The National Credit Code (NCC) is contained in Schedule 1 to the National Consumer Credit Protection Bill 2009.

The NCC will replace the Uniform Consumer Credit Code, with modifications.

Here is a list of changes (Note this is different from the changes in the exposure draft bill and does not include the registration and licensing changes):

Scope:

• Code applies as in UCCC but has been extended to cover credit provided for the purchase, renovation or improvement of a residential property for investment purposes. (Note the debtor must still be a natural person or strata corporation)
• Code now applies if the credit provider carries on business within the jurisdiction of the code (Australia). Does not matter where the debtor is usually resident.
• Short term credit: For a short term loan (less than 62 days) to be exempt credit fees and charges must amount to less than 5% of the total amount of credit (credit fees and charges for this calculation now includes any fees or charges that are payable to a person who introduced the debtor to the credit provider). This applies irrespective of whether there is an association between the introducer and the credit provider or not.
• The Code does not apply to credit arising out of a bill facility if the credit provider is an ADI
• The Code does not apply to credit provided by a pawnbroker but only if the pawnbroker’s only recourse, if the debtor defaults, is to the pawned goods
• Code does not apply to a ‘margin loan’.
• Terms sale of real estate: Where a purchaser enters into possession of real estate prior to becoming entitled to a conveyance (a Terms sale of land contract), and the price paid (in instalments or otherwise) is in excess of the ‘cash price’, this section sets out how to determine whether or not the contract is a ‘credit contract’ and hence whether the code applies or not. Does not apply if the payments exceeding the ‘cash price’ is a deposit of 10% or less or rent which does not reduce the amount payable on completion/settlement.
• Terms sale of goods: under a Conditional sale agreement where the purchaser takes possession of the goods prior to obtaining title to the goods (which will occur after the final instalment is paid). When the seller of goods under a sale of goods by instalments contract is the same body or a related body of the credit provider of finance to purchase the said goods, fees and charges under both the sale and the finance contracts are to be combined when determining whether or not the Code applies.
• Credit is presumed not to be for a code purpose if the debtor declares, in the form required by the regulations, that the credit is not to be applied for a code purpose (unless the credit provider knew or had reason to believe that the funds were in fact to be applied for a code purpose or would have known if they made reasonable enquiries). Business purpose declarations will no longer have conclusive evidentiary value, and it will be an offence punishable by up to two years’ imprisonment to procure a false business purpose declaration.
• A business purposes declaration will also be ineffective for a lease of goods if the lessor would have known or had reason to believe the goods were to be used for a code purpose if the lessor or relevant person made reasonable inquiries as to the purpose for which the goods were hired.

Non-permissible securities

• A mortgage cannot be taken over “essential household property” unless the mortgagee sold the property to mortgagor.
• “Essential Household Property” is defined by s116(2)(b)(i) of the Bankruptcy Act 1966 (Cth) which refers to Reg 6.03 of Bankruptcy Regulations 1996 (Cth).
• A mortgage cannot be taken over property used by the mortgagor to generate an income by personal exertion (provided the value of the goods does not exceed a monetary value limit set by s116(2)(c)(i) of the Bankruptcy Act 1966 (Cth). The amount is indexed annually with CPI).

Hardship provisions

• If a debtor makes an application under the hardship provisions of the code, the credit provider must reply within 21 days of receiving the application stating whether or not the credit provider agrees with the changes requested. If the credit provider does not agree to the changes requested by the debtor, the notice must state the name of the credit provider’s External Dispute Resolution (EDR) Scheme and the debtor’s rights under that scheme.
• Hardship provisions of the code under which consumers can request a change to certain terms of their credit contract now apply to loans up to $500,000 or any higher amount prescribed by the regulations.
• ASIC can make an application under the hardship and unjust provisions of the code (Division 3) in respect of any 1 or more credit contracts or all or any classes of contracts if it considers it to be in the public interest to do so.

Direct debit default notice
If a debtor authorises a payment under a credit contract by direct debit, a default occurs and it is the first occasion the default has occurred, the credit provider must give the debtor and any guarantor a direct debit default notice within 10 business days.

Loan default
Default Notice still required as per UCCC however the notice must now contain a prominent heading at its top stating that it is a default notice and the prescribed contents of the default notice has now expanded to also include:
• a warning that repossession of mortgaged goods may not extinguish the debtor’s liability;
• information about the debtors right to make a hardship application (s66) or request that the credit provider postpone
enforcement action (s86) or apply to the court for it to do so (s68 or 88);
• information about the credit provider’s EDR scheme and the debtor’s rights under that scheme; and
• a warning about a report being made to a credit reporting agency’s credit information file about the default.

If a debtor, mortgagor or guarantor makes a request that the credit provider negotiate a postponement of enforcement proceedings, after being given a default notice, the credit provider must give the debtor a notice within 21 days after receiving the request which states whether or not the credit provider agrees to negotiate a postponement and if not the name of the credit provider’s EDR scheme and the debtor’s rights under that scheme.

Enforcement by credit provider

• Postponement of enforcement proceedings: The thresshold under which a debotor can seek postponement of enforcement proceedings has increased to $500,000.00 or a higher amount prescribed by the regulations.
• Repossession relief: A mortgagor may apply to the court to regain possession of mortgaged goods if the credit provider has taken possession of the mortgaged goods without complying with the requirements of Part 5 – Division 2 (Default Notices etc) or Part 5 – Division 4 (Procedures for taking possession of mortgaged goods). A Court may make any ancillary or consequential orders that it considers appropriate including that the credit provider pay the mortgagor compensation.

Comparison rates
Comparison Rate Schedules are removed completely. But Comparison Rates continue.
If a comparison rate is used in a document other than a credit advertisement, the document must comply with Part 9A – Division 2 (information and warnings regarding comparison rates) as if it were a credit advertisement.