The National Consumer Credit Protection Amendment (Home Loan and Credit Cards) Bill 2011 (the Bill) was passed by the Australian Parliament on 4 July 2011 and is awaiting assent.
The Bill amends the National Consumer Credit Protection Act 2009 (NCCP Act) which changes will affect all lenders who provide standard home loans and credit card contracts.
Credit Card contracts
Key changes provided in the Bill are:
- making it mandatory for lenders to include, in credit card application forms, a Key Facts Sheet that contains key up-to-date information prescribed by regulations such as information about the annual percentage rate and other terms which apply to any resulting contact;
- prohibiting lenders from making unsolicited invitations that encourage consumers to increase their credit limits (except where the consumer has consented to receive such offers and the consent has not been withdrawn) – consent can be withdrawn by the consumer at any time and records of consents and withdrawals must be kept by the lender;
- requiring lenders to notify a consumer if a credit card is used in excess of its credit limit, and restricts the charging of fees or higher interest (except where the consumer has consented to the charging of such fees or higher interest and the consent has not been withdrawn) where the credit card is used to obtain credit in excess of the credit limit for the credit card contract – consent can be withdrawn by the consumer at any time and records of consents and withdrawals must be kept by the lender; requiring lenders to allocate repayments by the borrower to that part of the balance of their credit card on which they are charged the highest interest rate (subject to the consumer specifically requesting to have a different payment arrangement and the request has not been withdrawn) – consumer may withdraw the request at any time.
A credit card is defined as a card of a kind commonly know as a credit card, a card of a kind that persons carrying on business commonly issued to their customers for use in obtaining goods or services from those persons on credit or anything else that may be used as a card as such (this may include devices that are not like the traditional plastic credit cards).
Transitional provisions provide that lenders can seek and obtain consents from consumers to receive credit limit increase invitations prior to 1 July 2012 so the lenders can rely on the consents for the purpose of making an unsolicited credit limit offers after 1 July 2012.
Standard Home Loans
The Bill introduces a requirement for lenders to display on their website (if they have a website that allows the consumer to apply for, or make an inquiry about a standard home loan), and make available on request or in circumstances prescribed by regulations (whether or not the lenders have a website), a Key Facts Sheet about the standard home loan products they offer.
The lender’s website must provide instructions on how to generate a Key Facts Sheet and allow consumers to generate an up-to-date Key Facts Sheet that can be printed. The Key Facts Sheet sets out, in a standardised format, pricing and other information, as prescribed by regulations, about their products to allow consumers to readily compare different standard home loans, especially in respect to their cost.
A standard home loan is defined as a standard form of credit contract under which the lender provides credit either to pruchase residential property or to refinance credit that has been provided predominantly to purchase residential property, including for investment purposes.
Consequence of Breaches
Contravention of various provisions of the Bill attract civil and criminal penalties. Some offences attract strict liability penalties. Civil penalties may be imposed up to 2,000 penalty units ($1.1 million for companies).
Changes provided by the Bill are to commence on 1 Jul 2012 for credit card contracts and 1 January 2012 for standard home loans
What do you need to do?
If you are providing standard home loans or credit card contracts, you will need to review your lending practices and processes for compliance with the NCCP Act, as amended by the Bill.