Introduction and key legislation: Understanding credit and finance

 

The credit industry is governed by legislation, common law, and industry codes of conduct all of which contain protections for consumers of financial products and services.

Introduction

Credit usually involves someone borrowing money and agreeing to pay it back later with some extra interest, fees or charges. Common forms of credit are home loans, credit cards, store cards and accounts, personal loans and pay-day loans.

Other financial products or services that may be protected by Australian consumer credit laws include lease contracts for the supply of goods, mortgages, guarantees, terms contracts for the sale of land and pawn broking contracts.

Main sources of consumer protections under Australian Credit Law

The main source of consumer credit law is the National Consumer Credit Protection Act 2009 (Cth) (“NCCPA”), the National Consumer Credit Protection Regulations 2010 (Cth) (“NCCP Regulations”) and the National Credit Code (NCC).

The NCC is very similar to the Uniform Credit Code (“Old Code”), which was the main source of consumer credit law before 1 July 2010. The Old Code commenced on 1 November 1996 and still has limited application to some contracts entered into before the NCC commenced (for discussion of transitional arrangements, seeWhat credit contracts are regulated by the NCC?”).

Other legislation also applies to any credit transaction, including:

Australian Securities and Investments Commission Act 2001 (Cth) (“ASIC Act”);

Banking Act 1959 (Cth);

Consumer Credit (Victoria) Act 1995 (Vic); and

Australian Consumer Law and Fair Trading Act 2012 (Vic) (prior to 1 July 2012, see the Fair Trading Act 1999 (Vic)).

Common law principles also apply to credit transactions.

Guidance on credit law can be found in the various Regulatory Guides published by the Australian Securities and Investments Commission (ASIC) (see www.asic.gov.au/rg). We have endeavoured to note where these sources may be particularly useful.

Credit providers may also have obligations under one or more codes of conduct. These include:

Code of Banking Practice (seeCode of Banking Practice” in Unauthorised transactions and epayments code, for amendments that commenced on 1 February 2014). The Code of Banking Practice has been held to form part of the contract between a bank and customer (see National Australia Bank Limited v Rice [2015] VSC 10);

Mortgage and Finance Association of Australia Code of Practice; and

Customer Owned Banking Code of Practice (prior to 1 January 2014 the Mutual Banking Code of Practice applied).

Some of these codes are voluntary, and set standards of best practice in the industry (see Credit reporting).

External dispute resolution schemes, also known as industry ombudsman schemes (e.g. the Financial Ombudsman Service and the Credit and Investments Ombudsman), have regard to fairness, good industry practice and industry codes, as well as legal principles, in determining disputes between consumers and credit providers (seeCredit dispute resolution” in Unauthorised transactions and epayments code).

Readers of this chapter may also be assisted by:

Mortgages, credit cards and other finance products

Are you in debt?;

Mortgages, credit cards and other finance products;

Credit reporting;

Buying or selling a house;

Buying a car;

How contract law works; Guarantees on the supply of goods and services; Consumer protection laws; Taking action as a consumer, on consumers and contracts.