The credit code
The Consumer Credit Code commenced operation on November 1, 1996. This is a national code that applies in each State.
Despite what its title suggests, it is not a code of conduct but legislation that is enforceable in certain situations where credit is offered. Any non-business credit transactions are governed by the Code if entered into after that date, including continuing contracts that were in force at that date.
- credit provided predominantly for domestic, personal or household purposes;
- where a charge is made for the credit; and
- credit is provided in the course of a business of providing credit, or incidental to any other business of the credit provider.
What it covers
The Consumer Credit Code covers credit contracts entered into after November 1, 1996 including:
- all consumer credit e.g. credit cards, housing etc loans that are characterised as being domestic, personal or household - not for business purposes;
- where charges are made for the credit;
- where the credit provider does so in the course of business.
Personal, domestic & household purposes
The Consumer Credit Code does not apply for business purposes.
According to the Code the nature of the credit does not have to be wholly concerned with domestic credit, but will be caught by the provisions of the Consumer Credit Code if:
- more than half the credit is for personal, domestic & household purposes; or
- if the credit is to purchase goods that are to be used for different purposes, then the purpose is mostly for personal, domestic & household purposes.
Mortgages are a security over goods (sometimes called "chattels") or real property. This means that the lender has the right to take the property/goods and sell it if the borrower defaults on the loan.
There are certain requirements that must be met before the mortgage comes under the Consumer Credit Code, including that the goods or land must be specifically described.
Applicable credit providers
For a credit contract to be covered by the Consumer Credit Code, the credit provider must supply the credit:
- in the course of a business that provides credit; or
- where it is incidental to any other business of the credit provider.
There is no hard and fast way to determine this, but it can be important where the seller simply allows the buyer to pay for the goods in instalments, or when a family member offers a loan.
In the first case the contract would probably be covered by the Consumer Credit Code; in the latter case it may not be covered.
Exclusions from the Consumer Credit Code
This can be complicated, and it is always worth asking whether the contract is covered by the Consumer Credit Code. There are many situations where the Consumer Credit Code will not apply, including:
- short term credit;
- where credit provision occurs without contemplation e.g. a savings account goes into debit;
- most pawnbroker transactions; employee loans.
Credit Code & guarantees
A guarantee must be:
- in writing;
- signed by the guarantor;
A copy of the credit contract must be received by the guarantor. They must also receive a copy of a document that sets out the obligations of the guarantor under the contract.
Last Updated – March 2010
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This fact sheet is intended to be general information about the law in Australia. It is not a substitute for legal or other professional advice. Lawscape Communications Pty Ltd and Fairfax Digital Ltd do not accept responsibility for loss to any person, who either acts or does not act because of this fact sheet. Last Updated - October 2005