The Government has released a draft of the Credit Contracts and Consumer Finance Amendment Bill (the Bill), designed to protect consumers from irresponsible lenders.
While the changes were developed to protect consumers against unscrupulous lending practices, the reforms will affect all lenders.
The proposed changes include:
- better controls against misleading, deceptive or confusing advertising;
- the complete disclosure of loan terms; and
- an extension of the "cooling off period" for borrowers to cancel loans.
Click here to read our earlier article Proposed tougher consumer credit laws target loan sharks for a summary of the main impact of the new legislation.
Submissions closed on 25 May, and a report on the submissions is to be provided to the Minister of Consumer Affairs next month. The Minister will seek final agreement from Cabinet on the content of the Bill by the end of July. The Parliamentary Counsel Office will make any resulting amendments to the Exposure Draft of the Bill, aiming for the final Bill to be tabled in Parliament in September.
The Government has also indicated it will introduce a new code of responsible lending, with non-compliant lenders facing being banned from the market. Also, if lenders are not registered financial service providers, borrowers will not be obliged to pay interest or fees. In addition, it will be illegal to lend money where loan repayments would be likely to result in substantial hardship for the borrower.