Compliance: Theory and Practice in the Financial Services Industry

11C. Credit Facilities

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Outline

	Definitions
	Exclusion of Credit Facilities from FSR Rules
	Credit Activities Covered by the NCCPA
	Australian Credit Licences
	Credit Guides
	Responsible Lending Obligations
	Fees and Charges for Credit Assistance
	National Credit Code Obligations

Note: the materials in Lecture 11A on the Banking Act, Financial Sector (Collection of Data) Act and Industry Codes of Practice are equally applicable to credit facilities.

Definitions

ASICR r2B(1) has a similar definition of "credit facility" for the purposes of the ASICA, with one additional item: (i) a facility for making non-cash payments (within the meaning of CA s763D) if payments made using the facility will all be debited to a facility mentioned in paragraphs (a) to (h).

The provision of consumer credit insurance that includes a contract of general insurance for the Insurance Contracts Act 1984 is not a credit facility (r7.1.06(2)).

For a discussion on how the definition of "credit facility" operates in relation to bills of exchange and promissory notes, see Lewis, "When is a Financial Product not a Financial Product?" (2004) 22 CSLJ 103.

ASICR r2B(3) has a similar definition of "credit" for the purposes of the ASICA.

Under CR rr7.1.06(1)(a)(iv)-(vi) and (f)(ii)-(iv), products which are specifically defined to be "financial products" under various provisions in s764A or are an investment product as defined in s763A(1)(a) are excluded from the combined operation of s765A(1)(h) and r7.1.06 even though they may have a credit element to them (eg a debenture is a facility for making an investment from the perspective of the person acquiring the debenture but is a form of credit from the perspective of the issuer). They are thus still regulated as financial products even though they might otherwise be considered to be credit facilities. While such products are included in the definition of financial product to ensure that the investment element is appropriately regulated, it is not intended to regulate the credit element. This is achieved through the provisions in CR rr7.1.06A(2) and (3).

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Exclusion of Credit Facilities from FSR Rules

Click here for a copy of the National Consumer Credit Protection Act 2009 and the National Consumer Credit Protection Regulations 2010.

The Uniform Consumer Credit Code ("UCCC") was a uniform regime for regulating consumer credit enacted under the Uniform Consumer Credit Laws Agreement 1993 between the States and Territories. Under that agreement, Queensland would enact template legislation (the Consumer Credit (Queensland) Act 1994 and Consumer Credit (Queensland) Regulations)) and each of the other States and Territories would adopt that legislation as its own.

The NCCPA addresses a number of perceived deficiencies in the regulatory framework of the UCCC. It imposes an ASIC administered national licensing regime for regulated credit activities, which brings with it enhanced compliance, training, dispute resolution and compensation requirements similar to those applicable to financial service licensees under CA Chapter 7 and also broader powers for ASIC to exclude or remove unscrupulous operators from the industry. It also imposes responsible lending obligations requiring those providing credit or assisting in obtaining credit (such as finance or mortgage brokers) to assess whether the credit will be 'unsuitable' for the customer.

The responsible lending obligations in the NCCPA are being phased in. The requirements to conduct unsuitability assessments and not to arrange or provide credit that is unsuitable will come into force on 1 July 2010 for non-ADIs and non-RFCs and on 1 January 2011 for ADIs and RFCs. Other responsible lending obligations (including the requirement for quotes for credit assistance and to give credit guides) will come into force on 1 January 2011. This is to allow the industry time to put in place the necessary systems and training.

The NCC is substantially the same as the UCCC, save that it has been extended to apply to credit used to purchase, renovate, improve or refinance residential property for investment purposes and the threshold under which a debtor can request a change to their credit contract on the grounds of hardship has been increased to $500,000 (or such higher amount as may be prescribed in the regulations).

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Credit Activities Covered by the NCCPA

For these purposes it does not matter whether the person is: (a) the original credit provider, lessor, mortgagee or beneficiary of a guarantee under a credit contract, consumer lease, mortgage or guarantee; or (b) a person to whom the rights of a credit provider, lessor, mortgagee or beneficiary of a guarantee under a credit contract, consumer lease, mortgage or guarantee have been assigned or passed by law (NCCPA s10(1)).

A contract for the sale of goods is taken to involve the incurrence of debt and the provision of credit if the amount payable to purchase the goods under the contract is payable by instalments and exceeds the cash price of the goods (NCC s11).

A contract for the hire of goods under which the hirer has a right or obligation to purchase the goods, is regarded as a sale of the goods by instalments and is taken to involve the incurrence of debt and the provision of credit if the charge that is or may be made for hiring the goods, together with any other amount payable under the contract (including an amount to purchase the goods or to exercise an option to do so), exceeds the cash price of the goods (NCC s9).

A 'terms sale of land contract' (ie an executory contract for the sale of land under which the purchaser is entitled to enter into possession of the land before becoming entitled to receive a conveyance or transfer of the land and is bound to make a payment or payments (other than a deposit or rent payment) to, or in accordance with the instructions of, the vendor without becoming entitled to receive a conveyance or transfer of the land in exchange for the payment or payments) is also taken to involve the incurrence of debt and the provision of credit if the amount payable to purchase the land under the contract exceeds the cash price of the land (NCC s10).

NCC s204(1) defines the "cash price" of goods or services to which a credit contract relates to mean: (a) the lowest price that a cash purchaser might reasonably be expected to pay for them from the supplier; or (b) if the goods or services are not available for cash from the supplier or are only available for cash at the same, or a reasonably similar, price to the price that would be payable for them if they were sold with credit provided, the market value of the goods or services. "Services" is defined to include rights in relation to, and interests in, real property.

The Explanatory Memorandum for the Bill that introduced these provisions stated that ss3 and 11 are not intended to regulate lay-by contracts, where the requirement to make payments is not a "deferred debt" within the meaning of section 4.

The credit service provisions are intended to regulate the activities of finance brokers and mortgage brokers who operate in the consumer credit area. They are also intended to capture the activities of "aggregators", who act as a conduit between individual brokers and credit providers.

A person provides "credit assistance" to a consumer if, by dealing directly with the consumer or the consumer’s agent in the course of, as part of, or incidentally to, a business carried on in this jurisdiction by the person or another person, the person: (a) suggests that the consumer apply for a particular credit contract with a particular credit provider; (b) suggests that the consumer apply for an increase to the credit limit of a particular credit contract with a particular credit provider; (c) suggests that the consumer remain in a particular credit contract with a particular credit provider; (d) assists the consumer to apply for a particular credit contract with a particular credit provider; (e) assists the consumer to apply for an increase to the credit limit of a particular credit contract with a particular credit provider; (f) suggests that the consumer apply for a particular consumer lease with a particular lessor; (g) suggests that the consumer remain in a particular consumer lease with a particular lessor; or (h) assists the consumer to apply for a particular consumer lease with a particular lessor. It does not matter whether the person does so on the person’s own behalf or for or on behalf of another person (NCCPA s8).

A person acts as an "intermediary" if, in the course of, as part of, or incidentally to, a business carried on in this jurisdiction by the person or another person, the person: (a) acts as an intermediary (whether directly or indirectly) between a credit provider and a consumer wholly or partly for the purposes of securing a provision of credit for the consumer under a credit contract for the consumer with the credit provider; or (b) acts as an intermediary (whether directly or indirectly) between a lessor and a consumer wholly or partly for the purposes of securing a consumer lease for the consumer with the lessor. It does not matter whether the person does so on the person’s own behalf or for or on behalf of another person (NCCPA s9).

NCC s169 defines "consumer lease" as a contract for the hire of goods by a natural person or strata corporation under which that person or corporation does not have a right or obligation to purchase the goods. If a person has a right or obligation to purchase goods under a contract for the hire of goods and the aggregate amount payable under the contract exceeds the cash price of the goods, that contract is treated as a sale of the goods by instalments and regulated as a credit contract rather than a consumer lease (see the notes to NCC s3(1) above). "Contract" includes a series or combination of contracts, or contracts and arrangements (NCC s204(1)).

If the NCC applies to the provision of credit (and to the credit contract and related matters), it applies in relation to all transactions or acts under the contract whether or not they take place in this jurisdiction and it continues to apply even though the credit provider ceases to carry on a business in this jurisdiction (NCC s5(2)).

For these purposes, investment by the debtor is not a "personal, domestic or household purpose" (NCC s5(3)) and the "predominant purpose" for which credit is provided is: (a) the purpose for which more than half of the credit is intended to be used; or (b) if the credit is intended to be used to obtain goods or services for use for different purposes, the purpose for which the goods or services are intended to be most used (NCC s5(4)).

NCCPA s12 provides that CA Part 1.2 Div 3 applies for the purposes of working out whether a business is carried on in this jurisdiction. It also provides that a business is taken to be carried on in this jurisdiction by a person if, in the course of carrying on the business, the person engages in conduct that is: (a) intended to induce people in this jurisdiction to use the goods or services the person provides; or (b) is likely to have that effect; whether or not the conduct is intended, or likely, to have that effect in other places as well. These provisions broadly correspond to CA ss761C and 911D.

NCCPR rr52-65 specify other types of credit to which the NCC does not apply.

Where a loan is made to an employee or former employee by a regulated credit provider, the exception above only applies to the provision of credit on terms that are more favourable to the debtor than the terms on which the credit provider provides credit to non-employees.

Note that even though pawnbroker and trustee/beneficiary loans are excluded from the general operation of the NCC, the provisions of ss76 to 81 (Court may reopen unjust transactions) still apply to them.

If Part 11 applies to a consumer lease, it applies to all transactions or acts under the lease whether or not they take place in this jurisdiction and it continues to apply even though the lessee ceases to carry on a business in this jurisdiction (NCC s170(2)).

For these purposes, the amount payable under a consumer lease includes any agreed or residual value of the goods at the end of the lease or on termination of the lease by the lessor or lessee, but does not include: (a) any amount payable for services that are incidental to the hire of the goods under the lease; or (b) any amount that ceases to be payable on the termination of the contract following the exercise of a right of cancellation by the lessee at the earliest opportunity (NCC s170(3)).

The predominant purpose for which goods are hired is: (a) the purpose for which more than one half of the goods are intended to be used; or (b) if the same goods are intended to be used for different purposes, the purpose for which the goods are intended to be most used (NCC s170(4)).

If a mortgage also secures other obligations, the NCC applies to the mortgage to the extent only that it secures obligations under the credit contract or related guarantee (NCC s7(2)).

If a guarantee also guarantees other obligations, the NCC applies to the guarantee to the extent only that it guarantees obligations under the credit contract (NCC s8(2)).

If a declaration is ineffective under s13(3), s5(1)(b) is taken to be satisfied in relation to the contract (s13(4)).

A person commits an offence if: (a) the person engages in conduct; (b) the conduct induces a debtor to make a declaration under s13 that is false or misleading in a material particular; and (c) the declaration is false or misleading in a material particular. This is a criminal offence punishable by a fine of 100 penalty units and/or 2 years imprisonment (s13(6)).

There are equivalent provisions for consumer leases in s172 of the NCC.

A declaration under s13 or s172 has to be substantially in the form (if any) required by the regulations and is ineffective for the purposes of this section if it is not (s13(5) and s172(5)). The prescribed form of declaration for credit contracts can be found in NCCPR r68, and for consumer leases in r104.

These provisions are designed to stop credit providers and lessors trying to escape the operation of the NCC by getting consumers to give a false declaration as to the purpose of a credit contract or consumer lease.

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Australian Credit Licences

See generally ASIC Regulatory Guide 203 - Do I need a credit licence? and ASIC Regulatory Guide 204 - Applying for and varying a credit licence.

In most instances, a person will only engage in a credit activity if they do so in the course of, as part of, or incidentally to, a business carried on in this jurisdiction by the person. As mentioned above, a business is taken to be carried on in this jurisdiction where a person engages in conduct that is intended to induce people in Australia to use the goods or services the person provides, or is likely to have that effect (NCCPA s12).

Breach of s29(1) is a civil penalty punishable by 2,000 penalty units. It is also a criminal offence punishable by a fine of 200 penalty units and/or 2 years imprisonment (s29(2)).

It is a defence if: (a) the person engages in the credit activity on behalf of another person (the principal); (b) the person is: (i) an employee or director of the principal or of a related body corporate of the principal; or (ii) a credit representative of the principal; (c) the person’s conduct in engaging in the credit activity is within the authority of the principal; and (d) the principal holds a licence authorising the principal to engage in the credit activity (s29(3)). In this regard, NCCPA Part 2-3 contains a regime for the appointment of “credit representatives” by credit licensees that is broadly similar to the regime for the appointment of authorised representatives by financial services licensees under CA Part 7.6 Div 5.

The holder of an ACL is only authorised to engage in the credit activities which are specified by ASIC in a condition of the licence (s35).

Under the transitional arrangements for the switchover to the new regime, all persons engaging in credit activities must be registered with ASIC to continue operating after 1 July 2010 (they can apply for registration between 1 April and 30 June 2010). All registered persons must have an ACL to continue operating after 31 December 2010 (they can apply for their ACL between 1 July and 31 December 2010). Persons who engage in credit activities for the first time on or after 1 July 2010 must apply for and receive an ACL before commencing business.

A streamlined licensing process applies to ADIs (s38).

NCCPA s30 makes it both a civil penalty and an offence for a person to hold out: (a) that they hold a licence; (b) that they hold a licence authorising them to engage in a particular credit activity; (c) that a credit activity engaged in by them or by someone else is exempt from a requirement to hold a licence; (d) that, in engaging in a credit activity, they act on behalf of another person; or (e) that their conduct, or proposed conduct, is within the authority of a licensee, if that is not the case. It also makes it both a civil penalty and an offence for a person to hold out or advertise that they engage or are able to engage in a credit activity if they would, by engaging in that credit activity, contravene s29.

Thus, a licensed credit provider who receives a loan application from an unlicensed broker, or a licensed broker that introduces their client to an unlicensed credit provider, potentially breaches this section.

Breach of s31(1) is a civil penalty punishable by 2,000 penalty units. It is also a criminal offence punishable by a fine of 200 penalty units and/or 2 years imprisonment (s31(2)).

Breach of s32(1) is a civil penalty punishable by 2,000 penalty units. It is also a criminal offence punishable by a fine of 50 penalty units and/or 1 year imprisonment (s32(2)).

This corresponds to the obligations of AFSL holders under CA s912A. See generally ASIC Regulatory Guide 205 - Credit licensing: General conduct obligations, ASIC Regulatory Guide 206 - Credit licensing: Competence and training and ASIC Regulatory Guide 210 - Compensation and insurance arrangements for credit licensees.

For these purposes, "credit legislation" means: (a) the NCCPA; (b) the National Consumer Credit Protection (Transitional and Consequential Provisions) Act 2009; (c) Division 2 of Part 2 of the ASIC Act and regulations made for the purpose of that Division; and (d) any other Commonwealth, State or Territory legislation that covers conduct relating to credit activities (whether or not it also covers other conduct), but only in so far as it covers conduct relating to credit activities (NCCPA s5(1)).

Compliance with the obligations in ss47(1)(b), (g), (k) and (l) is to be determined according to the nature, scale and complexity of the credit activities engaged in by the licensee (s47(2)). According to the Explanatory Memorandum for the Bill that introduced these provisions, this enables a licensee to tailor the way in which they comply with their obligations, taking into account factors such as: (a) the types of credit activities the licensee engages in; (b) the diversity and structure of the licensee‘s operations (including the geographical spread of the operations and the extent to which the licensee out-sources any of its functions); (c) the volume and size of the transactions the licensee is responsible for; and (d) the number of people in the licensee‘s organisation.

NCCPA s33 also makes it both a civil penalty and an offence for a person, in the course of engaging in a credit activity, to give information or a document to another person if the giver knows, or is reckless as to whether, the information or document is false in a material particular or materially misleading.

The NCCPA imposes specific obligations on licensees to assist ASIC in gathering intelligence and information about licensees, in order to assist it in its functions in regulating those engaging in credit activities (ss49 to 51). It also requires a licensee to cite their ACL number on documents of a kind prescribed by the regulations (s52). NCCPR r13 prescribes the following documents for these purposes: (a) a document that is required to be created or produced in accordance with Chapter 3; (b) a printed advertisement that relates to the provision of credit to which the Code would apply; (c) a document that is required to be created, produced, given or published by a provision of the NCC; and (d) a document lodged with ASIC that relates to the provision of credit to which the Code would apply.

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Credit Guides

Breach of s113(1) attracts a civil penalty of 2,000 penalty units. It is also a criminal offence punishable by a fine of 50 penalty units (s113(5)).

The obligations under ss120 and 123 mentioned in (i) above are, in reverse order, not to provide credit assistance in relation to an unsuitable credit facility and to provide a copy of the preliminary unsuitability assessment to the consumer upon request.

NCCPA s136 imposes a similar obligation on licensees who provide credit assistance to a consumer in relation to a consumer lease (with the references above to ss120 and 123 replaced by references to ss143 and 146). Their credit guide must be given as soon as practicable after it becomes apparent to the licensee that it is likely to provide credit assistance to a consumer in relation to a consumer lease.

Breach of s126(1) attracts a civil penalty of 2,000 penalty units. It is also a criminal offence punishable by a fine of 50 penalty units (s126(5)).

The obligations under ss132 and 133 mentioned in (f) above are, in reverse order, not to provide an unsuitable credit facility and to provide a copy of the unsuitability assessment to the consumer upon request.

NCCPA s149 imposes a similar obligation on lessors under consumer leases (with the references above to ss132 and 133 replaced by references to ss155 and 156). Their credit guide must be given as soon as practicable after it becomes apparent to the licensee that it is likely to enter a consumer lease with a consumer who will be the lessee under the lease.

Breach of s127(1) attracts a civil penalty of 2,000 penalty units. It is also a criminal offence punishable by a fine of 50 penalty units (s127(5)).

NCCPA s150 imposes a similar obligation on assignees of rights or obligations of a lessor under a consumer lease. Their credit guide must be given as soon as practicable after they have been assigned any rights or obligations of a lessor under a consumer lease.

Breach of s158(1) attracts a civil penalty of 2,000 penalty units. It is also a criminal offence punishable by a fine of 50 penalty units (s158(5)).

Breach of s160(1) or (2) attracts a civil penalty of 2,000 penalty units. It is also a criminal offence punishable by a fine of 50 penalty units (s160(6)).

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Responsible Lending Obligations

See generally ASIC Regulatory Guide 209 - Credit licensing: Responsible lending conduct obligations.

The responsible lending conduct obligations in NCCPA Chapter 3 will commence on 1 January 2011. The delayed start is to provide the industry with the time to put in place the systems and training needed to comply with the new obligations.

Breach of s115 attracts a civil penalty of 2,000 penalty units.

NCCPA s138 imposes similar obligations on licensees providing credit assistance in relation to consumer leases.

The note to s116 states that the licensee is not required to make the preliminary assessment if the credit assistance is not provided.

NCCPA s120 entitles clients to request the licensee to provide them with a written copy of their preliminary assessment of unsuitability up to 7 years after the date of the credit assistance quote  under s114 (see below). If the request is made within 2 years of the quote, the copy must be provided within 7 business days. If the request is made between 2 and 7 years after the quote, the copy must be provided within 21 business days. The copy of the assessment must be given to the client without charge.

The credit guide issued by a credit assistance provider must mention the consumer's entitlement to request a copy of the credit assistance provider's preliminary assessment of unsuitability (s113(2)(i)).

NCCPA ss139 and 143 impose similar obligations on licensees providing credit assistance in relation to consumer leases.

Breach of s117(1) attracts a civil penalty of 2,000 penalty units.

NCCPA s140 imposes similar obligations on licensees providing credit assistance in relation to consumer leases.

Breach of s118(1) attracts a civil penalty of 2,000 penalty units.

The note to s118(1) points out that even if the contract will not be unsuitable for the consumer under (a)-(c) above, the licensee may still assess that the contract will be unsuitable for other reasons.

NCCPA s118(3) provides that for the purposes of para (a) above, it is presumed that, if the consumer could only comply with the consumer’s financial obligations under the contract by selling the consumer’s principal place of residence, the consumer could only comply with those obligations with substantial hardship, unless the contrary is proved.

NCCPA s118(4) provides that for the purposes of determining whether the contract will be unsuitable, only information that satisfies both of the following is to be taken into account: (a) the information is about the consumer’s financial situation, requirements or objectives, or any other matter prescribed by the regulations under s117(1)(d) or (e); and (b) at the time of the preliminary assessment, the licensee had reason to believe that the information was true or would have had reason to believe that the information was true if it had made the inquiries or verification under s117.

NCCPA s141 imposes similar obligations on licensees providing credit assistance in relation to consumer leases.

Breach of s119(1) attracts a civil penalty of 2,000 penalty units.

The note to s119(1) points out that even if the contract will not be unsuitable for the consumer under (a)-(c) above, the licensee may still assess that the contract will be unsuitable for other reasons.

NCCPA s119(3) provides that for the purposes of para (a) above, it is presumed that, if the consumer could only comply with the consumer’s financial obligations under the contract by selling the consumer’s principal place of residence, the consumer could only comply with those obligations with substantial hardship, unless the contrary is proved.

NCCPA s119(4) provides that for the purposes of determining whether the contract will be unsuitable, only information that satisfies both of the following is to be taken into account: (a) the information is about the consumer’s financial situation, requirements or objectives, or any other matter prescribed by the regulations under s117(1)(d) or (e); and (b) at the time of the preliminary assessment, the licensee had reason to believe that the information was true or would have had reason to believe that the information was true if it had made the inquiries or verification under s117.

NCCPA s142 imposes similar obligations on licensees providing credit assistance in relation to consumer leases.

Breach of s123(1) attracts a civil penalty of 2,000 penalty units. Failure to comply is also a criminal offence punishable by a fine of up to 100 penalty units and/or 2 years jail for individuals, and a fine of up to 500 penalty units for a body corporate (s123(6)).

Again, NCCPA s123(3) provides that for the purposes of para (c) above, it is presumed that, if the consumer could only comply with the consumer’s financial obligations under the contract by selling the consumer’s principal place of residence, the consumer could only comply with those obligations with substantial hardship, unless the contrary is proved.

NCCPA s123(4) provides that for the purposes of determining whether the contract will be unsuitable, only information that satisfies both of the following is to be taken into account: (a) the information is about the consumer’s financial situation, requirements or objectives, or any other matter prescribed by the regulations under s117(1)(d) or (e); and (b) at the time the licensee provides the credit assistance, the licensee had reason to believe that the information was true or would have had reason to believe that the information was true if it had made the inquiries or verification under s117.

NCCPA s146 imposes similar obligations on licensees providing credit assistance in relation to consumer leases.

The regulations may prescribe particular situations in which a credit contact is taken, despite s123(2) to be, or not to be, unsuitable for a retail client (s123(5)).

Breach of s124(1) attracts a civil penalty of 2,000 penalty units. Failure to comply is also a criminal offence punishable by a fine of up to 100 penalty units and/or 2 years jail for individuals, and a fine of up to 500 penalty units for a body corporate (s124(6)).

For the purposes of ss124(1) and (6), it is a defence if: (a) the licensee suggested that the consumer remain in the credit contract because, after making reasonable inquiries, the licensee reasonably believed that there was no other credit contract that was not unsuitable for the consumer; and (b) the licensee informed the consumer that there is a procedure under NCC ss72 and 94 for consumers in hardship (s124(7)).

Again, NCCPA s124(3) provides that for the purposes of para (a) above, it is presumed that, if the consumer could only comply with the consumer’s financial obligations under the contract by selling the consumer’s principal place of residence, the consumer could only comply with those obligations with substantial hardship, unless the contrary is proved.

NCCPA s124(4) provides that for the purposes of determining whether the contract is unsuitable, only information that satisfies both of the following is to be taken into account: (a) the information is about the consumer’s financial situation, requirements or objectives, or any other matter prescribed by the regulations under s117(1)(d) or (e); and (b) at the time the licensee provides the credit assistance, the licensee had reason to believe that the information was true or would have had reason to believe that the information was true if it had made the inquiries or verification under s117.

NCCPA s147 imposes similar obligations on licensees providing credit assistance in relation to consumer leases.

The regulations may prescribe particular situations in which a credit contact is taken, despite s124(2) to be, or not to be, unsuitable for a retail client (s124(5)).

Breach of s128 attracts a civil penalty of 2,000 penalty units.

NCCPA s151 imposes similar obligations on licensees entering into consumer leases.

The note to s129 states that the licensee is not required to make the assessment if the contract is not entered into or the limit is not increased.

NCCPA s132 entitles clients to request the licensee to provide them with a written copy of their assessment of unsuitability up to 7 years after the credit contract is entered or the credit limit increased. If the request is made before the contact is entered or the limit increased, then the copy must be provided before entering the contract or increasing the limit. If the request is made within 2 years after the contract is entered or the limit increased, the copy must be provided within 7 business days. If the request is made between 2 and 7 years after the contract is entered or the limit increased, the copy must be provided within 21 business days. The copy of the assessment must be given to the client without charge.

The credit guide issued by a credit provider must mention the consumer's entitlement to request a copy of the credit provider's unsuitability assessment (s126(2)(f)).

NCCPA ss152 and 155 impose similar obligations on licensees entering into consumer leases.

Breach of s130(1) attracts a civil penalty of 2,000 penalty units.

NCCPA s153 imposes similar obligations on licensees entering into consumer leases.

Breach of s131(1) attracts a civil penalty of 2,000 penalty units.

The note to s131(1) points out that even if the contract will not be unsuitable for the consumer under (a)-(c) above, the licensee may still assess that the contract will be unsuitable for other reasons.

NCCPA s131(3) provides that for the purposes of para (a) above, it is presumed that, if the consumer could only comply with the consumer’s financial obligations under the contract by selling the consumer’s principal place of residence, the consumer could only comply with those obligations with substantial hardship, unless the contrary is proved.

NCCPA s131(4) provides that for the purposes of determining whether the contract will be unsuitable, only information that satisfies both of the following is to be taken into account: (a) the information is about the consumer’s financial situation, requirements or objectives, or any other matter prescribed by the regulations under s130(1)(d) or (e); and (b) at the time of the assessment, the licensee had reason to believe that the information was true or would have had reason to believe that the information was true if it had made the inquiries or verification under s130.

NCCPA s154 imposes similar obligations on licensees entering into consumer leases.

Breach of s133(1) attracts a civil penalty of 2,000 penalty units. Failure to comply is also a criminal offence punishable by a fine of up to 100 penalty units and/or 2 years jail for individuals, and a fine of up to 500 penalty units for a body corporate (s133(6)).

Again, NCCPA s133(3) provides that for the purposes of para (c) above, it is presumed that, if the consumer could only comply with the consumer’s financial obligations under the contract by selling the consumer’s principal place of residence, the consumer could only comply with those obligations with substantial hardship, unless the contrary is proved.

NCCPA s133(4) provides that for the purposes of determining whether the contract will be unsuitable, only information that satisfies both of the following is to be taken into account: (a) the information is about the consumer’s financial situation, requirements or objectives, or any other matter prescribed by the regulations under s130(1)(d) or (e); and (b) at the time of the assessment, the licensee had reason to believe that the information was true or would have had reason to believe that the information was true if it had made the inquiries or verification under s130.

NCCPA s156 imposes similar obligations on licensees entering into consumer leases.

The regulations may prescribe particular situations in which a credit contact is taken, despite s133(2) to be, or not to be, unsuitable for a retail client (s133(5)).

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Fees and Charges for Credit Assistance

Breach of s114(1) attracts a civil penalty of 2,000 penalty units.

The licensee must not request or demand payment of an amount that exceeds the maximum amount set out in the quote (s114(4)), request or demand payment of an amount for the licensee’s credit assistance before the licensee provides the assistance (s114(5)) or lodge, or threaten to lodge, a caveat in relation to land to induce the consumer to pay an amount to the licensee for the licensee’s credit assistance or other services (s114(6)).

NCCPA s137 imposes similar obligations on licensees providing credit assistance in relation to consumer leases.

Breach of s121(1) attracts a civil penalty of 2,000 penalty units.

NCCPA s144 imposes similar obligations on licensees providing credit assistance in relation to consumer leases.

Breach of s122(1) attracts a civil penalty of 2,000 penalty units. Failure to comply is also a criminal offence punishable by a fine of up to 25 penalty units and/or 6 months jail for individuals, and a fine of up to 125 penalty units for a body corporate.

NCCPA s145 imposes similar obligations on licensees providing credit assistance in relation to consumer leases.

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National Credit Code Obligations

The precontractual statement may be the proposed contract document or be a separate document or documents (s16(5)).

Mortgages that secure amounts owing under a credit contract or a related guarantee must also be in writing (s42) and a copy provided to the mortgagor within 14 days (s43). Certain types of mortgages are prohibited (s44-50).

Guarantees that secure amounts owing under a credit contract likewise must be in writing (s 55) and a copy provided to the guarantor within 14 days (s57). In addition, before a guarantee is signed by the guarantor, the credit provider must give to the prospective guarantor: (a) a copy of the credit contract or proposed credit contract; and (b) a document in the prescribed form explaining the rights and obligations of a guarantor (s56). Certain types of provisions in guarantees are prohibited or rendered void in certain circumstances (ss59-60).

Similarly, consumer leases must be in the form of a written lease document signed by the lessee (s173) and satisfy the content requirements of the Code (s174). Again, once the lease is signed, the lessor must provide a copy of the signed lease to the lessee within 14 days (s175).

There are also provisions making credit providers who fund the purchase of goods or supply of services under tied credit contracts liable for misrepresentations by the supplier of the goods or services (s125-139) and regulating related insurance contracts (ss142-149), advertising (ss150-151)), harassment (s155), door to door selling of credit (s156) and the use of comparison rates (ss157- 168).

A detailed examination of the NCC is beyond the scope of this course.

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