Consumer Credit Law

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Consumer credit law for all states and territories is now regulated by the Federal Government under a Uniform Consumer Credit Code (UCCC).

Consumer credit law is regulated under the National Consumer Credit Protection Bill 2009 and administered by the Australian Securities & Investment Commission (ASIC). This means that consumer credit products such as home loans, personal loans, credit cards, overdrafts, line of credit accounts and other financial products will now fall under the new laws.

How will the consumer credit laws be phased in?

The plan to bring the regulation of consumer credit law under the Commonwealth – the National Consumer Credit Action Plan – will be introduced in two phases. This was decided to give the credit industry more time to make the necessary changes to move to the new laws and regulations.

The first phase involved the Federal Government assuming responsibility for the Uniform Consumer Credit Code (UCCC) and enacting it as Commonwealth law. The second phase involves a review of unsolicited credit card limit extension offers, the possible regulation of reverse mortgages and where necessary addressing unfavourable lending practices.

ASIC and The Treasury, industry representatives and other key stakeholders are working together to implement the changes. ASIC will continue to make information about the new regulatory framework including the legislation, licensing system, business obligations and the timeframe in which the changes will take effect, available on the ASIC website.

How the consumer credit laws benefit the credit services industry?

The new laws will be a comprehensive national credit licensing system. Consumer credit laws will be amalgamated into one national scheme thus reducing red tape, bureaucracy and duplication and ensuring consistency of the consumer credit code, credit legislation and regulations across all the different states and territories.

The consumer credit code will provide quality benchmarks and raise industry standards for both credit providers and credit service providers and consumers, promote responsible lending and provide improved protection for consumers and enhanced powers for ASIC to enforce the consumer credit laws.

How have the registration and licensing laws changed?

The consumer credit laws have also changed in regards to registration and licensing for credit providers and credit service providers and intermediaries. A national licensing program requires providers of consumer credit and credit-related brokering services to obtain an Australian Credit Licence from ASIC.

From 1 January 2011, if you want to engage in credit activities you must be:

A credit licence holder

A credit registered person who has submitted a licence application to ASIC

An authorised representative of either of the above.

This legislation applies to all businesses that offer credit assistance or act as an intermediary. An intermediary is someone who plays a role in securing a credit contract or a lease for a consumer, even if you do not deal directly with the client. Financial planners and brokers may be considered intermediaries.

If you applied for a credit licence before 31 December 2010, you can continue to engage in credit activities until ASIC makes a decision on your licence application. If you missed the December 31 cut-off, you must cease engaging in credit activities until you are granted a credit licence or you are authorised as a credit representative.

Owen Hodge Lawyers has business law specialists that can advise you about the credit laws and your obligations. If you are a credit provider or credit service provider and you would like more information about the changes to the consumer credit law and how this may affect your business, please contact our Consumer Credit Team and Sydney business lawyers during business hours on 1800 770 780.

If you need any assistance with this topic, please contact us.

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