The Credit Contracts and Financial Services Law Reform Bill is expected to pass its third reading without further changes (as the Credit Contracts and Consumer Finance Amendment Bill) following further technical amendments introduced through Supplementary Order Papers at the Committee of the whole House stage (see SOP 442 and SOP 443).
What are the key proposed changes for the CCCFA?
The Credit Contracts and Consumer Finance Amendment Bill introduces additional consumer protection provisions in the Credit Contracts and Consumer Finance Act 2003 (CCCFA), including principles of “responsible lending” which lenders must adhere to and a Responsible Lending Code (which is to be finalised within 12 months of the Bill being enacted). The Bill also makes a number of major changes to the law governing repossession of consumer goods with the repeal of the Credit (Repossession) Act 1997 and the incorporation of replacement provisions within an expanded CCCFA. Significantly, the new repossession provisions include a licensing requirement for individuals acting as repossession agents under the Private Security Personnel and Private Investigators Act 2010.
Although the new credit contract provisions are largely targeted at ‘fringe lending practices’, the amendments to the CCCFA will require a number of changes to be made to most lenders’ documentation and practices which involve credit provided to consumers for personal, domestic or household purposes (such as home loans, personal loans, credit sales, hire purchase, student loans, credit cards, long-term leases, housing buy-back schemes and certain layby sales). This includes:
providing all initial disclosure before a credit contract is entered into (rather than within five working days of when the contract is made);
ensuring that no security interest is taken over consumer goods that are essential items (for example, beds and bedding and cooking equipment), travel or identity documents, bank cards, or other consumer goods prescribed by regulations;
allowing for five working days rather than the current three working day “cooling-off” period for cancelling credit contracts;
complying with the new “standing disclosure” requirements by displaying the lender’s standard form contract terms and borrowing costs on its Internet site, and if the lender operates from business premises, ensuring that there is a prominent and clearly displayed notice that a copy of those details are available on request (free of charge);
including a prescribed minimum repayment warning on credit card statements; and
complying with new disclosure requirements relating to continuing disclosure statements, variations of terms and transfers of creditors’ rights.
The Bill also includes a small amendment to the Personal Property Securities Act 1999 to remove the opportunity for secured creditors to use powers of attorney to extend the coverage of their security over future property a borrower might acquire.
When do the changes come into force?
The Bill provides for staggered commencement dates of the new provisions (which are still to be announced) to allow for the development of the Responsible Lending Code, and for the necessary changes to be implemented in the credit industry. All provisions will be in force within 12 months of the Bill receiving Royal assent (which is expected to be by the first week of June 2014).
The amendments to the CCCFA will not apply to existing agreements except in certain specified circumstances.