What is the national credit reform package?
The national credit reform package marks phase one of the reform of credit in Australia and includes:
- a licensing regime for all providers of consumer credit and services
- responsible lending conduct requirements
- sanctions and enforcement powers for The Australian Securities and Investments Commission (ASIC) as the regulator of the regime
ASIC is now the regulator of consumer credit and finance broking under the National Consumer Credit Protection Act 2009 (National Credit Act).
Schedule 1 of the National Credit Act contains the National Credit Code (Code). This largely replicates the state and territory based Uniform Consumer Credit Code (UCCC), including the aim to ensure strong consumer protection through ‘truth in lending’. The Code also regulates many aspects of the provision of certain types of credit.
Who will be affected?
If you engage in consumer credit activities, you will be affected by the national credit regime.
Products that are regulated include home loans, personal loans, credit cards, consumer leases, overdrafts and line of credit accounts, among other products and services.
Importantly the National Credit Code includes the provision of credit to purchase, renovate, improve or refinance a residential investment property.
This section has been developed to help you understand the regulation of consumer credit and finance broking. It is also intended to provide you with guidance when licensing* will be required under the National Consumer Credit Protection Act 2009 and what must be done if want to engage in credit activities.
- Credit activities that will be regulated
- Activities that can be provided without holding a credit licence
- Credit contracts made before 1 July 2010 and specific exemptions
- Your options to address the National Credit Act
- Requirements to apply for your own Australian credit licence
- Australian financial services licence holders applying for an Australian credit licence
- Becoming a credit representative
- Responsible lending conduct obligations
*Throughout these pages reference to licensing means an Australian credit licence (credit licence) issued by the ASIC or becoming a credit representative of a licence holder.
Further proposed regulation
The implementation of the National Consumer Credit Protection Act 2009 and associated legislation largely marks the completion of phase one from the Australian Government’s two-phase implementation plan for the national regulation of consumer credit.
Key elements of phase two have been flagged to include:
- enhancements to specific conduct obligations to stem unfavourable lending practices, such as a review of credit card limit extension offers, an examination of state approaches to interest rate caps; and other fringe lending issues as they arise
- regulation of the provision of credit for small businesses
- regulation of investment loans other than margin loans and mortgages for residential investment properties
- reform of mandatory comparison rates and default notices
- enhancements to the regulation and tailored disclosure of reverse mortgages
- examination of remaining existing state and territory reform projects
In July 2010, the government released a green paper to initiate phase two of the consultation process. CPA Australia made a submission to this paper and are now waiting on the government to announce the next steps.
CPA Australia will continue to monitor the progress of phase two.