25/02/2010

In the second half of 2009, the National Consumer Credit Protection Bill 2009 was introduced in the Federal Parliament.  The main thrust is to enact the previous state-based legislation at a Federal level whilst consolidating and enhancing the current framework where necessary.

Up until now, the credit legislation has been state-based on the Uniform Consumer Credit Code with each state enacting its own laws which has not always been consistent across each.

Two of the main obligations being proposed under the Bill are:

1.            the general conduct obligations on Australian Credit Licence (“ACL”) holders; and

2.            responsible lending requirements on lenders and brokers.

General Conduct Obligations on ACL holders

The obligations to be imposed on ACL holders will be similar to the obligations that exist on Australian Financial Services Licence holders.  In particular, ACL holders will be required to:

·                     ensure any credit activities are carried out efficiently, honestly and fairly;

·                     ensure that their representatives are trained and are competent;

·                     have an internal dispute resolution system;

·                     be a member of an approved external dispute resolution scheme;

·                     have a compliance plan; and

·                     report significant contraventions of the credit legislation to ASIC within 10 days of becoming aware of such contraventions.

Responsible lending requirements

The Bill provides for a general prohibition on ACL holders from providing credit products and services that are unsuitable for the consumers’ needs.  The responsible lending requirements include the ACL holder:

·                     providing a credit guide with information on the ACL holder and its obligations;

·                     giving an up-front binding quote if credit assistance is being provided by the ACL holder; and

·                     assessing whether the credit contract is unsuitable for the particular consumer.

Considerations of whether the credit contract is unsuitable include whether the consumer can meet its financial obligations under the contract without substantial hardship.

For more information on the proposed Consumer Credit legislation, please contact David Nicoll of TOWNSENDS BUSINESS & CORPORATE LAWYERS on (02) 8296 6222