What you can expect from your lender

The lender responsibilities say that your lender must act carefully and responsibly at all times, and treat you reasonably and with respect.

When entering into your loan, the most important lender responsibilities are that the lender must:

• make enquiries to check that the loan is suitable for your needs
• make enquiries to check that you can afford the loan
• help you to understand the key terms of the loan before you enter into it
• ensure the loan agreement is not oppressive and that they do not treat you oppressively.

Your lender must check whether the loan is suitable for you

Your lender needs to check that it is likely that the loan will meet your needs and be suitable for you.

Expect your lender to ask questions about:

• the amount of credit you need
• the purpose of the loan – for example, you may need the loan for a sudden unexpected short-term cost (such as an air ticket or medical costs) or to make a planned long-term purchase, such as a household appliance or a car – different kinds of loans can be better in different situations
• whether you will need any flexibility attached to your loan (for example, you may wish to be able to change how often you make your payments, or to re-borrow any amounts that you repay)
• whether you want to be able to pay off lump sums during the loan
• whether the loan will include extra products, for example loan insurance, extended warranties or repayment waivers.

Your lender must check whether the loan is affordable for you

Your lender must make enquiries to check whether you are likely to be able to make your loan payments without suffering substantial hardship.

What does “without suffering substantial hardship” mean?

The test is whether you can afford to make repayments on your loan without undue difficulty, while paying for all your necessities and meeting other financial commitments.

Necessities include such things as accommodation, food, power, telephone, transport and required medical costs. Other financial commitments might include repayments on existing debts or child support payments.

Expect your lender to ask you questions about:

• your income (for example, what you earn, how regularly you get paid and how long you have been in your job)
• your expenses (for example, what you pay for accommodation, food, childcare costs, and debts)
• your credit history and whether you are likely to be in a position to repay the loan.

Your lender also needs to see documents that prove your financial situation. When you meet with a lender about a possible new loan, they might ask for all relevant financial documents (for example, payslips, bank statements, mortgage documents, existing loan contracts and insurance documents).

Even if they do not ask for them, it is a good idea to show them these documents. Having them with you will help you to answer the lender’s questions and will help the lender to understand your current financial situation.

You may wish to consider getting advice from a budget adviser, to help work out whether you are in a position to be able to pay back a loan.

Your lender must help you to understand your loan

Before you sign up, your lender is required to provide you with key information about your loan in writing. This is called a disclosure document. Your lender also must help you to understand what you are committing to before you sign up, by discussing the key information in the disclosure document with you and by answering your questions.

This helps you to understand what the transaction will cost and what your obligations are. Disclosure lets you compare competing credit offers, gives you a written record of the key terms of the contract and helps you keep track of your debt.

To help you understand the loan, a lender should:

• clearly highlight the key features of the agreement (for example, by providing a copy of the agreement and circling key features while explaining them, or ensuring key features are highlighted clearly on an online loan application) – key features you should look out for include the term of the loan, interest rates, fees, the repayments you will need to make, and whether security is being taken over anything else you own
• give you plenty of time to fully consider the loan (for example, by giving you information to read off-site, and the time to consult with another person)
• provide access to an interpreter or information in another language, if you do not have a good understanding of the English language.

A lender may also recommend that you seek legal advice. This can assist if you are not sure what you might be committing to.

If the lender is aware that you have not understood some aspect of the agreement, they must explain it to you in a way you understand.

What information does a lender have to provide?

The lender must give you information such as what payments are required, how any interest is calculated and any fees or charges that apply.

The disclosure that a lender needs to give you will depend on the specific contract, for example, whether it is a mortgage, a revolving credit facility, a hire purchase agreement or a lease. The disclosure will also depend on the stage of the contract, for example, at the start of the contract or midway through it, and whether the information is available at that time.

How does a lender have to provide this information?

A lender must provide disclosure in writing, either in a single document or a series of related documents. The information must be clear and concise so that a reasonable person will see it. The overall effect must not be misleading or deceptive. For example, a lender should not use fine print to disclose additional charges or costs that add to the total cost of the loan.

A lender must provide disclosure by either:

• giving a disclosure statement to you in person
• posting a disclosure statement to your last known address or
• emailing or faxing a disclosure statement to you (as long as you have agreed to this and the information remains readily accessible so that it can be referred to again at a later date).

The lender must also provide disclosure to anyone who has agreed to pay back the debt if you don't (the guarantor).

When does a lender have to provide this information?

Lenders must provide disclosure at various stages of a consumer credit contract, consumer lease or buy-back transaction. There are five different types of disclosure under the CCCF Act.

• Initial disclosure must be provided when the contract starts.
• Continuing disclosure must be provided during the term of the contract.
• Variation disclosure must be provided when the contract is changed.
• Request disclosure must be provided when you ask for it.
• Guarantee disclosure must be provided to anyone guaranteeing the debt.

When working out when you can cancel or when a lender can enforce a contract, disclosure is treated as having been made either:

• 4 working days after it’s been sent by post, or
• 2 working days after it’s been sent by fax or email.

Otherwise, disclosure is treated as being made on the day the lender sends it to you.

Contracts cannot be oppressive

There are a number of specific protections for borrowers, such as limits on fees that lenders can charge, and requirements for lenders to disclose key information to borrowers. It also protects borrowers and guarantors from what is called “oppressive” contracts and from “oppressive” conduct by lenders.

“Oppressive” means that the contract or lender’s conduct is extremely unfair or unreasonable. Any loan that you enter into should suit the needs of both the lender and yourself.