A consultation draft of new regulations under the National Consumer Credit Protection Act released for comment this week proposes rules for:
- the content of responsible lending disclosure documents; and
- the way they must be given to consumers.
The documents affected include the credit guide, credit quote and credit proposal disclosure document (“Disclosure Documents”).
Disclosure of fees and charges and commissions
The draft regulations contain detailed specifications about how credit assistance providers such as brokers must disclose in their Disclosure Documents the fees and charges payable to them or to the credit provider, and commissions paid to them or paid by them to a third party for the introduction of credit business.
The specifications include a requirement to express the amounts fees and charges and commissions in dollars.
Commission information must be set out in the same manner for each credit provider so that the consumer can compare the commissions.
The type of commission must also be specified. For example, a commission such as an advertising subsidy or attendance at a conference must be described as such.
Some of the information about fees and charges does not need to be included in the credit proposal disclosure document if it has previously been disclosed in the credit quote, if:
- the quote was given to the consumer no more than 30 days before the credit proposal disclosure document is required to be provided; and
- the credit proposal disclosure document includes a statement next to the fees and charges that the consumer should refer to the credit quote for more information about the fees and charges.
The proposals in the draft regulations do not affect the content of the credit guide required to be given by credit providers.
As the regulations are only in draft form, credit assistance providers will need to wait until the final form of the regulations before they can complete the design of their Disclosure Documents.
Manner of giving Disclosure Documents
The draft regulations propose that the consumer must be given Disclosure Documents in the following way:
- given to the consumer personally or to an agent of the consumer (other than an agent who is the licensee); or
- if the licensee will not have a reasonable opportunity to give the consumer the Disclosure Document personally by the time required under the legislation, and if the consumer agrees, it may be:
- sent to the consumer including an e-mail address or fax number nominated by the consumer;
- in the case of the credit guide only, made available on the licensee’s website; or
- otherwise made available to the consumer as agreed between the consumer and the licensee.
The Disclosure Documents must be given in a printed or electronic form that is capable of being retained for future reference, and in a way that it is clear that it is a Disclosure Document, and what type of Disclosure Document it is.
If a Disclosure Document is not given to the consumer personally, at the time when the licensee is required to give it to the consumer, the licensee must also:
- tell the consumer about the licensee’s obligation to give the consumer the Disclosure Document;
- tell the consumer that the Disclosure Document will be given to him or her in the manner agreed;
- advise the consumer to read the Disclosure Document;
- explain the main features of the Disclosure Document; and
- ask the consumer if he or she has any questions about the Disclosure Document and answer those questions.
This additional information may be given in the same manner in which previous communication with the consumer has been conducted. For example, if the licensee has been communicating by telephone with the consumer, it may give this information by telephone.
Where the Disclosure Document is not given personally to the consumer, the licensee must also be reasonably satisfied that he or she has received the Disclosure Document before engaging in further credit activities in relation to the credit contract. The draft regulations provide that a licensee may be reasonably satisfied that the consumer has received the Disclosure Document (unless the consumer advises the licensee otherwise) if it is properly addressed to the consumer and sent to that address (including electronic address or fax number), or in the case of a credit guide made available on the website, if the consumer has told the licensee that he or she has accessed the credit guide on the website.
If the regulations are made as proposed, licensees will need to consider how they will obtain the consent of the consumer for delivery of Disclosure Documents by means other than giving them personally. For credit providers, the opportunity might arise when the consumer makes an application for credit.