National Credit Laws

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

A national legislative framework governing the provision of consumer credit commenced on 1 July 2010. It comprises the National Consumer Credit Protection Act 2009 (Cth) ("NCCP"), incorporating the National Credit Code ("NCC") at Schedule 1 to the NCCP Act and the National Consumer Credit Protection Regulations 2010 (Cth) ("NCCPR") (herein referred to as ‘the credit law’). The credit law is regulated by the Australian Securities and Investment Commission (“ASIC”).

The credit law provides consumers with the following important rights and protections:

• Pre-contractual disclosure requirements for credit contracts and consumer leases;
• Responsible lending obligations for consumer credit contracts and leases;
• Financial hardship;
• Unjust transactions and unconscionable fees and charges;
• Rights in relation to accessing documents;
• Key procedural requirements relating to the repossession of property/goods and the commencement of court action;
• Free access to external dispute resolution for consumers, in addition to the right to seek redress directly from a court.

Additional consumer credit protections

Consumer credit is also subject to consumer protection provisions applying to financial products and services under the Australian Securities and Investments Commission Act 2001 (Cth) (“ASIC Act”), various industry codes of practice and external dispute resolution terms of reference. ASIC Regulatory guides offer guidance on how regulated industries should meet their obligations.

ASIC Act

The ASIC Act applies to suppliers of credit product and services, including business and investment credit. The consumer protection provisions in the ASIC Act are more general in scope than many in the credit law and accordingly, also assist consumers of credit which are not regulated by the credit law. The principal protections for consumers under the ASIC Act relate to misleading or deceptive conduct (s 12DA ASIC Act), unconscionable conduct (ss 12 CA and 12CB ASIC Act), false or misleading representations (ss 12DB, 12DC and 12DF ASIC Act) and unfair contract terms from 1 July 2010 (s 12BF ASIC Act).

Industry Codes of Practice

The banking and finance industry has adopted a number of voluntary codes of practice which detail key commitments and obligations to customers on standards of practice and principles of conduct. These include:

• Code of Banking Practice (bank membership list and code available at https://www.ausbanking.org.au). The Code of Banking Practice applies to both individuals and small businesses;
• Customer-Owned Code of Banking Practice (building societies/credit unions membership list and code available at www.customerownedbanking.asn.au);
• Mortgage & Finance Association of Australia Code of Practice (non-bank lenders, finance brokers and mortgage managers list and code available at www.mfaa.com.au).

The Code of Banking Practice forms part of a contract between a subscribing bank and its individual or small business customers, the terms of which can be enforced in court (see for example National Australia Bank Ltd v Rose [2016] VSCA 169). Customers can also seek redress through external dispute resolution, where provisions of the Code of Banking Practice can be considered and compensation for loss awarded (see Financial Ombudsman Service Approach, to the 2013 Code of Banking Practice). A new Code of Banking Practice, currently awaiting ASIC approval, contains some important changes for individuals and small businesses, including ending unsolicited offers of credit card increases, an ability for customers to cancel credit cards online and improved transparency around fees. Further, retail banks in Australia will be required to sign up to the new Code of Banking Practice as a condition of membership to the Australian Banking Association.

External Dispute Resolution

All credit licensees (see Who is Regulated?) must, among other things, be a member of an approved external dispute resolution scheme. On 14 February 2018, parliament passed the Treasury Laws Amendment (Putting Consumers First—Establishment of the Australian Financial Complaints Authority) Bill 2017 (“AFCA Bill”), in doing so creating a single external dispute resolution scheme for financial disputes - the Australian Financial Complaints Authority (“AFCA”). ASIC will retain oversight of the two existing ASIC approved schemes - the Financial Ombudsman Service and the Credit and Investment Ombudsman - in the interim. Consumers will be able to lodge complaints with Financial Ombudsman Service and Credit and Investment Ombudsman up to and including 31 October 2018. AFCA then commences on 1 November 2018 and from that date complaints can be lodged with it. Complaints made to the Financial Ombudsman Service and Credit and Investment Ombudsman schemes before 1 November 2018 and which remain unresolved at that date will be dealt with by AFCA under the Rules/Terms of Reference that applied when the complaint was originally made.

Financial Ombudsman Service and Credit and Investment Ombudsman consider fairness, good industry practice and industry codes in determining disputes between consumers and credit providers. The schemes have their own terms of reference and guidelines explaining their approach on substantive issues. At the time of writing, AFCA’s Terms of Reference have not been finalised, however, ASIC Draft Regulatory Guide 139: Oversight of AFCA provides an overview of the new EDR scheme.

ASIC Regulatory Guides

ASIC regulatory guides offer guidance on how ASIC interprets the law, when and how it will exercise specific powers and how regulated entities may meet their obligations (see www.asic.gov.au). These guides do not have formal legal status but are instructive, particularly given the paucity of case law on the topic.