Understanding credit and finance

A credit provider must provide a consumer with a credit guide as soon as practicable after it becomes apparent to the credit provider that it is likely to enter into a credit contract with the consumer (s 126 National Consumer Credit Protection Act 2009 (Cth) (‘NCCP Act’)).

The credit guide must:

• be in writing;
• specify the credit provider’s name, contact details and Australian credit licence number;
• include details regarding complaint handling, including the contact details of the Australian Financial Complaints Authority;
• disclose the credit provider’s obligations to provide upon request a written copy of an assessment of the suitability of any proposed credit contract; and
• advise that the credit provider is prohibited from entering, or increasing the credit limit under, a credit contract that is unsuitable for the consumer.

Credit providers are required to provide a key facts sheet about standard home loans and credit cards to prospective borrowers.

A key facts sheet is a simple one-page infor­mation sheet that enables consumers to more easily compare like credit products offered by other credit providers.

Standard home loans

If a consumer requests one, a credit provider must provide a key facts sheet containing up-to-date information about the credit provider’s standard home loan (or loans) (s 133AD NCCP Act). This requirement has applied since 1 January 2012.

If the credit provider also has a website that can be used by a consumer to apply for or make an enquiry about a standard home loan, the website must be capable of being used by the consumer to generate a key facts sheet. The website must also provide the consumer with instructions for generating the key facts sheets, including the information that must be provided by the consumer (ss 133AC–133AE NCCP Act).

A standard home loan is a standard form of credit contract under which credit is provided for the purchase of residential property or to refinance credit that has been provided wholly or predominantly to purchase residential property (s 133AA NCCP Act).

The key facts sheet must be in the form provided in schedule 5 to the National Consumer Credit Protection Regulations 2010 (Cth) (‘NCCP Regulations’) and contain:

• the consumer’s specifications (that is, loan amount, term of home loan, interest type, and lender and product name);
• a description of the relevant home loan (including repayment method and frequency, interest rate and personalised comparison rate); and
• information about the cost of the loan (including the total amount to be repaid for every $1 borrowed, establishment fees, ongoing fees and amount to be repaid each month and year) (s 133AB NCCP Act).

Credit card contracts

All credit card application forms must now include a key facts sheet containing up-to-date information about the credit card contract (s 133BC NCCP Act). This requirement has applied since 1 July 2012.

A credit provider is prohibited from entering into a credit card contract with a consumer if they have not provided a key fact sheet containing up-to-date information (s 133BD NCCP Act). However, it is permissible for the key facts sheet to contain information that is no longer up-to-date if certain other requirements are met (ss 133BC(3)–(4), 133BD(1)(b) NCCP Act).

The key facts sheet must be in the form provided in schedule 6 to the NCCP Regulations and provide information including a description of the credit card, including the product name and applicable credit limit, minimum repayments, interest on purchases, annual fees and so on.

Pre-contractual statement

Prior to the debtor either entering into a credit contract or making an offer to enter into a credit contract (whichever occurs first), the credit provider must give the debtor a statement disclosing the information set out in section 17 of the NCC (s 16(1)–(2) NCC).

As this information must also be included in the credit contract, the credit provider can simply provide a copy of the proposed credit contract to the debtor (ss 16(5), 17 NCC). Alternatively, the credit provider can provide the information in a separate pre-contractual statement (s 16(5)).

Information statement

Before the debtor enters into, or makes an offer to enter into, a credit contract (whichever occurs first), the credit provider must give the debtor a copy of an information statement in the form required by the NCCP Regulations setting out the debtor’s statutory rights and obligations (form 5: things you should know about your proposed credit contract).