Treasury released an exposure draft National Consumer Credit Protection Amendment (Credit Card and Home Loans) Bill on 4 March for consultation until 8 March 2011.

It is intended that the Bill be introduced in Parliament in the week beginning 21 March 2011.

If passed, it will amend the National Credit Act to give effect to the Government’s announced credit card reforms and introduce a requirement for lenders to give borrowers a Key Facts Sheet for home loans.

The changes will be made by making additional rules that apply to credit licensees that are credit providers under credit card contracts and standard home loans.

Other reforms announced as part of the Government’s Fairer, Simpler Banking policy (such as requiring lenders to inform consumers about the implications of only paying minimum repayment amounts on their statements) are intended to be introduced through regulations to the National Consumer Credit Protection Act 2009, and will be the subject of further consultation in the near future.

Credit card changes

The changes will:

• insert new restrictions on a licensee approving the use of a credit card in excess of the credit limit for the credit card contract. The Bill provides for a default buffer above the credit limit, and restricts the charging of fees or a higher rate of interest when a borrower goes over their specified limit. The default buffer for a credit card contract is the lesser of $500 and 10% of the credit limit of the contract. The default buffer applies to a credit card contract unless the consumer who is the debtor under the contract has elected not to have the default buffer apply to the contract and the election has not been withdrawn.
• require credit card providers to allocate repayments to higher interest debts first.
• prohibit a licensee making a credit limit increase invitation unless expressly consented to by the consumer.
• require a consumer is provided with, or given access to, a Key Facts Sheet before entering into a credit card contract. If a consumer applies to a licensee for a credit card contract under which the licensee would be the credit provider, the licensee must not enter into, or offer to enter into, the contract unless the application is made using an application form that includes a Key Facts Sheet for the contract that contains up-to-date information.

Standard Home Loans

A standard home loan of a licensee is a standard form of credit contract under which the licensee provides credit to purchase residential property or to refinance credit that has been provided wholly or predominantly to purchase residential property.

It will be mandatory for standard home loan borrowers to be provided with, or given access to, a Key Facts Sheet whether the application is made on a website or otherwise.