Lecture Fundamentals of business law (4th): Chapter 14 - Margaret L. Barron, Richard J.A. Fletcher

Chapter 14 - Consumer credit law. At the end of this chapter you should understand: the background to the development of the National Credit Code, the types of credit contract regulated by the National Credit Code, the types of credit excluded from the operation of the National Credit Code, the key requirements that must be disclosed under a consumer credit contract,...

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This is the prescribed textbook for your course.

Available NOW at your campus bookstore!

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by Barron & Fletcher Slides prepared by Kay Fanning

Consumer credit law

Chapter 14

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Customer Credit Code

• Introduced on 1 November 1996

• Developed uniform credit laws in Australia

• Includes: All credit providers for provision

of credit, wholly or predominantly for

personal, household or domestic purposes

• Ensures: Obligations and liabilities clearly set out

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by Barron & Fletcher Slides prepared by Kay Fanning 14-4

Definitions

• Creditor: Person providing the credit

• Debtor: Person receiving the credit

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Credit provider

A credit provider is any person who

provides credit, where a charge is made for the provision of the credit.

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Types of transaction covered

by the Code

• Transactions where credit provided to individuals wholly or predominantly for personal, household or domestic

purposes, i.e not for business or

investment purposes.

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Types of credit covered by the

Code

• Continuing credit contracts

e.g revolving credit

• Loan contracts

e.g home loans

personal loans

bank term loans

• Consumer leases: i.e Hire of goods by a natural person (or strata corporation),

where the lessee does not have a right or obligation to purchase the goods.

• Credit sales contracts: i.e Credit is provided to a buyer in the course of a sale

of goods or services.

• Mortgages and guarantees: Related transactions providing security for the debt.

• Hire purchase agreements: i.e A sale of goods by instalments, where there is a right or obligation to purchase the goods, with the cash price being less than the ultimate combined amounts paid for the goods).

• Credit-related insurance contracts: required by the credit provider for the

consumer to enter.

Type of credit not covered by the code: Section7.

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Disclosure requirements

(before contract signed)

Precontractual statement

• Clearly understandable

• Conforms to requirements set out in regulation attached

to code

Information statement

• Form 2 - Legal rights and obligations in plain English

Written contract

• Signed by debtor and credit provider

• Information as set out in S15 of Code

• Copy of contract (within 14 days)

• Form 3 - “Before you sign things you must know”

(Penalty for non-compliance: $500 000 plus compensation for any loss suffered by debtor or guarantor)

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NOT ENFORCEABLE unless

• in writing

• signed by guarantor

• contains warning to guarantor

• guarantor advised to seek legal advice

• warned of consequences should debtor fail to pay.

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Disclosure requirements

(after contract signed)

Regular statement of accounts

• Continuing credit card contracts - at least every 40 days

• Continuing credit contracts - between 40 days to three months

• Other credit contracts - at least every six months

Changes to the contract

• Credit provider has unilateral rights - notified in writing

• Credit provider and debtor mutually agree - notified in writing

• Contract unjust or causes hardship - may appeal to

Credit Tribunal/Court

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Action against defaulting

debtor

Credit provider makes Default Notice

Debtor, guarantor, mortgager

30 days to remedy Pay Not pay

Mortgage Debt > $125 000 Debt < $125 000 reinstated

Renegotiate Repossession Mortgage reinstated

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Advertising

• Regulated by the Code:

• Cost must include:

– the annual percentage rate

or rates – a statement detailing any fees or charges that may apply.

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Linked credit

• Linked credit provider: Credit provider has

a commercial relationship with a supplier of goods and services, to refer the credit

provider to the prospective purchasers.

• Credit provider and supplier jointly liable to debtor for loss or damage, e.g from:

- breach of contract

- misrepresentation

- failure to disclose relevant

material under the terms

of the contract

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Consumer affairs and fair

trading agencies

Major functions:

• Receive complaints

• Take action on behalf of consumers

• Investigate matters on behalf of government

• Advise government

Also:

• Carry out research

• Provide information to the community

• Raise community awareness of Code’s operation

• Provide legal representations to consumer

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Penalties for breaching the

Code

Civil penalties for breach of key requirements:

• Up to $500 000 for each separate breach, plus compensation for any loss suffered by debtor

or guarantor.

• Order applied for by - Debtor

- Guarantor

- Credit provider

- Government Consumer

Agency

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Penalties for breaching the

Code

Criminal penalties for breach of key

requirements:

• Up to $10 000 for each separate

breach.

Application by Government Consumer

Agency, Tribunal or Court.

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