Royal Assent 24 April 2002 (475kB)
Explanatory Paper (53kB)
New Part 9A of Uniform Consumer Credit Code
The Consumer Credit Code (Queensland) Amendment Bill 2002 was introduced into the Queensland Parliament on 6 March 2002 and was passed on 18 April 2002. The Act provides that:
Consumer Credit (Queensland) Amendment Act 2002
(these documents link to the Office
of the Queensland Parliamentary Counsel website)
Royal Assent 24 April 2002 (475kB) |
Explanatory Paper (53kB) |
Regulations prescribe the method of calculating the comparison rate and the loan amounts and terms which are to be used for the purposes of comparison rates in advertising and in comparison rate schedules.
The regulations were made by Governor in Council on 6 March 2003. A copy of
the Final Regulation can be downloaded below. They are in force from
1 July 2003.
Consumer Credit Amendment Regulation (No1) 2003
(this document links to the Office
of the Queensland Parliamentary Counsel website)
Consumer Credit Amendment Regulation (No1) 2003 (179kB) |
Mandatory comparison Rates are in force from 1 July 2003.
What is a comparison rate?
A comparison rate is a tool to help consumers identify the true cost of a loan.
It is a rate which includes both the interest rate and fees and charges relating to a loan, reduced to a single percentage figure. For example, a bank's advertised interest rate may be 5.49% and its comparison rate 6.75%.
When must I be provided with a comparison rate?
Comparison rates only have to be provided for:
From 1 July 2003:
How is a comparison rate calculated?
Comparison rates are calculated in accordance with a standard formula, which takes into account:
Comparison rates in advertisements
As different loan amounts and terms produce different comparison rates, comparison rates in advertisements must be based on the amount and term in a legislated standard list that is most typical of the loan being advertised.
For example, the standard list includes a loan of $30,000 for 5 years, which is similar to a typical car loan, and $150,000 for 25 years, which is similar to a typical home loan.
A credit advertisement must clearly state the amount and term on which a comparison rate is based.
Comparison rate schedules
A comparison rate schedule is a list of comparison rates for a range of standard loan amounts and terms for a particular credit product.
The standard amounts and terms have been set in legislation and a comparison rate must be provided for all of the listed amounts that are generally available for that credit product.
As they use the same loan amounts and terms, comparison rate schedules can be used to compare the comparison rates of different credit products.
Comparison rate schedules must be made available at any premises of a credit provider, finance broker or linked supplier at which consumer credit products are advertised or at which members of the public can lodge credit applications in person.
A relevant comparison rate schedule must also accompany any credit application that is sent or given to you by a credit provider, finance broker or linked supplier. Whenever credit products are advertised on the internet, electronic access to a relevant comparison rate schedule must also be made available.
A comparison rate can be a useful tool for comparing the cost of different loans, but it is important to consider all of a loan's features and not just focus on the comparison rate.
Remember that the comparison rate does not include government fees and charges or fees and charges which will only charged in certain circumstances. Therefore the comparison rate may not provide a complete picture of the total cost of a loan.
A comparison rate also does not take into account some factors which may make a loan more attractive, such as fee free banking, or flexible repayment arrangements. You should give careful consideration to whether these features are important to you and the effect they will have on the cost of the loan.
The amounts and terms shown on a comparison rate schedule do not represent all the possible combinations of amounts and terms.
This means the amount and term of your particular loan may not be included in the comparison rate schedule. In order to get an idea of the comparison rate which applies to your loan, look at the comparison rate for the amount and term closest to the amount and term of your loan.
Credit providers, finance brokers and suppliers linked to credit providers are not required to provide you with a comparison rate for your particular loan amount and term, but some may be willing to do so if you ask them.
Credit advertisements and comparison rate schedules may sometimes state whether a comparison rate is based on a secured loan (that is, a loan for which the credit provider takes a mortgage over property) or an unsecured loan (where no mortgage is taken).
This is because there can be a significant difference in the comparison rate for a secured loan and an unsecured loan of the same value, due to the higher interest rates usually charged for unsecured loans and the higher up-front fees for secured loans.
If a comparison rate is based on a secured loan, it is unlikely to be accurate for an unsecured loan of the same value, and vice versa.
Where can I get further information?
A list of frequently asked questions about comparison rates is available at www.creditcode.gov.au.
Questions can also be directed to your nearest Fair Trading Centre.
A copy of a Consumer Guide to Comparison Rates can be downloaded below.
Comparison Rates - A Consumer Guide (102kB) |
Why don't comparison rates have to be provided for continuing credit products?
The comparison rate formula requires the amount and term of a loan to be known. In the case of continuing credit products such as credit cards, however, neither the amount nor the term of the loan are known in advance.
What does the warning accompanying a comparison rate mean?
The warning advises consumers that the comparison rate is accurate only for the particular loan amount and term on which it is based, as different amounts and terms will produce different comparison rates.
The warning also advises consumers of the limitations of comparison rates, by noting that:
The warning is intended to make consumers aware that, while a comparison rate can be a useful tool for comparing the cost of different loans, it is important to consider all of a loan's features and not just focus on the comparison rate.
Are credit application and establishment fees included in the comparison rate calculation?
Yes. The comparison rate formula includes credit fees and charges which are payable before credit is provided and which are payable even if the credit is not provided.
Are fees paid to brokers, lawyers and valuers included in the comparison rate calculation?
The comparison rate calculation includes fees and charges payable in connection with a credit contract or mortgage, except for:
Fees charged by brokers, lawyers, and valuers will only be included in the comparison rate calculation if they are payable in connection with the credit contract.
Generally, if you have no choice but to pay a fee or charge, it will be included in the comparison rate, provided the charge is ascertainable whether the comparison rate is provided and it is not a government fee or charge.
Therefore if the credit provider requires you to pay a valuation fee, for example, this will be included in the comparison rate calculation. However if you employ a valuer independently of the credit provider the fee will not be included in the comparison rate.
What can I do if the amount or term of my loan are not listed in the comparison rate schedule?
The amounts and terms shown on a comparison rate schedule do not represent all the possible combinations of amounts and terms.
This means the amount and term of your particular loan may not be included in the comparison rate schedule. In order to get an idea of the comparison rate which applies to your loan, look at the comparison rate for the amount and term closest to the amount and term of your loan.
If I do not expect to keep a loan for the full term, does that make any difference to the comparison rate?
No. The comparison rate must be calculated in accordance with a standard formula, which takes into account the term of the loan as stated in the credit contract. The contractual term is always used in the calculation of the comparison rate, whether or not the consumer intends to keep the loan for that term.
Does the comparison rate differ for interest only and principal and interest loans of the same amounts and terms?
The comparison rate will usually be slightly higher for an interest only loan than for an equivalent principal and interest loan, because slightly more interest is paid on an interest only loan.
Are home loans which feature a line of credit covered by the comparison rate requirements?
The home loan is a fixed term credit product, and is therefore covered by the comparison rate requirements. The line of credit is an extra feature, and is not covered by the comparison rate requirements as it is a continuing credit product.
This means that the comparison rate for a home loan with a line of credit only applies to the fixed term home loan.
If a credit application is made over the telephone, must a comparison rate be provided?
No, a comparison rate doesn't have to be provided if a credit application is made over the phone.
Are advertisements which say that a loan is interest free required to contain a comparison rate?
No. These advertisements do not feature an interest rate and so do not have to provide a comparison rate.
Do advertisements which state how much you will save on a loan have to contain a comparison rate?
Not unless they also contain an interest rate. Comparison rates only have to be provided in advertisements which feature an interest rate.
Does the repayment frequency affect the comparison rate, and if so, could the comparison rate be manipulated by using the repayment frequency that produces the lowest comparison rate?
Different repayment frequencies have only a very minor effect on the comparison rate. For example, changing the repayment frequency from fortnightly to weekly on a loan with an interest rate of between 6% and 10% will usually reduce the comparison rate by about 0.01%.
The comparison rate formula requires the comparison rate to be calculated on the basis of the repayment frequency which is required by the credit contract. Most credit providers have a standard contract for their credit products, which will stipulate a certain repayment frequency.
A copy of Frequently Asked Questions in relation to Comparison Rates can be downloaded below.
Comparison Rates - Frequently Asked Questions (86kB) |
If you have any questions please direct these to:
Luke Seivers
Senior Legal Policy Adviser
Consumer Affairs Victoria
Phone: 03 8684 6491
Six Statement of Enforcement policies have now been converted into regulations. The Statement of Enforcement Policies were drafted to clarify a number of issues in relation to comparison rates.
" * " indicates those statement of enforcement policies that have been made into regulations
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.