National Consumer Credit Reform exposure draft bill changes

The Minister for Financial Services, Superannuation and Corporate Law, Chris Bowen MP has introduced the reform package into Parliament.

He announced that changes have been made to the exposure draft bills following industry and consumer consultation.

The significant changes include:

  • Breach reporting by holders of an Australian Credit Licence has been removed;
  • An express provision has been included to allow some flexibility to the application of the obligations of a licence holder according to the nature, scale and complexity of the credit activities engaged in by the licensee;
  • Licence requirements only apply to legal (not equitable) assignees of debts and rights under credit contracts (this will assist securitised loans);
  • The requirement for credit providers to perform the credit assistance obligations (eg a separate credit assistance guide) when providing credit assistance in relation to their own proprietary credit products has been removed;
  • Responsible lending conduct requirements have been applied to consumer leases;
  • Inclusion of a provision in the law that presumes that if a consumer will only be able to 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 established;
  • A prohibition on a credit assistant from securing their fees for providing credit assistance by taking a caveat has been included;
  • The timeframe within which a written assessment requested by the consumer must be provided has been extended to seven business days, if the request is made within two years of the quote or contract date or 21 business days if the request is made thereafter. A consumer's right to request a copy of the assessment is limited to seven years after the date of the quote or contract;
  • A lender will be required to give the debtor (and any guarantor) a notice within 10 business days of the first direct debit payment failing in relation to a direct debit instruction;
  • The civil penalty infringement notice amount is reduced from 1/20th to 1/40th.;
  • The criminal penalty is reduced to two years jail term and 100 penalty units. This reflects the different economic risks in credit matters compared to other financial products.
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