Credit contracts regulated by the NCC

Contributed by Elizabeth Samra, Consumer Law Centre of the ACT and current to May 2018

The credit law applies to a variety of consumer credit products, including:

• Credit contracts (a contract under which credit is or may be provided (s 4 NCC);
• Consumer leases (a contract for the hire of goods under which the consumer does not have a right or obligation to purchase the goods (s 169 NCC));
• Mortgages that secure obligations under a credit contract or a related guarantee regulated by the credit law and where the mortgagor is a natural person or strata corporation (s 7 NCC);
• Guarantees that secure obligations under a credit contract regulated by the credit law and where the guarantor is a natural person or strata corporation (s 8 NCC).

Credit contracts

Under the credit law, credit is provided if payment of a debt owed by one person to another is deferred or if one person incurs a deferred debt to another (s 3(1) NCC). The credit law applies to credit contracts if:

• The debtor is a natural person or a strata corporation;
• The credit is wholly or predominantly for personal, domestic or household purposes, or to purchase, improve or renovate an investment property (only for loans granted on or after 1 July 2010);
• A charge is or may be made for providing the credit (e.g. interest or fees); and
• The credit provider is in the business of providing credit (s 5(1) NCC).

Common forms of credit contracts include home loans, personal loans, credit cards, loans to purchase an investment property and payday loans.

The credit law is presumed to apply to a credit contract, mortgage or guarantee unless the contrary is established (s 13(1) NCC). It will also apply to multi-purpose loans, provided more than half the loan is intended to be used for personal, domestic or household purposes or to purchase, improve or renovate an investment property (s 5(4)(a) NCC). Where credit is intended to be used to obtain goods or services for different purposes, the predominant purpose is the one goods or services are intended to be mostly used (s 5(4)(b) NCC).

Sometimes a consumer may sign a declaration before entering the credit contract that credit is not provided wholly or predominantly for personal or residential investment purposes. The inclusion of the declaration does not automatically exclude the protections of the credit law from operating. The declaration will be ineffective if when the declaration was made, the credit provider knew, or had reason to believe or would have known or had reason to believe with reasonable inquiries, that the credit was in fact wholly or predominantly for a credit law purpose (s 13(3) NCC). The declaration is also ineffective if it is not in proper form (s 13(5) NCC).

Consumer leases

The credit law applies to consumer leases if:

• The goods are hired wholly or predominantly for personal, domestic or household purposes;
• A charge is or may be made for the hire that exceeds the cash price of the goods; and
• The lessor who hires the goods does so in the course of that business, or incidental to any other business it carries out (s 170(1) NCC).

Similar presumptions about the application of the credit law and the effect of declarations apply to consumer leases as they do to credit contracts (see s 172 NCC).

Credit contracts entered into before 1 July 2010

Contracts entered into in the ACT prior to 1 July 2010 were regulated by the Uniform Consumer Credit Code (“old Code”). Complex transitional arrangements were adopted following the introduction of the new credit law. Generally, the NCC will apply to consumer credit contracts that were entered into before 1 July 2010 and regulated by the old Code, however, there are exceptions. Legal advice should be obtained for disputes relating to pre-1 July 2010.