credit Bill) and related Bills, together with Government amendments, were passed in the Senate on 26 October 2009. The Bills were returned to the House of Representatives and passed on 23 November 2009. More information is available on the Consumer Credit website.
-
Progress of State Referrals
On 28 October 2009, the Tasmanian Parliament passed its reference legislation, the Credit (Commonwealth Powers) Bill 2009. The Act commenced by proclamation on 17 November 2009. Links to the:
On 10 November 2009, the Queensland Government introduced its reference legislation, the Credit (Commonwealth Powers) Bill 2009 into the Queensland Legislative Assembly. The links to the Bill and Hansard are:
-
Introduction into Parliament of the National Consumer Credit Protection laws
On 25 June 2009, the Minister for Financial Services, Superannuation and Corporate Law, Chris Bowen MP, introduced the Rudd Government's national consumer credit laws into Parliament. More information is available on the Consumer Credit website.
At the meeting of the Council of Australian Governments on 2 October 2008, the plan for the transfer of all consumer credit regulation to the Commonwealth from the States and Territories was announced.
Under the first phase of the action plan, the Commonwealth will assume responsibility for the Code by enacting it as Commonwealth law. ASIC will become the sole, national regulator for consumer credit lending and finance broking. This phase will be completed by mid 2009.
The second phase of the action plan will include a review of unsolicited credit card limit extension offers, an examination of State and Territory approaches to interest rate caps, and possible regulation of reverse mortgages. This phase will be completed by mid 2010.
Key elements of phase one of the action plan include:
- Enacting the UCCC into Commonwealth legislation.
- Establishing a national licensing regime to require providers of consumer credit and credit-related brokering services and advice to obtain a licence from ASIC.
- Extending the powers of ASIC to be the sole regulator of the new national credit framework with enhanced enforcement powers.
- Requiring licensees to observe a number of general conduct requirements, including responsible lending practices.
- Requiring mandatory membership of an external dispute resolution (EDR) body by all providers of consumer credit and credit-related brokering services and advice.
- Extending the scope of credit products covered by the UCCC to regulate the provision of consumer mortgages over residential investment properties.
- Extending the operation of the Corporations Act to regulate margin lending.
- Regulation of trustee corporations.
Key elements of phase two of the action plan include:
- Enhancements to specific conduct obligations to stem unfavourable lending practices, such as a review of credit card limit extension offers, an examination of State approaches to interest rate caps; and other fringe lending issues as they arise.
- Regulation of the provision of credit for small businesses.
- Regulation of investment loans other than margin loans and mortgages for residential investment properties.
- Reform of mandatory comparison rates and default notices.
- Enhancements to the regulation and tailored disclosure of reverse mortgages.
- Examination of remaining existing State and Territory reform projects.
Information about the new regulatory framework including the legislation, licensing process, general obligations and the timeframe in which the changes will take effect is available on ASIC's dedicated credit website.
-
Responsible Lending Practices Consumer Credit Cards
The Ministerial Council on Consumer Affairs has released a consultation Regulatory Impact Statement on Responsible Lending Practices in Relation to Consumer Credit Cards.
The Paper discusses options to assist consumer choice of card products and protect consumers from lending practices which provide continuing credit at levels which cannot be repaid without substantial hardship.
The Ministerial Council invites comments or submissions on the issues raised and the options to address those issues.
The paper can be downloaded from the NSW Office of Fair Trading website.
Submissions should be received no later than 3 October 2008.
-
Implementation of National Competition Policy Recommendations
Recommendations from the National Competition Policy Review of the Consumer Credit Code (the Code) commenced on 22 May 2009.
The amendments were brought about by Part 6 of the Justice Legislation Amendment Act 2008 (the Act) and ensure “terms sale of land”, “conditional sale agreements” and “tiny terms contracts” are brought within the scope of the Code as new sections 10A, 10B and 10C. The Act, accompanying explanatory document and proclamation are available from the following links:
A terms sale of land (a sale on ‘vendor’s terms’ or a ‘wrap loan’) is a sale of land under which the purchase price is payable by instalments. The vendor lets the purchaser into possession but retains title until conveyance following the final payment.
A conditional sale agreement (or ‘Romalpa agreement’) is a sale of goods under which the purchase price is payable by instalments. The seller delivers the goods to the buyer but retains title until the final payment.
Tiny terms contracts are contracts where the cost of credit is incorporated into the cash price and the transaction is represented as a sale of goods by instalment (without any credit charges).
Technical amendments have also been drafted to capture contracts containing instalment payments that exceed the cash price of the goods, which are related to the contract for the actual sale of the goods.
These practices were arguably already covered by the Code, as was confirmed in relation to vendor terms by the Victorian Supreme Court decision in Geeveekay Pty Ltd & Ors v Director of Consumer Affairs Victoria [2008] VSC 50 (28 February 2008). However, due to doubts raised in the National Competition Policy Review of the Code, it was recommended the Code be amended through technical redrafting to put the situation beyond doubt.
By clarifying these practices are captured by the Code, consumers will benefit from key protections in the Code, including full disclosure of fees and charges, controls on the calculation of interest, access to hardship arrangements and procedural protections in enforcement situations.
Updated 4 June 2009
-
August 2007 Consultation Package
MCCA has agreed to refinements in the August 2007 Consultation Package. The amendments are intended to enhance the operation of the Code by:
- Tightening current exemptions to the Code for short term credit and pawnbrokers;
- Dealing with abuses of business purpose declarations aimed at avoiding the Code;
- Enhancing consumer remedies under the Code by broadening existing powers of courts to review credit fees and charges and changes of interest;
- Providing Government Consumer Agencies with standing to conduct proceedings under the Code on behalf of consumers;
- Prohibiting lenders from taking ‘blackmail’ security over essential household items; and
Requiring that consumers be provided with information about their rights and responsibilities regarding direct debit payment arrangements
Updated 27 May 2008
-
Bill Facilities (Promissory Notes) Regulation
As of Friday 30 November 2007, the Consumer Credit Code (the Code) applies to the use of bill facilities (promissory notes and bills of exchange) where the credit is provided wholly or predominantly for personal, domestic or household purposes. In Tasmania and Western Australia, this change took effect on 21 May 2008 and 8 August 2008 respectively.
The application of the Code to bill facilities has been brought about by the Consumer Credit (Bill Facilities) Amendment Regulation 2007 (the Regulation). These are available for download. By bringing bill facilities within the Code, consumers will benefit from key protections in the Code, including full disclosure of fees and charges, controls on the calculation of interest, access to hardship arrangements and procedural protections in enforcement situations.
Bill facilities were previously exempt from the Code, as they are predominantly used for commercial purposes. However, bill facilities (especially promissory notes) have also been used by some consumer credit providers to avoid the Code. Promissory notes generally carry very high interest and other charges, and are targeted towards vulnerable and disadvantaged consumers. The enactment of this Regulation closes this loophole, and will ensure greater consumer protection for vulnerable and disadvantaged consumers.
It is important to note that this amendment will not apply to commercial bill facilities or to any bill facility (no matter what the purpose) provided by an ADI.
The proposal to bring all bill facilities under the Code was part of the Fringe Credit Providers’ Regulatory Impact Statement and public consultation took place on the draft Regulation last year.
Further information about this Regulation is available for download.
Updated 3 December 2007
-
Streamlining pre-contractual disclosure
UCCCMC has commissioned an independent consultant to conduct research into pre-contractual disclosure with the goal of developing a disclosure model which addresses the needs of consumers.
The research will test the effectiveness of a range of disclosure models for different consumer credit products. The effectiveness of the disclosure models will be tested by conducting comprehension testing, focus groups discussions and cognitive testing. The effect timing has on the effectiveness of the pre-contractual disclosure information will also be examined. The results of these tests will inform the development of one or more revised disclosure models. The research is expected to be completed by mid 2009.
Updated 27 May 2008
-
Mandatory Comparison Rates regime extended in the Consumer Credit Code until referral to the Commonwealth
The Consumer Credit Code has been amended to remove the sunset date of 30 June 2009 in relation to the mandatory comparison rate scheme.
Mandatory comparison rates combine the interest, fees and charges of a loan into a single percentage figure. The purpose of disclosing comparison rates is to help consumers to understand the true cost of a fixed-term loan and to compare various loan products in order to select a product that best suits their budget and borrowing needs.
Last year, COAG agreed that responsibility for the regulation of credit will be referred by the states and territories to the Commonwealth. The Commonwealth laws will maintain comparison rates. If the comparison rate scheme was allowed to sunset on 30 June 2009, this would have left a gap in regulation where the scheme would have sun-setted under the Consumer Credit Code before the Commonwealth credt laws commence.
The current amendment ensures the requirement for lenders to provide mandatory comparison rates to consumers is retained under the Cosumer Credit Code until relevant power is referred from the States and Territories to the Commonwealth. This amendment will not have any new impact on industry as it maintains the status quo.
Updated 19 June 2009
The new threshold is $350,240. The next change will be on 13 April 2010. Further information is available at Hardship Threshold.
Updated 16 March 2010
-
Finance brokers - National Regulation
Almost 100 submissions were received on the Exposure Draft Finance Broking Bill 2007. Work is continuing on the issues raised in the submissions.
Updated 27 May 2008
In response to concerns about reverse mortgages, the Ministerial Council on Consumer Affairs has agreed to explore the extent to which additional consumer protections are necessary for reverse mortgages. A Working Group comprising representatives from the Australian Securities and Investments Commission, Commonwealth Treasury and Government Consumer Agencies has been formed to explore this issue. A Consultation Regulatory Impact Statement is currently being prepared.
Updated 05 September 2008
|
