The National Consumer Credit Protection Amendment Regulation 2012 (No. 4) was registered on 12 December 2012.
The Regulation amends the National Consumer Credit Protection Regulations 2010 to specify the details of the obligations introduced by the Consumer Credit Legislation Amendment (Enhancements) Act 2012 to the regulation of small amount credit contracts. (Background)
Small amount credit contracts are for less than $2,000 in value and for a term of at least 16 days but not longer than one year. They do not include continuing credit contracts, contracts where the credit provider is an Authorised Deposit-taking Institution or contracts where the debtor’s obligations under the contract are secured.
The Regulation specifies that from 1 March 2013 licensees who enter small amount credit contracts are required to:
• display warning notices on their premises;
• display a warning on their website; or
• for licensees that communicate by telephone – read a warning to a consumer before providing credit assistance.
The forms of the warnings are set out in Schedules 7 and 8 of the Regulation.
The Regulation requires that a statement, in the form set out in Schedule 10, be completed by the debtor or lessor where a credit provider or lessor proposes to give an employer an authorisation for payments under a credit contract or consumer leases with the debtor or lessor to be paid directly from their salary or wages.
The Regulation also introduces a requirement on credit providers not to enter into a small amount credit contract or offer to enter into a small amount credit contract if the repayments would exceed 20 per cent of the consumer’s gross income, for consumers who would receive at least 50 per cent of their gross income as payments under the Social Security Act 1991.
From 1 July 2013 there are new rules relating to unsuitable credit contracts, fees or charges in relation to a small amount credit contract, the annual cost rate of credit contracts and default in payment by direct debit under a small amount credit contract.
The Regulation prohibits loan-splitting in order to circumvent the cap on the maximum amount of costs which can be charged under a credit contract.
It also prohibits a credit provider from recovering charging third-party fees (for example, fees charged by a third party for providing access to the credit through cashing a cheque), where the third party has been introduced to a consumer to provide a service in relation to a small amount credit contract.
The Regulation also prohibits a credit provider from obtaining a return greater than that permitted by the cap by, in relation to medium amount credit contracts, introducing new fees after the contract has been entered into, and, in relation to other credit contracts, charging a fee such as a deferred establishment fees by arranging for the consumer to repay the amount owing earlier than specified in the contract.
The Regulation imposes requirements on a credit provider to refrain from seeking a repayment due under a small amount credit contract when there have been two successive defaults in seeking a payment through a direct debit. The regulation requires the credit provider to make reasonable attempts to contact the debtor to clarify why the direct debit is being rejected. The intention is to prevent the debtor’s liability to other persons increasing through dishonour fees incurred from repeated attempts to secure payment through the direct debit authority, at a time when the debtor may not be aware there are insufficient funds in their account to meet the payment.
