Interest rate caps under the National Credit Scheme

From 1 July 2010 ASIC will be responsible for the national administration of consumer credit legislation.

But the states will retain responsibility for the regulation and enforcement of maximum interest rates (the interest rate caps) for regulated consumer credit.

Currently, New South Wales, Victoria, Queensland and the ACT impose an interest rate cap on regulated consumer credit. There are no caps in Western Australia, Tamania and South Australia.

In New South Wales, Queensland, and the ACT, the annual cap of 48% is generally calculated inclusive of interest, fees and charges other than government fees, charges and duties (there are some variations between the states).

In Victoria, a cap of 48% is imposed on unsecured credit regulated by the UCCC, and a cap of 30% imposed on secured credit regulated by the UCCC. The caps are imposed on the interest component alone, and the cap is not inclusive of fees and charges.

Even though the current consumer credit laws will be repealed, the states will re-establish interest cap regulation under new laws (in Queensland, the Credit (Commonwealth Powers) Bill 2009 Queensland).

According to the Queensland Office of Fair Trading, most current breaches result from lack of understanding of the model and not including fees that should be included such as establishment fees and account keeping fees.

Print Friendly, PDF & Email

Your Compliance Support Plan

We understand you need a cost-effective way to keep up to date with regulatory changes. Talk to us about our fixed price plans.