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Banking Law > Consumer Credit Regulation > Flashcards

Consumer Credit Regulation Flashcards

1
Q

What is the regulatory framework for consumer credit?

A
  1. Common law obligations (Breach contractual duties)
  2. Statutes (NCCPA and ASIC act (pt 2 d 2 ) RG273)
  3. Industry code and self regulation (Banking code of practice)
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2
Q

What is the national credit act?

A

A 7 statute chapter regulation that provides definitions, licensing and contractual obligations and best interest obligations. Has a schedule attached to it to the National credit code which refers to contractual disclosures. It also discloses the National credit regulations which have the regulatory guidelines.

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3
Q

Why is consumer credit protection not covered under Australian Consumer Law (s.131A)of CCA and the Corporations act (s.765A) of CA?

A

Regulation is more efficient under a functional regulatory model. A single regulator governs the function which is the policy in Australia.

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4
Q

What are some types of credit covered by NCCPA?

A
  1. Continuing credit contracts 2. Consumer leases 3. Loans 4. Payments made by instalments
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5
Q

What is the difference between a credit service provider and a credit provider?

A

CSP refers to mortgage brokers who act as an intermediary for the transaction (bound under S.7 of NCA)(Not bound by credit code), whereas CP’s provide the loan.

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6
Q

When does the NCCPA apply?

A

When a person engages in a credit activity (s.6 of NCA), includes: Consumer leases, mortgages, the beneficiary of a guarantee, Debt management, provide credit services and when credit is provided under a regulated credit contract.

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7
Q

When is a contract a regulated credit contract (NCC)?

A

Must satisfy the purpose test (s.5): a) Must be a natural person b) more than 50% must be intended for personal, domestic or household purposes or to refinance credit that has been provided to purchase property c) A charge must be charged d) The credit provider must be in the business of providing credit

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8
Q

What are some exemptions under the NCC?

A
  • Short term credit (less than 62 days, less than 5% of credit amount, charge less than 24% I.R)(s 6(1) NCC)
  • Credit without prior agreement (Temporary overdraft) (s 6(4) NCC)
  • Continuing credit contract that charges a fixed periodic charge ( s 6(5) NCC)
  • Credit contracts with credit or debit facilities (s 6(6) NCC)
  • Insurance instalments (s 6(8) NCC)
    Pawnbrokers ( s 6(9) NCC)
  • Advances to beneficiaries from trusts (s 6(10) NCC)
  • Employee loans ( s 6(11) NCC)
  • As contained in the regulations (s 6(13) NCC
  • Margin loans according to 761EA(1), s 6(12) NCC
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9
Q

What does the NCC cover?

A
  • Pre-contractual disclosure
  • Content obligations
  • Price regulation
  • hardship variations
  • Unjust transactions
  • Enforcing credit contracts
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10
Q

What is pre-contractual disclosure under NCC (s.16)

A
  1. Pre-contractual statement with the features (s.17): C.P name, loan amount, annual percentage rate, I.R charge calculations and total I.R payable, repayment amounts, credit fees and charges, statement of account, default rate, enforcement expenses, any mortgage or guarantee, commission, insurance financed by credit contract.
  2. Information statements of the rights
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11
Q

What features do credit contracts have?

A
  • Must be signed by provider and debtor (s.14)
  • Alternations not allowed by credit provider after initiation (s.19)
  • Must give a contract of the debtor (s.20) must provide contract within 14 days of written request (under a year) or 30 days (over a year) (s.36)
  • Must be easy to understand (s.184) with min 10 point font (NCR 110)
  • Financial table at the start NCR reg (72)
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12
Q

What are the periodic information rights?

A
  • Must provide periodic statements (s.33)
  • Must contain (s.34): Statement of the period, balance, credit provided, supplier id, interest charges, fee and charges , payments, the amount payable, insurance payments, alternations
  • payout figure must be given within 7 days (s.83)
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13
Q

Right to terminate the contract (NCC)

A
  • May terminate up until expiry (s.11)
  • Can be terminated by writing to the credit provider if repayment obligations are complete (s.21)
  • Early payments are permitted (s.26)
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14
Q

What is the NCC price regulation?

A
  • annual cost rate capped at 48% (s.32A) (ASIC vR20)
  • Small amount credit contract s.5 NCA 16-1 year, max value $2000 that isn’t continuing and not from ADI). No I.R can be charged (s.31A) can charge monthly fee (max 4%) (s.31A), limit to recoverable amount of 200% (s.39B), No direct debit fees (s.31A), Max establishment fee of 20% (s.31A)
  • ## Medium account credit contract (same but 2000 - 5000), Max annual cost rate of 4% and establishment fee of $400
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15
Q

What is the notice to change rights under NCC? (s.64 - s.66)

A
  • Same day notice for I.R change
  • 20 days advanced for: change in I.R calculations, fees or other changes.
  • If obligations are reduced no obligation is needed
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16
Q

What is the right to seek hardship under NCC? (s.72)

A
  • Seek a change in the case they are unable to meet obligations
  • May extend the term of the contract and reduce payment or delay payments
  • Must take action within 21 days
  • They can approve, reject or ask for more info
  • Guarantor must be notified and debtor may approach court for changes
17
Q

What are other consumer protection provisions?

A
  • Notice of default if direct debit payments have defaulted (s.87)
  • Given at least 30 days from notice of default remedy (s.88)
  • The default notice must clearly specify (s.88(3): default, action for remedy, date of enforcement proceedings, debtors rights, credit default reporting
18
Q

NCC specific remedies

A
  • Courts may reopen unjust transactions (s.76) and may set aside the loan agreement or revise credit contracts (s.77)
  • Courts may reduce fees (on many bases’) if unconscionable (s.78).
19
Q

NCC advertisement and conduct regulations

A
  • Canvassing at home is prohibited (s.156)
  • Harassing prohibited (s.155)
  • False or misleading representations (s.154)
  • Must state fees apply on the ad (s.150)
20
Q

NCC summary

A
  • RIght to get details (s.16)
  • RIght to copy of the final contract (s.20)
  • Right to terminate the contract (s.21)
  • Right to get payment figure (s.83)
  • Right to get notified of changes (s.64)
  • Right to dispute if unjust (s.76)
  • RIght to hardship variation (s.72)

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