The ACL has special provisions to protect consumers who have purchased goods using finance provided by a “linked credit contract”. This avoids the situation where a client rejects defective goods and returns them to the supplier, but is still liable to a third-party finance provider for the cost of the goods.
A “linked credit contract” is a finance or credit contract where the supplier of goods and the credit provider have a contract, arrangement or understanding between them, or where the supplier regularly refers customers to the credit provider (s 2).
The ACL provisions are designed to capture situations where, for example, a car dealer has a finance provider operating at their dealership, or where a supplier recommends or refers a consumer to a particular lender. When any of the ACL guarantees are breached, the supplier and the linked credit provider are each liable for the whole amount of the loss and damage the consumer suffers (s 278). Generally, the consumer must take any action against the supplier and the linked credit provider jointly (s 279).
It is important that the consumer can establish a link between the supplier of goods or services and the credit provider. A linked credit provider is not liable if the consumer sought out the credit provider independently, and was not induced to do so by the supplier of goods or services (s 280(1)). A linked credit provider is also not liable where they had satisfied themselves that the supplier was of good reputation, they had no cause to suspect that the consumer would be entitled to take action for breach of an ACL guarantee, and had no cause to suspect that the supplier could not cover the liability (s 280(2), (3)). A linked credit provider who supplies continuing credit (e.g. a credit card) tied to the supply of goods or services will not be liable if, given the nature and volume of their business, they had no cause to suspect that a consumer might be entitled to claim damages from the supplier for breach of a guarantee (s 280(4), (5)).