Changes to credit laws
This page was updated3 months ago
Credit laws are changing, it is important that you understand the changes to your obligations.
The commencement of the Credit Contracts Legislation Amendment Act 2019 (CCLAA) has been impacted by COVID-19 and the changes have been introduced at different stages. The first changes were effective from 20 December 2019, with the final changes coming into force on 1 December 2021. The changes that came into force on 1 December 2021 were originally meant to come take effect on 1 October 2021 however in September 2021, Cabinet decided to extend the compliance date due to the impact of COVID-19 on alert levels.
There are some additional obligations to those that are set out below but will take effect once Regulations have been passed. We will update this page with that information when it becomes available.
- Introduction of penalties and statutory damages for breaching Lender Responsibility Principles
- Amendments to how disclosure can be provided
- Changes to the ability to take repossession enforcement action where there is a complaint or hardship application
- Expansion of enforcement response options for the Commission to include enforceable undertakings
- Prohibition on the enforcement of guarantees in some situations
- Changes to the criteria for the application of repossession rules
- Introduction of offences (including infringement offences) for failing to make prescribed information publicly available including online.
1 May 2020
Introduction of the following rules that apply to high-cost consumer credit contracts (HCCC):
- Lenders are required to disclose additional key information
- Total cost cap – fees and interest under a HCCC will be limited to 100% of the first advance
- Lenders cannot charge compound interest
- Default fees exceeding $30 considered unreasonable unless the lender can prove it is reasonable
- Anti-avoidance provision to address anyone trying to circumvent provisions apply to HCCC
- Expansion of remedies for CCCF Act breaches including compliance orders and corrective advertising
- Option of providing certain disclosure within 5 days or next continuing disclosure statement no longer applies for high-cost loans.
1 June 2020
- All mobile trader contracts where goods are not paid for in full at the time of purchase will now be subject to the CCCF Act
- Amendment to initial disclosure requirements for credit agreements that are also layby sales
- Introduction of rules that only apply to high-cost consumer credit contracts (HCCC):
- Rate cap – maximum daily charge of interest and fees added to a HCCC will not be able to exceed 0.8% of the credit provided per day
- Restrictions on entering into HCCC in certain circumstances when the borrower already has or has had other HCCCs.
1 October 2021
- Lenders (except for those exempt) and mobile traders must be certified by the Commission that their directors and senior managers are fit and proper persons to hold their respective positions
Read our handouts that we provided at our lender seminars which is aimed at assisting lenders in understanding the law changes.
1 December 2021:
- Introduction of duties on directors and senior managers to exercise due diligence and penalties for failing to comply
- Lenders are no longer able to rely solely on the fact that information has been provided by the borrower to show that they have made reasonable inquiries about the affordability and suitability of loans
- There are minimum advertising standards and requirements for affordability and suitability inquiries
- Lenders must keep records demonstrating compliance with their obligation to undertake affordability and suitability inquiries
- Lenders must take reasonable steps to provide information about the loan to borrowers in the same language as they advertise in
- Lenders under HCCCs must prominently disclose in print and internet advertising prescribed information about disputes resolution and financial mentoring services
- Advertisements for HCCCs are required to include a prominent statement that a HCCC should not be used for long-term or regular borrowing, and is only suitable for temporary, short-term cash needs
- Lenders must make disclosure to borrowers when they start debt collection
- Lenders must keep records demonstrating that their fees are reasonable and review their fees if there is a material change that is likely to affect the reasonableness of the fee
- Lenders must undertake affordability and suitability inquiries before making “material changes”
- Revised Responsible Lending Code (with the exception of Chapter 12)
Read our handouts that we provided at our lender seminars which are aimed at assisting lenders in understanding the law changes.
The following change came into force on 1 February 2022:
- Chapter 12 of the Revised Responsible Lending Code
Lenders’ questions and answers:
We have put together answers to questions that were submitted during our series of online seminars on the CCCF Act, but were unable to answer due to time restraints.