Business Checklist

• Introduction
• Credit
• Before the contract is made
• Precontractual statement
• Information statement
• The contract
• After the contract is made
• Requests for further information
• Changes to the contract
• Enforcement proceedings
• Advertising
• Hardship provisions
• Re-opening a contract
• Disclaimer
• Glossary

Leases

• The Lease Document
• After the lease is made
• Repossession proceedings
• Hardship provisions

Introduction

If you provide money to purchase goods, services or land, or to lease goods then you are providing credit.

The  Consumer Credit Code applies if you charge for the credit you provide and your customers are individuals or residential strata corporations who use it mostly for personal, household or domestic purposes.

The following checklist is a handy way to check your requirements under the Code.

The checklist sets out your obligations at all stages of the contract's life including what you need to do before you give the contract to your customers, what must be included in the contract, what must be included in account statements, advertising restrictions and what to do to enforce or change the contract.

It is important to remember that this is only a broad guide covering common credit and lease contracts. Your business may be excluded from some of these requirements or have further obligations under the Code. For example, it does not cover linked credit or differing mortgage arrangements.

It is therefore important that you obtain a copy of the Code and Regulations from your local Government printers/Government bookshops and consult with your solicitor or accountant to ensure that your contract fully complies with the Code.

If you provide credit or lease goods with a right or obligation to purchase then you need to look at the Credit part of the checklist.

If you charge to hire goods for any period over four months and there is no right or obligation to purchase then you need to look at the Leases section.

Credit

Under the Code, any credit arrangement between yourself and a debtor must follow these steps:

• A Precontractual statement and an Information statement is given to the debtor
• A written contract is signed by you and the debtor
• Regular account statements are sent to the debtor
• Any changes to the contract, advertising relating to the contract, or enforcement proceedings must follow the terms set out in the Code.

Before the contract is made

Before you enter a contract, you need to provide the debtor with a Precontractual statement and an Information statement. These statements can form part of the actual credit contract or be provided separately. Both documents should be clearly understandable and be in not less than 10 point type.

It is an offence to pressure a debtor into signing a contract or to visit a debtor's house to sign a contract without prior invitation.

Precontractual Statement

The first page of the Precontractual statement must disclose the following in table form:

• The amount of credit to be provided. If the amount is not ascertainable then the maximum amount of credit to be provided*
• The annual percentage rate or rates*
• Details of any interest free period*
• The total amount of interest if the contract is to be paid out within 7 years*
• The number, amount and frequency of repayments
• Any credit fees and charges.*

The rest of the Precontractual statement should disclose:

• The credit provider's name
• To whom the credit is to be paid*
• Details of any changes that can be made under the contract*
• The frequency of account statements
• Any default rate of interest
• Whether enforcement expenses would be paid by the debtor in the event of a breach
• Details of any mortgage or guarantee that may apply
• Details of any commission to be paid
• Details of insurance financed under the contract.*

Please note:

• If a number of documents are provided, each document must state that it does not contain all of the required information.
• If you are a supplier of goods (including land sales) and allow your customers to pay by instalments then you will also need to provide a clear description of the goods and their price.

* Failure to provide these details can lead to a civil penalty of up to $500,000 plus compensation for any loss suffered by the debtor or guarantor.

Information Statement

You must provide the Information Statement as set out in Form 2 of the Regulations to the Code, which explains the debtor's rights and obligations under the Consumer Credit Code. The Regulations are available from your local Government printer (please see the back for a list of addresses).

You may also wish to give your debtors details of the comparison rate. This gives the debtor information which allows them to compare the cost of credit against similar credit products. The calculation of this rate and their accompanying warnings are also set out in the Regulations.

The Contract

The credit contract should be clearly understandable and be in not less than 10 point type. It should include:

• the credit provider's name
• to whom the credit is to be paid*
• the amount of credit to be provided. If the amount is not ascertainable then the maximum amount of credit to be provided*
• the annual percentage rate or rates*
• details of any interest free period*
• the total amount of interest if the contract is to be paid out within 7 years*
• the number, amount and frequency of repayments
• any credit fees and charges*
• details of any changes that can be made under the contract*
• the frequency of account statements
• any default rate of interest and how it is calculated (eg. from a published reference rate)
• whether enforcement expenses would be paid by the debtor in the event of a breach
• details of any mortgage or guarantee that may apply
• details of any commission to be paid
• details of insurance financed under the contract.*

* Failure to provide these details can lead to a civil penalty of up to $500,000 plus compensation for any loss suffered by the debtor or guarantor.

After the contract is made

Once the contract is completed you need to:

• provide a copy of the signed contract to the debtor within 14 days
• send regular account statements:-
  • at least every 40 days for continuing credit contracts accessed by a card
  • between 40 days to 3 months for other continuing credit contracts
  • no longer than every 6 months for any other credit contract.

Note: Statements are not required in some circumstances. See Section 31 (3) of the Code for more details

Your account statements must include:-

• the opening and closing balances of the statement period
• the dates on which the statement period begins and ends
• details of each amount of credit provided during the statement period
• the name of the supplier in any credit card purchases
• interest charges including when they were charged
• any fees and charges
• the annual percentage rate including any changes during the statement period
• payments and transfers to and from other accounts
• the minimum payment owed and the due date
• insurance payments made including the name of the insurer and any commission paid
• any corrections to previous accounts.

Further Information

A debtor or guarantor is entitled to ask for details of:

• the current balance of their account
• any amounts credited or debited during a specific period
• any overdue payments and the due date
• any amount payable and the date it became due.

Your reply must:

• be in writing if requested in writing
• be given within 14 days or 30 days if it relates to information over a year old.

Note: A reply need not be provided if you have already given the information within the last 3 months.

Failure to provide a proper reply statement can lead to court action

Contract Changes

It is possible to change the contract if both parties agree to the changes. In most cases, you will need to confirm these changes in writing within 20 days of the agreement as well as provide the debtor with any information required by the regulations.

If your contract allows for changes to be made by you without consultation with the debtor you must:

• give the debtor 20 days written notice of any changes which increase the amount, frequency or calculation of repayments
• give written notification of any changes to the annual percentage rate or reference rate not later than the day the change takes effect
• give 30 days written notice of an increase to credit fees or charges.

Enforcement Proceedings

Before you can take enforcement action you must:

• give written warning to the debtor, guarantor or mortgagor of the breach and allow the debtor 30 days to remedy the problem
• before taking action against a guarantor, you must obtain judgement against the debtor from a Tribunal/Court and allow the debtor 30 days to pay.
• obtain a court order before repossessing mortgaged goods if the amount outstanding is less than 25% or up to $10,000 (whichever is less) of the total credit provided.

Note: A debtor, mortgagor or guarantor can negotiate with the credit provider for a postponement of enforcement proceedings. If that is unsuccessful and the amount of the loan is $125,000 or less, they can apply to the Credit Tribunal/Court for a postponement.

Advertising

If you place an advertisement which refers to the cost of any credit available, it must contain:

• the annual percentage rate or rates
  
• a statement detailing any fees or charges that may apply.
  

It is an offence to make false or misleading representation of the credit contract or any material relating to it. If a debtor loses any money as a result of false or misleading representation then you will be liable to refund them this money.

Hardship provisions

If a debtor experiences any personal hardship, caused by circumstances such as illness or unemployment, they may ask you to change the terms of their contract so they can still meet their credit obligations. Borrowers have a right to apply for changes where the credit amount does not exceed a set amount. Please refer to the Hardship Threshold section of What's New for the relevant amount.

Re-opening a contract

If a debtor, mortgagor or guarantor considers their contract to be unjust they may approach a Credit Tribunal/Court to have it changed so they can better meet their repayments. If you are unable or unwilling to make any changes, the debtor can apply to a court to have the contract re-opened.

Leases

Under the Code, any lease arrangement between yourself and a lessee must follow these steps:

• a written lease document is signed by you and the lessee
• an Information Statement is given to the lessee
• any changes to the lease or repossession proceedings must follow the terms set out in the Code

Any consumer leasing arrangement between yourself and a lessee must be in the form of a written document. The lease document should be clearly expressed and not less than 10 point type.

Remember, if your customers have a right or obligation to purchase the goods then you should refer to the Credit part of the checklist.

The Lease Document

The lease must contain:

• a clear description or identification of the goods hired
• the amount of any deposit or any other thing of value needed before goods are hired
• the amount of any stamp duty or other Government charges to be paid
• any fees or charges not included in the normal rental charge
• the amount of each rental payment
• the date when the first rental payment is due
• when rental payments are due - the regular day or specific dates
• the number of rental payments due
• the total amount of rent to be paid
• a statement of the conditions on which a lease can be terminated
• a statement of any liabilities incurred if a lease is terminated.

After the lease is made

Once the lease is made you need to:

• provide a copy of the signed lease to the lessee within 14 days
• provide a copy of the information statement as set out in Form 11 of the Regulations to the Code, which explains the lessee's rights and obligations under the Consumer Credit Code.

Repossession Proceedings

Before you can repossess goods you must give 30 days written notice to the lessee of:-

• your intention to repossess goods.

You are not required to give notice if:-

• the lease says you can take possession of the goods on a specified date at the end of the lease
• you have reasonable grounds to believe the lessee has disposed of the goods or intends to dispose of the goods
• you have been unable to contact the lessee despite reasonable attempts
• the lessee is unable to meet future repayments
• the Court allows you to do so.

Hardship provisions

If a lessee experiences any personal hardship caused by circumstances such as illness or unemployment, they may ask you to change the terms of their lease so they can still meet their rental obligations. If you decide to refuse any changes on a lease where the lessee's commitment is $125,000 or less, the lessee may apply to the Credit Tribunal/Court to have the lease changed.

The court also has power to rule on any transactions that are considered unjust under the Code.

Disclaimer

This checklist is a general guide to some of the most important features of the Consumer Credit Code. It does not replace the actual Code or regulations and may not include everything relevant to your credit transactions. If you feel you are affected by the Code you should obtain a full copy of the Code and regulations and seek independent legal advice as soon as possible.

Glossary

What is a debtor?

A debtor is an individual or strata corporation who owes money to a credit provider or arranges money through a finance broker.

What is a lessee?

A lessee is an individual or strata corporation who pays money for the temporary use of goods.

What is a reference rate?

The reference rate is the rate published by financial institutions to advertise the interest that is applied to different types of credit contract. The Benchmark Lending Rate, The Variable Home Loan Rate and the Fixed Term Loan Rate are all examples of reference rates.

Disclaimer

Disclaimer: The information provided in this web site is of a general nature only and does not replace the Code itself. You should obtain your own copy of the Code and seek independent legal advice if you believe you are affected by the Code.

The Government Consumer Agencies assume no responsibility or liability in relation to anyone acting in reliance on the information provided on or linked to this site.