If you are a lender, this page will help you understand your obligations in relation to your advertising.
You will need to comply with:
advertising obligations in the lender responsibility principles set out in the Credit Contracts and Consumer Finance Act 2003
advertising standards set out in the Credit Contracts and Consumer Finance Regulations 2004 (the Regulations)
obligations in the Fair Trading Act 1986 prohibiting misleading representations and conduct.
Lender responsibility principles
The lender responsibility principles include that every lender must at all times exercise the care, diligence, and skill of a responsible lender in any advertisement for:
providing credit or finance under an agreement
providing credit-related insurance under a relevant insurance contract.
The lender responsibilities include that lenders must assist borrowers and guarantors to reach an informed decision as to whether or not to enter into an agreement, and to be reasonably aware of the full implications of entering into an agreement, including ensuring that any advertising:
is not, or is not likely to be, misleading, deceptive, or confusing to borrowers; and
complies with the advertising standards set out in the regulations that came into force on 1 December 2021.
To comply with the obligation to assist borrowers to reach an informed decision, lenders must take reasonable steps, if advertising in a certain language within the preceding six months, to offer information about the agreement in the language of the advertising. Lenders are only required to take these reasonable steps if it’s necessary to ensure the borrower can make an informed decision.
The Responsible Lending Code elaborates on the lender responsibility principles and provides guidance on how lenders can comply with the principles. An updated Code came into force on 1 December 2021, except for changes to chapter 12 that came into force on 1 February 2022.
Advertising standards
From 1 December 2021, the Regulations prescribe certain details that must be stated in advertising, and prohibit certain advertising practices.
The Regulations contain rules about the advertising of:
payment amounts. For example, if the advertisement refers to the amount of a payment such as “$50 a week”, it must also state the total amount of the payments, for example “total payments will be $500”.
interest rates or charges. For example, if the advertisement refers to an interest rate, such as highlighting a special rate, it must also set out the range of interest rates that could apply and the mandatory credit fees. For example, if 7% p/a is highlighted then the advertisement must add “Interest 7% p/a – 20% p/a. Establishment fee $100”.
credit fees if the advertisement states there is no interest, or if an interest rate is stated.
high cost consumer credit contracts.
The Regulations also prohibit lenders from certain advertising practices. Lenders must not make representations in their advertising that:
the lender will not inquire into a borrower’s circumstances. For example, a lender must not say “no credit checks”.
the lender will not take into account a borrower’s circumstances in assessing whether to enter into the loan. For example, a lender must not say “bankrupt – ok”.
the loan has already been approved or granted if suitability and affordability inquiries have not been completed. For example, a lender must not say “pre-approved” or “$500 in your account”.
if the speed of approval of a loan is mentioned, the advertising must also include a prominent reference to the responsible lending criteria or inquiries. For example, if the advertisement says “Approval in minutes”, it must also reference “Subject to responsible lending inquiries”.
The matters required by the advertising standards regulations must be stated in plain language and in a clear, concise, and intelligible way.
Consequences of non-compliance
Breaches of the lender responsibility principles are subject to civil pecuniary penalties of up to $600,000 for a company and $200,000 for an individual, plus statutory damages equal to the cost of borrowing (interest and fees charged to the borrower). Failure to comply with the Regulations will result in a breach of the relevant lender responsibility principle resulting in potential liability for these penalties.
Lenders must also comply with the general rules in the Fair Trading Act that apply to all traders, to ensure that any advertising is not misleading or deceptive, and must take care not to make unsubstantiated representations.
