Introduction of National Credit Code
The National Credit Code commenced operation on 1 July 2010. This is a national code that replaces the former Consumer Credit Code. Despite what its title suggests, it is not a code of conduct but legislation that is enforceable in certain situations where credit is offered. The key aspects of the new Code are:
- Licensing of credit providers
- New lending conduct obligations
- Enforcement through ASIC (Australian Securities and Investment Commission)
The key changes are:
- Including loans used for purchase or renovations to residential investment property.
- Consumers can apply for hardship relief for credit contracts where the amount of credit is less than $500,000.
- Essential household goods ( there are some exceptions) cannot be used as security for a loan.
- New obligations in relation to “default” notices.
- Changes about which court/tribunal can deal with disputes.
The law is in Schedule 1 of the National Consumer Credit Protection Act 2009. You can find this law on the internet via www.comlaw.gov.au.
As well as this Code there are other codes that are not legally binding but may be useful in negotiations. Some of these are:
- Banking Code of Practice
- General Insurance Code of Practice
- Financial Planners Code of Professional Practice
From 1 July 2010, registration or licensing is compulsory for those engaged in credit activities (this now includes finance brokers). Credit activity is defined as including “activity relating to credit contracts, consumer leases, related mortgages and guarantees, and credit services.”
Some exceptions apply, such as retail stores or car yards where credit is provided. Note the actual credit provider must however be licensed.
Detailed information about who needs a licence is on the ASIC web site.
When does the new law apply?
It applies to credit contracts signed on or after 1 July 2010 where all of the following apply:
- The debtor must be a natural person, ie not a company.
- The Credit must be provided primarily for personal or household purposes; to purchase or renovate residential property (purchased as an investment) ; or to refinance credit provided for those purposes.
- A charge must be made for providing credit.
- The credit provider must provide credit as part of their business.
Note, some contracts, such as margin loans, are specifically excluded by the legislation (see s.6).
Last Updated – February 2014