Annotated national credit code [5 ed.] 9780409336160, 0409336165, 9780409336177, 0409336173

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LEXISNEXS ANNOTATED ACTS

ANNOTATED NATIONAL CREDIT CODE 5TH EDITION

Legislation current as at 1 July 2014. Commentary current as at 1 July 2014 unless otherwise indicated.

Andrea Beatty LLB (Hons) LLM (Cantab)

Andrew Smith BEc (Hons) LLB (Hons)

LexisNexis Butterworths Australia 2014

The fifth edition of this text is dedicated to our loyal clients — thank you for your longstanding and constant support. The first edition was commenced in 1996 and published in 1997 — the fifth edition is almost triple the size of the first. It’s been quite a journey in Australian financial services regulation over the past 20 years …

LexisNexis AUSTRALIA LexisNexis Butterworths 475–495 Victoria Avenue, Chatswood NSW 2067 On the internet at: www.lexisnexis.com.au ARGENTINA LexisNexis Argentina, BUENOS AIRES AUSTRIA LexisNexis Verlag ARD Orac GmbH & Co KG, VIENNA BRAZIL LexisNexis Latin America, SAO PAULO CANADA LexisNexis Canada, Markham, ONTARIO CHILE LexisNexis Chile, SANTIAGO CHINA LexisNexis China, BEIJING, SHANGHAI CZECH REPUBLIC Nakladatelství Orac sro, PRAGUE FRANCE LexisNexis SA, PARIS GERMANY LexisNexis Germany, FRANKFURT HONG KONG LexisNexis Hong Kong, HONG KONG HUNGARY HVG-Orac, BUDAPEST INDIA LexisNexis, NEW DELHI ITALY Dott A Giuffrè Editore SpA, MILAN JAPAN LexisNexis Japan KK, TOKYO KOREA LexisNexis, SEOUL MALAYSIA LexisNexis Malaysia Sdn Bhd, PETALING JAYA, SELANGOR NEW ZEALAND LexisNexis WELLINGTON POLAND Wydawnictwo Prawnicze LexisNexis, WARSAW SINGAPORE LexisNexis, SINGAPORE SOUTH AFRICA LexisNexis Butterworths, DURBAN SWITZERLAND Staempfli Verlag AG, BERNE TAIWAN LexisNexis, TAIWAN UNITED KINGDOM LexisNexis UK, LONDON, EDINBURGH

USA LexisNexis Group, New York, NEW YORK LexisNexis, Miamisburg, OHIO National Library of Australia Cataloguing-in-Publication entry ISSN ISBN ISBN

1838-5753 9780409336160 (pbk) 9780409336177 (ebk)

©2014 Reed International Books Australia Pty Limited trading as LexisNexis First edition 1997. Second edition 2000. Third edition 2006. Fourth edition 2011. This book is copyright. Except as permitted under the Copyright Act 1968 (Cth), no part of this publication may be reproduced by any process, electronic or otherwise, without the specific written permission of the copyright owner. Neither may information be stored electronically in any form whatsoever without such permission. Inquiries should be addressed to the publishers. Printed in China. Visit LexisNexis Butterworths at www.lexisnexis.com.au

FEATURES OF THIS VOLUME This volume of LexisNexis Annotated Acts provides practitioners and students with a guide to consumer credit legislation. Reproduced are the National Credit Code (Code) and National Consumer Credit Protection Regulations 2010 (Cth) (Regulations) relating to the National Credit Code, both annotated and explained in a comprehensive and detailed commentary.

Currency of legislation The legislation reprint is current up to and including 1 July 2014.

Historical notes Where a section, subsection or definition of the Code or a regulation or Schedule has been amended, LexisNexis has inserted an historical note in square brackets in a small typeface immediately beneath the provision. This note details the history of the provision as amended.

Legislative histories To find out the full name and date of assent and commencement of an amending Act, or number and date of gazettal and commencement of an amending regulation, turn to the relevant “Legislative History” at the front of the legislation.

Commentary The Code, and Regulations relating to the Code, have been annotated by Andrea Beatty and Andrew Smith, based on the law as at 1 July 2014, to provide an overview and a clear analysis of the legislation, including its more complex provisions, as well as important case law and historical notes. Commentary on a section of the Code or Regulations is located at the end of the section, providing an overview of the section, relevant case law and links the topic under discussion to related areas.

How to find commentary on a particular topic Information within the commentary can be researched according to topic, case law or provision of the legislation by using the: Index, which is located at the rear of the volume, subject-based and referenced to paragraphs of the commentary; Table of Cases, which is located at the front of the volume, lists all cases mentioned in the commentary and referenced to paragraphs; Table of Statutes, which is located at the front of the volume, lists all statutes mentioned in commentary and referenced to paragraphs; and Table of Provisions, which is located before both the Code and Regulations, and shows the legislation as divided into Parts, Divisions and Subdivisions, including the titles of every section or regulation. This is a convenient starting point if you need an overview of the structure of the legislation to find commentary on a particular topic.

Cross-references The commentary contains: internal cross-references to paragraphs of the Code and Regulations and to other paragraphs in the volume where the same or related issues are discussed in more detail or in other contexts; and cross-references to cases, other Acts and Regulations and other publications dealing with aspects of the issues under discussion.

Paragraph numbers Annotations have been paragraphed to follow the numbering of the Code sections and Regulations.

Running heads Running heads at the top of each page indicate the Part, section or

regulation, and commentary set out on each page as follows: Left page: Right page:

s 47 Pt 3

Annotated National Credit Code National Credit Code

Pt 3 [48.10]

THE AUTHORS Andrea Beatty is a lawyer and consultant specialising in financial services. Andrea has been actively involved in developing financial services regulation since the mid-1990s. With Andrew Smith, she has co-authored five editions of this text. The first edition was published in 1997. Andrea’s expertise extends across legal and consulting fields, and includes designing and conducting financial services training for business, compliance officers, consumer advocates and lawyers. Andrea advises on all aspects of financial services, including product development, compliance strategies, regulatory investigations, compliance audits and pro forma documents. Andrea has been recognised in the Australian Financial Review’s Best Lawyers 2012, Best Lawyers 2013 and Best Lawyers 2014 awards, for her skill in relation to financial institutions and regulatory law. She has also been nominated for Euromoney Legal Media Group’s 2013 and 2014 Australasia Women in Business Law Awards for the Banking and Finance practice group. Andrea holds a Bachelor of Laws (Honours) from the University of Adelaide, and a Masters of Laws from Cambridge University. Andrea was previously a partner at Mallesons Stephen Jaques for 12 years and is currently a partner at K & L Gates. K&L Gates conducts a number of other credit-related training sessions for all sectors of the credit industry (business, lawyers, compliance). Please contact the authors for details. Andrea can be contacted at [email protected] or on 0419 721 217. Andrew Smith is a lawyer and consultant. Andrew was previously a deputy ombudsman at the Credit Ombudsman Service, Head of Legal at National Australia Bank, and General Counsel and Vice-President, Legal and Compliance for GE Money Australia and New Zealand. During his career, Andrew has also worked as a university tutor in economics, an economist for the State Government of New South Wales, a bank supervisor with the Reserve Bank of Australia, and a regulator for the Australian Securities and Investments Commission.

Andrew was a partner at Mallesons Stephen Jaques for more than 20 years, working in offices in Sydney, Melbourne and Jakarta.

Andrea and Andrew’s practice areas Consumer financial services Financial products regulation Standard form financial services documents (eg loan contracts and security documents), marketing, processes and procedures manuals Compliance training programs (including for responsible managers) External dispute resolution (EDR) and complaints to EDR schemes Unfair contract terms Loyalty programs and financial services alliances Financial services litigation and customer disputes (including EDR) Deposit product terms and conditions and disclose documents Licensing and compliance (Australian financial services licence and Australian credit licence) Consumer credit and margin lending Finance and mortgage broking Personal property securities reform Consumer protection Payment systems and reloadable cards (including gift cards) Retail and electronic banking (eg online payments, real time payments) E-commerce Banking law Privacy and spam regulation Anti-money laundering Compliance process and audits: privacy and anti-money laundering

Regulatory investigations, enforceable undertakings, exemptions and remedial action and audits Complete advisory Property and project finance Commercial transactions: product development, loyalty programs, outsourcing, white labelling, alliances, acquisitions and disposals Information technology systems compliance audits Consumer credit products: credit cards, credit contracts, consumer leases, reverse mortgages and small amount credit contracts

Other contributors The authors wish to thank Joanne Eslick who has been involved in all five editions of this text, since the first edition was published in 1997. The authors also thank Abhishek Bansal, Katherine Montano and Jason Vongratsavai for their assistance in preparing this fifth edition. This edition of the text involved substantial amendment to the fourth edition — nevertheless, it would not have been possible without the work done by those involved in the production of the fourth edition; in particular, the authors thank Kate Corcoran and Glenn Phillips. The fourth edition updated the Uniform Consumer Credit Code to the National Consumer Credit Protection regime — the cross-referencing changes required for the fourth edition text alone were a nightmare! This commentary does not constitute legal advice. Readers should obtain their own legal advice suitable to their circumstances. The publishers, authors, reviewers and endorsers of this text each excludes liability for loss suffered by any person resulting in any way from the use of, or reliance on, this text. This commentary is based on the National Credit Code (Code) as at 1 July 2014 and includes: an overview of the National Consumer Credit Protection Act 2009 (Cth) (NCCP Act) and the National Consumer Credit Protection

Regulations 2010 (Cth) (Regulations) to the extent that they relate to the Code; commentary on the following legislation: Act

Number and year

National Consumer Credit Protection Act 2009

134, 2009

National Consumer Credit Protection Amendment Act 2010 Statute Law Revision Act 2011 Acts Interpretation Amendment Act 2011

9, 2010

National Consumer Credit Protection Amendment (Home Loans

84, 2011

5, 2011

46, 2011

Assent date Commencement Application, date saving and transitional provisions 15 ss 3–337 and — December Sch 1: 1 April 2009 2010 (see F2010L00301) Remainder: Royal Assent 3 March 3 March 2010 — 2010

22 March 2011

Sch 1 (items 66– 68): Royal Assent 27 June Sch 2 (items 2011 781–784) and Sch 3 (items 10, 11): 27 December 2011 25 July 2011 Sch 1 (items 1– 5): 1 January 2012 Sch 1 (items 6, 8–10, 12, 14, 15, 17– 28): 1 July 2012

—

Sch 3 (items 10, 11)

—

and Credit Cards) Act 2011 Consumer 130, 2012 Credit Legislation Amendment (Enhancements) Act 2012

Privacy 197, 2012 Amendment (Enhancing Privacy Protection) Act 2012 Federal Circuit 13, 2013 Court of Australia (Consequential Amendments) Act 2013

17 September 2012

12 December 2012

14 March 2013

Sch 1, Sch 2 — (items 9–14, 16– 18, 21, 22, 24– 26), Sch 3 and Sch 5: 1 March 2013 Sch 2 (items 1–8, 15, 19, 20, 23): 18 September 2012 Sch 4: 1 July 2013 Sch 5 (Items 12 March 131, 132) 2014

Sch 1 (items — 418, 419); 12 April 2013 (see s 2(21)) Schedule 2 (item 1)

an overview of the Regulations relating to the Code — the National Consumer Credit Protection Regulations 2010 (Cth) (Regulations) — as at 1 July 2014, incorporating: Regulations

Number and year

FRLI Commencement registration date date

National Consumer Credit Protection Regulations 2010 National Consumer Credit Protection Amendment Regulations 2010 (No 1) National Consumer Credit Protection Amendment Regulations 2010 (No 2) National Consumer Credit Protection Amendment Regulations 2010 (No 3) National Consumer Credit Protection Legislation Amendment Regulations 2010 (No 1) National Consumer Credit Protection Legislation Amendment Regulations 2010 (No 2)

2010 No 44

12 March 2010 (see F2010L00631)

1 July 2010

2010 No 59

26 March 2010 (see F2010L00742)

1 July 2010

2010 No 105

21 May 2010 (see 24 May 2010 F2010L01369)

2010 No 137

18 June 2010 (see 19 June 2010 F2010L01578)

2010 No 185

30 June 2010 (see 1 July 2010 F2010L01810)

2010 No 235

21 July 2010 (see Sch 1 (item 1): 1 F2010L02121) October 2010 Remainder: 22 July 2010

National 2010 No 303 Consumer Credit Protection Legislation Amendment Regulations 2010 (No 3)

25 November 2010 (see F2010L03104)

26 November 2010

National Consumer Credit Protection Amendment Regulations 2010 (No 4) National Consumer Credit Protection Amendment Regulations 2011 (No 1) National Consumer Credit Protection Amendment Regulations 2011 (No 2) National Consumer Credit Protection Amendment Regulations 2011 (No 3) National Consumer Credit Protection Amendment

2010 No 333

10 December 2010 (see F2010L03196)

1 January 2011

2011 No 39

24 March 2011 (see F2011L00474)

25 March 2011

2011 No 40

23 March 2011 (see F2011L00465)

1 July 2011

2011 No 67

13 May 2011 (see 1 July 2011 F2011L00764)

2011 No 143

2 August 2011 (see F2011L01585)

regs 1–3 and Sch 1: 3 August 2011 Sch 2: 1 October 2011

Regulations 2011 (No 4) National Consumer Credit Protection Amendment Regulations 2011 (No 5) National Consumer Credit Protection Amendment Regulations 2011 (No 6) National Consumer Credit Protection Amendment Regulation 2012 (No 1) National Consumer Credit Protection Amendment Regulation 2012 (No 2) National Consumer Credit Protection Amendment Regulation 2012 (No 3) National Consumer Credit Protection

2011 No 165

5 September 2011 1 January 2012 (F2011101805)

2011 No 201

7 November 2011 1 July 2012 (see F2011L02260)

2012 No 117

18 June 2012 (see regs 1–3 and Sch F2012L01233) 1: 19 June 2012 s 4 and Sch 2: 1 July 2012

2012 No 201

7 November 2011 21 August 2012 (see F2012L01706)

2012 No 313

11 December 2012 (see F2012L02415)

regs 1–4 and Sch 1: 12 December 2012 Sch 2: 1 March 2013

2012 No 314

12 December 2012 (see F2012L02429)

regs 1–3: 12 December 2012 Sch 1: 1 March

Amendment

2013 Sch 2: 1 July 2013

Regulation 2012 (No 4) National Consumer Credit Protection Amendment Regulation 2013 (No 1) Federal Circuit Court of Australia Legislation (Consequential Amendments) Regulation 2013 (No 1) National Consumer Credit Protection Amendment Regulation 2013 (No 2) National Consumer Credit Protection Amendment (Small Amount Credit Contracts) Regulation 2014

2013 No 43

3 April 2013 (see 4 April 2013 F2013L00608)

2013 No 51

11 April 2013 (see F2013L00649)

2013 No 85

21 May 2013 (see Sch 1: 22 May F2013L00814) 2013 Sch 2: 1 June 2013

2014, No 89

12 June 2014 (see 13 June 2014 F2014L00701)

Sch 1 (item 104)

The Regulations were made under the NCCP Act and first commenced on 1 July 2010. Section references are references to the National Credit Code (Code) unless otherwise stated. Regulation references are references to the National Consumer Credit Protection Regulations 2010 (Cth) (Regulations) unless otherwise stated.

A reference to the “explanatory memorandum” (in relation to the Code) or the “explanatory statement” (in relation to the Regulations) is a reference to the explanatory memorandum or explanatory statement for the particular provision to which the reference applies.

INTRODUCTION National Credit Code On 1 July 2010, the National Credit Code (Code), which is Sch 1 to the National Consumer Credit Protection Act 2009 (Cth) (NCCP Act), replaced the Uniform Consumer Credit Code (UCCC) in all Australian states and territories. The Code substantially replicates the UCCC with some amendments (including to section numbering — see “Comparative Table: National Credit Code (Code) and Uniform Consumer Credit Code (UCCC)” under the annotated National Credit Code). The key objective noted in the Revised Explanatory Memorandum to the National Consumer Credit Protection Bill 2009 was to ensure strong consumer protection through “truth in lending” while at the same time acknowledging that laws must remain flexible and non-prescriptive in order to facilitate competition and product innovation. The Code provides protection to a wider variety of consumers than that offered under the UCCC, as it has been extended to apply to the provision of credit to purchase, renovate or improve a residential investment property or to refinance a credit contract for those purposes. In 2013, a number of enhancements were made to the Code, dealing with hardship variations, short term and small amount credit contracts, reverse mortgages, and consumer leases and maximum annual percentage rates.

State referral of powers In order for the NCCP Act to be binding on each state and territory, each individual jurisdiction had to refer power to the Commonwealth. Section 51(xxxvii) of the Commonwealth Constitution allows the Commonwealth to make laws with respect to matters referred to it by a state or territory. The National Consumer Credit Protection Amendment Act 2010 was passed by Federal Parliament on 25 February 2010, received royal assent on 3 March 2010, and presently provides a model for each state and territory referral bill.

Uniform Consumer Credit Code This book still refers to the UCCC, which continues to govern certain credit contracts made before the commencement of the Code on 1 July 2010. The final reprint of the UCCC in force before its repeal was reprint 4B, which included all amendments in force on 1 December 2009. The UCCC commenced operation in all Australian states and territories (except Tasmania) on 1 November 1996. The commencement date for the UCCC in Tasmania was 1 March 1997, or any date between 1 November 1996 and 1 March 1997 that credit providers chose to apply the UCCC provisions (including the transitional provisions). A credit provider could make a written application to the Tasmanian Consumer Affairs Department by 18 October 1996 to select their application date. An order specific to that credit provider was then published in the Tasmanian Government Gazette, detailing that the UCCC would apply to that credit provider as at the date specified in the order.

Uniform scheme under the UCCC The UCCC formed part of a legislative scheme that involved the enactment of adopting legislation by the states and territories. The scheme was based on the Uniform Credit Laws Agreement 1993 (Agreement) of the states and territories. The states and territories agreed under the Agreement to pass “template” legislation. Queensland was the state nominated to enact the UCCC and the Regulations to the UCCC. Under the Agreement, the other Australian states and territories could either apply the UCCC (as in force from time to time) as the law of the state or territory or enact a law that was consistent with the UCCC. Under the Agreement, the Queensland Parliament could only change the UCCC with the approval of a ministerial council of the states and territories. The Consumer Credit (Queensland) Act 1994, incorporating the UCCC, was passed by the Queensland Parliament on 2 September 1994. Initially all other Australian states and territories introduced legislation adopting the Queensland UCCC, except Western Australia which passed “alternative but consistent” legislation to the Queensland UCCC (see the

Consumer Credit (Australian Capital Territory) Act 1995; Consumer Credit (New South Wales) Act 1995; Consumer Credit (Northern Territory) Act 1995; Consumer Credit (Queensland) Act 1994; Consumer Credit (South Australia) Act 1995; Consumer Credit (Tasmania) Act 1996; Consumer Credit (Victoria) Act 1995; Consumer Credit (Western Australia) Act 1995). From 2003, Western Australia adopted the Queensland UCCC but chose to retain certain differences. Tasmania also made a number of unilateral variations to the Queensland UCCC.

Credit Acts References in this commentary to the Credit Act are to the Credit Act 1984 (NSW) (which is substantially identical to the Credit Acts of Victoria, Queensland, the Australian Capital Territory and Western Australia). However, the New South Wales Act was repealed by Sch 1 to the Credit (Commonwealth Powers) Act 2010 (NSW), in effect from 1 July 2010.

Goods and Services Tax The Goods and Services Tax (GST) commenced on 1 July 2000. For an analysis of the implications for consumer credit, see A Duggan and E Lanyon “Managing Consumer Credit Code Compliance in a GST Environment” (2000) 15(7) Australian Banking and Finance Law Bulletin 105. This text does not consider the implications of the GST in detail. However, overall the same general principles apply to the disclosure of GST related costs as those that apply to other government charges and taxes. The legislation reprint is current up to and including 1 July 2014.

Scope of title This fifth edition text provides commentary on, and precedents related to, the provision of credit to consumers or strata corporations for personal, domestic or household purposes, or for purchasing, refinancing, renovating or improving residential investment property.

Issues considered This title covers the requirements under the National Credit Code (Code), being Sch 1 to the National Consumer Credit Protection Act 2009 (Cth) (NCCP Act). This title considers: transactions regulated by the Code, including in relation to: —

credit contracts (including small amount credit contracts, medium amount credit contracts and reverse mortgages);

—

mortgages and guarantees;

—

consumer leases; and

—

insurance;

statements of account; payouts and surrender of goods; formal requirements for documents and other notices; disclosure obligations (including credit guides and key facts sheets); procedural matters including obligations imposed on increases in credit limits or amount of credit; compliance and enforcement; penalties; and overview of privacy reforms enacted on 12 March 2014 and comprehensive credit reporting.

Related issues not covered within this title This title does not consider: taxation and stamp duty; general law enforcement issues; competition law; or personal properties security law (other than with incidental references).

This title considers the requirements of the National Credit Code (Code) in relation to the provision of credit to consumers or strata corporations for personal, domestic or household purposes or for purchasing, refinancing, renovating or improving residential investment property. The Code is set out in Sch 1 to the NCCP Act. The NCCP Act makes the Code apply as a law of the Commonwealth (see s 3 of the NCCP Act). The Code substantially replicates the former state-based consumer credit legislation (the Uniform Consumer Credit Code (UCCC)). The Code commenced operation on 1 July 2010. The scope of the Code is very wide. The Code is not limited to financial institutions, nor is it limited to credit provided below a monetary ceiling. The Code applies to any person who carries on business if “consumer” credit (ie credit provided to individuals and strata corporations wholly or predominantly for personal, domestic or household purposes) is part of, or even incidental to, that business. The Code also applies to credit wholly or predominantly for the purchase, renovation, improvement or refinancing of residential investment property (s 5). (Credit wholly or predominantly for investment purposes is otherwise excluded.) Related mortgages, guarantees (see Pt 3 of the Code) and insurance contracts (see Pt 8 of the Code) are also covered.

Glossary Term ACC ACCC ACL ADIs AFSL AML/CTF Act APPs APR

Meaning annual compliance certificate Australian Competition and Consumer Commission Australian credit licence authorised deposit-taking institutions Australian financial services licence Anti-Money Laundering and CounterTerrorism Financing Act 2006 (Cth) Australian Privacy Principles annual percentage rate

APRA ARCA ARNECC

Australian Prudential Regulation Authority Australian Retail Credit Association Australian Registrars’ National Electronic Conveyancing Council ASIC Australian Securities and Investments Commission ASIC Act Australian Securities and Investments Commission Act 2001 (Cth) ATO Australian Tax Office AUSTRAC Australian Transaction Reports and Analysis Centre CBP or Code of Banking Code of Banking Practice (2013) — the Practice banking industry’s charter on best banking practice standards The revised Code of Banking Practice was published in January 2013. The commencement date for the 2013 version of the CBP is 1 February 2014 COAG Council of Australian Governments COBCP or Customer Owned Customer Owned Banking Code of Practice Banking Code of Practice (January 2014) (formerly the Mutual Banking Code of Practice) is a code of practice for Australia’s credit unions, mutual banks and mutual building societies. As of 1 July 2009, it replaces the Credit Union Code of Practice. See www.customerownedbanking.asn.au Code National Credit Code (Sch 1 to the NCCP Act) COI “carried over instruments” Corporations Act Corporations Act 2001 (Cth) CPD continuing professional development Credit Act Credit Act 1984 (NSW) (repealed by Sch 1

to the Credit (Commonwealth Powers) Act 2010 (NSW), in effect from 1 July 2010) EDR EDR scheme Enhancements Act ePayments Code

Explanatory Memorandum

FOFA HCA licensee MACC NCCP Act NCCP Amendment Regulations OAIC Phase 2 Bill

PPSA PPSR

external dispute resolution external dispute resolution scheme Consumer Credit Legislation Amendment (Enhancements) Act 2012 (Cth) Formerly known as the Electronic Funds Transfer Code of Conduct (EFT Code). The ePayments Code was released on 20 September 2011 and replaced the EFT Code from March 2013 Explanatory Memorandum to the Consumer Credit and Corporations Legislation Amendment (Enhancements) Bill 2011 (Cth) future of financial advice High Court of Australia a holder of an Australian credit licence issued by ASIC under the NCCP Act medium amount credit contract National Consumer Credit Protection Act 2009 (Cth) National Consumer Credit Protection Amendment Regulation 2012 (No 1) (Cth) Office of the Australian Information Commissioner National Consumer Credit Protection Amendment (Credit Reform Phase 2) Bill 2012 (Cth) Personal Property Securities Act 2009 (Cth) (commenced on 30 January 2012) Personal Property Securities Regulations 2010 (Cth)

Privacy Act Privacy Reform Act RBA Regulations Revised Explanatory Memorandum SACC SMSF Transitional Act

UCCC

Privacy Act 1988 (Cth) Privacy Amendment (Enhancing Privacy Protection) Act 2012 (Cth) Reserve Bank of Australia National Consumer Credit Protection Regulations 2010 (Cth) Revised Explanatory Memorandum to the National Consumer Credit Protection Bill 2009 (Cth) small amount credit contract self-managed superannuation fund National Consumer Credit Protection (Transitional and Consequential Provisions) Act 2009 (Cth) Uniform Consumer Credit Code — state and territory legislation (predecessor to the Code)

OVERVIEW OF THE NATIONAL CONSUMER CREDIT PROTECTION ACT (NCCP ACT) REGIME 1 Consumer credit regulation in Australia — National Consumer Credit Action Plan In late 2008, the Council of Australian Governments (COAG) reached an agreement that the Commonwealth Government should assume responsibility for the regulation of consumer credit (which, at that time, was regulated by the individual states and territories — though on a substantially uniform basis). That agreement was reflected in the National Consumer Credit Action Plan (Action Plan). The Action Plan was to be implemented in two phases. The first phase — involving the introduction of new legislation (collectively known as the Consumer Credit Reform Package) and amendments to the Corporations Act 2001 (Cth) — was implemented in stages during 2010 and early 2011. This first phase (phase 1): enacted the existing state-based consumer credit legislation (the Uniform Consumer Credit Code (UCCC)) as Commonwealth legislation; enhanced consumer credit protection (including by extending the scope of credit which is regulated and requiring external dispute resolution (EDR) schemes); established a single national licensing scheme for those engaged in providing consumer credit or other credit activities, via an Australian credit licence (ACL); required ACL holders to meet ongoing conduct standards; required credit providers to lend “responsibly” (ie, not to provide a consumer with an “unsuitable” credit contract);

appointed the Australian Securities and Investments Commission (ASIC) as the new regulator of consumer credit with increased sanctions and enforcement powers; and brought margin loans into the Australian financial services licensing regime and a responsible lending regime. The second phase (phase 2), which is ongoing: extends the regulation of consumer leases in order to limit any incentive to frame credit as a lease; introduces specific regulation of credit cards (eg, disclosure of key terms at the application stage, allowing consumers to nominate their credit limit and giving a health warning on account statements); changes hardship variation limits and the stay of enforcement proceedings; regulates short term, small amount lending; and tailors the regime’s application to reverse mortgages. The Commonwealth Government’s Green Paper, National Credit Reform: Enhancing Confidence and Fairness in Australia’s Credit Law (7 July 2010) (Green Paper) discussed these phase 2 areas. Reforms were subsequently made to the Code by the Consumer Credit Legislation Amendment (Enhancements) Act 2012 (Cth). 1.1 Phase 1: Consumer Credit Reform Package and Corporations Act amendments The legislative regime regulating the provision of credit to consumers was overhauled in late 2009 with the introduction of the Consumer Credit Reform Package and Corporations Act amendments that, together, constituted phase 1 of the Action Plan. The reform package included the Bills for the following three Acts and related draft regulations: National Consumer Credit Protection Act 2009 (NCCP Act); National

Consumer

Credit

Protection

(Transitional

and

Consequential Provisions) Act 2009 (Transitional Act); and National Consumer Credit Protection (Fees) Act 2009 (Fees Act). The NCCP Act made the National Credit Code (Code) apply as a law of the Commonwealth (see s 3 of the NCCP Act). The Code is set out in Schedule 1 to the NCCP Act and substantially replicates the former UCCC (with significant revisions made by the Enhancements Act). By virtue of the Code, the NCCP Act now regulates the provision of credit to debtors or strata corporations for personal, domestic or household purposes or for purchasing, refinancing, renovating or improving residential investment property. Credit for business purposes or for investment other than in residential investment property (and certain other credit — such as informal credit) is not regulated by the Code. The NCCP Act also assigns enforcement of the Code and regulation of credit providers (licensing and responsible lending conduct) to the Australian Securities and Investments Commission (ASIC). ASIC is the governing body responsible for administering the NCCP Act (including the Code) (see s 239 of the NCCP Act). Details of the reform package are set out below at para 4 of this overview “Framework of phase 1”. The Corporations Act amendments were effected by the Corporations Legislation Amendment (Financial Services Modernisation) Act 2009. This Act brought margin lending for financial products within the Australian financial services licensing regime for the first time. The amended Corporations Act: introduced a national licensing scheme for those providing or advising on margin loans for debtors; introduced responsible margin lending and advising criteria; ensured debtor access to dispute resolution services for margin loans; and clarified the responsibility for notifying debtors if there is a margin call. 1.2 Phase 1: Timing

The phase 1 provisions commenced as set out below. The new licensing scheme was introduced in stages commencing on 1 July 2010 (see “Requirement to hold an Australian Credit Licence” at para 5.3 below for an overview of the transitional arrangements). The responsible lending provisions commenced on 1 July 2010 for non-authorised deposit-taking institutions and non-registered financial corporations, and commenced on 1 January 2011 for authorised deposit-taking institutions and registered financial corporations. The general consumer credit provisions (ie, the Code) commenced on 1 July 2010. The margin lending licensing scheme commenced on 1 July 2010 with a six-month transitional period. The rest of the margin lending provisions commenced on 1 January 2011.

2 Before the Consumer Credit Reform Package — the Uniform Consumer Credit Code and multiple licensing 2.1 The UCCC The predecessor to the Code (Sch 1 to the NCCP Act) was the Uniform Consumer Credit Code (UCCC). Prior to the NCCP Act, this code was often known as simply the “Consumer Credit Code” but, since the introduction of the reform package, it has become known as the Uniform Consumer Credit Code or UCCC to distinguish it from the similar code (the National Credit Code) in the NCCP Act. The UCCC commenced operation in all Australian states and territories (except Tasmania) on 1 November 1996. In Tasmania, the commencement date was 1 March 1997 but credit providers with national operations were able to “opt in” to the legislation from 1 November 1996. The UCCC formed part of a legislative scheme that involved the enactment

of adopting legislation by the states and territories (as envisaged in an agreement — the Uniform Credit Laws Agreement 1993 — arrived at by the states and territories in 1993). “Template” legislation was passed in Queensland in the form of the UCCC and the UCCC Regulation; the other states and territories either applied the UCCC as the law of their state or territory or enacted a law that was consistent with the UCCC (at the election of the relevant state or territory). The Consumer Credit (Queensland) Act 1994 incorporating the UCCC was passed by the Queensland Parliament on 2 September 1994. It was agreed that the Queensland Parliament could only change the UCCC with the approval of a ministerial council of the states and territories. Initially, all other Australian states and territories introduced legislation adopting the Queensland code, except Western Australia which passed “alternative but consistent” legislation to the Queensland code.1 From 2003, Western Australia adopted the Queensland code but chose to retain certain differences. Tasmania also made a number of unilateral variations to the Queensland code. The UCCC was substantially similar to the current National Credit Code (Code) — the major differences are that: the UCCC only applied to credit for personal, domestic or household purposes, whereas the Code extends this to also include credit for purchasing, refinancing, renovating or improving residential investment property; and the UCCC was enforced by individual state and territory government agencies, whereas the Code is enforced by the Australian Securities and Investments Commission (ASIC), a national body with significant funding to carry out its responsibilities. Differences between the UCCC and the Code are summarised and highlighted throughout this book. Since 1 July 2010, these differences are now largely academic as the UCCC was repealed when the Code commenced (however, the differences may be significant to the extent that pre-1 July 2010 conduct is relevant to a particular credit contract). 2.2 Impact of personal property securities law (including the PPSA)

The scheme introduced by the Personal Property Securities Act 2009 (Cth) (PPSA) (which commenced on 30 January 2012) and related legislation has changed some aspects of consumer credit law practice. The following information about interrelated Code and PPSA requirements is located in this commentary (and is current at 1 July 2014): whether goods under the Code would be “personal property” as defined in the PPSA; whether mortgages should be registered under the PPSA; whether “general security agreements” under the PPSA are suitable for Code-regulated transactions; in relation to enforcement of mortgages; whether a banker’s right to combine accounts is a mortgage for Code purposes, and the treatment of contractual rights of set-off under the PPSA; in relation to repossession and disposal of goods; for leases of goods, in relation to repossession; and as to options available when issuing notices. 2.3 Licensing of credit providers Before the Consumer Credit Reform Package, credit providers were regulated by a variety of methods across Australia: registration, positive licensing and negative licensing. These are briefly described below: Negative licensing (applied in New South Wales, the Northern Territory, Queensland and South Australia): The least burdensome of the regulatory models, this permitted any person or body corporate to be a credit provider, except for certain classes of prohibited persons — such as a person under 18 years old or an undischarged bankrupt. Registration (applied in the Australian Capital Territory and Victoria): A more involved system, this required all credit providers to be registered with a central authority, such as the relevant consumer affairs agency. The person or body corporate

could not be in a prohibited class (similar to negative licensing) and had to meet certain other requirements. Maintaining registration often involved lodging annual statements and the payment of fees. Positive licensing (applied in Western Australia): Even more complex than registration, this regime required credit providers to be registered with the relevant authority, lodge annual statements and pay fees, but it also imposed further specific requirements on credit providers and encompassed detailed procedural rules governing the relationship between credit providers and the relevant authority. As a result, before the reform package, credit providers across Australia were regulated by a myriad of authorities.2 These regulators were not as well funded as ASIC and consequently had less “teeth”.

3 Before the UCCC — the Credit Acts Before the introduction of the UCCC, the provision of credit was regulated by fragmented, state-based Credit Acts, with inconsistent application across the country. The Credit Act 1984 applied in New South Wales and substantially identical Credit Acts applied in the Australian Capital Territory, Queensland, Victoria and Western Australia.3 The Northern Territory, South Australia and Tasmania had significantly lesser regulation.4 Many cases brought under the Credit Acts are still relevant today because they indicate the approach of relevant authorities to consumer protection matters.

4 Framework of phase 1 As described at para 1.1 above, under “Phase 1: Consumer Credit Reform Package and Corporations Act amendments” the consumer credit protection regime now consists of the following Acts and regulations: Acts National Consumer Credit Protection Act 2009 (Cth) (NCCP Act); National Consumer Credit Protection (Transitional and Consequential Provisions) Act 2009 (Cth) (Transitional Act);

National Consumer Credit Protection (Fees) Act 2009 (Cth) (Fees Act); and Corporations Act 2001 (Cth), as amended by the Corporations Legislation Amendment (Financial Services Modernisation) Act 2009. Regulations The National Consumer Credit Protection Regulations 2010 (Regulations), as amended by the following: —

National Consumer Credit Regulations (No 1) 2010;

Protection

Amendment

—

National Consumer Credit Regulations (No 2) 2010;

Protection

Amendment

—

National Consumer Credit Regulations (No 3) 2010;5

Protection

Amendment

—

National Consumer Credit Protection Legislation Amendment Regulations (No 1) 20106 (which also amend the Transitional Regulations referred to below); and

—

National Consumer Credit Protection Legislation Amendment Regulations (No 2) 20107 (which also amend the Transitional Regulations referred to below).

The National Consumer Credit Protection (Transitional and Consequential Provisions) Regulations 2010 (Transitional Regulations), as amended by the following: —

National Consumer Credit Protection (Transitional and Consequential Provisions) Amendment Regulations (No 1) 2010;

—

National Consumer Credit Protection (Transitional and Consequential Provisions) Amendment Regulations (No 2) 2010;

—

National Consumer Credit Protection (Transitional and Consequential Provisions) Amendment Regulations (No 3)

2010; —

National Consumer Credit Protection Amendment Regulations (No 1) 2010; and

Legislation

—

National Consumer Credit Protection Amendment Regulations (No 2) 2010.8

Legislation

The National Consumer Credit Protection (Fees) Regulations 2010 (Fees Regulations), as amended by the following: —

National Consumer Credit Protection (Fees) Amendment Regulations (No 1) 2010; and

—

National Consumer Credit Protection (Fees) Amendment Regulations (No 2) 2010.

Other In addition, as at the date of writing, ASIC, as the new national regulator of consumer credit, has issued the following regulatory guides (RGs): RG 51 Applications for relief RG 108 No-action letters RG 139 Approval and oversight of external dispute resolution schemes RG 165 Licensing: Internal and external dispute resolution RG 202 Credit registration and transition RG 203 Do I need a credit licence? RG 204 Applying for and varying a credit licence RG 205 Credit licensing: General conduct obligations RG 206 Credit licensing: Competence and training RG 207 Credit licensing: Financial requirements RG 208 How ASIC charges fees for credit relief applications RG 209 Credit licensing: Responsible lending conduct

RG 210 Compensation and insurance arrangements for credit licensees RG 218 Licensing: Administrative action against persons engaging in credit activity RG 234 Advertising financial products and advice services (including credit): Good practice guidance ASIC has also issued various information sheets (INFOs) aiming to provide concise guidance on specific process or compliance issues, and overviews of more detailed guidance. At 1 July 2014, these included: INFO 96 Getting ready for credit INFO 97 Guidance for small credit businesses INFO 101 Does the new credit regime apply? INFO 102 Getting registered for credit INFO 103 Getting a credit licence INFO 104 Complying with your credit obligations INFO 105 Dealing with consumers and credit INFO 108 How much does a credit licence cost? INFO 109 Credit licensee offences: Prohibited dealings and unlawful authorisations INFO 110 Lenders with carried over instruments INFO 112 Guidance for financial counsellors INFO 128 Credit infringement notices — your rights INFO 129 New credit laws and book up: What you need to know INFO 134 Complying with your obligations if you are both a credit licensee and an AFS licensee INFO 135 Annual compliance certificates for credit licensees INFO 136 Complying with your trust account obligations as a

credit licensee INFO 137 Credit disclosure: Transitional arrangements INFO 137 Credit disclosure: Transitional arrangements INFO 195 ePayments Code: Reporting data on unauthorised transactions. As at the date of writing (1 July 2014), ASIC has issued or updated the following regulatory guides relating to matters that affect margin lenders: RG 1 AFS Licensing Kit: Part 1 — Applying for and varying an AFS licence RG 2 AFS Licensing Kit: Part 2 — Preparing your AFS licence application RG 3 AFS Licensing Kit: Part 3 — Preparing your additional proofs RG 146 Licensing: Training for financial product advisers RG 166 Licensing: Financial requirements RG 219 Non-standard margin lending facilities: Disclosure to investors. ASIC’s regulatory guides and information sheets are available from its website: www.asic.gov.au.

5 Overview of the NCCP Act

The NCCP Act introduced significant changes and new regulation in the consumer credit industry. The key changes relate to: licensing requirements; responsible lending obligations; slightly increased scope of regulation; extensive civil and criminal penalties for non-compliance; and the appointment of ASIC as the sole regulator with significant powers to regulate the credit industry. 5.1 The licensing regime Under the NCCP Act, any person who engages in a “credit activity” must hold an ACL. This includes: providers of Code-regulated credit or leases and any person who

performs the obligations or exercises the rights of a credit provider or lessor (such as debt collectors and legal assignees); mortgagees under Code-regulated mortgages and any person who performs the obligations or exercises the rights of a mortgagee; beneficiaries under Code-regulated guarantees and any person that performs the obligations or exercises the rights of a beneficiary; and any person that provides a “credit service”, which includes providing “credit assistance” or acting as an intermediary between a credit provider or lessor and a consumer. There are a number of exemptions from the requirements to hold an ACL. These are provided for in the NCCP Act and under regs 20–25 of the National Consumer Credit Protection Regulations 2010 (Cth) (Regulations). 5.2 Definitions Definitions of the terms “credit activity”, “credit service”, “credit assistance” and “intermediary” are set out below. This text applies the term “consumer” to describe individuals prior to their entry into a credit contract or consumer lease. Subsequently, they are referred to as a “debtor” or “lessee” (as the context requires). 5.2.1 Credit activity “Credit activity” is defined in s 6 of the NCCP Act. It includes: providing credit under a credit contract or being the lessor under a consumer lease; benefiting from a mortgage or guarantee relating to a credit contract or consumer lease; and providing a credit service in relation to a credit contract or consumer lease. This definition creates the link between the licensing regime under the NCCP Act and the Code, in that a credit activity is defined by reference to credit contracts, consumer leases, mortgages and guarantees, which are regulated by the Code.

The definition focuses on two broad classes of credit activity, being the provision of credit, and the provision of a credit service. 5.2.2 Credit service Providing a “credit service” is a type of credit activity. There are two categories of credit service: providing “credit assistance” to a consumer; and acting “as an intermediary” between a credit provider and a consumer (in relation to a credit contract), or between a lessor and a consumer (in relation to a consumer lease). A person providing credit assistance may also act as an intermediary. 5.2.3 Credit assistance “Credit assistance” is defined in s 8 of the NCCP Act. A person provides credit assistance to a consumer if, by dealing directly with the consumer or the consumer’s agent in the course of, as part of, or incidentally to, a business carried on in Australia by the person or another person, the person: suggests that the consumer apply for, or remain in, a particular credit contract with a particular credit provider; or assists the consumer to apply for a particular credit contract with a particular credit provider; or suggests that the consumer apply for an increase to the credit limit of a particular credit contract with a particular credit provider; or assists the consumer to apply for an increase to the credit limit of a particular credit contract with a particular credit provider; or suggests that the consumer apply for, or remain in, a particular consumer lease with a particular lessor; or assists the consumer apply for a particular consumer lease with a particular lessor. There are therefore two broad categories of credit assistance: suggesting particular products or actions, and assisting the consumer to apply for those products or actions.

5.2.4 Intermediary Acting “as an intermediary” is defined in s 9 of the NCCP Act. A person acts as an intermediary if, in the course of, as part of, or incidentally to, a business carried on in Australia by the person or another person, the person: acts as an intermediary (whether directly or indirectly) between a credit provider and a consumer, wholly or partly for the purposes of securing a provision of credit for the consumer under a credit contract with the credit provider; or acts as an intermediary (whether directly or indirectly) between a lessor and a consumer, wholly or partly for the purposes of securing a consumer lease for the consumer with the lessor. It does not matter whether the person acts on their own behalf or on behalf of another person. See the discussion about mortgage aggregators and originators acting as intermediaries at para 5.11 of this overview. 5.3 Requirement to hold an Australian credit licence 5.3.1 Snapshot

Each ACL authorises its holder to engage in regulated credit activity in one of three categories: as the credit provider; not as the credit provider; or as the credit provider in some cases and not as the credit provider in other cases. In the ACL-issuing process, there are no distinctions drawn between the kinds of credit products (such as between credit cards, personal loans or consumer leases), nor on the role that the ACL holder might play (as a credit provider, mortgagee, intermediary or credit assistance provider). 5.3.2 Exemptions There are a number of exemptions from the requirement to hold an ACL. These are provided for in the NCCP Act and under regs 20–25 of the Regulations. Employees of an ACL holder and directors of a body corporate ACL holder are exempt from obtaining an ACL and can act as representatives of

the ACL holder, when acting within the scope of their authority (NCCP Act, s 29(3)). A temporary employee is treated in the same manner as an employee who replaces another employee who is absent from work, or where they are performing substantially the same duties as that employee and are subject to similar controls or directions by the employer. Additionally, a person can engage in credit activities without an ACL if they are appointed as a “credit representative” of an ACL holder (see below). The following list is indicative of the types of other exemptions from the requirement to hold an ACL: corporate or personal insolvency practitioners, when acting as a receiver, liquidator or an administrator or as official receiver or trustee under the Bankruptcy Act 1966 (reg 20(3)); financial counsellors engaged in a financial counselling service which is not remunerated by reference to the actions its clients take as a result of the counselling (reg 20(5)); credit activities carried on by a related body corporate of an ACL holder only because that related body corporate’s employees exercise and perform the ACL holder’s rights and obligations on behalf of the ACL holder (reg 20(6));9 credit services provided by an organisation that offers member benefits, one of which is the ability to apply for credit from a particular licensed credit provider (but not to obtain goods or services from the organisation) (reg 20(11)); credit services provided by specified persons (including charities) to low income consumers (where the person is not remunerated by reference to the actions the low income consumer takes) (reg 20(12)); credit activity carried out by third party suppliers of services in relation to the anti-money laundering and privacy obligations of credit providers or lessors (reg 20(13)); credit activity carried out by licensed debt collectors (reg 21); credit activity carried out by third parties who provide records

storage services or administrative processing services for a credit provider or lessor (reg 22); credit assistance provided by suppliers of goods and services at the point of sale (reg 23) except where the item being supplied is an interest in land (reg 25D) or the supply of goods or services is the result of unsolicited contact with the consumer (reg 23(4)); credit activity by a supplier of goods or services in relation to a cobranded credit card (reg 23A); certain special purpose funding entities and securitisation entities (in connection with securitisation arrangements) (regs 23B and 23C); credit assistance provided by legal practitioners acting in relation to matters of law, legal interpretation or the application of the law to any facts (reg 24(2)) or acting on their client’s instructions (reg 24(4)); credit services provided by registered tax agents in the ordinary course of their work (reg 24(5)); credit activity consisting of passing on, distributing, publishing or otherwise disseminating factual information that is provided by a licensed person (reg 24(6)); mere referrers providing contact details or the web address of an ACL holder to a consumer (as long as commission is disclosed) (reg 25) (see discussion on “Referrers” at para 5.10 below); credit activity in connection with pawnbroking credit (reg 25(3)); credit activity in connection with employee loans (but where the credit provider is in the consumer credit industry, only employee loans on preferential terms are exempt) (reg 25(3)); certain credit providers and lessors in relation to carried over instruments that provide “grandfathering” relief for lenders who remained credit providers but did not expect to make new loans after the commencement of the Code (reg 25E) (see discussion at “Unlicensed carried over instrument lenders” at para 5.9 below); and

credit activity in connection with employment agencies providing temporary staff or locums (reg 23D). ASIC regulatory guides RG 203 Do I need a credit licence?, RG 204 Applying for and varying a credit licence and RG 205 Credit licensing: General conduct obligations provide further explanation on the nature of licensing and general conduct obligations of ACL holders. 5.3.3 Timing

The national ACL licensing regime was introduced in stages. Initially, the major obligations that applied to participants in the credit industry were that those continuing to engage in credit activities after 1 July 2010 had to hold an ACL or be registered with ASIC; then, after a 12-month transition period with detailed rules, those registered with ASIC had to hold an ACL. From 1 July 2011, all persons engaging in credit activities must hold an ACL. This process is summarised in the following table:

Date 1 April 2010–30 June 2010

1 July 2010–30 December 2010

1 January 2011

1 July 2011 onwards

NCCP Act requirement All persons engaging in credit activities had to have applied to be registered with ASIC (if intending to apply for an ACL) All persons engaging in credit activities commit an offence unless they are registered with ASIC (if intending to apply for an ACL) or licensed (ie, have applied for and been granted an ACL). Those persons engaging in credit activities for the first time on or after 1 July 2010 must have an ACL before commencing business (ie, the period for registration has closed, so obtaining an ACL is the only option) All persons engaging in credit activities commit an offence unless they are registered with ASIC and have an ACL application pending, or they have applied for and obtained an ACL A registered person who has applied for an ACL can continue engaging in credit activities until they receive the ACL decision. At that time: if the ACL application is granted — they can continue to engage in credit activities; or if the ACL application is rejected — they must cease engaging in credit activities (they commit an offence if they continue) All persons engaging in credit activities must hold an ACL

5.4 Obligations of ACL holders ACL holders are subject to a broad range of general obligations (Pt 2-2,

Div 5 of the NCCP Act). Many of these are similar to the obligations imposed on the holder of an Australian financial services licence (AFSL) (under Pt 7 of the Corporations Act 2001 (Cth)). The obligations of an ACL holder include: ensuring that its credit activities are engaged in efficiently, honestly and fairly; ensuring that clients are not disadvantaged by any conflict of interest that may arise; complying with its licence conditions and the credit legislation and taking reasonable steps to ensure that its representatives (not just credit representatives) do likewise; ensuring that its representatives are competent and adequately trained; having a formal internal dispute resolution procedure that meets ASIC standards; being a member of an approved EDR scheme (such as the schemes operated by Financial Ombudsman Service Limited and Credit Ombudsman Service Limited — see “External dispute resolution” at para 26 below); having adequate professional indemnity insurance or other approved compensation arrangements; having adequate documented compliance systems, adequate financial, technological, human and other resources to engage in its authorised credit activities and an adequate risk management system; complying with specified rules regarding trust accounts; and lodging an annual compliance certificate with ASIC. ASIC has issued formal guidance (see “Framework of phase 1” at para 4 above) on requirements to satisfy some of these obligations, such as those relating to the competence and training of representatives and staff (see regulatory guides RG 205 Credit licensing: General conduct obligations and RG 206 Credit licensing: Competence and training) and dispute resolution

systems (see RG 165 Licensing: Internal and external dispute resolution). It is to be emphasised that compliance with financial services regulation (for instance, in relation to hardship and privacy) is a condition of an ACL. A credit provider could lose their licence if they breach or fail to meet obligations imposed by financial services Acts, rules and regulations (or if they fail to monitor the activities of their representatives and ensure they also comply with those things — see 5.6 below). As stated above, the ACL general obligations are broadly similar to the obligations on AFSL holders. The table below summarises the differences between the general obligations of the two types of licences: Licence obligations — differences between the ACL and the AFSL ACL AFSL Comply with laws and take (credit laws) (financial services steps to ensure representatives laws) comply Conflicts of interest (but see (ensure clients not (manage conflicts) commentary below) disadvantaged) Engage efficiently, honestly and fairly Maintain competence Have adequate compliance systems and written plan Comply with licence conditions Have adequate resources and (if not APRA (if not APRA risk management systems regulated) regulated) Ensure representatives are trained and competent Have internal dispute (for retail clients) resolution procedure and be member of an EDR scheme Have compensation (for retail clients) arrangements

Report breaches

X

Annual compliance certificate

(significant breaches) X

One important area where the two regimes (ACL and AFSL) differ is in their approach to conflicts of interest. AFSL holders need to manage conflicts of interest and, in some cases, this may be effected by full disclosure. However, ACL holders must ensure that their clients are not disadvantaged if there is a conflict of interest. Mere disclosure of the conflict of interest is unlikely to satisfy this obligation. Accordingly, conflicts of interest that disadvantage clients must be avoided — they cannot simply be “managed”. 5.5 Credit representatives — appointment An ACL holder can appoint suitably qualified individuals or bodies corporate as its credit representatives. The appointment takes the form of an authorisation for the credit representative to engage in particular credit activity on behalf of the ACL holder. A credit representative: who holds an ACL cannot be a credit representative in relation to a credit activity which they are authorised to do under their own ACL (NCCP Act s 67); must be a member (or covered by a corporate membership) of an EDR scheme (NCCP Act s 64(5)(c)); cannot be the subject of a banning or disqualification order under the NCCP Act or other relevant legislation or have been convicted of serious fraud in the last 10 years (NCCP Act s 64(5)(b)); and in the case of a body corporate, cannot have an officer or senior manager who is the subject of a relevant state or territory order (NCCP Act s 64(5)(g)). A person can only be appointed the credit representative of two or more different ACL holders with the consent of all those ACL holders (NCCP Act s 66). The ACL holder must notify details of all credit representatives to ASIC on their appointment and following any change to their details (NCCP Act s

71). Information such as the credit representative’s principal place of business and the appointing ACL holder is then made available to the public via the ASIC website. A corporate credit representative of an ACL holder may, with the written consent of the ACL holder, “sub-authorise” individuals to be credit representatives of the ACL holder (NCCP Act s 65). The corporate credit representative is then responsible for notifying ASIC of the appointment of any sub-authorised credit representative. 5.6 Credit representatives — liability Where a credit representative (including a sub-authorised credit representative) is authorised by a single ACL holder, that ACL holder is “responsible” for all credit activity-related conduct of the credit representative (NCCP Act, Pt 2-3, Div 4). This means that: the ACL holder is jointly and severally liable with the credit representative for any general law liability arising from the credit representative’s conduct (and the ACL holder cannot contract out of this liability (NCCP Act s 78(5)); an EDR scheme may make a determination against the ACL holder in relation to the credit representative’s conduct; and the credit representative’s conduct will be relevant in determining whether the ACL holder has complied with the credit legislation. (The situation is more complex in the case of a credit representative holding authorisations from two or more ACL holders (NCCP Act s 76).) ACL holders therefore need to manage these risks when appointing a credit representative. This will usually be achieved by entering into a credit representative agreement in which the credit representative indemnifies the ACL holder in respect of any such liability. ACL holders will need to satisfy themselves that their credit representatives have sufficient means to meet their indemnity obligations. Quite separately, the conduct of a credit representative (and other representatives) can affect the ACL holder’s compliance with its obligations under the NCCP Act, including the: obligation to have in place adequate arrangements to ensure that

clients are not disadvantaged by any conflict of interest that may arise in relation to a representative’s credit activities (NCCP Act s 47(1)(b)); obligation to ensure that its representatives comply with credit legislation (NCCP Act s 47(1)(d)) and are adequately trained, and are competent, to engage in the credit activities authorised by the ACL holder (NCCP Act s 47(1)(g)); “responsible lending” requirements (Pt 3-1 Div 4 and Pt 3-2 Div 3, Pt 3-3 Div 4, Pt 3-4 Div 3 of the NCCP Act) if the ACL holder relies on the representative in fulfilling those requirements (such as if the credit representative carries out the financial assessment and contract unsuitability assessment); and ACL holder’s obligation to lodge an annual compliance certificate (NCCP Act s 53), given the reliance the ACL holder may have on its credit representative notifying it of any possible failures to comply, or of any ASIC investigation or audit of the credit representative. 5.7 External dispute resolution As already stated (see “Obligations of ACL holders” at para 5.4 above), a credit provider must be a member of an approved EDR scheme before it can obtain an ACL. There are currently only two ASIC-approved EDR schemes: the Financial Ombudsman Service (FOS) and Credit Ombudsman Service Limited (COSL). The difference between FOS and COSL essentially relates to the industries to which they apply: FOS historically has dealt with the majority of complaints in the finance sector (such as those relating to general insurance, financial planning, stockbroking, banking and managed investments); COSL deals with the remaining complaints (being those primarily in relation to nonbank credit). In general, credit representatives must also be members of an EDR scheme. However, any sub-authorised credit representatives who are employees or directors of a body corporate credit representative need not themselves be a member of an EDR scheme, but can rely on the membership

of the body corporate credit representative. Contractors who are subauthorised must have their own EDR scheme membership. 5.8 Responsible lending obligations 5.8.1 Purpose of responsible lending The purpose of the responsible lending conduct obligations in Ch 3 of the NCCP Act is to ensure that credit providers, lessors and credit assistance providers do not: suggest a credit contract or consumer lease to a consumer; assist a consumer to apply for a credit contract or consumer lease; enter into a credit contract or consumer lease with a consumer; increase the limit of a credit contract; or encourage a consumer to stay in a credit contract or consumer lease, if the contract or lease is “unsuitable” for the consumer (NCCP Act ss 123, 124, 133, 146, 147 and 156). Steps in assessing unsuitability There are three steps in the process of assessing unsuitability under the NCCP Act (see ss 129 and 130). The credit provider and credit assistance provider must: make reasonable inquiries about the consumer’s financial situation, requirements and objectives; take reasonable steps to verify the consumer’s financial situation; and conduct an assessment as to whether the credit contract is “unsuitable” for the consumer. The assessment should be based on the results of the inquiries and verification preceding the assessment. An assessment by a credit assistance provider is described as a “preliminary” assessment (NCCP Act ss 116 and 139) and ASIC describes the assessment made by a credit provider or lessor

as a “final” assessment (RG 209 Credit licensing: Responsible lending conduct para RG 209.2). 5.8.2 Scalability of reasonable inquiries The obligation to make reasonable inquiries is scalable — which means that the steps that an ACL holder must take in order to meet the obligation will vary depending on the circumstances. In RG 209 Credit licensing: Responsible lending conduct, ASIC describes the factors that affect what constitutes “reasonable inquiries”. These include: the effect on the consumer of entering into an unsuitable credit contract (or lease) — in the case of a credit contract, if the loan is large relative to the consumer’s capacity to repay the loan, ASIC expects the ACL holder to make more extensive inquiries of the consumer to ascertain whether the consumer can meet their obligations under the contract; the complexity of the credit contract or lease — if the terms of the contract or lease are simple less extensive inquiries may be acceptable, since most consumers could be expected to understand the terms; and whether the debtor is an existing or new consumer — an ACL holder may be able to make less extensive inquiries when an existing debtor or lessee is entering into a new credit contract or lease if they already hold information about that debtor or lessee; more extensive inquiries would be needed for a new debtor or lessee. Examples of reasonable inquiries At para RG 209.32 of RG 209 Credit licensing: Responsible lending conduct, ASIC suggests examples of the types of inquiries that an ACL holder might make about the consumer’s financial situation, such as the: consumer’s amount and source of income or benefits (including the nature and length of employment); extent of the consumer’s fixed expenses (such as rent, repayment of

existing debts, child support and recurring expenses such as insurance); the consumer’s variable expenses (and drivers of variable expenses such as dependants and any particular unusual circumstances); consumer’s variable expenses (and drivers of variable expenses such as dependants and any particular unusual circumstances); extent to which any existing debts are to be repaid from the credit advanced; consumer’s credit history; consumer’s circumstances, including their age and number of dependants; consumer’s assets, including their nature and value; and reasonably foreseeable significant changes to their current financial position. At para RG 209.33, ASIC suggests examples of the types of inquiries that an ACL holder might make about the consumer’s objectives, such as: the purpose for which the credit is sought and the benefit to the consumer; and whether the consumer seeks particular product features or flexibility. 5.8.3 Verification Verifying the information provided by the consumer in relation to their financial position is an important step in the responsible lending process. Credit assistance providers and credit providers should confirm the information by requesting supporting documents, such as PAYG statements, bank, building society or credit union statements, income tax returns and credit reports, in order to satisfy themselves that the information provided by the consumer is accurate. ASIC has stated that in some circumstances, automated systems and tools for testing the reliability of information about income may play a role in satisfying the verification obligations (regulatory guide RG 209 para 209.45). However, credit assistance providers, unlike

credit providers, may not have access to credit reports, and may not be able to take these into account (para RG 209.28). (Note: Agents of credit providers can access credit reports on behalf of credit providers — but usually a credit representative would not be an agent of an ACL holder as, under general law liability, a principal may be liable for the acts of an agent to the extent that it raises it. An ACL holder is liable, though, for the acts of its credit representative). 5.8.4 Test for unsuitability After verifying the financial position of the consumer, the credit assistance provider (where relevant) and credit provider must assess whether or not the credit contract or lease being considered is “unsuitable” for the consumer given his or her circumstances. The assessment requirement in the NCCP Act is expressed in the negative — the requirement is not that the credit contract or lease be suitable for the consumer. Rather, in the assessment, the ACL holder is to assess whether the credit contract or lease is “unsuitable” for the consumer — if it is unsuitable, the ACL holder is then prohibited from assisting with or entering into (or increasing the limit under) that contract or lease (NCCP Act ss 123, 124, 133, 146, 147 and 156). In its guidance, ASIC converts the assessment requirement into a double negative — indicating that ACL holders must assess whether the credit contract or lease is “not unsuitable” for the consumer. A new consumer lease or credit contract, or an increase to an existing credit contract, will be unsuitable if, at the time of the assessment, it is likely that: the proposed credit contract or lease will not meet the consumer’s requirements or objectives; or the consumer will be unable to comply with the financial obligations of the contract or lease or only able to comply with substantial hardship (and there is a rebuttable presumption that, if the consumer can only meet their obligations by selling their main place of residence, they can only meet their obligations with substantial hardship). The consumer may request a copy of the assessment and the credit

assistance provider or credit provider, as appropriate, must provide the consumer with a written copy of the assessment, free of charge, within the time prescribed by ss 120, 132, 143 and 155 of the NCCP Act. 5.8.5 Responsible lending disclosure requirements The following documents must be disclosed throughout the application process, depending on who is providing the credit or the credit assistance: credit guide — as soon as practicable after it becomes apparent to an ACL holder that it is going to provide credit assistance or credit to a consumer, the ACL holder must provide the consumer or lessee with its credit guide; quote for providing credit assistance — credit assistance providers must not provide credit assistance to the consumer unless the consumer has been given a quote with information about services, which the consumer has signed and dated; credit proposal disclosure document — this must be provided at the same time as the credit assistance provider provides assistance to the consumer, and will contain a summary of information such as the fees and charges and commissions; and a copy of a preliminary assessment or final assessment — this must be provided to the debtor on request and free of charge. ASIC RG 209 provides further guidance on responsible lending conduct. 5.8.6 Checklist — matters to consider before commencing an application for an ACL Prospective credit licence applicants should be prepared to provide particulars of each of the matters described below before commencing an application for an ACL, using ASIC form CL01 Application for an Australian Credit Licence. The form assumes that key persons and responsible managers will have already been identified and that relevant policies and procedures have already been developed. At the time an application is finalised, ASIC will generally expect all relevant documents to be available on request.

The following table summarises the requirements to obtain an ACL: Application for ACL — requirements No Requirement 1 General details

Details Entity type and ABN and ACN Principal business address Alternative address Contact details for key contact for application Business names Delayed licence commencement date (if required) Authorisations (types of credit activities the entity will engage in) Details of business activities Details of credit activities Details of credit intermediary activities Number of representatives (ie, the number of employees and directors who will engage in credit activity) Whether money is likely to be held on trust

2 Summary business description

A written summary that describes the applicant’s intended business activities, including: credit activities types of credit products how the applicant will assess credit applications remuneration structure location and number of applicant’s offices supervision of representatives the extent of outsourcing

3 “Fit and proper persons”

Prepare a list of the entity’s “fit and proper persons” (ie, director, secretary and the senior manager performing duties in relation to credit) For each “fit and proper person”, provide details of: name date and place of birth description of the person’s role in the business description of industry category best reflecting person’s area of experience whether person is a responsible manager Statement of Personal Information, which

includes whether the person has been the subject of certain events in the last 10 years, such as: — refusal or restriction of any authorisations required by law for a trade, business or profession, disciplinary action or investigations that may result in disciplinary action or licence cancellation — cancellation of any licence — disqualification of any professional or regulatory body or EDR scheme relating to matters of honesty, integrity or business conduct — claims against, or refusal of PI insurance — denial of accreditation by a lender, mortgage manager or mortgage insurer — — —

—

use of any other names administrative, civil or criminal proceedings or enforcement action, which had an adverse determination any declaration of bankruptcy or insolvency, any involvement in the management of a company that has had an external administrator appointed, or entry into a scheme of arrangement or compromise with creditors or has been declared insolvent; or declaration of insolvency

particulars of any outcomes of concerns listed in Statement of Personal Information criminal history check (not more than 12 months old) bankruptcy check (not more than 12 months old) 4 Responsible managers

Prepare a list of the applicant’s “responsible managers” In addition to the information provided for a “fit and proper person” (item 3), the following additional information must be provided for a responsible manager: Educational qualifications — institution — course name — year of completion Refer to RG 206 paras 206.49–206.66 for additional information about the qualifications and experience required for responsible managers Previous employers — employer — job title, including division (if applicable)

— 5 Required statement about past conduct or history

period of time with previous employer

The application must contain a statement that none of the “fit and proper people” have been subject to: a banning order or disqualification order under Pt 2-4 of the NCCP Act or Pt 7-6 Div 8 of the Corporations Act an order under the Crimes (Criminal Organisations Control) Act 2009 (NSW) or the Serious and Organised Crime (Control) Act 2008 (SA)

6 Compliance plan

The applicant must have a written compliance plan documenting arrangements and systems to ensure compliance with ACL obligations, including: how often compliance procedures are monitored and reported on people within the business responsible for ongoing monitoring and reporting identifying arrangements in place to ensure that clients will not be disadvantaged by any conflicts of interest that arise in relation to credit activities appropriate processes in place to adequately deal with any outsourcing of business credit activities

7 Representatives (including credit representatives)

The applicant must have a: written policy that details the minimum training requirements for representatives training register documented process for monitoring and supervising all representatives recruitment process for representatives that includes: — criminal history check — bankruptcy check — ASIC banned and disqualified persons register check

8 Conflicts management

Demonstrate that the entity has adequate arrangements in place to ensure that clients are not disadvantaged by any conflicts of interest that arise in relation to credit activity

9 Outsourcing

If functions of the business will be outsourced, then the applicant should have appropriate processes to ensure that: due skill and care is taken in choosing a suitable service provider

ongoing performance is monitored any breaches of the outsourcing agreement are effectively dealt with 10 Adequacy of resources

The applicant must have available: financial resources human resources information technology resources adequate to engage in credit activities and carry out supervisory arrangements

11 Dispute resolution and hardship applications

The applicant must have: a documented internal dispute resolution (IDR) procedure a guide to this procedure or a document setting out this procedure which is available to customers documented policies and procedures for receiving and assessing requests to vary credit contracts on the grounds of hardship membership of an ASIC-approved EDR scheme that can deal with credit related complaints

12 Risk management

An adequate risk management system: that can identify, analyse, evaluate, treat and communicate risks in the business and monitor and report on risk management issues that can assess risks associated with the business and probability of those risks in which relevant representatives are provided with risk management training

13 Compensation arrangements 14 Declarations

Adequate arrangements to compensate customers The application is submitted under terms and conditions of ASIC’s Electronic Lodgement Protocol To the best of the entity’s knowledge, the information supplied in the ACL application is complete and accurate If granted the ACL, the entity will comply with its obligations as a credit licensee The agent preparing and submitting application on behalf of the entity has been authorised by the entity to make the above declarations on the entity’s behalf

15 Application fees

The application fee is calculated based on the total

amount of credit the entity has advanced in the past financial year The minimum fee for a company that has more than one employee is $1000

5.9 Unlicensed carried over instrument lenders The licensing provisions in Ch 2 of the NCCP Act are modified in their application to persons known as “unlicensed carried over instrument lenders”. An “unlicensed carried over instrument lender” is essentially a person who: was the credit provider or lessor under a credit contract or consumer lease which, having been entered into before 1 July 2010, was regulated under the UCCC, but which continues in force after the commencement of the Code on 1 July 2010; and continues to be the credit provider or lessor under the credit contract or lease on and after 1 July 2010; and will not engage in Code-regulated credit activity on or after 1 July 2010 (other than because of their continuing status as credit provider or lessor under the relevant credit contract or lease: see definition of “credit activity” in NCCP Act s 6(1) item 1(a) and item 3(a)) — and therefore does not need to apply for or hold an ACL. Note that the defined term “unlicensed carried over instrument lender” is a slight misnomer since it includes lessors as well as lenders/credit providers. In this book, the term “unlicensed carried over instrument lender or lessor” is used for clarity. Such pre-existing credit contracts and leases (and certain other pre-existing instruments such as mortgages, guarantees and sale contracts) are known as “carried over instruments” (COI). The modifications to the NCCP Act in relation to unlicensed carried over instrument lenders and lessors are permitted under NCCP Act s 110(c) and are found in reg 25E and Sch 2 to the Regulations. An unlicensed carried over instrument lender or lessor is exempt from obtaining an ACL but must comply with the NCCP Act as modified. Generally, their obligations under the modified NCCP Act are similar to

those applying to ACL holders. An unlicensed carried over instrument lender or lessor must: ensure that its credit activities in relation to its COI are engaged in efficiently, honestly and fairly; have adequate arrangements in place to ensure that its debtors or lessees are not disadvantaged by any conflict of interest that may arise wholly or partly in relation to credit activities engaged in by it or its representatives; ensure that its representatives are adequately trained and competent to engage in credit activities in relation to its COI; maintain its competence to engage in credit activities in relation to its COI; unless the unlicensed carried over instrument lender or lessor is regulated by APRA, have adequate resources (including financial, technological and human resources) so it can engage in credit activities in relation to its COI, and carry out supervisory arrangements, and also have adequate risk management systems; and have an IDR procedure. An unlicensed carried over instrument lender or lessor is not obliged to be a member of an EDR scheme — however, if it was not a member of an EDR scheme, it was required to provide an audit report to ASIC by 31 December 2010, indicating whether it had complied with the Code requirements relating to the content of credit contracts and consumer leases (see Sch 2 to the Regulations, paras 2.23 and 2.25, which insert modified ss 49(3A) and 49(10) into the NCCP Act). The time for lodgment of the audit report was extended by ASIC to 28 February 2011. Further, if such an unlicensed COI lender or lessor discovers at any time that it has or is likely to have significantly contravened the NCCP Act, it must notify ASIC as soon as practicable, and no later than 10 business days after becoming aware of the contravention. A carried over instrument lender or lessor (or mortgagee or beneficiary of a guarantee in relation to a COI) who intended to engage in a credit activity in relation to that COI on or after 1 July 2010 and who also intended to engage in other credit activity on or after that date, must have applied for an ACL

(which must cover both of those types of activity) (reg 7A). In that case, the COI lender or lessor is not an “unlicensed carried over instrument lender” to which the modified regime applies. 5.10 Referrers There are currently exemptions from obtaining an ACL that are available to persons who merely refer consumers to an ACL holder. Without the exemptions, making referrals would potentially constitute acting as an intermediary and therefore require an ACL (NCCP Act s 9). There may be said to be two main kinds of referring: active referral, where the person informs the debtor of the ACL holder’s details or services; and passive referral, where the debtor obtains that information from a website. 5.10.1 Active referrers Where an individual recommends a particular credit provider or product to a friend or colleague, they will not be doing so in the course of a business and so are not caught by the licensing provisions of the NCCP Act (see definition of “acts as an intermediary” under s 9 of the NCCP Act). Where a person makes referrals in a business context, some limited exemptions apply if the following conditions are met: mere information — where a referrer merely informs a consumer that an ACL holder provides a particular credit activity and informs the consumer how to contact the ACL holder, as long as the referrer simultaneously discloses any commission in connection with the referral (see reg 25(2)); passing on details incidentally to another business (transitional exemption) — where a referrer informs a consumer that an ACL holder provides a particular credit activity and, with the consumer’s consent, passes on the consumer’s name, contact details and the reason why they want credit or a consumer lease (if known) to the ACL holder, as long as the referrer: —

only makes referrals incidentally to carrying on a business that does not principally involve contacting people in order to give their details to another person (eg, as long as the business is not a call centre);

—

simultaneously discloses any benefits and commission in connection with the referral;

—

does not charge the debtor a fee; and

—

is not a banned person;10

passing on names incidentally to another business — this applies where a referrer has entered into an agreement with an ACL holder and the agreement (i) allows the referrer only to carry out conduct to which this exemption applies; and (ii) is either in writing or constitutes a written offer which is accepted by the referrer’s conduct (eg, by making a referral). The conduct to which the exemption applies is where the referrer informs a consumer that an ACL holder provides a particular credit activity and, with the consumer’s consent, passes on the consumer’s name and the reason why they want credit or a consumer lease (if known) to the ACL holder, as long as: —

the referral is made within five business days;

—

the referrer only makes referrals incidentally to carrying on a business that (i) does not principally involve contacting people in order to give their details to another person (eg, as long as the business is not a call centre); and (ii) is not a business conducted face-to-face with people, from non-standard business premises;

—

the referrer simultaneously discloses any benefits and commission in connection with the referral;

—

the referrer does not charge the debtor a fee; and

—

the referrer is not a banned person.

This exemption applies to referrals made on or after 1 October 2010. Note that this exemption is limited to passing on the consumer’s name (and purpose) whereas the transitional exemption allowed the consumer’s contact details also to be passed on. It is assumed that this omission is an oversight because, in its current state, the exemption is almost worthless in practice. However, this omission is also replicated in the note to reg 9AB(3)(c), which may

suggest it is not an oversight. Also note that the exemption does not apply if the referrer carries on their main business via face-to-face contact from non-standard business premises, such as a temporary booth in a shopping mall. Where this exemption is relied on, the relevant ACL holder will be subject to additional conditions as set out in reg 9AB. These conditions relate to keeping a register of referrers, the time in which the ACL holder must follow up the referral and disclosures that the ACL holder must give when it contacts the consumer (see reg 25(5)).11 5.10.2 Passive referrers A website exemption is available where a referrer informs a consumer that an ACL holder provides a particular credit activity, informs the consumer how to contact the ACL holder and provides a website link enabling the consumer to contact the ACL holder — as long as the referrer simultaneously discloses any commission in connection with the referral (see reg 25(2A)). If a referrer does not fall within any of these exemptions, they may need to be licensed or appointed as a credit representative. Note that the relevant ACL holder will breach s 31 of the NCCP Act if it engages in a credit activity with a referrer who should be licensed (or be the ACL holder’s credit representative) but is not. 5.11 Mortgage aggregators and originators In some cases, aggregators or originators of mortgages provide credit assistance to consumer (eg, by recommending a particular credit contract and credit provider or helping a consumer to complete application forms). Even where they do not provide credit assistance, they are likely to be acting as an intermediary between the relevant credit provider and the consumer. In either case, they will need an ACL or must be a credit representative of the licensed credit provider. Individual franchisee aggregators and originators often operate their business through a company. Even if the franchisor credit provider authorises the individual franchisee as its credit representative, the corporate franchisee through which the business is operated must itself be separately authorised as a credit representative or must have an ACL. At general law, the employee’s actions are the actions of the company; it follows that where the employee

engages in credit activity, the company is engaging in that activity and must be licensed (or be a credit representative) if it is not to breach s 29 of the NCCP Act.

6. Phase 2 of the National Consumer Credit Action Plan As noted in 1 “Consumer Credit regulation in Australia — the National Consumer Credit Action Plan”, the Commonwealth Government’s Green Paper National Credit Reform: Enhancing Confidence and Fairness in Australia’s Credit Law (7 July 2010) (Green Paper) discussed a range of possible reforms that may constitute a second phase (known as phase 2) of national credit reforms. As at 1 July 2014, some of the phase 2 reforms have been enacted (see para 8 of this overview). However, the significant reforms outlined in paras 6.1, 6.4 and 6.8 below have not yet occurred. Further, only some of the reforms listed in para 6.7 have been made. The discussion in paras 6.1–6.8 below is included for completeness so as to summarise the originally proposed phase 2 reforms, as set out in the Green Paper referred to above. Each of these possible reforms is discussed briefly below. 6.1 Regulation of small business credit For these purposes, small business is defined as a business employing up to 100 people, if the business involves manufacturing goods, or otherwise up to 20 people. The Green Paper stated that the main issues faced by small businesses relate to fees, financial hardship, misrepresentation by the credit provider and failure by the credit provider to follow instructions given by the consumer. There is a consumer protection argument that small business borrowers should be afforded similar protections to consumers because: small business lending often involves taking similar security to consumer lending (such as the primary residence); and small business borrowers often have similar levels of financial sophistication to consumers.

Reform options include: limited application of the consumer credit protection regime — limited to certain elements such as mandatory external dispute resolution scheme membership, responsible lending disclosure requirements and licensing requirements for credit providers lending to small businesses; or full application of the consumer credit protection regime — the whole regime to be applied to credit providers lending to small businesses; or development of a new regime, tailored specifically for small business lending. 6.2 Further regulation of credit cards Any reform to credit card regulation would seek to reduce the incidence and effects of unmanageable debt, while maintaining appropriate access to such credit. “Unmanageable debt” refers to situations where debtors do not have the capacity to repay the debt in a reasonable amount of time without financial hardship. As a result of delaying or making small repayments, interest charges are incurred and the debt perpetuated. Reform options include: changing the timing of provision of essential information by summarising and bringing attention to the interest rates and other key features of credit cards on the card application form; requiring credit providers to allow consumers to nominate the credit limit sought in order to safeguard against card issuers granting credit in excess of that requested by the debtor; and requiring a “health warning” on monthly account statements about the effect of paying only the minimum repayment. 6.3 Regulation of reverse mortgages The Green Paper discussed the appropriateness of regulating reverse mortgages. The issues associated with debtors (generally older people) entering into reverse mortgages are: responsibility for negative equity (ie, when the value of the debt

exceeds the proceeds of sale of the debtor’s property); lack of comprehension of terms and conditions before entering into a reverse mortgage, particularly of default clauses specific to reverse mortgages; the younger the debtor(s), the greater the likely depletion in equity; and default procedures which have not been tailored to reverse mortgage debtors and are inappropriate for the circumstances of most reverse mortgage debtors. The Green Paper discussed various reforms to address these issues. Options include: requiring debtors to obtain independent financial and/or legal advice to assist debtors in understanding the terms and conditions before entering into a reverse mortgage; improving pre-and post-contractual generic advice to debtors; and improving consumer protections surrounding minimum age, maximum loan-to-value ratios and default clauses. 6.4 Regulation of investment lending The Green Paper discussed the current limited regulation of investment lending (ie, limited to residential investment and margin loans) in light of the increasing popularity of borrowing to invest in shares, managed investment schemes and the like. Factors relevant to reforms include whether: only natural persons should be protected, or corporations as well; only retail investors should be protected, or wholesale investors as well; and the type of investment for which the credit is provided should be relevant. 6.5 Regulation of the small-amount lending market The Green Paper noted that there are no standard terms on which short

term, small amount loans are offered. Credit providers generally offer amounts from $100 to $5000 with repayment periods ranging from a week to two years. Interest rates vary (in extreme cases, they can be over 1000 per cent per annum) and a range of fees may be charged in addition to interest. Reform options include: implementing a national interest rate cap; warnings on high-cost products (enhanced disclosure); prohibition on rollovers (ie, no extensions of existing loans or advancing new loans before the existing loan is repaid); and restrictions on fees or charges, especially for late payment or defaults. 6.6 Regulation of consumer leases The Code originally imposed a reduced level of regulation in relation to consumer leases compared with consumer credit contracts. This may have created an incentive to frame credit as a lease, with a consequent reduction in consumer rights and adverse competitive effects on suppliers of credit relative to lessors. Reform options include: broadening the definition of consumer lease to abolish the distinction between leases where the debtor has a right or obligation to purchase goods and where they have no such right or obligation; and considering whether debtors would benefit from enhanced precontractual disclosure, and information to assist comparison between consumer leases and credit contracts. 6.7 Enhancements to the National Credit Code Reform options included: broadening the types of variations that can be requested, possibly codifying aspects of the Code of Banking Practice and the Customer and Banking Code of Practice (formerly the Mutual

Banking Code of Practice) or putting no limits on the type of variation that can be requested; increasing, or removing, the ceiling under which a debtor has a statutory right to request a hardship variation; enhancing enforcement protections, including requiring the credit provider only to commence court proceedings once they have considered and rejected the possibility of a hardship variation; providing a remedy in relation to unjust conduct by credit advisers and intermediaries as well as credit providers; prohibiting or further regulating the provision of credit marketed “door to door” to finance the sale of goods or services; and reforming the types of credit to which the Code applies (in order to overcome current avoidance measures) — options include: —

broadening the definition of credit to encompass the current known avoidance techniques;

—

an anti-avoidance provision; or

—

extending the application of the Code on a case by case basis in response to avoidance techniques as they are identified.

6.8 Simplifying precontractual disclosure The paper also considered precontractual disclosure issues. The current disclosure model is the precontractual disclosure document mandated by the Code. This can be a separate document, but is usually a copy of the credit contract, which presents certain required information in a financial table or schedule. A revised disclosure model was proposed in a report commissioned by the Standing Committee of Officials of Consumer Affairs into the UCCC disclosure model.12 The revised disclosure model would apply to home loans, car loans, store cards and credit cards. It would include core credit contract information formatted for the benefit of debtors. It would also provide minimum repayment information and, where necessary, financial summary tables and important information tables. The revised disclosure model was

found to be significantly more meaningful for consumers than the existing disclosure regime. The Green Paper sought broad industry feedback on the revised disclosure model and submissions in response to the paper were invited by 6 August 2010.

7. Enhancements Act — change in philosophy Prior to the Consumer Credit Legislation Amendment (Enhancements) Act 2012 (Cth) (Enhancements Act), the Code did not specifically distinguish between different types of products offered by credit providers falling within the definition of “credit contract” (such distinctions have been made since the UCCC, and in the Code prior to the Enhancements Act, for continuing and non-continuing credit contracts, consumer leases and real property mortgages or goods mortgages). The Enhancements Act changed this regulatory philosophy. The Code now contains different applications of certain Code provisions depending on whether a non-continuing credit contract is a: small amount credit contract (SACC); medium amount credit contract (MACC); “reverse mortgage” credit contract (RMCC); or credit contract that is not an SACC, MACC or RMCC (ordinary CC). The differing provisions are scattered throughout the NCCP Act, the Code and the Regulations, for example: SACC — see ss 17(4), 17(6), 23, 23A, 24, 27A, 31(2), 31A, 31B, 32A, 32B, 34(6), 39A, 39B, 39C, 114(1A) and definitions in s 204 of the Code; MACC — see definition in s 204 of the Code (discussed in the commentary at [32B.10]); RMCC — see ss 13A, 17(15A), 18A, 18B, 18C, 22, 26, 32(2), 67A, 86A, 86B, 86C, 86D, 86E, 86F, 88, 93A, 111, 185A and 204 of the Code.

Prior to the Enhancements Act, the Code contained a light touch regulatory regime for consumer leases. Part 11 of the Code contains 43 new sections regulating consumer leases. The result is that the Code now effectively contains “sub-regulatory regimes” for the products mentioned above. It remains to be seen whether future enhancements to the Code will contain specific regulatory provisions for other types of credit products — for example, small business loans. This is a departure from the Code’s original philosophy that as long as the Code’s pre-contractual and contractual disclosure and other requirements were met, a credit provider was free to offer any type of credit product. The Code’s original generic “credit contract regulation regime” as introduced by the UCCC is no longer apparent following the commencement of the Enhancements Act. This is a significant departure from the original underlying UCCC/Code philosophy. The Explanatory Memorandum to the Enhancements Act states the key reforms introduced by the Enhancements Act (at p 3): a number of specific changes to the provisions of the NCCP Act, to improve its operation (for example, changes to make it easier for debtors to seek a variation of the repayments under their contract due to financial hardship); product specific obligations in respect of reverse mortgages, including a statutory protection against negative equity and improved disclosure requirements, intended to assist consumers to make more informed choices in relation to the use of these products; caps on the maximum amount credit providers can charge under both small amount credit contracts, and all other credit contracts, and additional obligations in relation to small amount contracts (namely, restrictions on multiple borrowings and new disclosure requirements); and changes to provide greater regulatory consistency between consumer leases and credit contracts (to address regulatory arbitrage arising from the current lower level of obligations applying to consumer leases).

The Explanatory Memorandum further supplies (at paras 1.6 and 1.7): 1.6 The Enhancements Bill amends the NCCP Act to provide protections to consumers when they use credit and to assist consumers to make more efficient use of credit contracts and consumer leases. 1.7 These reforms will: enhance the regulation of credit by a number of specific reforms (for example, introducing a remedy for unfair or dishonest conduct by credit service providers); implement the Government’s election commitments in relation to reverse mortgages through the introduction of a statutory protection against negative

equity, pre contractual disclosure requirements and other protections relevant to seniors; introduce protections for consumers who enter into small amount credit contracts (including a cap on the maximum amount credit providers can charge under these contracts); and address the current regulatory gap in respect of consumer leases.

Further, at para 1.14, the Explanatory Memorandum states: 1.14 These new reforms will: enhance the regulation of credit by: —

improving the capacity of borrowers to obtain hardship variations;

—

introducing a remedy for unfair or dishonest conduct by credit service providers;

—

restricting the use of high impact terms and representations by licensees;

—

giving ASIC and consumers comprehensive standing in relation to contraventions of the Code; and

implement the Government’s election commitments in relation to reverse mortgages through the introduction of: —

a statutory protection against negative equity;

—

pre contractual disclosure requirements (including a requirement on licensees to present the consumer with different scenarios in relation to the impact of a reverse mortgage on the equity in their home before they enter into a reverse mortgage);

—

other protections relevant to seniors (including an obligation to make reasonable attempts to personally contact a defaulting debtor); and

introduce protections for consumers who enter into small amount credit contracts by: —

imposing a cap on the maximum amount credit providers can charge under these contracts (complemented by a more restrictive cap on all other credit contracts);

—

introducing multiple contract prohibitions, to address the risk of a debtor entering into a debt spiral, where the amount of their indebtedness increases over time, as a greater proportion of their income is used to meet repayments; and

—

requiring credit providers and providers of credit assistance to disclose the availability of alternatives; and

addressing the current regulatory gap in respect of consumer leases, by requiring lessors to comply, where appropriate, with similar obligations to those that currently apply to credit providers.

The Enhancements Act also introduced additional changes to the NCCP Act, including:

remedies for unfairness or dishonesty by providers of credit services (see commentary at [76.75]); provisions regarding the making of representations to enter into credit contracts, consumer leases etc without assessing unsuitability (see ss 125 and 128 of the NCCP Act). The Explanatory Memorandum explains (at paras 2.58–2.60): 2.58 The effect of these amendments is to prohibit credit providers from making representations to consumers that they are eligible to enter into a contract, or have their credit limit increased irrespective of, for example, their personal circumstances or credit history. These types of representations can encourage a consumer to apply for credit because of the certainty their application will be accepted, but where the resulting terms on which the credit is provided may be more onerous than those offered by other credit providers. 2.59 As a result of the amendments the credit provider can represent to the consumer they are eligible to enter into the contract (or have the credit limit increased) once an assessment has been made. This representation can only be made for the same period of time following an assessment that the credit provider is able to rely on the assessment in order to enter into the credit contract or increase its limit (that is, for a period of 90 days or such other period as may be prescribed in the regulations). 2.60 Item 19 replaces the existing section 151 of the NCCP Act with a replacement section. The new section implements the same restrictions in respect of representations to a consumer that they are eligible to enter into a consumer lease. …

and further (at para 2.63): 2.63 These provisions will also prevent credit providers or lessors from using advertisements which represent that a consumer is eligible to enter into a contract, even where they have poor credit. Advertisements of this type will need to be suitably qualified.

prohibitions on persons engaging in credit activities regarding the use of certain terms (“independent”, “impartial”, “unbiased”) (NCCP Act s 160B), unless certain conditions apply, namely (as explained in the Explanatory Memorandum at para 2.69): the licensee does not receive any commissions (apart from commissions that are rebated in full to the person’s clients) or any other gifts or benefits from a credit provider or lessor that may reasonably be expected to influence the licensee; the licensee’s employer (if any) or any other person (or class of person) that may be identified in the regulations does not receive any of the commissions, gifts or benefits described above; in providing a credit service, the licensee does not operate under any direct or indirect restrictions, other than restrictions imposed by the NCCP Act or by an Australian credit licence (so that this would cover, for example, directions from a

credit provider that restrict the capacity of the provider of credit services to arrange credit contracts with other credit providers); and in providing a credit service, the licensee does not operate under any conflicts of interest that might arise from the person’s associations or relationships with credit providers and lessors, that may reasonably be expected to influence the person in providing the services.

prohibitions on a licensee using terms such as “financial counsellor” or “financial counselling” (NCCP s 160C) unless (at para 2.76 of the Explanatory Memorandum): they are providing, or offering to provide, the credit service on behalf of another person (the principal); they are a representative (as defined in section 5 of the NCCP Act) of the principal; regulations exempt the principal from this prohibition in relation to a credit activity because the principal engages in the activity as part of a financial counselling service; and the person’s actions in providing or offering to provide the credit service are within the authority of the principal.

The Explanatory Memorandum provides (at para. 2.79): 2.79 The effect of the defence is to allow these terms to only be used by Government funded or not for profit financial counsellors (who currently meet the exemption from the need to hold an Australian credit licence in subregulation 20(5) of the National Consumer Credit Protection Regulations 2010). These organisations are exempted as they provide free services to consumers, including financial education and advice, and assisting consumers to communicate and negotiate with creditors and other organisations.

However, a licensee may use those terms in the negative, to say they are not a financial counsellor. Technical and grammatical amendments to ss 128, 130, 181(b) (similar technical amendments were also made to the Code — ss 88(3)(g)(i), 127(2) and 204, and headings to ss 129, 130, 131, 132 and 133).

8. Home loans and credit cards The provisions of the National Consumer Credit Protection Amendment (Home Loans and Credit Cards) Act 2011 (Cth) have been incorporated into the NCCP Act and amendments in respect of home loan key fact sheets (home loan KFS) commenced on 1 January 2012. Other amendments in respect of credit cards, including key fact sheets (card KFS), commenced on 1 July 2012.

The Explanatory Memorandum to the Enhancements Act provides (at para 1.4): 1.4 The National Consumer Credit Protection Amendment (Home Loans and Credit Cards) Act 2011 introduced reforms in relation to home loans (by requiring credit providers to make available a Key Facts Sheet to enable consumers to compare different products more effectively) and credit card contracts (to address specific practices that had developed in relation to these products, for example, by introducing a payment allocation hierarchy, so that the highest interest bearing component of a consumer’s liability would be repaid first).

8.1 Additional obligations for home loan providers From 1 January 2012, home loan credit providers in relation to “standard home loans” have been required to provide a home loan KFS as follows: when a home loan credit provider’s website can be used to apply for or enquire about a home loan, the website must tell the prospective debtor that they can generate a home loan KFS addressing the prospective debtor’s selected criteria and the website must have that capability; and when a prospective debtor requests a copy of the home loan KFS from the credit provider and has given the credit provider sufficient information to prepare a KFS, an appropriate KFS must be provided. A home loan KFS will also be required in circumstances prescribed by the Regulations. A “standard home loan” is one that requires principal and interest repayments for the whole of the loan term: see reg 28LA of the Regulations. The Regulations were amended on 18 June 2012 by the NCCP Amendment Regulations (see Glossary). This has resulted in some changes to the form of a home loan KFS, which must have been implemented by providers of regulated home loans by 1 October 2012. Those amendments make changes to both the appearance and the content of the home loan KFS, including: the “Description of home loan” section is amended for the purposes of a more detailed explanation of the home loan products that are subject to future changes, by allowing for a description of a transition from an initial interest rate to another interest rate;

the “What happens at the end of the fixed rate period?” section will include additional information about when the fixed rate period expires, when the variable rate will commence, and state changes to monthly repayments and the commencement date of the amended monthly repayments; and new notes 16A and 18 within the KFS have been added to permit the home loan credit provider to omit information about valuation fees and interest rate increases respectively, where the information is not relevant to the home loan product. 8.2 Additional obligations for credit card providers From 1 July 2012, credit card providers have been required to: ensure that credit card application forms include a card KFS containing up-to-date information about the credit card account; not enter into the credit contract unless the prospective debtor has been provided with a card KFS; not, without the express consent of a debtor, impose fees or a higher interest rate for a credit card that exceeds its credit limit; include in each statement of account for a credit card contract a “minimum repayment warning”, which details how long it would take the debtor to pay off the credit card if they only make the minimum repayment, and also how much they are likely to pay in interest charges during that time; notify a debtor that they have exceeded their credit limit within two business days of the credit provider becoming aware that it has occurred; first apply a payment received from the debtor against the remainder of the closing balance as stated on the last statement of the credit card account; where different parts of the closing balance attract different annual interest rates, the credit provider (subject to any other agreement made with the debtor) must apply the payment received to discharge the part of the account balance that has the highest

interest rate until all of that part has been repaid, and only then be applied to parts of the account accruing interest at lower rates; and not offer to increase the credit limit on existing credit cards or invite the debtor to apply for an increase to their existing credit card limit unless specific written consent has been received from the debtor to receive such invitations. The NCCP Amendment Regulations (see Glossary) provide further details of the obligations on credit card providers. The amendments commenced on 1 October 2012 and include: where an application for a credit card contract is made available in electronic form, the card KFS can be made available via a hyperlink as part of the application; where various consents are sought from the debtor, including for offers to increase credit card limits, the consents must be given separately for each matter. For example, a consent for the credit provider to perform a credit check must be separate to the consent for the credit provider to make offers for credit card limit increases; a minimum repayment warning will be unnecessary for those accounts on which: —

the outstanding balance is $50 or less;

—

there is no outstanding balance; or

—

there is a payment arrangement in place which replaces the regular minimum repayments; and

the card KFS will inform the consumer that a fee may only be charged to them for exceeding their credit card limit if they have separately agreed to being charged the fee. 8.3 Unsolicited credit card increase invitations From 1 July 2012 it has been necessary for credit card providers to obtain consent from debtors in order to send invitations to increase credit limits under a credit card contract. Under s 133BF of the NCCP Act, this consent is to be “informed consent”. That is, it should be made clear that it is up to the debtor to apply for an increase in their credit limit, and that it is for the credit

provider to approve or decline such an application. It must also be made clear that the debtor may withdraw their consent at any time. The credit provider must also keep records of these consents and any withdrawals of consent that may be received from the debtor from time to time. In order to maintain seamless business processes, credit providers were able to accept and rely on consents that were given prior to 1 July 2012. However, ASIC took the view that some credit card issuers had sought consent in a way that might have tended to mislead customers, or did not comply strictly with the requirements for consents. For example, ASIC examined and required some credit providers to modify their consent processes, on grounds that included that their consent correspondence was potentially misleading in that it: suggested that without giving consent, the debtor would not be able to access additional funds if they needed them; and gave debtors the impression that they needed to act urgently, which may have caused some debtors to act without properly weighing up their options.13

9. Unfair contract terms The national unfair contract terms regime was introduced with effect from 1 July 2010 and, insofar as it applies to financial products and contracts for the supply of financial services, is found in ss 12BF–12BM of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act). It applies to standard form consumer contracts (see para 9.2 below) which will encompass most retail loan and security documents (ie, most Code-regulated documents), except those relating to residential investment loans. 9.1 Unfair terms and financial products In relation to financial products, the regime applies to any standard form contract: which is itself a financial product or which is a contract for the supply (or possible supply) of financial services; and where at least one of the parties to the contract is an individual who

is acquiring the product or service wholly or predominantly for personal, domestic or household use or consumption. The Australian Consumer Law contains the part of the regime that applies to goods and services other than financial products. 9.2 What is a “standard form contract”? The term “standard form contract” is not defined — this was a deliberate policy in order to try to prevent companies from structuring their contracts to fall outside any prescriptive definition. Rather, a contract is presumed to be a standard form contract unless a party can prove otherwise (s 12BK(1) of the ASIC Act). In determining whether a contract is a standard form contract, certain factors must be taken into account, including whether: one of the parties has all or most of the bargaining power relating to the transaction; the contract was prepared by one party before any discussion relating to the transaction occurred between the parties; there was an effective opportunity to negotiate the terms of the contract; and a party was, in effect, required either to accept or reject the terms of the contract in the form in which they were presented. See s 12BK(2) of the ASIC Act for further information. 9.3 Some terms cannot be reviewed By virtue of s 12BI(1) of the ASIC Act, the regime does not apply to terms that: define the main subject matter of the contract; are required or expressly permitted by law; or set the upfront price payable under the contract and certain contracts (such as employment contracts and shipping contracts). The upfront price is defined to be consideration that is provided (or to be provided) for the supply under the contract and which is disclosed when or before the contract is entered into (s 12BI(2) of the ASIC Act).

In relation to credit contracts, the consideration is expressly stated to include the principal that is owed under the contract (s 12BI(3) of the ASIC Act). The upfront price does not include any other consideration that is contingent on the occurrence or non-occurrence of a particular event (s 12BI(2) of the ASIC Act). Thus it appears that contingent fees such as early termination fees and break costs would not be part of the upfront price and would therefore be subject to the unfair terms regime. This interpretation is reflected in ASIC’s regulatory guide on such fees (RG 220). Any term of a standard form consumer contract entered into (or renewed) after 1 July 2010 will be void if that term is unfair — however, the rest of the contract will continue to operate if it is capable of doing so without the unfair term (s 12BF(1) and (2) of the ASIC Act). 9.4 What is an “unfair” term? By virtue of s 12BG(1) of the ASIC Act, a term will be unfair if it: would cause significant imbalance in the parties’ rights and obligations; is not reasonably necessary to protect the legitimate business interests of the party who would be advantaged; and would cause detriment (financial or otherwise) if relied on. A term is presumed not to be reasonably necessary to protect the legitimate business interests of a party unless that party proves otherwise (s 12BG(4) of the ASIC Act). In determining whether a term is unfair, a court must take into account: the extent to which the term is transparent (ie, the extent to which it is expressed in reasonably plain language, legible, presented clearly and readily available to the party affected by it); and the contract as a whole. See s 12BG(2) of the ASIC Act. 9.5 Unfair terms for small business At the time of writing, there is a consultation paper (May 2014) by Consumer Affairs Australia and New Zealand called “Extending Unfair

Contract Terms Protections to Small Businesses”. It requests submissions by 1 August 2014 on the impact of unfair terms in standard form business contracts and whether extension of Australian consumer law protections to small business is an option.

10. Other relevant regulatory developments In addition to the National Consumer Credit Action Plan and related legislation and regulations (see para 4 “Framework of phase 1” above), there are several other recent regulatory changes that will affect the activities of persons involved in providing credit to debtors. These include the Personal Property Securities Act 2009 (Cth), which commenced on 30 January 2012.

11. ASIC 11.1 ASIC’s compulsory information gathering powers ASIC information sheet 145 (INFO 145) was released on 2 September 2011. INFO 145 explains ASIC’s current policy for general market surveillance and specific investigations. ASIC has a range of powers to issue a notice requiring a person or entity to: provide ASIC with documents and information; and/or attend an examination to answer questions or to provide assistance with ASIC inquiries. ASIC sometimes uses its powers to investigate general market conditions and practices, and to assess whether the laws and its policies are effective — known as “surveillance”. ASIC may also open a formal investigation where it suspects breaches of the laws that it administers. While ASIC will often gather information by providing formal notices that allow time to respond, ASIC also has powers to attend any premises without notice and obtain copies of documents. ACL holders should be aware of ASIC’s powers and be ready to respond to its formal notices within the periods specified. It is also prudent for ACL holders to have a written plan about how to respond to ASIC information requests, or on-site inspections by any regulator. 11.2 Misuse of ASIC’s name and logo

On 17 August 2011, ASIC warned businesses against using its name and logo when promoting their business or identifying themselves as being licensed by ASIC. ASIC considers the use of its name and logo to be a breach of its intellectual property. ASIC Commissioner Dr Peter Boxall further stated that “ASIC is concerned that the use of the ASIC name and logo in conjunction with identification requirements [under the NCCP Act] could cause consumers to believe the business or company is some way endorsed or approved by ASIC”.14 11.3 ACL numbers on documents From 1 April 2012, s 52(2) of the NCCP Act and reg 13 of the Regulations require an ACL holder to include its ACL number on: responsible lending disclosure documents; any printed advertisement; any document required by the Code; and any document lodged with ASIC. (It need not be included on other business documents such as business cards and letterheads.) The words “Australian credit licence” must be included in full and not abbreviated to “ACL” when it first appears in a document (although the abbreviated form could appear the second and following times it is used in the same document).

12 ePayments Code As part of its review of the Electronic Funds Transfer Code of Conduct (EFT Code), ASIC released consultation papers in January 2007 and October 2008. Following a review of the submissions made in reference to the consultation papers, in May 2011, ASIC published CP 158 which included a draft of the replacement Code, which is renamed “the ePayments Code”. The final ePayments Code was released on 20 September 2011. The former EFT Code has been completely rewritten. There have been changes to key definitions used. Key changes include the following:

the two-part structure of the EFT Code has been replaced with a unified structure, but there is a “light touch” regime for certain “low value facilities”; a formal regime for dealing with mistaken payments using internet banking “pay anyone” facilities has been included for the first time; there are transactional level disclosure requirements for surcharges charged by an ATM operator; a six-year limitation period for making complaints under the ePayments Code has been formalised; the requirements for printed receipts are prescribed in greater detail; there are new requirements for subscribers to prepare and submit reports to ASIC on some matters such as annual reporting about unauthorised transactions; and ASIC is given power to issue guidelines for interpretation and is given exemption and modification powers. The draft ePayments Code noted the commencement date as 1 July 2012, but the final ePayments Code allowed a full 18-month transition period, which expired on 20 March 2013. However, the ePayments Code allowed a subscriber to elect to be bound by the ePayments Code before the formal commencement date.

13 Consumer credit fine-tuning regulations At the time of writing, there is a government proposal to fine-tune regulations to the credit laws. Amendments are proposed to fix incorrect and obsolete references, ambiguities and unintended consequences in the credit laws. Those changes are not intended to make wholesale policy changes to the credit laws. The kinds of likely fine tuning regulations may include to: remove obsolete references to “registered persons”, as this term refers to the transition arrangements set out in the credit laws (all registrations were cancelled either when a person obtained an

Australian credit licence or, by operation of the transitional provisions by 30 June 2011); fix errors such as where the small amount credit contract limit provides for up to $2,000 cash in hand, but the medium amount credit lower limit is $2001, leaving a gap between $2,000.01 to $2000.99; update the amounts that credit providers are required to quote a comparison interest rate in advertisements (consequential amendments introduced by the Enhancements Act prohibit loans of $250 for 2 weeks, which is the amount currently required); clarify areas of stakeholder confusion. For example, the credit regulations require a credit provider to disclose on their websites, in relation to small amount credit contracts, a hyperlink, in the form of a boxed icon and the words “Warning about Borrowing”. There is stakeholder confusion as to whether the word “boxed” refers to the warning icon, the phrase “Warning about Borrowing” or both; and clarify wording ambiguities, for example, the regulation permitting interest to be charged in advance. Current wording suggests that whether or not interest can be charged in advance on loans will depend on the purpose for which credit was initially provided, even where this purpose has changed over time. However, whether or not interest can be charged in advance on loans should depend on the purpose for which credit is currently provided when a loan has been refinanced.

14 ACCC and ASIC 2014 debt collection guidelines The ACCC and ASIC have issued an updated version of their “Debt collection guideline: for collectors and creditors” (ASIC Regulatory Guide 96 (RG 96)). The 2014 revised RG 96 was issued on 8 July 2014. See further [155.15]. 1 See the Consumer Credit (Australian Capital Territory) Act 1995 (ACT); Consumer Credit (New South Wales) Act 1995 (NSW); Consumer Credit (Northern Territory) Act 1995 (NT); Consumer Credit (Queensland) Act 1994 (Qld); Consumer Credit (South Australia) Act 1995 (SA); Consumer

Credit (Tasmania) Act 1995 (Tas); Consumer Credit (Victoria) Act 1995; Consumer Credit (Western Australia) Act 1995 (WA). 2 Being the ACT Office of Fair Trading, NSW Department of Fair Trading, NT Office of Consumer and Business Affairs, Qld Office of Fair Trading, Tas Office of Consumer Affairs and Fair Trading, Consumer Affairs Victoria and WA Department of Consumer and Employment Protection. 3 ACT, NSW, Vic and WA: Credit Act 1984; Qld: Credit Act 1987. 4 Money Lenders Act 1903 (NT); Consumer Credit Act 1972 (SA); Lending of Money Act (Tas). 5 The National Consumer Credit Protection Amendment Regulations (No 3) 2010 (2010 No 137) contain certain amendments which were “misdescribed” (according to the 1 July 2010 compilation of the Regulations prepared by the Office of Legislative Drafting and Publishing of the AttorneyGeneral’s Department, Canberra (see Note 2 to that compilation)). These amendments are therefore not incorporated in that compilation. 6 The National Consumer Credit Protection Legislation Amendment Regulations (No 1) 2010 (2010 No 185) contain certain amendments that were “misdescribed” (according to the 1 July 2010 compilation of the Regulations prepared by the Office of Legislative Drafting and Publishing of the Attorney-General’s Department, Canberra (see Note 3 to that compilation)). These amendments are therefore not incorporated in that compilation. 7 This amendment came into force on 22 July 2010, except for Item 1 of Sch 1 which came into force on 1 October 2010. 8 This amendment came into force 22 July 2010, except for Item 1 of Sch 1 which came into force on 1 October 2010. 9 Note also that the employees and directors of the related body corporate do not need an ACL or to be appointed as credit representatives of the ACL holder because they come within an exemption for employees and directors of a related body corporate of an ACL holder (NCCP Act s 29(3)). 10 This exemption only applied until 30 September 2010 (ie, before 1 October 2010) (see reg 25(4). This regulation was introduced by the National Consumer Credit Protection Legislation Amendment Regulations 2010 (No 2) (No 235 of 2010) that came into force on 22 July 2010, except for Item 1 of Sch 1 which came into force on 1 October 2010. 11 Ibid. 12 P O’Shea, Simplification of Disclosure Regulation for the Consumer Credit Code: Empirical Research and Redesign, Uniquest Project No 14808, 12 March 2010. 13 See further ASIC media releases 12-40MR, http://www.asic.gov.au/asic/asic.nsf/byheadline/12-40MR+ASIC+accepts+enforceable+undertaking+from+Commonwealth+Bank?openDocument (accessed 24 January 2014); 12-79MR, http://www.asic.gov.au/asic/asic.nsf/byheadline/12-79MR+Westpac+withdraws+unsolicited+credit+card+limit+increase+invitation+in+response+to+ASICs+concerns?openDocument (accessed 24 January 2014). 14 Australian Securities and Investments Commission, 11-17MR Credit licensees warned against misuse of ASIC name and logo, media release, 17 August 2011, http://www.asic.gov.au/asic/asic.nsf/byheadline/11-174MR+Credit+licensees+warned+against+misuse+of+ASIC+name+and+logo?openDocument (accessed 24 January 2014).

OVERVIEW OF THE NATIONAL CREDIT CODE The Code is contained in Sch 1 to the NCCP Act. The Code is substantially similar to the previous state-based UCCC. A comparative table comparing the section numbers of the UCCC to those of the Code is provided in the introductory pages of this text.

1 Scope of the Code The Code applies to all credit provided to individual debtors and strata corporations for wholly or predominantly personal, domestic or household purposes whenever any type of charge is made for credit, regardless of the amount lent or the interest rate charged. Unlike the UCCC, the Code also applies to credit wholly or predominantly for the purchase, renovation, improvement or refinancing of residential investment property (s 5). Credit wholly or predominantly for investment purposes is otherwise excluded. Related mortgages, guarantees (see Pt 3 of the Code) and insurance contracts (see Pt 8 of the Code) are also covered. The Code applies to any credit provided in the course of a business of providing credit in Australia, or as part of, or incidentally to any other business in Australia (s 5). Unlike the UCCC, the Code does not require the debtor to be an Australian resident. The credit is presumed to be for a Code purpose unless the debtor declares otherwise before entering into the contract (s 13). The declaration must be substantially in the form prescribed by the Code. Unlike the UCCC, the declaration will not be conclusive under the Code. Instead, the declaration will be ineffective if the credit provider (or other prescribed person) knew or had reason to believe, or would have known or had reason to believe if they had made reasonable enquiries, that the declaration was untrue (s 13). It is a strict liability offence to induce a debtor to make a false or misleading declaration (s 13(6) and (7)). The scope of the Code is very wide. The Code does not have an upper monetary limit or a minimum interest rate threshold. The Code is not limited

to financial institutions and applies to any person who carries on a business where “consumer” credit is provided as part of, or even incidentally to, that business. This means, for example, that a loan from solicitor to client will be regulated by the Code. The following types of credit are exempt from some or all of the provisions of the Code (s 6): credit provided for 62 days or less where the maximum amount of credit, fees and charges does not exceed 5 per cent of the credit and the maximum amount of interest charges do not exceed 24 per cent per annum (s 6(1), (2) and (3)); credit provided without prior agreement (eg, where a cheque account becomes overdrawn and there is no agreed overdraft) (s 6(4)); continuing credit contracts for which only an account charge is payable (ie, the only charge for providing the credit is a periodic fixed charge that does not vary according to the amount of credit) (s 6(5)); combined credit and debit facilities, to the extent that the contract or any amount payable or other matter arising out of it relates only to the debit facility (s 6(6)); bill facilities (s 6(7)); credit from an insurer to pay insurance premiums by instalments (s 6(8)); most employee loans (s 6(11)); credit provided by pawnbrokers (but only if, when a debtor defaults, the pawnbroker’s recourse is against the pawned or pledged goods only) (s 6(9)); credit from trustees of estates by way of an advance to a beneficiary or prospective beneficiary (s 6(10)); margin loans (s 6(12)); classes of credit providers or contracts excluded by regulation (s 6(11)); and

provision of credit specifically excluded by ASIC (s 6(14)(18)).

2 Fringe lending provisions In contrast to the UCCC, the Code prohibits taking security over household goods (eg, fridges and bedding) unless the credit has been provided specifically to buy the household goods (s 50(2)).

3 Hardship Prior to the Enhancements Act, the amount of credit to which the hardship provisions apply had been significantly increased (to $500,000) and, unlike the UCCC, was fixed and subject to change only through regulation (s 72(5) of the NCCP Act). See paragraph 23.3 for discussion of the changes to the hardship provisions introduced by the Enhancements Act. The Enhancements Act removed the $500,000 cap in respect of hardship applications and broadened the circumstances in which a debtor can request a hardship variation. The Australian Bankers’ Association Industry Guideline “Promoting Understanding About Banks’ Financial Hardship Programs” details the common features of the hardship programs banking institutions develop to meet their obligations under the Code. Of particular interest is the section explaining the different types of hardship arrangements open to banks. They range from deferred repayments and temporary overdrafts to refinancing, debt consolidation and fee waivers. The guideline also comprehensively considers how banks may ensure that customers have access to those hardship arrangements.

4 Business purpose declaration Unlike the UCCC, the Code provides that the business purpose declaration will no longer be conclusive (and will instead be considered a rebuttable presumption, open to be challenged). Procuring a false business purpose declaration is a criminal offence punishable by up to two years imprisonment (s 13).

5 Governing body

ASIC is the governing body responsible for administering the NCCP Act (including the Code) (see s 239 of the NCCP Act).

6 Form and content of the documents 6.1 Introduction The Code regulates the form and content of the following documents if the Code applies to them: credit contracts (including the information statement which must be given to all debtors and the precontractual statement — see Pt 2-1 of the Code, and Pt 7-2 and Sch 1, Forms 5, 6, 7 and 7A of the Regulations); guarantees (including the information statement which must be given to all guarantors — see Pt 3-2 of the Code, and regs 81, 82 and Sch 1, Form 9 of the Regulations); and mortgages (see Pt 3-2 of the Code and reg 80 of the Regulations). Credit contracts, mortgages, guarantees and notices must be legible and clearly expressed. There are also requirements in relation to print and type size (s 184 of the Code). Additional detail about requirements for these different types of document is set out below. 6.2 Credit contracts Credit providers must not enter into a credit contract unless the credit provider has given the debtor a precontractual statement setting out the matters required under the Code. The precontractual statement must be in the form prescribed by the Code. The precontractual statement must include: the credit provider’s name; the amount of credit; the annual percentage rate; the repayments; credit fees and charges; and all other information by s 17 of the Code.

All these requirements are set out in ss 16 and 17 of the Code. Credit contracts must be in writing (s 14 of the Code). In addition to being signed by the credit provider, they must also be signed by the debtor, except in instances where the offer to provide credit is accepted by the debtor’s conduct, in accordance with the terms of the offer. The Code sets out detailed requirements for providing copies of documents to debtors, mortgagors and guarantors, both before and after the documents are signed (ss 20, 43 and 57 of the Code). Credit providers must also give key fact sheets for: “standard home loans” (from 1 January 2012); and credit cards (from 1 July 2012). See para 8 of the “Overview of the National Consumer Credit Protection Act (NCCP Act) regime”. 6.3 Guarantees The Code stipulates that liability under a guarantee may not exceed the amount of the debtor’s liabilities under the credit contract and the reasonable expenses of enforcing the guarantee (s 60 of the Code). Guarantors may withdraw from the guarantee by notice in writing any time before the credit is first provided (s 58 of the Code). A guarantee is void to the extent that it limits the guarantor’s right of indemnity against the debtor (s 60 of the Code). If the debtor’s liability under the guaranteed credit contract is increased because a term of the credit contract is changed, the guarantor does not guarantee the increased liability unless the credit provider gives the guarantor written notice of the credit contract variation and the guarantor gives written acceptance to the guarantee being extended to cover the increased liability (s 61 of the Code). 6.4 Mortgages Third party mortgages are prohibited unless the mortgagor also guarantees the debt (s 48 of the Code). “All money mortgages” will be unenforceable unless the requirements of s 47 of the Code are met (ie, unless the credit provider first gives the mortgagor a copy of the credit contract or guarantee that is to be secured by the

mortgage and then obtains the mortgagor’s written acceptance that the mortgage is to extend to that credit contract or guarantee). The Code provides that mortgages that are over all assets and property are void. The mortgage must identify or describe the property being mortgaged (s 44 of the Code). Liability under a mortgage may not exceed the amount of the debtor’s liabilities under the credit contract that it secures and the reasonable expenses of enforcing the mortgage (s 49 of the Code). The ability for credit providers to take mortgages of future property is restricted by s 45 of the Code.

7 Debtors’ monetary obligations The calculation of interest is regulated by the Code. Interest cannot be charged or debited in advance even by one day (it may be debited on the last day of the period provided that the amount debited is not treated as part of the unpaid daily balance for the purposes of calculating interest) (ss 28 and 29 of the Code) — there are exceptions for residential investment loans (see “Residential investment loans” at para 20 of this “Overview of the National Credit Code”). Default interest may be charged, but only in the event of default in payment, in respect of the amount in default and while the default continues (s 30 of the Code). Periodic statements of account must be supplied. The Code regulates when statements of account are to be sent and what they must contain (ss 33 and 34 of the Code). In addition to periodic statements of account, credit providers are required, on request, to give a debtor or guarantor a statement containing prescribed information about the account balance (s 36 of the Code). A credit contract cannot forbid the early repayment of the whole amount owing under the contract (s 82 of the Code). Debt Collection Guidelines 2014 ASIC and the ACCC have jointly issued on 8 July 2014 the “Debt Collection Guideline: for collectors and creditors”. This guideline explains how the code applies to practical, everyday situations and interactions between credit providers and debtors. See [155.15].

8 Fees and charges 8.1 Introduction With the exception of reg 79A, which prohibits certain fees or charges to be charged on or in relation to the termination of a credit contract entered into on or after 1 July 2011 where any amount of credit provided is secured over residential property (see [R79A.05]), credit providers are free to charge any type of credit fees and charges subject to disclosing them fully to the debtor (see also s 31 — prohibited credit fees or charges). Credit fees and charges must also be authorised under the credit contract (ss 17(8) and 23(3) of the Code). The Enhancements Act introduced provisions regulating the permitted maximum annual percentage rate (see Div 4A ss 32A–32B); maximum charges for small amount credit contracts (see Div 4 ss 31–31B and Div 5A ss 39A–39C); restrictions for medium amount credit contracts (eg, see s 32B); and reverse mortgages (see commentary on s 13A). Credit providers can pass on only the exact amount of third party fees (s 32 of the Code). This means that credit providers cannot benefit from any discount or commission they are offered, for example, by the insurer on lenders mortgage insurance. They can only require the debtor to pay the actual amount of the premium paid to the insurer, less any applicable rebate or allowance. A court may decide that an establishment fee, or a fee or charge payable on early termination of a credit contract, or for a prepayment of an amount under a credit contract is unconscionable if the amount of the fee or charge exceeds the credit provider’s estimated costs or losses on the establishment of the loan or termination/early payment, as the case may be (s 78 of the Code). The court may annul or reduce the amount of an unconscionable fee or charge. 8.2 Exit fees With effect from 1 July 2011, “exit fees” are prohibited in relation to any Code regulated credit contract secured over residential property. The prohibition applies to any fee to be paid on, or in relation to the termination of, the credit contract, whether the liability to make the payment is incurred at the time of termination or an earlier time (reg 79A(1)(b)). However, the prohibition does not apply to a “break fee” or a “discharge fee” as defined in reg 79A. A “break fee” is a credit fee or charge that relates:

only to the early repayment of an amount provided under a credit contract for a fixed rate loan; only to the portion of the loan that is fixed; and to the part of the credit provider’s loss, arising from the early repayment, that is a result of differences in interest rates. A “discharge fee” means a credit fee or charge that only reimburses the credit provider for the reasonable administrative cost of terminating the credit contract.

9 Related insurance contracts A credit provider can require a debtor or guarantor to take out only limited types of insurance. A credit provider cannot require a debtor or a guarantor to take out consumer credit insurance (s 143 of the Code). Only up to a single year’s premium for insurance of the mortgaged property may be financed under the credit contract, although premiums for subsequent years may be financed when they become due (s 144 of the Code). ASIC undertook successful enforcement action in 2012 for breaches of this restriction, in relation to the financing of tyre and wheel rim insurance (see commentary on s 144). The maximum commission on consumer credit insurance is 20 per cent of the premium (s 145 of the Code). Detailed rules apply in relation to information to be given to debtors and the procedures to be followed on termination of the credit contract (ss 148 and 149 of the Code).

10 Variations The Code contains detailed provisions in relation to unilateral and agreed changes to obligations under credit contracts, mortgages and guarantees (Pt 4 of the Code). The Code does not prohibit unilateral changes by the credit provider except changes to early termination and prepayment fees under fixed rate contracts. There are strict notice requirements which vary from advance or same day notice requirements to confirmation after the variation (depending on the type of variation).

The debtor may request a variation of the contract during a period of hardship (eg, illness, unemployment or other “reasonable” cause) (ss 72–75 of the Code). The Enhancements Act made significant changes to the hardship regime. There are now two hardship regimes. One applies to the period before 1 March 2013 where the maximum amount of credit that may be provided is below $500,000. This is an increase in the threshold that applied under the UCCC and, unlike the threshold that existed under the UCCC, it is fixed. The other regime applies to for contracts entered into after 1 March 2013, for which there are no monetary limits. See commentary on ss 72–76. The Code requires credit providers to find out about debtors and their circumstances. This is because the reopening provisions allow a court to reopen credit transactions and changes which, having regard to all the circumstances, the court regards as unjust (s 76 of the Code). The Code prescribes the criteria the court can look at to decide whether a contract, guarantee or mortgage is unjust. These criteria are similar to those found in the Contracts Review Act 1980 (NSW).

11 Termination and enforcement The debtor or guarantor may pay out a contract at any time. The Code prescribes the way in which pay out figures must be calculated (s 82 of the Code). The Code regulates the procedures which must be followed before a credit provider can commence enforcement proceedings against a debtor, mortgagor or guarantor. In particular, the Code prescribes more detailed notice requirements than the UCCC and enables the debtor, guarantor or mortgagor to remedy a default within the period specified in a default notice. The Code also contains detailed provisions in relation to the enforcement of a goods mortgage and in relation to the voluntary return of goods by the mortgagor. Further, the Code contains new provisions dealing with mortgagors’ remedies. Under reg 4.1 of the Personal Property Securities Regulations 2010 (Cth) (PPSR), compliance with the Code includes requirements relating to: notification to the mortgagor on taking possession of mortgaged

goods; and sale of mortgaged goods. Compliance with the Code is taken to be compliance with equivalent provisions of the Personal Property Securities Act 2009 (Cth). That is, provided that notices related to the enforcement of a goods mortgage or consumer lease are given to the mortgagor or lessee in accordance with the requirements of the Code, notices to the grantor under the PPSR need not also be given.

12 Advertising Advertisements stating the amount of any repayment must include the annual percentage rate and a statement about credit fees and charges (if they are payable) (s 150 of the Code). Harassment and unsolicited visits by a credit provider to the home of a prospective debtor are prohibited (s 155 of the Code).

13 Comparison rates The Code retains the UCCC requirement for credit advertisements that contain an annual percentage rate to contain a comparison rate, with the exception of advertisements for continuing credit contracts (see Pt 10 of the Code). The object of this requirement is to assist consumers to identify the true cost of credit offered by credit providers. The Regulations contain a series of comparison rates based on different combinations of loan amounts and terms (see reg 97). The advertisement must contain the comparison rate that most closely corresponds to the loan amount and term of the credit product being advertised. The Code does not retain the UCCC requirement for debtors to be supplied with comparison rate schedules.

14 Consumer leases Consumer leases (ie, contracts for the hire of goods by a natural person or a strata corporation where there is no option to purchase the goods), are covered by the Code. The Code does not apply unless the goods are hired

wholly or predominantly for private purposes and a charge is made, so that the amount payable under the lease exceeds the cash price of the goods. Disclosure and procedural rules cover variations, entry to property to take possession of goods and other miscellaneous matters in the same way as with other credit contracts. Special rules apply to the repossession of leased goods (Pt 11 of the Code). Significant changes were made to the consumer lease regime by the Enhancements Act. These changes commenced on 1 March and 1 July 2013. See para 23.4 below.

15 Related sale contracts A credit provider may be liable for defects in goods or services supplied (or other breaches) under a sale contract if the credit provider is “linked” to the supplier of the goods or services (s 129 of the Code). A “linked credit provider” is liable for misrepresentations made about the credit contract by employees or agents of the supplier (s 128 of the Code). A credit provider becomes a “linked credit provider” when its association with a supplier involves the: parties having an existing business arrangement; supplier referring their customers to the credit provider for credit; credit provider’s application forms or contracts being provided to customers by the supplier; or credit provider’s application forms or contracts being signed by customers at the supplier’s premises (s 127 of the Code).

16 Penalties for non compliance Penalties for non-compliance are both civil and criminal. The Code contains more than 40 specific pecuniary penalties for noncompliance and creates almost 60 specific criminal offences. If a credit provider fails to make disclosure of what is regarded as a key requirement, a pecuniary penalty is imposed (see s 111 of the Code, which sets out the “key requirements”). The amount of the pecuniary penalty depends on who makes the application to the court or tribunal. Where the

application is made by the credit provider or ASIC the pecuniary penalty for a contravention of a key requirement is limited to a maximum of $500,000 for all contraventions of the requirement nationally (s 116 of the Code). Where the application is made by the debtor or guarantor, the pecuniary penalty could be as much as the whole of the interest charge under the contract (s 115 of the Code). An additional 100 penalty units can also be imposed (equating to $17,000 for individuals and $85,000 for bodies corporate — see para 17 below). The Code provides for pecuniary penalties, which may affect the right of a credit provider to retain certain fees and charges, for breaches of certain “key requirements” (see below). These pecuniary penalties were referred to as “civil penalties” under the UCCC. That nomenclature is no longer used in the Code because “civil penalty” is used in a different way in the NCCP Act and other Commonwealth laws, such as the Corporations Act 2001 (Cth). The “key requirements” (s 111 of the Code) in respect of a credit contract are the disclosures of the: amount of credit or credit limit; annual percentage rate and the method for calculating and frequency of payment of interest charges; total amount of interest charges; default rate (if any); retained credit fees and charges; fact that the interest rate may be varied or that the amount of or times for payment of a fee or charge or instalment may be varied or that a new credit fee or charge may be imposed and the means of informing the debtor of the change or the new credit fee or charge; and name of insurer and amount of premium for credit-related insurance. The “key requirements” in respect of a continuing credit statement of account are the disclosures of the: interest charges debited during the statement period and when

interest was debited; annual percentage rate and any change in the annual percentage rate since the last statement period; and opening balance, which may not be greater than the closing balance of the previous statement. There are criminal penalties in the form of fines for certain other breaches (eg, ss 22–26, 33, 36 and 64–68 of the Code). In addition to all of these fines and penalties, a court can order compensation to be paid to any debtor who has been caused any loss or damage as a result of a breach of the Code (s 124 of the Code).

17 Civil and criminal penalties A contravention of the Code may result in civil or criminal penalties, or both, depending on the particular contravention. Criminal penalties apply to more serious contraventions and can include fines and imprisonment. The UCCC predecessor legislation referred to potential orders affecting a credit provider’s rights to charges under a credit contract (such as under s 111 and following) as “civil penalties”. “Civil penalty” is not used in this sense in the Code because “civil penalties” are used in a different sense in the NCCP Act. The pecuniary or monetary penalties under the Code are expressed in “penalty units”. The term “penalty unit” is defined in s 4AA of the Crimes Act 1914 (Cth). At the time of writing, a penalty unit is $170. However, where an offence is committed by a body corporate, s 4B(3) of the Crimes Act 1914 (Cth) permits a court to impose a pecuniary penalty of up to five times the amount of the maximum penalty that the court may impose on a natural person convicted for the same offence. So, for example, where an offence carries a maximum penalty of 100 penalty units, this means that, at the time of writing, the offence carries a maximum penalty of $17,000 for an individual or $85,000 for a body corporate. For a contravention of a civil penalty provision (which is not an offence (s 168 of the NCCP Act)), the court may order the person to pay a pecuniary penalty (s 167(2) of the NCCP Act). The maximum pecuniary penalty for

natural persons is the number of penalty units shown in the provision, and for bodies corporate, partnerships or multiple trustees is five times that amount (s 167(3) of the NCCP Act). Penalties under the UCCC were expressed as “maximum penalty”; however, the word “maximum” is not included in the Code penalty provisions. This is because s 4D of the Crimes Act 1914 applies to the Code and that section provides that an offence is punishable by a penalty “not exceeding” the penalty set out in the relevant legislation. The word “maximum” is therefore not needed.

18 Strict liability The NCCP Act regime amendments to the Code introduce strict liability offences (eg, in ss 13 and 26 of the Code). ASIC has statutory powers to issue infringement notices against individuals and corporations in relation to strict liability offences (and certain civil penalty provisions) (together, these are known as “infringement notice offences” — see reg 38). An infringement notice can be issued up to 12 months after the date of an alleged contravention. Unlike court proceedings, infringement notices can be issued by ASIC where it has “reasonable grounds to believe” there has been a contravention (see reg 39). This enforcement tool can be used by ASIC without the cost and burden of bringing court proceedings and is likely to be used for less serious contraventions. The maximum penalty that ASIC can impose in an infringement notice given to an individual in relation to a strict liability offence is one fifth of the maximum penalty that a court could impose on that person. In the case of bodies corporate, the maximum infringement notice penalty is equal to the maximum penalty that a court could impose on an individual in relation to the offence. If the infringement notice is paid within the stipulated timeframe, then the liability of the offender is discharged, without any admission of guilt (reg 45).

19 Personal liability for directors, employees and agents Individuals cannot shelter behind the corporate veil when it comes to

compliance with the Code. If a corporation contravenes any provision of the Code, any officer of the corporation (ie, a director or a person otherwise concerned in the management of the corporation) who knowingly authorised or permitted the contravention is personally liable, as if that officer had committed the contravention. The officer may be prosecuted and convicted, even though proceedings may not be taken against the corporation (ss 200 and 201 of the Code). Moreover, any person who is in any way involved in a contravention (by being concerned in it, inducing it, conspiring with others to effect it, or aiding, abetting, counselling or procuring it) is personally liable as if they had committed the offence (s 169 of the NCCP Act).

20 Residential investment loans The NCCP Act regime changes extended the Code application to credit for residential investment purposes for the first time. Residential investment loans typically permit interest to be paid annually in advance (as this brings benefits in terms of timing of tax deductibility). Such an arrangement would be prohibited under s 29 of the Code (which prohibits early debiting or payment of interest). Also, it is possible that other typical features of such transactions may be prohibited under s 25 or s 26 (“Loan to be in money or equivalent” and “Early payment and crediting of payments”). Accordingly, the NCCP Act regime changes also introduce ss 26A and 30A allowing disapplication or modification of ss 25, 26 and 27–30 in relation to residential investment loans, to accommodate the arrangements commonly associated with those loans. At the date of writing, no regulation has been introduced under s 26A. However, reg 78 is made under s 30A. Regulation 78 disapplies s 29 in relation to residential investment loans with the result that existing annual interest in advance residential investment loan products is allowed to continue under the Code. Regulation 65C exempts from the Code residential investment loans for multiple properties if the credit to be provided is more than $5 million. This means that credit for a single residential investment property of more than $5 million (as well as less than $5 million) is regulated by the NCC.

21 Electronic transactions and documents

The Electronic Transactions Act 1999 (Cth) applies to the Code. Further, any requirement or permission under the Code to give information in writing, provide a signature, produce a document, record information in writing, provide a signature, produce a document, record information in writing or retain a document may be met in accordance with the Electronic Transactions Act (s 187 of the Code). The Code, unlike the UCCC, does not allow for documents or transactions to be excluded from the application of the Electronic Transactions Act (although particular classes of documents that must not be provided electronically may be added in future to the Electronic Transactions Regulations 2000 (Cth)).

22 Interpretation The Acts Interpretation Act 1901 (Cth) (Interpretation Act) applies to the Code and accordingly there is no longer an equivalent to the former Sch 2 of the UCCC, which contained the uniform interpretation provisions for the UCCC (of a kind that would usually be contained in the Interpretation Act of a state or territory). Part 14 of the Code includes relevant interpretative provisions for the Code — being those interpretation provisions that are not addressed by the Interpretation Act (described below), the functions and powers conferred by the Code where they are not already covered by the Legislative Instruments Act 2003 (Cth) and provisions relating to time, distance and age. The interpretation provisions, which are in Pt 14 of the Code where they are not already addressed in the Interpretation Act, include: preliminary matters including displacement of Pt 14 where a contrary intention appears in the Code; material that is not part of the Code (for example, headings, punctuation and notes); provisions covering how Commonwealth, state and territory Acts should be cited in the Code (eg use of short titles); and matters relating to compliance with prescribed forms.

23 Enhancements Act

23.1 Introduction The Consumer Credit Legislation Amendment (Enhancements) Act 2012 (Cth) (Enhancements Act) received Royal Assent on 18 September 2012, and its key provisions commenced in March 2013 and July 2013. The changes introduced by the Enhancements Act can be divided into four main categories: 1.

short term and small amount credit contracts (see para 23.2);

2.

enhancements to the NCCP Act (see para 23.3);

3.

consumer leases (see para 23.4); and

4.

reverse mortgages (see para 23.5).

These changes are briefly summarised below. 23.2 Short term and small amount credit contracts (SACCs) The Enhancements Act introduced specific regulation of SACCs. These are non-ADI issued credit contracts of less than $2000 for a term of between 16 days and one year. Following numerous submissions by small amount credit providers as to the nature of their business and the characteristics of debtors who make use of short term small amount loans, significant changes were made to the proposed regulation of SACC before the Enhancements Act was passed by parliament. Previously, some states and territories regulated the so-called “pay day lending” industry by enforcing a cap on the costs and interest that those credit providers can charge for small amount loans. However, the Enhancements Act introduced a costs structure which applies to providers of small amount loans nationally. In some states and territories (eg, New South Wales, Australian Capital Territory and Queensland), there may be an increase in the number of credit providers offering SACCs post the Enhancements Act as the costs structures implemented by state and territory governments are amended. Since March 2013, the following measures apply to SACC providers: a warning advising of the alternative sources of funds that might be available must be displayed on the credit provider’s website and at their place of operations.

there is now a prohibition on credit contracts not offered by ADIs with terms of 15 days or less; and credit providers must obtain and review bank statements for the three months prior to their decision on whether or not to extend a loan to a debtor. Another change is that SACC providers will be remunerated not on the basis of traditional interest charges, but by maximum fees that are based on the amount of credit actually provided to the debtor and the time that any part of the loan is outstanding. The restrictions on interest and other fees apply nationally from 1 July 2013. 23.3 Enhancements to the Code and the NCCP Act The Code enacted in July 2010 mostly reflected the provisions of its predecessor — the UCCC. The government recognised that changes to the UCCC would be considered as part of phase 2 of the credit reforms. As a consequence, the Enhancements Act introduced the following additional “enhancements” to the Code and NCCP Act that came into effect on 1 March 2013: removing the $500,000 cap in respect of hardship applications and broadening the circumstances in which a debtor can request a hardship variation; a prohibition on credit providers commencing proceedings where there is an outstanding hardship application; and a prohibition on terms such as “pre-approved” in advertising. The transitional provisions in the Enhancements Act provide that the changes to the hardship provision apply to credit contracts entered into after 1 March 2013. 23.4 Consumer leases Consumer leases have been regulated by Pt 11 of the Code. The Code originally adopted a “light touch” regime but the Enhancements Act makes changes with the purpose of achieving greater regulatory consistency between leases and credit contracts. On 1 March 2013, the following provisions commenced:

lessors must issue statements at least annually and, if requested by a lessee, the lessor must also provide an end-of-lease statement; lessors must issue a pre-termination notice; lessors must inform the lessee if there is a direct debit default; changes to enforcement procedures and a right to seek postponement of enforcement; and a right for a lessee to take action against a “linked lessor” for any misrepresentation by the supplier about leased goods, and introducing criminal penalties for both lessor and supplier for harassment. 23.5 Reverse mortgages Reverse mortgages are now subject to separate requirements from other kinds of credit contracts, with tailored consumer protection provisions. The changes affecting providers of reverse mortgages can be categorised in three groups: pre-contractual conduct; documentary requirements; and procedures during the term. Credit providers should remember that while the majority of changes commence on 1 March 2013, the following changes commenced on 18 September 2012 (ie, when the Enhancements Act received Royal Assent): credit contracts must not prohibit early repayment of reverse mortgages; a statutory negative equity protection, or “no negative equity guarantee”, which prohibits credit providers requesting or accepting repayments that exceed the market value of the security property (certain exceptions are provided); and additional requirements for enforcing reverse mortgages if the debtor’s liability exceeds the value of the reverse mortgage security property. Credit providers are also required to use a reverse mortgage calculator,

available on the MoneySmart website15 to make and show prospective reverse mortgage borrowers information relating to the value of their home and the amount of debt over time. A new reverse mortgage calculator was launched in March 2013 and guidance on using the reverse mortgage calculator was released in September 2013.16 23.6 Other enhancements to the Code and the NCCP Act From March 2013, the following additional “enhancements” were introduced by the Enhancements Act: removal of the $500,000 cap in respect of hardship applications and broadening the circumstances in which a debtor can request a hardship variation; extension of the right to make a hardship application to those debtors with regulated residential investment loans; a prohibition on credit providers commencing proceedings where there is an outstanding hardship application; a national annual cost rate cap of 48 per cent on all credit contracts (other than SACCS and credit provided by ADIs);17 inclusion of provisions to provide a remedy to debtors for unfair or dishonest conduct by credit service providers; ASIC given standing to apply for certain court orders regardless of whether a civil remedy is also available under another provision; a prohibition on terms such as “pre-approved” in advertising; and ASIC given the power to commence and appear in proceedings on behalf of debtors and in its own right.

24 Phase 2 of credit reforms 24.1 Phase 2 — NCCP Act The NCCP Act currently only applies where credit is provided either for “personal, domestic or household purposes” or “investment in residential property”. The credit reforms of 2009 did not extend to credit provided for business or investment purposes. However, it was originally contemplated that the second phase of national credit reforms would address these areas.

In December 2012, Treasury released a public consultation draft of the National Consumer Credit Protection Amendment (Credit Reform Phase 2) Bill 2012 (Phase 2 Bill), which set out the proposed framework for regulation of small business credit and investment lending. The Treasury consultation period ended on 1 March 2013. However, on 15 February 2013, it was announced by Treasury that reforms to small business lending would be deferred. 24.2 Investment lending The proposed regulation provides that anyone engaging in credit activities in relation to an investment credit contract will be required to obtain an ACL. An “investment credit contract” is widely defined to include contracts where credit is predominantly provided for “investment purposes”. “Investment purposes” is not defined in the draft and, in applying the ordinary meaning, is likely to include investment in real property, including commercial property, financial products including shares, and other products such as gold. However, this provision will only apply where the debtor is either a natural person or a strata corporation. 24.3 Small business lending The consultation draft of the Phase 2 Bill proposed that a person will be prohibited from engaging in credit activities in relation to a small business credit contract unless they hold a “credit permit”. Generally, a contract whereby credit is predominantly provided for the purposes of providing credit to a small business will be categorised as a small business credit contract. The small business lending provisions are proposed to extend to company and individual borrowers. A business will be categorised as a small business if it is a manufacturing business and employs less than 100 people, or if it is any other business type and employs less than 20 people. As previously noted, Treasury announced on 15 February 2013 that the above reforms have been deferred indefinitely.

25 Disclosure changes 25.1 Changes to disclosure requirements under NCCP Act A discussion paper, “Changes to Disclosure Requirements under the National Consumer Protection Act 2009”, was released in April 2013

(Discussion Paper).18 The Discussion Paper sets out possible changes to the format, content and timing of the disclosure requirements currently prescribed by ss 16 and 17 of the Code. The Discussion Paper provides a preliminary view of the proposed change. No draft legislation or further information is currently available. 25.2 Timing of the pre-contractual disclosure The Discussion Paper introduces a proposition requiring credit providers to provide pre-contractual disclosures at an earlier stage than the current practice, which involves providing debtors with the relevant disclosures at the time when debtors enter into the credit contract. Specifically, the Discussion Paper sets out the following alternative timings for pre-contractual disclosure: pre-contractual disclosure to be provided within a reasonable time before the contract is entered into; or pre-contractual disclosure to be provided as soon as practicable once the provider has determined on the terms on which it is prepared to enter into a contract with the debtor. 25.3 Information to be included in Financial Summary Table If the changes to the disclosure requirements in s 17 of the Code as set out in the Discussion Paper are accepted, credit providers will not be required to disclose the following in the Financial Summary Table: information about the default rate of interest; and details as to credit-related insurance contracts that are financed by the credit contract. Note that these details will still be required to be disclosed elsewhere in the contract.

26 External dispute resolution 26.1 Access to EDR schemes for small business borrower In June 2013, ASIC released a report on existing EDR access arrangements for small businesses where a credit provider has already commenced legal proceedings.19 ASIC affirmed that small business borrowers can continue to lodge a complaint with their credit provider’s EDR scheme. However, from 1

January 2014, where the credit amount exceeds $2 million and the credit provider has already commenced proceedings in a court, the small business will be prevented from accessing EDR. If the credit amount is $2 million or less, the small business debtor will continue to be able to access the credit provider’s EDR scheme even when the credit provider has already commenced court proceedings against them. 26.2 External dispute resolution continues to grow in popularity There are currently two ASIC-approved EDR schemes, namely those of the Financial Ombudsman Service Limited (FOS) and the Credit Ombudsman Service Limited (COSL). They handle financial services and credit complaints and these services continue to see an increasing number of complaints. For the financial year 2012–2013, FOS received 32,307 disputes, which was an 11 per cent decrease in the number of disputes it received. Of these, 55 per cent were resolved within 60 days and 73 per cent within 120 days.20 Similarly, for the financial year 2012–2013, COSL received 3,763 complaints, a 37 per cent increase in the number of complaints received on the previous year. Of these, 60% of complaints, were closed within 3 months and 79% were closed within 6 months.21 Interestingly, COSL reported in July 2013 that 74 per cent of all complaints it closed in the previous 12 months resulted in favourable outcomes for debtors. These included payment variations on grounds of financial hardship, fee reductions and refunds, monetary compensation and non-monetary orders, such as amending or removing a credit listing or returning a security asset to the debtor’s possession.22

27 Annual compliance certificates Annual compliance certificates (ACCs) must be lodged within 45 days of the annual compliance date — the anniversary of the day on which the ACL was issued to an ACL holder. The ACC must in most cases be signed by the ACL holder’s CEO and must certify: matters in respect of its fit and proper people and notify ASIC of

any changes; that the ACL holder is compliant with its licence obligations; and that adequate arrangements and systems are in place to maintain the competence of the ACL holder to engage in credit activities, and ensure that its representatives comply with the credit regulation and are adequately trained. ASIC has provided further guidance through information sheet INFO 135 Annual compliance certificates for credit licensees. Failure to lodge an ACC on time may lead to civil and/or criminal penalties, or eventually even cancellation of an ACL. ASIC has indicated that it reviews the content of ACCs and has been following up on ACL holder’s compliance with this obligation, including by imposing changes to ACL conditions if there are changes to an ACL holder’s activities or personnel.

28 Responsible managers and representatives — ongoing training 28.1 Responsible managers Responsible managers of ACL holders must demonstrate competency to operate a credit business in order to be a fit and proper person (similar obligations exist for AFSL responsible managers in respect of an AFSL licence). ASIC requires responsible managers of ACL holders to undertake at least 20 hours of continuing professional development (CPD) per year.23 The CPD should include product and industry developments related to credit and compliance training. The activities that may be counted towards CPD include: attendance at professional seminars or conferences; preparation time for presenting at relevant professional seminars or conference; publication of journal articles relevant to the credit industry; viewing DVDs of recent (within the last year) professional

seminars or conferences (up to maximum of 10 hours per year); completion of online tutorials and/or quizzes on recent (within the last year) regulatory, technical or professional developments in the industry; and internal training on systems, procedures and policies relevant to the responsible manager’s role — although this category should not make up the majority of CPD hours. Note: ASIC does not regard private study as adequate for the purpose of meeting the CPD requirements, unless it involves audio or visual material specifically designed for such a purpose. 28.2 Representatives Representatives are also required to be adequately trained to engage in the credit activities authorised by an ACL holder’s credit licence. Although ASIC has not outlined specific training standards for representatives, those that provide third party home loan credit assistance will need to undertake at least 20 hours of CPD per year.24 28.3 ACL responsible manager and other credit training Workshops for ACL responsible managers are designed to ensure that credit industry participants: meet their training requirements under credit laws; understand their obligations under the credit laws; keep up to date with recent developments in the credit industry; and have the tools to understand the risks and impacts of credit changes on their businesses. Please contact the authors for details of workshop programs and dates. 15 Moneysmart, Reverse mortgage calculator, Australian Securities and Investments Commission, https://www.moneysmart.gov.au/tools-and-resources/calculators-and-tools/reverse-mortgage-calculator (accessed 24 January 2014). 16 See Australian Securities and Investments Commission, 13-241MR ASIC releases guidance on use of reverse mortgage calculator, media release, 2 September 2013, http://www.asic.gov.au/asic/asic.ns-

f/byheadline/13-241MR+ASIC+releases+guidance+on+use+of+reverse+mortgage+calculator?openDocument (accessed 24 January 2014). 17 Although this enhancement commenced later, on 1 July 2013. 18 The Treasury, “Changes to Disclosure Requirements under the National Consumer Credit Protection Act 2009”, discussion paper, April 2013, http://www.treasury.gov.au/~/media/Treasury/Consultations%20and%20Reviews/2013/Changes%20to%20disclosure%20requirements%20under%20the%20NCCP/Key%20Documents/PDF/DP_Disclosure_Requirements.ashx (accessed 24 January 2014). 19 Australian Securities and Investments Commission, Response to submissions on CP 190 Small business lending complaints: Update to RG 139, Report 348, 13 June 2013, http://www.asic.gov.au/asic/asic.nsf/byheadline/Reports?openDocument#rep348 (accessed 24 January 2014). 20 Financial Ombudsman Service, Focused on Delivery: 2012–2013 Annual Review, annual review, 23 October 2013, annualreview.fos.org.au/#folio=1 (accessed 9 July 2014). 21 Credit Ombudsman Service Limited, Annual Report Operations 2013 snapshot, 22 November 2013, http://www.cosl.com.au/cosl/assets/COSL%20Annual%Report%202013%Snapshot.pdf (accessed 9 July 2014). 22 Credit Ombudsman Service Limited, COSL News, newsletter, Issue 3, July 2013, http://www.cosl.com.au/cosl/assets/File/COSL%20News%20-%20Issue%203%20-%20July%202013.pdf (accessed 24 January 2014). 23 Australian Securities and Investments Commission, RG 206 Credit licensing: Competence and training, regulatory guide, February 2013, http://www.asic.gov.au/asic/pdflib.nsf/LookupByFileName/rg206-published-25-February-2013.pdf/$file/rg206-published-25-February-2013.pdf (accessed 24 January 2014). 24 Australian Securities and Investments Commission, RG 206 Credit licensing: Competence and training, RG 206.93.

ASIC ACTION — ADVERTISING AND ENFORCEMENT ACTIVITIES 1. Advertising credit products 1.1 Update to RG 234 ASIC has continued its monitoring of advertising in the financial services and credit industry. In November 2012, ASIC updated its guidance on advertising, RG 234 Advertising financial products and services (including credit): Good practice guidance,25 to address credit activities and services covered by the NCCP Act. Particular areas in which ASIC provided further guidance include: bait advertising — where a product is advertised on the basis of a particular feature or benefit, that feature or benefit should remain available for a reasonable period (eg, when advertising a “low ongoing rate”); interest rates — advertising interest rates is a particular area of concern and credit providers should ensure that comparison rates are appropriately displayed and calculated, and important features of credit products or other unusual features are given equal prominence; product comparisons — comparisons must be between similar products and should not ignore relevant differences in features between products; and suitability claims — advertisements should generally not claim that a product is suitable for a class of people where it has not assessed an individual’s suitability. 1.2 ASIC action on credit advertising Some examples of ASIC enforcement action relating to credit advertising are set out below. The list is not exhaustive and the examples selected simply demonstrate the broad spectrum of ASIC’s enforcement activity range:

Credit Union Australia Limited (CUA) advertised that a product’s interest rate had a one per cent discount compared with the average standard variable interest rates advertised by the “Big Four” banks, when this did not reflect the terms and conditions of the product. CUA has entered into an enforceable undertaking to, in effect, abide by the claims made in their advertisement.26 Dale Cleves Music Pty Ltd, a musical instrument rental company advertised its products as “rent to buy”. However, the rental agreement did not give the lessee a right or obligation to buy the instrument. Instead, the lessee had the option of making an offer to purchase the instrument, which the rental company could accept or decline. In response to ASIC’s concerns, the rental company stopped advertising its rental agreement, published a corrective notice on its website, and also sent a copy of the corrective notice to its customers.27 Nimble Australia Pty Ltd (Nimble), an online small amount credit provider, advertised its credit contracts as “short term” when in fact they were continuing credit contracts of an indefinite term. The online advertisement also inaccurately compared the credit contract with a credit card. Nimble changed its ads in response to ASIC’s concerns and stopped offering continuing credit contracts.28 Foresters Community Finance Limited (Foresters), a credit provider, stated that its effective annual interest rate on certain loans was 19.95 per cent when the interest rate on the relevant contracts was 35 per cent. Foresters was issued a $6600 penalty.29 Other examples of ASIC enforcement action relating to credit advertising are set out in Attachment 1 at the end of this part.

2 ASIC enforcement 2.1 Enforcement round up ASIC has utilised its broad enforcement and investigative powers in recent times. ASIC’s media releases indicate that ASIC’s recent focus has been on a wide cross-section of credit industry activities, including car financiers, some participants in the rental industry, and SACC lenders.

Examples of ASIC’s enforcement action over the past year are summarised in Attachment 2 at the end of this part. 2.2 Tyre and rim insurance On 28 August 2013, ASIC announced the results of its industry-wide review of car financiers that were offering financing tyre and rim insurance premiums as part of car loans. It is reported that the industry had to pay back over $15 million in premiums to over 30,000 car owners. 30 The industrywide review was prompted after BMW Australia Finance Limited notified ASIC that it was financing tyre and rim insurance premiums, and ultimately BMW was required to refund $1.39 million to its customers. ASIC alleged that in financing the tyre and rim insurance premiums, the car financiers had breached s 144(1) of the Code. Section 144(1) provides that a credit provider must not knowingly finance premiums for mortgaged property insurance for more than one year. It is important to note that even if a credit provider contravenes s 144(1), the insurance policy is not affected — that is, the insured continues to be covered by the policy and is entitled to claim under that policy. The tyre and rim insurance policies generally had a term of three years, and longer in some cases. From a legal perspective, the requirement to refund the insurance premiums only applies if a credit provider breaches s 144(1) and s 144(3) applies. In some cases, it was arguable that the civil penalty under s 144(3) did not apply even though there may have been a contravention of s 144(1). Interestingly, it appears that the debtors who financed premiums for tyre and rim insurance as part of their car loans have benefited from ASIC’s investigations. The debtors have received a full refund of the insurance premiums from the credit provider (even though that premium was passed on by the credit provider receiving it to the insurance company providing the insurance). Those consumers have also received the benefit of the insurance policy from the insurer. 2.3 Rental industry Some organisations involved in the household goods rental business have been investigated by ASIC over the past year. The media releases indicate that ASIC’s review focused on the rental organisation’s compliance with the

responsible lending obligations.31 ASIC commented that in many cases, businesses were targeting poor and vulnerable consumers and did not take any of the steps required under responsible lending.32 Examples of ASIC’s enforcement actions include cancelling an ACL, issuing a banning order, and entering into an enforceable undertaking. ASIC has also attended to claims of “rent to buy”. Under the Code, a lease is only a consumer lease if it does not provide the lessee with the obligation or right to buy the rental goods (among other requirements). Rental organisations should ensure that their contracts and any advertisements comply with this requirement. 2.4 Improved disclosure on pet insurance ASIC conducted an industry-wide review arising from its concerns about disclosures in pet insurance provider’s Product Disclosure Statement documents and promotional online material. These concerns included: insufficient or confusing disclosure relating to key product features, such as policy limits, pre-existing conditions and exclusions; insufficient or non-disclosure that consumers need to make copayments and excess payments in the event of a claim; worked examples in promotional material that were not accurately reflective of the policy; and comparisons of pet insurance with health insurance, which has different features of cover. ASIC raised these concerns and subsequently reported that pet insurance providers revised and improved the disclosure in their PDS documents and advertising materials.33 25 Australian Securities and Investments Commission, RG 234 Advertising financial products and services (including credit): Good practice guidance, regulatory guide, November 2012, http://www.asic.gov.au/asic/pdflib.nsf/LookupByFileName/rg234-published-15-November-2012.pdf/$file/rg234-published-15-November-2012.pdf (accessed 24 January 2014). 26 Australian Securities and Investments Commission, 13-218MR CUA honours discounts on home loans after misleading ad campaign, media release, 19 August 2013, http://www.asic.gov.au/asic/asic.nsf/byheadline/13-218MR+CUA+honours+discounts+on+home+loans+after+misleading+ad+campaign?openDocument (accessed 24 January 2014)

27 Australian Securities and Investments Commission, 13-193MR ASIC acts on rent to buy advertisements, media release, 26 July 2013, http://www.asic.gov.au/asic/asic.nsf/byheadline/13-193MR+ASIC+acts+on+rent+to+buy+advertisements?openDocument (accessed 24 January 2014). 28 Australian Securities and Investments Commission, 13-193MR ASIC concerns sees payday lender change advertising, media release, 23 May 2013, http://www.asic.gov.au/asic/asic.nsf/byheadline/13-112MR+ASIC+concerns+sees+payday+lender+change+advertising?openDocument (accessed 24 January 2014). 29 Australian Securities and Investments Commission, 13-088MR24 Fair Finance Australia pays infringement notice penalty, media release, 24 April 2013, http://www.asic.gov.au/asic/asic.nsf/byheadline/13-088MR+Fair+Finance+Australia+pays+infringement+notice+penalty?openDocument (accessed 24 January 2014). 30 Australian Securities and Investments Commission, 13-231MR ASIC review prompts car financiers to refund more than $15 million, media release, 28 August 2013, https://www.asic.gov.au/asic/asic.nsf/byHeadline/13-231MR%20ASIC%20review%20prompts%20car%20financiers%20to%20refund%20more%20than%2015%20million%20dollars?opendocument (accessed 24 January 2014). 31 See Australian Securities and Investments Commission, ASIC enforcement outcomes: January to June 2013, Report 360, July 2013) http://www.asic.gov.au/asic/pdflib.nsf/LookupByFileName/rep360-published-24-July-2013.pdf/$file/rep360-published-24-July-2013.pdf (accessed 24 January 2014). 32 See, for example, Australian Securities and Investments Commission, 13-021MR ASIC takes action against Zaam rentals, cancelling its licence and banning its directors, media release, 11 February 2013, http://www.asic.gov.au/asic/asic.nsf/byheadline/13-021MR+ASIC+takes+action+against+Zaam+rentals%2C+cancelling+its+licence+and+banning+its+directors?openDocument (accessed 24 January 2014). 33 Australian Securities and Investments Commission, 13-249MR ASIC welcomes improved pet insurance disclosure, media release, 5 September 2013, https://www.asic.gov.au/asic/asic.nsf/byheadline/13-249MR+ASIC+welcomes+improved+pet+insurance+disclosure?openDocument (accessed 24 January 2014).

ATTACHMENTS Attachment 1: ASIC advertising enforcement — October 2012 to June 2014 Date of ASIC Media Release

Organisation name

Reasons for ASIC action

Consequences of ASIC action

24 June 2014

Industry Super Australia Misleading comparative advertising — Industry Super Australia’s advertising campaign “compare the pair” did not include sufficient clarity in relation to the samples used in the comparison and that past performance is not a reliable indicator of future performances.

Modification of advertising campaign — Industry Super Australia has cooperated and responded to ASIC’s concerns and has agreed to modify the campaign. While this enforcement action pertains to superannuation and not credit, it is indicative of ASIC’s approach to comparative advertising.

2 April 2014

Paid International Ltd.

$30,600 Penalty — Paid International was issued three infringement notices and ordered to pay $30,600 in penalties.

26 March 2014

Australia and New Feature of Visa gift Zealand Banking Group card not sufficiently Limited (ANZ) prominent — in order to qualify for the Visa gift card, consumers were required to maintain income protection insurance for a year and pay all premiums when due. However, this was not

Misleading online advertisements — Paid International stated that it offered “instant decisions” and loan approvals “within minutes” for small amount credit contracts. In fact, applications took 72 hours to be assessed.

Waiver of terms — ANZ to waive the relevant fine-print qualifications to the offer and send gift cards to over 700 consumers.

sufficiently disclosed in the advertising that promoted the gift card. 20 January 2014

TAL Direct Pty Ltd

ASIC concerns about funeral product insurance advertising — ASIC had concerns that the advertisements did not disclose or explain features of the insurance product such as premium increases and stepped premiums, did not give qualifications relating to advertised prices sufficient prominence, and quoted prices that were not representative of the imagery used in the advertising, such as the age of the actors.

Advertisements withdrawn and new range of funeral insurance products released — the new range of funeral insurance products also had new policy features, such as level premiums for the life of the policy and capped premiums.

6 January 2014

Media Super Limited

Potentially misleading advertisements — ASIC had concerns about a fact sheet prepared by Media Super which compared the costs and benefits of self-managed super funds and a Media Super product. ASIC was concerned that the costs and benefits of the Media Super product were inaccurately represented.

Infringement notice — Media Super paid a $10,200 infringement notice.

9 December 2013

MyRate Pty Ltd

ASIC concerns about website — ASIC was concerned that MyRate’s website gave the impression that the advertised rate for variable rate home loans applied to existing and new loans. However, the advertised rate only applied to new loans.

Changes to website — MyRate changed its website advertisement to address ASIC’s concerns.

5 December 2013

Advertising related to pensioner deeming accounts

Using the term “deeming account” to promote a basic savings account — ASIC had concerns about the manner in which these accounts were marketed. The term “deeming” may have suggested a possible connection with the Government’s “deeming rules” which are a part of the Government’s social security income test, and consumers may have believed that interest rates offered would be the same as the deeming rates.

Discussions with industry bodies — After discussions with the Australian Bankers’ Association (ABA) and the Customer Owned Banking Association (COBA), these industry bodies agreed that its members would ensure that certain terms would not be used in their advertising materials.

28 November 2013

Mortgage Choice Limited

False or misleading advertising — ASIC assessed that a claim by Mortgage Choice in television advertisements and on its website that it had refinanced numerous home loans and on average saved cusromers $10,000 over five years was false. The savings described were projected savings and based on a sample number of 300 refinancing customers over a six-month period. No savings had yet been realised by customers.

Infringement notices — ASIC issued three separate infringement notices to Mortgage Choice for advertisements. One for representations made on its television advertisements and a notice for each of its two websites.

28 October 2013

Insure 247 Pty Ltd

Misleading and deceptive advertising — ASIC was concerned that the company’s websites gave consumers the impression that they were accessing an online tool which

Changes to online advertising — Insure 247 changed its websites to include a statement on the home page and every product page that it is not a market comparison service.

compared the features of different insurance products. ASIC found that there was no comparison of the products. 5 September 2013

Pet insurance industry in Insufficient disclosure general in promotional online material — industrywide review prompted ASIC to raise concerns about whether appropriate disclosures relating to pet insurance products were given to consumers in both the product PDS and online promotional material.

Changes to disclosure — ASIC raised its concerns with the relevant pet insurers and distributors and subsequently reported improvements on disclosure.

4 September 2013

Credit Suisse Investments Services (Australia) Limited UBS AG (Australia branch) Instreet Investment

Advertising that a financial product is “protected” — ASIC had concerns that the use of the terms “contingent capital protection” and “conditional protection” in promotional material was misleading.

Advertising materials rectified — the relevant banks changed their promotional materials for complex financial products following ASIC’s concerns.

19 August 2013

Credit Union Australia Limited (CUA)

Misleading advertising — ASIC found that CUA ads gave a misleading impression as to the applicable standard variable interest rates, and did not sufficiently display important terms and conditions. The terms and conditions of the relevant product “Rate Breaker Package” enabled CUA to change the 1% discount at any time and stipulated that the interest rate could not fall below a minimum rate of 3% per annum.

Enforceable undertaking accepted — CUA to honour its advertising campaign by: ensuring that customers will receive a discount at least 1% less than the average of the variable interest rates advertised by the “Big 4” banks (except where it would be less than 0%) and notifying its customers of this; and sufficiently highlighting

the

qualifications in future advertising. 26 July 2013

Dale Cleves Music Pty Ltd

“Rent to buy” in promotional materials — Dale Cleves Music Pty Ltd, a musical instrument rental company advertised its products as “rent to buy”. However, the agreement did not give the consumer a right or obligation to buy the instrument. Instead, the consumer had the option of making an offer to purchase the instrument that the rental company could accept or decline.

Notification of rectification on website and sent to existing customers — the rental company published a corrective notice on its website and also sent a copy of the corrective notice to current customers.

17 July 2013

Woolworths Limited

Comparison between different products — ASIC had concerns that an advertising campaign for a car insurance product that claimed “on average, our customers saved $240” was potentially misleading. The comparison between Woolworths’ insurance product and other product the consumers switched from had different features such as different agreed values.

Advertising materials rectified — Woolworths agreed to change its advertising campaign in response to ASIC’s concerns.

16 July 2013

Commonwealth Bank of Advertising financial Australia (CBA) HSBC products as low risk — Bank (HSBC) ASIC had concerns that the advertising for certain retail structured products was potentially misleading.

Advertising materials rectified — CBA and HSBC changed their advertising for certain retail structured products following ASIC’s concerns.

26 June 2013

Hollard Financial Services Pty Ltd

Advertising materials rectified — Hollard Financial Services agreed to implement changes to the way it promotes funeral

Potentially misleading information about price of funeral insurance — ASIC was concerned that there was insufficient information

about premium increases, about inadequate qualifications regarding the price, and that prices quoted were not representative of imagery used in advertising; for example, the actors’ ages.

insurance in response to ASIC concerns. Hollard also, on its own initiative, agreed to change the features and pricing of its funeral insurance products by the end of June 2013.

23 May 2013

Nimble Australia Pty Ltd

Promoting credit product as “short term” — Nimble Australia Pty Ltd, an online lender, advertised its credit contracts as “short term” when in fact they were continuing credit contracts of an indefinite term. The online advertisement also inaccurately compared the credit contract with a credit card.

Advertising materials rectified — Nimble changed its advertising in response to ASIC’s concerns by removing references to “short term” and comparisons with other credit products from its website. It also promised to stop using continuing credit contracts at the end of June 2013.

24 April 2013

Foresters Community Finance Limited (trading as Fair Finance Australia)

Misleading advertisement — ASIC found that the organisation had advertised an interest rate on certain credit contracts as being 19.95%, when the interest rate was actually 35%.

Infringement notice and advertisement removed — the organisation was issued a $6600 penalty and Fair Finance Australia removed the advertisement.

Attachment 2: ASIC enforcement examples — October 2012 to July 2014 Date of ASIC Media Release

Organisation name

Reasons for ASIC action

Consequences of ASIC action

3 July 2014

GE Capital Finance Australia

False and misleading representations — The Federal Court found that GE Capital told certain credit card customers that to activate their credit card, or to apply for an increased credit limit, that they also had to consent to receiving invitations to apply for credit limit increases.

$1.5 million penalty — The Federal Court found that GE Capital’s contravention was serious, extensive and sustantial; “a systematic and deliberate attempt to mislead cardholders”. The court ordered a penalty of $1.5 million, as well as an additional $50,000 for its costs and to advise approximately 210,000 cardholders of what the decision means to them. GE Money’s cooperation with ASIC’s investigation mitigated the seriousness of the contravention and that was incorporated into the $1.5 million penalty, which would have been even more severe in the absence of such cooperation.

16 May 2014

Commonwealth Financial Planning Limited and Financial Wisdom Limited

Compensation arrangements — The two companies did not consistently apply the original process developed to compensate customers.

Conditions imposed on AFSL — ASIC has imposed conditions on the AFSLs of both companies, requiring them to understake significant further work in relation to the compensation process and to put in place independent monitoring of that work.

24 April 2014

WD Gelle Insurance & Failure to provide Finance Brokers Pty Ltd services honestly and efficiently — The

AFS licence cancelled — ASIC is also continuing

company was found to have failed to comply with AFS licence obligations, including failing to forward client funds.

investigations into shortfalls between amounts received from customers and amounts which should have been held in trust by the company on behalf of those customers.

25 March 2014

Franchelen Pty Ltd

Engaging in unlicensed credit activity — ASIC found that Franchelen created and provided loans totalling $7 million to 49 purchasers.

Enforceable undertaking — Franchelen to limit its engagement in credit activity to those 49 loans.

24 February 2014

Cash Stop Financial Services Pty Ltd

Retained funds in breach of laws — Cash Stop retained funds in breach of new pay-day lending laws by charging a subscription fee for a Membership Rewards Program.

Enforceable undertaking — Cash Stop to refund $14,000 to more than 650 customers.

4 February 2014

Home Essentials Australia Pty Ltd, I love my Water Pty Ltd; Triple Bay Group Pty Ltd and Triple Bay Pty Ltd

Engaging in unlicensed credit activity — ASIC’s investigation found that the four businesses were involved in unlicensed door-to-door “rent to own” agreements with vulnerable consumers.

Enforceable undertaking — ASIC banned the companies and their principals from engaging in credit activities for over five years. They were also required to refund customers approximately $100,000. The companies also had to make a payment of $250,000 to the Pilbara Community Legal Service and the Indigenous Consumer Network.

9 January 2014

Tru Blu Collections Services Pty Ltd

Engaging in unlicensed credit activity — ASIC’s investigation found that Tru Blu purchased a loan book consisting of 3200 credit contracts, collected money payable on these

Enforceable undertaking — ASIC accepted an enforceable undertaking from Tru Blu to cease any credit activity other than the receipt of established periodic payments, train

contracts but did not hold an ACL at the relevant time.

relevant staff to ensure future compliance with the NCCP Act, ensure early termination fees do not exceed Tru Blu’s loss, and engage an independent consultant to review Tru Blu’s compliance with credit legislation.

19 December 2013

SEL Absolute Return Fund SA Pty Ltd (t/a Solar Wholesalers)

Engaging in unlicensed credit activity — ASIC’s investigation found that Solar Wholesalers offered products that are regulated by the NCCP Act but did not hold an ACL.

Enforceable undertaking — ASIC accepted an enforceable undertaking from Solar Wholesalers to cease advertising its products unless it is authorised to offer the product, cancel relevant sale agreements, and conduct a review of its operations to ensure compliance with the NCCP Act.

5 December 2013

Australian Property Funding Group Pty Ltd (t/a Award Mortgage Solutions)

Not fully complying with licensee obligations — ASIC was concerned that Award Mortgage Solutions was not fully complying with its obligations to assess and verify loan applications, give proper disclosure documents to clients and ensure staff were adequately trained.

Additional licence conditions imposed — ASIC required Award Mortgage Solutions to engage an independent consultant to report to ASIC on its compliance obligations and to implement its recommendations.

18 November 2013

Individual — Ms Catherine Thompson

Defrauding investors — ASIC found that Ms Thompson defrauded investors of more than $4 million.

Permanently banned — ASIC permanently banned Ms Thompson from engaging in any credit activities and providing financial services. Ms Thompson was sentenced to five years and one month in jail.

1 November 2013, 8

Individual — Mr Daniel False or misleading

ACL cancelled —

November 2013

Nguyen and Ausfin Solutions Pty Ltd

conduct — ASIC found that Mr Nguyen, through his company Ausfin, provided false or misleading information in relation to a sale contract and rental appraisal letters provided in support of home loan applications.

ASIC cancelled Ausfin’s ACL and banned Mr Nguyen from engaging in credit activity and providing financial services for four years. Mr Nguyen received a four-month suspended sentence after pleading guilty to charges of giving false or misleading information.

24 October 2013

Mr Rental Port Augusta Unconscionable conduct — ASIC found that Mr Rental Port Augusta targeted Indigenous consumers and asked them to sign contracts that they did not understand. For examples, consumers were required to declare that they were not intoxicated at the time of leasing the goods.

Consumers released from contracts — Mr Rental Port Augusta provided an undertaking to notify ASIC if it intended to offer any products to a remote Indigenous community in the future.

22 October 2013

Bank of Queensland (BoQ)

Incorrect interest rates — an internal review identified further errors resulting in customers being overcharged in fees and underpaid in interest.

Review expanded — BoQ agreed to expand the scope of the review into its compliance systems following a request by ASIC. (See summary at April 2013 below). The bank confirmed that it would refund an additional $34.5 million and pay a further $11.5 million to rectify the additional errors.

17 October 2013

GE Money

Misleading or Legal action — ASIC deceptive conduct — ASIC alleged that GE Money engaged in misleading and deceptive conduct and made false and misleading statements to customers looking to

activate their credit cards or obtain credit limit increases.

commenced legal action against GE money seeking financial penalties against the company for making false and misleading representations.

11 September 2013

The Cash Store Pty Ltd Assistive Finance Australia Pty Ltd

Legal proceedings Pending outcome of initiated — ASIC is legal proceedings. claiming that the organisations have acted unconscionably and provided unaffordable loans to a large number of people on low incomes or receiving Centrelink benefits.

3 September 2013

Franchisees of Mobile Rentals

Breach of responsible lending obligations — by all franchisees of Mobile Rentals when entering into rental agreements.

Enforceable undertaking accepted — all franchisees’ directors will not engage in credit activities for three and a half years and are not able to recover further money on the contract or the leased goods.

28 August 2013

Franchisees of Zaam Rentals

Breach of responsible lending obligations — by all franchisees of Zaam Rentals when entering into rental agreements.

Enforceable undertaking accepted — all franchisees’ directors agreed not to engage in credit activities for three and a half years and not recover further money on the contract or the leased goods.

28 August 2013

Various car financiers

Unfair contracts and paying undue interest — ASIC’s industrywide review of the practice of financing tyre and rim insurance found a number of unfair contract terms

Refunds given to customers — various car financiers provided over $15 million in refunds following ASIC’s review.

and undue interest charged. 9 August 2013

Ray Rentals Pty Ltd

Unlicensed person — the organisation was providing credit and promoting provision of credit on its website without an ACL.

Banning order — ASIC banned the organisation, and its director, from offering credit for four years.

7 August 2013

Fast Access Finance Pty Unlicensed person — Ltd ASIC is claiming that the organisation entered into an elaborate diamond trading scheme designed to avoid the operation of the consumer credit laws.

Legal action commenced — ASIC has sought civil penalties against the companies, as well as compensation for affected consumers.

26 July 2013

Yellow Brick Road Finance Pty Ltd (YBR)

Concerns about licensing structure — while YBR directly authorised the individuals working in YBR branches as credit representatives, ASIC held a view that companies operating the branches were also required to be authorised.

Co-operation — in cooperation with ASIC, YBR began the process of authorising the relevant companies directly under the YBR credit licence.

17 July 2013

Mortgage Specialists Pty Ltd as a trustee for the Janet Smith Family Trust (trading as Specialist Mortgage)

Fraud — Mr Chu, an employee, falsified a letter stating finance approval had been provided for a client and forwarded it to a settlement agent so that the Commonwealth Bank would issue a loan.

Banning order — ASIC permanently banned Mr Chu from engaging in credit activities on the basis that he was not a fit and proper person.

25 June 2013

Pitline Pty Ltd

Unlicensed person — ASIC discovered the organisation to be engaging in credit activities without a credit licence.

Good behaviour bond — Mr John Sharp, a director of the company, was sentenced to a 12month good behaviour bond for aiding and abetting the company to engage in credit activities without a licence.

15 May 2013

Money Choice Pty Ltd

Serious failure to comply with credit laws — an ASIC investigation found failure to comply with credit laws, responsible lending shortfalls and unlicensed self-managed superannuation fund advice.

Cancellation of ACL and banning order — ASIC cancelled the organisation’s ACL, and banned its director from engaging in credit activities for eight years, and from providing financial services for three years.

29 April 2013

Solar Rental Company Pty Ltd

Unlicensed person and non-disclosure — ASIC found that the organisation had entered into credit contracts whilst not holding an ACL, and did not make the necessary disclosures required by the law.

Enforceable undertaking accepted — the organisation is required to write to all affected consumers and provide them with the necessary disclosures and offer them options to terminate or vary their existing credit contracts.

4 April 2013

Bank of Queensland Ltd Incorrect interest rates (BoQ) — a system error resulted in some customers being charged a higher interest rate on their home loan. BoQ discovered the error and reported it to ASIC.

Independent expert appointed to oversee remediation process — BoQ is refunding the fees and interest and agreed to appoint an independent expert to review its remediation process.

11 March 2013

Same Day Money Pty Ltd

False or misleading statements, criminal convictions — the organisation and its director were convicted of criminal offences relating to obstructing an inspector and making a statement knowing it to be false or misleading.

ACL cancelled and banning order — ASIC cancelled the organisation’s ACL, and banned its director from engaging in credit activities for four years.

19 February 2013

Mobile Rentals Pty Ltd

Failure to comply with responsible lending obligations — ASIC found that the organisation had failed to provide key information to

ACL cancelled and banning order — ASIC cancelled the organisation’s ACL and banned its director from engaging in credit activities for five years.

consumers, and did not comply with its

responsible lending obligations. 12 February 2013

Mr Rental Australia Pty Unfair contract term Ltd — ASIC had concerns that a term in the standard form contract was unfair.

Enforceable undertaking accepted — under the terms of the enforceable undertaking Mr Rental agreed to, among other things, refund the fee ASIC had concerns about.

11 February 2013

Zaam Rentals Pty Ltd

Failure to comply with responsible lending obligations — ASIC found that the organisation had deliberately targeted vulnerable people who had limited understanding of the contracts they were signing, and little capacity to make repayments.

ACL cancelled and banning order — ASIC cancelled the organisation’s ACL and banned its two directors from engaging in credit activities for four and six years respectively.

7 February 2013

Ezymanagement

Insolvent trading, director not fit and proper person — the sole director was found not to be a fit and proper person to engage in credit activities. The organisation had also been trading while insolvent and failed to lodge tax returns.

ACL suspended and banning order — ASIC suspended the organisation’s ACL and banned its director from engaging in credit activities for three years.

31 October 2012

ACM Group Limited (ACM)

Misled and harassed debtors — ASIC successfully litigated against ACM, which was found to have engaged in “widespread” and “systemic” misleading and deceptive conduct when recovering money as well as harassing and coercing debtors.

Declaration and injunctions — the court made a declaration against ACM for the conduct claimed and enjoined ACM from engaging in similar conduct.

8 October 2012

Australian Performance ACL holder became

ACL cancelled —

Finance Pty Ltd

insolvent — the ASIC cancelled the organisation’s ACL. organisation entered into receivership and was no longer engaging in credit activities.

PRIVACY REFORMS 1 Privacy reform — 12 March 2014 On 12 March 2014, amendments to the Privacy Act 1988 (Cth) commenced. The key changes are summarised below:34 the creation of the Australian Privacy Principles (APPs) — a single set of privacy principles that applies to both Commonwealth agencies and private organisations, with some exceptions (collectively referred to herein as “APP entities”). The APPs revise the current data offshoring rules and introduce new protocols for direct marketing; moving away from a negative credit reporting regime to a more comprehensive credit reporting regime — new data sets, including account open and close dates, account limits and repayment history information, to be provided to credit reporting bodies and accessible by credit providers. The credit reporting regime is now underpinned by the Privacy (Credit Reporting Code) 2014 (version 1.2), which is registered and enforced by the Australian Information Commissioner; the extension of external dispute resolution to credit reporting — credit reporting bodies and credit providers must be approved EDR scheme members (although for credit providers engaging in commercial credit only, the commencement of this obligation has been delayed for 12 months by regulation); increased powers for the Privacy Commissioner to investigate, audit, accept enforceable undertakings, make determinations and commence proceedings. The Privacy Commissioner has the power to pursue civil penalties of up to $1.7 million for serious or repeated interferences with privacy. The impact of these reforms is outlined in the table below: Significant impact of the reforms

Moderate impact of the reforms

Low to moderate impact of the reforms

The introduction of comprehensive credit reporting New obligations to maintain quality and security of credit information The introduction of EDR for credit reporting (for commercial credit providers this obligation has been delayed for 12 months by regulation) APP entities affected by these changes include traditional credit providers, utilities such as energy and telecommunications providers, and anyone who obtains credit reports (including law firms and commercial credit providers)

Changes to data offshoring practices and accountability — impact on contents of outsourcing contracts

Changes to collection of unsolicited information, and sensitive information

Changes to standard documents (including privacy policies, consents and statements) Changes to the Privacy All APP entities that are required Commissioner’s powers to comply with the Privacy Act APP entities affected by those will need to comply with the changes include any one who amended laws sends information offshore or is engaged in direct marketing Changes to direct marketing protocols

2 Australian Privacy Principles — OAIC guidance 2.1 Overview The Office of the Australian Privacy Commissioner (OAIC) has released Australian Privacy Principles Guidelines.35 The guidelines outline how the OAIC will interpret and apply the Australian Privacy Principles (APPs). While we note that the present government has made a budget decision to disband OAIC, these guidelines will continue to apply to the considerations of the Privacy Commissioner. It is currently proposed that the Privacy Commissioner be integrated into the Human Rights Commission. The APPs set out the rules for collection, use, disclosure, access and correction of personal information and replaced the National Privacy Principles from 12 March 2014. The APPs will apply to private and public sector organisations. In view of the guidelines, care must be exercised when considering: the concept of bundled consents and their use under the APPs (see para 2.2 below); the steps that an APP entity should take to comply with APP 1.2,

which requires an APP entity to implement practices, procedures and systems to ensure APP compliance (see para 2.3 below); the reasonable steps that are required before disclosing information to an overseas recipient (see para 2.4 below); and using information for direct marketing purposes (see para 2.5 below). 2.2 Bundled consents — APP Key Concepts The guidelines include a chapter setting out “Key concepts”, which outlines the OAIC’s interpretation of some key words and phrases that are used in the Privacy Act as amended by the Privacy Amendment (Enhancing Privacy Protection) Act 2012 (Cth). In Chapter B at para B.29, the OAIC states that the key elements of “consent” are: it must be provided voluntarily; the individual must be ‘adequately informed’ about what they are consenting to; it must be ‘current and specific’; and the individual must have the ‘capacity to understand and communicate their consent’. A “bundled consent” is where an APP entity gets an individual to consent to a wide range of collection, uses and disclosure of personal information through a single affirmation consent. The guidelines raise some concerns about entity’s use of bundled consents. Paragraph B.40 of Chapter B states that the bundled consents have “the potential to undermine the voluntary nature of the consent” as the individual is not given the opportunity to choose which collections, uses and disclosures they agree to and which they do not. There may well be practical IT difficulties in refining the use of bundled consents. 2.3 Implementing practices, procedures and systems to ensure APP compliance — APP 1.2 APP 1.2 requires an entity regulated by the Privacy Act to take reasonable steps to implement practices, procedures and systems that will ensure that it

complies with the APPs. This is a proactive and constant obligation. APP entities are also expected to keep records of the steps taken to comply with APP 1.2. The steps that an APP entity is required to take may depend on a number of factors, including the: nature of the APP entity that holds the personal information — that is, its size, resources and business model; nature of the personal information held — additional steps may be required as the quantity, extent or sensitivity of personal information increases; or adverse consequences for an individual if the APPs are breached — additional steps may be required if the risk of adversity increases. At para 1.7 of Chapter 1 of the guidelines, the OAIC has provided examples of practices, procedures and systems that an APP entity should consider implementing. These practices should be implemented with the view to: identify and manage privacy risks at each stage of the information lifecycle, including collection, use, disclosure, storage, destruction and de-identification; protect information from misuse, interference and loss — this may require changes to IT systems, internal access controls and audit trails; identify and report privacy breaches; receive and respond to privacy complaints and inquiries; and provide regular staff training to ensure that the relevant staff understand how the APPs apply to that entity and how an individual’s privacy is protected. As indicated above, the changes to the Privacy Act required entities to not only update their policies and procedures before March 2014 but also imposed additional ongoing commitments. The Privacy Commissioner has further commented that APP entities should make a commitment to conducting a privacy review for all new projects. In addition, a Privacy

Impact Assessment should be conducted for any new projects in which significant amounts of personal information will be handled. 2.4 Cross border disclosure — APP 8 The increasing use of cloud storage centres and the establishment of overseas operational centres (eg, call centres) means that data is routinely being disclosed to entities outside of Australia. The impact of the changes to data-offshoring principles is amplified as more organisations opt to use cloud storage centres due to lower capital expenditure and other costs savings. APP 8.1 provides that before an APP entity subject to the APPs discloses personal information about an individual to an overseas recipient, the entity must take reasonable steps to ensure that the recipient does not breach the APPs in relation to that information. The guidelines state that the nature of these appropriate steps to comply with APP 8.1 will depend on various circumstances, including the nature of personal information disclosed to the overseas recipient and the risk of harm to an individual if the information is mishandled by the overseas recipient. The guidelines note (at para 8.16) that the OAIC generally expects an APP entity to enter into an enforceable contract with the overseas recipient that includes a: requirement for the recipient to handle the personal information in accordance with the APPs; complaints handling process for privacy complaints; and requirement that the recipient implement a data breach response plan. (Under this plan, the overseas recipient should notify the organisation of any suspected privacy breaches and outline any appropriate remedial action). If an APP entity discloses information to an overseas recipient that is not itself bound by the APPs under the Privacy Act, the entity will be accountable for an act or practice of the overseas recipient that breaches the APPs, unless it falls within the limited exceptions under APP 8.2. The key exceptions under APP 8.2 apply if: the APP entity reasonably believes that the overseas recipient is subject to laws in its country that protect the information in a

substantially similar way to the APPs, and that an individual affected by a breach is able to access that justice system; or the APP entity expressly informs the individual that their information will be disclosed to an overseas recipient and the individual consents to that disclosure in the knowledge that the entity will not be held liable for any breaches by the overseas recipient. Cloud computing Chapter 8 of the guidelines provides some clarity about the applicability of the APPs to offshore cloud service providers. Paragraph 8.14 of the guidelines notes that an APP entity will not be subject to the requirements under APP 8 where personal information is provided to an overseas contractor as a “use” rather than a “disclosure”. The example of “use” provided by the guidelines is where personal information is provided by an organisation to a cloud service provider located overseas only for the limited purposes of storing and managing personal information. In those circumstances, the APP entity will not need to comply with APP 8: see para 8.14 of the guidelines. In that example, the guidelines differentiate between “use” and “disclosure”. Paragraph B.58 of the guidelines states that an “APP entity discloses personal information when it makes it accessible to others outside the entity and releases the subsequent handing of personal information from its effective control”. This would normally extend to circumstances where the overseas recipient has access to the personal information. However, where the overseas recipient is contracted to perform services on behalf of the APP entity, such as “storing and managing personal information”, the APP entity continues to maintain effective control of the information, making this a “use” rather than a “disclosure”. APP 8 would then not apply to this “use”. It is important that the contract between an APP entity and the cloud service provider reflects these limited purposes. Any permitted subcontractors of the cloud service provider should also be subject to similar restrictions. Contracts are likely to need re-drafting and amending to fit within this APP guidance. 2.5 Direct marketing — APP 7

Under the previous National Privacy Principles (NPPs), direct marketing was not specifically addressed in its own NPP. However, under the APPs, direct marketing is addressed separately in an APP. APP 7 permits an APP entity to use personal information for direct marketing purposes if (among other things) an easy opt-out mechanism is provided to the individual and the individual has not opted out. APP entities have previously been required to include opt-out mechanisms for communications that were regulated by the Spam Act 2003 (Cth) — for example, emails and short message service (SMS). However, the requirements under the Privacy Act expand the application of the opt-out mechanisms. The guidelines provide that examples of direct marketing include: sending a catalogue in the mail addressed to an individual; or displaying an advertisement on a social media site after the individual has logged in to the social media site. The advertisement would be classified as direct marketing if the APP entity uses personal information which may include data stored on cookies relating to websites the individual has viewed. Where the personal information was collected via a third party or the individual would not reasonably expect its use for direct marketing, an APP entity is required to include a prominent statement in marketing communications drawing attention to the opt-out mechanism. The guidelines provide that such a statement should be: positioned prominently, and not hidden among other text — headings may be necessary to draw attention to the statement; and published in a font size and type which is easy to read, and at least the same font size as the main body of text in the communication. Further, the guidelines provide the example that an APP entity could be required to tell the recipient of a direct marketing phone call that they can verbally opt out from any future calls. APP entities should start to review their direct marketing communications and include the relevant unsubscribe mechanisms. This may be difficult for

advertisements within the social media space or an app, as the space for including an unsubscribe mechanism is rather limited. APP entitles may wish to further consult with the OAIC about the application of APP 7 and its effect, as interpreted by the OAIC, with respect to social media. 2.6 Privacy Commissioner reviews website privacy policies On 14 August 2013, the OAIC released the results of its review of privacy policies listed on over 50 websites. In its review, the OAIC assessed the privacy policies for their accessibility, readability and content.36 The review found that over 65 per cent of the privacy policies provided information that was not relevant to the handling of personal information, and were potentially confusing. APP entites are reminded that, under APP 1, they are required to have a clearly expressed and up-to-date privacy policy about how the entity manages personal information. Paragraph 1.4 contains a non-exhaustive list of information that must be included in the privacy policy, such as how the entity collects, uses and discloses personal information. As their privacy policy is going to be made available on their public website, APP entities should ensure that their information-handling practices are correctly reflected in their privacy policy. This will avoid confusion and consumer complaints, and any claims of misleading or deceptive conduct.

3 What are the Australian Privacy Principles? The amendments to the Privacy Act 1988 (Cth) that commenced on 12 March 2014 represent key changes, including the creation of the APPs — a new single set of privacy principles that replaced the National Privacy Principles and Information Privacy Principles,37 and imposed obligations on both Commonwealth agencies and private organisations in relation to the management, collection, disclosure and use of the personal and sensitive information of individuals.38 3.1 APP 1: Open and transparent management of information APP 1 requires APP entities to implement practices, procedures and systems to comply with the APPs and contains new obligations regarding

data transparency. APP 1 also requires APP entities to maintain an up-to-date privacy policy and specifies the information that must be included by entities in their privacy policies. The privacy policy must be free of charge and available, in the appropriate form (typically by placing it on their website), and should include information about an APP entity’s complaint mechanisms, whether an entity is likely to disclose personal information overseas, and (if practicable) the location of any overseas disclosures. Example: An APP entity shares their customers’ name and address details with a third party, to whom they outsource parts of their billing process. To comply with APP 1, the entity must place on their website a current, freely available privacy policy that clearly sets out how it will disclose its customers’ personal information to third parties, how the personal information will be used, and how its customers can make a complaint if they are unhappy with how the personal information is being managed, collected, disclosed and/or used. 3.2 APP 2: Anonymity and pseudonymity APP entities must provide individuals with the option of not identifying themselves, or of using a pseudonym when dealing with them unless this is impracticable or customer identification is required or authorised by law. Example: An APP entity conducts regular customer surveys and records the name, address and phone number of the individuals surveyed. To comply with APP 2, the entity must offer all surveyed customers the opportunity to remain anonymous or use a pseudonym. 3.3 APP 3 and 4: Collection of solicited information and receipt of unsolicited information APP 3 regulates the collection of solicited information by APP entities. Entities are prohibited from collecting personal or sensitive information unless the information is reasonably necessary for one or more of the entity’s functions or activities. Personal information may only be collected by lawful and fair means. An entity must only collect sensitive information with an individual’s consent. APP 4 regulates the receipt of unsolicited information by APP entities. Entities are required to determine whether the information they receive from a third party could have been collected by them under APP 3.

Information that does not meet these standards will generally need to be destroyed or de-identified. Example: An APP entity has a visitors’ book in its lobby for the purpose of being able to account for all persons on its premises in the event of a building emergency such as a fire. The entity requires all visitors to sign the visitors’ book and record their name, mobile phone number, address, email and date of birth. To comply with APP 3, the entity must consider whether the amount of personal information it requests from its visitors is necessary for dealing with a building emergency and if not, it should ensure it only collect the necessary information for this purpose. Example: An APP entity has not advertised any available positions but receives CV from a speculative job seeker who is contacting companies with regard to their relevant experience. To comply with APP 3 and APP 4, the entity must consider if it could have collected the CV from the job seeker itself, if it had solicited the information. It should ask the job seeker for consent to have their personal information on the entity’s human resources department records in case a suitable position becomes available in the future. If the job seeker does not give their consent, the entity must securely shred the CV or de-identify the job seeker’s personal information on its copy of the CV. 3.4 APP 5: Collection notice APP 5 expands existing notification requirements to individuals on collection of their personal information, with entities required to disclose the circumstances in which they collected the information, if not directly from the individual; whether they are likely to disclose the information overseas; and (if applicable) the location of any likely overseas disclosure. Example: The Australian subsidiary of a global service APP entity has an extensive customer list that it shares with its parent company in the United Kingdom (located in London) for internal purposes. In order to conduct its credit checks on each new customer, the entity collects, with the customer’s consent, the following personal information: their name, email address(es), date of birth, home address, tax file number, job title, and phone number(s). To comply with APP 5, the APP entity must ensure that, at or before collecting this information, it provides all customers with a collection notice, which includes the matters set out in APP 5. The collection notice must also

clearly indicate to its customers that their information is disclosed to the entity’s parent company in the United Kingdom. 3.5 APP 6: Use or disclosure APP 6 provides that APP entities may generally use or disclose personal information for the primary purpose for which it was collected. Otherwise, entities may use or disclose personal information for a secondary purpose if the individual: has consented to the use or disclosure for that purpose; or would reasonably expect the use or disclosure for the secondary purpose (such as direct marketing) and that purpose is related to the primary purpose (in the case of sensitive information, that secondary purpose must be directly related). Example: A charity organisation has collected a list of names and phone numbers of its local community members while conducting its annual charity raffle. One of the charity’s partner organisations asks the charity to share the collected details of the local community members so that it can talk to them about time-share investments. To comply with APP 6, unless it has obtained the community members’ consent, the charity should not share the local community members’ names and phone numbers with the partner organisation. The local community members would not reasonably expect that their personal details would be used to sell them a potential time-share investment. 3.6 APP 7: Direct marketing Under APP 7, APP entities may use personal information for direct marketing purposes in certain circumstances, including the following: if the entity collects information directly from the individual, the individual would reasonably expect the information to be used or disclosed for direct marketing and the entity provides a simple optout mechanism; or if the individual would not reasonably expect the entity to use or disclose the information for direct marketing or the information was collected from a third party, then: —

the individual has consented or it is impracticable to seek

consent; and —

the marketing communication includes a prominent statement about, or otherwise draws attention to, the optout mechanism.

Example: An APP entity allows for potential new customers to request a call back from the entity’s customer service team. To receive a call back, the potential customer must the complete an online enquiry form and submit their contact details, including their name and contact number. The enquiry system prompts the customer to tick a box to opt out of receiving any promotional materials. The personal information provided is collated by the entity into a list of potential customers. The entity’s sales team subsequently decides to promote a new service line and would like to cold-call all contacts on the potential customer list. To comply with APP 7, the entity can only contact those customers from the potential customer list who did not select the optout option when they submitted their online enquiry form. 3.7 APP 8: Cross-border disclosure Under APP 8, before an APP entity discloses personal information overseas, they must take reasonable steps to ensure that the overseas recipient of the information does not breach the APPs. Importantly, although APP entities that meet this requirement are lawfully permitted to disclose personal information, they may still be held accountable for any breach of the APPs by their overseas recipient. This includes situations where they have received a contractual assurance from the recipient that they will treat the information in accordance with the APPs. There are several exemptions to APP 8 in very specific circumstances, including where: a cross-border disclosure is required by law; the individual has provided consent to the overseas disclosure after being informed that APP 8 will not apply; or the entity reasonably believes the recipient is subject to laws in its country that protect the information in a substantially similar way to the APPs and the individual can access the appropriate enforcement mechanisms.

Example: To save costs, an entity has moved all the day-to-day data processing of its customer account information to a contractor in India. As India is not a country that has substantially similar privacy laws to Australia, in order to comply with APP 8 the entity must take reasonable steps to ensure that the Indian subcontractor will comply with the APPs. Reasonable steps may include undertaking due diligence of the Indian subcontractor to ensure that they have or will put processes in place to ensure compliance with the APPs; have an up-to-date signed contract with the contractor that includes appropriate privacy compliance obligations and assurances (particularly in relation to security); and conducts regular risk assessments to ensure that the contractor does not breach its obligations. 3.8 APP 9: Government related identifiers APP 9 prohibits APP entities from adopting ‘government related identifiers as their own’. The expanded definition of ‘government related identifiers’ now includes numbers allocated by a Commonwealth agency as its own identifier as well as numbers allocated by state and territory authorities, such as driver licence numbers. Example: An APP entity requests all new staff members to submit a new staff registration form and provide the entity with their tax file number (TFN) and Medicare number. To comply with APP 9, the entity must not use the new staff member’s TFN or Medicare number as its unique staff identifier and must adopt a different form of unique staff identifier system. 3.9 APP 10 and 11: Quality and security APP 10 provides that APP entities must take reasonable steps to ensure that the personal information they collect, use or disclose is accurate, up to date, complete and relevant. APP 11 provides that entities must not allow personal information to be misused, lost, accessed, interfered with, modified or disclosed without authorisation. APP entities must take reasonable steps to ensure personal information is kept secure from unauthorised use or access. APP entities must take reasonable steps to destroy or de-identify personal information that is no longer needed for an authorised purpose under the Privacy Act. Example: An APP entity intends to launch a new cross-selling campaign to its customers but finds its customer list has not been updated since 1990. To

comply with APP 10, before commencing the campaign, the entity must take reasonable steps to update the customer list; for example, by contacting all customers on the list and requesting them to check their personal details and provide the entity with any updates if their personal information is incorrect, incomplete, or out of date. To comply with APP 11, the entity must take reasonable steps to keep the customer list secure; for example, by ensuring that all customer lists are kept in a lockable drawer when not in use, any soft copies of customer list files are password protected and all personal information is put in lockable shredding bins for secure destruction when no longer required. 3.10 APP 12 and 13: Access and correction APP 12 provides that individuals have a general right of access to their personal information and to have that information corrected if it is inaccurate, out of date, incomplete, irrelevant or misleading. APP entities must not refuse a person access to, or correction of, their personal information unless the request is vexatious, access would unreasonably impact on the privacy of others, or granting access would be unlawful or reveal commercially sensitive information. Under APP 13, APP entities must take reasonable steps to ensure that the personal information they hold is accurate, up to date, complete, relevant and not misleading. APP entities must provide a correction notice to other APP entities when requested and must not refuse requests by individuals to correct their personal information. Example: A policyholder has moved house and telephones his insurer to provide his new address details. To comply with APP 12 and APP 13, the insurer must allow the policyholder to correct his address details; for example, by allowing the policyholder to send a change of personal details form by post or email to the insurer. Once the insurer receives the change of personal details form, the insurer must update the policyholder’s address details.

4 Who regulates the Australian Privacy Principles? OAIC is an independent Australian Government agency with oversight and enforcement responsibility for the Privacy Act. Presently, OAIC’s responsibilities include handling complaints and investigations of breaches of

privacy law, administering privacy codes and guidelines, as well as promoting a general awareness, understanding and acceptance of the APPs among the general public. It is unclear who will be responsible for the regulation of the APPs in future. It is currently proposed that they will fall under the purview of the Human Rights Commission.

5 OAIC powers The new privacy regime gives additional powers to OAIC to ensure that APP entities comply with the APPs. The Privacy Commissioner may now apply to the Federal Magistrates Court or Federal Court of Australia for a penalty of up to $1.7 million where it is alleged that a corporation with a turnover of greater than $3 million a year has breached a civil penalty provision of the Privacy Act. Civil penalties of up to $340,000 a year may also apply to individuals in certain circumstances; for example, if they are running a business with an annual turnover greater than $3 million or disclosing personal information about another individual to anyone else to gain a benefit. Penalties apply for acts or practices that constitute a “serious” or repeated interference with an individual’s privacy. The Privacy Commissioner now also has powers to accept enforceable undertakings, initiate “own-motion” investigations and conduct monitoring related functions. Visit www.oaic.gov.au for further information.

6 Credit reporting For credit providers, the Privacy Reform Act introduces an all-new Pt IIIA ‘Credit reporting’, implementing changes that will, subject to limitations, permit the collection and disclosure of a broader range of relevant credit information that should assist in making more accurate assessments of credit risk. The key features of the new credit reporting provisions include the following: Five new data sets are to be included in the credit reporting system, which include the type of each active credit account, the date of opening and closure of accounts, account credit limits and credit repayment history. The definitions of “credit reporting body” and “credit provider”

have been broadened to ensure that otherwise exempt small business operators handling credit-related activities will be subject to the whole privacy regime (including credit reporting). In an attempt to enhance the accuracy and integrity of the credit reporting system, the obligations of credit reporting bodies and credit providers have increased under the new regime; for example, credit reporting participants must submit disputes to an approved EDR scheme. The new regime is underpinned by a new industry-agreed Privacy (Credit Reporting Code) 2014 (version 1.2), which is registered and enforced by the Australian Privacy Commissioner.

7 Mandatory breach reporting The Privacy Amendment (Privacy Alerts) Bill 2013 (Privacy Alerts Bill) was introduced into Federal Parliament on 29 May 2013. The Bill sought to amend the Privacy Act to introduce mandatory breach reporting notification provisions: that is, a legal requirement to provide notice to affected individuals and the Privacy Commissioner when personal information is accessed, obtained, used, disclosed, copied or modified by unauthorised persons. The notification must be provided when there is a serious data breach that significantly affects an individual. In some circumstances, the notification must be made to the general public by publication on its website and a newspaper circulating in each state. The underlying purpose of data breach notification is said to allow individuals that have been affected by a breach to take steps to reduce the impact of data breaches; for example, by changing passwords or notifying their financial institutions. The Privacy Alerts Bill passed the House of Representatives but did not pass the Senate before the parliament rose prior to the September 2013 Federal Government election. The status of the Bill is now unclear following the change of Federal Government in September 2013. A similar Bill, the Privacy Amendment (Privacy Alerts) Bill 2014 (Cth) was introduced into Federal Parliament on 20 March 2014. At the time of writing, the Bill is before the Senate.

8 Statutory tort of privacy In March 2013, the statutory tort of privacy was again referred to the Australian Law Reform Commission (ALRC) for its consideration by then Communications Minister Stephen Conroy. The ALRC had previously considered the question in 2011 and, before that, in the wide-ranging 2008 report For Your Information Report — Australian Privacy Law and Practice (ALRC Report 108), which provided the impetus for the current amendments to the Privacy Act. The ALRC’s report Serious Invasions of Privacy in the Digital Era (DP80) was published on 31 March 2014 and again proposed that a statutory tort of privacy be enacted, albeit in a narrower, more precise form.34 34 These changes are also reflected in the Privacy Regulation 2013 (Cth). 35 See Office of Australian Information Commissioner, OAIC releases APP Guidelines, news release, 21 February 2014, http://www.oaic.gov.au/news-and-events/news/privacy-news/oaic-releases-app-guidelines (accessed 16 March 2014). 36 Office of Australian Information Commissioner, Privacy Commissioner: Website privacy policies are too long and complex, media release, 23 August 2013, http://www.oaic.gov.au/news-and-events/media-releases/privacy-media-releases/privacy-commissioner-website-privacy-policies-are-too-long-and-complex (accessed 24 January 2014). 37 Note that the APPs replace the Information Privacy Principles in respect of their application to Commonwealth Government agencies. The Information Privacy Principles continue to apply to state government agencies. 38 Under the Privacy Act, different obligations apply to an entity’s use and disclosure of personal and sensitive information. Personal information means information or an opinion, whether true or not, about an individual whose identity is apparent, or can reasonably be ascertained, from that information or opinion. Sensitive information includes personal information (including an opinion) about an individual’s racial or ethnic origin, political opinions, membership of a political association, religious beliefs or affiliations, philosophical beliefs, membership of a professional or trade association, membership of a trade union, sexual preferences or practices, or criminal record. Health information, genetic information and biometric information is also sensitive information (refer Privacy Act). 34 See C Merritt, “Labor Shelves Privacy Tort Plan”, The Australian (Sydney), 13 March 2013, http://www.theaustralian.com.au/media/labor-shelves-privacy-tort-plan/story-e6frg996-1226595931407 (accessed online 24 January 2014).

Table of Cases References are to paragraph numbers Abiye v General Motors Acceptance Corp Australia [2003] VCAT 1170 …. [106.10], [107.05] ACP Publishing Pty Ltd v Federal Cmr of Taxation (1993) 49 FCR 191; 125 ALR 538; 93 ATC 4773 …. [150.10] Adams v Paul’s Properties Ltd [1965] NZLR 161 …. [3.40] Agussol v Australian Finance Direct Ltd (2004) ASC 155-066; [2004] VC 1560 …. [129.10], [130.10], [132.05], [135.05], [135.30], [137.05], [218.05] Allen’s Asphalt Pty Ltd v SPM Group Pty Ltd [2010] 1 Qd R 202; (2009) 255 ALR 588 …. [91.35] Ampol Ltd v Calaby Pty Ltd (1991) 30 FCR 426; 110 ALR 343 …. [127.30] ANZ v Various Debtors (2001 unreported) …. [113.20], [116.10], [116.15], [116.25] ANZ Banking Group Ltd v Alirezai [2004] ANZ ConvR 132; (2004) Q ConvR 54-601 …. [76.20] — v Bangadilly Pastoral Co Pty Ltd (1978) 139 CLR 195; 19 ALR 519; 52 ALJR 529 …. [85.30] — v Bollas (1999) ASC 155-031 …. [3.45] Associated Premium Funding Pty Ltd v Various Debtors (2003) ASC 155062; [2003] VCAT 1492 …. [28.30], [32.10] Australian Capital Providers Pty Ltd v Wakelin [2009] QSC 167; BC200905403 …. [13.60], [76.80], [88.95], [113.35], [118.25] Australian Finance Direct Ltd v Director of Consumer Affairs Victoria (2006) 16 VR 131 …. [3.35], [3.40], [3.45], [17.20], [17.95] — v — (2005) ASC 155-073 …. [3.40], [3.45], [17.20], [17.25], [144.25] — v — (2007) 234 CLR 96; 241 ALR 67 …. [3.35], [17.20], [17.25]

Australian Guarantee Corp Ltd v Hawkins (1991) ASC 56-041 …. [128.10] — v Various Debtors (1996) ASC 56-440 …. [180.55] — v Various Debtors (Qld) (1994) 1 ACCR 60; (1994) ASC 56-286 …. [17.75] Australian Society Group Financial Services (NSW) Ltd v Bogan (1989) ASC 55-938 …. [76.10] Avco Financial Services Ltd v Abschinski [1994] 2 VR 659; (1994) ASC 56256 …. [3.45], [144.25] Bahadori v Permanent Mortgages Pty Ltd (2007) 69 NSWLR 49 …. [135.35] — v — (2008) 72 NSWLR 44 …. [4.25], [6.65], [13.60], [71.70] Baltic Shipping Co, the Mikhail Lermontov v Dillon (1991) 22 NSWLR 1; (1991) ASC 56-039; (1991) ATPR (Digest) 46-068 …. [76.10] Bank of Credit and Commerce International SA, Re (No 8) [1996] Ch 245; [1996] 2 All ER 121; [1996] 2 WLR 631 (CA) …. [42.10] — [1998] AC 214; [1997] 4 All ER 568; (1997) 15 ACLC 3107; [1997] 3 WLR 909 (HL) …. [42.10] Bank of New Zealand v Fiberi Pty Ltd (1994) 12 ACLC 232 …. [13.35] Bank of Queensland Ltd v Dutta [2010] NSWSC 574; BC201005295 …. [88.95] Barclays Bank plc v O’Brien [1994] 1 AC 180; [1993] 4 All ER 417; [1993] 3 WLR 786; [1994] ANZ ConvR 182 …. [76.20] Barker v Perpetual Trustees Australia Ltd (2003) 85 SASR 263; 227 LSJS 395 …. [107.15] Bayford v St George Bank Ltd [2003] SASC 210; BC200303580 …. [107.15], [195.15] Beneficial Finance Corp Ltd v Karavas (1991) 23 NSWLR 256; (1991) ASC 56-062; (1991) Aust Contract R 90-001; (1991) NSW ConvR 55-580 …. [76.10], [76.15] Benjamin v Ashikian (2007) ASC 155-086 …. [5.65], [13.60], [88.95]

Berckelman v DaimlerChrysler Services Australia Pty Ltd [2003] NSWCTTT 807 …. [13.26] — v — [2004] NSWCTTT 715 …. [83.35], [113.10], [124.15] Best v Sutcliffe [1965] NZLR 750 …. [5.50] Booker v State Rail Authority of NSW (No 2) (1993) 31 NSWLR 402; 19 MVR 469 …. [159.15] Booth & Booth v Australian Investment Solutions Pty Ltd [2002] NSWCTTT 190 …. [5.30] Boulton & Watt v Bull (1795) 1 Carp Pat Cas 117; 2 Hy Bl 463; 126 ER 651 …. [17.40] Brian Gardner Motors Pty Ltd v Bembridge (2000) 120 A Crim R 53 …. [143.55] Brownbill v Esanda Finance Corp (1991) 31 FCR 153; 102 ALR 332; (1991) ASC 56-098 …. [159.15] Bunbury Foods Pty Ltd v National Bank of Australasia Ltd (1984) 153 CLR 491; 51 ALR 609; 2 ACLC 188 …. [88.35] Burswood Management Ltd v Attorney-General (Cth) (1990) 23 FCR 144; 20 ALD 357; 94 ALR 220 …. [17.45] Campbell v Commercial Banking Co of Sydney (1879) 2 LR (NSW) L 375; 40 LT 137 …. [88.35] Canham v Australian Guarantee Corp Ltd (1993) 31 NSWLR 246; (1993) ASC 56-227 …. [145.20] Cash Solutions (Aust) Pty Ltd v Turner [2008] QDC 108 …. [76.80] Charge Card Services Ltd, Re [1987] Ch 150; [1986] 3 All ER 289; [1986] 3 WLR 697 …. [42.10] Charteris v General Motors Acceptance Corp Australia [2002] NSWCTTT 693 …. [5.35] Citicorp Australia Ltd v O’Brien (1996) 40 NSWLR 398; (1996) ASC 56359; (1996) NSW ConvR 55-794 …. [76.55] Clegg v National Investment Institute Pty Ltd and Australian Finance Direct

Ltd [2004] NSWCTTT 669 …. [129.15] Comcare v Mather and Mitchell (1995) 56 FCR 456; 37 ALD 463; 21 AAR 297 …. [129.20] Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447; 46 ALR 402; [1983] ANZ ConvR 169 …. [76.20], [76.75] Commissioner for Consumer and Business Affairs v IOOF SA Credit Union Ltd (2003) 226 LSJS 205 …. [112.15] Commissioner for Corporate Affairs (Vic) v Guardian Investments Pty Ltd [1984] VR 1019; (1984) 9 ACLR 162; 2 ACLC 165 …. [152.15] Commonwealth Bank v Selfby Fullgrabe (2011) 275 LSJS 420 …. [88.95] Consolidated Fertilisers Ltd v Deputy Cmr of Taxation (1992) 36 FCR 1; 107 ALR 456; 23 ATR 305 …. [3.40] Cook v Capital Finance Australia Ltd (2004) 138 FCR 345 …. [88.45] — v Permanent Mortgages Pty Ltd (2007) ASC 155-085 …. [76.80] Cotterell v Stratton (1872) LR 8 Ch App 295 …. [107.05] Crawford v Shakespeare Haney Securities Ltd [2008] QCA 363; BC200810338 …. [13.60], [88.95], [111.60] Cuckmere Brick Co Ltd v Mutual Finance Co Ltd [1971] Ch 949; [1971] 2 All ER 633; [1971] 2 WLR 1207 …. [85.30] Custom Credit Corp Ltd v Gray [1992] 1 VR 540; (1991) ASC 56-096) …. [76.10] — v Luff (1989 unreported) …. [13.35] — v Lupi [1992] 1 VR 99; (1991) ASC 56-024 …. [76.10], [145.20] — v Lynch [1993] 2 VR 469; (1993) ASC 56-201 …. [76.10], [128.10] Custom Credit Corporation Ltd v Van Delft [1965] WAR 237 …. [85.30] DaimlerChrysler Services Australia Pty Ltd v Berckelman (2004) ASC 155065 …. [13.35] Dale v Nichols Constructions Pty Ltd [2003] QDC 453 …. [5.25], [5.40], [5.50], [13.28], [76.10]

Department of Social Security v Rurak (1990) 21 ALD 163; 26 FCR 1; 99 ALR 17; 12 AAR 478 …. [184.30] Dept of Consumer and Employment Protection v Chequecash Pty Ltd [2009] WASC 18; BC200900406 …. [4.25], [5.65], [111.60], [113.35], [14.35], [17.95], [28.45] Director of Consumer Affairs v City Finance Loans (2006) ASC 155-080 …. [3.35], [3.40], [23.10], [78.15], [78.35] — v Geeveekay Pty Ltd [2006] VCAT 793 …. [10.05] Director of Consumer Affairs Victoria v Australian Finance Direct Ltd (2004) ASC 155-064 …. [113.20], [120.05] — v Geeveekay Pty Ltd (2005) ASC 155-075 …. [3.20] Director of Public Prosecutions v United Telecasters Sydney Ltd (1990) 168 CLR 594; 91 ALR 1; 64 ALJR 181 …. [150.10] Dowhanuk v Superintendent of Insurance and Davies [1955] 1 DLR 560 …. [17.20] Dunlop Pneumatic Tyre Co Ltd v New Garage & Motor Co Ltd [1915] AC 79; [1914] All ER Rep 739; (1914) 83 LJKB 1574; 111 LT 862 …. [78.30] Edwards v National Australia Bank (2001) ASC 155-049; [2001] VCAT …. [74.20], [96.05] — v RAMS Home Loans Pty Ltd (No 1) (2005) ASC 155-074 …. [5.30] — v RAMS Home Loans Pty Ltd (No 2) (2005) ASC 155-076 …. [13.50] Elderton v Australian Finance Direct Ltd [2007] NSWSC 1192; BC200709102 …. [135.35] Equuscorp Pty Ltd v Olsen (2005) ASC 155-072 …. [88.35] — v Rigert (2003) ASC 155-061 …. [88.35] Esanda Finance Corp Ltd, Re (2004) ASC 155-070 …. [112.15], [113.10], [113.20] Fiduciary Services Ltd v Director-General of Fair Trading (1999) ASC 155035 …. [112.15]

First Option Credit Union v Williams [2005] NSWSC 855; BC200506398 …. [88.35], [88.95] Flood v Police Department Employees’ Credit Union (1999) ASC 155-028 …. [6.10], [6.15], [23.30], [23.35], [34.05], [37.10], [38.20], [88.05], [88.35], [113.20], [204.15], [204.25] Fryar & Simpson v Systems Services Pty Ltd (1994) 125 ALR 592; 57 IR 225; 1 IRCR 246 …. [43.15] Garas v Maharaj [2004] NSWSC 1157; BC200408595 …. [76.55] Garcia v National Australia Bank Ltd (1998) 194 CLR 395; 155 ALR 614 …. [76.20], [76.55] Garnar v Capital Finance Australia Ltd [2003] VCAT 1171 …. [72.15], [124.15] Gaszewski v Australian Finance Direct Ltd [2005] NSWCTTT 320 …. [5.30], [129.05] GE Capital Finance Australia v Various Debtors (2000) ASC 155-036 …. [111.05], [116.15], [117.05] Geeveekay Pty Ltd v Director of Consumer Affairs Vic (2008) 19 VR 512; (2008) ASC 155-090 …. [3.20], [3.55], [4.25], [5.65], [9.35], [13.60], [14.35], [17.95] George Hraiki v Jean Dorothy Beljon [2008] NSWSC 775; BC200807675 …. [13.60] Giampaolo v Esanda Finance Corp Ltd [2001] VSC 71; BC200101057 …. [5.35], [13.08] GIO Australia Holdings Ltd v Marks (1996) 70 FCR 559; (1996) ATPR 41544 …. [63.20] Godfrey v National Australia Bank Ltd (2001) ASC 55-053 …. [67.15], [76.50] Gray v Custom Credit Ltd (1989) ASC 55-947 …. [85.30] Guardian Mortgages Pty Ltd v Miller (2004) 12 BPR 22,833 …. [76.80] Hamafam Pty Ltd v Saadullah (2007) ASC 155-087 …. [5.65], [13.60], [88.95]

Harrison v Mercantile Credits Ltd (1987) ASC 55-537 …. [85.30] Hatfield v Health Insurance Comm (1987) 15 FCR 487; 14 ALD 131; 77 ALR 103 …. [17.45] Heating Centre Pty Ltd v Trade Practices Commission (1986) 9 FCR 153; 65 ALR 429; (1986) ATPR 40-674 …. [129.20] Henry & Henry v AGC Ltd [1985] WAR 137 …. [85.30] Hepples v Cmr of Taxation (1992) 173 CLR 492; (1991) 102 ALR 497 …. [184.30] Hewett v Court (1983) 149 CLR 639; 46 ALR 87; 1 ACLC 768 …. [76.20] Homestart Finance v Hayter [2007] SASC 367; BC200711605 …. [74.35] Household Financial Services Ltd v Various Respondents (1996) 2 ACCR 250; (1996) ASC 56-352 …. [180.55] Hungier v Grace (1972) 127 CLR 210; [1972] ALR 759; (1972) 46 ALJR 492 …. [5.50] I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd (2002) 210 CLR 109; 192 ALR 1 …. [154.30] Inglis v Commonwealth Trading Bank of Australia (1973) 47 ALJR 234 …. [107.05] Jones v ANZ Banking Group Ltd [2004] NSWCTTT 381 …. [72.15], [72.20], [76.50] Jonsson v Arkway Pty Ltd (2003) 58 NSWLR 451; (2003) ASC 155-060 …. [5.25], [5.30], [5.50] — v — [2005] NSWSC 304; BC200502731 …. [5.65] King Mortgages Pty Ltd v Nader (2008) ASC 155-089 …. [76.80], [88.95] Kontaxis v Hondros [2002] NSWCTTT 752 …. [17.45], [32.10] Kowalczuk v Accom Finance (2008) 252 ALR 55; 229 FLR 4 …. [13.60] Kranz v National Australia Bank Ltd (2003) 8 VR 310; [2003] ANZ ConvR 481 …. [76.20] Ku-ring-gai Co-operative Building Society, Re (No 12) Ltd (1978) 22 ALR

621; 36 FLR 134; (1978) ATPR 40-094 …. [143.35] Law Partners Mortgages Pty Ltd (in liq) v Jeremy [2008] QCA 010; BC200800399 …. [45.20] Lewis v Ormes [2005] NSWCTTT 481 …. [76.15], [76.20] Linkenholt Pty Ltd v Quirk (2000) ASC 155-040 …. [5.25], [5.30] Linter Group Ltd (in liq) v Goldberg (1992) 7 ACSR 580; 10 ACLC 739 …. [13.27], [13.28] McCarty v Yarra Capital Group (2002) ASC 155-054 …. [16.05], [78.20] McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457; 39 ALR 381; 7 ALJR 94 …. [3.20], [76.20] McGregor v BMW Finance Australia Ltd [2003] NSWCTTT 380 …. [85.15] McKenzie v Smith; Lenehan v Smith (1998) ASC 155-025 …. [3.20], [17.20], [17.30], [17.60], [17.65], [28.30], [76.10], [76.15], [112.15] McNally v ANZ Banking Group Ltd (2001) ASC 155-047 …. [72.15], [74.20], [88.75] Macquarie Credit Union Ltd v Director-General, Dept of Fair Trading (1998) 2 ACCR 676; (1998) ASC 155-014 …. [17.45], [23.30], [23.35], [23.45], [112.15], [113.15], [113.20], [204.25] McWha v Nissan Finance Corp Ltd (1995) ASC 56-325 …. [85.30] Mah v Esanda Ltd [2004] NSWCTTT 448 …. [76.10] Maisano v Car & Home Finance Pty Ltd (2006) ASC 155-078; [2005] VCAT …. [76.15] Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494; 158 ALR 333 …. [63.20] Marks, Kinross, McCullagh & Williamson v — (1996) 63 FCR 304; (1996) ATPR 41-471; (1996) ASC (Digest) 56-343 …. [63.20] Marshall & Brougham Pty Ltd v Cmr of Taxation (1986) 45 SASR 571; 85 FLR 346 …. [5.50] Mathis v La Trobe Investment Services Australia Pty Ltd [2004] NSWCTTT 803 …. [75.05], [94.10]

Maunsell v Olins [1975] AC 373; [1975] 1 All ER 16 …. [99.10] Mercantile Credits Ltd v Patterson (1986) ASC 55-516 …. [88.35] Minister for Industry and Commerce v Zyfert and Muller (1983) 77 FLR 471 …. [184.30] Mir Bros Projects Pty Ltd v 1924 Pty Ltd (1980) 2 NSWLR 907; 1 BPR 9503 …. [88.35] Morlend Finance Corp (Vic) Pty Ltd v Westendorp [1993] 2 VR 284; (1993) ASC 56-200 …. [76.15], [184.30] Moschella v Aussie Car Loans and Esanda Finance [2003] NSWCTTT 384 …. [76.10] Moussad v Cash King Pty Ltd [2003] NSWCTTT 818 …. [13.26] National Australia Bank Ltd v Burness [2007] NSWSC 247; BC200701982 …. [5.65], [76.80] — v Various Respondents (1995) ASC 56-324 …. [180.55] National Bank of Australasia Ltd v Mason (1975) 133 CLR 191; 7 ALR 653; 50 ALJR 362 …. [184.30] Nguyen v Taylor (1992) 27 NSWLR 48; (1992) ASC H56-157; (1992) Aust Contract R 90-015; (1992) NSW ConvR 55-631 …. [76.15] Ormes v Lewis [2006] NSWSC 16; BC200600260 …. [76.80], [77.15] — v Lewis (No 2) [2006] NSWSC 659; BC200605031 …. [76.15], [76.20] P & M Productions Pty Ltd v Leasing Ltd [1992] 1 Qd R 264; (1990) Q ConvR 54-380 …. [43.15] Paciocco v Australia and New Zealand Banking Group Limited [2014] FCA 35 …. [76.80] Paragon Finance plc v Nash [2002] 1 WLR 2263 …. [63.20] — v Staunton; Paragon Finance plc v Nash [2002] 2 All ER 248; [2001] 2 All ER (Comm) 1025; [2002] 1 WLR 685 …. [63.20] Park Avenue Nominees Pty Ltd v Boon (2001) ASC 155-052 …. [5.25], [13.35], [13.40]

Pendlebury v Colonial Mutual Life Assurance Society Ltd (1912) 13 CLR 676; 18 ALR 124 …. [85.30] Pereira (J) Fernandes SA v Mehta [2006] 2 All ER 891; [2006] 1 All ER (Comm) 885; [2006] 1 WLR 1543 …. [187.20] Permanent Custodians Ltd v Leybourne [2009] NSWSC 288; BC200902885 …. [76.80] — v Upston (2007) ASC 155-083; (2007) NSW ConvR 56-178 …. [5.65], [13.60], [66.50], [72.65], [74.35], [88.95], [93.35], [196.30] Permanent Mortgages Pty Ltd v Michael Robert Cook and Karen Cook (2006) ASC 155-082 …. [13.60], [76.80], [88.95] Perpetual Ltd v Treloar (2010) 14 BPR 27,699 …. [13.60] Perpetual Trustees v Khoshaba (2005) 14 BPR 26,639 …. [13A.60] Perpetual Trustees Victoria Ltd v Monas [2010] NSWSC 1156; BC201008283 …. [72.11] — v van den Heuvel (2009) 14 BPR 26,749 …. [5.65], [76.80], [77.15] Police Department Employees’ Credit Union v Flood (1999) ASC 155-034 …. [6.10], [6.15], [17.45], [23.30], [23.35], [23.40], [34.05], [204.25] Polish Community Credit Union Ltd, Re (2000) ASC 155-037 …. [113.15] Pyramid Building Society v Scorpion Hotels Pty Ltd 136 ALR 166; 14 ACLC 679; (1996) 20 ASCR 166 …. [13.35] Queensland v Ward (2002) ASC 155-055 …. [5.30], [13.16], [118.20], [124.10], [124.15], [124.25] — v — [2004] 1 Qd R 429; (2003) ASC 155-059 …. [113.05], [113.20], [114.25], [116.25] Queensland Bacon Pty Ltd v Rees (1966) 115 CLR 266; [1966] ALR 855; (1966) 40 ALJR 13 …. [152.15] Rabone v Deane (1915) 20 CLR 636 …. [5.50] Rafiqi v Wacal Investments Pty Ltd (1998) ASC 155-024 …. [3.20], [5.25] Ralena Pty Ltd v VCAT [2006] VSC 451; BC200609795 …. [5.65], [9.35]

Reliance Permanent Building Society v Harwood-Stamper [1944] Ch 362; [1944] 2 All ER 75 …. [106.10] RHG Mortgage Corp Ltd v Cran [2009] QSC 183; BC200905984 …. [72.65], [76.80] Ristic v Greater Building Society Ltd [2002] NSWCA 266; BC200204578 …. [107.30] Roberts v Australian Guarantee Corp (1986) ASC 55-515 …. [76.15] Rotary Offset Press Pty Ltd v Deputy Cmr of Taxation (1972) 3 ATR 319; 46 ALJR 609; 72 ATC 4212 …. [160.10] Rothmans of Pall Mall (Aust) Ltd v Australian Broadcasting Tribunal (1985) 5 FCR 330; 58 ALR 675; 7 ALN N232 …. [150.10] Sandtara Pty Ltd v Australian European Finance Corp Ltd (1990) 20 NSWLR 82; (1990) NSW ConvR 55-530; [1990] ANZ ConvR 454 …. [107.05] Shakespeare Haney Securities v Crawford [2009] 2 Qd R 156 …. [4.25], [5.65], [13.60], [88.95] Sixty-Fourth Throne Pty Ltd v Macquarie Bank Ltd (1996) 130 FLR 411; 14 ACLC 670; (1996) V ConvR 54-546 …. [13.35] Small v Gray [2004] NSWSC 97; BC200400764 …. [76.15] St George Bank Ltd v McCormack (2008) 253 LSJS 70 …. [107.35] — v McCormack (No 2) [2008] SASC 39; BC200806600 …. [88.95] — v Trimarchi [2004] NSWCA 120; BC200402026 …. [76.15] State Bank of New South Wales Ltd v Hibbert (2000) 9 BPR 17,543; (2000) Aust Contract R 90-119 …. [76.20] — v Various Respondents (1995) ASC 56-307 …. [R64.05] Stern v McArthur (1988) 165 CLR 489; 81 ALR 463; (1988) V ConvR 54325 …. [76.20] Stockloser v Johnson [1954] 1 QB 476; [1954] 1 All ER 630; [1954] 2 WLR 439 …. [76.20] Sullivan v Waltons Credits Ltd (1990) ASC 55-976 …. [127.30]

Suncorp-Metway Ltd v Director-General, Department of Equity and Fair Trading [2000] 2 Qd R 668; (1999) ASC 155-027 …. [112.15] Swayne v Palm [1970] SASR 158 …. [5.50] Szita v Capital Finance Australia Ltd (2004) ASC 155-063 …. [13.40] Tanwar Enterprises Pty Ltd v Cauchi (2003) 217 CLR 315; 201 ALR 359 …. [76.20] Taylor v Third Szable Holdings Pty Ltd (2001) ASC 155-050 …. [5.25], [13.45] Trade Practices Commission v British Building Society (1988) ATPR 40880 …. [143.35] Volpes v Permanent Custodians Ltd [2005] NSWSC 827; BC200506082 …. [78.50] Wakefield v Ribbera [2008] VSC 124; BC200802809 …. [88.95] Ward-Miller v Perpetual Trustees Australia Ltd (2001) ASC 155-046 …. [72.15] Webb v Stenton (1881) 11 QBD 518; [1881] All ER Rep 312; (1881) 49 LT 432; 55 LJQB 584 …. [3.20] West v AGC (Advances) Ltd (1986) 5 NSWLR 610; (1986) ASC 55-500; (1986) NSW ConvR 55-306 …. [76.10], [76.55] Westpac Banking Corp, Re [1992] 1 Qd R 674; (1991) ASC 56-068 …. [145.20] Westpac Banking Corporation Ltd v Various Respondents (No 4) (1992) ASC 56-187 …. [113.20] Williams v Bank of Western Australia Ltd [2004] NSWCTTT 581 …. [5.40], [96.05] Wilson v AGC Ltd (1987) ASC 55-598 …. [88.35] — v AGC Ltd (No 2) (1987) ASC 55-606 …. [85.30], [88.35] Wolfe v Permanent Custodians [2012] VSC 275; BC201207771 …. [88.95] Yango Pastoral Co Pty Ltd v First Chicago Australia Ltd (1978) 139 CLR 410; 21 ALR 585; 53 ALJR 1 …. [193.10]

Yerkey v Jones (1939) 63 CLR 649; [1939] ALR 62; (1939) 13 ALJR 84 …. [76.20], [76.55] Yeshiva v Marshall [2004] NSWSC 921; BC200406800 …. [5.25] Yeshiva Properties No 1 Pty Ltd v — (2005) 219 ALR 112 …. [5.25] Yorke v Lucas (1983) 49 ALR 672; 80 FLR 143; (1983) ASC 55-282; (1983) ATPR 40-401 …. [129.20] Young v Queensland Trustees Ltd (1956) 99 CLR 560; [1956] ALR 939; (1956) 30 ALJR 300 …. [3.25]

Table of Statutes References are to paragraph numbers CO-OPERATIVE SCHEME LEGISLATION Code of Banking Practice …. [33.05], [72.02] cl 2(2) …. [76.15] cl 3 …. [154.35] cl 4(11) …. [66.40] cl 4(15) …. [66.40] cl 4(16) …. [66.40] cl 17 …. [64.20], [66.40] cl 17(2) …. [66.40] cl 17(3) …. [66.40] cl 20 …. [66.40], [66.45] cl 20(1) …. [66.45] cl 20(2) …. [66.45] cl 20(6) …. [66.40] cl 25(2) …. [72.04] cl 26 …. [33.10] cl 28 …. [72.02], [72.45] cl 28(6) …. [72.02] cl 28.11 …. [58.20] cl 28.14 …. [90.05] cl 31.13 …. [59.05] Consumer Credit Regulation 1995 Pt 8A …. [R71.15]

s 33C …. [163.15] reg 4 …. [33.65] reg 10 …. [13.15], [13.40] reg 10(2) …. [13.15] reg 11 …. [R71.15] reg 12 …. [157.25] reg 12(1)(b) …. [R71.15] reg 12(1A) …. [R71.15] reg 13 …. [23.35], [23.45] reg 18 …. [39.10] reg 18A …. [5.55] reg 33C …. [164.10], [164.15] reg 33C(2) …. [157.40] reg 33D …. [157.30] reg 33D(3) …. [157.40] reg 33D(4) …. [157.40] reg 33F …. [157.25] reg 33G(1) …. [157.35] reg 33G(2) …. [157.35] reg 33H …. [157.35] reg 40 …. [R111.05] reg 43 …. [23.40] reg 48 …. [23.35], [23.40] reg 49 …. [28.25] reg 59 …. [17.40] reg 59(2) …. [17.40]

reg 61 …. [27.25] reg 62 …. [29.05] reg 63 …. [34.110], [39.05], [39.10] reg 63(4) …. [34.100], [34.110], [39.10] reg 63(6) …. [39.10] reg 71 …. [157.25] reg 72 …. [17.40] reg 97 …. [157.30] reg 100 …. [157.25] COMMONWEALTH Acts Interpretation Act 1901 …. [206.05] s 15AA …. [17.45] s 15AB …. [20.15] s 15AD …. [175.25] s 22 …. [R76.05] s 38(1) …. [183.15] Aged Care Act 1997 …. [6.55], [R25.25], [R60.05] Anti-Money Laundering and Counter-Terrorism Financing Act 2006 …. [R20.50] Australian Securities and Investments Commission Act 2001 Pt 2 Div 2 Subdiv BA …. [63.21], [76.65], [107.30] Subdiv C …. [76.65] s 12(3) …. [76.65] s 12BAA(7)(k) …. [76.65]

s 12BC …. [5.30] s 12BF …. [76.70] s 12BF(1) …. [76.70] s 12BF(2) …. [76.70] s 12BG(1) …. [76.70] s 12BG(2) …. [76.70] s 12BG(4) …. [76.70] s 12BH(1)(d) …. [63.21] s 12BI(1) …. [76.70] s 12BI(2) …. [76.70] s 12BI(3) …. [76.70] s 12BK(1) …. [76.70] s 12BK(2) …. [76.70] s 12CA …. [76.65] s 12CB …. [76.65] s 12CB(2) …. [76.65] s 12CC …. [76.65] s 12CC(2) …. [76.65] s 12DA …. [154.35] s 12DB …. [154.35] s 12DJ …. [155.05] s 12GD …. [79.10] s 12GF …. [154.35] s 12GND …. [79.10] s 72 …. [78.15] Australian Securities and Investments Commission Regulations 2001

reg 2B …. [76.65] Banking Act 1959 s 5 …. [113.15] s 5(1) …. [R58.05] Bankruptcy Act 1966 …. [R20.10] Pt 9 …. [R20.10] Pt 10 …. [R20.10] s 86 …. [115.10] s 164(4)(b) …. [13.35] s 187 …. [R20.10] Bankruptcy Regulations 1996 …. [50.05] reg 6.03 …. [50.05] reg 6.03B …. [50.05] Companies Code 1981 s 68A(4)(b) …. [13.35] s 230(8) …. [13.27] Competition and Consumer Act 2010 s 4B …. [5.30] s 12DA …. [154.05] s 12DB …. [154.05] s 12GF …. [154.05] s 18 …. [154.05] s 29 …. [154.05] s 47 …. [140.05], [143.35] s 47(6) …. [143.35] s 50 …. [155.05]

s 51AE …. [R28P.15] s 52 …. [154.30] s 73 …. [130.05] s 82 …. [154.30] s 87 …. [154.30] s 236 …. [154.05] Sch 2 …. [125.05] cl 278 …. [129.05], [134.05] Corporations Act 2001 …. [21.30], [R7.05], [R20.10] Ch 7 …. [6.51] Pt 1.2 Div 3 …. [204.06] Pt 5B.2 Div 2 reg 7 …. [R7.05] s 9 …. [R18.05], [R19.05], [R28P.15] s 420A …. [85.30] s 761EA(1) …. [6.51], [13A.50] s 765(h) …. [155.05] s 992A …. [155.05] Corporations Regulations 2001 reg 7.1.06 …. [155.05] reg 7.1.06A …. [155.05] reg 7.7.05B …. [R28P.15] Crimes Act 1914 s 4AA …. [111.50]

s 4B(3) …. [111.50] s 4C …. [125.05] s 4K …. [203.05] s 4K(1) …. [203.05] s 4K(2) …. [203.05] s 4K(3) …. [203.05] s 4K(4) …. [203.05] Criminal Code Act 1995 s 6(1) …. [73.10] Electronic Transactions Act 1999 …. [195.25] s 9 …. [14.05] s 10(1) …. [187.20] s 11(3) …. [187.20] s 14(3) …. [196.10] Electronic Transactions Regulations 2000 reg 10(1) …. [195.25], [195.30] reg 10(2) …. [195.25] reg 10(2)(b) …. [195.25] reg 10(3) …. [195.25] reg 10(4) …. [195.25] Financial Sector (Collection of Data) Act 2001 …. [R24A.05] Insurance Contracts Act 1984 …. [204.08] National Consumer Credit Protection (Transitional and Consequential Provisions) Act 2009 s 4 …. [1.10], [1.15] s 4(1) …. [R7A.05], [R9A.05]

Sch 1 Pt 2 Div 2 …. [1.10] s 3 …. [8.20] cl 3(2) …. [94.12] cl 3(6) …. [94.12] Sch 2 …. [203B.10], [R69C.10] National Consumer Credit Protection Act 2009 …. [R4.05], [R6.05], [R9.05], [R23.15], [R23B.05], [R25.05], [R25.15], [R25E.05], [R28B.05], [R28N.15], [R28P.15], [R37.05], [R39.05], [R46.05], [R65C.05] Ch 2 …. [R25G.05], [R25H.05], [R25I.05] Ch 3 …. [13A.20], [13A.40], [13A.55], [18A.15], [23A.40], [R13.05], [R25G.05], [R25H.05], [R28L.15] Pt 3.1 Div 7 …. [23A.05] Pt 3.2 Div 4 …. [13A.55] Pt 3.2C …. [23A.05] Pt 3.2D …. [13A.55] s 133DA …. [13A.30] Ch 4 …. [23A.10] Pt 2.3 Div 4 …. [R25.10] Pt 2.4 …. [R25.30], [R30.05] Pt 3 …. [R8.05] Pt 3.1

Div 2 …. [R28Q.15] Div 3 …. [R28Q.15] Div 4 …. [R28Q.10] Div 5 …. [R28Q.15] Div 6 …. [R28Q.10] Pt 3.2 Div 6 …. [R28LM.05] Pt 3.2B Div 4 …. [R28LH.05] Div 5 …. [R28LN.05] Div 6 …. [R28LN.05] Pt 3.7 …. [R28P.10] Pt 4 Div 3 …. [169.30] Pt 4.3 Div 2 Subdiv C …. [R36.05] Pt 14 …. [2.05] s 7 …. [13A.30] s 5 …. [13A.50], [17.26], [23A.05], [23A.25], [23A.30] s 5(1) …. [6.10], [13A.30], [18B.15], [204.56], [R5.05], [S4.10], [S5A.05] s 5(1)(b)(ii) …. [R65C.05] s 5(1)(b)(iii) …. [R65C.05] s 6 …. [R25.05] s 7 …. [R25.05]

s 8 …. [R25.05] s 9 …. [R25.05] s 11 …. [204.04] s 12 …. [204.06] s 16 …. [R26.05], [R28L.10] s 16(1) …. [R28L.10] s 18 …. [R28L.10] s 19 …. [169.30] s 23A …. [34.46] s 26(4) …. [26.06] s 26(5) …. [26.06] s 29 …. [R20.05], [R20.10], [R20.15], [R20.25], [R21.05], [R22.05], [R23.05], [R23A.05], [R23D.05] s 29(3) …. [R20.25] s 30A …. [28.25] s 31 …. [169.30], [R25.10] s 32 …. [169.30] s 33 …. [169.30], [R25J.05] s 34(6) …. [34.46] s 36 …. [194.10] s 37 …. [R7A.05], [R8.05] s 37(1) …. [R7.05] s 37(1)(b) …. [R8.05] s 37(1)(c) …. [R8.05] s 37(1)(e) …. [R7.05], [R7A.05] s 38 …. [R25F.05]

s 39 …. [R8.05] s 45(1) …. [S3.05] s 45(7) …. [R9.05] s 47 …. [R8.05], [R15.05] s 47(1)(d) …. [111.05] s 47(1)(h)(i) …. [R10.05] s 47(1)(i) …. [R8.05], [R10.05] s 47(1)(j) …. [R8.05], [R12.05] s 47(1)(k) …. [111.05] s 48 …. [R12.05] s 52 …. [17.15] s 52(2) …. [R13.05] s 53 …. [R14.05], [R14.10], [R15.05] s 53(3)(b) …. [R14.10] s 65(6)(c) …. [R16.05], [R16.10], [R25H.05] s 71 …. [R9.05], [R25H.05] s 76(2)(g) …. [183.30] s 76(2)(k) …. [183.30] s 82(2) …. [26.06] s 82(2)(d) …. [26.06] s 83 …. [169.30], [194.10] s 87 …. [169.30] s 88 …. [169.30] s 89 …. [169.30] s 93 …. [169.30] s 94 …. [169.30]

s 98 …. [169.30] s 100 …. [R17.05] s 107 …. [169.30] s 109 …. [203B.10], [R69C.10] s 110 …. [203B.10], [R69C.10] s 113 …. [R28N.05], [R28N.10], [R28P.25] s 113(2) …. [14.06], [R28P.20] s 113(3)(a) …. [R28B.05] s 114 …. [14.06], [R28N.10] s 114(2)(a) …. [R28C.05] s 114(4) …. [S4.15] s 115 …. [R28HA.05] s 118(2)(c) …. [R28LC.05], [R28XXF.05] s 121 …. [R28N.05], [R28N.10] s 123 …. [13A.20], [R28Q.10] s 123(2)(c) …. [R28LC.05], [R28XXF.05] s 124 …. [13A.20], [R28Q.10] s 124A …. [23A.05] s 124B …. [R28XXA.05] s 125 …. [169.30] s 126 …. [14.06], [R28N.05], [R28N.10] s 126(2) …. [14.06], [R28P.20] s 126(3) …. [R28B.05] s 127 …. [R28N.05], [R28N.10] s 128 …. [13A.20], [R25K.05], [R28HA.05], [R28J.05], [S3.10] s 128(a) …. [R28B.05]

s 130 …. [R28JA.05] s 130(1) …. [6.10] s 131(2)(c) …. [R28LC.05], [R28XXF.05] s 132 …. [R28M.05] s 132(2)(c) …. [R28M.05] s 132(2)(d) …. [R28M.05] s 133 …. [13A.30], [13A.60] s 133(1)(a) …. [R28B.05] s 133(2)(c) …. [R28LC.05], [R28XXF.05] s 133BB …. [R28LFA.05] s 133BD …. [R28LG.05] s 133BE(5) …. [R28LH.05] s 133BF(4) …. [R28LI.05] s 133BI …. [R28LK.05] s 133BQ …. [R28LM.05] s 133CA …. [6.10], [23A.25] s 133CB …. [23A.25], [R28XXA.05] s 133CC …. [23A.25] s 133D …. [R25M.05] s 133DA …. [13A.30] s 133DB …. [13A.30], [13A.55], [18A.15], [R28LE.05] s 133DB(1) …. [13A.55] s 133DB(1)(a) …. [R28LD.05] s 133DB(3) …. [13A.55] s 133DB(5) …. [13A.55] s 133DC …. [13A.30], [13A.45], [13A.55]

s 133DD …. [13A.30], [13A.45], [13A.55] s 133DD(4) …. [13A.55] s 133DE …. [13A.30], [13A.45], [13A.55] s 135 …. [135.25] s 135(3) …. [135.30] s 136 …. [R28N.05], [R28N.10], [R28P.25] s 136(2) …. [R28P.20] s 136(3)(a) …. [R28B.05] s 137 …. [R28N.10], [R28N.20] s 137(2)(a) …. [R28C.05] s 137(4) …. [S4.15] s 144 …. [R28N.05], [R28N.10], [R28N.20] s 149 …. [R28N.05], [R28N.10] s 149(2) …. [R28P.20] s 149(3) …. [R28B.05] s 150 …. [R28N.05], [R28N.10] s 151 …. [S3.10] s 154 …. [179V.10] s 155 …. [179V.10], [R28M.05] s 155(2)(c) …. [R28M.05] s 155(2)(d) …. [R28M.05] s 158 …. [R25H.05], [R28N.05], [R28N.10], [R28P.10], [R28P.25] s 158(2) …. [R28P.20] s 158(2)(h) …. [R28.05] s 158(3)(a) …. [R28.05], [R28B.05] s 160 …. [R28N.05], [R28N.10]

s 160(1) …. [R28P.25] s 160(2) …. [R28P.20], [R28P.25] s 160(4) …. [R28B.05] s 160E(1) …. [R28XXE.05] s 164(a) …. [R28P.10] s 173 …. [169.30] s 173A …. [179W.10] s 173A(1A) …. [179W.10] s 174A …. [179W.10] s 175A …. [179W.10] s 175C …. [179W.10] s 175D …. [179W.10] s 175E …. [179W.10] s 175F …. [179W.10] s 175G …. [179W.10] s 175J …. [179W.10] s 176 …. [13A.45] s 176(6) …. [13A.30] s 176D …. [32.05] s 177 …. [169.30] s 177(1)(a) …. [169.30] s 177A …. [179W.10] s 177B …. [179W.10] s 177C …. [179W.10] s 177D …. [179W.10] s 177E …. [179W.10]

s 177F …. [179W.10] s 177G …. [179W.10] s 177H …. [179W.10] s 177J …. [179W.10] s 177K …. [179W.10] s 178 …. [13A.60], [R45.05] s 179 …. [13A.60], [169.30], [R45.05] s 179(6) …. [13A.60], [13A.70], [13A.75] s 179(7) …. [13A.60] s 179A …. [179W.10] s 179B …. [179W.10] s 179C …. [179W.10], [R105J.05] s 179D …. [179W.10] s 179E …. [179W.10] s 179F …. [179W.10] s 179G …. [179W.10] s 179H …. [179W.10] s 179J …. [179W.10] s 179K …. [179W.10] s 179L …. [179W.10] s 179M …. [179W.10] s 179N …. [179W.10] s 179P …. [179W.10] s 179Q …. [179W.10] s 179R …. [179W.10] s 179S …. [179W.10]

s 179T …. [179W.10] s 179U …. [179W.10] s 179V …. [179W.10] s 180(1)(b) …. [23A.25] s 180(3) …. [180.40] s 180(4) …. [180.40] s 184 …. [183.30] s 187 …. [112.06] s 188 …. [112.06] s 191(2) …. [191.15] s 194 …. [194.05] s 194(4) …. [194.05] s 194(5) …. [194.05], [194.55] s 194(9) …. [194.40] s 195 …. [195.35] s 195(4) …. [195.20] s 195(4)(a) …. [195.35] s 199(3) …. [199.25] s 201(2) …. [201.05] s 201(4) …. [201.10] s 204 …. [R79A.05] s 213(2) …. [R29.05], [R30.05], [R30A.05] s 251(2)(d) …. [R31.05], [R32.05] s 253 …. [R35.05] s 253(2) …. [S1.10] s 268 …. [R33.05]

s 284 …. [R35.05] s 284(1) …. [R34.05], [S1.10] s 330 …. [R36.05] s 331 …. [R37.05], [R41.05], [S1.10] Sch 1 …. [33.65] Ch 3 …. [67.15] Pt 1 …. [R55.05], [R63.05] Pt 2 …. [111.35], [125.05] Div 1 …. [13A.65], [17.10], [22.05] Div 3 …. [23.10] Div 3 …. [30A.05], [R61.05] Div 5 …. [34.05], [37.05] Pt 3 Div 1 …. [53.05], [180.20] Div 2 …. [62.05], [180.20] Pt 4 …. [34.60], [34.110], [R63.05] Div 1 …. [19.25], [58.15], [61.10], [63.10], [66.45] Div 2 …. [19.30], [63.10] Div 3 …. [63.10], [63.23], [71.20], [79.05], [R55.05], [R61.05] Pt 4.3 Div 1 …. [112.06] Pt 5 …. [139.05] Div 1 …. [13A.30], [86A.05], [86F.05], [94.05], [R61.05] Subdiv B …. [13A.30], [86F.05] Subdiv C …. [13A.30] Div 2 …. [97.05], [108.05], [R61.05]

Div 3 …. [R63.05] Div 4 …. [106.05], [106.15], [108.05], [R55.05] Div 5 …. [R55.05] Pt 6 …. [9.30], [17.10], [17.20], [17.25], [17.75], [23.25], [27.20], [112.30] Div 1 …. [112.05], [112.15], [122.05], [124.05], [124.10], [124.25] Div 2 …. [124.10] Pt 7 …. [125.05], [125.20], [126.05], [127.05], [128.05], [137.05], [138.05], [139.05], [R55.05] Div 4 …. [R63.05] Div 5 …. [R63.05] Pt 10 …. [16.40], [150.01], [150.02], [150.10], [157.05], [157.10], [157.30], [158.05], [159.05], [194.05], [R71.15], [R100.06] Div 2 …. [150.01], [150.25] Pt 11 …. [9.05], [169.05], [169.07], [169.25], [170.05], [170.35], [171.05] Pt 12 …. [R63.05] Div 2 …. [183.30] Pt 13 …. [R63.05] Pt 14 …. [R63.05] Div 5 …. [102.40], [103.20], [104.50] s 2 …. [13A.25] s 7B …. [13A.25] s 3 …. [3.20], [3.35], [5.60], [6.15], [71.40] s 3(1) …. [5.61], [11.05] s 3(1)(a) …. [3.05], [3.50] s 3(1)(b) …. [3.05]

s 3(2) …. [3.45], [71.25] s 3(2)(b)(ii) …. [3.45] s 4 …. [4.05], [40.10] s 5 …. [5.05], [5.35], [5.40], [6.05], [6.15], [11.05], [71.40], [78.20], [170.35], [213.05] s 5(b) …. [13.05] s 5(1) …. [5.25], [5.31], [5.40], [9.10], [194.65] s 5(1)(a) …. [5.61] s 5(1)(b) …. [5.25], [5.30], [5.40], [5.61], [13.20] s 5(1)(b)(ii) …. [5.30], [5.31] s 5(1)(b)(iii) …. [5.30], [5.31] s 5(1)(c) …. [5.45], [5.61] s 5(1)(d) …. [5.50], [188.20] s 5(2) …. [5.05] s 5(3) …. [5.30], [5.31] s 5(4) …. [5.25], [5.35], [5.40] s 5(4)(a) …. [5.35] s 5(4)(b) …. [5.30] s 6 …. [6.05], [6.40], [7.25] s 6(1) …. [6.10], [6.15], [23A.50], [40.10], [R79AE.05] s 6(1)(b) …. [6.10] s 6(2) …. [6.10], [R79AE.05] s 6(2)(b) …. [6.10] s 6(3) …. [R79AE.05] s 6(4) …. [6.15] s 6(5) …. [4.05], [5.45], [6.20], [R51.05], [R51.10]

s 6(6) …. [6.25] s 6(8) …. [6.35], [142.10] s 6(9) …. [6.40], [76.05], [R25.25] s 6(10) …. [6.45], [76.05] s 6(11) …. [6.50], [R25.25] s 6(13) …. [6.55], [R53.05], [R57.05], [R58.05], [R62.05], [R65C.05] s 7 …. [41.05], [76.65], [112.10], [204.50] s 7(2) …. [44.10], [48.10] s 7(3) …. [7.20], [42.15], [R64.05] s 8 …. [54.05], [76.65], [187.10] s 8(3) …. [8.20], [127.25], [R65.05] s 8(A) …. [17.10] s 9 …. [9.05], [9.25], [9.30], [42.10], [76.65], [169.25], [213.05], [R66.05] s 9(1) …. [9.10], [169.05] s 9(2) …. [9.10], [169.05] s 9(3) …. [9.10] s 9(3)(f) …. [9.20], [R66.05], [S1.10] s 9(4) …. [9.10] s 10 …. [3.20], [5.60], [10.05] s 11 …. [3.20], [5.55], [11.05] s 12 …. [3.20], [12.05] s 12(4) …. [14.10] s 13 …. [4.05], [5.25], [5.30], [5.40], [13.05], [13.07], [13.15], [13.35], [13.45], [R67.05] s 13(1) …. [5.25], [5.40], [13.05], [13.10], [13.20], [13.26]

s 13(2) …. [5.25], [5.30], [5.40], [13.05], [13.07], [13.25], [13.28], [13.45] s 13(3) …. [5.25], [5.30], [5.35], [5.40], [13.05], [13.20], [13.28], [190.20], [199.15], [R67.05] s 13(3)(b) …. [13.16] s 13(4) …. [13.20] s 13(5) …. [13.15], [13.40], [172.20], [R67.05], [R68.05] s 13(6) …. [13.55] s 13(7) …. [13.55] s 13A …. [13A.30], [13A.50], [18A.05], [18A.10], [18A.15], [18B.05], [18C.05], [93A.05] s 13A(1)(b) …. [13A.50] s 13A(2) …. [13A.50] s 13A(3) …. [13A.50] s 13A(4) …. [13A.50] s 14 …. [14.05], [14.15], [20.05], [22.05], [22.10], [40.10], [186.10] s 14(1)(a) …. [14.10] s 14(1)(b) …. [14.10] s 14(2) …. [14.10], [14.20], [14.30], [186.05] s 14(3) …. [14.30], [186.05], [204.65] s 14(4) …. [14.10], [14.15], [16.15], [18.10], [23.45] s 15 …. [14.05] s 15(k) …. [17.65] s 15A …. [2.05] s 15AA …. [2.05] s 15AB …. [2.05] s 16 …. [4.20], [7.20], [14.10], [16.05], [16.10], [22.10], [23.40],

[40.10], [42.15], [76.15], [141.05], [153.20], [181.15], [189.15], [194.40], [194.45], [194.55], [R28N.10], [R65B.05] s 16(1) …. [14.25], [180.20] s 16(1)(a) …. [16.05], [16.10], [20.10], [20.20], [153.20], [R72.05] s 16(1)(b) …. [16.05], [20.10], [R70.05], [S1.10] s 16(2) …. [14.25], [16.05], [16.45], [16.55] s 16(3) …. [16.40], [R71.05] s 16(4) …. [16.05], [16.10], [16.15], [16.20], [17.25], [18.05], [23.35], [23.45] s 16(5) …. [14.05], [14.15], [16.10], [16.15], [16.50], [17.05], [18.10], [20.20] s 16(6) …. [14.15], [16.10], [16.15], [16.25], [16.45], [16.50], [18.10], [23.35], [23.45] s 16(7) …. [16.45] s 16(51)(b) …. [16.55] s 17 …. [3.40], [3.45], [4.20], [7.20], [13A.75], [16.05], [16.10], [16.15], [16.50], [17.05], [17.10], [17.20], [17.25], [17.60], [17.90], [22.05], [22.10], [23.40], [33.25], [40.10], [42.15], [76.15], [111.30], [141.05], [180.20], [R74.05], [R83.05] s 17(c) …. [13A.75] s 17(2) …. [16.25], [16.30], [16.50], [17.15], [111.30], [144.25] s 17(3) …. [3.35], [16.25], [16.30], [17.10], [17.20], [111.20] s 17(3)(a) …. [16.50], [17.20] s 17(3)(a)(i) …. [16.50] s 17(3)(a)(ii) …. [3.35], [3.45], [17.20] s 17(3)(b) …. [16.50], [17.10], [17.20], [111.25] s 17(3)(c) …. [16.50] s 17(4) …. [3.45], [16.30], [17.10], [17.25], [17.26], [23A.15],

[33.25], [111.20], [111.25] s 17(4)(a) …. [3.45], [16.50], [17.25] s 17(4)(b) …. [16.50], [17.25] s 17(4)(c) …. [16.50], [153.20] s 17(4)(c)(i) …. [16.50] s 17(4)(c)(ii) …. [16.50] s 17(4)(c)(iii) …. [16.50] s 17(4)(c)(iv) …. [16.50], [17.25] s 17(5) …. [3.45], [16.30], [16.50], [17.10], [17.30], [111.20], [111.25], [116.25], [153.20] s 17(6) …. [3.45], [16.50], [17.10], [17.26], [17.35], [23.45], [23A.15], [111.20], [113.15], [180.35], [181.15] s 17(6)(5) …. [23A.45] s 17(7) …. [17.40], [181.15] s 17(7)(a) …. [16.50] s 17(7)(a)(i) …. [16.50], [182.25], [R108.05] s 17(7)(a)(ii) …. [16.50], [180.40] s 17(7)(a)(iii) …. [16.50], [17.40] s 17(7)(a)(iv) …. [16.50], [17.40] s 17(7)(b) …. [16.50], [17.40], [182.25], [R108.05] s 17(8) …. [16.30], [17.45], [17.80], [23.35], [23.45], [32.10], [181.15] s 17(8)(a) …. [16.50], [17.10], [17.45], [111.10], [111.20], [111.25] s 17(8)(b) …. [16.50], [17.10], [17.45], [111.10], [111.20], [111.25] s 17(8)(c) …. [16.50], [180.45] s 17(9) …. [16.30], [16.50], [17.10], [17.50], [111.20], [111.25] s 17(10) …. [16.50], [33.10]

s 17(11) …. [17.10], [17.25], [17.60], [33.25], [111.20] s 17(11)(a) …. [16.50] s 17(11)(b) …. [16.50], [17.60] s 17(11)(b)(i) …. [16.50] s 17(11)(b)(ii) …. [16.50] s 17(11)(b)(iii) …. [16.50] s 17(11)(b)(iv) …. [16.50] s 17(12) …. [16.50], [17.65] s 17(13) …. [111.30] s 17(13)(a) …. [16.50] s 17(13)(b) …. [16.50] s 17(14) …. [16.50], [17.75], [71.25], [111.30], [145.15], [145.20], [181.15] s 17(14)(a) …. [16.50] s 17(14)(b) …. [16.50] s 17(14)(c) …. [16.50] s 17(14)(d) …. [16.50], [17.75] s 17(15) …. [16.50], [17.20], [17.75], [17.80], [34.95], [142.05], [R73.05] s 17(15)(a) …. [16.50], [17.10], [111.20] s 17(15)(b) …. [16.50], [17.10], [111.20] s 17(15)(c) …. [16.50], [R73.05] s 17(15)(d) …. [16.50] s 17(15A) …. [13A.25], [13A.30], [13A.65], [17.81], [111.20], [111.25] s 17(16) …. [16.50], [R74.05], [S1.10] s 18 …. [14.15], [18.05], [18.10], [23.35], [23.45], [R74.05]

s 18A …. [13A.25], [13A.30], [13A.65], [18A.05], [18A.10], [18A.15], [18A.20], [88.90] s 18A(3) …. [13A.30], [18A.05] s 18B …. [13A.25], [13A.30], [13A.65], [16.55], [18A.10], [18B.05], [22.15], [R74A.05] s 18B(2) …. [18B.15], [S1.10] s 18B(4) …. [18B.15], [22.15], [S1.10] s 18B(5) …. [22.15] s 18C …. [13A.25], [13A.30], [13A.65], [18A.10], [18A.15], [18C.05] s 19 …. [19.05], [19.10], [19.20], [19.25], [19.30], [22.10] s 19(1) …. [19.05] s 20 …. [14.10], [20.05], [20.15], [20.25], [43.05], [175.20], [189.15], [194.05] s 20(1) …. [14.25], [20.10], [20.20] s 20(2) …. [14.25], [175.20] s 20(3) …. [14.25], [20.10] s 21 …. [21.05], [21.25], [58.05] s 21(2) …. [21.10] s 22 …. [13A.25], [13A.65], [17.25], [17.75], [22.10], [22.15] s 22(1) …. [22.05] s 22(2) …. [22.05], [22.15] s 22(3) …. [13A.30] s 23 …. [17.05], [17.90], [23.05], [23.06], [23.35], [23.40], [23.45], [23.50], [23A.15], [32B.05], [39.20], [78.35], [120.05], [202.10] s 23(1) …. [23.10], [23.15], [23.25], [23.40], [23.50], [24.05], [27.20], [111.20], [111.25] s 23(1)(a) …. [23.10]

s 23(1)(b) …. [23.10], [23.40], [23.50], [78.35] s 23(1)(c) …. [17.25], [23.10], [23.40], [23.50] s 23(2) …. [23.15], [23.25], [27.20], [78.35], [202.10] s 23(3) …. [17.45], [23.10], [23.20], [23.35], [23.40], [23.50] s 23(4) …. [23.20], [88.70] s 23A …. [6.10], [17.26], [23.06], [23A.15], [23A.20], [23A.25], [23A.35], [24.10], [24A.05], [24A.10], [27A.05], [31.10], [31B.05], [32B.10], [39B.05], [39C.05], [S7.05], [S8.05], [S9.05] s 23A(1) …. [23A.20] s 23A(2) …. [23A.35] s 24 …. [23.25], [24.05], [24A.05], [26.11], [78.35] s 24(1) …. [23.25], [24.05] s 24(1)(a) …. [27.20] s 24(1)(b) …. [17.25] s 24(1A) …. [24.10] s 24(2) …. [23.25], [24.05] s 24A …. [24A.05], [24A.10] s 24A(1) …. [24A.15] s 25 …. [17.20], [25.05], [26A.05], [R75.05] s 25(1) …. [25.05], [25.10], [25.15] s 25(2) …. [25.15] s 25(3) …. [25.05] s 26 …. [13A.25], [26.05], [26.10], [26.35], [26A.05], [27.05], [39.15], [65.25], [190.10] s 26(1) …. [26.05], [26.30] s 26(2) …. [26.10], [26.30] s 26(3) …. [26.30]

s 26(3)(b) …. [183.25] s 26(4) …. [26.05], [26.15], [82.05] s 26(5) …. [26.20], [26.35], [82.05] s 26(6) …. [13A.30], [13A.65], [18A.15] s 26A …. [26A.05] s 27 …. [3.40], [17.60], [27.05], [27.30], [33.25], [39.15], [71.25], [153.20], [R83.05] s 27(1) …. [64.05] s 27(2) …. [27.25], [29.15] s 27A …. [23A.15] s 28 …. [17.25], [17.90], [23.10], [23.40], [28.30], [39.15] s 28(1) …. [28.05] s 28(1)(a) …. [28.15] s 28(1)(b) …. [28.15] s 28(2) …. [28.05], [28.20], [R76.05] s 29 …. [30A.05], [39.15], [R75.05], [R78.05] s 29(1) …. [25.05], [29.05], [R77.05], [R78.05] s 29(2) …. [29.10] s 29(3) …. [29.05], [R77.05] s 29(4) …. [29.05] s 29(4)(b) …. [29.05] s 30 …. [17.60], [23.10], [28.30], [30.05], [32.15], [33.25] s 30(2) …. [34.110] s 30A …. [28.30], [29.05], [30A.05], [R75.05], [R77.05] s 31 …. [17.45], [23.10], [31.10] s 31(2) …. [23A.15]

s 31A …. [6.10], [23A.15], [23A.20], [23A.25], [23A.35], [31A.05], [31B.05], [32A.05] s 31A(1) …. [31A.05] s 31B …. [23A.15], [31B.05], [R79AB.05] s 32 …. [17.80], [23.10], [26.12], [32.05], [32.15], [32.20] s 32(1) …. [32.05], [32.10], [32.15] s 32(2) …. [13A.25], [32.05] s 32(4) …. [34.110] s 32A …. [6.10], [6.55], [23A.15], [23A.25], [23A.35], [28.10], [28.31], [32A.05], [32A.10], [32B.05], [32B.10] s 32A(1) …. [111.20], [111.25] s 32AA …. [6.10], [6.55], [23A.35], [28.10], [28.31], [32B.10] s 32AA(2) …. [111.20], [111.25] s 32AB …. [32B.10] s 32B …. [6.10], [6.55], [23A.35], [28.10], [28.31], [32B.05] s 33 …. [4.15], [33.05], [35.05], [36.35], [37.10], [111.50], [194.05] s 33(2) …. [13A.30], [33.05], [33.10], [33.55] s 33(2)(a) …. [13A.30], [33.10] s 33(2)(b) …. [13A.30], [33.10] s 33(2)(c) …. [33.10] s 33(3) …. [33.05], [33.20], [33.50], [35.05] s 33(3)(a) …. [33.20], [33.25], [65.40], [66.25] s 33(3)(b) …. [33.20], [35.05], [R79.05] s 33(3)(c) …. [33.20], [35.05] s 33(3)(d) …. [33.20], [33.35], [35.05] s 33(3)(e) …. [33.20], [33.40] s 33(3)(f) …. [33.20]

s 33(4) …. [4.20], [33.65] s 34 …. [33.25], [34.05], [34.30], [34.35], [34.61], [34.80], [34.85], [39.15], [111.30], [180.20] s 34(2) …. [33.10], [34.20], [34.110] s 34(3) …. [23.40], [34.05], [34.25], [34.110], [181.15] s 34(4) …. [34.30], [34.35], [34.105], [34.110], [35.05], [181.15] s 34(5) …. [34.40], [34.110] s 34(6) …. [23.40], [34.61], [111.25], [181.15] s 34(6)(a) …. [28.30], [29.10], [34.45], [34.61], [34.110] s 34(6)(b) …. [33.25], [34.55], [34.60], [34.110] s 34(7) …. [17.45], [34.61], [34.65], [34.110], [181.15] s 34(8) …. [34.105], [181.15] s 34(8)(a) …. [34.70], [34.75], [34.80], [34.110] s 34(8)(b) …. [34.61], [34.85], [34.110] s 34(9) …. [34.90], [34.110], [181.15] s 34(10) …. [23.40], [34.95], [34.110], [142.05], [142.35] s 34(11) …. [34.100], [34.110] s 35 …. [34.25], [35.05], [35.10], [111.25] s 36 …. [4.15], [36.05], [36.10], [36.15], [36.20], [36.25], [36.35], [36.40], [36.45], [37.10], [183.25], [194.05] s 36(1) …. [36.30], [36.40], [36.50], [180.20] s 36(1)(a) …. [36.05] s 36(1)(b) …. [36.05] s 36(1)(c) …. [36.05], [36.30] s 36(1)(d) …. [36.05], [36.30] s 36(2) …. [36.10], [36.40] s 36(3) …. [36.15]

s 36(4) …. [36.20] s 36(5) …. [36.25] s 36(6) …. [36.25] s 36(7) …. [36.50] s 37 …. [37.10] s 38 …. [38.05], [38.20], [38.25] s 38(1) …. [38.05] s 38(2) …. [38.05] s 38(3) …. [38.05] s 38(4) …. [38.05] s 38(5) …. [38.05] s 38(6) …. [38.10] s 38(7) …. [38.15] s 38(8) …. [38.15] s 38(9) …. [38.15] s 39 …. [26.10], [27.05], [29.20], [34.70], [34.105], [34.110], [36.40], [39.05], [39.10], [39.15], [39.20] s 39(1) …. [27.05], [34.105], [36.40], [39.15] s 39(2) …. [27.05] s 39(3) …. [27.05] s 39(3)(a) …. [27.05], [39.15] s 39(3)(b) …. [27.05], [39.15] s 39A …. [23A.15], [23A.25] s 39B …. [6.10], [23A.15], [23A.25], [23A.35], [39B.05] s 39B(1) …. [6.10], [23A.35] s 39C …. [23A.15], [39C.05]

s 40 …. [40.05], [40.10], [40.15] s 40(2) …. [40.15] s 42 …. [42.15], [42.20] s 42(1) …. [186.10] s 42(2) …. [55.25] s 42(3) …. [111.30], [186.10] s 42(4) …. [42.20], [44.10], [124.05] s 43 …. [20.25], [43.05], [43.15], [43.20], [57.20], [189.15], [194.05] s 43(1) …. [43.05], [43.10] s 43(2) …. [43.05] s 44 …. [42.20], [44.10], [44.15] s 44(1) …. [44.05], [44.20] s 44(2) …. [44.05] s 45(1) …. [44.05], [44.20], [45.05], [45.15] s 45(2) …. [17.70] s 45(2)(a) …. [45.10] s 45(2)(b) …. [44.20], [45.10] s 45(2)(c) …. [45.10] s 45(2)(d) …. [45.10] s 46(1) …. [46.05] s 46(2) …. [46.05] s 47 …. [47.20], [47.25], [59.05], [59.15], [59.20] s 47(1) …. [47.15], [47.20] s 47(2) …. [47.05] s 47(2)(a) …. [47.10] s 47(2)(b) …. [47.10]

s 48 …. [48.10] s 48(1) …. [48.05] s 48(2) …. [48.05] s 48(3) …. [48.10] s 48(4) …. [48.10] s 48(5) …. [48.15] s 49 …. [49.10] s 49(1) …. [49.05] s 49(2) …. [49.05], [49.15], [60.15] s 50 …. [76.36] s 50(1) …. [50.05], [R80.05] s 50(2) …. [50.05] s 50(2)(a) …. [50.05] s 50(2)(b) …. [50.05] s 50(3) …. [76.36] s 50(5) …. [50.05] s 50(6) …. [50.05] s 50(8) …. [50.05] s 51 …. [51.10], [52.10], [189.10] s 51(1) …. [51.05], [189.10] s 51(2) …. [51.05], [52.05], [189.10] s 51(3) …. [51.05] s 51(4) …. [51.05] s 52 …. [52.05], [52.10], [189.10] s 52(1) …. [189.10] s 52(2) …. [51.05], [52.10]

s 52(3) …. [51.05], [52.10], [189.10] s 52(4) …. [51.05] s 53 …. [53.05], [62.05], [111.50] s 53(3) …. [53.05] s 55 …. [55.25], [186.10], [194.05], [R81.05], [S1.10] s 55(1) …. [55.15] s 55(2) …. [48.05], [55.25] s 55(3) …. [55.15] s 55(4) …. [55.15] s 56 …. [56.15], [57.10], [57.25], [59.05] s 56(1) …. [56.10] s 56(1)(a) …. [56.05], [57.10], [57.20] s 56(1)(b) …. [56.05], [57.10], [57.20], [58.20], [59.10], [S1.10] s 57 …. [20.25], [43.05], [57.05], [57.15], [57.25], [189.15], [194.05] s 57(1) …. [57.15], [57.20] s 57(1)(a) …. [187.10] s 57(1)(b) …. [57.10], [58.20], [187.10] s 57(2) …. [57.15], [57.20] s 58 …. [58.05], [58.10], [58.20] s 58(1) …. [56.15], [58.05] s 58(1)(a) …. [58.05] s 58(1)(b) …. [56.15], [58.05], [58.10], [58.15], [58.20] s 58(2) …. [58.05] s 58(3) …. [58.05], [58.15] s 59 …. [59.05], [59.15], [59.20], [61.05] s 59(1) …. [59.15]

s 59(2) …. [59.05] s 59(2)(a) …. [187.10] s 59(3) …. [59.10] s 60 …. [60.05] s 60(1) …. [49.15], [60.10], [60.15], [60.20], [191.15] s 60(2) …. [60.20], [191.15] s 60(3) …. [60.25] s 60(4) …. [60.30] s 60(5) …. [60.35] s 61 …. [4.15], [58.05], [58.15], [61.05], [61.15], [65.10], [66.10], [67.15], [68.10], [71.10], [71.20], [71.50], [71.65] s 61(1) …. [58.15], [61.05], [R56.05] s 61(1)(a) …. [58.15], [61.15], [187.10], [194.60] s 61(1)(b) …. [58.15], [61.05] s 61(2) …. [58.15], [61.10] s 62 …. [62.05], [111.50] s 62(1) …. [62.05] s 62(2) …. [62.05] s 62(3) …. [62.05] s 63 …. [63.05], [63.15], [63.20], [63.22], [66.45] s 63(1) …. [66.05], [66.45] s 63(2) …. [64.05] s 63(2)(a) …. [58.15], [61.10], [63.23], [64.25] s 63(2)(b) …. [58.15], [61.10], [63.23], [64.10], [65.10], [65.30] s 63(2)(c) …. [63.23] s 63(3) …. [63.15], [63.20]

s 64 …. [3.40], [17.60], [34.60], [34.110], [63.22], [64.05], [64.35], [64.45], [68.05], [68.25], [69.05], [111.50], [180.20], [181.15] s 64(1) …. [64.10], [64.45] s 64(2) …. [34.60], [34.110], [64.10], [64.40], [64.45] s 64(3) …. [64.10], [64.15] s 64(4) …. [64.20], [64.45] s 64(5) …. [63.23], [64.30] s 64(6) …. [64.45] s 64(7) …. [64.35] s 65 …. [65.05], [65.35], [65.40], [65.45], [65.50], [68.05], [68.25], [69.05], [180.20], [181.15] s 65(1) …. [64.10], [65.10], [65.45] s 65(2) …. [65.15], [65.40], [65.45] s 65(3) …. [65.20] s 65(4) …. [65.45] s 65(5) …. [63.23], [65.25] s 66 …. [23.10], [66.05], [66.15], [66.20], [66.35], [66.45], [68.05], [68.25], [69.05], [180.20], [181.15] s 66(1) …. [66.10], [66.35] s 66(2) …. [66.10], [66.35] s 66(3) …. [66.25], [66.35] s 66(4) …. [66.35] s 66(5) …. [66.20] s 67 …. [67.30], [68.05], [68.25] s 67(1) …. [67.10] s 67(2) …. [67.10], [67.25], [67.30] s 67(3) …. [67.30], [71.45]

s 67(4) …. [40.10], [58.15], [61.10], [67.15] s 67A …. [13A.25], [13A.30], [13A.65], [18A.15] s 68 …. [58.15], [61.10], [63.20], [63.22], [68.05], [68.25], [69.05], [111.50] s 68(1) …. [63.20], [68.10], [68.25] s 68(2) …. [68.15], [68.25] s 68(3) …. [68.25] s 69 …. [34.110], [64.10], [65.10], [65.15], [66.10], [66.15], [68.10], [68.15], [69.05] s 70 …. [33.25], [63.15] s 70(1) …. [33.25], [63.35], [70.05] s 70(2) …. [63.35], [70.05] s 71 …. [17.25], [71.10], [95.10], [95.15] s 71(1) …. [33.10], [67.05], [67.15], [71.05], [71.20], [71.25], [71.40], [71.45], [71.60] s 71(2) …. [71.15] s 71(3) …. [3.35], [27.30], [40.10], [67.05], [71.25], [71.40], [71.45], [71.60], [R83.05] s 71(4) …. [71.20] s 71(5) …. [61.15], [71.10], [71.20] s 71(6) …. [71.60] s 72 …. [72.02], [72.05], [72.12], [72.15], [72.20], [72.25], [72.60], [74.10], [74.15], [74.20], [76.35], [77.10], [89A.05], [124.15], [183.25], [R60.05], [R65A.05] s 72(2) …. [72.20], [74.15] s 72(3) …. [72.21], [72.22] s 72(4) …. [72.22] s 72(5) …. [72.12], [75.05]

s 73(1) …. [73.10] s 73(2) …. [73.05] s 73(3) …. [73.10] s 74 …. [72.20], [74.05], [74.20], [74.25] s 74(2) …. [58.15], [61.10], [74.15] s 74(3) …. [74.20], [75.05] s 75 …. [26.05] s 76 …. [6.40], [6.45], [42.25], [74.25], [76.05], [76.10], [76.15], [76.20], [76.25], [76.35], [76.36], [76.40], [76.45], [76.50], [76.65], [76.70], [78.10], [78.40], [81.05], [112.06], [128.10], [154.05], [184.25], [189.15], [199.45], [R54.05], [R56.05], [R59.05], [R60.05] s 76(1) …. [76.05], [76.40] s 76(2) …. [76.10], [76.15], [76.40], [76.50], [76.65] s 76(2)(1) …. [67.20], [76.45] s 76(2)(a) …. [76.10], [76.15] s 76(2)(b) …. [76.15], [76.50] s 76(2)(c) …. [76.15], [76.50] s 76(2)(d) …. [76.15], [76.50], [194.60] s 76(2)(e) …. [143.45] s 76(2)(f) …. [76.15] s 76(2)(g) …. [42.25], [76.15], [184.25] s 76(2)(h) …. [76.15], [76.50] s 76(2)(i) …. [76.15], [76.40], [199.45] s 76(2)(j) …. [76.15], [199.45] s 76(2)(k) …. [76.05], [76.15], [76.50], [184.25], [194.60] s 76(2)(l) …. [76.05], [76.15], [76.50], [199.45]

s 76(2)(m) …. [76.05], [76.55] s 76(2)(n) …. [76.05], [76.36] s 76(2)(o) …. [30.15], [76.05], [76.15], [78.10] s 76(4) …. [76.10], [76.15], [76.30], [76.50] s 76(5) …. [76.10], [76.25] s 76(6) …. [76.35], [78.40] s 76(7) …. [76.36] s 76(8) …. [76.10] s 77 …. [76.05], [76.65], [76.70], [77.10], [112.15] s 77(E) …. [112.06] s 78 …. [23.10], [26.20], [31.05], [64.10], [78.15], [78.31], [78.35], [78.40], [78.45], [81.05], [177.10], [R79A.20] s 78(1) …. [78.35] s 78(1)(a) …. [78.10] s 78(2)(a) …. [78.10] s 78(2)(b) …. [78.10] s 78(3) …. [78.15], [78.25], [78.31], [78.35] s 78(4) …. [17.45], [78.30], [78.31], [78.35] s 79 …. [79.10] s 79(3)(a) …. [112.06] s 80 …. [80.05] s 80(1) …. [88.10] s 80(2) …. [88.80] s 81 …. [81.05] s 81(1) …. [81.10] s 82 …. [36.30], [82.15], [82.20], [82.30], [83.10], [124.15]

s 82(1) …. [26.20], [78.30], [82.35] s 82(2) …. [82.05], [82.10], [82.15], [82.20], [82.30], [83.20] s 82(2)(d) …. [26.20], [82.05] s 83 …. [4.15], [83.10], [83.15], [83.35], [83.40], [84.10], [84.15], [124.15], [180.20], [181.15], [183.25], [194.05] s 83(1) …. [83.35], [84.15] s 83(2) …. [84.15] s 83(3) …. [83.35], [84.15] s 83(4) …. [83.30] s 83(5) …. [83.35] s 84 …. [83.35], [84.10], [84.15] s 84(1)(b) …. [85.20] s 84(2) …. [84.10] s 85 …. [85.05], [85.20], [85.25], [85.35], [85.40], [85.45], [86.15], [91.10], [102.50], [104.25] s 85(3) …. [85.15], [S1.10] s 85(5) …. [85.15], [85.30] s 85(5)(a) …. [85.40] s 85(6) …. [85.30] s 85(7) …. [85.35] s 85(8) …. [85.10] s 85(8)(d) …. [85.40] s 85(9) …. [85.15], [104.30] s 85(11) …. [85.45] s 86 …. [86.05], [86.10] s 86(1) …. [85.30] s 86(2) …. [94.10]

s 86A …. [13A.25], [13A.30], [26.35], [86C.05] s 86B …. [13A.25], [13A.30] s 86C …. [13A.25], [13A.30], [18A.15], [86D.05] s 86D …. [13A.25], [13A.30], [93A.10] s 86E …. [13A.25], [13A.30], [86E.05] s 86F …. [13A.25], [13A.30], [86F.05] s 87 …. [39C.05], [87.05], [87.10], [R69.05] s 87(1)(c) …. [R69.05] s 87(2) …. [87.20], [R69.05] s 87(3) …. [S1.10] s 87(4) …. [87.20] s 87(6) …. [87.25] s 88 …. [4.15], [18A.15], [23.40], [72.50], [72.55], [74.20], [88.05], [88.10], [88.35], [88.70], [88.75], [88.80], [88.95], [89.05], [90.10], [93.10], [93A.10], [95.05], [104.25], [111.50], [194.55] s 88(1) …. [13A.25], [13A.30], [13A.65], [88.05], [88.10], [88.20], [88.30], [88.70], [88.90], [89.05], [90.05], [187.10] s 88(1)(a) …. [88.30], [90.05] s 88(2) …. [13A.30], [13A.65], [88.05], [88.20], [88.30], [88.70], [88.90], [89.05], [90.05], [183.20], [187.10] s 88(2)(a) …. [88.30] s 88(3) …. [88.30], [88.50], [89.05], [89.10], [180.20] s 88(3)(f) …. [R86.05], [S1.10] s 88(3)(g) …. [R86.05], [S1.10] s 88(3)(i) …. [88.85] s 88(4) …. [88.20] s 88(5) …. [88.15], [88.30], [93.25]

s 88(5)(a) …. [88.06] s 88(5)(b) …. [178.15] s 88(5)(d) …. [88.06], [88.15], [178.15] s 88(6) …. [88.06], [88.30] s 88(7) …. [88.70] s 88(7A) …. [13A.30], [88.90] s 88(7B) …. [13A.30] s 88(8) …. [88.10], [88.45] s 88A …. [72.55] s 89 …. [88.90], [89.05] s 89(2) …. [89.05], [89.10] s 89A …. [89A.05] s 90 …. [88.05], [90.05], [90.10], [94.05], [95.05], [111.50] s 90(1) …. [90.20] s 90(2) …. [90.20] s 91 …. [7.20], [91.05], [98.05], [111.50], [R64.05] s 91(1) …. [91.10], [91.30] s 91(2)(a) …. [91.10] s 91(2)(b) …. [91.10] s 91(3) …. [91.30] s 91(4) …. [91.25] s 92 …. [88.30], [92.01], [92.10], [93.25] s 92(1) …. [92.05], [92.10] s 92(1)(a) …. [92.05] s 92(1)(b) …. [92.05], [93.25] s 92(2) …. [9.25], [92.10]

s 93 …. [88.06], [88.30], [88.90], [89.05], [92.05], [92.10], [93.05], [93.10], [93.25], [93.30], [104.25] s 93(1)(b) …. [93.15] s 93(1)(c) …. [93.25] s 93(2) …. [93.25] s 93(2)(b) …. [88.15] s 93(2)(c) …. [88.15] s 93(3) …. [93.30] s 93A …. [13A.25], [13A.30], [18A.15], [88.90], [93A.05], [93A.10] s 94 …. [88.90], [94.05], [94.10], [96.05] s 94(1) …. [94.05] s 94(2) …. [94.25], [94.30] s 94(3) …. [94.30] s 94(4) …. [94.10] s 95 …. [88.90], [95.10], [95.15] s 95(1) …. [95.05], [95.10], [95.15] s 95(2) …. [95.10], [95.20] s 95(3) …. [95.05], [95.10], [95.15], [95.25] s 95(4) …. [95.25] s 95(5) …. [95.05] s 95(6) …. [95.05], [95.15] s 96 …. [96.05] s 96(1) …. [96.05] s 96(2) …. [58.15], [61.10], [96.05] s 96(3) …. [96.15], [102.30] s 97(1) …. [97.05]

s 97(2) …. [97.05] s 98 …. [88.05], [98.10], [111.50], [178.05] s 98(1) …. [98.10] s 98(2) …. [98.10] s 98(3) …. [98.10] s 99 …. [99.20], [99.35], [100.05] s 99(1) …. [99.10], [156.10] s 99(1)(a) …. [99.30] s 99(1)(b) …. [187.10] s 99(2) …. [R87.05], [S1.10] s 99(3) …. [99.35] s 99(4) …. [99.35] s 99(5) …. [88.95] s 100 …. [100.05], [100.10] s 101 …. [101.10], [101.20] s 101(1) …. [99.30] s 101(3) …. [101.20] s 101(4) …. [101.20] s 102 …. [102.15], [102.50], [102.55], [103.05], [103.10], [104.05], [178.30] s 102(1) …. [102.20], [187.10] s 102(1)(a) …. [102.10] s 102(1)(b) …. [102.10], [102.15] s 102(1)(c) …. [102.10], [S1.10] s 102(2) …. [102.20] s 102(3) …. [102.30]

s 102(4) …. [102.35] s 102(4)(a) …. [102.35] s 102(5) …. [102.55] s 102(6) …. [102.55] s 103 …. [103.05], [103.25], [104.05], [104.15] s 103(1) …. [103.15] s 103(2) …. [103.15], [103.25] s 103(3) …. [103.25] s 104 …. [104.15], [104.25], [104.55], [104.60], [178.30] s 104(2) …. [104.20], [104.25], [105.05] s 104(3) …. [104.30], [104.45], [R89.05] s 104(4) …. [104.55] s 104(5) …. [104.55] s 105 …. [104.20], [104.35], [105.05] s 105(a) …. [104.40] s 106 …. [86.10], [104.15], [106.05], [106.10] s 106(1) …. [104.15], [106.05] s 106(2) …. [106.05] s 107 …. [49.10], [49.15], [82.25], [105.10], [107.05], [107.20] s 107(1) …. [107.05], [107.10] s 107(2) …. [107.10], [107.15] s 107(3) …. [107.25] s 108 …. [108.05], [109.05], [110.05] s 108(3) …. [108.05] s 108(4) …. [108.05] s 109 …. [109.05], [110.05]

s 109(1) …. [109.05] s 109(1)(c) …. [178.30] s 109(4) …. [109.05] s 109(5) …. [109.05] s 111 …. [13A.30], [17.25], [17.45], [17.75], [22.05], [32A.10], [33.70], [111.05], [111.10], [124.10], [R106.15] s 111(1) …. [13A.25], [111.15] s 111(1)(e) …. [111.10], [111.20] s 111(1)(ha) …. [13A.30] s 111(1)(i) …. [23.25], [27.20] s 111(2) …. [33.70], [111.15] s 111(2)(d) …. [111.10] s 111(2)(ea) …. [13A.30] s 111(2)(f) …. [23.25], [27.20] s 111(2)(h) …. [35.10] s 111(3) …. [111.35] s 112 …. [38.20], [111.05], [112.15], [113.20], [114.05], [114.25], [118.15], [124.10], [189.15] s 112(1) …. [23.40], [111.05], [113.20] s 112(2) …. [111.05], [112.20], [112.25], [114.25], [118.10], [118.35], [120.05] s 112(3) …. [112.20], [118.10] s 113 …. [17.75], [23.40], [112.15], [118.35], [191.10] s 113(1) …. [111.05], [112.15], [113.10] s 113(2) …. [111.05], [112.15], [113.10], [113.15], [113.20] s 113(3) …. [111.05], [113.15] s 113(4) …. [111.05], [112.30], [113.20], [114.20], [114.25]

s 113(4)(a) …. [113.20] s 113(4)(b) …. [113.20] s 113(4)(c) …. [114.20], [114.25] s 113(4)(e) …. [199.45] s 113(4)(f) …. [113.20] s 113(4)(g) …. [111.05] s 113(4)(h) …. [111.05], [113.20] s 113(4)(i) …. [113.20] s 113(5) …. [112.20], [113.25], [116.25] s 113(6) …. [112.15], [113.30] s 114 …. [23.40], [112.05], [114.05], [114.15], [114.20], [114.25], [118.15], [118.20], [124.10] s 114(1) …. [111.05], [114.30] s 114(1)(a) …. [114.10], [114.25], [118.20] s 114(1)(b) …. [114.10] s 114(1)(c) …. [114.10] s 114(1A) …. [23A.15], [114.30] s 114(2) …. [111.05], [114.10], [114.20], [114.25], [118.20] s 115 …. [115.05], [115.10], [115.15], [118.15], [199.45] s 115(1) …. [23.40], [111.05], [114.15], [114.25], [115.15], [115.25] s 115(2) …. [112.15], [115.25] s 115(3) …. [115.20] s 116 …. [111.05], [112.05], [112.06], [114.05], [114.25], [116.05], [116.25], [118.10], [118.35] s 116(1) …. [113.25] s 117 …. [111.05], [112.30], [117.05] s 118 …. [112.15], [112.20], [112.30], [114.20], [114.25], [118.05],

[118.10], [118.15], [118.20], [119.10], [120.05], [128.10], [191.10] s 118(1) …. [114.20], [114.25], [118.20] s 118(2) …. [114.25], [118.20] s 118(3) …. [114.25] s 118(4) …. [118.10] s 119 …. [119.05], [119.15] s 119(2) …. [112.15], [112.30], [119.10] s 120 …. [120.05] s 121 …. [112.15] s 121(2) …. [121.05] s 122 …. [122.05] s 123 …. [123.05] s 124 …. [17.10], [17.75], [22.05], [64.45], [65.45], [66.35], [67.30], [68.25], [72.02], [83.35], [88.70], [111.45], [111.50], [124.05], [124.10], [124.15], [128.10], [191.10] s 124(1) …. [124.10], [124.15] s 124(1)(a) …. [124.15] s 124(2) …. [124.15] s 125 …. [125.05], [125.10] s 126 …. [126.05] s 127 …. [125.15], [127.05] s 127(1)(a) …. [127.10] s 127(1)(b) …. [127.10] s 127(1)(c) …. [127.10] s 127(1)(d) …. [127.10] s 127(2) …. [127.15], [143.40]

s 127(3) …. [127.20], [135.05], [143.40] s 128 …. [124.15], [125.05], [125.20], [128.05], [128.10], [129.25], [R25J.05] s 129 …. [125.05], [125.20], [128.05], [129.05], [129.25], [130.05], [130.10], [130.15], [133.05] s 129(1) …. [129.10] s 129(2) …. [129.15] s 129(2)(b) …. [129.15] s 129(2)(b)(i) …. [129.15] s 129(2)(b)(ii) …. [129.15] s 130 …. [130.05] s 130(2) …. [130.10] s 130(3) …. [130.10] s 130(4) …. [130.15], [131.05] s 130(4)(a) …. [3.35] s 130(5) …. [130.20] s 130(5)(a) …. [187.10] s 130(6) …. [130.05] s 130(6)(a) …. [187.10] s 131 …. [125.05], [131.05] s 132 …. [132.05] s 133 …. [133.05] s 133BBH …. [67.06] s 133BE …. [67.06] s 133BF …. [67.06] s 134 …. [125.20], [134.05], [134.10] s 134(1) …. [134.20]

s 134(2) …. [134.20] s 134(3) …. [134.25] s 134(3)(a) …. [134.25] s 134(3)(b) …. [134.25] s 134(4) …. [134.10] s 135 …. [125.20], [135.05], [135.15], [135.20], [135.25], [135.30], [218.05] s 135(1) …. [135.05] s 135(2) …. [135.05] s 135(3) …. [135.15] s 135(4) …. [135.15] s 135(5) …. [135.15] s 135(6) …. [135.10], [137.05] s 135(7) …. [135.20] s 135(8) …. [135.05], [135.25] s 136 …. [136.05] s 136(2) …. [136.05], [S1.10] s 136(3) …. [136.05] s 136(4) …. [136.05] s 137 …. [134.20] s 138 …. [138.05] s 139 …. [139.05] s 140 …. [17.10], [140.05], [140.10] s 140(1) …. [140.10] s 141 …. [141.10] s 141(3) …. [141.10]

s 142 …. [17.80], [142.05], [R93.05] s 142(1) …. [147.10] s 142(2) …. [142.05], [142.15] s 142(3) …. [142.05], [142.20] s 143 …. [32.15], [143.55], [143.60], [143.75] s 143(1) …. [143.05], [143.25], [143.30] s 143(2) …. [143.05], [143.50] s 143(2)(a) …. [143.05], [143.35], [143.50] s 143(2)(b) …. [143.05], [143.45] s 143(3) …. [143.75] s 144 …. [144.05], [144.15], [144.25] s 144(1) …. [144.05], [144.25] s 144(2) …. [144.20] s 144(3) …. [88.70], [144.05], [144.25] s 145 …. [32.20], [145.05], [145.15], [145.20] s 145(1) …. [145.10], [145.15] s 145(2) …. [145.05], [145.15] s 145(3) …. [145.15], [145.25] s 145(5) …. [88.70], [145.05], [145.25] s 146 …. [142.05], [146.35], [R93.05] s 146(1) …. [146.15], [146.20], [146.30] s 146(2) …. [146.10], [146.15], [146.30], [146.35] s 146(4) …. [146.35] s 147 …. [147.05], [R110.05] s 147(2) …. [147.15] s 147(3) …. [147.15]

s 148 …. [82.10], [82.20], [142.05], [148.15], [148.20] s 148(1) …. [R94.05] s 148(2) …. [82.30] s 148(4) …. [148.25], [R94.05] s 148(5) …. [148.20] s 148(6) …. [148.25] s 149 …. [142.05], [149.20], [149.25] s 149(2) …. [149.30], [S1.10] s 149(3) …. [149.30] s 149(5) …. [149.20] s 149(6) …. [149.25] s 150 …. [150.01], [150.02], [150.10], [150.15], [150.25], [150.35], [150.45], [151.05], [151.15], [151.25], [152.05], [152.20] s 150(1) …. [150.25], [151.25], [152.10], [152.20] s 150(2) …. [150.20] s 150(3) …. [150.15], [150.35] s 150(4) …. [151.25], [152.10], [152.20] s 150(5) …. [124.05] s 151 …. [151.05], [151.25], [152.05] s 151(1) …. [150.05], [151.10], [151.15], [151.20], [151.25], [151.30] s 151(2) …. [151.05], [151.25], [152.10], [154.25] s 152 …. [152.05], [152.10], [152.15], [152.20], [154.25] s 153 …. [150.35], [153.05], [153.10], [153.15], [153.20], [153.30] s 153(1) …. [153.05] s 153(1)(a) …. [153.25] s 153(2) …. [153.30]

s 154 …. [128.10], [150.15], [152.20], [154.05], [154.10], [154.35] s 154(1) …. [154.05], [154.25] s 154(2) …. [152.20] s 154(3) …. [124.05], [154.25], [154.30] s 155 …. [155.05], [155.10], [156.15], [156.20], [156.25] s 156 …. [155.05], [156.05], [156.10], [156.15], [156.20], [156.25] s 156(1) …. [156.10] s 156(2) …. [156.10], [156.15] s 157 …. [16.40], [150.01], [157.30] s 158 …. [159.10] s 159 …. [150.10], [159.05], [160.05], [165.05] s 160 …. [16.40], [160.05], [160.10], [161.05], [165.05], [R71.05] s 160(1) …. [150.15] s 160(2) …. [150.15] s 161 …. [161.05] s 161(1) …. [R97.05] s 161(2) …. [R97.05] s 162 …. [162.05] s 162(1) …. [150.15], [162.05] s 162(2) …. [162.05], [R98.05] s 163 …. [163.05] s 163(1) …. [R99.05] s 164 …. [164.05] s 164(1) …. [164.05] s 164(2) …. [164.05] s 164(3) …. [163.05], [164.10], [164.15]

s 165 …. [165.05] s 166 …. [166.05], [166.10], [R100.06] s 166(2) …. [R100.15] s 167 …. [R100.15] s 168 …. [R100.06] s 169A …. [192.05] s 170 …. [170.05] s 170(1)(b) …. [170.15] s 170(1)(c) …. [170.20] s 170(2) …. [170.30] s 170(3) …. [170.15] s 170(4) …. [170.10] s 171(1) …. [171.05] s 171(2) …. [171.05], [R102.05] s 171(3) …. [171.05] s 171(4) …. [171.05] s 171(6) …. [171.05] s 172 …. [R103.05] s 172(1) …. [172.05] s 172(2) …. [172.05], [172.10] s 172(3) …. [172.15], [199.15] s 172(6) …. [172.25] s 172(6)(c) …. [172.25] s 172(7) …. [172.25] s 173 …. [173.05] s 173(1) …. [173.05], [173.15], [179W.10]

s 173(2) …. [173.10] s 173(3) …. [173.05] s 173(4) …. [173.05] s 174 …. [173.05] s 174(1) …. [174.05], [180.20], [181.15] s 174(2)(a) …. [72.02] s 174A …. [19.06] s 175 …. [175.20], [175.25] s 175(1) …. [175.05], [175.10], [175.15], [175.30], [S1.10] s 175(2) …. [175.05], [175.10], [175.15], [175.25] s 175(3) …. [175.30] s 175(4) …. [175.20], [175.25] s 175J …. [40.05], [40.15], [175J.05] s 176 …. [176.05], [176.10] s 177 …. [178.30] s 177(1)(a) …. [72.05], [76.05], [177B.05] s 177(1)(b) …. [178.05], [179L.05] s 177(1)(c) …. [175.20], [184.05], [184.25] s 177A …. [177J.05] s 177B …. [72.02], [72.03], [72.45] s 177D …. [177E.05] s 178 …. [178.05], [178.15], [178.20], [178.30] s 178(1) …. [178.25], [187.10] s 178(2)(b) …. [178.15] s 178(2)(c) …. [178.15] s 178(3) …. [178.25]

s 179C …. [S1.10] s 179C(2) …. [S1.10] s 179D …. [72.55], [179F.05] s 179F …. [72.55] s 179N(1) …. [S1.10] s 179T …. [179U.05] s 179U …. [179V.10] s 180 …. [17.05], [17.20], [17.35], [17.40], [17.90], [28.35], [34.15], [34.40], [34.110], [71.25], [114.10], [157.25], [174.25], [180.05], [180.20], [180.35], [180.40], [180.45], [180.50], [R71.05], [R100.06], [R100.15], [S5.05] s 180(1) …. [16.35], [16.50], [83.05], [174.10], [174.20], [180.05] s 180(1)(a) …. [17.20], [88.35], [R106.05] s 180(1)(b) …. [16.45], [17.25], [83.15], [93.20] s 180(2) …. [83.15], [180.35], [180.40], [180.45] s 180(2)(a) …. [180.35] s 180(2)(b) …. [180.35] s 180(2)(c) …. [83.15], [180.35] s 180(3) …. [83.15], [180.35], [180.40], [180.45] s 180(4) …. [17.45], [83.15], [180.35], [180.40], [180.45], [R100.15] s 180(4)(a) …. [83.15] s 180(4)(b) …. [83.15] s 180(5) …. [174.15], [174.25], [180.60] s 180(6) …. [180.45], [180.50] s 180(7) …. [17.15], [17.20], [17.80], [180.55] s 180A …. [76.75] s 181 …. [17.90], [180.10], [180.35], [R107.05]

s 182 …. [17.35], [17.90], [71.25], [114.10], [174.15], [180.15], [180.35], [180.40], [180.45] s 183(2) …. [34.15], [88.20], [183.20] s 183(3) …. [135.10], [183.25], [183.30], [186.10] s 184 …. [14.05], [34.15], [42.25], [55.20], [76.15], [184.10], [R110.05] s 184(1) …. [18.15], [34.15], [184.10], [184.16] s 184(1)(b) …. [18.15], [88.25], [R110.05] s 184(2) …. [184.10], [R110.05] s 184(3) …. [184.05] s 185 …. [185.15], [185.25], [185.30] s 185(1) …. [185.35] s 185(1)(a) …. [185.05] s 185(1)(b) …. [185.05] s 185(1)(c) …. [185.05] s 185(2)(a) …. [185.05] s 185(2)(b) …. [185.05] s 185(3) …. [185.15], [185.35] s 185(4) …. [185.35] s 185A …. [13A.25], [13A.30], [13A.65], [18A.15], [185A.05] s 185A(1) …. [R110A.05] s 186 …. [13.45], [14.30], [186.05], [186.10], [186.20] s 187 …. [15.05], [19.10], [173A.05], [187.05] s 187(1) …. [187.10] s 187(2) …. [187.15] s 188 …. [188.30], [R25L.05] s 188(2) …. [188.25], [188.30]

s 189 …. [189.10], [189.15] s 189(2) …. [189.05] s 189(3) …. [189.10] s 190 …. [26.11], [26.25], [190.15] s 190(1) …. [190.05], [190.15] s 190(2) …. [190.20] s 190(4) …. [190.05] s 191 …. [6.10], [17.90], [58.10], [88.05], [111.45], [195.30], [R28XXF.05] s 191(1) …. [111.45] s 191(3) …. [111.45], [191.20] s 191(4) …. [191.20] s 191(5) …. [191.15] s 192 …. [192.05], [192.10], [192.15] s 192(1) …. [192.05] s 192(2) …. [192.10], [192.20] s 193(1) …. [193.05] s 193(2) …. [193.05] s 194 …. [20.15], [36.20], [43.20], [57.25], [175.25], [194.05], [194.40], [194.55], [194.60], [R111.05], [R111.10] s 194(1) …. [20.15], [43.20], [57.25], [175.25], [194.10] s 194(1)(b) …. [20.15], [20.20], [194.55] s 194(1)(c) …. [88.55], [194.40] s 194(2) …. [33.50], [88.15], [194.15], [194.20], [204.31] s 194(3) …. [194.25], [194.65] s 194(4) …. [20.15], [43.20], [57.25], [88.55], [194.25], [194.30], [194.35], [194.55], [194.65], [R111.05]

s 194(5) …. [20.15], [43.20], [57.25], [88.55], [194.25], [194.35], [194.55], [194.65], [R111.10] s 194(6) …. [194.40], [204.65], [R111.05] s 194(6)(a) …. [194.55] s 194(6)(b) …. [194.55] s 194(6)(c) …. [194.55] s 194(7) …. [194.45], [194.55] s 194(8) …. [194.40] s 194(9) …. [194.50] s 195 …. [19.10], [33.50], [58.10], [85.25], [88.55], [137.05], [195.05], [195.25], [195.35] s 195(1) …. [195.05], [195.10] s 195(1)(a) …. [195.10] s 195(1)(b) …. [195.10] s 195(2) …. [195.05], [195.15] s 195(2)(a) …. [195.15] s 195(2)(b) …. [195.15], [195.16] s 195(3) …. [195.20] s 196 …. [33.15], [36.10], [63.30], [85.25], [88.60], [185.20], [196.05] s 196(1)(a) …. [196.15] s 196(1)(b) …. [196.15] s 196(1)(c) …. [196.10], [196.15] s 199 …. [155.05], [199.20] s 199(1) …. [199.05] s 199(2) …. [14.10], [14.30], [21.30], [186.05], [186.15], [204.65] s 199(3) …. [21.30]

s 199(4) …. [76.15], [127.20], [199.10], [199.15] s 199(5) …. [13.35] s 200 …. [199.50], [200.05] s 201 …. [199.50] s 201(1) …. [201.05] s 202 …. [202.10] s 203 …. [203.05] s 203A …. [203A.05] s 203A(1) …. [203A.05] s 203A(2) …. [203A.05] s 203A(3) …. [203A.05] s 203A(4) …. [203A.10] s 203A(5) …. [203A.15] s 203B …. [203B.05], [R52.05], [R54.05], [R55.05], [R56.05], [R59.05], [R60.05], [R61.05], [R63.05], [R65A.05], [R65B.05], [R69.05] s 204 …. [2.05], [5.20], [5.31], [6.10], [7.15], [8.15], [9.15], [13A.25], [13A.80], [14.15], [17.45], [17.60], [17.70], [17.75], [21.15], [23.35], [23A.15], [31A.05], [32B.10], [34.110], [42.10], [49.10], [51.10], [55.10], [64.15], [66.05], [66.45], [71.45], [76.05], [76.10], [76.45], [82.10], [82.25], [82.30], [85.40], [88.10], [88.15], [91.20], [93.05], [93.25], [94.15], [94.20], [98.15], [102.15], [105.10], [107.20], [111.20], [125.10], [127.10], [137.05], [142.15], [142.20], [143.10], [143.30], [143.40], [145.20], [146.20], [146.25], [147.10], [148.15], [151.20], [153.15], [158.05], [169.07], [169.15], [175.25], [177F.10], [182.20], [204.55], [R58.05], [R64.05], [R93.05] s 204(1) …. [13A.30], [23A.25], [92.01], [204.01], [204.02] s 204(1)(a) …. [204.01] s 204(1)(a)(i) …. [204.01]

s 204(1)(a)(ii) …. [204.01] s 204(2) …. [14.30], [21.30], [179W.05], [186.15], [199.30], [204.65] s 204(3) …. [204.02] s 205 …. [205.05] s 206 …. [3.10], [4.05], [4.20], [124.05], [205.05], [206.05], [206.10] s 206(1) …. [206.10] s 206(2) …. [206.10] s 206(3) …. [130.05], [134.10], [206.15] s 206(4) …. [20.15], [43.20], [57.25], [206.15] s 207 …. [207.05] s 207(a) …. [207.10] s 207(b) …. [207.15] s 208 …. [13.40], [208.05], [R6.05] s 208(1) …. [208.10] s 208(2) …. [13.40], [208.10], [208.15] s 209 …. [209.05] s 209(1) …. [209.10] s 209(2) …. [209.10] s 209(3) …. [209.15] s 209(4) …. [209.15] s 210 …. [115.15], [210.05] s 210(1) …. [113.10], [210.10] s 210(2) …. [210.15] s 210(3) …. [210.05] s 211 …. [5.10], [169.20], [211.05] s 212 …. [212.05]

s 213 …. [213.05] s 214(a) …. [214.05] s 214(b) …. [214.05] s 215 …. [215.05] s 216 …. [216.05] s 216(1) …. [216.05] s 216(2) …. [216.05] s 217 …. [217.05] s 218 …. [85.25], [88.65], [90.15], [98.20], [135.05], [146.30], [175.15], [178.10], [185.25], [196.25], [218.05] s 218(2) …. [63.30], [146.30] s 218(3) …. [146.30] s 218(4) …. [146.30] s 218(5) …. [65.40], [218.05] s 218(6) …. [146.30] s 1945 …. [194.20] reg 51 …. [R51.05] Sch 1 s 23A …. [23A.25] National Consumer Credit Protection Regulations 2010 …. [R1.05], [R4D.10] Ch 2 …. [R21.10] Ch 3 …. [R26.05] Ch 7 Pt 7.8 …. [150.15] Pt 6.2 …. [R37.05] Pt 7.1 …. [R50.05]

reg 26A …. [R26A.05] reg 26A(2) …. [R26A.05] reg 26A(3) …. [R26A.05] reg 26A(4) …. [R26A.05] reg 26A(5) …. [R26A.05] reg 26B …. [R26B.05] reg 27 …. [R27.05] reg 27(2) …. [R27.10] reg 27(3) …. [R27.10] reg 27A …. [R27A.05], [R27A.10] reg 27A(2) …. [R27A.10] reg 27A(3) …. [R27A.10] reg 27A(4) …. [R27A.10] reg 27A(5) …. [R27A.10] reg 27B …. [R27B.05] reg 28 …. [R28.05], [R28B.05], [R28P.20] reg 3 …. [R3.05], [R11.05], [R23.10] reg 4 …. [R4.05] reg 4D …. [R4D.05], [R4D.10] reg 5 …. [R5.05] reg 6 …. [S1.05] reg 6(5) …. [16.55] reg 7 …. [R11.05] reg 8(1) …. [R8.05] reg 8(2)(c) …. [R8.05] reg 8(3) …. [R8.05]

reg 8(5) …. [R8.05] reg 8(7) …. [R8.05] reg 9 …. [R9.05] reg 9(10) …. [R9.05] reg 9(14) …. [R9.05] reg 9A …. [R9A.05] reg 9AB …. [R9AB.05], [R25.30] reg 10 …. [187.20], [R10.05] reg 11 …. [187.20], [R7.05], [R11.05] reg 12 …. [R12.05] reg 12(3) …. [R12.05] reg 13 …. [17.15], [R13.05] reg 13(2) …. [R13.05] reg 13A …. [S5A.05] reg 14 …. [R14.05] reg 15 …. [R15.05] reg 16 …. [R16.05], [R16.10], [R28.05] reg 17 …. [R17.05] reg 18 …. [R18.05], [R19.05] reg 18(1)(b) …. [R19.05] reg 18(1)(c) …. [R19.05] reg 19 …. [R18.05], [R19.05] reg 19(2) …. [R19.05] reg 19(2)(a) …. [R19.05] reg 20(1)(e) …. [R20.40] reg 20(3) …. [R20.10]

reg 20(3)(a)(i) …. [R20.10] reg 20(3)(a)(ii) …. [R20.10] reg 20(3)(b)(i) …. [R20.10] reg 20(3)(b)(ii) …. [R20.10] reg 20(3)(c) …. [R20.10] reg 20(3)(d) …. [R20.10] reg 20(3)(e)(i) …. [R20.10] reg 20(3)(e)(ii) …. [R20.10] reg 20(3)(f)(i) …. [R20.10] reg 20(3)(f)(ii) …. [R20.10] reg 20(3)(fa)(i) …. [R20.10] reg 20(3)(fa)(ii) …. [R20.10] reg 20(3)(g)(i) …. [R20.10] reg 20(3)(g)(ii) …. [R20.10] reg 20(3)(h) …. [R20.10] reg 20(3)(j) …. [R20.10] reg 20(3)(k)(i) …. [R20.10] reg 20(3)(k)(ii) …. [R20.10] reg 20(3)(l)(i) …. [R20.10] reg 20(3)(l)(ii) …. [R20.10] reg 20(4) …. [R20.10] reg 20(5) …. [R20.15], [R20.20] reg 20(6) …. [R20.25] reg 20(7) …. [R20.30] reg 20(8) …. [R20.35] reg 20(9) …. [R20.35]

reg 20(10) …. [R20.35] reg 20(11) …. [R20.40], [R25J.05] reg 20(11)(b) …. [R20.40] reg 20(11)(d) …. [R20.40] reg 20(12) …. [R20.45] reg 20(13) …. [R20.50] reg 21 …. [R20.35], [R21.05], [R21.10] reg 22 …. [R22.05] reg 23 …. [R23.05], [R23.10], [R23.20], [R23A.10], [R25.15], [R25B.05], [R25D.05] reg 23A …. [94.10], [R23.20], [R23A.05], [R23A.10], [R25C.05], [R25D.05] reg 23A(4) …. [R23A.05] reg 23A(5) …. [R23A.05] reg 23B …. [R23B.05], [R23C.05] reg 23C …. [R23B.05], [R23C.05] reg 23D …. [R23D.05] reg 24 …. [R24.05] reg 24(2) …. [R24.05] reg 24(3) …. [R24.10] reg 24(4) …. [R24.05] reg 24(5) …. [R24.05], [R24.15] reg 24(6) …. [R24.05], [R25.15] reg 24(7) …. [R24.20], [R25.15] reg 24(8) …. [R24.05], [R24.25], [R25.15] reg 24(9) …. [R24.05], [R24.30] reg 25 …. [R25.15]

reg 25(2) …. [R25.15], [R25.20] reg 25(2A) …. [R25.15], [R25.20] reg 25(3) …. [R25.25] reg 25(4) …. [R25.15], [R25.30], [R25J.05] reg 25(5) …. [R9AB.05], [R25.15], [R25.30], [R25J.05] reg 25A …. [R25A.05] reg 25B …. [R23.10], [R25B.05], [R25B.10] reg 25C …. [R23A.05], [R25C.05] reg 25D …. [R23.20], [R25D.05] reg 25E …. [R25E.05], [S2.05] reg 25F …. [R7A.05], [R25F.05] reg 25G …. [R25G.05], [S3.05] reg 25H …. [R23D.05] reg 25I …. [R25I.05] reg 25J …. [R25J.05] reg 25K …. [R25M.05] reg 25M …. [R25M.05] reg 26 …. [R3.05], [R26.05], [R26A.05], [R28L.15], [R28P.05] reg 28A …. [R28A.05], [R28P.05] reg 28B …. [R28B.05], [R28P.20] reg 28B(2)(a) …. [R28B.05] reg 28B(2)(b) …. [R28B.05] reg 28B(3) …. [R28B.05] reg 28C …. [R28C.05], [S4.15] reg 28C(a) …. [R28C.05] reg 28C(b) …. [R28C.05]

reg 28D …. [R28D.05], [R28D.10] reg 28E …. [R28E.05], [R28E.10] reg 28F …. [R28E.05], [R28F.05] reg 28G …. [R28E.05], [R28G.05] reg 28H …. [R28E.05], [R28H.05] reg 28HA …. [R28LC.10] reg 28J …. [R28J.05] reg 28JA …. [R28JA.05] reg 28L …. [R28L.05], [R28L.10], [R28N.15] reg 28L(1) …. [R28L.10] reg 28L(1)(m) …. [R28L.10] reg 28L(3) …. [R28L.05] reg 28L(4)(a) …. [R28L.05] reg 28L(5) …. [R28L.05] reg 28L(6) …. [R28L.05] reg 28L(8) …. [R28L.05] reg 28L(9) …. [R28L.05] reg 28LA …. [R28LA.05] reg 28LB …. [14.07], [R28LB.05] reg 28LC …. [R28LC.05], [R28LC.10] reg 28LD …. [R28LC.10] reg 28LD(1) …. [R28LD.05] reg 28LD(2) …. [R28LD.05] reg 28LE …. [R28LC.10], [R28LE.05], [R69C.05], [S5A.05] reg 28LF …. [R28LF.05] reg 28LFA …. [14.07], [R28LFA.05], [S6.05]

reg 28LFA(2) …. [R28LFA.05] reg 28LFB …. [R28LFB.05] reg 28LG …. [R28LG.05] reg 28LH …. [67.06], [R28LH.05] reg 28LI …. [67.06], [R28LI.05] reg 28LI(2) …. [R28LI.05] reg 28LJ …. [67.06], [R28LJ.05] reg 28LK …. [R28LK.05] reg 28LL …. [R28LL.05] reg 28LM …. [R28LM.05] reg 28LN …. [R28LN.05] reg 28M …. [R28M.05], [S4.05] reg 28N …. [R28N.10] reg 28N(1) …. [R28N.05], [R28N.10] reg 28N(2) …. [R28N.15] reg 28N(4) …. [R28N.20] reg 28N(4)(a) …. [R28N.20] reg 28N(4)(b)(i) …. [R28N.20] reg 28N(5) …. [R28N.05], [R28N.15], [R28N.20] reg 28P …. [R28A.05], [R28P.05], [R28P.10] reg 28P(1) …. [R28P.15] reg 28P(1)(b) …. [R28P.15] reg 28P(1)(c) …. [R28P.15] reg 28P(1)(d) …. [R28P.15] reg 28P(2) …. [R28P.20] reg 28P(3) …. [R28P.25]

reg 28P(3)(a) …. [R28P.25] reg 28Q …. [R28Q.05], [R28Q.10], [R28Q.15] reg 28R …. [R28R.05] reg

28XXA …. [R28XXC.05]

[R28XXA.05],

[R28XXA.10],

[R28XXB.05],

reg 28XXA(1)(c)(i) …. [S7.05] reg 28XXB …. [R28XXA.10], [R28XXB.05], [R28XXC.05] reg 28XXB(d)(i) …. [S9.05] reg 28XXC …. [R28XXC.05], [R28XXD.05] reg 28XXD …. [R28XXC.05] reg 28XXE …. [R28XXA.10], [R28XXE.05] reg 28XXE(2) …. [S10.05] reg 28XXF …. [R28XXF.05] reg 32 …. [S1.10] reg 34 …. [S1.10] reg 40(a) …. [S1.10] reg 50 …. [R50.05] reg 50A …. [R50A.05], [R51.15] reg 51 …. [6.20], [R4D.05], [R4D.10], [R51.05] reg 52 …. [6.55], [R25.25], [R52.05], [R56.05] reg 53 …. [6.55], [R53.05] reg 54 …. [6.55], [R25.25], [R54.05] reg 55 …. [6.55], [R25.25], [R55.05] reg 56 …. [6.55], [R25.25], [R56.05] reg 57 …. [6.55], [R25.25], [R57.05] reg 58 …. [6.10], [6.55], [R58.05]

reg 59 …. [6.55], [R59.05] reg 60 …. [6.55], [R25.25], [R60.05] reg 61 …. [6.55], [R25.25], [R61.05] reg 62 …. [6.55], [R62.05] reg 62(2) …. [R62.05] reg 63 …. [6.55], [R25.25], [R63.05] reg 64 …. [7.20], [42.15], [R64.05] reg 64(1) …. [7.20], [42.10] reg 64(1)(b) …. [7.20], [42.10], [42.15], [R64.05] reg 64(3) …. [7.20], [91.10], [R64.05] reg 65 …. [8.20], [54.05], [127.25], [R65.05] reg 65A …. [R65A.05] reg 65B …. [R65B.05] reg 65C …. [5.31], [R65C.05], [R65C.10], [R79A.05] reg 65C(1) …. [82.05] reg 66 …. [9.20], [R66.05], [S1.10] reg 67 …. [13.30], [R67.05], [R104.05] reg 68 …. [13.15], [13.40], [13.45], [183.10], [R67.05], [R68.05], [R104.05] reg 68(1) …. [R68.05] reg 68(2) …. [13.15], [R68.05] reg 68(3) …. [13.40] reg 68(3)(a) …. [13.45] reg 69 …. [87.10], [87.30], [R69.05], [R69.10] reg 69(2) …. [R69.10] reg 69A …. [R69A.05], [R69A.10], [R69A.15], [R69B.05]

reg 69B …. [R69A.05], [R69A.10], [R69A.15] reg 69C …. [R69C.05], [R69C.10] reg 69D …. [R69.10], [R69D.05] reg 70 …. [14.05], [14.25], [16.55], [R70.05], [R82.05], [R105.05], [S1.10] reg 71 …. [16.40], [163.20], [R71.05], [R71.15], [R97.10], [R100.35] reg 71(1)(b) …. [R71.15] reg 71(3) …. [R71.05] reg 71(5) …. [R71.05] reg 71(6) …. [R71.05] reg 71(8) …. [R71.10] reg 71(9) …. [R71.10] reg 71(10) …. [R71.05], [R71.15] reg 71(11) …. [16.40], [R71.05] reg 71(12) …. [R71.15], [R99.10] reg 72 …. [16.05], [16.10], [16.15], [16.20], [18.05], [23.35], [23.45], [R72.05] reg 72(1) …. [16.20] reg 72(1)(a) …. [16.50] reg 72(1)(b) …. [16.50] reg 72(1)(c) …. [16.50], [17.30] reg 72(1)(d) …. [16.50] reg 72(1)(e) …. [16.50] reg 72(1)(f) …. [16.50], [17.45] reg 72(2) …. [16.20], [17.45] reg 72(3) …. [16.30], [17.25] reg 72(3)(a) …. [16.30], [16.50]

reg 72(3)(b) …. [16.25], [16.30], [16.50], [17.25], [17.75] reg 72(4) …. [16.20] reg 72(5) …. [16.20], [16.25] reg 72(6) …. [16.20], [16.25] reg 72(7) …. [16.50] reg 72(8) …. [16.50], [17.50] reg 72(10) …. [16.35], [16.50], [182.25] reg 73 …. [16.50], [17.80], [R73.05] reg 74 …. [16.50], [17.85], [R74.05], [R81.05] reg 74(2) …. [S1.10] reg 74(3) …. [S1.10] reg 74(4) …. [17.85] reg 74(4)(b) …. [R74.05] reg 74A …. [16.55], [R74A.05], [S1.10] reg 75 …. [25.10], [R75.05], [R77.05] reg 76 …. [28.20], [R76.05] reg 76(2) …. [28.20] reg 76(4) …. [28.20] reg 76(5) …. [28.20] reg 77 …. [29.05], [39.10], [R77.05] reg 78 …. [5.31], [28.30], [29.05], [30A.05], [82.05], [R75.05], [R78.05] reg 78(3) …. [R78.05] reg 79 …. [33.20], [R79.05] reg 79A …. [17.45], [21.10], [23.10], [26.06], [26.20], [31.05], [78.05], [78.30], [78.33], [R79A.05], [R79A.20] reg 79A(1)(a) …. [R79A.05]

reg 79A(1)(b) …. [R79A.05] reg 79A(1)(c) …. [R79A.05] reg 79A(2)(a)(i) …. [R79A.05] reg 79A(2)(a)(ii) …. [R79A.05] reg 79A(2)(b) …. [21.10], [R79A.05] reg 79A(3) …. [R79A.05], [R79A.10] reg 79A(4) …. [R79A.15] reg 79AC …. [R79AC.05] reg 79AC(1) …. [R79AC.05] reg 79AC(2) …. [R79AC.05] reg 79AE …. [R79AE.05], [R79AE.10] reg 79B …. [R79B.05] reg 79B(1A) …. [R79B.05] reg 79C …. [R79C.05] reg 80 …. [R80.05] reg 81 …. [55.15], [R81.05], [S1.10] reg 82 …. [56.05], [R82.05], [S1.10] reg 83 …. [R83.05] reg 83(1) …. [71.25] reg 83(1)(b) …. [R83.05] reg 83(2) …. [71.25], [R83.05] reg 84 …. [85.15] reg 84A …. [R84A.05] reg 85 …. [87.15], [R85.05], [S1.10] reg 86 …. [88.30], [R85.05], [S1.10] reg 87 …. [99.15], [R87.05], [S1.10]

reg 87(a) …. [187.10] reg 87(c) …. [187.10], [R87.05] reg 87(d) …. [R87.05] reg 88 …. [102.10], [R88.05], [S1.10] reg 89 …. [104.30], [104.45], [R89.05] reg 90 …. [132.05], [R90.05] reg 91 …. [136.05], [S1.10] reg 92 …. [136.05], [R91.05], [R92.05] reg 93 …. [146.10], [R93.05] reg 93(2) …. [146.15], [R93.05] reg 93(3) …. [146.10] reg 94 …. [82.10], [148.10], [148.25], [R94.05] reg 95 …. [149.10], [R95.05], [S1.10] reg 96 …. [149.15], [R96.05] reg 97 …. [161.05], [R97.05], [R97.10], [R100.05] reg 98 …. [162.05], [R98.05] reg 99 …. [16.40], [163.05], [R99.10] reg 99(1) …. [R99.05] reg 99(2) …. [163.10] reg 99(3) …. [163.05] reg 99(4) …. [163.05] reg 100 …. [16.40], [163.20], [166.10], [R71.15], [R100.06], [R100.15], [R100.35] reg 100(3) …. [166.05], [R100.30] reg 100(4) …. [166.05] reg 100(5) …. [R100.06], [R100.30]

reg 100(6) …. [R100.06], [R100.15] reg 100(7) …. [R100.05] reg 104 …. [183.10], [R104.05] reg 104(4) …. [83.15] reg 105 …. [175.10], [S1.10] reg 105A …. [R105A.05] reg 105B …. [R105B.05] reg 105C …. [R105C.05] reg 105D …. [R105D.05] reg 105E …. [R105E.05] reg 105G …. [R105G.05] reg 105H …. [R69D.05], [R105H.05] reg 105J …. [R105J.05], [S1.10] reg 105K …. [R105K.05], [S1.10] reg 105L …. [R105L.05] reg 105L(c) …. [S1.10] reg 105L(d) …. [R105L.05] reg 106 …. [17.40], [174.20], [180.25], [R106.05], [R106.20], [R107.05] reg 106(1) …. [180.25], [R106.05], [R106.10] reg 106(1)(a) …. [180.25], [181.15] reg 106(1)(b) …. [174.20], [180.25], [181.15] reg 106(2) …. [180.25] reg 106(3) …. [R106.05], [R106.10], [R107.05] reg 106(4) …. [88.35], [180.25], [180.30], [182.15], [182.30], [R106.15], [R108.05], [R109.05] reg 106(5) …. [180.25], [181.15], [R106.15]

reg 107 …. [174.20], [180.25], [180.35], [181.10], [181.15], [R107.05] reg 107(1)(a) …. [181.10], [181.15], [R107.05] reg 107(1)(b) …. [174.20], [181.10], [181.15], [R107.05] reg 107(2) …. [R107.05] reg 108 …. [17.40], [83.15], [174.25], [180.35], [180.40], [180.45], [182.10] reg 108(1) …. [83.15], [182.15] reg 108(2) …. [182.25], [R108.05] reg 108(3) …. [182.25], [R108.05] reg 109 …. [17.25], [33.70], [34.110], [180.35], [182.10], [182.30], [R109.05] reg 109(1) …. [83.15], [182.30] reg 109(2) …. [34.50], [182.30], [R109.10] reg 109(2)(a) …. [182.30] reg 109(2)(b) …. [182.30] reg 110 …. [14.05], [18.15], [34.15], [42.25], [55.20], [85.20], [88.25], [98.20], [102.40], [104.50], [183.30], [184.15], [R110.05] reg 110A …. [R28LC.10], [R110A.05] reg 111 …. [183.10], [194.30], [194.50], [R111.05] reg 111(1) …. [R111.05] reg 111(1)(a) …. [194.30], [R111.05] reg 111(1)(b) …. [194.30] reg 111(2) …. [194.35], [R111.10] reg 111(2)(a) …. [194.35], [R111.10] reg 111(2)(b) …. [194.35] reg 111(2)(c) …. [194.35] reg 111A …. [203B.10], [R69C.05], [R111A.05]

reg 112 …. [R112.05] reg 174 …. [174.35] reg 174(1) …. [174.25], [174.30] reg 174(2) …. [174.30] reg 174(4) …. [174.35] Sch 1 …. [R32.05], [R34.05] Sch 2 …. [R9A.05], [R25E.05] Sch 3 …. [R9AA.05], [R23B.05], [R23B.10], [R25G.05] Sch 4 cl 4.1 …. [S4.10] cl 4.2 …. [S4.15] cl 4.4 …. [S4.15] cl 4.10 …. [S4.15] Personal Property Securities Act 2009 …. [7.25] Ch 4 …. [42.30] Ch 5 …. [42.30] Pt 4 …. [78.45] Pt 4.3 …. [78.45] s 8(1)(d) …. [42.10] s 14 …. [42.30] s 14(2)(c) …. [42.30] s 14(2A) …. [42.30] s 44 …. [42.30] s 102 …. [78.45] s 104 …. [78.45] s 109(5) …. [78.45]

s 115(1) …. [42.30] s 117 …. [42.30] s 118 …. [42.30] s 123(1) …. [78.45], [88.80] s 124(1)(b) …. [78.45] s 124(2)(a) …. [78.45] s 128 …. [78.45], [104.60] s 128(1) …. [78.45] s 128(2)(a) …. [78.45] s 130 …. [78.45] s 131 …. [78.45], [85.30], [104.60] Personal Property Securities Regulations 2010 Pt 4 …. [42.30] reg 4.1 …. [104.60] Privacy Act 1988 …. [5.30], [56.05], [88.85], [R20.50] Social Security Act 1991 …. [R28S.05] Uniform Consumer Credit Code Pt 6 Div 1 …. [112.07], [112.35] Pt 9A …. [71.30], [150.01], [150.02], [157.05], [157.15], [157.25], [157.30], [159.40], [194.05], [R71.15] Div 3 …. [157.30] Pt 10 …. [150.15] Div 2 …. [150.15] s 4 …. [3.20] s 4(2)(b)(ii) …. [3.45]

s 6 …. [5.35], [5.55], [78.20] s 6(1) …. [5.15], [5.25], [6.10] s 6(1)(a) …. [5.15], [7.10], [8.10] s 6(1)(b) …. [5.25], [5.30], [5.40] s 6(1)(d) …. [5.50] s 6(2) …. [5.15] s 6(4) …. [5.30], [6.15] s 6(5) …. [5.25] s 6(5)(a) …. [5.35] s 7 …. [28.35] s 7(1) …. [6.10], [6.15] s 7(2) …. [6.15] s 10A …. [5.60], [10.05] s 10B …. [11.05] s 10C …. [12.05] s 11 …. [5.25], [13.06], [13.08], [172.15] s 11(1) …. [5.25], [13.26] s 11(2) …. [5.25], [5.40], [13.15], [13.28] s 11(3) …. [5.25], [13.30], [172.15] s 11(4) …. [13.15] s 12(4) …. [23.45] s 14 …. [23.40], [116.15] s 14(4) …. [23.35], [23.45] s 14(6) …. [23.35], [23.45] s 15 …. [3.40], [3.45], [17.20], [17.25], [23.40], [71.30], [111.10], [116.15]

s 15(e) …. [17.40] s 15(f) …. [17.40] s 15(f)(a)(IIA) …. [17.40] s 15(j) …. [17.60] s 15(B) …. [17.20] s 15(B)(a)(ii) …. [3.35], [3.45], [17.20] s 15(B)(c) …. [3.20] s 15(B)(ii) …. [3.45] s 15(C) …. [17.25] s 15(C)(a) …. [3.45] s 15(D) …. [3.45], [17.30] s 15(E) …. [3.45], [23.45] s 15(F) …. [17.40] s 15(F)(a) …. [17.40] s 15(F)(b) …. [17.40] s 15(G) …. [17.45], [23.35], [23.45] s 15(K) …. [17.65] s 15(N) …. [17.80], [34.95] s 15B …. [3.35] s 15B(A) …. [17.20] s 15C …. [3.45] s 15D …. [3.45] s 15E …. [3.45] s 15G …. [23.35] s 16 …. [23.35], [23.45] s 16G …. [32.10]

s 17 …. [19.10], [19.15] s 19 …. [58.05] s 21 …. [21.25], [23.35], [23.40], [23.45], [111.10] s 21(1) …. [23.40], [23.50] s 21(1)(a) …. [23.10] s 21(1)(b) …. [23.40], [23.50] s 21(1)(c) …. [23.50] s 21(3) …. [23.35], [23.40], [23.50] s 24 …. [26.05] s 25 …. [153.20] s 25(2) …. [27.25] s 26 …. [28.25], [28.30] s 27 …. [28.25] s 27(4) …. [29.05] s 30 …. [32.05], [32.10], [32.15] s 30(1) …. [32.10], [32.20] s 30(4) …. [32.20] s 32 …. [34.05], [111.10] s 32(I) …. [34.95] s 34 …. [37.10] s 35 …. [37.10] s 36 …. [38.20], [38.25] s 36A …. [34.110], [39.05] s 38 …. [38.30] s 53(1)(a) …. [58.05] s 53(1)(b) …. [58.10]

s 61(1A) …. [72.04] s 65 …. [71.30] s 66 …. [124.15] s 66(3) …. [72.07], [75.05] s 70 …. [76.10], [76.20] s 70(2)(b) …. [76.50] s 70(2)(c) …. [76.50] s 70(2)(d) …. [76.50] s 70(2)(h) …. [76.50] s 70(2)(k) …. [76.50] s 70(2)(l) …. [76.50] s 70(4) …. [76.50] s 71 …. [112.15] s 73 …. [80.05] s 75 …. [124.15] s 76 …. [124.15] s 78 …. [104.25] s 78(3) …. [85.15] s 78(7) …. [85.35] s 78(8)(e) …. [85.40] s 78(9) …. [85.40] s 80 …. [88.35], [88.75] s 80(1) …. [88.30] s 80(2) …. [88.30] s 80(3) …. [88.30] s 86(2) …. [94.10]

s 96 …. [104.25] s 99(1) …. [107.05] s 100 …. [111.10] s 101 …. [38.20], [111.05], [112.35], [114.25] s 101(1) …. [111.05], [113.20] s 101(2) …. [111.05], [112.35], [118.35] s 102 …. [116.30] s 102(1) …. [23.40] s 102(2) …. [113.20] s 102(4)(a) …. [113.20] s 102(4)(b) …. [113.20] s 102(4)(c) …. [114.25] s 102(4)(i) …. [113.20] s 103 …. [114.25] s 103(1) …. [112.10] s 103(1)(a) …. [118.20] s 103(2) …. [118.20] s 104(1) …. [114.25] s 105 …. [114.25], [116.25], [116.30] s 105(1) …. [112.10] s 105(2) …. [116.05], [116.15] s 105(3) …. [116.20] s 106 …. [111.05] s 107 …. [114.25] s 107(1) …. [118.20] s 107(2) …. [118.20]

s 107(3) …. [114.25] s 108 …. [116.30], [118.30], [118.35] s 108(2) …. [118.35] s 109 …. [118.30], [118.40] s 113A …. [123.05] s 114 …. [124.15], [124.20] s 114(1) …. [124.10] s 115 …. [125.05] s 118 …. [124.20] s 119 …. [129.05] s 119(2) …. [129.15] s 119(2)(b) …. [129.15] s 119(2)(b)(i) …. [129.15] s 119(2)(b)(ii) …. [129.15] s 125 …. [135.05], [218.05] s 125(1) …. [135.05] s 125(8) …. [135.25] s 133 …. [143.55], [143.60] s 135 …. [32.20] s 140 …. [150.15], [150.35] s 140(3) …. [150.35] s 143 …. [150.35], [153.20] s 146 …. [156.15] s 146A …. [150.02], [157.05] s 146C …. [157.35], [157.45], [159.25] s 146D …. [157.05]

s 146G(3) …. [162.05] s 146H(2) …. [163.15] s 146I …. [164.15] s 146I(3) …. [164.10], [164.15] s 146K …. [157.45] s 146K(1) …. [157.35] s 146K(2) …. [157.35] s 146K(3) …. [157.35] s 146K(4) …. [157.35] s 146K(5) …. [71.30], [157.35] s 146L …. [157.35] s 146M …. [159.20] s 146P(1)(c) …. [157.40] s 148(1)(a) …. [170.25] s 150(3) …. [172.15] s 155 …. [125.10] s 156 …. [178.20] s 157 …. [157.25] s 158 …. [28.35] s 162 …. [184.10] s 162(1) …. [184.10] s 162(2) …. [184.10] s 163(3) …. [185.10] s 164A …. [187.05] s 169A …. [192.05] s 171 …. [20.15], [194.30], [194.55]

s 171(2) …. [194.15] s 171(3) …. [194.30] s 171(4) …. [194.30], [194.55] s 171(5) …. [194.55] s 172 …. [187.20] s 176 …. [199.20] reg 12(9) …. [R71.15] reg 22A …. [72.07] reg 66 …. [69.05] Sch 1 …. [5.15], [112.10] Sch 2 Pt 2 …. [13.26] cl 7(1) …. [17.45] cl 8 …. [20.15] cl 30(5) …. [135.05], [218.05] Form 1 …. [S1.15] Form 2 …. [S1.15] NEW SOUTH WALES Consumer Credit (New South Wales) Act 1995 …. [32.15] s 11 …. [28.35] Consumer Credit (New South Wales) Special Provisions Regulation 2002 reg 7 …. [28.35] reg 8 …. [28.35] reg 9 …. [28.35] Contracts Review Act 1980 …. [13A.60], [76.05], [76.10], [76.15], [76.55], [76.65]

s 7 …. [76.70] s 8 …. [76.70] s 9 …. [76.70] s 9(2) …. [76.15] s 9(2)(h) …. [76.15] s 76(4) …. [76.10] Credit (Commonwealth Powers) Act 2010 …. [28.40] Sch 3 cl 5 …. [28.40] cl 6 …. [28.40] cl 7 …. [28.40] Credit (Home Finance Contracts) Act 1984 s 5 …. [72.25] Credit Act 1984 …. [28.25], [76.15], [R64.05] Pt 2 …. [125.05] Pt 9 …. [76.05] s 5 …. [125.10] s 13(4) …. [13.35] s 20 …. [125.10] s 21 …. [134.15] s 23 …. [125.20] s 24 …. [125.20], [129.05] s 25 …. [125.20] s 25(3)(d) …. [135.15] s 25(4) …. [135.15] s 26 …. [125.20]

s 26(1)(c) …. [135.15] s 26(2) …. [135.15] s 27 …. [125.20] s 28 …. [125.20] s 35 …. [111.05] s 36 …. [111.05] s 39 …. [111.05] s 40(1) …. [111.05] s 42 …. [111.05] s 85 …. [111.05] s 86 …. [111.05] s 86A …. [111.05] s 91 …. [111.05] s 95 …. [99.10] s 107 …. [88.15], [88.35] s 114 …. [85.30] s 119 …. [50.05] s 120 …. [50.05] s 121(1) …. [150.10] s 134(2) …. [135.15] s 140(2) …. [60.25] s 143 …. [58.10] s 144 …. [58.10] s 145 …. [76.10] s 147(2) …. [76.15] s 150 …. [50.05]

Fair Trading Act 1987 …. [155.05] Real Property Act 1900 s 57 …. [88.20], [195.35] s 58 …. [195.35] Strata Schemes Management Act 1996 s 11(1) …. [204.60] s 11(2) …. [204.60] VICTORIA Consumer Credit (Victoria) Act 1995 …. [28.40] s 39 …. [28.35], [28.40] s 40 …. [28.35], [28.40] Credit (Administration) Act 1984 …. [117.05] Fair Trading (Consumer Contracts) Act 2004 …. [155.05] Subdivision Act 1988 s 29 …. [204.60] Transfer of Land Act 1958 s 74 …. [195.35] s 76 …. [88.20], [195.35] s 77 …. [195.35] QUEENSLAND Building Units and Group Titles Act 1980 s 27(1) …. [204.60] s 27(2) …. [204.60] Consumer Credit (Queensland) Act 1994 s 14 …. [28.35] Consumer Credit (Queensland) Amendment Act 1998 …. [192.05], [192.15],

[194.20], [194.30], [194.55], [199.20] Credit (Commonwealth Powers) Act 2010 …. [28.40] s 32 …. [28.40] s 33 …. [28.40] s 34 …. [28.40] Criminal Organisation Act 2009 …. [R5.05] Land Title Act 1994 …. [88.20] s 73 …. [195.35] WESTERN AUSTRALIA Consumer Credit (Western Australia) Act 1996 s 12 …. [28.35] Credit (Administration) Act 1984 …. [R20.35] Finance Brokers Control Act 1975 …. [R20.35] Property Law Act 1969 s 59 …. [88.20] Strata Titles Act 1985 s 32(1) …. [204.60] s 32(2B) …. [204.60] s 32(4) …. [204.60] Transfer of Land Act 1893 s 106 …. [88.20], [195.35] s 108 …. [88.20], [195.35] SOUTH AUSTRALIA Consumer Credit (South Australia) Act 1995 s 12 …. [28.35] Real Property Act 1886

s 132 …. [88.20] s 132 …. [195.35] s 133 …. [195.35] Strata Titles Act 1988 s 18(1) …. [204.60] s 18(2) …. [204.60] TASMANIA Land Titles Act 1980 …. [88.20] s 77 …. [195.35] AUSTRALIAN CAPITAL TERRITORY Consumer Credit (Administration) Act 1996 …. [R20.35] Consumer Credit Act 1995 s 8B(1) …. [28.35] s 8B(2) …. [28.35] Consumer Credit Regulations 1996 reg 5 …. [28.35] Fair Trading Act 1992 …. [67.15], [67.20], [76.51] s 28A …. [67.20] s 28A(1) …. [67.20] s 28A(2) …. [67.20], [76.51] s 28A(3) …. [76.51] s 28A(4) …. [76.51] Hawkers Act 2003 …. [155.05] Land Titles Act 1925 s 93 …. [88.20], [195.35] s 94 …. [195.35]

Contents Features of this Volume The Authors Introduction Overview of the National Consumer Credit Protection Act (NCCP Act) Regime Overview of the National Credit Code ASIC Action — Advertising and Enforcement Activities Attachments Privacy Reforms Table of Cases Table of Statutes National Credit Code Comparative Table Table of Provisions Table of Amendments Part 1 — Preliminary Part 2 — Credit contracts

Part 3 — Related mortgages and guarantees Part 4 — Changes to obligations under credit contracts, mortgages and guarantees Part 5 — Ending and enforcing credit contracts, mortgages and guarantees Part 6 — Penalties for defaults of credit providers Part 7 — Related sale contracts Part 8 — Related insurance contracts Part 9 — Advertising and related conduct Part 10 — Comparison rates Part 11 — Consumer leases Part 12 — Miscellaneous Part 13 — Principal definitions Part 14 — Miscellaneous provisions relating to interpretation National Consumer Credit Protection Regulations 2010 Contents Table of Provisions Table of Amendments Regulations Index

[page 1]

National Credit Code CONTENTS Comparative Table (National Credit Code (NCC) — Uniform Consumer Credit Code (UCCC)) Table of Provisions Table of Amendments National Credit Code

[page 3]

Comparative Table National Credit Code (NCC) — Uniform Consumer Credit Code (UCCC)

[page 4]

[page 5]

[page 6]

[page 7]

[page 8]

[page 9]

National Credit Code

Table of Provisions Section

Title

Part 1 — Preliminary 1 2 3 4 5 6 7 8 9 10 11 12 13 13A

Short title Interpretation generally Meaning of credit and amount of credit Meaning of credit contract Provision of credit to which this Code applies Provision of credit to which this Code does not apply Mortgages to which this Code applies Guarantees to which this Code applies Goods leases with option to purchase to be regarded as sale by instalments Deciding application of Code to particular contracts for the sale of land by instalments Deciding application of Code to particular contracts for the sale of goods by instalments Deciding application of Code to particular contracts for the sale of goods by instalments under related contracts Presumptions relating to application of Code Reverse mortgages

Part 2 — Credit contracts DIVISION 1 — NEGOTIATING AND MAKING CREDIT CONTRACTS 14 Credit contract to be in form of written contract document 15 Other forms of contract 16 Precontractual disclosure 17 Matters that must be in contract document 18 Form and expression of contract document 18A Provisions that must not be included in credit contract for reverse mortgage 18B Disclosure if credit contract for reverse mortgage does not protect tenancy of person other than debtor 18C Independent legal advice before entry into credit contract for reverse mortgage 19 Alteration of contract document 20 Copy of contract for debtor 21 When debtor may terminate contract 22 Offence for noncompliance [page 10]

23 23A 24 24A

DIVISION 2 — DEBTOR’S MONETARY OBLIGATIONS Prohibited monetary obligations — general Prohibited monetary obligations — small amount credit contracts Offences related to prohibited monetary obligations — credit providers Offences related to prohibited monetary obligations — credit assistance providers

25 26 26A

Loan to be in money or equivalent Early payments and crediting of payments Regulations about residential investment property

27 27A 28 29 30 30A 30B

DIVISION 3 — INTEREST CHARGES Definitions relating to interest Application of this Division Limit on interest charges Early debit or payment of interest charges prohibited Default interest Regulations about residential investment property Regulations about credit card contracts

31 31A 31B

32

DIVISION 4 — FEES AND CHARGES Prohibited credit fees or charges Restrictions on fees and charges for small amount credit contracts Credit provider or prescribed person must not require or accept payment of a fee or charge in relation to a small amount credit contract etc Fees or charges in relation to third parties

DIVISION 4A — ANNUAL COST RATE OF CERTAIN CREDIT CONTRACTS 32A Prohibitions relating to credit contracts if the annual cost rate exceeds 48% 32AA Prohibition relating to the annual cost rate of credit contracts — later increases of the annual percentage rate etc 32B Calculation of annual cost rate DIVISION 5 — CREDIT PROVIDER’S OBLIGATION TO ACCOUNT 33 Statements of account

34 35

Information to be contained in statements of account Opening balance must not exceed closing balance of previous statement

36 37 38 39

Statement of amount owing and other matters Court may order statement to be provided Disputed accounts Dating and adjustment of debits and credits in accounts

DIVISION 5A — ADDITIONAL RULES RELATING TO SMALL AMOUNT CREDIT CONTRACTS 39A Limit on the application of amount of credit provided under a small amount credit contract [page 11] 39B 39C

Limit on amount that may be recovered if there is default under a small amount credit contract Credit provider must do prescribed things if a default in payment by direct debit occurs

DIVISION 6 — CERTAIN TRANSACTIONS NOT TO BE TREATED AS NEW CONTRACTS 40 Changes etc under contracts Part 3 — Related mortgages and guarantees

41 42 43 44 45

DIVISION 1 — MORTGAGES Application of Division Form of mortgage Copy of mortgage for mortgagor Mortgages over all property void Restriction on mortgage of future property

46 47 48 49 50 51 52 53

Mortgages and continuing credit contracts All accounts mortgages Third party mortgages prohibited Maximum amount which may be secured Prohibited securities Assignment or disposal of mortgaged property by mortgagor Conditions on consent to assignment or disposal of property subject to mortgage Offence for noncompliance

54 55 56 57 58 59 60 61 62

DIVISION 2 — GUARANTEES Application of Division Form of guarantee Disclosure Copies of documents for guarantor Guarantor may withdraw before credit is provided Extension of guarantee Limitation of guarantor’s liability Increase in guarantor’s liabilities Offence for noncompliance Part 4 — Changes to obligations under credit contracts, mortgages and guarantees

DIVISION 1 — UNILATERAL CHANGES BY CREDIT PROVIDER 63 Application of Division 64 Interest rate changes 65 Repayment changes 66 Credit fees and charges changes 67 Changes to credit limits etc in continuing credit contracts 67A Changes to tenancy protection in credit contracts for reverse

68

mortgages Other unilateral changes by credit provider [page 12]

69 70

71

72 72 73 73 74 74 75 76 77 78 79 80 81

Particulars of matters as changed only required to be given under this Division in certain cases Prohibited increases in liabilities DIVISION 2 — CHANGES BY AGREEMENT OF PARTIES Changes by agreement DIVISION 3 — CHANGES ON GROUNDS OF HARDSHIP AND UNJUST TRANSACTIONS Changes on grounds of hardship Changes on grounds of hardship [Applicable prior to 1 March 2013] Notice of change Notice of change [Applicable prior to 1 March 2013] Changes by court Changes by court [Applicable prior to 1 March 2013] Credit provider may apply for variation of change Court may reopen unjust transactions Orders on reopening of transactions Court may review unconscionable interest and other charges Applications by ASIC Time limit Joinder of parties

Part 5 — Ending and enforcing credit contracts, mortgages and guarantees DIVISION 1 — ENDING OF CREDIT CONTRACT BY DEBTOR ETC

82 83 84 85 86

Subdivision A — Paying out contract etc Debtor’s or guarantor’s right to pay out contract Statement of pay out figure Court may determine pay out figure if credit provider does not provide a pay out figure Surrender of mortgaged goods and goods subject to sale by instalments Compensation to debtor or mortgagor

Subdivision B — Ending of reverse mortgage by credit provider receiving value of reverse mortgaged property 86A Application of this Subdivision 86B Discharge of debtor’s obligations under credit contract and discharge of mortgage 86C Credit provider must pay debtor excess of receipt over adjusted market value for reverse mortgaged property 86D Credit provider must not demand or accept further payments 86E Cases in which sections 86B, 86C and 86D do not apply 86F Relationship between this Subdivision and other provisions [page 13]

87

Subdivision C — Notice of first direct debit default One-off notice to be given the first time a direct debit default occurs DIVISION 2 — ENFORCEMENT OF CREDIT CONTRACTS,

88 89 89A 90 91 92 93 93A

MORTGAGES AND GUARANTEES Requirements to be met before credit provider can enforce credit contract or mortgage against defaulting debtor or mortgagor Defaults may be remedied Effect of hardship notices on enforcement Requirements to be met before credit provider can enforce guarantee against guarantor Requirements to be met before credit provider can repossess mortgaged goods Acceleration clauses [Repealed] Requirements to be met before credit provider can enforce an acceleration clause Extra requirements for enforcing reverse mortgage if debtor’s liability exceeded value of reverse mortgaged property

DIVISION 3 — POSTPONEMENT OF ENFORCEMENT PROCEEDINGS 94 Postponement of exercise of rights 95 Effect of negotiated postponement 96 Postponement by court 97 Credit provider may apply for variation of postponement order

98 99 100 101 102 103 104

DIVISION 4 — ENFORCEMENT PROCEDURES FOR GOODS MORTGAGED Information as to location of mortgaged goods Entry to residential property to take possession of goods Court may order entry Order for possession Procedures to be followed by credit provider after taking possession of goods Mortgagor may nominate purchaser of goods taken by credit provider Sale of goods by credit provider

105 106

Matters for which account can be debited after mortgagee sale of goods Compensation to mortgagor

107

DIVISION 5 — ENFORCEMENT EXPENSES Recovery of enforcement expenses

108 109 110

DIVISION 6 — MORTGAGOR’S REMEDIES Mortgagor may apply to regain possession of mortgaged goods Order for possession for mortgagor Ancillary or consequential orders [page 14]

Part 6 — Penalties for defaults of credit providers DIVISION 1 — PENALTIES FOR BREACH OF KEY DISCLOSURE AND OTHER REQUIREMENTS 111 Key requirements 112 Application for order relating to key requirements 113 Penalty may be imposed for contravention of key requirement 114 Penalty if application made by debtor or guarantor 115 Payment of penalty to debtor or guarantor 116 Penalty if application made by a credit provider or ASIC 117 Payment of penalty 118 Compensation for debtor or guarantor 119 General provisions relating to applications by credit providers or ASIC 120 ASIC may represent interests of debtors 121 Directions pending court’s decision

122 123

Offences Time limit for application for orders under this Division

124

DIVISION 2 — OTHER PENALTIES Civil effect of contraventions Part 7 — Related sale contracts

125 126 127

DIVISION 1 — INTERPRETATION AND APPLICATION Meaning of sale contract Sale contracts to which this Part applies Linked credit providers and tied credit contracts

DIVISION 2 — LIABILITY OF CREDIT PROVIDERS FOR SUPPLIERS’ MISREPRESENTATIONS 128 Credit provider liable with respect to supplier’s misrepresentations etc about tied credit contract DIVISION 3 — LIABILITY OF CREDIT PROVIDERS IN RELATION TO GOODS 129 Right to damages under sale contract against both supplier and linked credit provider 130 Limits on debtor’s right of action against linked credit provider 131 Liability of supplier to linked credit provider 132 Interest may be awarded 133 Subrogation of credit provider DIVISION 4 — TERMINATION OF RELATED TRANSACTIONS 134 Termination of sale contract which is conditional on obtaining credit 135 Termination of (or recredit under) tied credit contract if sale contract terminated 136 Termination of linked maintenance services contract if credit

contract terminated [page 15] 137 138 139

140 141

142 143 144 145 146 147 148 149

150 151

Termination of contract under this Part to be in writing Powers of court with respect to termination of contract under this Part Part 5 not to apply to termination of contract under this Part DIVISION 5 — OTHER PROVISIONS Requirement as to source of credit for goods or services Prohibition on payment for goods or services by postdated bills of exchange or notes which exceed cash price of goods or services Part 8 — Related insurance contracts Interpretation and application Requirement to take out insurance or to insure with particular insurer or on particular terms Financing of insurance premiums over mortgaged property Commission for consumer credit insurance Supply of copy of credit-related insurance contract by insurer Rejection of debtor’s proposal for insurance Termination of consumer credit insurance contract if credit contract terminated Termination of insurance contract over mortgaged property if credit contract terminated Part 9 — Advertising and related conduct Advertising Persons liable for advertisements

152 153 154 155 156

Defence Interest rates which may be disclosed False or misleading representations Harassment Canvassing of credit at home Part 10 — Comparison rates

157 158 159

DIVISION 1 — PRELIMINARY Object of Part Part not to apply to continuing credit contracts Definitions

DIVISION 2 — COMPARISON RATE IN CREDIT ADVERTISING 160 Comparison rate mandatory in advertisements containing annual percentage rate 161 The relevant comparison rate 162 Information about comparison rate 163 Warning about comparison rate 164 Other requirements for comparison rate DIVISION 3 — COMPARISON RATE IN OTHER DOCUMENTS 165 Comparison rates in documents other than credit advertising [page 16]

166 167 168

DIVISION 4 — MISCELLANEOUS Calculation of comparison rates Compliance grace period following changes in interest or fees Regulations — exemptions and other matters

Part 11 — Consumer leases

169 170 171 172

DIVISION 1 — INTERPRETATION AND APPLICATION Meaning of consumer lease Consumer leases to which this Part applies Consumer leases to which this Part does not apply Presumptions relating to application of this Part

DIVISION 2 — FORM OF AND INFORMATION TO BE INCLUDED IN CONSUMER LEASES 173 Form of consumer lease 173A Other forms of consumer lease 174 Disclosures in consumer leases 174A Alteration of consumer lease document 175 Copy of lease etc for lessee

175A 175B

DIVISION 4 — FEES AND CHARGES Prohibited consumer lease fees or charges Fees or charges in relation to third parties DIVISION 5 — LESSOR’S OBLIGATION TO ACCOUNT

175C 175D 175E 175F 175G

Subdivision A — Ongoing statements of account Statements of account Information to be contained in statements of account Statement of amount owing and other matters Court may order statement of account to be provided Disputed accounts

175H

Subdivision B — End of lease statements End of lease statement

DIVISION 6 — CERTAIN TRANSACTIONS NOT TO BE TREATED AS

175J 176

NEW CONSUMER LEASES Changes etc under consumer leases Further goods and deferrals or waivers under consumer leases [Repealed]

DIVISION 7 — CHANGES TO OBLIGATIONS UNDER CONSUMER LEASES

177A

Subdivision A — Changes by agreement of parties Changes by agreement

Subdivision B — Changes on grounds of hardship and unjust transactions 177B Changes on grounds of hardship [page 17] 177C 177D 177E 177F 177G 177H 177J 177K

Notice of change Changes by court Lessor may apply for variation of change Court may reopen unjust transactions Orders on reopening of transactions Applications by ASIC Time limit Joinder of parties DIVISION 8 — REPOSSESSION, TERMINATION AND ENFORCEMENT OF CONSUMER LEASES

177 178

Subdivision A — Repossession of goods under consumer lease Application of certain Code provisions to consumer leases [Repealed] Notice of repossession

178A 179 179A 179B 179C

179D 179E 179F 179G

179H 179J 179K 179L

Subdivision B — Termination of consumer lease by lessee Termination before goods have been provided Termination after goods have been provided Statement of amount payable on termination Court may determine amount payable on termination if lessor does not One-off notice to be given the first time a direct debit default occurs Subdivision C — Enforcement of consumer leases Requirements to be met before lessor can enforce consumer lease against defaulting lessee Defaults may be remedied Effect of hardship notices on enforcement Requirements to be met before lessor can enforce an acceleration clause Subdivision D — Postponement of enforcement proceedings Postponement of exercise of rights Effect of negotiated postponement Postponement by court Lessor may apply for variation of postponement order

Subdivision E — Enforcement procedures for goods hired under a consumer lease 179M Information as to location of goods hired under a consumer lease 179N Entry to residential property to take possession of goods 179P Court may order entry 179Q Order for possession

179R

Subdivision F — Enforcement expenses Recovery of enforcement expenses

[page 18]

DIVISION 9 — LINKED LESSORS AND TIED CONSUMER LEASES

179S

Subdivision A — Interpretation and application Linked lessors and tied consumer leases

Subdivision B — Liability of lessors for suppliers’ misrepresentations 179T Lessor liable for supplier’s misrepresentations about hired goods DIVISION 10 — CONDUCT RELATING TO CONSUMER LEASES 179U False or misleading representations 179V Harassment DIVISION 11 — OTHER CODE PROVISIONS APPLICABLE TO CONSUMER LEASES 179W Application of certain Code provisions to consumer leases Legislation as at 28 February 2013, applicable to agreements made prior to 1 March 2013 Part 11 — Consumer leases

169 170 171 172

DIVISION 1 — INTERPRETATION AND APPLICATION Meaning of consumer lease Consumer leases to which this Part applies Consumer leases to which this Part does not apply Presumptions relating to application of this Part

DIVISION 2 — FORM OF AND INFORMATION TO BE INCLUDED IN

173 174 175 176

CONSUMER LEASES Form of consumer lease Disclosures in consumer leases Copy of lease etc. for lessee Further goods and deferrals or waivers under consumer leases

DIVISION 3 — OTHER PROVISIONS APPLICABLE TO CONSUMER LEASES 177 Application of certain Code provisions to consumer leases 178 Notice of repossession 179 Termination of lease Part 12 — Miscellaneous

180 181 182

DIVISION 1 — TOLERANCES AND ASSUMPTIONS Tolerances and assumptions relating to information Tolerances relating to contracts and other documents Regulations

183

DIVISION 2 — DOCUMENTARY PROVISIONS Form of notices [page 19]

184 185 185A 186 187

Legibility and language Copies of contracts and other documents Records of nominations of persons to occupy reverse mortgaged properties Signing of documents Electronic transactions and documents

188 189 190 191 192 193 194 195 196 197 198 199

200 201 202 203

DIVISION 3 — GENERAL PROVISIONS Assignment by credit provider Assignment by debtor, mortgagor or guarantor Appropriation of payments Contracting out Indemnities Effect of noncompliance Giving notice or other document Manner of giving notice or other document Date of notice or other document Extensions of time Orders of court Conduct of agents and related matters DIVISION 4 — PROVISIONS RELATING TO OFFENCES Offences by officers, agents or employees Offences by corporations Limitations Application of section 4K of the Crimes Act 1914

203A 203B

DIVISION 5 — EXEMPTIONS FROM THIS CODE Exemptions by ASIC Exemptions by the regulations

204

Part 13 — Principal definitions Principal definitions Part 14 — Miscellaneous provisions relating to interpretation

205

DIVISION 1 — PRELIMINARY Displacement of Part by contrary intention

206 207 208

DIVISION 2 — GENERAL Material that is, and is not, part of this Code [Repealed] References to particular Acts and to enactments Compliance with forms

209 210 211 212 213

DIVISION 3 — TERMS AND REFERENCES Provisions relating to defined terms and gender and number Meaning of may and must etc Effect of express references to bodies corporate and individuals Reference to certain provisions of Code Reference to provisions of this Code or an Act is inclusive [page 20]

215 216 217

DIVISION 4 — FUNCTIONS AND POWERS Power to make instrument or decision includes power to amend or repeal Matters for which statutory instruments may make provision Presumption of validity and power to make Exercise of powers between enactment and commencement

218

DIVISION 5 — DISTANCE, TIME AND AGE Matters relating to distance, time and age

214

[page 21]

National Credit Code

Table of Amendments The National Credit Code is Schedule 1 to the National Consumer Credit Protection Act 2009 (No 134 of 2009). That Act was assented to on 15 December 2009 and ss 1 and 2 commenced on that day. The remainder (ss 3– 337 and Sch 1) commenced on 1 April 2010 (F2010L00301). The National Credit Code commenced on 1 July 2010 and has been amended by: Amending Legislation Date of Assent Act 5 of 2011: Statute Law Revision Act 2011 Act 46 of 2011: Acts Interpretation Amendment Act 2011 Act 84 of 2011: National Consumer Credit Protection Amendment (Home Loans and Credit Cards) Act 2011 Act 130 of 2012:

22 March 2011

Date of Commencement 22 March 2011

27 June 2011

27 December 2011

25 July 2011

Sch 1 Pt 2: 1 July 2012

17 September 2012

Sch 2 (items 2, 3, 5–8,

Consumer Credit Legislation Amendment (Enhancements) Act 2012

Act 197 of 2012: 12 December 2012 Privacy Amendment (Enhancing Privacy Protection) Act 2012

15, 19, 20, 23): 18 September 2012; Sch 1 items 1–9, 26–51, 55–62; Sch 2 Pt 3 items 12–14, 16–18, 21, 22, 24– 26; Sch 5 items 11– 38: 1 March 2013; Sch 4 items 1–27: 1 July 2013 13 March 2014

[page 23]

National Credit Code [Editorial Note: Uniform Consumer Credit Code (UCCC) provisions have been reproduced here as an aid to assist comparison with the National Credit Code (Code).]

Part 1 — Preliminary Short title 1 This Code may be cited as the National Credit Code. ________________________________________ [Editorial note: UCCC s 1 provided as follows: Short title 1 This Code may be cited as the Consumer Credit Code.] [Editorial note: There is no NCC provision comparable to UCCC s 2.]

COMMENTARY ON SECTION 1 [1.05] Commencement The Code commenced on 1 July 2010 throughout Australia. [1.10] Transitional arrangements The Code applies to all credit contracts entered into after its commencement date of 1 July 2010, and also all credit contracts that were on foot on 30 June 2010 and were regulated by the Uniform Consumer Credit Code (UCCC) — being credit contracts entered into from 1 November 1996 or continuing credit contracts first entered into before November 1996. It also applies, with modifications, to credit contracts made before 1 July 2010 that are “carried over instruments”. A “carried over instrument” (COI) is defined in s 4 of the National Consumer Credit

Protection (Transitional and Consequential Provisions) Act 2009 (Cth) (Transitional Act) to be a contract or other instrument, made before the commencement of the Code, to which the UCCC applied. The scope of the Code is very wide. Unlike the previous Credit Acts, the Code does not have an upper monetary limit, and does not have a minimum interest rate threshold. The Code is not limited to financial institutions and will apply to any person who carries on any business if “consumer” credit is provided as a part of, or even incidentally to, that business. This means, for example, that solicitors’ loans to clients will be regulated by the Code. An increase in the credit provided under a pre-Code contract that is not a carried over instrument could result in the contract becoming a credit contract to which the Code applies. The modifications to the Code that are applicable to COIs are set out in Div 2 of Pt 2 of Sch 1 to the Transitional Act. [page 24] [1.15] Residential investment loans The UCCC did not apply to residential property investment loans and so the Code will not apply to contracts for loans of that type made prior to the commencement of the Code; those contracts are not “carried over instruments” as defined in s 4 of the Transitional Act.

Interpretation generally 2 (1) [Definitions] Part 13 contains the principal definitions of words and expressions used in this Code. 2 (2) [Other interpretations] Part 14 contains other miscellaneous provisions relating to the interpretation of this Code. ________________________________________

[Editorial note: UCCC s 3 provided as follows: Interpretation generally 3 (1) [Definitions] Schedule 1 contains the principal definitions of words and expressions used in this Code. 3 (2) [Other interpretations] Schedule 2 contains other miscellaneous provisions relating to the interpretation of this Code.]

COMMENTARY ON SECTION 2 [2.05] Outline Section 204 contains the principal definitions of words and expressions used in the Code. Part 14 contains other miscellaneous provisions relating to the interpretation of the Code. As the Code forms part of a Commonwealth Act, the Interpretation Act applies to the Code. The provisions of the Interpretation Act most relevant to the Code are ss 15A, 15AA and 15AB.

Meaning of credit and amount of credit 3 (1) [Credit] For the purposes of this Code, credit is provided if under a contract: (a) payment of a debt owed by one person (the debtor) to another (the credit provider) is deferred; or (b) one person (the debtor) incurs a deferred debt to another (the credit provider). 3 (2) [Amount of credit] For the purposes of this Code, the amount of credit is the amount of the debt actually deferred. The amount of credit does not include: (a) any interest charge under the contract; or (b) any fee or charge: (i)

that is to be or may be debited after credit is first provided under the contract; and

(ii) that is not payable in connection with the making of the

contract or the making of a mortgage or guarantee related to the contract. ________________________________________ [Editorial note: UCCC s 4 — apart from numbering the section is unchanged.]

[page 25] COMMENTARY ON SECTION 3 [3.05] Outline Credit is defined in the Code as the deferral of payment of a debt or the incurring of a deferred debt under a contract (s 3(1)(a) and (b)). The Code contemplates that “credit” may be provided in two ways: by an agreement to defer a debt that is already owing (s 3(1)(a)); or by an agreement that a debt will become owing in the future (ie, a “deferred debt”) (s 3(1)(b)). See also Butterworths Consumer Credit Law Bulletin No 10/1996, and J Wilkin, “Credit fees and Charges: Credit Act; an Offence to Lend Money: Credit Code; Impossible to Lend Money” (1995) 23 Australian Business Law Review 259. [3.10] “Under a contract” For the purposes of the Code, credit is only provided if it is provided “under a contract”. “Contract” is defined in s 204 to include a “series or combination of contracts, or contracts and arrangements” (see also [4.20]). [3.15] “Deferred” There cannot be provision of credit for the purposes of the Code unless there is an element of “deferral”. While one can respond intuitively to the concept of deferral in the context of the provision of credit, the notion of “incurring” a “deferred debt” may cause some difficulty to a legal purist. Perhaps the difficulty is with the concept of a “deferred debt”, which presumably means a debt which arises (ie, is incurred) and payment of

which is deferred at the same time. We examine below three possible approaches to interpreting a “deferred debt”. [3.20] “Deferred debt” — any future debt The courts have interpreted the concept of “deferred debt” to mean a present debt payable in the future. In Rafiqi v Wacal Investments Pty Ltd (1998) ASC ¶155-024, Rafiqi purchased land from Wacal Investments on an instalment basis. A portion of the purchase price was paid at settlement and the contract provided that the remainder was to be paid over 15 years. There was some discussion as to whether this arrangement established a debt or deferred debt situation for the purposes of s 4 of the UCCC (s 3 of the Code). Each instalment was an obligation to make a payment. It only became a debt at law on the date that the particular instalment was due. The court held that although “the obligation to make a payment cannot be described as a debt, before it is due, it can be described as a ‘probable future debt’”. Instalments due to be paid at some point in the future may be considered “future debts”. This is what the court held that parliament meant by the concept of a “deferred debt”. Rafiqi, by promising to pay future instalments, “incurred a deferred debt” to Wacal Investments. Further, in McKenzie v Smith; Lenehan v Smith (1998) ASC ¶155-025, Mr and Mrs McKenzie entered into a contract with Smith to purchase land on instalment terms. The Commercial Tribunal (NSW) held that “deferred debt” means “an existing debt incurred under [a] contract payable under the contract at a defined future date”, but does not include probable future debts or contingent or conditional future debts, such as exist under an ordinary contract for the sale of land. [page 26] The interpretation of “deferred debt” adopted in Rafiqi and McKenzie has been criticised on the basis that it seems “inconceivable” that the legislature would intend that a currently existing debt payable in the future would be credit under the Code while existing debts, presently payable (eg, loans repayable on demand) are not: see D G Robertson, Butterworths Consumer

Credit Law Bulletin No 10/1999 at [77]. It appears that this analysis may be particular to certain land purchases made by instalment payments. Under the UCCC, there emerged an avoidance practice of selling land or goods by means of instalments or “term contracts”, with ownership in the goods only passing to the consumer on payment of the last instalment. As D Niven and T Gough describe in The Operation of the Uniform Consumer Credit Code (Consumer Credit Legal Service Inc, August 2004) some involved in these kinds of transactions argued that they were not regulated by the UCCC in that: … credit can only occur where a debt is formed and then deferred. In these transactions, it is argued that the time for payment of the debt is at the end of the transaction or when each instalment becomes due, and therefore no deferment of debt ever occurs. Such credit providers point to High Court authority for such a proposition in the case of McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457; 39 ALR 381.

Such an argument was advanced in the case of Director of Consumer Affairs Victoria v Geeveekay Pty Ltd (2005) ASC ¶155-075; [2005] VCAT 555, affirmed on appeal to the Supreme Court of Victoria in Geeveekay Pty Ltd v Director of Consumer Affairs Victoria (2008) 19 VR 512; (2008) ASC ¶155-090; [2008] VSC 50; BC200800981, with the “vendor”, Geeveekay, arguing that an application in relation to particular breaches of certain key requirements of the UCCC should be struck out because the UCCC did not apply as the arrangements in question were incapable of constituting the “provision of credit” under s 4 of the UCCC. Geeveekay argued that the arrangements were nothing more than instalment contracts for the sale and purchase of land and did not create “debts” or “deferred debts”. In the alternative, Geeveekay argued that even if the contracts did create debts, those debts were future debts that arose only on the date they were due for payment. Geeveekay relied on the obiter of Dixon J (with whom Rich and McTiernan JJ agreed) in McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457; [1933] ALR 381; (1993) 7 ALJR 94; BC3300017 as support for this proposition. The tribunal rejected the submission that McDonald is authority for such a proposition, noting that the case is concerned with the recovery and payment of instalments, rather than when a debt was first created or came into existence. Without having the benefit of reviewing the contracts in question,

the tribunal said it was not convinced the UCCC did not apply to the contracts as Geeveekay claimed. Further evidence that some of the loan contracts referred to the UCCC, and the fact that s 15(B)(c) of the UCCC referred directly to the sale of land by instalments, indicated that the UCCC was intended to apply. This issue has now been clarified by the inclusion of ss 10, 11 and 12 of the Code (see [10.05]–[12.05]). Interestingly, the tribunal commented, in obiter, that the final “instalment” would not be a debt as it was an obligation conditional on the vendor delivering to the purchaser a signed conveyance of the land. The tribunal held that “debt” should be given its common law meaning, being a “sum certain” that is either immediately payable or for which there is a present obligation to pay at some [page 27] definite future time (Webb v Stenton [1881–5] All ER Rep 312; (1883) 55 LJQB 584; 49 LT 432; 11 QBD 518 at 526–8). In this respect, the tribunal preferred the more limited approach taken in McKenzie (which excludes probable future debts or contingent debts from being “deferred debts”) over that in Rafiqi (which seems to include all future debts). [3.25] “Deferred debt” — payment after ordinary time for payment This approach to considering when a debt is “deferred” accords with an analysis of English credit legislation whereby a debt is said to be deferred if a contract allows the debtor to pay the creditor at a time later than the time at which payment would ordinarily be due under a contract which confers some benefit on the debtor: see D G Robertson, Butterworths Consumer Credit Law Bulletin No 10/1999 at [77]. For example, a “deferred debt” is incurred under this analysis if A sells B goods and permits B to pay in 12 equal instalments. Payment is ordinarily due at the time of delivery of the goods from A to B and, as such, payments permitted after the time of delivery would constitute a “deferred debt”. This interpretation has been criticised on

the basis that English legislation does not include the concept of “deferment” but only the undefined notion of “credit”. Further, this approach does not allow loans repayable on demand to fall within the definition of credit: see D G Robertson, Butterworths Consumer Credit Law Bulletin No 10/1999 at [77]. For example, the provision of credit under a loan agreement is assumed to arise from the deferment of payment by the debtor to the creditor permitted by the terms of the loan agreement. However, money advanced under a loan payable on demand is repayable immediately upon the money being advanced (Young v Queensland Trustees Ltd (1956) 99 CLR 560; [1956] ALR 939; 30 ALJR 300; BC5600800). As such, there would be no provision of credit as there is no deferment of payment under the terms of the loan. [3.30] “Deferred debt” — payment after benefit received Traditional legal analysis suggests that a debt is deferred if a contract allows the debtor to pay later than the time the benefit is supplied to the debtor under the contract; the benefit to be supplied at the time payment would otherwise have been earned under the express or implied terms of the contract (see R M Goode, Consumer Credit Law, Butterworths, London, 1989, at [8.12]). This approach would result in loans under loan agreements (whether repayable on demand and otherwise) being treated as credit as the benefit of the loan is received by the debtor at the time the money is advanced and repaid at a later time. However, this approach would not result in the Code applying in a situation where A sells B goods under a lay-by sale on the condition that property is retained by A until 12 equal instalments have been made. Prior to the 12th payment, B would not have received the benefit B had bargained for and consequently there is no “deferment” of debt as each debt arises at the time the instalment is due, and payment is made at the time. In summary, this approach has the benefit of including within the meaning of “deferred debt” loans payable on demand, but it would exclude certain debts payable in the future. This exclusion is inconsistent with the case law referred to in [3.20]. [page 28]

[3.35] “Amount of credit” Amount of credit is defined, for the purposes of the Code, to be “the amount of the debt actually deferred”. The amount of credit is an important concept in the Code (see, for example, ss 17(3) and 71(3)). It is not always clear what constitutes the “amount of credit”. It seems that “amount of credit” is a concept generally applicable to noncontinuing credit contracts. (Note, however, that s 130(4)(a) expressly uses “amount of credit” in the context of continuing credit contracts.) This point is dealt with expressly in s 71(3), but only for the purposes of that section. Section 3 provides that “amount of credit” does not include interest charged under the contract, and certain fees and charges in connection with the making of, or related to, the contract, but some uncertainty nevertheless remains. For example, it is still not clear whether an agreement to capitalise the amount of instalments in arrears will constitute an increase in the amount of credit (see [3.45]). However, in Director of Consumer Affairs v City Finance Loans (2006) ASC ¶155-080; [2005] VCAT 1989 the tribunal held that the UCCC drew a distinction between the amount of credit (ie, the principal) on the one hand and interest, charges and fees on the other. In Australian Finance Direct Ltd v Director of Consumer Affairs Victoria (2007) 234 CLR 96; (2008) ASC ¶155-088; [2007] HCA 57; BC200710769, the High Court held that “holdbacks”, being amounts remitted by a supplier back to a linked credit provider, should be disclosed as part of the “amount of credit” under s 15(B) of the UCCC (s 17(3) of the Code). The holdbacks were the subject of a separate agreement between the supplier and the linked credit provider but were still “an ascertainable amount of credit to be paid to an ascertainable person, body or agent (including the credit provider)” under s 15(B)(a)(ii) of the UCCC (s 17(3)(a)(ii) of the Code). In reasoning that was affirmed on appeal by the High Court, Neave JA of the Victorian Court of Appeal in Australian Finance Direct Ltd v Director of Consumer Affairs Victoria (2006) 16 VR 131; [2006] VSCA 245; BC200609322 at [190] stated that: The words “including the credit provider” should be interpreted as covering amounts paid out of the amount of credit in connection with the credit contract, but which are not required to be paid under the contract itself.

[3.40] Interest The terms “interest”, “interest charges” and “rate” are used

frequently in the Code, but are not defined. As such it is likely they are to be given their ordinary meaning. It is clear that interest is closely related to the concept of an annual percentage rate under s 27 (see [27.10]). In s 64, a change in interest rate is used interchangeably with a change in an “annual percentage rate” or “rates payable under a credit contract”. Both the Victorian Civil and Administrative Tribunal in Director of Consumer Affairs Victoria v Australian Finance Direct Ltd (2004) ASC ¶155-067; [2004] VCAT 1515 and the Supreme Court of Victoria in Australian Finance Direct Ltd v Director of Consumer Affairs Victoria (2005) ASC ¶155-073; [2004] VSC 526; BC200408816 affirmed that the term “interest” should be afforded its ordinary meaning. The tribunal relevantly defined interest according to its dictionary definition, being: payment of a sum paid for the use of money borrowed, the principal, or for the forbearance of a debt; or [page 29] a rate per cent per unit of time represented by such a payment. In the Supreme Court, Kaye J noted that the parties had rightly accepted that “interest” should be given its ordinary meaning as understood in other statutory contexts, being: … the return or compensation for use or retention by one person of a sum of money belonging or owed to another.

See 27 Halsbury’s Laws of England, 3rd ed, 7 quoted with approval in Adams v Paul’s Properties Ltd [1965] NZLR 161; Consolidated Fertilisers Ltd v Deputy Cmr of Taxation (1992) 36 FCR 1; 107 ALR 456; 23 ATR 305; BC9203491. In Australian Finance Direct Ltd v Director of Consumer Affairs Victoria (2005) ASC ¶155-073; [2004] VSC 526; BC200408816, the Supreme Court held that “holdbacks”, being amounts remitted by a supplier back to a linked credit provider, were not to be considered “interest” for the purposes of s 15 of the UCCC (s 17 of the Code) (see [17.25]). This point was affirmed by

Maxwell P on appeal of Australian Finance Direct to the Victorian Court of Appeal (2006) 16 VR 131; [2006] VSCA 245; BC200609322 at [43]–[45]. While Maxwell P was in the minority, this issue was not addressed by the majority or by the High Court on appeal. In Director of Consumer Affairs v City Finance Loans (2006) ASC ¶155080; [2005] VCAT 1989, Morris P considered whether certain fees were actually interest. Referring to the decision of Kaye J in Australian Finance Direct, Morris P held that there were two elements to interest in the context of the UCCC: first, a relation to a principal sum and second, a charge for the use of the principal sum by the debtor. The Code provisions reinforce these concepts as they contemplate that interest will be expressed in terms of a ratio related both to the principal sum and period of use by the debtor, and they also make separate provision for fees. Applying these principles, Morris P held that the application fee, the establishment fee and the periodic loan maintenance fee were not interest as they were not sufficiently related to the two elements identified above. [3.45] “Under”/“in connection with the making of” the contract Section 3(2) excludes from the definition of amount of credit any fees, charges or interest charges accruing “under the contract”. The concept is utilised numerous other times throughout the Code. For example, determining whether an interest charge accrues “under the contract” is important; such charges are required to be disclosed under the key disclosure provisions in s 17. The proper construction was considered by the Supreme Court of Victoria in Australian Finance Direct Ltd v Director of Consumer Affairs Victoria (2005) ASC ¶155-073; [2004] VSC 526; BC200408816. Even though Kaye J had determined that “holdbacks” (see [3.40] above) were not to be characterised as interest, it was necessary for him to consider whether holdbacks operated “under the contract” for the purposes of s 15(C)(a), (D) and (E) of the UCCC (s 17(4)(a), (5) and (6) of the Code). This was because the Victorian Civil and Administrative Tribunal at first instance characterised the holdbacks as interest by construing the phrase “under the contract” widely to mean “directly referable to the contract, within the

[page 30] bounds of the credit contract, as distinct from unrelated to it, outside its bounds or wholly independent of it” (at [88]). According to Kaye J, this was not the correct approach, noting (at [92]) that: The construction of that phrase preferred by the Tribunal, and supported by the respondent in its submissions before me, is particularly wide. It is also quite vague and imprecise, and as such does not really assist in the resolution of the issue whether holdbacks are interest payable “under the contract”. There is no reason why the phrase “under the contract” in ss 15(C), (D) and (E) [of the UCCC (ss 17(4), (5) and (6) of the Code)] should not bear its plain and ordinary meaning.

Kaye J agreed with the construction of the phrase “under the contract” adopted by Ormiston J (as he then was) in Avco Financial Services Ltd v Abschinski [1994] 2 VR 659; (1994) ASC ¶56-256. That is, the phrase is to be taken in its ordinary sense as excluding rights and obligations, the source of which was a separate or different contract. The court rejected arguments that even if a narrow construction is applied, the fact that there was a separate agreement or arrangement that was entirely contingent on the contract for sale of goods could therefore be characterised as an amount payable under the contract. The court considered the case of ANZ Banking Group Ltd v Bollas (1999) ASC ¶155-031; [1999] VSCA 50; BC9902736 where it was held that fees payable under a mortgage document were not fees owing “under the [credit] contract”. The Bollas case was distinguished by the court in Australian Finance Direct, as the obligations under the mortgage in Bollas were “essentially linked” to those of the credit contract, having no independent existence from the obligations under the loan contract. In Australian Finance Direct, however, the holdbacks had an independent legal existence from the obligations under the credit contract. In Australian Finance Direct Ltd v Director of Consumer Affairs Victoria (2006) 16 VR 131; [2006] VSCA 245; BC200609322, the Victorian Court of Appeal heard an appeal from Kaye J’s decision. In the appeal judgment, Neave JA at [186] thought that “considerable significance should be attributed to the omission of the words ‘under the contract’ in s 15(B)(ii)” of the UCCC (s 17(3)(a)(ii) of the Code) relating to the required disclosure of the amount of credit, given that so many other aspects of the contract document to be disclosed under s 15 of the UCCC were expressly those

aspects “under the contract”. Under s 15(B)(a)(ii) of the UCCC (s 17(3)(a)(ii) of the Code), the contract document is required to disclose the amount of credit, if ascertainable, and the persons, bodies or agents (including the credit provider) to whom it is to be paid, but only if both the person, body or agent and the amount are ascertainable. In Australian Finance Direct, the contract document stated that $15,340 was the amount of credit payable to the supplier, but it failed to state that, under a separate arrangement between the linked credit provider and the supplier, the linked credit provider actually retained part of that amount (called a “holdback”) and did not pay it to the supplier. The fact that the “amount of credit” to be paid is not qualified by the words “under the contract” in s 15(B)(a)(ii) of the UCCC (s 17(3)(a)(ii) of the Code) was held by Neave JA at [181]–[182] to require the contract document to specify the persons to whom the amount of credit is to be [page 31] paid, regardless of whether the source of that obligation was the contract document or a different agreement. Neave JA also found at [181]–[182] that “the words ‘in connection with the making of the contract’ in s 4(2)(b)(ii) of the UCCC [s 3(2)(b)(ii) of the Code] are sufficiently wide to cover payments occurring outside the contract itself” and that they included an arrangement that was not “under the contract” in question. It follows that the phrases “in connection with the making of the contract” and “in connection with the making of a mortgage or a guarantee related to the contract” will be interpreted in their ordinary sense, and are of much wider ambit than the phrase “under the contract”. [3.50] Credit substitutes Financial accommodation may be provided other than by way of loan. For example, bank guarantees or performance bonds may be given on account of a personal customer in connection with the construction of a home. Would financial accommodation of this kind be regarded as “credit”? The issue of a bank guarantee (assuming it is pursuant to a contract) involves neither the deferral of a debt nor the incurring of a

“deferred debt”. Rather, it results in a contingent liability on the part of the issuer that may or may not result in a debt of the customer. If a claim is made on the issuer, the issuer will seek reimbursement, by way of indemnity, from the customer. If the customer makes immediate payment to the issuer, there is no deferral of a debt nor is there an incurring of a deferred debt, because at no time before the demand was made under the guarantee could there be said to have been a debt of the customer. If the issuer and the customer decide to defer payment of the amount the customer is required to indemnify to the issuer, there may be at that point a contract under which payment of a debt is deferred (s 3(1)(a)) and, therefore, a credit contract. [3.55] Case Geeveekay Pty Ltd v Director of Consumer Affairs Vic (2008) 19 VR 512; (2008) ASC ¶155-090; [2008] VSC 50; BC200800981.

Meaning of credit contract 4 For the purposes of this Code, a credit contract is a contract under which credit is or may be provided, being the provision of credit to which this Code applies. ________________________________________ [Editorial note: UCCC s 5 — apart from numbering the section is unchanged.]

COMMENTARY ON SECTION 4 [4.05] Outline Section 4 makes it clear that, for the purposes of the Code, “credit contract” means only a contract under which credit is provided and to which the Code applies. “Contract” is defined in s 204 to include a “series or combination of contracts, or contracts and arrangements”. This does not sit easily with other provisions of the Code for example, ss 6(5) and 13, which can only be given a sensible meaning if the definition in s 4 is not strictly applied. This is an early example of the Code’s ambiguous drafting.

[page 32] [4.10] Existing contracts Section 40 states that if credit is provided as a result of a change to an existing credit contract, or a deferral or waiver of an amount under an existing credit contract, a new credit contract is not created, as long as the change, deferral or waiver complies with the Code or is made in accordance with the contract. [4.15] “Contract” and “account” The Code distinguishes between “credit contracts” and “accounts”, identifying them as different concepts (s 33(4)). This distinction becomes important where statements of account (under s 33) and notices (under, for example, ss 36, 61, 83 and 88) must be given in respect of multiple accounts opened under a single contract. [4.20] Multiple contracts A customer may wish to enter into a series of credit contracts with a credit provider — for example, contracts for a home loan and a credit card. Some facilities currently available to customers involve multiple options. “Contract” is defined in s 204 to include “a series or combination of contracts”. Does this mean that, if there is more than one credit contract entered into by a credit provider and a customer, they can be said to be a “series” or a “combination”, with the result that they must be “aggregated” for the purposes of the Code and treated as a single contract? This would require a single composite disclosure under ss 16 and 17. Or should they be treated both as separate contracts and combined contracts, requiring disclosures separately and together? The better view would appear to be that, if the Code is being complied with individually in connection with a series of contracts, there should be no need to impose a further level of “aggregated” compliance. Support for this view can be found in s 33(4), which provides for a “disaggregated” approach to compliance. [4.25] Cases Geeveekay Pty Ltd v Director of Consumer Affairs Vic (2008) 19 VR 512; (2008) ASC ¶155-090; [2008] VSC 50; BC200800981; Bahadori v Permanent Mortgages Pty Ltd (2008) 72 NSWLR 44; [2008] NSWCA 150; BC200805005; Dept of Consumer and Employment Protection v Chequecash

Pty Ltd [2009] WASC 18; BC200900406; Shakespeare Haney Securities Ltd v Crawford [2009] 2 Qd R 156; [2009] QCA 085; BC200902421.

Provision of credit to which this Code applies 5 (1) [Key elements] This Code applies to the provision of credit (and to the credit contract and related matters) if when the credit contract is entered into or (in the case of precontractual obligations) is proposed to be entered into: (a) the debtor is a natural person or a strata corporation; and (b) the credit is provided or intended to be provided wholly or predominantly: (i)

for personal, domestic or household purposes; or

(ii) to purchase, renovate or improve residential property for investment purposes; or (iii) to refinance credit that has been provided wholly or predominantly to purchase, renovate or improve residential property for investment purposes; and (c) a charge is or may be made for providing the credit; and [page 33] (d) the credit provider provides the credit in the course of a business of providing credit carried on in this jurisdiction or as part of or incidentally to any other business of the credit provider carried on in this jurisdiction. 5 (2) [Continuing jurisdiction] If this Code applies to the provision of credit (and to the credit contract and related matters): (a) this Code applies in relation to all transactions or acts under the contract whether or not they take place in this jurisdiction; and (b) this Code continues to apply even though the credit provider ceases

to carry on a business in this jurisdiction. 5 (3) [Personal, domestic or household purpose] For the purposes of this section, investment by the debtor is not a personal, domestic or household purpose. 5 (4) [Predominant purpose] For the purposes of this section, the predominant purpose for which credit is provided is: (a) the purpose for which more than half of the credit is intended to be used; or (b) if the credit is intended to be used to obtain goods or services for use for different purposes, the purpose for which the goods or services are intended to be most used. ________________________________________ [Editorial note: UCCC s 6 provided as follows: Provision of credit to which this Code applies 6 (1) [Key elements] This Code applies to the provision of credit (and to the credit contract and related matters) if when the credit contract is entered into or (in the case of pre-contractual obligations) is proposed to be entered into— (a) the debtor is a natural person ordinarily resident in this jurisdiction or a strata corporation formed in this jurisdiction; and (b) the credit is provided or intended to be provided wholly or predominantly for personal, domestic or household purposes; and (c) a charge is or may be made for providing the credit; and (d) the credit provider provides the credit in the course of a business of providing credit or as part of or incidentally to any other business of the credit provider. 6 (2) [Fees or charges included] If not all the debtors under a credit contract ordinarily reside, or are strata corporations formed, in this jurisdiction, this Code applies only if credit is first provided under the contract in this jurisdiction. 6 (3) [Association not required] If this Code applies to the provision of credit (and to the credit contract and related matters)— (a) this Code applies in relation to all transactions or acts under the contract whether or not they take place in this jurisdiction; and (b) this Code continues to apply even though the debtor ceases to be ordinarily resident in this jurisdiction. 6 (4) [“personal, domestic or household” purpose] For the purposes of this section, investment by the debtor is not a personal, domestic or household purpose.

6 (5) [“predominant purpose”] For the purposes of this section, the predominant purpose for which credit is provided is— (a) the purpose for which more than half of the credit is intended to be used; or (b) if the credit is intended to be used to obtain goods or services for use for different purposes, the purpose for which the goods or services are intended to be most used.]

COMMENTARY ON SECTION 5 [5.05] Outline Section 5 is a central provision of the Code because it identifies the kind of credit which is covered by the Code. For credit to be covered by the Code, it must have four elements: the debtor must be a natural person or a strata corporation; the credit must be provided or intended to be provided wholly or predominantly: [page 34] —

for personal, domestic or household purposes (ie, not business or investment purposes); or

—

to purchase, renovate or improve residential property for investment purposes; or

—

to refinance credit that has been provided wholly or predominantly to purchase, renovate or improve residential property for investment purposes; and

a charge is or may be made for providing the credit; and the credit is provided in the course of or incidentally to a business carried on in Australia. Section 5(2)–(4) contains definitions which assist in the interpretation of s 5. There are no monetary or interest rate limits — credit which has the four elements described above will be regulated regardless of the amount of the credit provided and of the interest rate charged, unless one of the specific exemptions applies.

[5.10] “Natural person” “Person” is defined in s 211 to include an individual or a body corporate. A natural person is an individual. [5.15] UCCC — “ordinarily resident” The UCCC included a definition of “ordinarily resident”. Until the Consumer Credit (Queensland) Amendment Act 1998 came into force, Sch 1 of the UCCC defined “ordinarily resident” in the jurisdiction to mean, if the person concerned was not ordinarily resident in Australia, resident for the time being in the jurisdiction. This definition was deleted by the Consumer Credit (Queensland) Amendment Act. From then on, the general meaning of “ordinarily resident” applied for the purposes of s 6(1) of the UCCC. The explanatory notes to the Consumer Credit (Queensland) Amendment Act explained the reason for the deletion of “ordinary resident” as follows: By virtue of … s 6(1)(a) [of the UCCC], the [UCCC] does not apply to a credit contract unless, at the time the contract is entered into, the debtor is ordinarily resident in the relevant jurisdiction. The original definition gives the term an extended or artificial meaning if at the relevant time the debtor is not ordinarily resident anywhere in Australia; in such a case the debtor is effectively deemed to be ordinarily resident in the State or Territory where he or she is currently resident for the time being. It is now considered unnecessary to extend the application of the [UCCC] to people ordinarily resident outside Australia and accordingly the definition is to be deleted.

Section 6(2) of the UCCC covered a situation where not all of the debtors under a credit contract ordinarily resided in the same jurisdiction. Where debtors ordinarily resided in different jurisdictions, the test for whether the UCCC applied was where the credit was first provided under the credit contract in the jurisdiction. The UCCC did not make it clear how the place where credit was provided was to be determined. For example, if a credit contract was formed in one jurisdiction, [page 35] but the first drawdown of credit took place in another, in which jurisdiction was the credit provided? This definition was included in the UCCC because it was necessary to

determine which state or territory code applied to a particular contract. Now that the Code is a national law, the definition is no longer needed. See also [5.50]. [5.20] “Strata corporation” Section 204 defines “strata corporation” to mean a body corporate incorporated in relation to land subdivided wholly or mainly for residential purposes under a law providing for strata, cluster, precinct or other subdivision of land, or a body corporate whose issued shares confer a right to occupy land for residential purposes. Strata corporation therefore includes various forms of collective ownership of property, including company title (see s 204). [5.25] “Provided or intended to be provided for … purposes” There has been some difference of opinion as to whether s 5(1)(b) creates a test which is objective or subjective, or a hybrid. That is, whether the relevant “purpose” is the debtor’s actual purpose in obtaining the credit or the purpose to which the credit provider believes the credit will be put. In Rafiqi v Wacal Investments Pty Ltd (1998) ASC ¶155-024, Brabazon DCJ stated that the proper construction of s 6(1)(b) of the UCCC (s 5(1)(b) of the Code) required an objective approach to be taken: Once a particular purpose can be isolated it must be shown that the intention of the credit provider was that it be provided wholly or predominantly for that purpose … s 6(1)(b) [of the UCCC (s 5(1) (b) of the Code)] allows an objective approach to be adopted to allow the court to decide that the relevant intention for the purposes of the [UCCC] will be that which a reasonable person standing in the shoes of the credit provider would have understood the predominant purpose for which the credit is provided.

Brabazon DCJ contrasted the terms of s 6(1)(b) of the UCCC (s 5(1)(b) of the Code) with those of s 6(5) of the UCCC (s 5(4) of the Code). It is apparent that his Honour considered the key difference to be that s 6(l)(b) of the UCCC (s 5(1)(b) of the Code) is framed in terms of credit being “provided or intended to be provided”, which required the balance of the subsection to be construed from the perspective of the credit provider. Although his Honour did not say so, it is clear from his remarks that he regarded both elements of the expression “provided or intended to be provided” to require consideration of the intention of the credit provider. The difference between credit provided and credit intended to be provided was

implicitly regarded as being that the credit may in fact be provided at or some time after the time when the credit contract is entered into (that being the point of time at which applicability of the Code is determined). Brabazon J commented that “any other interpretation would place an intolerable burden on the credit provider”. Under this approach, if the debtor subjectively intends to use the credit predominantly, but not entirely, for personal purposes, and a reasonable credit provider would understand that it is providing credit for this purpose, the Code [page 36] will apply. On the other hand, if a reasonable credit provider would understand that credit is being provided for business purposes (unrelated to residential property investment), the Code will not apply (but if the debtor asserts that it does, there is a presumption that this is so unless the credit provider knew, or had reason to believe otherwise or would have known or had reason to believe otherwise, if the credit provider had made reasonable enquiries: s 13). This raises the relevance of the presumptions provided for in s 13 (see [5.40] and [13.05]). In Park Avenue Nominees Pty Ltd v Boon (2001) ASC ¶155-052; [2001] NSWSC 700; BC200104848, Harrison M (at [38]) relied on Rafiqi for the proposition that: … the intention for which credit was sought is to be determined by an objective test, that is what a reasonable person standing in the shoes of the credit provider would have understood the predominant purpose for which the credit was provided. To apply a subjective test would create a legal fiction that a borrower could claim the protection of the [UCCC] by satisfying what he or she subjectively intended to do with the finances.

In that case, a father and a son jointly borrowed money in 1997 for the business purpose of developing the son’s cattle stud. In 1999 a second loan was made in order to refinance the first loan, but by this time the father’s purpose was to provide financial assistance to aid his son in discharging his debts. A (false) business purpose declaration was signed by the father, but it was ineffective for want of substantial compliance with the required form.

The father’s subjective purpose was never communicated to the credit provider and, for the purposes of s 6(1)(b) of the UCCC (s 5(1)(b) of the Code), a reasonable person in the shoes of the credit provider objectively would have understood that the purpose of the further loan was for investment in a cattle enterprise. Therefore the presumption in s 11(1) of the UCCC (s 13(1) of the Code) that the UCCC applied was rebutted, and the UCCC did not apply. In Taylor v Third Szable Holdings Pty Ltd (2001) ASC ¶155-050; [2001] VCAT 1841, McKenzie DP placed significance on the use of the word “provided” in s 6(1)(b) of the UCCC (s 5(1)(b) of the Code) in taking broadly the same approach as that taken in Rafiqi: The question is, whose knowledge is relevant for the purposes of the Code? The credit provider’s or the debtor’s or both? Section 6(1)(b) [of the UCCC (s 5(1)(b) of the Code)] uses the words, “the credit is provided or intended to be provided” for specified purposes. Credit is not of course, provided by the debtor. It is provided by the credit provider. While what the debtor tells the credit provider is clearly relevant, as also is what the credit provider knows from other sources or ought to have known from reasonable enquiry, the knowledge of the credit provider is clearly relevant. I note that parliament does not speak of the purpose for which credit is obtained. It speaks of the purpose for which credit is provided. I note also that when parliament speaks of the use to which their debtor is to put the credit provided, it uses different words. So where, in s 6(5) [of the UCCC (s 5(4) of the Code)], parliament is resolving difficulties which may arise where credit is used for more than one purpose or where the money borrowed is used to obtain goods or services that are used for different purposes, parliament chooses the word “used” in this situation.

In Mummery v IMMS Financial Services Ltd [2002] VCAT 383, McKenzie DP again stated that whether credit is provided for a personal purpose must be [page 37] considered “from the point of view of a person in the shoes of the credit provider” having regard to the information provided by the debtor or what the credit provider ought reasonably to have known at the time of entering into the contract. The Mummery case dealt with a 10-acre property which was comprised of a nine-acre caravan park and motel, and a one-acre residence. In making the decision, McKenzie DP did not consider the “predominant”

purpose in light of these proportions, relying instead on what information had been provided by the debtor to the credit provider. McKenzie DP found that nothing provided to the credit provider by the debtor would have alerted the credit provider or a reasonable credit provider in the circumstances to the fact that the purpose of the loan was other than for business or investment purposes. In Yeshiva v Marshall [2004] NSWSC 921; BC200406800, the debtor swore a “Consumer Credit Code declaration” under s 11(2) of the UCCC (s 13(2) of the Code) and the judgment states (at [49]) that a “statutory declaration” was declared before a solicitor pursuant to the Oaths Act 1900 (NSW) stating the loan was for business purposes. There was no reason for the credit provider to suspect otherwise, and in those circumstances s 11(2) of the UCCC (s 13(2) of the Code) applied, s 11(3) of the UCCC (s 13(3) of the Code) was not “enlivened”, and any relief under the UCCC was excluded. Appeal proceedings from this decision did not change this finding: See Yeshiva Properties No 1 Pty Ltd v Marshall (2005) 219 ALR 112; [2005] NSWCA 23; BC200500885. This finding was based on the operation of the presumption in s 11 of the UCCC (s 13 of the Code). Some confusion has arisen from the objective (“reasonable person standing in the shoes of the credit provider”) test emerging from Rafiqi. In Dale v Nichols Constructions Pty Ltd [2003] QDC 453, the Queensland District Court had to determine, among other things, whether two loans were covered by the UCCC. The facts were that Mr and Mrs Dale had obtained a loan of $160,000 from Equity Investments in order to purchase property from Roebuck. The loan was secured by a mortgage on the property. Although the Dales had signed business purpose declarations as contemplated by s 11(2) of the UCCC (s 13(2) of the Code) and statutory declarations to the effect that the loan was to purchase an investment property, all concerned knew that the credit was being used to purchase the property in which the Dales were going to live. The Dales obtained a loan from Nichols (the “first loan”) of $161,000 in order to pay out the Equity Investments loan. Subsequently, Mrs Dale obtained a loan from Nichols (the “second loan”) of $20,000 (of which $5,000 was immediately deducted as charges), and signed a business purpose declaration, although the loan was in fact used to pay out Roebuck. Nichols

contended that it had been told that the second loan was made on the basis that it would be used to develop Mr Dale’s business. McGill DCJ adopted a subjective approach, holding that: … whether credit is provided for a particular purpose for the purposes of s 6(1) of the UCCC [s 5(1) of the Code] depends on the intention of the borrower at the time the credit is provided, and not the intention of the lender.

On this approach, since the actual intention of the plaintiff in each case was to use the funds to pay moneys outstanding on a residence, the loans were within s 6(1)(b) of the UCCC (s 5(1)(b) of the Code). In Dale, McGill DCJ expressed the view that Rafiqi and Park Avenue Nominees were wrongly decided, and gave [page 38] (at [27]) a number of reasons for rejecting the interpretation that the purpose within s 6(1)(b) of the UCCC (s 5(1)(b) of the Code) has to be determined by reference to what would be apparent to a reasonable person standing in the shoes of the credit provider: “Section 6(1)(b) [s 5(1)(b) of the Code] is not expressed in terms of the apparent purpose of the debtor, or the credit provider’s understanding of the purpose of the debtor, it is expressed in terms of the purpose, and that is, on its natural meaning, the true purpose.” “An interpretation of s 6(1)(b) [s 5(1)(b) of the Code] as referring to the purpose of the debtor, rather than what is known by the credit provider of the purpose of the debtor, fits more readily with the operation of s 11 of the [UCCC (s 13 of the Code)].” “If s 6(1)(b) [s 5(1)(b) of the Code] operated by reference to what the credit provider understood, it might be possible for a credit provider to avoid the operation of the [UCCC] merely by ensuring that it never became aware of the purpose for which the debtor was borrowing the money. If it never became aware (whether tested

subjectively or objectively) of the debtor’s purpose, para (b) would not, on that test, be satisfied.” McGill DCJ stated that the proper construction of s 11 of the UCCC (s 13 of the Code) negated the difficulty perceived by Brabazon DCJ in Rafiqi that it would be an “intolerable burden on the credit provider” if purpose were determined otherwise than by reference to information provided by the debtor. This was because the requirement for a declaration by the debtor in s 11(2) of the UCCC (s 13(2) of the Code) assumes that what is relevant is the debtor’s purpose in relation to the application of the credit. McGill DCJ stated (at [29]) that: If the purpose was to be determined by reference to what was objectively apparent to the lender, there would be no need for a declaration as to the borrower’s true purpose.

In support of this interpretation, McGill DCJ stated that he was following the approach of Shaw J in Jonsson v Arkway Pty Ltd (2003) 58 NSWLR 451; (2003) ASC ¶155-060; [2003] NSWSC 815; BC200305377 in not following Rafiqi. In Jonsson, Shaw J stated (referring to Linkenholt Pty Ltd v Quirk (2000) ASC ¶155-040; [2000] VSC 166; BC200002358 at [98]) that: In contrast to the distinction drawn by the learned District Court Judge in Queensland, Brabazon DCJ, in Rafiqi, I would prefer the approach taken by Gillard J in Linkenholt. His Honour said at [98]: “It is appropriate to consider what the money was used for in order to determine the purpose of the provision of the credit. In considering the question, it is important to look at the substance of the transaction in the context of its performance…” His Honour’s emphasis was that the court should consider the substance and reality of the transaction.

The effect of this statement is unclear and some caution must be exercised in accepting Dale, Jonsson and Linkenholt in this context. The judgment of Brabazon DCJ in Rafiqi did not consider the question of how purpose is to be determined, but instead it decided that whether or not the credit was “provided or intended to be provided” for that purpose (already determined) was to be determined by that objective test. That is an entirely different question from the question which was being answered in the other cases. It is not clear from Jonsson precisely why Shaw J [page 39]

was disapproving of Rafiqi, and the first reason given in Dale for rejecting Rafiqi is unclear and arguably represents a misconstruction of the actual decision in that case. The second and third reasons are considered further at [5.40] regarding the relationship between ss 5(1)(b) and 13 of the Code. The majority view from the cases discussed above seems to be that an objective test should be applied to determine whether the credit was provided or intended to be provided for personal purposes. The better view may be that even though the purpose may be determined by reference to subjective factors, the actual use of funds is not of itself determinative, but simply one of a number of factors the court may consider to determine objectively as a question of fact whether the credit was provided for a personal purpose (for the purpose of the credit provider rebutting the s 13(1) presumption that the Code does apply). These grounds for applying an objective test have been strengthened by the Code change to the UCCC position in relation to the presumption in s 13 which adds a constructive knowledge test for the credit provider regarding the consumer’s declaration of purpose (see [13.05]). That is, if the credit provider knew or had reason to believe, or would have known or had reason to believe if the credit provider had made reasonable enquiries, that the credit was to be provided for a Code purpose, then a consumer’s declaration that the credit was intended for a non-Code purpose will be ineffective. For more on the business purpose declaration and its relevance to a determination of the purpose for which credit was provided, see [5.35], [5.40] and [13.05]. [5.30] Personal, domestic or household purpose The Code does not make clear whose purpose is the relevant purpose for determining whether the Code applies. The Code does not specify that the purpose must be the purpose of the debtor so, for example, credit provided to an individual who is also a trustee which is to be used for personal, domestic or household purposes of a beneficiary of the trust would presumably satisfy the purpose test (see ss 5(1)(b) and (4)(b), 13(2) and 13(3), which contain no references to the person who will use the credit). In Jonsson v Arkway Pty Ltd (2003) 58 NSWLR 451; (2003) ASC ¶155-060; [2003] NSWSC 815; BC200305377, the trust structure employed by the debtor to obtain the credit did not preclude the court from finding the purpose was a personal one.

The words “personal, domestic or household” are not defined in the Code, but they do not include investment (s 5(3)) and would clearly not include any business purpose (on the ordinary meaning of the words and by inference from s 13). Similar tests are applied under the Competition and Consumer Act 2010 (Cth) (s 4B), the ASIC Act 2001 (Cth) (s 12BC) and the Privacy Act 1988 (Cth) (s 6(1) — definition of “credit”), although in the case of the Privacy Act the words used are different. See Jonsson v Arkway Pty Ltd (2003) 58 NSWLR 451 at 455–6; (2003) ASC ¶155-060; [2003] NSWSC 815; BC200305377 for judicial interpretation of the concept of “personal”. Section 6(4) of the UCCC (s 5(3) of the Code) was applied in the case of Booth & Booth v Australian Investment Solutions Pty Ltd [2002] NSWCTTT 190. [page 40] Note that, with the addition of s 5(1)(b)(ii) and (iii) to the Code, credit will now be for a Code purpose if it is for residential property investment purposes (see [5.31]). In Jonsson v Arkway Pty Ltd (2003) 58 NSWLR 451; (2003) ASC ¶155060; [2003] NSWSC 815; BC200305377, credit was obtained by a daughter for the purpose of providing a home for her parents as beneficiaries under a trust. Shaw J held that: In my opinion, the adjective “personal” in the context of beneficial legislation has separate and independent work to do, that is to say, connotations distinguishable from the other concepts contained in the same section of “domestic” or “household” purposes. Each of the adjectives in that section should be given their full meaning and, in my opinion, something can be said to be characterised as “personal” if it involves a transaction designed to benefit the person by providing for her parents.

Applying a purposive approach to ascertain the meaning of the UCCC, Shaw J held that a restrictive meaning should not be given to “personal, domestic or household purposes”, and therefore the accommodation of one’s parents could reasonably be characterised as a personal purpose. In Linkenholt Pty Ltd v Quirk (2000) ASC ¶155-040; [2000] VSC 166; BC200002358, Gillard J indicated that it was appropriate to consider what

the money was used for to determine the purpose of the provision of the credit. That is, the court will consider “the substance of the transaction in the context of its performance”. In that case, a refinancing loan in respect of a business loan to a company was made requiring Mr Quirk to assume primary liability for the sum advanced, instead of secondary liability as guarantor for the company. Essentially, the refinancing was to discharge the original guarantee, and to put in place a personal obligation on Mr Quirk to repay the loan. Mr Quirk claimed that the purpose of discharging his liability under a guarantee was a personal purpose, such that the UCCC applied. The credit provider claimed that since the original loan (which was never repaid) was for business purposes and the personal guarantee was for business purposes, the substitution of the defendant’s liability under the guarantee by a direct obligation to repay a loan realistically was for business purposes and not for personal purposes. Gillard J accepted that liability under a personal guarantee pursuant to an initial loan provided for business purposes did not change the character of the debt; the debtor remained throughout a debtor of money which was used for business purposes. Hence none of the loans was subject to the UCCC. See also Edwards v RAMS Home Loans Pty Ltd (No 1) (2005) ASC ¶155074; [2005] VCAT 193, where it was held that a letter sent by the credit provider to the debtor of an investment loan stating that the credit provider had acted in compliance with the UCCC did not alter the character of the loan as an investment loan. In Queensland v Ward (2002) ASC ¶155-055; [2002] QSC 171; BC200203212, Ambrose J held that the carrying on of an unlawful business activity such as trafficking in a dangerous drug was not a business purpose envisaged by the UCCC and should be categorised as “personal purposes” under s 6(1)(b) of the [page 41] UCCC (s 5(1)(b) of the Code). In essence, it can be implied that business or

investment purposes should be read to only include lawful business or investment purposes. In Gaszewski v Australian Finance Direct Ltd [2005] NSWCTTT 320, Mrs Gaszewski borrowed money from Australian Finance Direct to finance the cost of educational courses undertaken with the National Investment Institute Pty Ltd. Australian Finance Direct argued that the purpose of the credit was so that the Gaszewskis could earn income from investments and obtain an Australian financial services licence from ASIC in order to broker investments. The tribunal member found that whatever their ultimate purpose, the Gaszewskis used the credit to undertake educational courses which they believed would provide them with information and qualifications to assist them with their investment strategies. The undertaking of an educational course was a personal purpose, and therefore the UCCC applied. [5.31] Residential property investment purposes The types of credit in respect of which the Code applies has been expanded in comparison to the UCCC, which only applied in respect of “personal, domestic or household purposes”. The Code now also applies to credit provided or intended to be provided wholly or predominantly to purchase, renovate or improve residential property for investment purposes or to refinance such credit (s 5(1)(b)(ii) and (iii)). It would appear that this expansion includes construction of residential property for investment purposes if the credit is made available to an individual or strata corporation (s 5(1)). The definition of “residential property” in s 204 includes “land on which a dwelling is or will be affixed predominantly for residential purposes”. The only way that land on which a dwelling will be affixed can come to have a dwelling affixed is through construction. Accordingly, it appears that construction would be considered an improvement of residential property. Regulation 65C provides that the Code does not apply to credit provided for residential property investment purposes where the credit is provided for the purpose of investment in more than one residence and the total amount of the credit provided exceeds $5 million. Regulation 78 also modifies the operation of the Code in relation to credit

provided for residential property investment purposes. Residential property investment loans are unique in that they may make provision for interest to be charged and paid in advance (reg 78). However, in documenting such loans it is important to ensure that interest charges will not exceed the maximum amount that can be charged consistently with the Code. This may mean that a recalculation must be performed if there is an unexpected repayment during a period for which interest has been prepaid. Credit wholly or predominantly for investment purposes other than residential property investment is not regulated by the Code (s 5(3)). [5.35] Predominant purpose Section 5(4) defines the predominant purpose for which credit is provided to be the purpose for which more than half of the credit is intended to be used, or if the credit is intended to be used to obtain goods or services for use for different purposes, the purpose for which the goods or [page 42] services are intended to be most used. In Neuendorf v Rengay Nominees Pty Ltd [2003] VCAT 1732, the view was taken that s 6(5)(a) of the UCCC (s 5(4)(a) of the Code) requires consideration of what a reasonable person in the shoes of the credit provider would have thought was the debtor’s intended purpose for the credit. Where the dollar amount of credit may be clearly divided into different uses, this definition will obviously assist. However, where, for example, goods such as a motor vehicle are acquired for a mixed purpose, it may become difficult in practice to determine the predominant purpose with precision. In Giampaolo v Esanda Finance Corp Ltd [2001] VSC 71; BC200101057 the plaintiff, Mr Giampaolo, entered into a hire-purchase arrangement for the finance of a vehicle which he intended to use for travel in the course of his employment. The Victorian Civil and Administrative Tribunal (VCAT) decided that the predominant purpose was satisfying his employer’s

requirements which were business purposes. Leave to appeal was granted in the Victorian Supreme Court but the appeal was not heard. The leave was granted on the grounds that, in basing the determination that the vehicle was for business purposes on the fact that the debtor subsequently claimed tax deductions relating to the vehicle, the tribunal member had arguably made an error in law. At the Supreme Court, Gillard J said that the issue was what purpose the credit was provided for at the time the contract was entered into. Strictly speaking, these observations are obiter dicta, as the case was decided on the basis that it was arguable that the VCAT member had misdirected himself. Also, the case does not appear to have proceeded beyond the interlocutory stage. Nevertheless, the observations support what appears to be the plainest interpretation of s 6 of the UCCC (s 5 of the Code). In Charteris v General Motors Acceptance Corp Aust [2002] NSWCTTT 693, the tribunal found that a loan contract, which was entered into by a company formed by the applicant, and was for the purpose of purchasing a “robust vehicle” to use in the applicant’s cleaning business, was not predominantly for a domestic or personal purpose. The use of a business purpose declaration may go some way to resolving the matter if the credit provider is entitled to rely on the declaration (see s 13(3)). In practice, where there is any doubt as to the predominant purpose for which credit is being provided, it would be prudent to document the credit contract as if it were regulated by the Code. This will avoid the most serious penalties if it is subsequently determined that the credit contract was in fact regulated by the Code. On the other hand, if it is found that the credit contract is not regulated by the Code, there is a risk that, by using documentation and procedures which comply with the Code and providing the debtor with the Code information statement and warnings, the debtor may be led incorrectly to believe that the Code applies to the credit. This risk is unavoidable. On balance, the prudent course of action, where there is any doubt about the predominant purpose of any credit, is to document the credit contract as if it was regulated. [5.40] Relationship between s 5(1)(b) and s 13 Section 13(1) of the Code

creates a presumption that the Code applies in any proceedings in which a party claims that it does so apply. The party denying that the Code applies must prove the contrary. [page 43] There are two references in s 5 to the intention of a party to a credit contract. Section 5(1)(b) refers to credit “provided or intended to be provided wholly or predominantly” for personal, domestic or household or residential investment purposes. Section 5(4) refers to credit “intended to be used to obtain goods or services” and “the purpose for which goods or services are intended to be most used”. “Intention” in s 5(1) could apply to either or both of the debtor and credit provider. In s 5(4), it seems clearer that the relevant intention is the intention of the debtor. The relationship between ss 5(1)(b) and 13 creates a presumption that the Code applies in any proceedings in which a party claims that it does so apply. The party denying that the Code applies must prove the contrary. In cases when a credit provider denies that the Code applies on the basis that the credit was not provided for personal, domestic or household purposes or residential investment purposes within s 5(1)(b), the onus lies on the credit provider to prove on the balance of probabilities that the credit was provided for non-personal or non-residential investment purposes. Even if an objective test does pertain to s 5(1)(b) such that the Code will apply if a reasonable person standing in the shoes of the credit provider would have apprehended that the credit was to be provided for personal purposes or to purchase, renovate or improve residential property for investment purposes or a related refinance, the effect of s 13 is that this must be proven by the credit provider to the requisite standard. If there is no business purpose declaration satisfying s 13(2) and (3), it may be extremely difficult to prove, requiring assessments of the relative credibility of the debtor and the credit provider in the context of the transaction. In Williams v Bank of Western Australia Ltd [2004] NSWCTTT 581, the Consumer Trader and Tenancy Tribunal considered whether a hire-purchase

agreement entered into for the purchase of video editing and DVD copying computer equipment was provided for business or investment purposes, despite the fact that no business purpose declaration had been signed. The debtor claimed that he had entered into the contracts in his personal capacity, intending the equipment to vest in him personally, and the fact that the goods the subject of the agreement were nothing more than a “high powered computer system” used by the debtor and his wife in pursuit of researching, studying, executing, and writing about his (and his wife’s) hobbies. In finding that the presumption as to household/domestic purposes could be rebutted on the evidence available, the following factors were taken into account: the credit provider only provided hire purchase finance for business purposes; the terms and conditions as to the use of the equipment stated they were only to be used in the customer’s business operations; communications between the parties before and during the term of the contract were initiated by the customer on a company letterhead; and the debtor had indicated to the credit provider that the equipment was being used for a business-related use (the production of “Davis Cup official videos”). [page 44] In Dale v Nichols Constructions Pty Ltd [2003] QDC 453, McGill DCJ suggested that an interpretation of s 6(1)(b) of the UCCC (s 5(1)(b) of the Code) as referring to the purpose of the debtor, rather than what is known by the credit provider of the purpose of the debtor, fitted more readily with the operation of the UCCC because otherwise there would be no need for a declaration as to the debtor’s true purpose under s 11(2) of the UCCC (s 13(2) of the Code). Section 13 of the Code is, however, an evidentiary provision. If there was a declaration on which the credit provider is entitled to rely, it is presumed that the credit is not provided for a Code purpose and that the Code does not apply. Without the declaration, the credit provider must

rebut the presumption in s 13(1) that the Code does apply. Whether or not a declaration is made makes no difference to the test that must be applied under s 5(1)(b). McGill DCJ also suggested in Dale that if s 6(1)(b) of the UCCC (s 5(1)(b) of the Code) operated by reference to what the credit provider understood, it might be possible for a credit provider to avoid the operation of the UCCC merely by ensuring that it never became aware of the purpose for which the debtor was borrowing the money. With respect, the contrary is more logical; if a credit provider never took steps to ascertain the purpose for which it was providing credit it would never be able to rebut the presumption that the Code applies by showing that it provided the credit for non-Code purposes. With the introduction of the Code, this line of argument proposed by McGill DCJ has also been undermined by the addition to s 13(3) of constructive knowledge provisions; a credit provider cannot now rely on a business purpose declaration if it would have known that the credit was for a Code purpose if it had made reasonable enquiries. There remains room for argument on whether the application of the Code should be determined by an objective reasonable person test or by reference to the debtor’s subjective intention. In practice, however, whether or not the Code applies is usually determined by resorting to the evidentiary presumptions in s 13. [5.45] Charge Credit is not regulated unless a charge is or may be made for providing it. It is therefore clear that even though there is no charge under the contract at the outset, the fact that a charge may potentially be made will be sufficient to bring the credit within the application of the Code. Section 5(1)(c) does not limit the charge to an interest charge or a charge in the nature of interest. Any charge will be sufficient to satisfy s 5(1)(c). This interpretation is supported by, for example, s 6(5), which would be unnecessary if the word “charge” in s 5(1)(c) were intended to have a limited meaning. However, the charge must be “for providing the credit”. This would not appear to extend to the situations described below:

where free credit is provided for, say, 30 days, but an interest charge is applied if payment is late — in such a case, the terms on which credit is provided (ie, for the agreed period) do not include the making of a charge. The charge is applied only when the payment is overdue, and the charge cannot be said to be made “for providing the credit”; on the contrary, the charge is made because the debtor has failed to pay their debt on time; [page 45] credit provided by way of a cheque account with an occasional overdraft, where no fee or charge is imposed on the overdraft itself (as opposed to a fee applied to the account regardless of whether it is in overdraft) — in this case, provided that no other fee or charge were imposed, the Code would not apply. Interest charged on an overdraft account would constitute a fee or charge for these purposes. Where a product is sold on the basis that the customer may pay by instalments, consideration must be given as to whether credit has been provided and, if so, whether a charge is made for providing that credit. Where title is transferred when the customer takes possession of the product but payment is delayed, it is likely that credit has been provided. Where the product price does not vary according to whether the customer pays up front or by instalments, obviously no charge has been imposed. Where the product is only available on a “pay by instalments” basis, one should consider the price for which that product would be otherwise available, either from the same supplier or another supplier, to ascertain whether the price contains a charge for the provision of credit. [5.50] Course of business in Australia For credit to be regulated by the Code, it must be provided by the credit provider in the course of a business of providing credit carried on in Australia or as part of, or incidentally to, any other business of the credit provider carried on in Australia. This means that the provision of credit need not be the main business of the credit provider.

As long as the credit is provided in the course of any business, it will fall within s 5(1)(d). In Dale v Nichols Constructions Pty Ltd [2003] QDC 453, Nichols was a construction company building houses and unit blocks on the Gold Coast, which did not lend money to purchasers of those dwellings. The company had a practice of lending out working capital for interest, but it did not advertise the availability of loans or actively seek debtors; it merely informed its third party finance broker from time to time that applications for loans would be considered. McGill DCJ held that Nichols was carrying on a business of providing credit since there was an element of system, repetition and continuity that raised the situation above constituting more than occasional and disconnected loans. Also relevant was the nature and scale of the third party finance broker’s operations, which Nichols was employing as its business system. McGill DCJ distinguished a line of cases (Rabone v Deane (1915) 20 CLR 636; BC1590124; Best v Sutcliffe [1965] NZLR 750; Swayne v Palm [1970] SASR 158; Hungier v Grace (1972) 127 CLR 210; [1972–73] ALR 759; (1972) 46 ALJR 492; BC7200550 and Marshall & Brougham Pty Ltd v Cmr of Taxation (1986) 45 SASR 571; 85 FLR 346) in which courts had required a fairly high threshold to be satisfied before finding that a money-lending business was being conducted on the basis that those cases were dealing with penal money-lending legislation that imposed quite severe sanctions on persons carrying on the business of providing credit without a licence. McGill DCJ adopted a purposive approach (following the approach of Shaw DCJ in Jonsson v Arkway Pty Ltd (2003) 58 NSWLR 451; (2003) ASC ¶155-060; [2003] NSWSC 815; BC200305377), characterising the legislation as beneficial legislation which ought to be broadly and liberally interpreted. Accordingly, Nichols was held to be carrying on a business of providing credit, in the course of which the loans to the Dales were made. [page 46] In Dale, McGill DCJ also made findings as to whether the loans were in any case made “incidentally to any other business of the credit provider”

within s 6(1)(d) of the UCCC (s 5(1)(d) of the Code). Again applying a broad purposive approach, McGill DCJ rejected a submission that in order to be incidental, the credit-providing activity must inseparably depend on or appertain to the construction business, finding instead that “there has to be some connecting factor such that the provision of credit could be said to incidental to the other business”. The legislation was intended to cover situations distinct from the provision of credit to customers of the other business. Here the sufficient connection was that it was the working capital of the ordinary construction business which was being lent when it was not immediately required for that business. McGill DCJ commented that the legislation was an attempt by the legislature to “cast the net wide”. Under the UCCC, the required territorial connection for the operation of the UCCC was that the debtor had to be “ordinarily resident” in the relevant state or territory. Following the introduction of the Code, the territorial operation of the Code is determined by reference to where the credit provider is carrying on business (s 5(1)(d)). ASIC states in Regulatory Guide RG 203 Do I need a credit licence? at para RG203.69 that: Credit provided in the course of a business carried on outside Australia will not ordinarily be subject to the National Credit Code, even if the credit provider also carries on business in Australia. The Code applies to acts or omissions taking place outside Australia where they relate to credit provided in the course of the business carried on in Australia.

[5.55] UCCC — Tasmania The Consumer Credit (Tasmania) Code inserted additional subsections at the end of s 6 of the UCCC. The effect of these additional provisions ensured that sales of goods by instalment were caught by the operation of the UCCC. These were inserted to curtail a particular arrangement intended to avoid the UCCC which was increasing in prevalence in Tasmania. Under that arrangement, a credit provider purchased household goods for cash and then immediately entered into an agreement whereby the seller was to repurchase the goods by instalment. The practice also involved the charging of excessive fees for the valuation of the goods. This is now dealt with in s 11 of the Code. Tasmania also inserted reg 18A into the Consumer Credit (Tasmania) Regulations to prohibit a credit contract from including a fee to value household goods. [5.60] Vendor term contracts Vendor term contracts (also known as “terms

contracts”) are a method of purchasing a home by instalments, where finance is supplied by a vendor rather than an established credit provider, and title to the property only passes on the payment of the final instalment. These vendor term contracts often contain much higher rates of interest, with the underlying cost of the property being much higher than market price. In 2004, it was announced by the Uniform Consumer Credit Code Management Committee that the UCCC would be amended to clarify that vendor term contracts are credit contracts to which the UCCC applies. A discussion paper on this topic was [page 47] released in late 2005 for public consultation. Case law in this area suggests that instalments may be considered deferred debts for the purposes of s 3 (see [3.20]). This is now dealt with in s 10 of the Code (formerly s 10A of the UCCC) (see [10.05]). [5.61] Vendor finance — purchase shortfall Sometimes a property developer will allow a purchaser to settle without receiving the full balance of the purchase price because the purchaser is unable to obtain adequate financing to complete a settlement. The shortfall may be payable by the purchaser to the property developer at a later date. However, care should be exercised when taking this approach and varying the payment terms under a contract of sale for land for purchasers of residential property. In 2013, ASIC reviewed the practices of property developers that allow purchasers to postpone part payment of the purchase price until after settlement. ASIC is concerned that the practice of delaying part payment may in some cases involve the “provision of credit”, which is regulated by the Code. In those cases, the property developer should need an Australian credit licence (ACL) to engage in such practices. Engaging in credit activities without an ACL is an offence under the NCCP Act. Penalties include a fine of up to A$1.7 million and up to two years imprisonment.

Application of the Code The Code and the NCCP Act will apply to an arrangement if: credit is provided under a contract either where payment of a debt owed by one person to another is deferred or where one person incurs a deferred debt to another (s 3(1) of the Code); the debtor is a natural person (s 5(1)(a)); the credit is provided or intended to be provided wholly or predominantly for household, domestic or personal use; or to purchase, renovate or improve residential property or investment property (s 5(1)(b)); a charge is or may be made for providing the credit (s 5(1)(c)) — note this can be fees (including legal fees); the credit provider provides the credit in the course of providing credit carried on in Australia or as part of or incidentally to any other business of the credit provider carried on in Australia. Traps for property developers A shortfall arrangement between a property developer and a purchaser may satisfy the above requirements and may be categorised as a “credit contract”. If so, the property developer will need to be licensed under the NCCP Act as a “credit provider”. Further, if an intermediary, such as a real estate agent or solicitor, negotiated or assisted in proposing the shortfall arrangement, that intermediary may also be engaging in a credit activity and will either need to be licensed or appointed as a credit representative. Since 2010, the NCCP Act applies to credit provided to purchase a residential property by an individual, including purchase of an investment property. If a credit provider is entering into arrangements for payment of a shortfall amount with an [page 48] individual purchaser, then this may be a credit activity even if that credit

provider is not in the business of lending money. It is possible to structure the shortfall arrangement whereby it is not regulated by the Code and the NCCP Act — however, extreme care must be exercised. [5.65] Cases Geeveekay Pty Ltd v Director of Consumer Affairs Vic (2008) 19 VR 512; (2008) ASC ¶155-090; [2008] VSC 50; BC200800981; Perpetual Trustees Victoria Ltd v van den Heuvel (2009) 14 BPR 26,749; [2009] NSWSC 57; BC200900803; Dept of Consumer and Employment Protection v Chequecash Pty Ltd [2009] WASC 18; BC200900406; Jonsson v Arkway Pty Ltd [2005] NSWSC 304; BC200502731; Permanent Custodians Ltd v Upston (2007) ASC ¶155-083; (2007) NSW ConvR 56-178; [2007] NSWSC 223; BC200701913; Benjamin v Ashikian (2007) ASC ¶155086; [2007] NSWSC 735; BC200705347; Hamafam Pty Ltd v Saadullah (2007) ASC ¶155-087; [2007] NSWSC 818; BC200706016; National Australia Bank Ltd v Burness [2007] NSWSC 247; BC200701982; Ralena Pty Ltd v VCAT [2006] VSC 451; BC200609795; Shakespeare Haney Securities Ltd v Crawford [2009] 2 Qd R 156; [2009] QCA 085; BC200902421.

Provision of credit to which this Code does not apply 6 (1) Short term credit This Code does not apply to the provision of credit if, under the contract: (a) the provision of credit is limited to a total period that does not exceed 62 days; and (b) the maximum amount of credit fees and charges that may be imposed or provided for does not exceed 5% of the amount of credit; and (c) the maximum amount of interest charges that may be imposed or provided for does not exceed an amount (calculated as if the Code applied to the contract) equal to the amount payable if the annual

percentage rate were 24% per annum. 6 (2) [Fees or charges included] For the purposes of paragraph (1)(b), credit fees and charges imposed or provided for under the contract are taken to include the following, whether or not payable under the contract: (a) a fee or charge payable by the debtor to any person for an introduction to the credit provider; (b) a fee or charge payable by the debtor to any person for any service if the person has been introduced to the debtor by the credit provider; (c) a fee or charge payable by the debtor to the credit provider for any service related to the provision of credit, other than a service mentioned in paragraph (b). 6 (3) [Association not required] For the purposes of paragraphs (2)(a) and (b), it does not matter whether or not there is an association between the person and the credit provider. 6 (4) Credit without express prior agreement This Code does not apply to the provision of credit if, before the credit was provided, there was no express agreement between the credit provider and the debtor for the provision of credit. For example, when a cheque account becomes overdrawn but there is no expressly agreed overdraft facility or when a savings account falls into debit. 6 (5) Credit for which only account charge payable This Code does not apply to the provision of credit under a continuing credit contract if the only charge that is or may be made for providing the credit is a periodic or other fixed charge that does not vary according to the amount [page 49] of credit provided. However, this Code applies if the charge is of a nature prescribed by the regulations for the purposes of this subsection or if the charge exceeds the maximum charge (if any) so prescribed.

6 (6) Joint credit and debit facilities This Code does not apply to any part of a credit contract under which both credit and debit facilities are available to the extent that the contract or any amount payable or other matter arising out of it relates only to the debit facility. 6 (7) Bill facilities This Code applies to the provision of credit arising out of a bill facility, that is a facility under which the credit provider provides credit by accepting drawing discounting or endorsing a bill of exchange or promissory note. However, it does not apply if: (a) the credit is provided by an authorised deposit-taking institution (within the meaning of subsection 5(1) of the Banking Act 1959); or (b) the regulations provide that the Code does not apply to the provision of all or any credit arising out of such a facility. 6 (8) Insurance premiums by instalments This Code does not apply to the provision of credit by an insurer for the purpose of the payment to the insurer of an insurance premium by instalments, even though the instalments exceed the total of the premium that would be payable if the premium were paid in a lump sum, if on cancellation the insured would have no liability to make further payments under the contract. 6 (9) Pawnbrokers This Code does not apply to the provision of credit on the security of pawned or pledged goods by a pawnbroker in the ordinary course of a pawnbroker’s business (being a business which is being lawfully conducted by the pawnbroker) as long as it is the case that, if the debtor is in default, the pawnbroker’s only recourse is against the goods provided as security for the provision of the credit. However, sections 76 to 81 (Court may reopen unjust transactions) apply to any such provision of credit. 6 (10) Trustees of estates This Code does not apply to the provision of credit by the trustee of the estate of a deceased person by way of an advance to a beneficiary or prospective beneficiary of the estate. However, sections 76 to 81 (Court may reopen unjust transactions) apply to any such provision of credit. 6 (11) Employee loans This Code (other than this Part, Part 4, Division 3 of

Part 5, Divisions 4 and 5 of Part 7 and Parts 12, 13 and 14) does not apply to the provision of credit by an employer, or a related body corporate within the meaning of the Corporations Act 2001 of an employer, to an employee or former employee (whether or not it is provided to the employee or former employee with another person). However, for a credit provider that provides credit to which this Code applies in the course of a business of providing credit to which this Code applies to employees or former employees and to others, this subsection applies only to the provision of credit on terms that are more favourable to the debtor than the terms on which the credit provider provides credit to persons who are not employees or former employees of the credit provider or a related body corporate. 6 (12) Margin loans This Code does not apply to the provision of credit by way of a margin loan (within the meaning of subsection 761EA(1) of the Corporations Act 2001). 6 (13) Regulations may exclude credit The regulations may exclude, from the application of this Code, the provision of credit of a class specified in the regulations. In particular (but without limiting the generality of the foregoing), the regulations may so exclude the provision of credit if the amount of the credit exceeds or may exceed a specified amount or if the credit is provided by a credit provider of a specified class. 6 (14) ASIC may exclude credit ASIC may exclude, from the application of this Code, a provision of credit specified by ASIC. [page 50] 6 (15) [Circumstances where ASIC may exclude credit] Without limiting subsection (14), ASIC may exclude a provision of credit if: (a) the amount of the credit exceeds, or may exceed, a specified amount; or (b) the credit is provided by a specified credit provider. 6 (16) [Not legislative instrument] An exemption under subsection (14) is

not a legislative instrument. 6 (17) [Exclusion by legislative instrument] ASIC may, by legislative instrument, exclude from the application of this Code, the provision of credit of a class specified in the instrument. 6 (18) [Circumstances where ASIC may exclude credit by legislative instrument] Without limiting subsection (17), ASIC may exclude a provision of credit if: (a) the amount of the credit exceeds, or may exceed, a specified amount; or (b) the credit is provided by a specified credit provider, or a class of credit providers. 6 (19) Definitions In this section: fee or charge does not include a government fee, charge or duty of any kind. security, of pawned or pledged goods, means security by way of bailment of the goods under which the title to the goods does not pass, conditionally or unconditionally, to the bailee. ________________________________________ [Editorial note: UCCC s 7 provided as follows: Provision of credit to which this Code does not apply 7 (1) Short term credit This Code does not apply to the provision of credit if, under the contract— (a) the provision of credit is limited to a total period that does not exceed 62 days; and (b) the maximum amount of credit fees and charges that may be imposed or provided for does not exceed 5% of the amount of credit; and (c) the maximum amount of interest charges that may be imposed or provided for does not exceed an amount (calculated as if the Code applied to the contract) equal to the amount payable if the annual percentage rate were 24% per annum. 7 (2) Credit without expenses prior agreement This Code does not apply to the provision of credit if, before the credit was provided, there was no express agreement between the credit provider and the debtor for the provision of credit. For example, when a cheque account becomes overdrawn but there is no expressly agreed overdraft facility or when a savings account falls into debit.

7 (3) Credit for which only account charge payable This Code does not apply to the provision of credit under a continuing credit contract if the only charge that is or may be made for providing the credit is a periodic or other fixed charge that does not vary according to the amount of credit provided. However, this Code applies if the charge is of a nature prescribed by the regulations for the purposes of this subsection or if the charge exceeds the maximum charge (if any) so prescribed. 7 (4) Joint credit and debit facilities This Code does not apply to any part of a credit contract under which both credit and debit facilities are available to the extent that the contract or any amount payable or other matter arising out of it relates only to the debit facility. 7 (5) Bill facilities This Code does not apply to the provision of credit arising out of a bill facility, that is, a facility under which the credit provider provides credit by accepting, drawing, discounting or endorsing a bill of exchange or promissory note. However, the regulations may provide for the application of the Code to the provision of all or any credit arising out of such a facility. 7 (6) Insurance premiums by instalments This Code does not apply to the provision of credit by an insurer for the purpose of the payment to the insurer of an insurance premium by instalments, even though the instalments exceed the total of the premium that would be payable if the premium were paid in a lump sum, if on cancellation the insured would have no liability to make further payments under the contract. 7 (7) Pawnbrokers This Code does not apply to the provision of credit by a pawnbroker in the ordinary course of a pawnbroker’s business (being a business which is being lawfully conducted by the pawnbroker). However, sections 70 to (Court may reopen unjust transactions) apply to any such provision of credit.

[page 51] 7 (8) Trustees of estates This Code does not apply to the provision of credit by the trustee of the estate of a deceased person by way of an advance to a beneficiary or prospective beneficiary of the estate. However, sections 70 to 72 (Court may reopen unjust transactions) apply to any such provision of credit. 7 (9) Employee loans This Code (other than this Part, Part 4, Division 3, Part 5, Divisions 4 and 5, Part 7, Part 11 and Schedules 1 and 2) does not apply to the provision of credit by an employer, or a related body corporate within the meaning of the Corporations Act of an employer, to an employee or former employee (whether or not it is provided to the employee or former employee with another person). However, for a credit provider that provides credit in the course of a business of providing credit to which this Code applies to employees or former employees and to others, this subsection applies only to the provision of credit on terms that are more favourable to the debtor than the terms on which the credit provider provides credit to which this Code applies to persons who are not employees or former employees of the credit provider or a related body corporate. 7 (10) Regulations may exclude credit The regulations may exclude, from the application of all or any provisions of this Code, the provision of credit of a class specified in the regulations. In particular (but without limiting the generality of the foregoing), the regulations may so

exclude the provision of credit if the amount of the credit exceeds or may exceed a specified amount or if the credit is provided by a credit provider of a specified class.]

COMMENTARY ON SECTION 6 [6.05] Outline Section 6 sets out a number of exceptions to s 5. Section 6 identifies certain types of credit to which the Code does not apply. [6.10] Short-term credit The original version of the short-term credit exemption introduced by the UCCC was used by “pay-day lenders” to make “pay-day loans”. Pay-day loans are short-term cash loans offered to consumers between “pay-days” and are typically for fairly small amounts. These types of loans were often aimed at people with poor credit histories. In many cases, approval required the consumer to provide the lender with no details other than proof of residency and income. The interest rates charged on pay-day loans were generally extremely high compared to those offered by more traditional and regulated lenders such as banks, building societies and credit unions. For many years, pay-day lenders were not regulated by the UCCC as s 7(1) of the UCCC specifically exempted loans made for a period of less than 62 days. Under amendments made to s 7(1) of the UCCC by the Consumer Credit (Queensland) Amendment Act 2001, short-term credit (ie, credit provided for a period of less than 62 days) became subject to the UCCC where the maximum fees and charges payable exceeded five per cent of the amount of credit which was provided and where the maximum amount of interest charged exceeded an equivalent annual rate of 24 per cent. This provision carried through to the Code in s 6(1). However, authorised deposittaking institutions (ADIs) are exempt from this provision under reg 58 (see [6.55]). In summary, in order to exclude the operation of the Code for loans of less than 62 days the credit provider must be an ADI or the following must apply: the maximum amount of credit fees and charges must be less than five per cent of the credit; and the maximum amount of interest charges must be less than 24 per cent per annum.

Where the terms on which credit is provided require repayment within 62 days and on terms that would exempt the loan from the Code, but the debtor fails to repay within the specified period, the fact that the debt might actually be [page 52] outstanding for more than 62 days will not be sufficient to convert unregulated credit into regulated credit. The s 6(1) exemption applies where the contract limits the time for which credit is provided, so the actual repayment date of the credit (if it is in breach of the contract) will be irrelevant. An attempt to circumvent the Code by providing the same credit for a series of consecutive periods of 62 days or less may not be successful. A court may choose to aggregate the separate short-term contracts (perhaps relying on s 204, which defines “contract” to include “a series or combination of contracts”), or may invoke s 191. Note that there must be a contract before s 6(1) can apply. It was argued in Flood v Police Department Employees’ Credit Union (1999) ASC ¶155-028 (CCCT) and Police Department Employees’ Credit Union v Flood (1999) ASC ¶155-034; [1999] NSWSC 885; BC9905483 that an “on-demand” credit contract could not be considered to be granting credit that exceeded 62 days. The court held that in order to fall within s 7(1) of the UCCC (s 6(1) of the Code), the contract must impose a definite requirement to repay within 62 days. The Code has introduced a clarification absent from the UCCC regarding the meaning of “credit fees and charges imposed or provided for under the contract” for the purposes of s 6(1)(b). Under s 6(2), these credit fees and charges will be taken to include a fee or charge payable by the debtor to any person for an introduction to the credit provider, a fee or charge payable by the debtor to any person for any service if the person has been introduced to the debtor by the credit provider, and a fee or charge payable by the debtor to the credit provider for any service related to the provision of credit other than the service mentioned in s 6(2)(b).

The table below summarises examples of the different NCCP Act and Code requirements impacting on short-term and small amount credit contracts, excluding reverse mortgages and consumer leases: No 1

Name and key features Exempt — short-term credit (s 6(1)) of the Code) Credit must be provided for less than 62 days

Permitted fees and interest charges Maximum fees of 5% of the amount of credit — this includes any late payment or direct debit interest fees Maximum interest rate of 24% per annum

Comments Australian credit licence (ACL) is not required to offer this product NCCP Act and the Code will not apply to this product Can charge enforcement expenses — ie, debt collection costs — and these are not included in the 5% limit for maximum fees

[page 53] 2

Small amount credit contract (SACC) (s 204 of the Code and s 5(1) of the NCCP Act, ss 23A, 31A, 39B of the Code) Not a continuing credit contract Not offered by an ADI Credit limit is less than $2000 Term of the contract is between 16 days and 1 year Obligations under the contract are not secured

Monthly fee of up to 4% of the adjusted credit amount — ie the amount of credit provided under the contract excluding permitted establishment fee or permitted monthly fee or other fees held by credit provider Establishment fee of up to 20% of the adjusted credit amount — ie, the amount of credit provided under the contract excluding permitted establishment fee or permitted monthly fee or other fees held by credit provider

Require an ACL to offer this product Additional responsible lending obligations apply to this product — eg have to collect and review at last 90 days bank statements before entering into a credit contract (s 130(1) of the NCCP Act)

Default fees — can charge but with limitations (see s 39B(1) of the Code) Government fees, charges or duties 3

Continuing credit contract An ongoing credit contract where multiple advances of credit are contemplated (similar to a credit card) (see s 204 of the Code)

The annual cost rate must not exceed 48% (see ss 32A, 32AA and 32B of the Code) In calculating the annual costs rate, must have regard to the interest rate and any credit fees and charges that are payable under the contract Fees payable upon default (eg, late payment fee) are not included in annual cost rate calculation

4

Standard credit contract Not a continuing credit contract Term of the contract must be more than 1 year, otherwise it will fall within the SACC

Require an ACL to offer this product Only need to enter into one contract with the consumer and can make multiple advances under that contract The amount of fees/interest that may be charged is limited due to the annual costs rate cap

The annual cost rate must not exceed 48%

Require an ACL to offer this product

In calculating the annual costs rate, must have regard to the interest rate

The amount of fees/interest that may be charged is limited due to the annual costs rate cap

and any credit fees and charges that are payable under the contract

Must allow early termination of the

[page 54] regime (see 2 above, if amount of credit is less than $2000) 5

Short-term credit contract Not a continuing credit contract

contract This product is prohibited by s 133CA of the NCCP Act

Not offered by an ADI Credit limit is less than $2000 Term of the contract is 15 days or less

[6.15] Credit without express prior agreement Where there is no express prior agreement to provide credit, there is, presumably, no contract under which that credit is provided. There may well be another contract between the credit provider and the debtor (eg, a contract relating to a cheque account) but s 6(4) will only apply to credit provided outside the terms of that other contract. If there is no contract under which credit is provided, arguably the Code does not apply in any event (see ss 3 and 5 which both require a contract to exist), so it might be argued that s 6(4) is unnecessary. However it does provide certainty. Section 7(2) of the UCCC (s 6(4) of the Code) was amended by the Consumer Credit (Queensland) Amendment Act 2001 to address any potential consequence of the amendment to s 7(1) of the UCCC (s 6(1) of the Code). Prior to this, s 7(2) of the UCCC was not limited to situations involving express prior agreements to provide credit. The added requirement that the agreement be express ensures that the Code will not apply to situations where a bank customer overdraws a cheque or savings account if this is permitted under an implied agreement between the bank and the customer. If there is no express prior agreement, it will not matter if the fee exceeds five per cent of the amount overdrawn. In Flood v Police Department Employees’ Credit Union (1999) ASC ¶155028 (CTTT) and Police Department Employees’ Credit Union v Flood (1999) ASC ¶155-034; [1999] NSWSC 885; BC9905483, it was argued that s 7(2) of

the UCCC (s 6(4) of the Code) applied where a debtor exceeded an approved credit limit. The court held that s 7(2) of the UCCC (s 6(4) of the Code) applied only where there was no relevant agreement for the provision of credit. In Flood, there was an underlying credit contract and so the s 7(2) of the UCCC (s 6(4) of the Code) exemption did not apply. As discussed above, the exemption contained in s 6(4) would not apply if, for example, a casual overdraft was permitted under the terms of a prior oral agreement between the credit provider and customer. However, in such circumstances, if the agreement limited the period for which credit is to be provided to 62 days or less, and the other tests relating to interest rates and fees were met, s 6(1) would apply. This may be difficult to prove in the context of an oral agreement. Care must also be taken to avoid a course of dealings by which credit is regularly [page 55] provided without an express agreement on each separate occasion. In these circumstances, a prior course of conduct might give rise to an implied agreement that the account would be permitted to be overdrawn, and therefore fall outside the exemption in s 6(4). [6.20] Credit for which only an account charge is payable This exception is self-explanatory (s 6(5)). The Code does not apply to the provision of credit under a continuing credit contract if the only charge for that credit is a periodic or other fixed charge that does not vary according to the amount of credit provided. However, this type of credit will be regulated if the charge is of a nature prescribed by the Regulations for the purpose of s 6(5) or if the charge exceeds the maximum charge prescribed by the Regulations. Regulation 51 prescribes that the maximum charge that may be made within this exemption is $200 for the first 12 months and $125 for each subsequent period of 12 months. [6.25] Joint credit and debit facilities The Code does not apply to the debit

facility part of a joint debit and credit facility. This exception means that, for example, the operation of an overdraft account is not regulated to the extent that the account has a positive balance (ie, to the extent that the credit aspect of the account is not being used) (s 6(6)). [6.30] Bill facilities In the UCCC, this exception applied to all bill facilities. Now, all bill facilities are covered by the Code except if the credit is provided by an ADI or if it is otherwise excluded by the Regulations. To date, the Regulations have not excluded any other types of bill facilities from the application of the Code. [6.35] Insurance premiums by instalments The Code does not apply to the provision of credit by an insurer for the purpose of the payment to the insurer of an insurance premium by instalments, even though the instalments exceed the total of the premium that would be payable if the premium were paid in a lump sum, if on cancellation the insured would have no liability to make further payments under the contract. This exception is limited by the requirement that it will apply only if, on cancellation of the policy, the insured would have no liability to make further payments under the contract. It is common, where a claim is made on a policy under which the premium is paid by instalments, for the insured to be required to pay the balance of the outstanding annual premium before the claim will be paid (s 6(8)). On balance, this should not remove the benefit of the exemption: if the insurance contract is cancelled, there would not be an obligation to make further payment. If a claim is made and the full premium must be paid, there is no longer credit being provided. [6.40] Pawnbrokers Usually, the Code does not apply to the provision of credit by a pawnbroker in the ordinary course of the pawnbroker’s business. [page 56] This exception has a clarification in the Code, absent in the UCCC, to the

effect that the exception applies only to the provision of credit on the security of pawned or pledged goods by a pawnbroker as long as the pawnbroker’s only recourse on default is against the goods provided as security. This ensures that any other type of credit provided by a pawnbroker will not be exempted simply because it is provided by a pawnbroker (s 6(9)). Sections 76–81 of the Code, which allow a court to reopen unjust transactions, apply to the provision of credit by pawnbrokers. It is not clear whether the other provisions of s 6 apply in relation to pawnbrokers. For example, would credit provided by a pawnbroker still be subject to ss 76–81 if it were for a period of 62 days or less? [6.45] Trustees of estates Credit provided by the trustee of a deceased person’s estate by way of an advance to a beneficiary is exempted from the Code (s 6(10)). As for pawnbrokers, ss 76–81 may apply to trustees. The comments made at [6.40] apply equally here. [6.50] Employee loans There is a partial exemption for employee loans; that is, loans provided by an employer or its related body corporate to an employee or former employee (whether or not it is provided to the employee or former employee with another person). The preliminary, miscellaneous and definitions parts of the Code, as well as the provisions of the Code dealing with changes, hardship, postponement of enforcement and related sale contracts, apply in relation to employee loans. Note that the employee loan exemption applies, in the case of a credit provider that provides credit to which the Code applies in a course of a business of providing credit, only to the provision of credit on terms that are more favourable to the debtor than the terms on which the credit provider provides credit to persons who are not employees. If the credit provider does not carry on a business of providing credit to which the Code applies, this qualification is not relevant. The Consumer Credit (Queensland) Amendment Act 1998 put this proposition beyond doubt. It said that employee loans made by a credit provider which provides credit incidentally to another business (but which

does not itself carry on a business of providing credit) may be on the same terms as are available to non-employees and yet still be exempt from the Code. The requirement that employee loans must be “on terms that are more favourable” than loans available to non-employees is broad enough to encompass all aspects of the credit contract, not just the cost of the credit. For example, if employees were granted loans at the same interest rate as nonemployees, but had more favourable terms with regard to eligibility (eg, a higher loan to valuation ratio was permitted), the employee loan exemption in s 6(11) should apply. [6.51] Margin loans The Code has introduced a new exception in relation to the provision of credit by way of a margin loan within the meaning of s 761EA(1) of the Corporations Act. This exception does not mean that margin [page 57] loans are unregulated but that the regulation is in Ch 7 of the Corporations Act as part of the existing financial services regulatory regime, rather than in the Code. [6.55] Regulations may exclude credit The Code also states that the Regulations may exclude from the application of all or any provisions of the Code, the provision of credit of a class specified in the Regulations (s 6(13)). Regulation 52 provides that the provisions of the Code (other than those provisions dealing with hardship variations and enforcement) will not apply to the provision of credit under a contract if: the contract is not a continuing credit contract; the amount of credit does not at any time exceed $50; there is no insurance financed under the contract; there is no mortgage or guarantee taken by the credit provider; and the annual percentage rate for the contract does not exceed the

maximum annual percentage rate (if any) for the contract if it were a contract to which the Code applies. (See [28.40] and commentary on ss 32A, 32AA and 32B for discussion of maximum annual percentage rates under the Code.) Regulations have been made under s 6(13) exempting: a particular product known as the “No interest loan scheme” offered by GIO Finance Ltd (reg 53); credit provided under the Queensland Government Rental Purchase Plan Scheme (formerly known as the HOME Shared Scheme) (reg 54); credit provided by a firm, or related body corporate of the firm, to a partner of the firm (including where provided to the partner with another person (reg 55)); credit provided by a higher educational institution, or a student body of such an institution, to a student of that institution in an emergency or hardship situation (reg 56); credit provided under the New South Wales, South Australian and Victorian Heritage Acts (reg 57); credit provided by an ADI where the contract period is less than 62 days — this provides a short-term loan exemption for ADIs (reg 58); credit provided to a person’s estate by a public official or public body authorised by any law to administer that estate (reg 59); credit provided by an approved aged-care provider and regulated under the Aged Care Act 1997 (Cth) (reg 60); credit provided to a person by the Firefighters’ Benefit Fund of WA Inc (reg 61); credit provided under certain charge card contracts (reg 62); and credit providers providing credit to their directors, provided the credit is provided on terms more favourable to the directors than

the terms on which the credit provider provides credit to nondirectors (reg 63). (See commentary on regs 53–63.) [6.60] ASIC may exclude credit ASIC has the power to exclude any provision of credit from application of the Code. Without limiting ASIC’s powers [page 58] in this regard, ASIC may by legislative instrument or otherwise exclude a provision of credit if the: amount of the credit exceeds, or may exceed, a specified amount; or credit is provided by a specified credit provider, or a class of credit providers. [6.65] Case Bahadori v Permanent Mortgages Pty Ltd (2008) 72 NSWLR 44; [2008] NSWCA 150; BC200805005.

Mortgages to which this Code applies 7 (1) [Scope of Code] This Code applies to a mortgage if: (a) it secures obligations under a credit contract or a related guarantee; and (b) the mortgagor is a natural person or a strata corporation. 7 (2) [Credit obligations only] If any such mortgage also secures other obligations, this Code applies to the mortgage to the extent only that it secures obligations under the credit contract or related guarantee.

7 (3) [Exclusions in regulations] The regulations may exclude, from the application of all or any provisions of this Code, a mortgage of a class specified in the regulations. ________________________________________ [Editorial note: UCCC s 8 — apart from numbering the section is unchanged.]

COMMENTARY ON SECTION 7 [7.05] Outline For the Code to apply to a mortgage: the mortgage must secure obligations under a credit contract or guarantee that itself is regulated by the Code; and the mortgagor must be a natural person or strata corporation. See [4.05]–[4.20], [5.10] and [5.20] for the meanings of “credit contract”, “natural person” and “strata corporation”. [7.10] UCCC — Nexus The UCCC did not require that the mortgagor must reside in the jurisdiction whose code regulated the credit contract, nor even that the mortgaged property be in that jurisdiction. Therefore, a mortgage over land in jurisdiction A was governed by the code of jurisdiction B if the debtor was ordinarily resident in jurisdiction B (s 6(1)(a) of the UCCC). Further, if a mortgage was provided by a guarantor over land in jurisdiction A, the mortgage was governed by the code of jurisdiction B if the debtor was ordinarily resident in jurisdiction B even though the guarantor may have been resident in jurisdiction A. This issue is no longer relevant because the Code is now a national law; it is no longer necessary to ascertain which state or territory code applies to a particular transaction. [page 59] [7.15] “Mortgage” Mortgage is defined widely in s 204 to include interests or powers that would not normally be regarded as constituting mortgages or

security interests. For example, a contractual right of set-off arguably falls within para (a) of the s 204 definition. [7.20] Exclusions The Regulations may exclude certain mortgages from the operation of the Code (s 7(3)). Regulation 64(1) excludes the following mortgages from the operation of the Code: (a) any mortgage relating to perishable goods, livestock, primary produce or food stuffs; (b) a banker’s right to combine accounts; and (c) a lien or charge arising by operation of any Act or law or by custom. However, s 16 (pre-contractual disclosure) and s 17 (matters that must be in a contract document) apply to a mortgage referred to in (a). See the comments on reg 64 for a detailed discussion on the breadth of the exclusion in relation to a banker’s right to combine accounts in reg 64(1)(b). Regulation 64(3) excludes from s 91 of the Code (requirements to be met before goods are repossessed) any mortgage relating to goods that are lawfully in the possession of the credit provider. [7.25] Personal Property Securities Act Mortgages under the Code may need to be registered under laws relating to land or the Personal Property Securities Act 2009 (Cth) (PPSA) in order to have priority against subsequent registered mortgages and to survive the insolvency of the mortgagor. The Code adopts a broad definition of “mortgage”, covering a wide variety of security arrangements and quasi-security arrangements that may not be mortgages at law. The significance of being a mortgage within the Code is that specific documentary provisions apply, and that there are limits on what may be secured that would not otherwise arise at common law. The PPSA adopts a different (but also broad) definition of “security interest”, defining it as an interest in personal property provided for by a transaction that in substance secures payment or performance of an obligation regardless of the form of the transaction. Examples of these kinds of transactions include:

retention of title clauses in sale agreements where a purchaser has possession of personal property, but does not acquire title to the property from the vendor until the full purchase price has been paid; and hire purchase agreements where personal property is leased for payments that cover the cost of the property and the lessee has the right to acquire title to that property. In addition, the PPSA deems certain other arrangements — including certain medium to long term leases — to be “security interests”, even though the interest does not in substance secure payment or performance of an obligation and is a form of transaction that, before the PPSA, was not considered to be a form of security. Further, certain transactions are deemed to be security interests under the PPSA. Examples include: the interests of a factor in an account; [page 60] commercial consignment arrangements; and leases of personal property for a term exceeding 12 months (or 90 days for motor vehicles, boats or aircraft).* (Source and see further ppsr.gov.au.) Depending on the transaction, there may be Code “mortgages” which should be registered on the Personal Property Securities Register. Equally there may be PPSA security interests that relate to Code-regulated loans which are not “mortgages” regulated by the Code (including because the loans are exempt under s 6 of the Code).

Guarantees to which this Code applies

8 (1) [Scope of Code] This Code applies to a guarantee if: (a) it guarantees obligations under a credit contract; and (b) the guarantor is a natural person or a strata corporation. 8 (2) [Credit obligations only] If any such guarantee also guarantees other obligations, this Code applies to the guarantee to the extent only that it guarantees obligations under the credit contract. 8 (3) [Exclusions in regulations] The regulations may exclude, from the application of all or any provisions of this Code, a guarantee of a class specified in the regulations. ________________________________________ [Editorial note: UCCC s 9 — apart from numbering the section is unchanged.]

COMMENTARY ON SECTION 8 [8.05] Outline For the Code to apply to a guarantee, the: guarantee must guarantee obligations under a credit contract that itself is regulated by the Code; and guarantor must be a natural person or strata corporation. See [4.05]–[4.20], [5.10] and [5.20] for the meanings of “credit contract”, “natural person” and “strata corporation”. [8.10] UCCC — Nexus The UCCC did not require that the guarantor must reside in the jurisdiction whose code regulated the credit contract. Therefore, a guarantee was governed by the code of the jurisdiction in which the debtor (to whose debt the guarantee related) was ordinarily resident (s 6(1)(a) of the UCCC) although the guarantor may have resided elsewhere. This issue is no longer relevant because the Code is now a national law; it is no longer necessary to ascertain which state or territory code applies to a particular transaction. [8.15] “Guarantee” Guarantee is defined in s 204 to include an indemnity

(other than one arising under a contract of insurance). [page 61] [8.20] Exclusions The Regulations may exclude certain classes of guarantee from the operation of the Code (s 8(3)). Regulation 65 excludes from the operation of the Code any guarantee by the supplier under a tied loan contract or tied continuing credit contract. Section 3 of Sch 1 of the Transitional Act (see [1.10]) deals with the application of the Code to guarantees made before 1 July 2010. * The Personal Property Securities (Regulatory Measures) Bill 2014 proposes to exclude leases of motor vehicles, boats or aircraft which have a term of longer than 90 days but less than 1 year from the definition of PPS Lease under the PPSA. At the time of writing the Bill has had its first reading.

Goods leases with option to purchase to be regarded as sale by instalments 9 (1) [Where total charges exceed cash price] For the purposes of this Code, a contract for the hire of goods under which the hirer has a right or obligation to purchase the goods, is to be regarded as a sale of the goods by instalments if the charge that is or may be made for hiring the goods, together with any other amount payable under the contract (including an amount to purchase the goods or to exercise an option to do so) exceeds the cash price of the goods. Note: A contract includes a series of contracts, or contracts and arrangements (see Part 13).

9 (2) [Debt incurred] A debt is to be regarded as having been incurred, and credit provided, in such circumstances. 9 (3) [Code applies] Accordingly, if because of subsection 5(1) the contract is a credit contract, this Code (including Part 6) applies as if the contract had always been a sale of goods by instalments, and for that purpose: (a) the amounts payable under the contract are the instalments; and

(b) the credit provider is the person who is to receive those payments; and (c) the debtor is the person who is to make those payments; and (d) the property of the supplier in the goods passes under the contract to the person to whom the goods are hired on delivery of the goods or the making of the contract, whichever occurs last; and (e) the charge for providing the credit is the amount by which the charge that is or may be made for hiring the goods, together with any other amount payable under the contract (including an amount to purchase the goods or to exercise an option to do so), exceeds the cash price of the goods; and (f)

a mortgage containing the terms and conditions set out in the regulations is taken to have been entered into in writing between the person to whom the goods are hired under the contract and the supplier as security for payment to the supplier of the amount payable to the supplier by the person to whom the goods are hired under the contract; and

(g) any provision in the contract for hiring by virtue of which the supplier is empowered to take possession, or dispose, of the goods to which the contract relates is void. 9 (4) [Amount payable under the contract] For the purposes of this section, the amount payable under the contract includes any agreed or residual value of the goods at the end of the hire period or on termination of the contract, but does not include the following amounts: (a) any amount payable in respect of services that are incidental to the hire of goods under the contract; (b) any amount that ceases to be payable on the termination of the contract following the exercise of a right of cancellation by the hirer at the earliest opportunity. Note: Part 11 (Consumer leases) applies to the contracts specified in that Part for the hire of goods under which the hirer does not have a right or obligation to purchase the goods.

________________________________________

[page 62] [Editorial note: UCCC s 10 provided as follows: Goods leases with option to purchase to be regarded as sale by instalments 10 (1) [Where total charges exceed cash price] For the purposes of this Code, a contract for the hire of goods under which the hirer has a right or obligation to purchase the goods, is to be regarded as a sale of the goods by instalments if the charge that is or may be made for hiring the goods, together with any other amount payable under the contract (including an amount to purchase the goods or to exercise an option to do so) exceeds the cash price of the goods. Note: A contract includes a series of contracts, or contracts and arrangements (see Schedule 1). 10 (2) [Debt incurred] A debt is to be regarded as having been incurred, and credit provided, in such circumstances. 10 (3) [Code applies] Accordingly, if because of section 6(1) the contract is a credit contract, this Code (including Part 6) applies as if the contract had always been a sale of goods by instalments, and for that purpose— (a) the amounts payable under the contract are the instalments; and (b) the credit provider is the person who is to receive those payments; and (c) the debtor is the person who is to make those payments; and (d) the property of the supplier in the goods passes under the contract to the person to whom the goods are hired on delivery of the goods or the making of the contract, whichever occurs last; and (e) the charge for providing the credit is the amount by which the charge that is or may be made for hiring the goods, together with any other amount payable under the contract (including an amount to purchase the goods or to exercise an option to do so), exceeds the cash price of the goods; and (f)

a mortgage containing the terms and conditions set out in the regulations is taken to have been entered into in writing between the person to whom the goods are hired under the contract and the supplier as security for payment to the supplier of the amount payable to the supplier by the person to whom the goods are hired under the contract; and

(g) any provision in the contract for hiring by virtue of which the supplier is empowered to take possession, or dispose of, the goods to which the contract relates is void. 10 (4) [“amount payable under the contract”] For the purposes of this section, the amount payable under the contract includes any agreed or residual value of the goods at the end of the hire period or on termination of the contract, but does not include the following amounts— (a) any amount payable in respect of services that are incidental to the hire of goods under the contract; (b) any amount that ceases to be payable on the termination of the contract following the exercise of a right of cancellation by the hirer at the earliest opportunity. Note: Part 10 (Consumer leases) applies to the contracts specified in that Part for

the hire of goods under which the hirer does not have a right or obligation to purchase the goods.]

COMMENTARY ON SECTION 9 [9.05] Outline Finance for goods may be provided by way of loan, but is also commonly provided in other ways which involve the financier retaining title to the goods, namely hire-purchase and leasing. Consumer leases are dealt with in Pt 11 of the Code. Hire-purchase is a form of contract under which goods are hired, and the hirer has a right or obligation to purchase the goods. The effect of s 9 is to change the legal nature of a consumer hire-purchase contract into a sale of goods by instalments secured by a mortgage of the goods. [9.10] Application The effect of s 9(1) and (4) is that where: the charge that is or may be made for hiring the goods; plus any other amount payable under the contract (including an amount to purchase the goods or exercise an option to do so); less any amount payable in respect of services that are incidental to the hire of goods under the contract; less [page 63] any amount that ceases to be payable on the termination of the contract following the exercise of a right of cancellation by the hirer at the earliest opportunity; exceeds the cash price of the goods, the contract for the hire of goods is deemed to be a contract for sale of goods by instalments. In that case, s 9(2) specified that a debt is regarded as having been incurred and credit provided. Section 5(1) then needs to be applied to determine whether the deemed contract for the sale of goods by instalments is a credit contract regulated by the Code. Section 9(3) specifies how s 5(1) is to be applied. If, because of s 5(1), the contract is a credit contract, the Code applies as if the contract had always been a sale of goods by instalments, and for that purpose:

(a) the amounts payable under the contract are the instalments; (b) the credit provider is the person who is to receive those payments; (c) the debtor is the person who is to make those payments; (d) the property of the supplier in the goods passes under the contract to the hirer on delivery of the goods or the making of the contract, whichever occurs last; (e) the charge for providing the credit is the amount by which the charge that is or may be made for hiring the goods, together with any other amount payable under the contract (including an amount to purchase the goods or to exercise an option to do so), exceeds the cash price of the goods; (f)

a mortgage containing the terms and conditions set out in the Regulations is taken to have been entered into in writing between the hirer under the contract and the supplier as security for payment to the supplier of the amount payable to the supplier by the hirer; and

(g) any provision in the contract for hiring by virtue of which the supplier is empowered to take possession, or dispose of, the goods to which the contract relates is void. Where the deemed contract is not regulated by the Code, the contract effectively retains its original nature as a hire purchase contract. [9.15] “Cash price” Cash price is defined in s 204 to mean the lowest price that a cash purchaser might reasonably be expected to pay for the goods or services to which a credit contract relates, or the market price, if not available for cash or only available at the same price. [9.20] Mortgage Regulation 66 and Form 4 set out the terms of the mortgage referred to in s 9(3)(f). [9.25] “Right or obligation” Section 9 applies where, under the contract, the hirer has a right or obligation to purchase the goods. Where this right or obligation is clearly set out in the contract, the position is clear. It is often the

case, however, in leasing transactions that there is no such right or obligation expressed in the contract, but there is nevertheless an understanding that the hirer will acquire the goods. The Code defines “contract” to include a series or combination of contracts and arrangements. It might be argued that an understanding of this sort could be an “arrangement” for the purposes of the definition of “contract”; however, “understanding” and “arrangement” are distinguished from one another [page 64] elsewhere in the Code (eg, s 92(2)), and on the ordinary meaning of the words, a non-binding understanding would not be considered to give rise to a right or obligation or arrangement. [9.30] Deemed credit contract If a hire purchase agreement is deemed, by virtue of s 9, to be a credit contract, the provisions of the Code dealing with credit contracts will apply. This means that the contract must comply with all the requirements of the Code, including those relating to precontractual conduct, disclosures, the form of documents, interest charges and changes. Penalties for non-compliance (including penalties under Pt 6) will apply in the same way as they do in respect of other credit contracts. [9.35] Cases Geeveekay Pty Ltd v Director of Consumer Affairs Vic (2008) 19VR 512; (2008) ASC ¶155-090; [2008] VSC 50; BC200800981;Ralena Pty Ltd v VCAT [2006] VSC 451; BC200609795.

Deciding application of Code to particular contracts for the sale of land by instalments 10 (1) [Sale of land by instalments] This section applies to an executory contract for the sale of land if: (a) under the contract, the purchaser:

(i)

is entitled to enter into possession of the land before becoming entitled to receive a conveyance or transfer of the land; and

(ii) is bound to make a payment or payments (other than a deposit or rent payment) to, or in accordance with the instructions of, the vendor without becoming entitled to receive a conveyance or transfer of the land in exchange for the payment or payments; and (b) the amount payable to purchase the land under the contract exceeds the cash price of the land. Note: Cash price is defined in Part 13 in terms of goods or services. Services is defined in Part 13 to include rights in relation to, and interests in, real property.

10 (2) [Relevant considerations] For the purpose of deciding whether the contract is a credit contract and, if it is a credit contract, of applying this Code (including Part 6) to it: (a) a debt is to be regarded as having been incurred, and credit provided, in the circumstances mentioned in subsection (1); and (b) the debtor is the purchaser under the contract; and (c) the credit provider is the vendor under the contract; and (d) the charge for providing the credit is the amount by which the amount payable to purchase the land, together with any other amount payable under the contract other than outgoings for the land, exceeds the cash price of the land. 10 (3) [Application of Code otherwise not affected] This section does not affect the application of this Code to a contract that is, apart from this section, a credit contract. 10 (4) [Definitions] In this section: deposit, in relation to a contract, means an amount: (a) not exceeding 10% of the amount payable to purchase the land under the contract; and (b) paid or payable in one or more amounts; and

[page 65] (c) liable to be forfeited and retained by the vendor in the event of a breach of contract by the purchaser. outgoings includes rates, water charges and house and contents insurance. rent payment, under a contract, means a payment: (a) made by the purchaser to the vendor in exchange for possession of the land before becoming entitled to receive a conveyance or transfer of the land; and (b) that is not deductible from the amount payable to purchase the land. ________________________________________ [Editorial note: UCCC s 10A provided as follows: Deciding application of Code to particular contracts for the sale of land by instalments 10A (1) This section applies to an executory contract for the sale of land if— (a) under the contract, the purchaser— (i)

is entitled to enter into possession of the land before becoming entitled to receive a conveyance or transfer of the land; and

(ii) is bound to make a payment or payments (other than a deposit or rent payment) to, or in accordance with the instructions of, the vendor without becoming entitled to receive a conveyance or transfer of the land in exchange for the payment or payments; and (b) the amount payable to purchase the land under the contract exceeds the cash price of the land. Note: Cash price is defined in Schedule 1 in terms of goods or services. Services is defined in Schedule 1 to include rights in relation to, and interests in, real property. 10A (2) For the purpose of deciding whether the contract is a credit contract and, if it is a credit contract, of applying this Code (including part 6) to it— (a) a debt is to be regarded as having been incurred, and credit provided, in the circumstances mentioned in subsection (1); and (b) the debtor is the purchaser under the contract; andc (c) the credit provider is the vendor under the contract; and (d) the charge for providing the credit is the amount by which the amount payable to purchase the land, together with any other amount payable under the contract other

than outgoings for the land, exceeds the cash price of the land. 10A (3) This section does not affect the application of this Code to a contract that is, apart from this section, a credit contract. 10A (4) In this section— deposit, in relation to a contract, means an amount— (a) not exceeding 10% of the amount payable to purchase the land under the contract; and (b) paid or payable in 1 or more amounts; and (c) liable to be forfeited and retained by the vendor in the event of a breach of contract by the purchaser. outgoings includes rates, water charges and house and contents insurance. rent payment, under a contract, means a payment— (a) made by the purchaser to the vendor in exchange for possession of the land before becoming entitled to receive a conveyance or transfer of the land; and (b) that is not deductible from the amount payable to purchase the land.]

COMMENTARY ON SECTION 10 [10.05] Outline Section 10 of the Code replaces s 10A of the UCCC, which was inserted by the Justice Legislation Amendment Act 2008 (Qld). This section clarifies the Code’s application to executory contracts for the sale of land by instalments. These transactions are regulated where they involve the provision of credit (see Director of Consumer Affairs v Geeveekay Pty Ltd [2006] VCAT 793). Section 10 ensures that, if the purchaser is entitled to possession before title is [page 66] transferred and has to pay a total amount that exceeds the cash price of the land, the transaction may be regulated regardless of the legal structure involved. The rationale is that such a transaction is functionally equivalent to a credit contract to finance the land purchase, and so the purchaser should have the protections afforded to a debtor if the Code otherwise applies to the transaction (ie, if it involves a provision of credit to which the Code applies). The vendor and purchaser under the land sale contract are deemed to be the

credit provider and debtor and the charge for the provision of credit is deemed to be the difference between the cash price and the total amount payable under the contract. Note that for the purpose of s 10, the total amount payable under the contract excludes any deposit or rent payments.

Deciding application of Code to particular contracts for the sale of goods by instalments 11 (1) [Sale of goods by instalments] This section applies to a contract for the sale of goods if the amount payable to purchase the goods under the contract: (a) is payable by instalments; and (b) exceeds the cash price of the goods. 11 (2) [Hire of goods contracts] This section does not apply to a contract for the hire of goods even if the hirer has a right or obligation to purchase the goods. 11 (3) [Relevant considerations] For the purpose of deciding whether the contract is a credit contract and, if it is a credit contract, of applying this Code (including Part 6) to it: (a) a debt is to be regarded as having been incurred, and credit provided, in the circumstances mentioned in subsection (1); and (b) the debtor is the person who is to make the payments; and (c) the credit provider is the person who is to receive the payments; and (d) the charge for providing the credit is the amount by which the amount payable to purchase the goods, together with any other amount payable under the contract, exceeds the cash price of the goods. 11 (4) [Application of Code otherwise not affected] This section does not

affect the application of this Code to a contract that is, apart from this section, a credit contract. ________________________________________ [Editorial note: UCCC s 10B — apart from numbering the section is unchanged.]

COMMENTARY ON SECTION 11 [11.05] Outline Section 11 of the Code replaces s 10B of the UCCC, which was inserted by the Justice Legislation Amendment Act 2008 (Qld). It is intended to clarify an area of interpretation of the Code that is not straightforward, being the application of the Code to the sale of goods by instalments. Section 11 is not intended to regulate lay-by contracts where the lay-by payments do not relate to a debt (see s 3(1)). A contract for the sale of goods by instalments where the total amount payable exceeds the cash price of the goods is said to be “functionally equivalent” to a credit contract to finance the purchase of the goods. Accordingly, the Code may apply to such contracts by deeming the purchaser and vendor of the goods to be [page 67] a debtor and credit provider under a credit contract and the charge for the provision of credit to be the amount by which the total amount payable under the contract exceeds the cash price of the goods. If the credit provided is credit to which the Code otherwise applies (eg, s 5), the transaction will be regulated.

Deciding application of Code to particular contracts for the sale of goods by instalments under related

contracts 12 (1) [Sale of goods by instalments: related contracts] For the purpose of this section, a contract is a related contract to a contract for the sale of goods (the goods contract) if: (a) the sale of goods is financed, wholly or partly, by the provision of credit under the contract; and (b) the credit provider under the contract is: (i)

the supplier of goods under the goods contract; or

(ii) a related body corporate within the meaning of the Corporations Act 2001 of the supplier of the goods under the goods contract; and (c) the amount payable under the contract is payable by instalments. 12 (2) [Relevant considerations] For the purpose of deciding whether a related contract to a goods contract is a credit contract and, if it is a credit contract, of applying this Code (including Part 6) to it, the charge for providing the credit is the amount by which the amount payable to purchase the goods, together with any other amount payable under the related contract, exceeds the cash price of the goods. 12 (3) [Application of Code otherwise not affected] This section does not affect the application of this Code to a contract that is, apart from this section, a credit contract. ________________________________________ [Editorial note: UCCC s 10C provided as follows: Deciding application of Code to particular contracts for the sale of goods by instalments under related contracts 10C (1) For the purpose of this section, a contract is a related contract to a contract for the sale of goods (the goods contract) if— (a) the sale of the goods is financed, wholly or partly, by the provision of credit under the contract; and (b) the credit provider under the contract is— (i)

the supplier of goods under the goods contract; or

(ii) a related body corporate within the meaning of the Corporations Act of the supplier of the goods under the goods contract; and (c) the amount payable under the contract is payable by instalments. 10C (2) For the purpose of deciding whether a related contract to a goods contract is a credit contract and, if it is a credit contract, of applying this Code (including part 6) to it, the charge for providing the credit is the amount by which the amount payable to purchase the goods, together with any other amount payable under the related contract, exceeds the cash price of the goods. 10C (3) This section does not affect the application of this Code to a contract that is, apart from this section, a credit contract.]

COMMENTARY ON SECTION 12 [12.05] Outline Section 12 of the Code replaces s 10C of the UCCC, which was inserted by the Justice Legislation Amendment Act 2008 (Qld). It relates to a contract to finance the purchase of goods supplied either by the financier under the contract or a related body corporate of the supplier of the goods where the [page 68] payment under the contract is to be made by instalments. Such a contract is called a “related contract”. For the purposes of deciding whether the Code applies to the related contract, the charge for providing the credit is the amount by which the total amount payable under the related contract exceeds the cash price of the goods.

Presumptions relating to application of Code 13 (1) [Code presumed to apply] In any proceedings (whether brought under this Code or not) in which a party claims that a credit contract, mortgage or guarantee is one to which this Code applies, it is presumed to be such unless the contrary is established.

13 (2) [Debtor’s declaration as to purpose] It is presumed for the purposes of this Code that credit is not provided or intended to be provided under a contract wholly or predominantly for any or all of the following purposes (a Code purpose): (a) for personal, domestic or household purposes; (b) to purchase, renovate or improve residential property for investment purposes; (c) to refinance credit that has been provided wholly or predominantly to purchase, renovate or improve residential property for investment purposes; if the debtor declares, before entering the contract, that the credit is to be applied wholly or predominantly for a purpose that is not a Code purpose, unless the contrary is established. 13 (3) [Credit provider’s knowledge as to purpose] However, the declaration is ineffective if, when the declaration was made, the credit provider or a person (the prescribed person) of a kind prescribed by the regulations: (a) knew, or had reason to believe; or (b) would have known, or had reason to believe, if the credit provider or prescribed person had made reasonable inquiries about the purpose for which the credit was provided, or intended to be provided, under the contract; that the credit was in fact to be applied wholly or predominantly for a Code purpose. 13 (4) [Ineffective declaration] If the declaration is ineffective under subsection (3), paragraph 5(1)(b) is taken to be satisfied in relation to the contract. 13 (5) [Form of declaration] A declaration under this section is to be substantially in the form (if any) required by the regulations and is ineffective for the purposes of this section if it is not. 13 (6) [Offence] A person commits an offence if:

(a) the person engages in conduct; and (b) the conduct induces a debtor to make a declaration under this section that is false or misleading in a material particular; and (c) the declaration is false or misleading in a material particular. Criminal penalty: 100 penalty units, or 2 years imprisonment, or both. 13 (7) [Strict liability offence] Strict liability applies to paragraph (6)(c). Note: For strict liability, see section 6.1 of the Criminal Code.

________________________________________ [Editorial note: UCCC s 11 provided as follows: Presumptions relating to application of Code 11 (1) [Code presumed to apply] In any proceedings (whether brought under this Code or not) in which a party claims that a credit contract, mortgage or guarantee is one to which this Code applies, it is presumed to be such unless the contrary is established.

[page 69] 11 (2) [Debtor’s declaration as to purpose] Credit is presumed conclusively for the purposes of this Code not to be provided wholly or predominantly for personal, domestic or household purposes if the debtor declares, before entering into the credit contract, that the credit is to be applied wholly or predominantly for business or investment purposes (or for both purposes). 11 (3) [Credit provider’s knowledge as to purpose] However, such a declaration is ineffective for the purposes of this section if the credit provider (or any other relevant person who obtained the declaration from the debtor) knew, or had reason to believe, at the time the declaration was made that the credit was in fact to be applied wholly or predominantly for personal, domestic or household purposes. For the purposes of this subsection, a relevant person is a person associated with the credit provider or a finance broker (or a person acting for a finance broker) through whom the credit was obtained. 11 (4) [Form of declaration] A declaration under this section is to be substantially in the form (if any) required by the regulations and is ineffective for the purposes of this section if it is not.]

COMMENTARY ON SECTION 13 [13.05] Outline The effect of s 13(1) is to put the onus of proof entirely on a

person who wishes to claim, in the course of any proceedings, that a credit contract, mortgage or guarantee is not subject to the Code. Section 13 allows a specified form of “business purpose declaration” to be given before a credit contract is made, to change the presumptions that would otherwise be available about whether the Code applies to the contract. Section 13(1) provides that in any proceedings, it is presumed that a credit contract, mortgage or guarantee is one to which the Code applies, unless the contrary is established. The effect of s 13(1) is to put the onus of proof entirely on a person who wishes to claim, in the course of any proceedings, that a credit contract, mortgage or guarantee is not subject to the Code. However, this presumption is reversed in certain circumstances. Section 13 was amended with the introduction of the Code. Credit is presumed not to be provided for a Code purpose (ie any purpose listed in s 5(b)) if, before entering into a credit contract, the debtor declares that the credit will be applied wholly or predominantly for a non-Code purpose (s 13(2)). This presumption is rebuttable — a party may establish that, despite such a declaration having been made, the credit was, in fact, to be applied for a Code purpose. In addition, the debtor’s declaration as to the purpose of the credit (often known as a “business purpose declaration”) is ineffective if, when the declaration was made, the credit provider (or any other person who obtained the declaration or was involved in the transaction (see the comments regarding a “prescribed person” at [13.30])) knew or had reason to believe that the credit was in fact to be applied wholly or predominantly for a Code purpose or if they would have known this or had reason to believe this if they had made reasonable inquiries about the purpose of the credit (s 13(3)). [13.06] Changes from UCCC position Under the UCCC, the debtor’s declaration created a “conclusive” presumption that took the relevant credit contract out of the UCCC regime (unless the credit provider or finance broker knew or had reason to believe that the declaration was not true) (s 11 of the UCCC). The Revised Explanatory Memorandum to the National Consumer Credit Protection Bill 2009 (Cth) (Revised Explanatory Memorandum) explains that this conclusive presumption was abused by certain credit

providers in circumstances where the credit was actually to be applied for personal use (see [page 70] Revised Explanatory Memorandum para 8.56). It was then difficult for the debtor to overcome the effect of the declaration as they had to argue that (a) the credit was for personal use, and (b) they had signed a false declaration (Revised Explanatory Memorandum para 8.59). Presumably, they would also have had to have shown that the credit provider or finance broker knew or had reason to believe that the declaration was false. [13.07] Position under the Code The Code (s 13) removes the “conclusive” nature of the presumption created when a business purpose declaration is given — it is now a rebuttable presumption (due to the removal of the word “conclusive” and the insertion of the phrase “unless the contrary is established”) (s 13(2)). It also widens the circumstances in which a business purpose declaration will be ineffective by referring to circumstances where the credit provider (or other person dealing with the debtor) would have known the true purpose of the credit if they had made reasonable inquiries, or would have had reason to believe that the true purpose of the credit was a Code purpose if they had made those inquiries. The Revised Explanatory Memorandum states (at para 8.22) that: … the changes were made to address abuses of the [business purpose] declaration that allowed credit providers to avoid the UCCC. Specifically, the amendment addresses the situation where credit is being provided wholly or predominantly for personal, domestic or household use, or in relation to a residential investment property, and the lender fails to enquire as to the purpose of the credit because it does not want to hear an inconvenient answer. The aim of the amendment is to make the business purpose declaration presumptive rather than conclusive. Further changes have been made … to minimise the circumstances in which declarations can be used as an avoidance mechanism. Credit providers will still be able to have the benefit of the presumption in situations where the purpose of the credit is ambiguous.

[13.08] UCCC position Under s 11 of the UCCC, if a debtor signed a business purpose declaration this could completely discharge the onus of proving that the UCCC did not apply to a particular credit contract (see

Giampaolo v Esanda Finance Corp Ltd [2001] VSC 71; BC200101057). That is, if the court or tribunal was satisfied that a declaration in the prescribed form had been signed by the debtor, it was presumed that the purpose of the credit was not personal, domestic or household use and the Code therefore did not apply (see Neuendorf v Rengay Nominees Pty Ltd [2003] VCAT 1732). However, in certain circumstances, the debtor had to be given the opportunity to dispute the effectiveness of a business purpose declaration — the case of Dent v Ford Credit Australia (2001) ASC ¶155-048; [2001] VCAT 208 concerned a strike-out application made on the basis that the UCCC did not apply to a particular motor vehicle finance lease because the lessee had signed a business purpose declaration. McKenzie DP held that it was for the respondent, Ford Credit, to rebut the presumption that the UCCC applied to the lease: … on a strike out application such as this, the Tribunal will be cautious before it summarily terminates a claim and so deprives the claimant of the chance to have his or her case heard in the ordinary course.

[page 71] This is particularly the case where there is some dispute between the parties as to what knowledge the employee who obtained the declaration had, and whether this should be imputed to the employer. [13.10] “Party” It is not clear what the word “party” means in s 13(1). It could mean either a party to proceedings referred to in the section or a “party” to a credit contract, mortgage or guarantee referred to in the section. On balance, it appears that “party” refers to a party to proceedings. [13.15] Business purpose declaration A declaration under s 13 must be made substantially in the form set out in reg 68 and will be ineffective if it is not (s 13(5)). (For commentary on “substantially”, see [13.40].) The Code does not set out the consequences where a business purpose declaration is ineffective because it is not in the correct form (cf the position where it is

ineffective as a result of the credit provider’s, or other person’s, knowledge as to purpose — see [13.16]). A business purpose declaration will also be ineffective where it fails to contain the warnings required by reg 68. These state, in effect, that, by signing the declaration, an individual will lose their protection under the Code. A “warning”, that states that an individual has already lost the protection of the Code, is ineffective (Mummery v IMMS Financial Services Ltd [2002] VCAT 383). The court will also look at the form of the declaration. In Edwards v South Eastern Investments Ltd [2005] VCAT 2146, there were a number of differences between the declaration signed and the form of declaration in reg 10 of the UCCC Regulation (reg 68 of the Regulations). The most significant was that, following the paragraph stating the purpose of the credit contract but before the warning, there was an additional paragraph. Regulation 10(2) of the UCCC Regulation (reg 68(2) of the Regulations) requires the warning to appear immediately after the business purpose declaration. On account of this, the declaration was held to be ineffective. Despite this, the declaration did have utility as a statutory declaration and was therefore treated as evidence of the purpose of the credit contract. From this it was clear that the loans were for business purposes, and so were outside the scope of the UCCC. Nonetheless, the Deputy President recommended that the company urgently consider amending its business purpose declaration. In Neuendorf v Rengay Nominees Pty Ltd [2003] VCAT 1732 it was a condition of the credit contract that: … the loan must be wholly or predominantly for business or investment purposes and not subject to the [UCCC]. A statutory declaration will be required to this effect.

The debtor signed a “business purpose” declaration in the form of a statutory declaration. The debtor asserted that the UCCC applied to her contract as the declaration was ineffective under s 11(4) of the UCCC (s 13(5) of the Code) as it was not substantially in the form required by the UCCC Regulation. The tribunal found the declaration ineffective under s 11(4) of the UCCC (s 13(5) of the Code) to found the conclusive presumption under s 11(2) of the UCCC. However, in that case, the debtor’s signed letter of offer and declaration, together, were held to be sufficient evidence to

displace the credit provider’s onus, with the tribunal finding the UCCC did not apply. [page 72] [13.16] Knowledge, belief and inquiries Even where a declaration is signed by the debtor, the court may decide that the credit provider knew or ought to have known credit was provided for a different purpose (see [5.40]; see also Neuendorf v Rengay Nominees Pty Ltd [2003] VCAT 1732 at [48]). The court will look beyond any attempts to circumvent the operation of the Code by a credit provider where they request that the debtor sign a business purpose declaration, where the purpose of the credit contract is known to be otherwise. For example, in Queensland v Ward (2002) ASC ¶155-055; [2002] QSC 171; BC200203212, a credit provider who secured interest payments through threatened and actual violence, and forced customers to sign business purpose declarations (despite evidence proving the credit provider had actual knowledge to the contrary), was held to be engaging in a “charade” to avoid the operation of the UCCC. A declaration will be ineffective in these circumstances. Furthermore, with the changes to the Code in s 13(3)(b), it will now be even harder for a credit provider to use the business purpose declaration to circumvent the operation of the Code. Credit providers (and prescribed persons (see [13.30] below)) must make reasonable inquiries as to the purpose of the credit or the credit provider runs the risk of the business purpose declaration being ineffective. It is not always clear when a business purpose will exist. However, it is clear that debtors will not waive their rights under the Code simply by signing a clearly false business purpose declaration. [13.20] Consequences of ineffective declaration Under the UCCC, where the declaration was ineffective the declaration was not taken as a presumption of intent on the part of the debtor, but could still be used, along with other evidence, to form a view as to the purpose for which credit was given

(Neuendorf v Rengay Nominees [2003] VCAT 1732). The court or tribunal could still use the declaration to determine whether or not the presumption that the UCCC applied to the contract had been displaced. The court or tribunal would consider those factors which led to the declaration as being ineffective in its judgment. Where, for example, a credit provider made a gross departure from the standard form business purpose declaration required by the UCCC Regulation, the court could choose to give little weight to the statement of purpose because the declaration did not contain, for example, an appropriate warning (see Neuendorf v Rengay Nominees Pty Ltd). However, the position is changed under the Code, by the insertion of new s 13(4). This provides that if the declaration is ineffective under s 13(3) (because of the credit provider’s knowledge as to purpose), the credit is deemed to be provided or intended to be provided wholly or predominantly for a Code purpose (that is, s 5(1)(b) of the Code is taken to be satisfied in relation to the credit under the contract). (The Code may still not actually apply to the credit contract, but this will only be where another section of the Code is not satisfied — for example, where the debtor is not a natural person or a strata corporation.) Therefore, at least where the credit provider or a prescribed person (see [13.30]) had reason to believe at the time that that there was a consumer purpose, it appears that it is no longer open to the court to consider other evidence and form a view as to the true purpose for which the credit was given, as it did in Neuendorf v Rengay Nominees (see [13.15]). (However, where a business purpose declaration [page 73] is effective due to a formal defect, the credit provider should still be able to bring evidence to rebut the s 13(1) presumption that the Code applies.) [13.25] Timing The declaration must be obtained from the debtor before the debtor enters into the credit contract (s 13(2)). [13.26] State of signing declaration An interesting question of law arises

when considering the situation where the credit contract is constructed as an offer by the consumer to be accepted by the credit provider — at what stage must the declaration be signed? In Berckelman v DaimlerChrysler Services Aust Pty Ltd [2003] NSWCTTT 807, Senior Member Connolly held that the declaration must be signed before the offer is made (at [25]): It is difficult to see how an interpretation that best achieves the purpose of the [UCCC] Schedule 2 Part 2(7)(1), is achieved by a Court or Tribunal finding a declaration can be signed after the asset/hire purchase agreement, on the basis this is merely an offer, and the debtor does not enter into a contract until the offer is accepted by the credit provider. The debtor must surely first sign the declaration removing himself from the protection of the [UCCC] if indeed that is his intention, before he signs the contract document(s).

Interestingly, however, another member of the same tribunal, Senior Member Durie, took the view in Moussad v Cash King Pty Ltd [2003] NSWCTTT 818 that the declaration may be signed any time before the offer is accepted by the credit provider: Whilst there must be some doubt as to the precise order in which the documents were signed, on each occasion there was a declaration in accordance with s 11(1) of the [UCCC (s 13(1) of the Code)]. The [UCCC] requires that the declarations be made “before entering into the contract” … I consider that the phrase should be given its natural meaning. As with any another contract, a credit contract is entered into when there has been an accepted offer. In this case, that acceptance was by the respondent when it accepted the completed loan application and associated documents from the applicant. On that basis the precise order of execution is irrelevant; what matters is that before the offer was accepted by the respondent, and the contract formed, the declaration had been made.

[13.27] Suggested approach to signing declaration This point of law is not settled. As a separate issue, for the sake of prudence, the declaration should be obtained as close as practicable to the date when the debtor enters into the credit contract in order to avoid any suggestion that the declaration has become “stale”. See Linter Group Ltd (in liq) v Goldberg (1992) 7 ACSR 580 at 649–650; 10 ACLC 739 where the Supreme Court of Victoria held (in the context of s 230(8) of the Companies Code) that “before” means “immediately before” and that a gap of 21 days between the giving of the certificate and the taking of security was too long a period to comply with the requirements of s 230(8). [13.28] A judicial consideration of a false business purpose declaration In Dale v Nichols Constructions Pty Ltd [2003] QDC 453, the credit

[page 74] provider sought to rely on a false business purpose declaration signed by Mrs Dale on 27 February 1998 in relation to the second loan, the terms of which were negotiated on 11 March 1998 and settled on 20 March 1998. The credit provider did not know that the declaration was false at the time it was made. McGill DCJ held that the declaration did not apply to the second loan because, on the facts, it was signed in the context of a proposal for a loan different from that ultimately made and also because it was signed too long before the parties entered into the credit contract. McGill DCJ followed the approach in Linter Group Ltd (in liq) v Goldberg (1992) 7 ACSR 580; 10 ACLC 739, on the basis that the statute and circumstances under consideration were sufficiently similar to make the reasoning persuasive, and gave a number of other substantial reasons for holding that s 11(2) of the UCCC (s 13(2) of the Code) requires the declaration to be made immediately before entering into the credit contract (at [37]–[38]): First, if the declaration could be given at any time before the credit contract was entered into, this would in my opinion provide less protection to the consumer than a requirement that it be given just before the credit contract was entered into … This is clearly consumer protection legislation, and it ought to be given an interpretation which is more beneficial to the consumer. The second is that subsection (3) provides that the declaration is ineffective in certain circumstances where someone has knowledge or reason to believe certain things “at the time when the declaration was made”. If the declaration were made some time before the credit contract was entered into, as long as the credit provider did not know at that time that the declaration was false, the credit provider would on the face of subsection (3) be entitled to continue to rely on the declaration even if the credit provider or relevant person later came to know, prior to the time when the credit contract was made, that the declaration was false … In my opinion the fact that the legislature has made subsection (3) operate by reference to the time when the declaration is made rather than the time when the credit contract is made indicates that the legislature contemplated that the declaration would be made just before the credit contract.

[13.30] “Prescribed person” A credit provider may not rely on a business purpose declaration if the credit provider or a “prescribed person” knew or had reason to believe that the declaration was false at the time it was made or would have known or had reason to believe that it was false if they had made reasonable enquiries about the purpose of the credit. Therefore, the effectiveness of a business purpose declaration will depend on the knowledge or belief of, or enquiries made by, a prescribed person as well as the credit

provider. “Prescribed person” is defined in reg 67 and varies depending on who obtains the business purpose declaration. In essence, any person obtaining the declaration (other than the credit provider) is a prescribed person and, where the declaration is obtained by someone other than the credit provider (or an associate of the credit provider (see [204.65])), any referrer or person who suggested that the debtor apply for the credit or helped them to apply, may be a prescribed person. Previously, under the UCCC, only the knowledge or belief of the credit provider or a “relevant person” (being a person associated with the credit provider or finance broker or a person acting for a finance broker) was relevant. If the declaration was obtained by anyone else, the credit provider could rely on the [page 75] declaration even if the person who obtained the declaration knew it was false. (And before the Consumer Credit (Queensland) Amendment Act 1998, there was no concept of “relevant person” in the UCCC, which meant that s 11(3) of the UCCC could operate unfairly where a false declaration was obtained by a person not directly associated with the credit provider or the finance broker.) Under the amended Code, the net is cast wider to try to catch the knowledge of all persons who may be involved in the transaction from the outset. The explanatory memorandum issued in relation to the NCCP Act states (at para 8.62) that the definition of prescribed person has been drafted so that a credit provider can protect itself from the risk of the declaration being set aside by obtaining the declaration itself. [13.35] “Knew, or had reason to believe” Section 199(5) states that a credit provider is not taken to know or have reason to believe something because one of its officers, agents or employees does so, unless that knowledge or reason to believe is acquired by the officer, agent or employee acting in that capacity and in connection with the transaction concerned. It is not clear

whether “knowledge” is only actual knowledge or includes constructive knowledge. Section 13 renders a business purpose declaration ineffective if the person who obtains it “knew, or had reason to believe” that it was untruthful. This formulation suggests that the word “knew” refers to actual knowledge and the words “had reason to believe” deals with a situation of constructive notice. It is unclear how the words “had reason to believe” will be interpreted in the Code context as to date no cases have considered this issue specifically. Similar expressions have been given judicial consideration in Bank of New Zealand v Fiberi Pty Ltd (1994) 12 ACLC 232; Sixty-Fourth Throne Pty Ltd v Macquarie Bank Ltd (1996) 130 FLR 411; 14 ACLC 670; (1996) V ConvR 54-546; BC9600719; Pyramid Building Society v Scorpion Hotels Pty Ltd (1996) 20 ASCR 166; 136 ALR 166; 14 ACLC 679; BC9601003 (which considered the meaning of the words “ought to know” for the purposes of s 68A(4)(b) of the Companies (New South Wales) Code and s 164(4)(b) of the Corporations Law); and in Custom Credit Corp Ltd v Luff (NSWSC, Murphy, O’Bryan and McDonald JJ, M77 of 1989, 27 November 1990, unreported), which considered the words “might reasonably be expected to be” in s 13(4) of the Credit Act 1984 (NSW). There is also the common law “put on enquiry” test. The cases do not establish conclusively whether there is any difference in substance between the various tests, but they do tend to suggest, without resolving the issue, that the tests are probably objective rather than subjective; that is, they rely on the standard of behaviour expected of an outsider acting reasonably, rather than on the facts and circumstances which are subjectively known to the outsider. In Park Avenue Nominees Pty Ltd v Boon (2001) ASC ¶155-052; [2001] NSWSC 700; BC200104848, it was said that the relevant test involves an objective consideration of what a reasonable person in the shoes of the credit provider would have understood as the predominant purpose. In DaimlerChrysler Services Aust Pty Ltd v Berckelman (2004) ASC ¶155-065; [2004] NSWSC 447; BC200403024, the New South Wales Supreme Court stated that the credit [page 76]

provider’s knowledge can be actual or implied. It was held that the tribunal had not erred by finding that: … a reasonable person making an objective determination in respect of the use of this contract would conclude that the contract was wholly or predominantly for personal, domestic or household purposes.

See further [5.25]. [13.40] “Substantially in the form” These words in s 13(5) duplicate provisions of s 208 which also provides that substantial compliance with a prescribed form is sufficient. However, the “substantial compliance” concession applies only to the format and contents of the form and does not apply to the completion of the form. This means that the requirement (set out in reg 68(3)) that the business purpose declaration must be signed by each person making a declaration and must contain either the date on which the declaration is signed or the date on which it is received by the credit provider, must be observed (see s 208(2)). In Park Avenue Nominees Pty Ltd v Boon (2001) ASC ¶155-052; [2001] NSWSC 700; BC200104848, there was interposed between the declaration and warning prescribed by reg 10 of the UCCC Regulation (reg 68 of the Regulations) an additional sentence stating: I/we declare that this declaration was executed prior to me/us entering into the mortgage and associated documents.

The court, both at first instance and on appeal, held that this was not substantial compliance because of the requirement in reg 10 of the UCCC Regulation (reg 68 of the Regulations) that the warning be placed “immediately below” the words of the declaration. Harrison M held (at [31]): The placement of these additional words had the effect of distorting the intended importance of the warning because the nexus between the warning and the statement to which it related had been severed.

In Szita v Capital Finance Australia Ltd (2004) ASC ¶155-063; [2003] VCAT 2008, a declaration concerning the purpose of the credit to be provided was not substantially in the form provided, where it referred to the purpose for which the goods purchased were to be used, not the purpose for

which the credit was provided. This was held to substantially change the meaning of the declaration and the warning the declaration contained. In Neuendorf v Rengay Nominees Pty Ltd [2003] VCAT 1732, a declaration was created which omitted the heading “IMPORTANT” and replaced it with “WARNING”. The declaration was found to be ineffective. Clearly the word “important” is just that. McKenzie DP held that this departed too substantially from the requirements of the UCCC Regulation and rendered the declaration ineffective. In making this finding, McKenzie DP considered the objective of the UCCC which she said was to promote truth in lending and enable the debtor to make an informed choice about entering the credit contract (at [79]). See also discussion of Edwards at [13.15]. [page 77] [13.45] Signing Although the 31 August 1994 drafting instructions for the UCCC Regulation indicated that a business purpose declaration would have to be signed separately (ie, it could not just be a term of the credit contract itself), neither s 13 nor reg 68 expressly require this. However, reg 68(3)(a) requires that the declaration must “contain” the signature of each person making the declaration, which tends to suggest that the declaration, although capable of being included in another document (such as an application form or the contract itself), should form a distinct part of that document. If the declaration is part of the contract, it would have to be separately signed by the debtor(s) because otherwise it would not be possible to comply with the requirement in s 13(2) that the debtor must sign the declaration before entering into the contract (see [13.30]). In all other cases (ie, if the business purpose declaration is not part of the contract), it would be advisable to require debtors to sign the business purpose declaration separately from their signing of any other document (such as an application form) of which it forms a part. Taylor v Third Szable Holdings Pty Ltd (2001) ASC ¶155-050; [2001] VCAT 1841 concerned a loan application in the name of a woman, together

with a business purpose declaration signed by her husband. Without elaborating on the reasons, the tribunal held that the business purpose declaration was invalid. Under s 186, to be valid, a document signed by another person will be effective if signed under the authority of the person required to sign. That is, under s 186, to be valid, any document signed by a person other than the debtor must be done so under the authority of the debtor. It is not, however, clear whether, in the absence of the debtor themselves being expressly warned about the consequential loss of Code protection, a business purpose declaration signed under authority, for example, by way of a power of attorney, would be valid. [13.50] Costs In Edwards v RAMS Home Loans Pty Ltd (No 2) (2005) ASC ¶155-076; [2005] VCAT 556, the credit provider (RAMS) made a claim for its costs due to actions by the debtor, such as failing to attend the directions hearing. In holding that RAMS was entitled to a portion of its costs, the Victorian Civil and Administrative Tribunal considered that the function of the UCCC in providing protection to debtors should not be undermined. Although the debtor asserted that the UCCC applied, RAMS was entitled to its costs from the day it applied to strike out the claim since the application showed that, in actual fact, the UCCC did not apply (as the loan was for investment purposes). [13.55] Penalties Section 13(6) is a new provision introduced with the Code which was not in the UCCC. It makes it an offence for a person to do anything that induces a debtor to make a declaration that is false or misleading in a material respect. The offence carries a criminal penalty of 100 penalty units or two years imprisonment, or both. The changes introduced with the Code also made the s 13(6) offence (inducing a false or misleading declaration) an offence of strict liability by the insertion of s 13(7). The explanatory memorandum indicates that the penalties are designed to enhance ASIC’s role in enforcing the provision. (See paras 17 and 18 of the “Overview of the National Credit Code” for commentary on penalty units and strict liability offences.)

[page 78] [13.60] Cases Bahadori v Permanent Mortgages Pty Ltd (2008) 72 NSWLR 44; [2008] NSWCA 150; BC200805005; Benjamin v Ashikian (2007) ASC ¶155-086; [2007] NSWSC 735; BC200705347; Geeveekay Pty Ltd v Director of Consumer Affairs Vic (2008) 19 VR 512; (2008) ASC ¶155-090; [2008] VSC 50; BC200800981; Permanent Custodians Ltd v Upston (2007) ASC ¶155-083; (2007) NSW ConvR 56-178; [2007] NSWSC 223; BC200701913; Hamafam Pty Ltd v Saadullah (2007) ASC ¶155-087; [2007] NSWSC 818; BC200706016; George Hraiki v Jean Dorothy Beljon [2008] NSWSC 775; BC200807675; Permanent Mortgages Pty Ltd v Michael Robert Cook and Karen Cook (2006) ASC ¶155-082; [2006] NSWSC 1104; BC200608529; Kowalczuk v Accom Finance (2008) 252 ALR 55; 229 FLR 4; [2008] NSWCA 343; BC200810918; Perpetual Ltd v Treloar (2010) 14 BPR 27,699; [2009] NSWSC 386; BC200903990; Perpetual Trustees Australia v Richards (unreported judgment); Australian Capital Providers Pty Ltd v Wakelin [2009] QSC 167; BC200905403; Crawford v Shakespeare Haney Securities Ltd [2008] QCA 363; BC200810338; Shakespeare Haney Securities v Crawford [2009] 2 Qd R 156; [2009] QCA 085; BC200902421; Hirvonen v White [2009] QDC 103.

Reverse mortgages 13A (1) For the purposes of this Code, an arrangement is a reverse mortgage if the arrangement involves a credit contract, except a bridging finance contract, and a mortgage over a dwelling or land securing a debtor’s obligations under the contract and either: (a) the conditions in subsections (2) and (3) are met; or (b) the arrangement is of a kind declared by ASIC under subsection (4) and is made on or after the commencement of that declaration. 13A (2) Conditions The first condition is that the debtor’s total liability under the credit contract or mortgage may exceed (to a limited or unlimited extent) the maximum amount of credit that may be provided under the

contract without the debtor being obliged to reduce that liability to or below that maximum amount. Note: The debtor’s total liability can exceed the maximum amount of credit because interest and some other fees and charges are not included in an amount of credit: see subsection 3(2).

13A (3) The second condition is that, if the regulations prescribe any prerequisites for the arrangement to be a reverse mortgage, those prerequisites are met. 13A (4) Declarations by ASIC ASIC may by legislative instrument declare specified kinds of arrangements involving a credit contract and a mortgage over a dwelling or land securing a debtor’s obligations under the contract to be reverse mortgages. [s 13A insrt Act 130 of 2012 s 3 and Sch 2 item 2, eff 18 Sep 2012]

________________________________________ [Editorial note: There was no comparable UCCC provision.]

COMMENTARY ON SECTION 13A [13A.05] Outline Since the Enhancements Act, reverse mortgages are subject to separate requirements from other kinds of credit contracts, with tailored consumer protection provisions. The changes affecting providers of reverse mortgages can be categorised in three groups: pre-contractual conduct; [page 79] documentary requirements; and procedures during the term. See [13A.25] for a list of all Code provisions specifically relating to reverse mortgages, introduced by the Enhancements Act. Credit providers should remember that while the majority of changes

commenced on 1 March 2013, the following changes commenced on 18 September 2012 (ie, when the Enhancements Act received Royal Assent): credit contracts must not prohibit early repayment of reverse mortgages; there is a statutory negative equity protection, or “no negative equity guarantee”, which prohibits credit providers requesting or accepting repayments that exceed the market value of the security property (certain exceptions are provided); and there are additional requirements for enforcing reverse mortgages if the debtor’s liability exceeds the value of the reverse mortgage security property. Credit providers are also required to use a reverse mortgage calculator, available on the MoneySmart website1 to make and show prospective reverse mortgage debtors information relating to the value of their home and the amount of debt over time. A new reverse mortgage calculator was launched in March 2013 and guidance on using the reverse mortgage calculator was released in September 2013.2 [13A.10] What is a reverse mortgage? A reverse mortgage is a financial instrument aimed at seniors to allow them to access equity in their home and remain living in their own home. The key difference between a reverse mortgage and a traditional real property mortgage is that there are no principal or interest payments required to be made by the debtor while they continue to live in their home. Generally, if there are two debtors on title, the other debtor may continue to live in the home even if one of them dies or moves into permanent care. Repayment is usually only required if the debtor (or all the debtors, if there is more than one) ceases to reside in their home. A reverse mortgage, while capable of taking a number of forms, is a product aimed at enabling retired people to use the equity accumulated in real estate (usually the family home) to derive a cash flow. Reverse mortgages, although having been popular in Britain and the United States for some time,

are a relatively new addition to the Australian financial landscape. Two of the alternative types of reverse mortgages are described below: Method 1 — under the more common method, the home owner borrows an amount from the lender up to a particular level. The amount which can [page 80] be borrowed is determined by reference to a model which takes into account such factors as the projected term of the loan and the value of the property. The lender then takes a mortgage over the property. However, unlike in a typical arrangement, the debtor does not make any repayments and the interest that is incurred is simply added to the amount that is already owing. The money borrowed, together with the interest owing, will be repaid to the lender at the time the house is sold or the debtor dies, or on the occurrence of some other stipulated triggering event. An advantage of this method is that the debtor retains ownership of the property until the triggering event occurs. Method 2 — another type of reverse mortgage involves the retiree selling their home to a financial institution in exchange for the right to live in the house, and a guaranteed annuity, calculated on the basis of actuarial data, payable until death. [13A.15] Enhancements Act The specific regulation of reverse mortgages was introduced by the Enhancements Act. Prior to the Enhancements Act, the Code did not distinguish between types of credit products (other than distinctions between continuing credit and non-continuing credit contracts, goods mortgages and real property mortgages, and consumer leases). The Enhancements Act introduced specific rules for certain types of credit contracts — namely reverse mortgages, short-term and small amount credit contracts, and medium amount credit contracts (as well as an enhanced regime for consumer leases).

[13A.20] Explanatory Memorandum Chapter 3 of the Explanatory Memorandum to the Enhancements Act sets out a detailed summary of the reverse mortgage provisions. They are spread across both the Code and NCCP act. The Explanatory Memorandum states (at para 3.1): 3.1 … The key elements of these requirements are: introducing a “no negative equity guarantee” protection through a prohibition against credit providers requiring or accepting repayment of the loan for an amount which exceeds the market value of the mortgaged property (subject to certain exceptions); mandating that holders of an Australian credit licence must undertake the following conduct before they make an assessment or a preliminary assessment under sections 123, 124 or 128 of the NCCP Act: —

using a website approved by the Australia Securities and Investments Commission (ASIC), show a consumer projections of the potential effect a reverse mortgage may have on the equity they have in their home;

—

provide the consumer with a print out of these projections;

—

notify the consumer of additional information that will assist them to decide whether to enter into a reverse mortgage, and, if so, on what terms; and

—

give the consumer a reverse mortgage information statement;

prohibiting credit providers from specifying that certain types of conduct can constitute a default under a reverse mortgage contract; disclosure of the way in which non-title holding residents will be treated under a reverse mortgage contract;

[page 81] prohibiting credit providers from entering into a reverse mortgage contract unless the consumer has received legal advice regarding the contract (with commencement of this obligation deferred to a date to be prescribed by regulation); and new requirements on credit providers where they have given a default notice to the debtor, including an obligation to take reasonable steps to contact the debtor in person, to make sure they understand they are in default and therefore provide them with an opportunity to rectify the default.

Then further, at paras 3.6–3.10, the Explanatory Memorandum states: 3.6 Reverse mortgage contracts require targeted regulation because they differ from other credit contracts. Some of the main differences are that: they are marketed exclusively to seniors or persons approaching an age where they will retire from the workforce; interest is capitalised as there is no obligation on the borrower to make regular

repayments, meaning the amount owing increases over time; at the time they are considering taking out the loan, consumers have no way of accurately determining the value of the equity in their home over time; and debtors may be required to repay more than the value of the mortgaged property at a stage in their life when they may no longer have the financial resources to be able to do so. 3.7 The Enhancements Bill contains amendments to the NCCP Act to address these issues.

Summary of new law 3.8 The Enhancements Bill contains amendments to the NCCP Act (including the National Credit Code) which relate specifically to contracts for reverse mortgages. 3.9 In general terms a reverse mortgage contract is defined as a contract in which the balance of the credit contract will increase over time (as the borrower will ordinarily only repay the debt following sale of their residence). 3.10

The key elements of these amendments are: creating a prohibition against credit providers requiring or accepting repayment of the loan for an amount which exceeds the market value of the mortgaged property; requiring licensees to undertake the following conduct before they make an assessment or a preliminary assessment under sections 123, 124 or 128 of the NCCP Act: —

using a website approved by the Australia Securities and Investments Commission (ASIC), show a consumer projections of the potential effect a reverse mortgage may have on the equity they have in their home;

—

provide the consumer with a print out of these projections;

—

notify the consumer of additional information that will assist them to decide whether to enter into a reverse mortgage, and, if so, on what terms; and

—

give the consumer a reverse mortgage information statement.

prohibiting credit providers from specifying that certain types of conduct can constitute a default under a reverse mortgage contract; disclosure of the way in which non-title holding residents will be treated under a reverse mortgage contract;

[page 82] prohibiting credit providers from entering into a reverse mortgage contract unless the consumer has received legal advice regarding the contract (with commencement of this obligation deferred to a date to be prescribed by regulation); and new requirements on credit providers where they have given a default notice to the debtor, including an obligation to take reasonable steps to contact the debtor in

person, to make sure they understand they are in default and therefore provide them with an opportunity to rectify the default. Comparison of key features of new law and current law

New law Specific obligations will be introduced on credit providers and persons engaging in credit services in relation to reverse mortgage contracts.

Current law The NCCP Act regulates reverse mortgage contracts consistently with all other credit contracts. It does not include any responsible lending conduct obligations, requirements in relation to the reverse mortgages or disclosure requirements that are specific to reverse mortgages. Credit providers cannot demand or The NCCP Act does not include any accept payment of an amount to specific requirements in relation to discharge the debtor’s liability which reverse mortgages. exceeds the value of the reverse mortgaged property (subject to limited exceptions). Licensees must give consumers The obligations under the NCCP Act projections of equity before providing do not require the disclosure of credit assistance or entering into a projections of future equity. reverse mortgage credit contract. Licensees must make available a The obligations under the NCCP Act reverse mortgage information do not require the provision of a statement on their website or upon reverse mortgage information request by a consumer. statement. [13A.25] Other Code provisions See also ss 17(15A); 18A; 18B; 18C; 22; 26; 32(2); 67A; 86A; 86B; 86C; 86D; 86E; 86F; 88(1), (2) and (7B); 93A; 111(1) and (2); 185A; and 204 for other Code provisions specifically about reverse mortgages. Additional provisions are set out in the NCCP Act (see [133A.30]). [13A.30] Summary tables of reverse mortgage requirements Table 1: Changes to the NCCP Act

Reverse mortgages — commenced on 1 March 2013 (other than those provisions commencing on 18 September 2012 — see [13A.05]) Item Description of the change Section reference (NCCP Act) 1 Definitions (note: same meaning as in the Code) s 5(1) 1.1 reverse mortgage s 5(1) 1.2 reverse mortgage information statement s 5(1) [page 83] 2 3 3.1 3.2 3.3 3.4 3.5 4

Remedies available for unsuitable credit contract when reverse mortgage is not unsuitable Responsible lending conduct Guide to Pt 3-2D — summary of obligations Requirement to give projections and information statement Making reverse mortgage information statement available on the website Making reverse mortgage information statement available in other circumstances Prohibition on use of the term “reverse mortgage” in representations Presumption in favour of converting an unsuitable loan into a not unsuitable reverse mortgage

s 133

s 133DA s 133DB s 133DC s 133DD s 133DE s 176(6) and (7)

Table 2: Changes to the Code

Reverse mortgages — commenced on 1 March 2013 (other than those provisions commencing on 18 September 2012 — see [13A.05]) Item Description of the change Section reference

1 2 2.1 2.2 2.3 2.4 2.5 3 4 5

6 7 8 9 9.1

9.2

(Code) Meaning of reverse mortgages s 13A Definitions s 204(1) reverse mortgage s 204(1) bridging finance contract s 204(1) engage in conduct s 204(1) practising lawyer s 204(1) reverse mortgaged property s 204(1) Permitting nomination of a non-title holding resident s 17(15A) Restrictions on certain default events for reverse s 18A mortgages Notifying a consumer that the reverse mortgage does s 18B not contain option to nominate a non-title holding resident Requirement to obtain legal advice s 18C Offence of non-compliance does not apply if a credit s 22(3) provider breaches s 18B A credit contract must not prohibit early repayment s 26(6) of reverse mortgage Account statements s 33(2) Credit provider must issue statement at least every 12 s 33(2)(a) months for a continuing credit contract for a reverse mortgage Credit provider must issue statement at least every 12 s 33(2)(b) months for a non-continuing credit contract for a reverse mortgage [page 84]

10

A credit provider must not make certain changes to

s 67A

11 11.1

11.2 11.3

11.4

11.5

11.6 12 12.1 12.2 13

14 14.1 14.2

tenancy protection in credit contracts for reverse mortgages Subdivision B — ending of reverse mortgage by credit provider receiving value of reverse mortgage The effect of the credit provider receiving the amount equal to the adjusted market value of the mortgaged property for reverse mortgages A borrower’s obligations are discharged under a reverse mortgage by application of s 86A If a credit provider receives more than the adjusted market value of the mortgaged property, the credit provider must return this to the borrower A credit provider must not demand or accept more payment than the adjusted market value of the mortgaged property Certain circumstances where a credit provider can recover more than the adjusted market value of the mortgaged property Subdiv B does not limit any other Provisions of Div 1 Subdiv C — notice of first direct debit default A credit provider must contact certain people to confirm delivery of default notice A credit provider cannot issue a default notice for default events described under s 18A(3) Extra requirements for enforcing reverse mortgage if debtor’s liability exceeded value of reverse mortgaged property Key requirement changes The requirements under s 17(15A) are key requirements for a non-continuing credit contract The requirements under s 17(15A) are key requirements for a continuing credit contract

Pt 5, Div 1 s 86A

s 86B s 86C

s 86D

s 86E

s 86F Pt 5, Div 1 s 88(1) and (2) s 88(7A), (7B) s 93A

s 111 s 111(1)(ha) s 111(2)(ea)

15

Credit provider must maintain records of s 185A nominations of persons to occupy reverse mortgaged property

[13A.35] SEQUAL Code The reverse mortgage Code regime reflects many of the restrictions set out in the Senior Australian Equity Release Association (SEQUAL) Code of Conduct and Guidelines. [13A.40] Reverse mortgages and responsible lending The Enhancements Act introduced additional responsible lending conduct obligations on Australian credit licence (ACL) holders in relation to reverse mortgages, prior to undertaking an unsuitability assessment. These obligations apply to credit providers and providers of credit services. In summary, the obligations include (Ch 3 of the NCCP Act): (a) showing the consumer the effect of the reverse mortgage on the equity in their property (projections). These projections must either be prepared

[page 85] through a facility available on ASIC’s website or through an ASICapproved website; (b) giving a printed copy of the projection to the consumer; (c) telling the consumer in person things prescribed by the Regulations that relate to reverse mortgages; and (d) giving the consumer a reverse mortgage information statement. [13A.45] Other requirements ACL holders must also make the reverse mortgage information statement available on their websites if their website provides information about reverse mortgages (NCCP Act s 133DC). A reverse mortgage information statement must also be provided when requested by a consumer and in other circumstances prescribed by the Regulations (NCCP Act s 133DD). The information to be included in the reverse mortgage information statement will be prescribed by the Regulations. The Enhancements Act restricts the use of the term “reverse mortgage” in representations about a credit contract (NCCP Act s 133DE). Most importantly, the Enhancements Act permits a court to convert a standard credit contract into a reverse mortgage. Specifically, if a credit contract is found to be unsuitable and if it can be established that the debtor was eligible for a reverse mortgage and the reverse mortgage would not have been unsuitable for the debtor, then a court may allow a debtor to continue to reside in the mortgaged property (NCCP Act s 176). Importantly, the Enhancements Act also introduces a statutory negative equity protection. A lender is prohibited from recovering an amount more than the value of the mortgaged property after the reverse mortgage is discharged. This limitation applies regardless of whether the discharge takes place after a mortgagee sale of the property or as a voluntary repayment by the debtor (s 26(b) of the Code).

The Enhancements Act limits the ability of the credit provider to rely on certain types of defaults to initiate enforcement action. Furthermore, before relying on a default notice to initiate enforcement proceedings, a credit provider will be required to contact the debtor, the debtor’s solicitor or the debtor’s attorney in financial matters to ensure that they received the default notice and understand the consequences of not remedying the default notice (see [13A.65]). The Enhancements Act states that the Regulations may prohibit a credit provider from entering into a credit contract unless the proposed debtor has obtained independent legal advice (s 18C of the Code). [13A.50] Definition of a reverse mortgage The Enhancements Act inserts definitions of “reverse mortgage” in both s 5 of the NCCP Act and s 13A of the Code. A reverse mortgage is defined in s 5 of the NCCP Act as having the same definition in s 13A of the Code. Reverse mortgage is defined as an arrangement which involves a credit contract and a mortgage over a dwelling or land securing the debtor’s obligations under the credit contract, and either: (a) conditions under s 13A(2) and (3) of the Code are met; or (b) ASIC declares the arrangement to be a reverse mortgage (s 13A(4)). Under s 13A(2), a credit contract will be a reverse mortgage if the debtor’s total liability under the credit contract or mortgage may exceed the maximum amount [page 86] of credit that may be provided under the contract without the debtor being obliged to reduce that liability to less than the maximum amount. The Explanatory Memorandum to the Enhancements Act provides an example of a reverse mortgage pursuant to the above definition (Example 3.1 at para 3.14 of the Explanatory Memorandum). The example states that a

credit product whereby the lender provides the debtor with a $50,000 loan and does not require the debtor to make regular payments but the full repayment has to be made if the debtor sells or permanently vacates their home, or on the death of the debtor, will be a reverse mortgage. Such a loan will be a reverse mortgage because the interest on the loan is compounded and the total loan amount owing under the loan increases above the initial $50,000 and the debtor is not required to reduce the loan amount. The above example should be compared to a loan where the maximum amount of credit under the contract is $1 million but only $50,000 is advanced to the debtor. The debtor is not required to make any repayments but the full repayment of the outstanding loan balance has to be made when they sell or permanently vacate their home, or on the death of the debtor. The interest on this loan is also compounded and added to the outstanding loan balance. Such a loan may not be a reverse mortgage under s 13A(2) because the outstanding loan balance may never exceed the maximum amount of credit, that is, $1 million. The Regulations may prescribe prerequisites for the arrangement to be a reverse mortgage under s 13A(3). If these prerequisites are met, then the credit contract will be a reverse mortgage. The Explanatory Memorandum explains (at para 3.15): 3.15

ASIC may, by a legislative instrument, declare a credit contract to be a reverse mortgage [Schedule 2, item 2, subsection 13A(4)]. This will allow ASIC, as the national regulator for consumer credit, to ensure that changes in product design do not have the result that those credit contracts which should be regulated under the NCCP Act as a reverse mortgage will not be subject to the protections introduced in Schedule 2. ASIC’s power to make this type of declaration in respect to reverse mortgage contracts is analogous to its power under section 761AE of the Corporations Act 2001 in relation to margin lending facilities.

ASIC may also declare an arrangement to be a reverse mortgage under s 13A(1)(b). [13A.55] Responsible lending conduct Chapter 3 of the NCCP Act regulates responsible lending conduct applicable to ACL holders, which includes credit providers and providers of credit services. The Enhancements Act introduced specific obligations on credit providers and credit service providers who offer reverse mortgages. (See para 3.23 of the Explanatory Memorandum.)

The Enhancements Act inserts Pt 3-2D “Licensees and reverse mortgages” at the end of the current Pt 3-2, Div 4 of the NCCP Act. The obligations of ACL holders under Pt 3-2D of the NCCP Act are summarised below. Giving projections of equity before providing credit assistance or entering contract — NCCP Act s 133DB Before undertaking an unsuitability assessment under Ch 3 of the NCCP Act, an ACL holder, including a credit provider and credit service provider, must: [page 87] show the proposed debtor in person projections that relate to the value of the mortgaged property and the level of the proposed debtor’s indebtedness after entering into the reverse mortgage. These projections are to be made either using the ASIC website or an ASIC-approved website (NCCP Act s 133DB) (details of these websites have not yet been provided). The Explanatory Memorandum states that the projections will illustrate the effect a reverse mortgage may have on the equity the proposed debtor has in their home over time, and the potential impact of interest rates and house price movements (at paras 3.25– 3.27); give a printed copy of the above projection to the proposed debtor; tell the proposed debtor certain matters about a reverse mortgage in person; The Enhancements Act states that the Regulations will prescribe the matters that must be disclosed. The Explanatory Memorandum states that the matters will include notifying proposed debtors that there are alternatives to a reverse mortgage and informing the proposed debtor that a reverse mortgage may affect their entitlements to government benefits (para 3.33).

An ACL holder may be required to notify the proposed debtor that their government benefits may be affected if the proceeds of the reverse mortgage are placed into a financial investment (eg, term deposit). Any income produced from such an investment may be taken into account in calculating the proposed debtor’s government benefits. give the proposed debtor a reverse mortgage information statement. A reverse mortgage information statement is a document relating to reverse mortgages and complies with the Regulations. The form and content of this document will be advised by the Regulations (NCCP Act s 133DB(1)). Failure to comply with the above requirements attracts civil and criminal penalties of $340,000 and $8,500 respectively for each offence. An ACL holder is not required to show or give a copy of the projections to the proposed debtor if they reasonably believe that another person has previously done so and the projections will be substantially the same (NCCP Act s 133DB(3)). Currently, there are no time limits on such a defence. An ACL holder is also not required to provide a reverse mortgage information statement if they reasonably believe that another person has given the proposed debtor a reverse mortgage information statement in the last 90 days (NCCP Act s 133DB(5)). Making reverse mortgage information statement available on website of credit provider or credit assistance provider — NCCP Act s 133DC An ACL holder, including a credit provider or a credit assistance provider, who has a website that provides information about a reverse mortgage must make a reverse mortgage information statement available on their website. Failure to comply with this obligation attracts civil penalties of $340,000 and criminal penalties of $8,500. [page 88] Making reverse mortgage information statement available in other

situations — NCCP Act ss 133DB, 133DC and 133DD An ACL holder must also give a copy of the reverse mortgage information statement to the proposed debtor if the proposed debtor asks the ACL holder or the Regulations require the ACL holder to provide the proposed debtor with the information statement. This obligation only arises after the proposed debtor has given the ACL holder their name and the contact details required by the Regulations. Failure to comply with this obligation attracts civil penalties of $340,000 and criminal penalties of $8,500. An ACL holder is not required to provide a reverse mortgage information statement where the: ACL holder reasonably believes that someone else has given the proposed debtor a reverse mortgage information statement; ACL holder is a credit provider of reverse mortgages and the credit provider reasonably believes that the proposed debtor will not be eligible for a reverse mortgages; or Regulations prescribe circumstances where an ACL holder is not required to give a reverse mortgage statement (NCCP Act s 133DD(4)). Representations that use the term “reverse mortgage” — NCCP Act s 133DE A credit service provider or a credit provider must not use the phrase “reverse mortgage” in a representation about a credit contract. It is a defence to this requirement if the use of the phrase “reverse mortgage” accurately represents that the credit contract is being referred to: (a) is or will be a reverse mortgage; (b) is not or will not be a reverse mortgage. A breach of the prohibition on the use of the term “reverse mortgage” will attract a civil penalty of $340,000. [13A.60] Proposed remedy for unsuitable contracts — NCCP Act s 179 The Enhancements Act amends s 179 of the NCCP Act and provides for a specific order where the court can allow a debtor to continue to reside in the mortgaged property after a credit contract is found to be unsuitable (NCCP

Act s 179(6) and (7)). Specifically, the Explanatory Memorandum (at para 3.50) states that: In the case of a consumer who is placed into a contract that is unsuitable, where a reverse mortgage would not have been unsuitable, this power would allow the court to make orders so that the unsuitable credit contract is written to apply in the way that the suitable reverse mortgage would have (for example, by allowing the consumer to remain in their residence until they permanently vacate it).

A note included in s 133 of the NCCP Act provides an example that illustrates the consequences of a breach. The example refers to someone entering into an unsuitable credit contract, when a reverse mortgage would have been “not unsuitable” — and that person can apply to a court for orders under ss 178 and 179 of the NCCP Act. This is to allow a court to make flexible orders to provide a remedy. There is a presumption in favour of the court to make the above order unless the court is satisfied that the order would adversely affect a person other than the debtor or the credit provider. The court may make an order where: [page 89] (a) the credit provider has entered into an unsuitable credit contract with the debtor; (b) the unsuitable credit contract is secured by the debtor’s principal place of residence; (c) the court is satisfied that at the time of completing the assessment in relation to the unsuitable credit contract: (i)

there was a credit provider offering credit through a reverse mortgage;

(ii) the debtor would have been eligible to enter into a reverse mortgage; (iii) the reverse mortgage would not have been unsuitable for the debtor; and

(d) the debtor, or ASIC on behalf of the debtor, applies for an order letting the debtor continue to reside in the mortgaged property. Orders made under proposed s 179(6) of the NCCP Act allow a court to convert a standard home loan into a reverse mortgage. Such orders can be costly for credit providers as they are not receiving any ongoing payments from the debtors. However, there may be limitations in the applications of the above order. Specifically, s 179(6) of the NCCP Act requires the debtor to establish that there was a credit provider offering credit through a reverse mortgage. Given that the amount of credit offered through a reverse mortgage is relatively low compared to a standard home loan, it may be arguable that there was not a credit provider offering comparable credit through a reverse mortgage. EDR schemes EDR schemes have been known to effectively convert a standard credit contract into something akin to a reverse mortgage. In Perpetual Trustees v Khoshaba (2005) 14 BPR 26,639; [2006] NSWCA 41; BC200602108, the Court of Appeal found that a lender’s failure to follow their lending guidelines can be taken into account in assessing if the loan contract is an unjust transaction under the Contracts Review Act 1980 (NSW). In view of that case, a credit provider could argue at an EDR level in appropriate cases that converting a standard loan into a reverse mortgage is not appropriate because doing so would mean that it is not following its lending guidelines. It is not clear as to the effectiveness of such an argument. However, with the introduction of s 179(6) of the NCCP Act, it is possible that EDR schemes may view themselves as having a solid right available to convert a standard home loan into a reverse mortgage in appropriate cases. [13A.65] Changes to the Code Protections of non-title holding residents — tenancy protection provisions A reverse mortgage may include a provision to allow a debtor to nominate another person to occupy the mortgaged property (nontitle holding resident). When such a nomination is in place, the non-

title holding resident will have the same rights as the debtor (s 17(15A)). Pursuant to such a nomination, the non-title holding resident will be allowed to occupy the mortgaged property even after the debtor has vacated the property. [page 90] The credit contract can limit the type of people that the debtor may nominate as a non-title holding resident. If the reverse mortgage does not include a provision to allow occupation by a non-title holding resident, the credit provider must provide a written notice to the debtor to this effect. The form of the written notice may be prescribed by the Regulations. Such a form must be provided before the credit service is provided or the credit provider enters into the credit contract (s 18B). A credit provider cannot make certain changes to the tenancy protection provisions provided by the credit contract. Specifically, a credit provider cannot remove the tenancy provisions contained in the credit contract or vary the credit contract as to the ability of the debtor to nominate a non-title holding resident or the rights of the non-title holding resident (s 67A). A credit provider must keep a record of any nominations or revocations made by the debtor in relation to tenancy protection provisions (s 185A). Restrictions on default events for reverse mortgages A reverse mortgage must not contain the following default events: the debtor fails to inform the credit provider that another person occupies the mortgaged property; the debtor fails to provide evidence to the credit provider that they or the non-title holding resident has occupied the mortgaged property;

the debtor leaves the mortgaged property unoccupied while it is their principal place of residence; the debtor fails to pay a cost to a person other than the credit provider; the debtor fails to comply with the credit contract where the credit contract does not make it clear how the debtor is to comply with the provision; the debtor breaches another credit contract with the credit provider; or any other circumstances prescribed by the Regulations (s 18A). Section 18A is included in Pt 2, Div 1 and therefore will attract the operation of s 22. Section 22 states that a credit provider must not enter into a credit contract that does not comply with the requirements set out in Pt 2, Div 1. A credit provider may be liable for a criminal penalty of $17,000 if they contravene s 22. Consequently, the credit provider must not enter into a credit contract that contains the above default events. Independent legal advice Although the Enhancements Act does not prohibit a credit provider from entering into a reverse mortgage with a proposed debtor who has not obtained legal advice, it leaves it open for the Regulations to do so (s 18C). Accordingly, the Regulations may make it mandatory for a credit provider to ensure that the debtor has obtained independent legal advice before entering into a reverse mortgage. Ending of credit contract by debtor A reverse mortgage may not prohibit an early payment of a reverse mortgage (s 26(6)). The Enhancements Act restricts the maximum amount of money that a credit provider can claim at the discharge of a [page 91] reverse mortgage. Specifically, a credit provider cannot claim more than the

adjusted market value of the mortgaged property. These provisions will apply when a debtor discharges the reverse mortgage voluntarily or following a sale of the mortgaged property the credit provider. The adjusted market value of the mortgaged property will be calculated in accordance with the Regulations. If the credit provider receives more money than the adjusted market value of the mortgaged property, they must pay the excess to the debtor. The above provisions do not apply where the market value of the mortgaged property was reduced by deliberate damage by the debtor or any other person occupying the property with the debtor’s consent or where the debtor engaged in fraud or made a misrepresentation relating to the reverse mortgage before or at the time of entering into the credit contract. Enforcement of a credit contract or a mortgage The Enhancements Act introduced further obligations on a credit provider before initiating enforcement proceedings. Specifically, after issuing a default notice to the debtor, a credit provider must either contact the debtor, the debtor’s lawyer or a person with the debtor’s power of attorney relating to their financial matters. Such contact may be via telephone or in person. The credit provider must confirm that the debtor has received the default notice and inform the person of the consequences of failing to remedy the default (ss 88(1) and (2)). [13A.70] Lending policy A credit provider’s lending policy for reverse mortgages should consider the following factors: obviously, in calculating the amount of credit to be advanced, the age of the debtor; setting the loan to value ratio (LVR) at a sliding scale to the debtor’s age; for example, an LVR of 60 per cent for a debtor aged 60 years and an LVR of 80 per cent for a debtor aged 75 years (these ratios are only expressed for purposes of this example, and are not to be taken as recommended ratios); if the reverse mortgage is to be advanced on a fixed rate basis, the amount of the fixed rate break costs that may be payable by the debtor upon early repayment. Specifically, a credit provider should

ensure that this cost does not lead to the debtor’s obligations under the loan exceeding the adjusted market value of the debtor’s mortgaged property; determining if it wishes to offer tenancy protection provisions for non-title holder residents. By offering such a provision, the term of the loan may be extended until the non-title holder vacates the mortgaged property; and where it would not be appropriate for a court to convert a standard home loan into a reverse mortgage. This may pre-empt a court from exercising their powers under s 179(6) of the NCCP Act. [13A.75] Remedies for unsuitable/unjust credit contracts Section 179(6) of the NCCP Act offers a specific remedy in relation to contracts that are found to be unsuitable. Specifically, if a debtor is able to establish that a reverse mortgage was not unsuitable, the court can convert the current credit contract into a reverse mortgage. [page 92] It should be noted that this power is additional to the remedies available under s 77 of the Code. Specifically, under s 77, where a court finds a credit contract to be unjust, a court may: (a) set aside the transaction in whole or part; or (b) revise or alter an agreement as it sees fit (s 77(c)). However, the causes of action of unsuitable contract and unjustness are extremely different. In establishing that a contract is unjust, a court has to review a number of factors. An enquiry as to unsuitability of a credit contract does not involve a detailed factual enquiry. [13A.80] Bridging finance contracts These types of contracts are excluded from the definition of reverse mortgages, as they are also contracts where the outstanding balance of the contract can increase until final repayment, but the

protections available to reverse mortgages are not applicable (see para 3.20 of Explanatory Memorandum to the Enhancements Act). See the definition of “bridging finance” in s 204. 1 Moneysmart, Reverse mortgage calculator, Australian Securities and Investments Commission, https://www.moneysmart.gov.au/tools-and-resources/calculators-and-tools/reverse-mortgage-calculator (accessed 25 January 2014). 2 See Australian Securities and Investments Commission, 13-241MR ASIC releases guidance on use of reverse mortgage calculator, media release, 2 September 2013, http://www.asic.gov.au/asic/asic.nsf/byheadline/13-241MR+ASIC+releases+guidance+on+use+of+reverse+mortgage+calculator?openDocument (accessed 25 January 2014).

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Part 2 — Credit contracts DIVISION 1 — NEGOTIATING AND MAKING CREDIT CONTRACTS Credit contract to be in form of written contract document 14 (1) [Signed written contract] A credit contract must be in the form of: (a) a written contract document signed by the debtor and the credit provider; or (b) a written contract document signed by the credit provider and constituting an offer to the debtor that is accepted by the debtor in accordance with the terms of the offer. 14 (2) [Acceptance by debtor] An offer may be accepted by the debtor for the purposes of paragraph (1)(b): (a) by the debtor or a person authorised by the debtor accessing or drawing down credit to incur a liability; or (b) by any other act of the debtor or of any such authorised person that satisfies the conditions of the offer and constitutes an acceptance of the offer at law. 14 (3) [Authorisation by debtor] The credit provider, or a person associated with the credit provider, may not be authorised by the debtor for the purposes of subsection (2). However, this subsection does not prevent the debtor authorising the credit provider to debit the debtor’s account. 14 (4) [More than one document] In the case of a contract document

consisting of more than one document, it is sufficient compliance with this section if one of the documents is duly signed and the other documents are referred to in the signed document. ________________________________________ [Editorial note: UCCC s 12 provided as follows: Credit contract to be in form of written contract document 12 (1) [Signed written contract] A credit contract must be in the form of— (a) a written contract document signed by the debtor and the credit provider; or (b) a written contract document signed by the credit provider and constituting an offer to the debtor that is accepted by the debtor in accordance with the terms of the offer. 12 (2) [Acceptance by debtor] An offer may be accepted by the debtor for the purposes of subsection (1)(b)— (a) by the debtor or a person authorised by the debtor accessing or drawing down credit to incur a liability; or (b) by any other act of the debtor or of any such authorised person that satisfies the conditions of the offer and constitutes an acceptance of the offer at law. 12 (3) [Authorisation by debtor] The credit provider, or a person associated with the credit provider, may not be authorised by the debtor for the purposes of subsection (2). However, this subsection does not prevent the debtor authorising the credit provider to debit the debtor’s account. 12 (4) [More than one document] In the case of a contract document consisting of more than one document, it is sufficient compliance with this section if one of the documents is duly signed and the other documents are referred to in the signed document.]

COMMENTARY ON SECTION 14 [14.05] Outline A credit contract must be in writing. A credit contract must also be easily legible and clearly expressed (see s 184) and must conform with regulation type and print size, which must be not less than 10 point (see s 184 and reg 110). [page 94] The Code regulates the form and content of credit contracts if it applies to them. The formation of a Code-regulated contract involves the following documents:

(a) an information statement; (b) a pre-contractual statement; and (c) a credit contract. It may also involve the preparation of one or both of: (d) a guarantee; and (e) a mortgage. The form and content requirements for each of these documents is discussed below. It should be noted at the outset that the precontractual statement may form part of the credit contract itself (s 16(5)), in which case care should be taken to ensure that the Code requirements for both the contract and precontractual statement are satisfied when preparing the issuing the combined document. The information statement may be in the form of a separate document but is commonly bound together with part of the credit contract document (reg 70). A credit contract must be in writing (Code s 14). It must also be easily legible and clearly expressed (s 184) and must conform with regulation type and print size, which must be not less than 10 point (s 184 and reg 110). Section 15 states that the Regulations may authorise other ways of making a credit contract that do not involve a written document. This section gives flexibility for credit contract formation. For example, the Regulations may permit a credit contract to be formed electronically. No regulations have been made authorising credit contracts to be made other than in writing. Note, however, that (pursuant to s 9 of the Electronic Transactions Act 1999 (Cth)) a purely electronic credit contract can satisfy the “writing” requirement.) [14.06] NCCP Act “responsible lending” disclosures Before a credit contract is offered to a debtor, it will usually be necessary for other disclosures to have been made. The nature of the disclosures will vary depending on the way that the debtor was introduced to the credit provider. Where the debtor has directly approached the credit provider (or an employee or credit representative of the credit provider), the credit provider must give a copy of its credit guide as soon as practicable after it becomes apparent that it

is likely to become a credit provider (NCCP Act s 126). Usually, this would not become reasonably apparent until the credit provider’s internal approvals have been satisfied. A credit provider’s credit guide must specify: its name and contact details; its Australian credit licence (ACL) number; and information about its: —

dispute resolution arrangements; and

—

obligations to conduct an unsuitability assessment, and to provide a copy of that assessment on request (NCCP Act s 126(2)).

If a debtor approaches a person other than the credit provider or the credit provider’s credit representative (such as by approaching a credit broker), then before a credit contract is suggested to them they will usually have to receive: the credit guide of the broker (containing, in addition to the limited information that must be included for a credit provider, detailed [page 95] information about the broker’s fees and charges and its arrangements with its associated credit providers (NCCP Act s 113(2)); a written quote if there is to be any charge for the credit assistance (NCCP Act s 114); and a detailed “credit proposal disclosure document” containing detailed estimates of fees paid or payable by the debtor, and also detailed estimates of commissions or other payments that may be received if the credit contract proceeds, including detailed explanations of any formula, and generally expressed in dollars or a as a proportion of the loan amount (although a range of values may be specified or a reasonable estimate may be given).

[14.07] NCCP Act key facts sheets From 1 January 2012, ACL holders that are credit providers for Code-regulated home loans (ie, credit contracts secured over residential property) are required to have the capability to produce a “key facts sheet” in a form specified by the Regulations (see reg 28LB and Sch 5). Currently, only a home loan which requires principal and interest repayments over the whole loan term is defined as a “standard form of credit contract”, although such a contract may have a fixed interest rate for the whole or part of a contract, or have a variable interest rate for the whole of the loan term. A credit provider may (but need not) produce a modified key facts sheet for home loans which do not meet this requirement (Sch 5, Pt 2, para 2.4 of the Regulations). From 1 July 2012, ACL holders that are credit providers for Coderegulated credit card contracts are required to provide a key facts sheet with each application form for a credit contract that relates to a regulated credit card. The form of the key facts sheet is set out in Sch 6 of the Regulations (reg 28LFA). See further para 8 of the “Overview of the National Consumer Credit Protection Act (NCCP Act) Regime”. [14.10] Contract formation The Code contemplates two ways in which a credit contract can be formed: a written contract signed by the debtor and credit provider structured either as an offer by the debtor to borrow or as an offer by the credit provider to lend (s 14(1)(a)); or a written contract document signed by the credit provider as an offer to the debtor which is accepted by conduct of the debtor that satisfies the conditions of the offer (s 14(1)(b)). A debtor may satisfy an offer made by a credit provider by the debtor or a person authorised by the debtor: accessing or drawing down credit to incur a liability; or doing any other act that satisfies the offer and constitutes acceptance under the general law (s 14(2)).

Section 14(2) makes it clear that an authorised person (such as a secondary card holder) may accept an offer by the credit provider, whether by accessing or drawing down credit or by any other act that satisfies the offer. (However, the credit provider and their associates cannot be authorised for this purpose: s 199(2).) [page 96] Different obligations arise for the credit provider (depending on which approach is adopted) in relation to, for example, the: timing of the disclosure of precontractual statements (see s 16); and number of copies of the credit contract to be given to the debtor (see s 20). Section 14(1)(b) deals with the formation of a credit contract by conduct. Prior to the Consumer Credit (Queensland) Amendment Act 1998 (Qld), a contract could be formed by the credit provider giving a written offer to a potential debtor that could be accepted by the debtor or an authorised person accessing or drawing down credit or by some act of the debtor (but not an authorised person) that satisfies conditions of the offer. Section 14(2) provides that the “act” of an authorised person (such as a secondary cardholder) may also be effective as an acceptance of the contract. Contracts may be accepted by a new credit provider debiting the new credit account they are providing to the debtor with the amount required to pay out the old loan contract with another institution. Section 14(4) was inserted in 1998 to deal with the situation in which multiple documents contain the contractual arrangement between the debtor and credit provider. The explanatory notes to the Consumer Credit (Queensland) Amendment Act explain that: … section 12(4) [s 14(4) of the Code] is designed to confirm that where a contract consists of more than one document it is sufficient for only one to be duly signed if the other documents are referred to in the signed document.

[14.15] Contract document “Contract document” is defined in s 204 of the Code as meaning “the document or documents setting out the terms of a contract” (see [23.30]). In addition, s 18 expressly states that “the contract document … may consist of one or more separate documents”. See [23.30] for a discussion of the cases that have considered the meaning of “credit contract”. Note that the warning required by s 16(6) (see [16.10]) in connection with certain precontractual statements does not apply to the credit contract, but if the credit contract consists of more than one document, only one of which is signed, the other documents must be referred to in the signed document (s 14(4)). Section 14(4) deals with the situation in which multiple documents contain the contractual arrangement between the debtor and credit provider. It provides that where a contract consists of more than one document, it is sufficient for only one to be duly signed if the other documents are referred to in the signed document. Presumably if all the documents are signed, it is not necessary for the documents to refer to each other (although it would be advisable to do so in order to make it clear as to where the contract terms are located). If a contract consists of more than one document, it should be sufficient if only one of the documents is signed. This was confirmed by the Consumer Credit (Queensland) Amendment Act 1998, although it was always thought to be the better view. As set out elsewhere in this text, the precontractual statement may be (or form part of) the credit contract (see [14.05]). In that case, if the credit contract consists of more than one document, each document comprising that contract must [page 97] comply with the requirements for precontractual statements (as well as the requirements for credit contracts) and indicate that it does not contain all of the required information (s 16(5) and (6)). Section 14 is silent as to the situation where more than one, but not all, of

the contract documents are signed. Where different copies of the same document are signed by the credit provider and the debtor, it would be prudent for the credit provider to ensure that the document contains an express provision dealing with execution of counterparts. [14.20] “Accessing or drawing down credit” Section 14(2) recognises the traditional method of forming credit card contracts; that is, by a credit provider making a written offer of a credit card facility to the potential cardholder, which is accepted by the cardholder, or a subsidiary cardholder on the cardholder’s behalf, when they first use their card. Conduct other than “accessing or drawing down credit” may be prescribed by the credit provider as a method of accepting the offer (see [14.10]). [14.25] Formation steps The following are key things which a credit provider must do in forming contracts: provide a precontractual statement and the Form 5 information statement before the contract is entered into (ie, before the debtor signs their acceptance of a credit provider’s offer or accepts the offer by conduct) or before the debtor offers to enter into the contract by signing the offer (s 16(1) and (2), reg 70); if the contract document is to be signed by the debtor and returned to the credit provider, give the debtor a copy of the contract document to keep (s 20(1)); and not later than 14 days after a credit contract is made, give a copy of the contract in the form in which it was made to the debtor. (This does not apply if a copy has already been given (s 20(2) and (3))). [14.30] “Authorised person” The Code contains provisions regarding who can be authorised to sign a document on behalf of a debtor, mortgagor or guarantor. Any person authorised by the debtor, mortgagor or guarantor may sign a credit contract, mortgage or guarantee on behalf of the debtor, mortgagor or guarantor (s 186). Section 186 provides that the debtor may authorise another person to accept an offer made by the credit provider. The debtor would have the right

to do this under general law, for example, by appointing an attorney or agent, so s 186 is probably unnecessary. However, the Code limits the debtor’s right to appoint an authorised person by providing that the debtor may not appoint the credit provider, or a person associated with the credit provider, for the purpose of accepting an offer made by the credit provider (see s 14(3), which appears to be a partial repetition of s 199(2)). The reference to “authorised person” in s 14(2) would include a subsidiary cardholder. Section 186 could be interpreted to mean that, if someone other than the person who is to be bound by a document (eg, an agent or attorney) executes a document on behalf of the person to be bound, the person executing the document must not [page 98] write their name under the signature, but must instead write the name of the person to be bound. However, that interpretation would be contrary to general law regarding execution by an agent or attorney. Therefore, if a document is to be executed by someone on behalf of the person to be bound, they should write their name and capacity under that signature (eg, “Abbey Brown as attorney for Bill Smith”). However, a debtor, mortgagor or guarantor cannot authorise a credit provider, or a person associated with a credit provider, to enter into a credit contract, mortgage or guarantee on the person’s behalf (s 199(2)). The phrase “person associated with a credit provider” is defined in s 204(2). [14.35] Cases Geeveekay Pty Ltd v Director of Consumer Affairs Victoria (2008) 19 VR 512; ASC ¶155-090; [2008] VSC 50; BC200800981; Dept of Consumer and Employment Protection v Chequecash Pty Ltd [2009] WASC 18; BC200900406.

Other forms of contract

15 (1) [Regulations] The regulations may authorise other ways of making a credit contract that do not involve a written document. 15 (2) [Application of ss 14-22] In that case, the provisions of this Division apply with such modifications as are prescribed by the regulations. ________________________________________ [Editorial note: UCCC s 13 — apart from numbering the section is unchanged.]

COMMENTARY ON SECTION 15 [15.05] Outline This section gives flexibility for credit contract formation. For example, regulations may permit a credit contract to be formed electronically. No regulations have been made authorising credit contracts to be made other than by way of a written document (this can be made electronically in writing — see commentary on s 187).

Precontractual disclosure 16 (1) [Formal statement required] A credit provider must not enter into a credit contract unless the credit provider has given the debtor: (a) a precontractual statement setting out the matters required by section 17 to be included in the contract document; and (b) an information statement in the form required by the regulations of the debtor’s statutory rights and statutory obligations. 16 (2) [When to give statements] Those statements must be given: (a) before the contract is entered into; or (b) before the debtor makes an offer to enter into the contract; whichever first occurs. 16 (3) [Comparison rate optional] Before entering into a credit contract, the credit provider may inform the debtor of the comparison rate. If the credit

provider does so, the comparison rate must be calculated as prescribed by the regulations and be accompanied by the warnings set out in the regulations. [page 99] 16 (4) [Prescribed content] The precontractual statement must contain the financial information specified by the regulations in the form prescribed by the regulations. 16 (5) [Form of statement] The precontractual statement may be the proposed contract document or be a separate document or documents. 16 (6) [More than one document] A document forming part of a precontractual statement consisting of more than one document when the precontractual statement is first given must indicate that it does not contain all of the required precontractual information. 16 (7) [Variation of statement] A precontractual statement may be varied, within the time referred to in subsection (2), by written notice containing particulars of the variation given to the debtor. ________________________________________ [Editorial note: UCCC s 14 provided as follows: Precontractual disclosure 14 (1) [Formal statements required] A credit provider must not enter into a credit contract unless the credit provider has given the debtor— (a) a precontractual statement setting out the matters required by section 15 to be included in the contract document; and (b) an information statement in the form required by the regulations of the debtor’s statutory rights and statutory obligations. 14 (2) [When to give statements] Those statements must be given— (a) before the contract is entered into; or (b) before the debtor makes an offer to enter into the contract, whichever first occurs. 14 (3) [Comparison rate optional] Before entering into a credit contract, the credit provider may inform the debtor of the comparison rate. If the credit provider does so, the comparison

rate must be calculated as prescribed by the regulations and be accompanied by the warnings set out in the regulations. 14 (4) [Prescribed content] The precontractual statement must contain the financial information specified by the regulations in the form prescribed by the regulations. 14 (5) [Form of statement] The precontractual statement may be the proposed contract document or be a separate document or documents. 14 (6) [More than one document] A document forming part of a precontractual statement consisting of more than one document when the pre-contractual statement is first given must indicate that it does not contain all of the required precontractual information. 14 (7) [Variation of statement] A pre-contractual statement may be varied, within the time referred to in subsection (2), by written notice containing particulars of the variation given to the debtor.]

COMMENTARY ON SECTION 16 [16.05] Outline Section 16(1)(a) of the Code requires a credit provider to give a prospective debtor a precontractual statement setting out the matters required by s 17 of the Code to be included in a credit contract. The precontractual statement must be given before the credit contract is entered into or before the debtor makes an offer to enter into the contract, whichever first occurs (s 16(2)). Section 16 does not impose an obligation in relation to precontractual disclosure itself, but restricts credit providers from providing credit unless certain disclosure requirements have been met: see McCarty v Yarra Capital Group (2002) ASC ¶155-054; [2002] VCAT 95. [page 100] Section 16(4) of the Code allows the Regulations to prescribe the form of certain financial information that must be included in the precontractual statement. Regulation 72 contains the financial information form requirements. Credit providers must also, prior to entering into a credit contract, give prospective debtors an information statement in the prescribed form (s 16(1)(b), Form 5). [16.10] “Precontractual statement” Section 16 requirements for the precontractual statement can be summarised as follows: it must contain all the information which, under s 17, is required to

be contained in a credit contract (s 16(1)(a)); some of the s 17 information must be set out in the financial table referred to in reg 72 (s 16(4)); it may be the credit contract itself or be in a separate document or documents (s 16(5)); and it may be in more than one document (however, in those circumstances, each document must indicate that it does not contain all of the required information: s 16(5) and (6)). The Code does not require the precontractual statement to indicate that it is a precontractual statement, or to refer to the section of the Code under which it is provided. Nor does the Code appear to require that separate documents constituting the precontractual statement must be given simultaneously, although there may be an inference from s 16(6) that the Code envisages simultaneous delivery of all documents constituting the precontractual statement, and in practice it will probably be simpler to deliver all such documents at the same time. [16.15] Format of precontractual statement The Code permits a credit provider to adopt any of the following approaches: produce a precontractual statement which is a separate document from the credit contract itself; have the credit contract also perform the function of the precontractual statement (s 16(5)); or in either of the above cases, have the s 17 information in more than one document. The most common approach taken by credit providers is for the credit contract to perform the function of the precontractual statement. This involves the least amount of paper work. However, if the credit contract is also the precontractual statement, the credit contract must comply with the requirements of s 16(4) and reg 72 relating to the form in which the financial information required by the Regulations must be disclosed, and must contain

the s 16(6) warning. It may also have to refer to the other documents which constitute the contracts, in order to comply with s 14(4). [16.20] Financial table and “relevant financial information” Section 16(4) of the Code requires that certain financial information, which is specified in the Regulations, must be included in the precontractual statement and be in the form set out in the Regulations. The relevant provision is reg 72. It requires that the relevant financial information must be: set out in the precontractual statement separately from the remainder of the information; and in tabular form. [page 101] The information is defined in reg 72(1) to be the “relevant financial information”, and the table itself is defined in reg 72(2) to be “the financial table”. The financial table may be in either portrait or landscape format (reg 72(2)) and must appear at the beginning of the precontractual statement, after any formal cover page and pages that have no substantive content and, in the case of a precontractual statement included in the credit contract, any information necessary to identify the loan (reg 72(5) and (6)). If a credit contract consists of more than one type of credit facility (eg, a continuing credit portion and a non-continuing credit portion), the relevant financial information for each credit facility may be set out in a single financial table or in separate financial tables for each credit facility (reg 72(4)). In late 2005, the body overseeing the UCCC, the UCCC Management Committee, released draft legislation outlining a new look financial table. While this draft legislation was overtaken by events, the review of the efficacy of the financial information given and how it is presented has continued. There is a general perception of a need to simplify the disclosure.

The Commonwealth Government’s Green Paper National Credit Reform: Enhancing Confidence and Fairness in Australia’s Credit Law (Green Paper) released by Treasury on 7 July 2010) sought industry feedback on a revised disclosure model. The revised model was proposed in a report commissioned by the Standing Committee of Officials of Consumer Affairs into the UCCC disclosure model.3 The revised disclosure model would apply to home loans, car loans, store cards and credit cards. It would include core credit contract information formatted for the benefit of consumers. It would also provide minimum repayment information and, where necessary, financial summary tables and important information tables. The revised disclosure model was found to be significantly more meaningful for consumers than the existing disclosure regime. Submissions in response to the Green Paper were invited by 6 August 2010. No changes resulted. A further discussion paper was released in April 2013, “Changes to Disclosure Requirements under the National Consumer Protection Act 2009”. See para 25 of the “Overview of the National Credit Code” above. [16.21] Key Facts Sheets On 12 December 2010, the Commonwealth Government announced its Competitive and Sustainable Banking System Package, which included a proposal that credit providers be required to give prospective home loan consumers a one-page “Key Facts Sheet” setting out information about the proposed home loan. An exposure draft of the amending Act that would implement this and other changes from the package was released by Treasury on 15 February 2011. Rather than implementing the Green Paper’s proposal for a simplification of disclosure requirements, the requirement to provide a “Key Facts Sheet” provides an additional disclosure requirement without removing or simplifying any of the existing requirements. The provisions of the National Consumer Credit Protection Amendment (Home Loans and Credit Cards) Act 2011 (Cth) have been incorporated into the NCCP Act and commenced on 1 January 2012, in relation to home loan key fact [page 102]

sheets (home loan KFS). Other amendments in respect of credit cards, including key fact sheets (card KFS) commenced on 1 July 2012. The Act imposes additional obligations on providers of Code-regulated home loans and credit cards. See further para 8 of the “Overview of the National Consumer Protection Act (NCCP Act) regime” above. See also [14.07]. [16.25] Financial table and cover page Regulation 72(5) provides that the financial table is to be set out at the beginning of the precontractual statement, after any formal cover page or pages that have no substantive content. In the case of a precontractual statement included in the credit contract, the financial table may also be preceded by information necessary to identify the loan (reg 72(6)). Apart from this, little guidance is given in the Code or the Regulations as to what is permitted to appear before the financial table. A practical interpretation is that the cover page should be able to contain at least the name of the document, the credit provider’s name, logo and address and the consumer’s name. The Regulations do not state that the financial table must be the first item to appear on the first page. However, it seems clear that the intention of the Code is that the financial table should be the first substantive information the debtor sees, and, as noted above, the financial table must appear at the beginning of the precontractual statement; that is, on the first page of the precontractual statement (after any cover page). While the financial table may be preceded by information necessary to identify the loan, it is not completely clear where the name of the credit provider (which is required by s 17(2) to be disclosed in the contract) should appear. There would seem to be no good reason why the name of the credit provider should not appear on the page on which the financial table begins, but on the other hand the Code seems to intend that the financial table should be the first thing after the cover page. It is clear, however, that if the credit provider’s name appears in the financial table, it must appear after the information referred to in s 17(3), (4), (5) and (8) (see reg 72(3)(b)). On balance, it is probably permissible to include a small amount of information on the first page before the financial table commences. This

could include the credit provider’s name, logo and address, debtor’s name, the disclosure date, a statement under s 16(6) and the loan (or account) number. [16.30] Financial table and additional information Regulation 72(3) provides that additional information may be included in the financial table, but only in the following circumstances: any information in s 17(3), (4), (5) or (8) that is not “relevant financial information” may be included with the relevant financial information (reg 72(3)(a)); and any of the information in s 17(2) or s 17(9)–(16) may be included after the relevant financial information and any information included under reg 72(3)(a) (reg 72(3)(b)). [16.35] Disclosure date The date of disclosure of the information in the financial table may be set out in the financial table (reg 72(10)). If a disclosure date is included, debtors will know that the relevant financial information is disclosed [page 103] at that date. In addition, s 180(1) states that information disclosed in a precontractual statement (among other documents) will be taken to be correctly disclosed if the disclosure is made as at the date stated in the precontractual statement. [16.40] Comparison rate The Code permits a comparison rate to be given to debtors prior to entering into a credit contract (s 16(3)), but does not make this mandatory. If a comparison rate is used, it must be calculated in accordance with reg 71 and be accompanied by the warning that it is accurate only for the example given (reg 71(11)). However, under Pt 10 of the Code, comparison rates: must be included in credit advertisements that contain an annual

percentage rate (except for advertisements in relation to continuing credit contracts (ss 157 and 160)); and may be included in any other credit advertisement or other document (s 160). The comparison rate is calculated to include the annual percentage rate on a loan, and the fees and charges payable on the loan, taking into account the amount and term of the loan. For the purposes of Pt 10, the comparison rate must be calculated in accordance with reg 100 and be accompanied by one of the warnings set out in reg 99. See [R71.15] for commentary on an overlap between the comparison rate requirements under regs 71 and 100. [16.45] Variations to precontractual statements Section 16(7) allows a precontractual statement to be varied (presumably by the credit provider) “within the time referred to in s 16(2)”. This means that a precontractual statement may be varied only up until the latest time permitted under s 16(2) for giving a precontractual statement in connection with the particular contract involved. In some cases a credit provider may not want to vary a precontractual statement, given the provisions of s 180(1)(b), which provides that disclosures will comply with the Code if they are correct as at a stated date. However, if a precontractual statement is varied, the variation will either have to set out the entire precontractual disclosure again or (assuming that the original precontractual statement included the s 16(6) warning that it does not contain all of the required information) provide only the varied information and the s 16(6) warning that the variation document does not contain all of the required information. (If the original precontractual statement did not include the s 16(6) warning, it would not be consistent with the Code to have part of the required information in a separate document.) [16.50] Contents of precontractual statement (including financial table) The specific requirements of the precontractual statement are listed below, distinguishing between: (a) those items that must be included in the financial table (the relevant financial information);

(b) other items that may be included with the relevant financial information in the financial table; and [page 104] (c) other information that may be included in the financial table, but only after the relevant financial information and any information referred to in (b). A detailed discussion of each of those requirements is set out at [17.05]–[17.85]. Contents of precontractual statement Regulation

Code section Requirements

(a) Items that must be included in the financial table (“relevant financial information”) 1.

Regulation 72(1) s 17(3)(a)(i) (a) s 17(3)(b)

Amount of credit The amount of credit, if ascertainable, or, if amount of credit is not ascertainable: The amount of credit, if ascertainable, or, if amount of credit is not ascertainable: the credit limit (if any).

2.

Regulation 72(1) s 17(4)(a) (b) s 17(4)(b) s 17(4)(c) s 17(4)(c)(i)

Annual percentage rate(s) Annual percentage rate(s) (APR) If more than one APR, how each APR applies If APR is set by reference to a reference rate: the name of the rate or a

s 17(4)(c)(ii) s 17(4)(c)(iv)

3.

4.

5.

Regulation 72(1) s 17(5) (c)

description of it; margin(s) to determine APR; current APR(s) (ie, the actual total of reference rate plus margin at the disclosure date). Interest-free period Maximum duration of any interest free period under the credit contract.

Regulation 72(1) s 17(6) (d)

Total interest charges payable Total interest charges payable if ascertainable (for contracts of seven years or less).

Regulation 72(1) s 17(7)(a)(i) (e)

Repayments If it is possible for there to be more than one repayment: the amount of the repayments; or

the method of calculating the amount. s 17(7)(a)(ii) If ascertainable when the contract is made: s 17(7)(a)(iii) number of repayments; s 17(7)(a)(iv) total amount of repayments (for contracts of seven years or less). [page 105] s 17(7)(a)(iv) When the first repayment is to be paid, if ascertainable. s 17(7)(b) The frequency of payment of

s 17(7)(b)

6.

Regulation 72(1) s 17(8)(a) (f)

s 17(8)(a)

s 17(8)(b) s 17(8)(b)

7.

Regulation 72(8)

repayments (Note: s 17(7)(a) does not apply to minimum repayments under a continuing credit contract) If the contract provides for a minimum repayment, the amount of that repayment, if ascertainable. If amount of minimum repayment not ascertainable, the method of calculation of minimum repayment. Credit fees and charges Credit fees and charges Statement of credit fees and charges that are or may become payable (only in respect of retained credit fees and charges, and lenders mortgage insurance). Statement of when each such credit fee or charge is payable, if ascertainable. Amount of any such credit fee or charge, if ascertainable. If amount of any such credit fee or charge not ascertainable, method of calculation of fee or charge, if ascertainable. Change of information Statement of any financial table information subject to change by credit provider and that change can be made without debtor’s consent.

(b) Other items that may be included with the relevant financial information (see (a) above) in the financial table Amount of credit

1.

Regulation 72(3) s 17(3)(a) (a)

s 17(3)(c)

If the amount to be paid and the person, body or agent to whom it is to be paid is ascertainable — those persons, bodies or agents and the amounts payable to them. If the credit provider is a supplier of land or goods by instalments, a description of the land and its price or of the goods and their price. [page 106]

2.

Annual percentage rate(s) Regulation 72(3) s 17(4)(c)(iii) If an APR under the contract is (a) determined by referring to a reference rate: where the reference rate is published; when the reference rate is published. s 17(4)(c)(iii) If the reference rate is not published, then how debtor may ascertain the rate.

3.

Regulation 72(3) s 17(5) (a) s 17(5)

4.

Regulation 72(3) s 17(8)(a) (a)

Calculation of interest charges Method of calculation of interest charges. Frequency of debiting of interest charges. Statement of the credit fees and charges that are or may become payable under the contract other than those required to be set out in the

s 17(8)(a)

s 17(8)(b) s 17(8)(b)

s 17(8)(c)

5.

Regulation 72(10)

s 180(1)

financial table (see Reg 72(1)(f) above in respect of retained credit fees and charges, and lenders mortgage insurance). Statement of when each such credit fee or charge is payable, if ascertainable. Amount of any such credit fee or charge, if ascertainable. If amount of any such credit fee or charge is not ascertainable, method of calculation of fee or charge, if ascertainable. Total amount of all credit fees and charges payable, to the extent ascertainable. Date of disclosure Date of disclosure of the information in the financial table.

(c) Information that may be included in the financial table but only after the relevant financial information (see (a) above) and any information referred to in (b) 1.

Reg 72(3)(b)

s 17(2)

Credit provider’s name Credit provider’ name. [page 107]

2.

Reg 72(3)(b)

s 17(9)

Changes affecting interest and credit fees and charges The following statements if they are applicable:

s 17(9)

statement that APR(s) may be changed; s 17(9) statement that amount or frequency of payment of credit fee or charge may be changed; s 17(9) statement that new credit fee or charge may be imposed; s 17(9) statement that amount or frequency of payment of instalments may be changed; s 17(10)15(I) statement of the means by which debtor will be informed of the change or the new fee or charge; Statements of account. Frequency of statements of account provided to debtor (not necessary for contract with fixed rate for the whole term). 4. Reg 72(3)(b)

Default interest rate s 17(11)(a) If applicable, statement to the effect that the contract is a contract under which a default rate of interest may be charged when payments are in default. s 17(11)(a) If applicable, the default rate. s 17(11)(a) If applicable, how the default rate is to be applied. If the default rate is determined by a reference rate: s 17(11)(b) name or description of reference rate; s 17(11)(b)(i) margin(s) above or below

reference rate to determine the default rate. s 17(11)(b)(ii) s 17(11)(b) (iii) s 17(11)(b) (iii) s 17(11)(b) (iii) s 17(11)(b) (iv)

If reference rate is published: when published; where published. If reference rate not published, how debtor may ascertain rate. Current default rate.

[page 108]

5.

6.

Reg 72(3)(b)

Reg 72(3)(b)

s 17(12)

s 17(13)(a)

s 17(13)(b)

7. Reg 72(3)(b)

s 17(14)

Enforcement expenses Statement that enforcement expenses may become payable under the credit contract or mortgage (if any) in the event of a breach. Mortgage or guarantee If applicable, a statement to the effect that a mortgage or guarantee is to be or has been taken by the credit provider. If a mortgage is to be or has been taken, description of the mortgaged property, to the extent ascertainable. Commissions If it is possible that a commission is to be paid by or to the credit provider for the introduction of credit business

s 17(14)(a) s 17(14)(b) s 17(14)(c) s 17(14)(d)

8.

Reg 72(3)(b)

s 17(15)

s 17(15)(a) s 17(15)(b) s 17(15)(b)

s 17(15)(c)

or business financed by the contract, then: statement of that fact; person paying commission; person receiving commission; amount of commission, if ascertainable. Insurance finance by credit contract If credit-related insurance (mortgaged property insurance or consumer credit insurance) may be financed under the credit contract, then: name of insurer; amount payable to insurer, if ascertainable; if amount payable to insurer is not ascertainable, how it is calculated. (Note: Where general insurance is provided as part of consumer credit insurance, s 17(15)(a)and (b) are satisfied if the name of the general insurer and the total amount payable to all insurers involved (or if the amount is not ascertainable, the method of calculation) is disclosed) kind of insurance; [page 109]

Reg 73

s 17(15)(c)

Reg 72(3)(b)

s 17(15)(d)

term of each credit-related insurance contract, if ascertainable. If the credit provider knows of any commissions the insurer pays to anyone (not just to the credit provider) then provision for: a statement that the commission is to be paid the amount of the commission either in dollars or as a proportion of premium, if ascertainable (Note: Where general insurance is provided as part of consumer credit insurance, s 17(15)(d) is satisfied if the total amount of commission payable by the insurer (either in dollars or as a proportion of the premium) is disclosed)

9.

10

Reg 74

Reg 72(7)

s 17(16)

s 16(5) and 16(6)

Additional information and warnings The information and warnings set out in Form 6 or 7 (as applicable) Precontractual statement comprising more than one document If the pre-contractual statement (ie, all the s 17 information) consists of separate documents, the financial table need not be repeated, but each document must indicate that it does not contain all of the required precontractual information

[16.55] Information statement Section 16(1)(b) of the Code requires a credit provider to give a prospective debtor an information statement (in the form required by the Regulations) setting out the debtor’s statutory rights and statutory obligations. The information statement is a form prescribed by the Regulations, setting out the debtor’s statutory rights and statutory obligations (reg 70, Form 5 — note s 18B, reg 74A, Form 7A for reverse mortages). The information statement must be given before the contract has been entered into or before the debtor makes an offer to enter into the contract (whichever first occurs) (s 16(2)). The information statement must be in the form of a separate document or can be part of the credit contract document. It may be printed in the contract terms and conditions booklet. This will minimise the risk of a Form 5 (Form 7A for reverse mortgages) not being given to a prospective debtor, where the contract is used as the precontractual statement. [page 110] The information statement includes a warning to the prospective debtor to carefully read their credit contract and recommends that they contact the credit provider or its external dispute resolution scheme or obtain legal advice if more information is sought. The information statement need not contain any matters set out in the prescribed Form 5 (Form 7A for reverse mortgages) if it is not relevant to the credit contract concerned (eg, information about mortgages is not required for an unsecured loan: reg 6(5)). See further commentary on s 18B for reverse mortgages. 3 See P O’Shea, Simplification of Disclosure Regulation for the Consumer Credit Code: Empirical Research and Redesign, Uniquest Project No 14808, 12 March 2010).

Matters that must be in contract document 17 (1) [Matters required] The contract document must contain the

following matters. 17 (2) Credit provider’s name The contract document must contain the credit provider’s name. 17 (3) Amount of credit The contract document must contain: (a) if the amount of credit to be provided is ascertainable: (i)

that amount; and

(ii) the persons, bodies or agents (including the credit provider) to whom it is to be paid and the amounts payable to each of them, but only if both the person, body or agent and the amount are ascertainable; and (b) if the amount of the credit to be provided is not ascertainable — the maximum amount of credit agreed to be provided, or the credit limit under the contract, if any; and (c) if the credit is provided by the supplier for a sale of land or goods by instalments — a description of the land and its cash price or of the goods and their cash price. The requirement under paragraph (c) is in addition to, and does not limit, the requirement under paragraph (a) or (b). Note: A penalty may be imposed for contravention of a key requirement in this subsection: see Part 6.

17 (4) Annual percentage rate or rates In the case of a credit contract other than a small amount credit contract, the contract document must contain: (a) the annual percentage rate or rates under the contract; and (b) if there is more than one rate, how each rate applies; and (c) if an annual percentage rate under the contract is determined by referring to a reference rate: (i)

the name of the rate or a description of it; and

(ii) the margin or margins (if any) above or below the reference rate to be applied to determine the annual percentage rate or rates; and

(iii) where and when the reference rate is published or, if it is not published, how the debtor may ascertain the rate; and (iv) the current annual percentage rate or rates. Note: A penalty may be imposed for contravention of a key requirement in this subsection: see Part 6. [subs (4) am Act 130 of 2012 s 3 and Sch 4 item 1, eff 1 July 2013]

17 (5) Calculation of interest charges In the case of a credit contract other than a small amount credit contract, the contract document must contain the method of calculation of the interest charges payable under the contract and the frequency with which interest charges are to be debited under the contract. Note: A penalty may be imposed for contravention of a key requirement in this subsection: see Part 6. [subs (5) am Act 130 of 2012 s 3 and Sch 4 item 1, eff 1 July 2013]

[page 111] 17 (6) Total amount of interest charges payable In the case of a credit contract other than a small amount credit contract, the contract document must contain the total amount of interest charges payable under the contract, if ascertainable (but only if the contract would, on the assumptions under sections 180 and 182, be paid out within 7 years of the date on which credit is first provided under the contract). Note: A penalty may be imposed for contravention of a key requirement in this subsection: see Part 6. [subs (6) am Act 130 of 2012 s 3 and Sch 4 item 1, eff 1 July 2013]

17 (7) Repayments The contract document must contain: (a) if more than one repayment is to be made: (i)

the amount of the repayments or the method of calculating the amount; and

(ii) if ascertainable, the number of the repayments; and (iii) if ascertainable, the total amount of the repayments, but only if the contract would, on the assumptions under sections 180 and

182, be paid out within 7 years of the date on which credit is first provided under the contract; and (iv) when the first repayment is to be paid, if ascertainable, and the frequency of payment of repayments; and (b) if the contract provides for a minimum repayment, the amount of that repayment, if ascertainable, but, if not, the method of calculation of the minimum repayment. Paragraph (a) does not apply to minimum repayments under a continuing credit contract. 17 (8) Credit fees and charges The contract document must contain: (a) a statement of the credit fees and charges that are, or may become, payable under the contract, and when each such fee or charge is payable, if ascertainable; and (b) the amount of any such fee or charge if ascertainable, but, if not, the method of calculation of the fee or charge, if ascertainable; and (c) the total amount of credit fees and charges payable under the contract to the extent that it is ascertainable. Note: A penalty may be imposed for contravention of a key requirement in paragraph (a) or (b), but only in respect of retained credit fees and charges: see Part 6.

17 (9) Changes affecting interest and credit fees and charges If the annual percentage rate or rates or the amount or frequency of payment of a credit fee or charge or instalment payable under the contract may be changed, or a new credit fee or charge may be imposed, the contract document must contain a statement or statements to that effect and of the means by which the debtor will be informed of the change or the new fee or charge. Note: A penalty may be imposed for contravention of a key requirement in this subsection: see Part 6.

17 (10) Statements of account The contract document must contain the frequency with which statements of account are to be provided to the debtor (except in the case of a credit contract for which the annual percentage rate is fixed for the whole term of the contract and under which there is no provision for varying the rate).

17 (11) Default rate The contract document must contain: (a) if the contract is a contract under which a default rate of interest may be charged when payments are in default — a statement to that effect and the default rate and how it is to be applied; and (b) if the default rate under the contract is determined by referring to a reference rate: (i)

the name of the rate or a description of it; and

(ii) the margin or margins (if any) above or below the reference rate to be applied to determine the default rate; and [page 112] (iii) when and where the reference rate is published or, if it is not published, how the debtor may ascertain the rate; and (iv) the current default rate. Note: A penalty may be imposed for contravention of a key requirement in this subsection: see Part 6.

17 (12) Enforcement expenses The contract document must contain a statement that enforcement expenses may become payable under the credit contract or mortgage (if any) in the event of a breach. 17 (13) Mortgage or guarantee The contract document must contain: (a) if any mortgage or guarantee is to be or has been taken by the credit provider — a statement to that effect; and (b) in the case of a mortgage — a description of the property subject to, or proposed to be subject to, the mortgage, to the extent to which it is ascertainable. 17 (14) Commission If a commission is to be paid by or to the credit provider for the introduction of credit business or business financed by the contract, the contract document must contain: (a) a statement of that fact; and

(b) the person by whom the commission is payable; and (c) the person to whom the commission is payable; and (d) the amount if ascertainable. Commission does not include fees payable by a supplier under a merchant service agreement with a credit provider, an amount payable in connection with a credit-related insurance contract or commission paid to employees of the credit provider. 17 (15) Insurance financed by contract If the credit provider knows that the debtor is to enter into a credit-related insurance contract and that the insurance is to be financed under the credit contract, the contract document must contain: (a) the name of the insurer; and (b) the amount payable to the insurer or, if it is not ascertainable, how it is calculated; and (c) the kind of insurance and any other particulars that may be prescribed by the regulations; and (d) if the credit provider knows of any commission to be paid by the insurer for the introduction of the insurance business — a statement that it is to be paid and, if ascertainable, the amount of the commission expressed either as a monetary amount or as a proportion of the premium. In the case of consumer credit insurance that includes a contract of general insurance within the meaning of the Insurance Contracts Act 1984: (e) it is sufficient compliance with paragraphs (a) and (b) if the contract document contains the name of the general insurer and the total amount payable to the insurers (or, if it is not ascertainable, how it is calculated); and (f)

it is sufficient compliance with paragraph (d) relating to the amount of commission if the contract document contains the total amount of commission (expressed as a monetary amount or as a proportion of the premium) to be paid by the insurers.

Note: A penalty may be imposed for contravention of a key requirement in paragraph (a) or (b): see Part 6.

17 (15A) Provisions for person other than debtor to occupy reverse mortgaged property If the credit contract for a reverse mortgage is to make provision for a person other than the debtor to occupy the reverse mortgaged property, the contract document must contain provisions that have the following effect (whether or not the document also contains other provisions relating to such occupation by such a person): (a) the debtor may at any time (before, when or after the contract is made): (i)

nominate to the credit provider a person who is to be allowed to occupy the property (whether alone or with other persons); and

(ii) revoke such a nomination by notice given to the credit provider; [page 113] (b) while a nomination described in paragraph (a) is in force, the nominated person has the same rights (against the credit provider) to occupy the property as the debtor has or would have apart from the death of the debtor or vacation of the property by the debtor. Note: Other provisions contained in the contract document may, for example, limit the kinds of persons whom the debtor may nominate to the credit provider as persons who are to be allowed to occupy the property. [subs (15A) insrt Act 130 of 2012 s 3 and Sch 2 item 12, eff 1 Mar 2013]

17 (16) Other information The contract document must contain any information or warning required by the regulations. Note: Sections 180 to 182 set out the tolerances and assumptions applicable to matters required to be disclosed.

________________________________________ [Editorial note: UCCC s 15 provided as follows:

Matters that must be in contract document 15 (A) Credit provider’s name The credit provider’s name. 15 (B) Amount of credit (a) If the amount of credit to be provided is ascertainable— (i)

that amount; and

(ii) the persons, bodies or agents (including the credit provider) to whom it is to be paid and the amounts payable to each of them, but only if both the person, body or agent and the amount are ascertainable. (b) If the amount of the credit to be provided is not ascertainable, the maximum amount of credit agreed to be provided, or the credit limit under the contract, if any. (c) If the credit is provided by the supplier for a sale of land or goods by instalments, a description of the land and its cash price or of the goods and their cash price. The requirement under paragraph (c) is in addition to, and does not limit, the requirement under paragraph (a) or (b). (d) If the credit is provided by the supplier for a sale of land or goods by instalments, a description of the land and its price or of the goods and their cash price. 15 (C) Annual percentage rate or rates (a) The annual percentage rate or rates under the contract. (b) If there is more than one rate, how each rate applies. (c) If an annual percentage rate under the contract is determined by referring to a reference rate— (i)

the name of the rate or a description of it; and

(ii) the margin or margins (if any) above or below the reference rate to be applied to determine the annual percentage rate or rates; and (iii) where and when the reference rate is published or, if it is not published, how the debtor may ascertain the rate; and (iv) the current annual percentage rate or rates. 15 (D) Calculation of interest charges The method of calculation of the interest charges payable under the contract and the frequency with which interest charges are to be debited under the contract. 15 (E) Total amount of interest charges payable The total amount of interest charges payable under the contract, if ascertainable (but only if the contract would, on the assumptions under sections 158 and 160, be paid out within 7 years of the date on which credit is first provided under the contract). 15 (F) Repayments (a) If more than one repayment is to be made— (i)

the amount of the repayments or the method of calculating the amount; and

(ii) if ascertainable, the number of the repayments; and (iia) if ascertainable, the total amount of the repayments, but only if the contract would, on the assumptions under sections 158 and 160, be paid out within 7

years of the date on which credit is first provided under the contract; and (iii) when the first repayment is to be paid, if ascertainable, and the frequency of payment of repayments. (b) If the contract provides for a minimum repayment, the amount of that repayment, if ascertainable, but, if not, the method of calculation of the minimum repayment.

[page 114] Paragraph (a) does not apply to minimum repayments under a continuing credit contract. 15 (G) Credit fees and charges (a) A statement of the credit fees and charges that are, or may become, payable under the contract, and when each such fee or charge is payable, if ascertainable. (b) The amount of any such fee or charge if ascertainable, but, if not, the method of calculation of the fee or charge, if ascertainable. (c) The total amount of credit fees and charges payable under the contract to the extent that it is ascertainable. 15 (H) Changes affecting interest and credit fees and charges If the annual percentage rate or rates or the amount or frequency of payment of a credit fee or charge or instalment payable under the contract may be changed, or a new credit fee or charge may be imposed, a statement or statements to that effect and of the means by which the debtor will be informed of the change or the new fee or charge. 15 (I) Statements of account The frequency with which statements of account are to be provided to the debtor (except in the case of a credit contract for which the annual percentage rate is fixed for the whole term of the contract and under which there is no provision for varying the rate). 15 (J) Default rate (a) If the contract is a contract under which a default rate of interest may be charged when payments are in default — a statement to that effect and the default rate and how it is to be applied. (b) If the default rate under the contract is determined by referring to a reference rate— (i)

the name of the rate or a description of it; and

(ii) the margin or margins (if any) above or below the reference rate to be applied to determine the default rate; and (iii) when and where the reference rate is published or, if it is not published, how the debtor may ascertain the rate; and (iv) the current default rate. 15 (K) Enforcement expenses A statement that enforcement expenses may become payable under the credit contract or mortgage (if any) in the event of a breach. 15 (L) Mortgage or guarantee

(a) If any mortgage or guarantee is to be or has been taken by the credit provider, a statement to that effect. (b) In the case of a mortgage, a description of the property subject to, or proposed to be subject to, the mortgage, to the extent to which it is ascertainable. 15 (M) Commission If a commission is to be paid by or to the credit provider for the introduction of credit business or business financed by the contract— (a) a statement of that fact; and (b) the person by whom the commission is payable; and (c) the person to whom the commission is payable; and (d) the amount if ascertainable. Commission does not include fees payable by a supplier under a merchant service agreement with a credit provider, an amount payable in connection with a credit-related insurance contract or commission paid to employees of the credit provider. 15 (N) Insurance financed by contract If the credit provider knows that the debtor is to enter into a credit-related insurance contract and that the insurance is to be financed under the credit contract— (a) the name of the insurer; and (b) the amount payable to the insurer or, if it is not ascertainable, how it is calculated; and (c) the kind of insurance and any other particulars that may be prescribed by the regulations; and (d) if the credit provider knows of any commission to be paid by the insurer for the introduction of the insurance business — a statement that it is to be paid and, if ascertainable, the amount of the commission expressed either as a monetary amount or as a proportion of the premium. In the case of consumer credit insurance that includes a contract of general insurance within the meaning of the Insurance Contracts Act 1984 (Cwlth)— (i)

it is sufficient of compliance with paragraphs (a) and (b) if the contract document contains the name of the general insurer and the total amount payable to the insurers (or, if it is not ascertainable, how it is calculated); and

[page 115] (ii) it is sufficient compliance with paragraph (d) relating to the amount of commission if the contract document contains the total amount of commission (expressed as a monetary amount or as a proportion of the premium) to be paid by the insurers. 15 (O) Other information Any information or warning required by the regulations. Note: Sections 158 to 160 set out the tolerances and assumptions applicable to matters required to be disclosed.]

COMMENTARY ON SECTION 17 [17.05] Outline Section 17 lists the matters that must be contained in a credit contract regulated by the Code. The list is not an exhaustive catalogue of the contents of the credit contract, and consequently additional matters may be included in a credit contract (assuming they do not breach any other provisions of the Code — see, for example, s 23). The matters listed in s 17 are also the matters to be included in a precontractual statement (see discussion at [16.05]–[16.55]), which can be the proposed contract document or a separate document(s) (s 16(5)). The Code provides certain tolerances and assumptions in relation to the disclosure of information (see ss 180–182). [17.10] Key requirements The Pt 6 civil penalty provisions for breaches of key requirements will apply if the Code’s requirements for the following s 17 disclosures are not complied with (see [111.05]). In the case of credit contracts (other than continuing credit contracts), the key requirements are s 17(3), (4), (5), (6), (8)(a) and (b), (9), (11), and (15)(a) and (b). In the case of continuing credit contracts, the key requirements are s 17(3)(b), (4), (5), (8) (a) and (b), and (9). Section 17(8)(a) and (b) are only key requirements in respect of retained credit fees and charges. A maximum penalty of 100 units is payable if a credit provider contravenes the requirements of Div 1 of Pt 2 (ss 14–22). There is a criminal penalty which may be imposed in addition to civil penalties, such as those imposed for breaching a s 17 “key requirement”, or orders for a credit provider to make restitution or pay compensation to any person affected by a contravention of the Code (s 124). [17.15] Section 17(2) — credit provider’s name On balance, it seems that the credit provider’s name can appear above the financial table (see [16.25]). The credit provider’s full name is not necessary to satisfy s 17(2) (see s 180(7)), although it must appear in full (together with the ACN, ARBN, etc) to satisfy general law requirements. The ACL number should also appear — with the words “Australian Credit Licence” set out in full and not abbreviated (it is not sufficient to say “ACL” followed by the licence number: NCCP Act s 52 and reg 13). Section 180(7) provides that a name is taken to be correctly

disclosed if the information disclosed is sufficient to identify the person concerned. The Code does not require the credit provider’s address to appear in the credit contract. However, as a contractual matter, an address should be included for the service of notices. This could appear after the financial table or possibly on the cover page. [17.20] Section 17(3) — amount of credit The Code requires that the amounts disclosed under s 17(3) must be absolutely accurate, and no Code tolerances (see ss 180–182) apply in relation to the disclosure of the amount of credit under s 17(3). [page 116] The Code requirements relating to disclosure of the amount of credit provided were considered in McKenzie v Smith; Lenehan v Smith (1998) ASC ¶155-025 (see [3.20]). The McKenzies and Lenehans submitted that in order to comply with s 15(B) of the UCCC (s 17(3) of the Code), a credit contract must include an accurate statement of the amount of credit to be provided under the contract, and that this amount must be identified by the words “amount of credit”. The tribunal accepted that the amount of credit must be accurately stated, but held that the exact words “amount of credit” were not required. What is required is that the reference to the amount of credit in the contract is “so clear that there can be no doubt or argument about it”. Although the contract did not accurately state the amount of credit as required by s 15(B) of the UCCC (s 17(3) of the Code), the tribunal viewed the contravention as insubstantial. Holdbacks A “holdback” is an arrangement whereby the credit provider makes a deduction from the loan amount by way of holding back funds from the merchant who supplies the goods or services to the debtor. The UCCC requirements relating to holdback arrangements were considered in Australian Finance Direct Ltd v Director of Consumer Affairs Victoria (2005) ASC ¶155-073; [2004] VSC 526; BC200408816. The

Supreme Court of Victoria held that credit providers receiving subsidies and other commissions from retail suppliers may be required to disclose such arrangements in a credit contract. The court also clarified the extent of disclosure required and what constituted interest for the purposes of s 15 of the UCCC (s 17 of the Code). Australian Finance Direct (AFD) supplied credit to people wishing to attend investment education seminars conducted by the National Investment Institute Pty Ltd (NII) and two of its related companies. The credit provided was to be used to pay for seminar fees. It was common ground that the Code regulated the contracts between AFD and the debtor. Between NII and AFD there was an arrangement whereby on settlement of each credit contract, AFD disbursed to NII the course fees less a “holdback” amount. The retention of the “holdback” amount was not disclosed in the credit contract documents. At issue was the characterisation of the “holdback”; namely, whether, because of the “holdback”, the credit contract incorrectly stated the amount and people to whom amounts of credit were to be paid. Section 15(B) of the UCCC (s 17(3) of the Code) requires a contract document to disclose the amount of credit to be provided and the persons including the credit provider to whom any amounts are payable. At first instance, the Victorian Civil and Administrative Tribunal found that the credit contract failed to disclose the “holdback”, therefore incorrectly stating the amount payable to the seminar provider in addition to omitting to state that an amount of the credit was payable to AFD. AFD argued that the holdback constituted a debt owing by the seminar provider. Accordingly, its practice of retaining the “holdback” on settlement of the loan was essentially offsetting the amount of the loan against the debt for the holdback outstanding. However, on the facts, Kaye J found that the evidence did not establish an agreement between the parties characterising the holdbacks as a debt owed by NII to AFD, and was in fact required to be disclosed in the loan documentation. [page 117]

Alternatively, AFD sought to argue that s 15(B) of the UCCC (s 17(3) of the Code) did not require disclosure of the “holdback” as it was not an obligation “under the contract document” but outlined in a separate agreement. The court rejected this argument, as: this interpretation constitutes a rewrite of s 15(B)(a)(ii) of the UCCC (s 17(3)(a)(ii) of the Code); it ignores consistent drafting of successive provisions of s 15 of the UCCC (s 17 of the Code); and it detracted from “truth in lending”, a purpose of the Code. As such, s 15(B)(a)(ii) of the UCCC (now s 17(3)(a)(ii) of the Code) required full disclosure of all obligations arising in connection with the credit contract, and is not solely confined to disclosure of the obligations between debtor and credit provider. The decision of Kaye J was affirmed by the Court of Appeal of the Supreme Court of Victoria in Australian Finance Direct Ltd v Director of Consumer Affairs (Vic) (2006) 16 VR 131; [2006] VSCA 245; BC200609322. After granting special leave to appeal, the High Court of Australia affirmed the decision in Australian Finance Direct Ltd v Director of Consumer Affairs Vic (2007) 234 CLR 96; 241 ALR 67; [2007] HCA 57; BC200710769. Non-continuing credit contracts In the case of non-continuing credit contracts, the amount of credit or at least the maximum amount of credit agreed to be provided will be ascertainable. Section 17(3)(a) requires that the amount of credit and the persons, bodies or agents to whom the amount is to be paid must be disclosed, to the extent that they are ascertainable. This requires the disclosure of the payee and each disbursement of the amount of credit, to the extent that a credit provider can determine both of them. Credit providers only need disclose a recipient and the amount to be received where both the identity of the recipient and the amount to be received is ascertainable. “Ascertainable” is not defined in the Code, but is defined in the Oxford English Dictionary (3rd ed) to mean “that may be ascertained”. “Ascertain” is defined to mean “to find out or learn for a

certainty”. Credit providers should make “reasonable enquiries” to determine how and to whom the amount of credit is to be disbursed. A Canadian case limited the scope of the word “ascertainable” in this way (Dowhanuk v Superintendent of Insurance and Davies [1955] 1 DLR 560 at 564). As far as relevant, the court held that the word “ascertainable”: … can at the most mean no more than ascertainable by such reasonable means as are available to the … person, and that there is no obligation on him to perform a series of acts which are bound to be futile or which would involve the expenditure of an unreasonable amount of money.

Reasonable enquiries are likely to include enquiries to obtain information about disbursement of funds to cover stamp duty, statutory fees and the credit provider’s fees and charges. The balance of the loan funds remaining after all other ascertainable amounts could be disclosed as being “payable to you or as you direct”. [page 118] Continuing credit contracts Section 17(3)(a) only applies where the amount of credit is ascertainable. Section 17(3)(b), on the other hand, applies when the amount of credit is not ascertainable or where there is a continuing credit contract. For the purposes of the Code, continuing credit contracts do not have an “amount of credit”, instead they have a “credit limit”. If the amount of credit is not ascertainable then, pursuant to s 17(3)(b), credit providers are obliged to disclose the maximum amount of credit agreed to be provided or the credit limit under the contract, if any, but not how the credit is to be disbursed. Payees Section 17(3) requires that the actual name of the payee must be given rather than a generic description (eg, in Victoria, the payee of stamp duty must be specified as “Commissioner of State Revenue” and not “Stamp Duty Authority”). The name of the payee which is disclosed must be absolutely accurate because a credit provider may not be able to rely on s 180(7) which provides that “… a name is taken to be correctly disclosed if the information is sufficient to identify the person concerned”. Section 17(3) (a) requires disclosure of the “persons, bodies or agents (including the credit

provider)” and not “the name” of such entity. If the legislature intended the name of such entities to be disclosed (and thus for the tolerance in s 180(1)(a) to apply), arguably it would have expressly said so, as it has done with the requirement to disclose the name of the insurer under s 17(15). The reason for taking this conservative view is that s 17(3)(a) is a key requirement, a breach of which may lead to Pt 6 civil penalties such as a loss of interest charges. Unascertainable amounts The Consumer Credit (Queensland) Amendment Act 1998 amended s 15(B) of the UCCC (s 17(3) of the Code) to clarify that if persons, bodies or agents to whom money is to be paid are ascertainable, but the amounts to be paid to them are not ascertainable, the contract document need not disclose those persons, bodies or agents. Prior to this amendment, there was some uncertainty as to the disclosure that was necessary where an unascertainable (at the time of completion of the precontractual disclosure) amount of money was to be paid to an identified person. According to the explanatory memorandum which accompanied the Consumer Credit (Queensland) Amendment Act, this section was amended in order to “eliminate an ambiguity”: There has been considerable debate as to whether the expression “to the extent that they are ascertainable” appearing at the end of s 15B(a) [of the UCCC (s 17(3)(a) of the Code)] applies to both the amounts and the persons referred to in (a). New s 15B(a) [of the UCCC (s 17(3)(a) of the Code)] clarifies that disclosure of amounts and persons is only required where both are ascertainable.

See also commentary on s 25 — cash or “money’s” worth. [17.25] Section 17(4) — annual percentage rate(s) Section 17(4) requires the disclosure of information on annual percentage rates, namely: each annual percentage rate under the contract and how it applies; and if an annual percentage rate under the contract is determined by referring to a reference rate, its name or a description of it, any applicable margin, how a debtor is able to ascertain the rate and the current annual percentage rate or rates.

[page 119] If a credit contract is linked to a loan account offset arrangement, the annual percentage rate disclosure can be made on the assumption that the credit contract is not so linked (reg 109). Note that reg 109 also prescribes disclosure obligations for statements of account if a credit contract is linked to a loan account offset arrangement. In the absence of this regulation, the s 17(4) disclosure obligation would arguably require the setting out of the “net” interest rate or rates payable after taking into account the loan account offset arrangement, which would create extremely complex disclosures (assuming that they could be made at all). It is unclear whether s 17(4) requires the disclosure of any default rate applying to the credit contract. On balance, it would seem that the disclosure of the default rate is not required under s 17(4), as s 17(11) deals specifically with the disclosure of the default rate. Also, reg 72(3)(b) specifically states that s 17(11) information must follow the s 17(4) information. It is unlikely, therefore, that the legislature intended the default rate to be disclosed under both s 17(4) and (11). Section 17(4) is also unclear as to whether, if it is known at the start of a contract that at some point during the contract an election must be made (or failing an election, a deemed election will occur) to switch to a different type of interest rate from that applying at the start, it is then necessary to make a s 17(4) disclosure for each of the different interest rate options to which the debtor may switch at the time of election. Section 17(4)(a) requires the disclosure of “the annual percentage rate or rates under the contract”. Section 17(4)(b) requires the disclosure, “if there is more than one rate, [of] how each rate applies”. There is no “if ascertainable” wording in s 17(4). It is an absolute obligation to disclose the rate. The only assumption which seems applicable is s 180(1)(b), under which the disclosure may be made “as at a date stated in [the contract/precontractual statement]”. If the rate applying at the start of the contract only is disclosed, there is a risk that a court or tribunal may hold that this is insufficient disclosure to comply with s 17(4), and this would be a breach of a Pt 6 key requirement (see s 111). On the other hand, if the contract discloses the rate applying at the start

of the contract and the other rates for each of the possible options to which the debtor can switch, a court or tribunal could hold that the financial table will contain more information than is permitted by the Regulations. In this case, there will have been a breach of reg 72(3) (and therefore s 16(4)) because the financial table will contain information which it should not (see s 22 for criminal penalty of up to 100 penalty units per breach and see para 17 of the “Overview of the National Credit Code” for commentary on penalty units). It is unlikely that a court or tribunal would hold that it is sufficient compliance with s 17(4) if only the rate applying at the start of the contract is disclosed. The other disclosure options available to credit providers are: disclose the annual percentage rate applying from the start date and then the other interest rate options (together with the actual rates for each of those options as at the disclosure date) to which the debtor can switch; or disclose the annual percentage rate applying at the start date and the annual percentage rate (as at the disclosure date) of the interest rate option which will apply to their credit contract if they do not make a choice as to which interest rate option they select. [page 120] It is possible that the second option will be held by a court or tribunal to be sufficient compliance with s 17(4). As stated above, the first option has the danger of including too much information in the financial table. These issues will not arise if the contract makes no provision for switching of rates within the terms of the contract. If a change in interest rate option is treated as a variation of the contract, it will be regulated under s 71, and will not require disclosure under s 17(4). Section 17(4)(c)(iv) requires the disclosure of the “current annual percentage rate or rates”. The word “current” can only be given meaning if it is linked to a particular point in time. Section 180(1)(b) permits disclosures to

be made in a contract document or precontractual statement “as at a date stated in it”. Consequently, credit contracts should include a disclosure date in order to ensure compliance with s 17(4)(c)(iv). A failure to disclose the correct interest rate would amount to a breach of s 17(4). However, a failure to apply the correct interest rate when calculating interest charges would not necessarily breach s 17(4), but could lead to breaches of ss 23(1)(c), 24(1)(b) and/or 28. Holdbacks In Australian Finance Direct Ltd v Director of Consumer Affairs Victoria (2005) ASC ¶155-073; [2004] VSC 526; BC200408816, the Supreme Court of Victoria considered whether “holdbacks”, which were amounts remitted by a supplier back to a linked credit provider, could be considered interest for the purposes of s 15 of the UCCC (s 17 of the Code). It was common ground in the case that “interest” should be given its ordinary meaning as understood in other statutory contexts as stated in 27 Halsbury’s Laws of England, 3rd ed, 7, as “the return or compensation for use or retention by one person of a sum of money belonging or owed to another”. The court determined that the Victorian Civil and Administrative Tribunal had erred at first instance by considering the arrangement between the credit provider and the supplier, rather than the contract between the customer and the credit provider (see discussion at [17.30] below). The court held that, on the terms of the contract between the customer and the credit provider, “holdbacks” could not be considered interest. This was because, under the terms of the contract document, the customer did not receive any discount in the principal to be repaid by virtue of the holdback, and as such the repayment made by the customer of those amounts constituted a payment of principal and not interest. The fact that the repayment amount included an amount equivalent to the amount of the holdback under a separate arrangement did not transform the amount into interest. The effect of the holdback in this context was not to act as a form of interest but to subsidise the credit provider so that it might be able to offer the customer a lower nominal interest rate. It was also held that the accounting treatment of holdbacks by the credit provider was also relevant in determining the correct characterisation of the holdbacks. As such, holdbacks were not interest for the purposes of s 15(C)–(E) of the UCCC (s 17(4)–(6) of

the Code). The High Court of Australia affirmed the supreme court’s decision on appeal in Australian Finance Direct Ltd v Director of Consumer Affairs Victoria (2007) 234 CLR 96; 241 ALR 67; [2007] HCA 57; BC200710769. [page 121] For a discussion as to whether a particular arrangement can be characterised as interest, see [3.40] above. For a discussion as to whether a particular arrangement is said to be operating under the contract, see [3.45] above. Also, see commentary on s 28 for a discussion of maximum annual percentage rates. [17.26] Small amount credit contracts The Enhancements Act introduced changes to s 17(4) and (6) relating to SACCs. Small amount credit contract is defined by s 5 of the NCCP Act. The changes in relation to SACCs mean that credit providers will only be able to impose an upfront establishment fee and monthly fees (and not interest charges) in respect of this class of contracts. Accordingly, the Enhancements Act exempts providers of SACCs from the disclosure requirements that relate to annual percentage rate and interest charges. The Enhancements Act also introduced new and specific regulation of SACCs (s 23A). These are non-ADI issued credit contracts of less than $2000 for a term of between 16 days and one year. Following numerous submissions by small amount credit providers as to the nature of their business and the characteristics of consumers who make use of short-term small amount loans, significant changes were made to the proposed regulation of SACCs before the Enhancements Act passed parliament. Previously, some states and territories regulated the so-called “pay-day lending” industry by enforcing a cap on the costs and interest that those credit providers can charge for small amount loans. However, the Enhancements Act introduced a cost structure which applies to providers of small amount loans nationally. In some states and territories (such as New South Wales, Australian Capital Territory and Queensland), there may be an increase in the

number of credit providers offering SACCs as the costs structures implemented by those state and territory governments are amended. Since March 2013, the following measures apply to SACC providers: a warning advising of the alternative sources of funds that might be available must be displayed on the credit provider’s website and place of operations. The warning has been prescribed by Regulations that were released on 12 December 2012; a prohibition on credit contracts with a term of 15 days or less, not offered by an ADI; and credit providers must obtain and review bank statements for the three months prior to their decision on whether or not to extend a loan to a consumer. As to a change to the costs structure, SACC providers will be remunerated not on the basis of traditional interest charges, but by maximum fees that are based on the amount of credit actually provided to the consumer and the time that any part of the loan is outstanding. The restrictions on interests and other fees apply nationally from 1 July 2013. See further commentary at [23.06] and commentary on s 23A. [17.30] Section 17(5) — calculation of interest charges The Code gives no guidance as to the level of detail required for the disclosure of the method of [page 122] calculation of interest charges. However, for example, if interest is charged on a daily basis, it should be sufficient to state that: the interest charges are calculated by applying a daily percentage rate to the unpaid balance of the loan account at the end of the day; and the daily percentage rate is calculated by dividing the annual

percentage rate by 365 (or 366 in a leap year) (or similar wording for a monthly or other periodic rate). The Code does not require a credit contract to state expressly that interest will be capitalised, but the frequency of debiting of interest charges must be disclosed (eg, daily or weekly). The Code does not require the contract to specify the actual day on which the interest charges will be debited (eg, the last business day of the month). However, the Code does not prevent the disclosure of both. The Code requirements relating to disclosure of the method of interest calculation were considered in McKenzie v Smith; Lenehan v Smith (1998) ASC ¶155-025 (see [3.20]). With regard to the method of calculation of interest, the tribunal stated that while s 15(D) of the UCCC (s 17(5) of the Code) does not require the inclusion of a formula for interest calculation, it does require that a credit contract disclose the method of interest calculation “in a form which the prospective debtor can readily understand”. This requires express disclosure, rather than disclosure which requires a “process of construction or implication”. In this case, the contracts simply stated that the interest rate was 10 per cent. Only the method of calculation of amounts “payable” under the credit contract needs to be disclosed under s 17(5). The words “payable under the contract” in s 17(5) are apt to describe a payment authorised by the contract. Although the interest charged under the contract exceeded the maximum amount allowed under the Code, the applicant’s submission that the disclosed method of calculation of interest charges must also comply with the Code was not sustained. Interest-free offers The maximum duration of any interest-free period under the credit contract must also be stated in the precontractual statement (reg 72(1)(c)). The Standing Committee of Consumer Affairs (in conjunction with the NSW Department of Fair Trading) released a pamphlet Interest-free Offers and Promotions — A Guide for Businesses (2000). This pamphlet related to the UCCC and was not legally binding, but it provides useful guidance in

relation to interest-free products under the Code. The pamphlet suggests that prior to entering into the credit contract the debtor should be given: a plain language document containing a clear explanation of what an “interest-free period” is and when it expires; a clear explanation of any interest charges that may be incurred and the date from which the interest is calculated; and an optional 24-hour period to consider the purchase. Once the credit contract is entered into, the debtor should be: issued with a repayment booklet within two weeks of the credit contract being entered into; given plain language written information by the credit provider as to when the “interest-free period” expires and options for dealing with any amounts owing; [page 123] encouraged to contact the credit provider to discuss any difficulties with the credit contract; and informed of alternative sources of advice and assistance. [17.35] Section 17(6) — total amount of interest charges payable The information required by s 17(6) need only be included in a credit contract (or the financial table) if, on the assumptions and tolerances set out in ss 180 and 182, the contract would not be paid out within seven years. However, the Code is unclear whether the total amount of interest charges must be disclosed in the case of a multi-option facility, where one portion of that facility is repayable within seven years, but the other portions are not. As the Code does not contain clear words to the contrary, it is probably safe to conclude that the total amount of interest under s 17(6) need not be disclosed if the term of any part of the contract is longer than seven years, whether or not one of the facilities under the contract is repayable within seven years.

This is because the whole will not be paid out within seven years, with the result that s 17(6) is not relevant. See [17.26] above regarding SACCs. [17.40] Section 17(7) — repayments The Code and the Regulations permit credit providers to rely on various assumptions and use tolerances in disclosing repayment amounts (see s 180 and regs 106 and 108). There is no guidance given in the Code about how the “method” of calculating repayment amounts or minimum repayment amounts should be disclosed. At general law, “method” means “a mode or manner of effecting a result or constructing a thing” (Boulton & Watt v Bull (1795) 1 Carp Pat Cas 117; 2 Hy Bl 463 at 478; 126 ER 651 at 659). Credit providers should give a meaningful short explanation of the method of calculating repayments which will be used by them. This can either be in the form of a narrative description or a mathematical formula. It is likely that a reasonably detailed narrative will more effectively explain the repayment method to members of the public without significant financial experience. Prior to the Consumer Credit (Queensland) Amendment Act 1998, reg 59(2) of the UCCC dealt with an apparent inconsistency between s 15(E) of the UCCC, which required total interest charges to be disclosed only if the term of the contract did not exceed seven years, and s 15(F) of the UCCC, which effectively negated the concession in s 15(E) of the UCCC by requiring the total amount of repayments (which would include interest) to be disclosed. Regulation 59(2) of the UCCC Regulation limited the requirement under s 15(F)(a)(iia) of the UCCC to disclose the total amount of repayments payable under a credit contract to a requirement that that amount only needed to be disclosed for credit contracts with a term of less than seven years. Section 15(F) of the UCCC was subsequently amended by the Consumer Credit (Queensland) Amendment Act to incorporate the substance of reg 59 of the UCCC Regulation. The number of repayments, if ascertainable, had to be disclosed whenever more than one repayment was to be made under the contract. The total amount of the repayments under the contract had to be disclosed if, but only if, it was ascertainable and the contract was to be paid out within seven years.

[page 124] The amendment to s 15(F) of the UCCC, as replicated in s 17(7) of the Code, means that the total repayments under a credit contract and the number of repayments only need to be disclosed for loans where (based on the assumptions and tolerances) the loan will be paid in full within seven years (ie, the loan has a term of seven years or less). The obligation to disclose the period over which repayments are to be made has been removed. However, reg 72 permits a credit provider to choose to disclose, in the financial table in a precontractual statement, the period over which the repayments are to be made. The combination of the requirements to disclose (where ascertainable) the number of repayments (s 17(7)(a)(iii)) and the frequency of repayments (s 17(7)(a)(iv)) effectively combine to disclose the term of the loan. Section 15(F)(b) of the UCCC was also amended by the Consumer Credit (Queensland) Amendment Act to state that s 15(F)(a) of the UCCC Regulation did not apply to minimum repayments under a continuing credit contract. This is replicated in s 17(7)(b) of the Code. Balloon payments Some consumer credit products involve “balloon payments”. This is where small monthly or weekly instalments are made but a relatively large final repayment is required (ie, a “balloon payment”). The Standing Committee of Officials of Consumer Affairs (in conjunction with the NSW Department of Fair Trading) released a pamphlet, Balloon Payments: A Guide for Businesses (2000). Although this related to the UCCC and was not legally binding, it provides useful guidance on balloon payments under the Code. The pamphlet suggests that prior to entering the credit contract the debtor should: have their attention drawn to the total amount to be paid and not just the amount of the regular repayments; be provided with a plain language description of what a balloon payment is and when it falls due; and be told of their options on how to deal with the balloon payment. Once the credit contract has been entered into, the debtor should be:

contacted by the credit provider six months prior to the balloon payment falling due and reminded of this payment; given information by the credit provider as to options on how to deal with the “balloon payment” (eg, full payment, refinancing or rolling over into another credit product); encouraged to contact the credit provider to discuss any difficulties with the credit contract; and informed of alternative sources of advice and assistance. [17.45] Section 17(8) — credit fees and charges The Code permits credit providers to charge any type of credit fees and charges subject to disclosing them fully to the debtor and subject to any credit fees and charges prohibited by regulations made under s 31. Prior to 1 July 2011, there were no prohibited credit fees or charges. However, with effect from 1 July 2011, reg 79A prohibits fees or charges payable on or in relation to the termination of a credit contract secured [page 125] over residential property (other than “break fees” or “discharge fees”). Credit fees and charges must also be authorised under the credit contract (ss 17(8) and 23(3)) (see Macquarie Credit Union Ltd v Director-General, Dept of Fair Trading (1998) 2 ACCR 676; ASC ¶155-014 and [23.30]). Disclosure Section 180(4) allows disclosures of credit fees and charges to be made on the assumption that: there will be no changes to the credit fees and charges disclosed; no new fees and charges will be imposed; and the debtor will pay fees and charges at the times required by the credit contract. Section 17(8) requires the disclosure of credit fees and charges “payable under the contract”. The correct interpretation of this section was discussed in Macquarie Credit Union Ltd v Director-General, Dept of Fair Trading (see [23.35]). In Macquarie, the tribunal held that a fee or charge is “payable

under the contract” if a term in the credit contract obliges the debtor to pay the fee or charge. Definition The term “credit fee and charge” is defined in s 204. The key words in the s 204 definition are “fees and charges payable in connection with a credit contract or mortgage”. What fees and charges fall within the scope of this definition depends on how broadly the words “in connection with” are construed. At general law, the phrase “in connection with” has been interpreted very broadly (see Burswood Management Ltd v Attorney-General (Cth) (1990) 23 FCR 144; 20 ALD 357; 94 ALR 220; BC9003468 and Hatfield v Health Insurance Comm (1987) 15 FCR 487; 14 ALD 131; 77 ALR 103). Section 15AA of the Interpretation Act 1901 (Cth) applies to the Code. Applying this section to the Code, its effect is that a construction that would promote the purpose or object underlying the Code (whether that purpose or object is expressly stated in the Code or not) is to be preferred to a construction that would not promote that purpose or object. (The equivalent of this provision in the UCCC was found in cl 7(1) of Sch 2 of the UCCC. See para 22 of the “Overview of the National Credit Code” in the introductory pages of this publication.) Paragraph 8.3 of the explanatory memorandum to the NCCP Act states: As the Code largely replicates the UCCC, the objectives of the regime remain the same as when the UCCC was first enacted. Namely, to ensure strong consumer protection through “truth in lending”, while recognising that competition and product innovation must be enhanced and encouraged by the development of non-prescriptive flexible laws.

Taking into account the application of s 15AA of the Interpretation Act, the words “in connection with” could be construed using a “but for” test — only fees and charges which would not be payable but for the credit contract should be said to be fees and charges “in connection with” the credit contract. A conservative approach would see a credit provider disclosing all fees that have some connection with the credit contract. Some fees are difficult to categorise, such as fees applying to the use of a credit provider’s telephone or internet banking facilities.

[page 126] The s 204 definition states that: credit fees and charges do not include any fees or charges that are payable to or by a credit provider in connection with a credit contract which has both debit and credit facilities if the fees or charges would be payable even if credit facilities were not available (eg, a debit and credit card account — a fee for duplicate statements would not be a credit fee or charge); an annual fee or charge in connection with a debit and credit card account is nevertheless a credit fee or charge for the purposes of the Code; and interest charges and enforcement expenses are not credit fees and charges. Implications of definition Some examples of the implications of the Code definition of credit fees and charges are set out below: Fees such as duplicate statement fees, bank cheque fees or transaction fees would not be credit fees and charges for a debit and credit card account, but they would be credit fees and charges if incurred in connection with a credit facility that did not have a debit facility (eg, a personal loan or home loan). Condition precedent fees (eg, the credit provider’s costs of obtaining zoning and other certificates, searches, valuation fees) incurred by a credit provider in obtaining condition precedent material will constitute “credit fees and charges” if credit providers wish to recover the cost of them from the debtor, unless they are absorbed in an application or establishment fee. This could include fees for the credit provider’s labour and administrative costs in carrying out checks on a debtor’s credit worthiness or registering a bill of sale (see Kontaxis v Hondros [2002] NSWCTTT 752 and [32.10]). An application or establishment fee is a “credit fee or charge”

because it is a fee “payable in connection with a credit contract”. Because it is retained by the credit provider, the existence and amount of the fee is relevant financial information and must be disclosed in the financial table (see reg 72(1)(f) and (2)). (Note that the fee must also be disclosed in a statement of account under s 34(7) if it is debited to the debtor’s account.) Application fees can be charged if a credit contract is entered into by a debtor whether or not a contract eventuates. If a contract does eventuate, the charging of an application fee, as it is a credit fee or charge, should be retrospectively authorised in order to comply with s 23(3). Registration fees which would be incurred whether or not a credit contract is being entered into should not be regarded as credit fees and charges. Examples of such fees are the vendor’s discharge of mortgage fee when a credit provider is funding the purchaser’s acquisition of a property, the transfer fee payable on the purchase, and the stamp duty payable on the purchase. These fees should not be regarded as credit fees and charges because they do not come within the “but for” test referred to above. The scope of the concept of the “credit contract” must be considered. For example, in Macquarie Credit Union Ltd v Director-General, Dept of Fair Trading (1998) 2 ACCR 676; (1998) ASC ¶155-014 (see [23.35]) it was held that a fee that was not mentioned in the contract document but in [page 127] a marketing brochure was a fee incurred under the “credit contract” (see [23.35]). In Police Department Employees’ Credit Union v Flood (1999) ASC ¶155-034; [1999] NSWSC 885; BC9905483, the Supreme Court found that a fee imposed by a membership contract (between the customer and credit union) was a fee incurred under the “credit contract” for the purposes of the Code (see [23.35]).

Potentially every registration fee which might ever possibly be incurred in connection with the credit contract must be disclosed as a credit fee or charge. This is because all credit fees and charges that “are, or may become payable” must be disclosed in a credit contract. The disclosure may be split between credit fees and charges that are payable and credit fees and charges that may be payable, but all of these must be included in the s 17(8) disclosure. However, in practice credit providers can limit the number of fees they disclose by: —

disclosing a number of general fees (eg, deed production fee or consent fee) that are payable for a number of different items rather than listing fees for specific things (eg, consent to subdivision fee, consent to second mortgage fee, consent to lease fee etc); and

—

listing fees that they know they are likely to incur such as the fee payable for discharging any mortgage and the fee payable for producing a certificate of title to the Land Registry.

Where a credit provider is negotiating two or more credit contracts with a potential debtor at the same time, particular care needs to be taken as to the disclosure of fees and charges. Where more than one proposed credit contract is secured by the one security, the fees or charges applicable to each proposed credit contract may depend on whether the other proposed credit contracts are actually executed. Difficult questions arise as to how and in which contracts the applicable duty is disclosed. One possible response involves the credit provider inserting into each proposed contract a condition precedent to the effect that the particular offer is conditional on all other proposed contracts being offered at the same time also being accepted by the customer. Non-compliance A failure to comply with s 17(8)(a) and (b) is a breach of a key requirement (s 111), but only in respect of retained credit fees and charges. Prior to the Consumer Credit (Queensland) Amendment Act 1998,

all the requirements of s 15(G) of the UCCC (s 17(8) of the Code) were “key requirements”. The definition of “retained credit fees and charges” is set out in s 204. Disclosure of break costs Where break costs may be charged, an interesting question arises as to how the amount of break costs that may be payable is to be disclosed for the purposes of s 17(8)(b). Disclosure of the full mathematical formulae and other calculations used by the credit provider in determining break costs in a particular instance are likely to mean nothing to the average debtor. The most meaningful information that could be given to a debtor is an explanation of why break costs arise and generally how they are calculated, that is, [page 128] to explain the losses to the credit provider that can arise from breaking fixedrate funding. However, it is not clear that this would satisfy the disclosure requirements of s 17(8)(b). Credit providers should give all fixed-rate debtors or those entering into a contract with a fixed-rate option an explanation of how and why break costs are charged before they enter into the contract. Prominent warning should be given and it should be recommended to consumers to obtain independent financial advice. However, this will not stop a fee being unconscionable if it exceeds a reasonable estimate of the credit provider’s loss (plus administrative costs) following the prepayment or early termination (s 78(4)), or from being prohibited by reg 79A if it does not comply with that regulation (see [R79A.05]). In ASIC’s regulatory guide RG 220 Early termination fees for residential loans: Unconscionable fees and unfair contract terms (available from www.asic.gov.au), ASIC gives guidance on additional disclosure requirements for break costs. These reflect ASIC’s views on “transparent” disclosure of break costs (and any other early termination fee) —

“transparency” of a term will be relevant to a court in deciding whether a term is unfair for the purposes of the unfair contract terms provisions of the ASIC Act. ASIC’s approach is that disclosure required under the Code does not necessarily equate to transparency (RG 220 Section D Key Points). ASIC indicates that break costs (and other early termination fees) should be disclosed: before the contract is entered into — for example, in brochures or pamphlets; in plain English; by giving a dollar amount where possible and otherwise by giving the method of calculation; and by including worked examples (as long as they are not misleading) (paras RG 220.106, RG 220.116 and RG 220.122). ASIC further suggests that there should be a prominent warning that a loan may not be suitable if the consumer plans to terminate the loan within a given period and that details of any early termination fee should be mentioned in the account statement at least annually (paras RG 220.110 and RG 220.115). ASIC refers to the Financial Ombudsman Service’s Banking & Finance — Bulletin 60 (December 2008) (available from www.fos.org.au) as containing an example of how break costs may be able to be explained. [17.50] Section 17(9) — changes affecting interest and credit fees and charges Some of the statements required by s 17(9) are additional to the statements required to be included in the financial table by reg 72(8). [17.55] Section 17(10) — statements of account The credit contract must specify the frequency with which statements of account are to be provided to the debtor (other than for credit contracts where the annual percentage rate is fixed for the entire term and cannot be varied). [17.60] Section 17(11) — default rate A statement as to the default rate payable should track the Code wording as literally as possible. This is because not all of the s 17 disclosures require a “statement” of a particular fact. Therefore, where the Code does expressly require a statement of a fact,

an actual statement should be included rather than disclosing the information in some other way. [page 129] The UCCC requirements relating to disclosure of default rates were considered in McKenzie v Smith; Lenehan v Smith (1998) ASC ¶155-025 (see [3.20]). The tribunal stated that s 15(J) of the UCCC (s 17(11) of the Code) required the credit contract to contain an explicit statement that a default rate of interest may be charged when payments are in default, along with the default rate and how it is to be applied. It is not sufficient if one needs to make inferences and deductions. In this case, the contracts contained a statement that a default interest rate of 20 per cent per annum was to be calculated “on a daily basis”. This statement required inferences and deductions to be made about the daily percentage rate and the application of that rate to the unpaid daily balances. The disclosure, therefore, did not satisfy s 15(J) of the UCCC (s 17(11) of the Code). Section 27 defines “default rate” as meaning “a higher annual percentage rate permitted by s 30”. It is possible that the annual percentage rate (APR) can be the reference rate used to determine the default rate (ie, the default rate can be the APR plus, say, two per cent). “Reference rate” is defined in s 204 to mean “a benchmark, index or other reference rate”. There is nothing express or implied in the Code which either limits the meaning of those words or states that an APR specified by a credit provider cannot itself be a reference rate. However, it would be necessary for the credit contract to state that the APR is the reference rate for determining the default rate. This would mean that a change in the default rate could be notified in accordance with s 64 by simply notifying a change in the APR. This method of notification may not be available where the APR itself is determined by reference to another reference rate, unless the APR is itself published. If the default rate is linked to a reference rate, the default rate must be documented under s 17(11)(b). A credit provider must disclose the APR as

being the reference rate plus X per cent, and the default rate as being the reference rate plus Y per cent (where Y = X plus the difference between the APR and the default rate). On a variation of the reference rate, only one notice need be given. Otherwise, a credit provider must disclose the default numerical rate which applies at the date of disclosure. The credit contract would also have to provide a right for the credit provider to vary the rate, and notice will be required of the variation in the APR and the variation in the default rate. [17.65] Section 17(12) — enforcement expenses This section requires a “statement” that enforcement expenses may become payable “under the credit contract or mortgage”. The Code wording should be tracked as literally as possible for this statement. Section 17(12) applies to disclosures relating to credit contracts and mortgages. This requirement does not appear to apply to guarantees. The Code requirements relating to disclosure of enforcement expenses were considered in McKenzie v Smith; Lenehan v Smith (1998) ASC ¶155025 (see [3.20]). Section 15(K) of the UCCC (s 17(12) of the Code) requires a statement that enforcement expenses may become payable under the credit contract or mortgage (if any) in the event of a breach. The contracts in this case contained a term that the purchasers were “liable for all costs” associated with legal proceedings instigated against the purchasers for their breach. The tribunal held that such a [page 130] statement required an inference that such costs be reasonable and proper. It also found that what was required by s 15(K) of the UCCC (s 17(12) of the Code) was an explicit statement without resort to inferences and deductions. Accordingly, the statements described above in the contract were insufficient for compliance with s 15(K) of the UCCC (s 17(12) of the Code). [17.70] Section 17(13) — mortgage or guarantee The description should

specifically identify the property subject to, or proposed to be subject to, a mortgage unless it is property of a type described in s 45(2) which cannot be ascertained at the disclosure date. Note that a contractual right of set-off may constitute a mortgage for the purposes of this Code (see the definition of “mortgage” in s 204). [17.75] Section 17(14) — commission “Commission” is defined in s 204 to include “any form of monetary consideration or any form of non-monetary consideration to which a monetary value can be assigned”. Section 17(14) requires the disclosure of commissions paid for the introduction of creditrelated business or business financed by the contract, and whether the commission is paid to or by a credit provider. Scope and other interpretation issues In decisions under the various state Credit Acts (the predecessor regime to the UCCC and the Code), the courts have given a wide interpretation to the term “commission”. The cases indicate that a commission is certainly paid if a credit provider pays the person: an amount of money calculated by reference to the amount of the loan introduced; or a fee for every introduction which results in a contract (ie, a success-based fee), whether the amount is paid at the time the contract is entered into or at a later stage, and whether or not the amount is payable after a minimum number of contracts are entered into. The scope of “commission” has not been clearly defined by the courts. In every case where a person introduces credit business to the credit provider, and it is contemplated that the person will receive any money or anything with a monetary value, there is a chance that a court will find that a commission has been paid. In Australian Guarantee Corp Ltd v Various Debtors (Qld) (1994) 1 ACCR 60; (1994) ASC ¶56-286; BC9403995, a Queensland case on commissions, Thomas J of the Supreme Court of Queensland said: Legislation such as the Credit Act behoves credit providers to act with an abundance of caution. In a doubtful situation such as this where there was genuine doubt whether it was a service contract or

one which included at least a component of commission, it would seem better to concede the doubtful position, if necessary with a reservation. The commercial disadvantage would surely have been negligible.

See also [145.20]. Obligation on credit provider The obligation under the Code to disclose commissions is imposed on the credit provider. Even if the debtor actually knows that there is an arrangement between the credit provider and the introducer, this does not detract from the obligation to disclose the commission in the credit [page 131] contract. Similarly, where the credit provider does not realise that the amount of the commission is ascertainable but it is in fact ascertainable, the failure to disclose the amount is in breach of the credit provider’s duties under the Code. Specific scenarios An amount payable by a merchant under a merchant service agreement is specifically excluded from the definition of commission for the purposes of s 17(14), so that fees paid to a credit provider by merchants for the use of credit card facilities are not commissions under the Code. An amount payable in connection with a credit related insurance contract is not disclosable under s 17(14). It is disclosable under s 17(15). Incentive bonuses, or other commissions, paid to the credit provider’s own employees are not commissions under s 17(14). This exemption does not apply to agents, delegates, consultants or sub-contractors of the credit provider. Other considerations The Code also requires disclosure of the person to whom and by whom the commission is to be paid. If the amount of the commission is ascertainable at the time the contract is entered into, the amount must be disclosed. If the commission is not paid in

cash, it is not clear whether the Code requires the disclosure of the cash value of the thing given. The use of the word “amount” in s 17(14)(d) suggests that a disclosure is required of monetary commissions (ie, with a dollar value). Where the commission is a flat fee, or a set percentage of the amount financed, the amount of commission is ascertainable at the time of the contract, and must be disclosed. The amount of a commission payment need not be disclosed in respect of a particular contract if it cannot be ascertained at the time of the contract. For example, where the commission cannot be calculated until a later time because it is calculated on the basis of the total amount financed over a period, the amount referable to a particular contract will not be determinable until the end of the period. Thus the amount need not be disclosed in the contract. There is nothing in the Code prohibiting a credit provider from disclosing a method of calculating a commission if the amount is not ascertainable, although there is nothing to require a credit provider to disclose the method of calculation of commission. However, care would need to be taken to ensure that information about the method is disclosed in the financial table after the “relevant financial information” or not disclosed at all in the financial table, because the “method” is not a disclosable item under s 17(14). Section 17(14) information can be disclosed under the financial table pursuant to reg 72(3)(b), but may be disclosed elsewhere in the credit contract. The fact of the commission, the identity of the payer and the payee, and the value of the commission must be disclosed in the precontractual statement. Non-compliance The consequences of failure to disclose a commission can be severe. The Pt 6 civil penalty (see ss 111 and 113) does not apply to failures to notify debtors of a commission, but the court has the power under s 124 to order restitution or make any consequential orders. The maximum penalty under s 22 for failure to disclose a commission is 100 penalty units per contract (see para 17 of the “Overview of the National Credit Code” for commentary on penalty units).

[page 132] [17.80] Section 17(15) — insurance financed by contract “Credit-related insurance contracts” are defined by s 142 to be contracts for insurance of the following types: insurance over mortgaged property where the property is mortgaged to secure obligations under the credit contract and the insurance is financed under that credit contract (but this does not include insurance for an extended period of warranty for goods or insurance over property that is not mortgaged to secure obligations under the credit contract); consumer credit insurance (ie, insurance that insures the capacity of the debtor to make repayments under a credit contract) which insures the obligations of the debtor under the credit contract and the insurance is financed under that credit contract; and other insurance prescribed by the Regulations (there is none currently prescribed). Section 17(15) requires disclosure if the credit provider knows that the debtor is to enter into a credit-related insurance contract and that the insurance is to be financed under the credit contract. Section 180(7) states that a name is taken to be correctly disclosed if the information is sufficient to identify the person concerned. This removes the common problem under the state and territory Credit Acts (the predecessor regime to the UCCC and the Code) for credit providers that were found to have breached that Act as they disclosed part, but not all, of an insurer’s name. The disclosure is aimed at insurance which is financed under the credit contract. Section 17(15) seems to assume that the whole insurance premium will be financed and is unclear as to what disclosure must be made if only part of the premium is financed. Note that lenders mortgage insurance is not a “credit-related insurance contract” and is therefore not disclosable under s 17(15). However, if the credit provider requires the debtor to pay or reimburse the credit provider for

a lenders mortgage insurance premium, this will be a credit fee and charge and consequently requires disclosure in the precontractual statement and the credit contract under s 17(8). Note also that the effect of s 32 is to prohibit the payment of commissions, discounts or rebates by a lenders mortgage insurer to a credit provider where the debtor is to pay for the relevant insurance contract. Section 17(15) relates to disclosures in the contract document about related insurance policies financed by the credit contract. Generally, the name of the insurer, the amount payable to the insurer, the kind of insurance, and particulars of the commission paid by the insurer must be disclosed. Regulation 73 adds the term of each credit-related insurance contract, if ascertainable, to the information that must be disclosed. In some situations, general insurance may be provided as part of a creditrelated insurance policy. The amendment to s 15(N) of the UCCC (now s 17(15) of the Code) introduced by the Consumer Credit (Queensland) Amendment Act 1998 provided that, where more than one insurer provides insurance policies relating to a consumer credit contract, only the identity of the general insurer and the aggregate of the insurance premiums and commission need to be disclosed. For example, where both general and life insurance was financed by a consumer credit [page 133] contract, the documentation would only need to refer to the identity of the general insurer, the sum of the premiums payable and the sum of the commissions paid by the insurers. [17.81] Reverse mortgages If a reverse mortgage gives tenancy protection to a non-title holding resident (or residents), then the contract document must allow the debtor to nominate a person (or persons) who may occupy the property with the same rights as the debtor. The debtor must also be able to revoke the nomination. The Explanatory Memorandum to the Enhancements Act notes (at para

3.58): 3.58

This requirement only applies if a reverse mortgage contract provides for non-title holding resident protections. This provision: does not require all credit providers to offer protections to non-title holding residents; and does not regulate or prescribe who can be a non-title holding resident (so that credit providers can adopt different eligibility criteria).

Example 3.2 A credit provider offers reverse mortgages that do not provide residency protections to persons living the home over which the reverse mortgage is secured, apart from the title holder. Therefore, subsection 17(15A) would not apply to the credit provider in relation to its reverse mortgages. Example 3.3 A credit provider offers a reverse mortgage under which non-title holding residents nominated by the borrower are allowed to remain in the property after the borrower has died. This credit provider will need to comply with subsection 17(15A). This credit provider could also have their own criteria regarding who can be nominated by the borrower to have these residency protections (for example, they must be over a certain age).

A breach of this requirement attracts a criminal penalty of 100 penalty units and is an offence of strict liability (as a credit provider can control the matters in its contract document and it enhances ASIC’s ability to enforce this requirement). [17.85] Section 17(16) — other information Regulation 74 prescribes that the information and warnings set out in Form 6 (if the document signed by the debtor constitutes an offer by the debtor) or Form 7 (if the document signed by the debtor constitutes the acceptance of an offer by the credit provider) must be included in the credit contract. Those warnings must comply with the requirements of reg 74(4) — they must be set out immediately before each place where at least one debtor is to sign. Alternatively, if a contract is made by electronic communication, the information and warnings must be prominently displayed when (but not after) the consumer (or if two or more consumers, each consumer) signs the contract. See commentary on reg 74. [17.90] General In disclosing the s 17 information required to be included in the pre-contractual statement and a credit contract, a credit provider must take into consideration:

(a) the date the information is disclosed; [page 134] (b) whether the information is ascertainable or not; (c) the assumptions permitted by ss 180 and 182 and the Regulations; and (d) the tolerances permitted by s 181 and the Regulations. The content of a credit contract must also take into account the provisions of the Code which prohibit certain monetary obligations. Those provisions relate to fees and charges (s 23) and the amount of interest charges which can be imposed by a credit provider (s 28). Note that s 191 provides that a “provision of a contract (or any other instrument) by which a person seeks to avoid or modify the effect of the Code is void”. [17.95] Cases Geeveekay Pty Ltd v Director of Consumer Affairs Victoria (2008) 19 VR 512; ASC ¶155-090; [2008] VSC 50; BC200800981; Dept of Consumer and Employment Protection v Chequecash Pty Ltd [2009] WASC 18; BC200900406; Australian Finance Direct Ltd v Director of Consumer Affairs Vic (2006) 16 VR 131; [2006] VSCA 245; BC200609322.

Form and expression of contract document 18 The contract document must conform to the requirements of the regulations as to its form and the way it is expressed and, subject to any such requirements, may consist of one or more separate documents. ________________________________________ [Editorial note: UCCC s 16 — apart from numbering the section is unchanged.]

COMMENTARY ON SECTION 18 [18.05] Outline The credit contract must conform to the requirements of the

Regulations as to its form and the way it is expressed and, subject to any such requirements, may consist of one or more separate documents (s 18). Regulations may be made under s 18 prescribing the form of a credit contract and the way it is expressed. Section 16(4) allows the Regulations to prescribe the form of the financial information to be contained in a precontractual statement, and accordingly reg 72 sets out those requirements. However, the Regulations do not specify any requirements as to the form and expression of the contract document, as distinct from the precontractual statement financial information. Consequently, unless the contract is also to be the precontractual statement, it may be in any form. [18.10] Separate documents This section permits a contract to consist of one or more separate documents. Section 16(5) of the Code also permits a precontractual statement to consist of more than one document, if each document contains a statement that it does not contain all of the required precontractual information (s 16(6)). Section 18 does not include a similar requirement that if a contract consists of more than one document, each document must indicate that it is only part of the contract. However, as noted at [18.05] above, if the contract is used as the precontractual statement, the requirements for the form of the precontractual statement will also apply to the credit contract. In addition, under s 14(4), where a contract document consists of more than one document, only one of which is signed, the signed document must refer to the other documents (see [14.15]). [page 135] [18.15] Print size Section 184(1) requires that a credit contract (and a guarantee or a notice given by a credit provider) must be “easily legible”, “clearly expressed” and conform to print or type size requirements “to the extent that it is printed or typed”. For the purposes of s 184(1)(b), reg 110 states that the print or type must be “not less than 10 point”.

Provisions that must not be included in credit contract for reverse mortgage 18A (1) A credit provider must not enter into a credit contract for a reverse mortgage that provides a basis for beginning enforcement proceedings relating to the contract for an event described in subsection (3). 18A (2) A credit provider must not agree to change, or unilaterally change, a credit contract for a reverse mortgage so that it provides a basis for beginning enforcement proceedings relating to the contract for an event described in subsection (3). 18A (3) For the purposes of subsections (1) and (2), the events are as follows: (a) the debtor failing to inform the credit provider that another person occupies the reverse mortgaged property; (b) the debtor failing, when the debtor occupies the reverse mortgaged property, to give the credit provider evidence that the debtor, or another person nominated by the debtor to the credit provider, occupies or occupied the reverse mortgaged property; (c) the debtor leaving the reverse mortgaged property unoccupied while it is the debtor’s principal place of residence; (d) the debtor failing to pay a cost to a person other than the credit provider within 3 years after the payment became due; (e) the debtor failing to comply with a provision of the credit contract if the contract does not make it clear how the debtor is to comply with the provision; (f)

the debtor breaching another credit contract with the credit provider;

(g) an event that involves an act or omission by the debtor and is prescribed by the regulations. [s 18A insrt Act 130 of 2012 s 3 and Sch 2 item 13, eff 1 Mar 2013]

________________________________________

[Editorial note: There was no comparable UCCC provision.]

COMMENTARY ON SECTION 18A [18A.05] Outline The Enhancements Act introduced s 18A to specify that the default provisions listed in s 18A(3) may not be included in a reverse mortgage contract. See also commentary on s 13A. [18A.10] Enhancements Act reverse mortgage rules The key provisions relating to reverse mortgages are set out in ss 13A, 18A, 18B and 18C. See further [13A.25] for a list of all Code provisions dealing specifically with reverse mortgages, as introduced by the Enhancements Act. [18A.15] Reverse mortgages Reverse mortgages are subject to separate requirements from other kinds of credit contracts, with tailored consumer protection provisions. These are listed below (changes marked *** took effect on [page 136] 18 September 2012 — ie, when the Enhancements Act received Royal Assent — while the remainder commenced on 1 March 2013): Precontractual requirements A reverse mortgage must not be provided without the proposed debtor first receiving independent legal advice (s 18C). Credit providers and brokers must make additional enquiries to comply with responsible lending requirements (Ch 3 of the NCCP Act). Debtors must be given projections of the effect of a reverse mortgage on the equity in the secured property and a reverse mortgage information statement (s 133DB of the NCCP Act). Mandatory product features can be prescribed by the

Regulations or declared by ASIC (s 13A). There must be disclosure to the debtors if the contract does not include a provision to protect the tenancy of another person (s 67A). Documentary requirements Debtors must have a right to nominate a person (such as a spouse) to occupy a property with the same rights as the debtor, and to revoke that nomination (any purported change to this provision will be void) (s 185A). Contracts may not include certain default provisions (and credit providers may not initiate enforcement proceedings in certain default circumstances). These include payments to third parties overdue by less than three years, cross-defaults and matters relating to occupancy (s 18A). ***Credit contracts must not prohibit early repayment of reverse mortgages (s 26(6)). ***There is a statutory negative equity protection, or “no negative equity guarantee”, which prohibits credit providers requesting or accepting repayments that exceed the market value of the security property (certain exceptions are provided) (s 86C). Procedures during the term The provisions about occupancy of a non-debtor cannot be amended during the term of the loan (and any purported change is void) (s 67A). In the event of default, a credit provider must take reasonable steps to contact the debtor in person and ensure that they understand that they are in default and allow them an opportunity to rectify any default (s 88). ***There are additional requirements for enforcing reverse

mortgages if the debtor’s liability exceeds the value of the reverse mortgage security property (s 93A). [18A.20] Reason for prohibition The prohibition in s 18A is to ensure debtors will not be in default under a reverse mortgage because of minor oversights or for reasons which do not relate to risks borne by a credit provider from the default.

[page 137]

Disclosure if credit contract for reverse mortgage does not protect tenancy of person other than debtor 18B (1) This section applies if a proposed credit contract for a reverse mortgage does not include a provision (a tenancy protection provision) for a person other than the debtor to have a right against the credit provider to occupy the reverse mortgaged property. 18B (2) A person must not provide a credit service relating to the contract unless the person has told the debtor, in writing in the form (if any) prescribed by the regulations, that the contract does not include a tenancy protection provision. Criminal penalty: 50 penalty units. 18B (3) Subsection (2) does not apply if the person is or will be the credit provider under the contract. 18B (4) The credit provider must not enter into the contract unless the credit provider has told the debtor, in writing in the form (if any) prescribed by the regulations, that the contract does not include a tenancy protection provision. Criminal penalty: 50 penalty units. 18B (5) An offence against subsection (2) or (4) is an offence of strict liability. Note: For strict liability, see section 6.1 of the Criminal Code. [s 18B insrt Act 130 of 2012 s 3 and Sch 2 item 13, eff 1 Mar 2013]

________________________________________ [Editorial note: There was no comparable UCCC provision.]

COMMENTARY ON SECTION 18B [18B.05] Outline Section 18B was introduced by the Enhancements Act. A credit provider must clearly inform a proposed debtor if the proposed reverse mortgage contract does not protect the tenancy of another person (other than the debtor). See further commentary on s 13A. [18B.10] Explanatory Memorandum The Explanatory Memorandum to the Enhancements Act explains (at para 3.67): 3.67

This disclosure will enable the consumer to make a fully informed decision about whether a particular reverse mortgage contract is suitable for their requirements in respect of the consequences for non-title holding residents (such as a partner whose name is not on the title of the property). If the borrower wants to protect this person, they would then be on notice and could choose to find a credit provider who offers reverse mortgages with the appropriate protections.

[18B.15] Form 7A Form 7A is prescribed for the purposes of s 18B(2) and (4) (Sch 2 cl 4 of the National Consumer Credit Protection Amendment Regulation 2013 (No 2) (Cth)). (Note that Form 5A is prescribed for the definition of “reverse mortgage information statement” in s 5(1) of the NCCP Act (Sch 2 cl 3 of the National Consumer Credit Protection Amendment Regulation 2013 (No 2)).

Independent legal advice before entry into credit contract for reverse mortgage 18C (1) The regulations may regulate or prohibit the entry by a credit provider into a credit [page 138] contract for a reverse mortgage if the debtor has not obtained legal advice, in accordance with the regulations, about the contract or reverse mortgage. 18C (2) The regulations may provide for offences and civil penalties for

contraventions of regulations made for the purposes of subsection (1). 18C (3) The penalties for offences described in subsection (2) must not be more than 50 penalty units for an individual or 250 penalty units for a body corporate. 18C (4) The civil penalties described in subsection (2) must not be more than 500 penalty units for an individual or 2,500 penalty units for a body corporate. [s 18C insrt Act 130 of 2012 s 3 and Sch 2 item 13, eff 1 Mar 2013]

________________________________________ [Editorial note: There was no comparable UCCC provision.]

COMMENTARY ON SECTION 18C [18C.05] Outline The Enhancements Act introduced s 18C to stipulate that a reverse mortgage must not be provided without the proposed debtor first receiving independent legal advice. See further commentary on s 13A.

Alteration of contract document 19 (1) [Debtor’s acknowledgment required] An alteration of (including an addition to) a new contract document by the credit provider after it is signed by the debtor is ineffective unless the debtor has agreed in writing to the alteration. [subs (1) am Act 130 of 2012 s 3 and Sch 1 item 29, eff 1 Mar 2013]

19 (2) [Exception] This section does not apply to an alteration having the effect of reducing the debtor’s liabilities under the credit contract. ________________________________________ [Editorial note: UCCC s 17 — apart from numbering the section is unchanged.]

COMMENTARY ON SECTION 19

[19.05] Outline This section prescribes requirements to be followed if an alteration or addition is made to a contract document after it is signed by the debtor. If these requirements are not met, the alteration or addition is presumed to be ineffective. Note that s 19 only applies if the alteration or addition is made: by the credit provider; and after the credit contract is signed by the debtor, and only if the alteration or addition increases the debtor’s liabilities under the credit contract. The Enhancements Act amended s 19(1) to refer to a “new contract document”, instead of a “contract document”. [19.06] Consumer leases An equivalent provision for consumer leases is set out in s 174A. [page 139] [19.10] Electronic Transactions Act The UCCC equivalent of s 19 (s 17 of the UCCC) formerly required a debtor to confirm alterations to contract documents by signing or initialling in the margin opposite the alteration. That section was subsequently amended by the e-Commerce Act to facilitate electronic communications. Now, an alteration after a contract has been made simply needs to be “agreed” to “in writing” to be effective. Since “writing” includes electronic writing, an email (eg, from the debtor) will be sufficient if it meets the evidentiary requirements of the Electronic Transactions Act 1999 (Cth) (see commentary on ss 187 and 195). [19.15] Margin Prior to the e-Commerce Act, an alteration or addition to a contract under the UCCC regime was presumed to be ineffective unless the debtor signed or initialled in the margin opposite the alteration. Consequently, if the debtor signed or initialled in any other place — for example, above the change — that change was presumed not to form part of the credit contract. Although the presumption in s 17 of the UCCC was

rebuttable, it was difficult in practice for credit providers to produce evidence to rebut that presumption. Consequently, the safest course for credit providers was to ensure that, if an alteration or addition was made to a contract after it had been signed by the debtor, the debtor had to sign or initial all copies of the contract in the margin opposite the alteration or addition. [19.20] Presigning alterations In practice, a credit provider may have difficulty in proving that an alteration or addition to a contract was made before it was signed by the debtor, and consequently the debtor did not need to agree in writing to the alteration or addition. The safest course would be for all alterations and additions to a contract document to be agreed in writing by the debtor in accordance with s 19. [19.25] Unilateral changes Section 19 relates only to alterations or additions to a contract document after it is signed by the debtor, rather than a change to the contract terms that is itself contemplated under the credit contract. Division 1 of Pt 4 applies when a credit provider makes a unilateral change to a credit contract. In those circumstances, if the change does not require a change to the contract document itself, s 19 will not apply. [19.30] Agreed changes Division 2 of Pt 4 prescribes requirements to be followed if the parties to a credit contract agree to change its terms. The Code is unclear as to when an alteration or addition referred to in s 19 becomes an agreed change to which Div 2 of Pt 4 applies. That is, if both the debtor and the credit provider have signed the contract before the alteration or addition is made, the alteration or addition may be an agreed change to the contract. The logical interpretation is that s 19 (and not Div 2 of Pt 4) only applies to alterations or additions which are made at the contract formation stage. Section 19 should only be relied on for alterations which are essentially corrections or insertions of information which is incorrect or which was omitted by accident, but which all [page 140] parties to the credit contract intended to be included, and not to change rights,

obligations or liabilities. All other agreed alterations or additions after signing should be treated as agreed changes and the applicable requirements of Div 2 of Pt 4 should be followed.

Copy of contract for debtor 20 (1) [Pre-signing] If a contract document is to be signed by the debtor and returned to the credit provider, the credit provider must give the debtor a copy to keep. 20 (2) [Signed copies] A credit provider must, not later than 14 days after a credit contract is made, give a copy of the contract in the form in which it was made to the debtor. 20 (3) [Exceptions] Subsection (2) does not apply if the credit provider has previously given the debtor a copy of the contract document to keep. ________________________________________ [Editorial note: UCCC s 18 — apart from numbering the section is unchanged.]

COMMENTARY ON SECTION 20 [20.05] Outline Section 20 prescribes when debtors must be given copies of credit contracts and the number of copies they must receive. The requirements differ depending on how the contract is formed. The effect of s 20 in the context of each method of contract formation permitted by the Code (see s 14) is described below. [20.10] Provision of copies Method 1 — written offer by credit provider, accepted by debtor signing the contract Before the credit contract is entered into (ie, before the debtor accepts the credit provider’s offer) the debtor must be given: —

the precontractual statement (s 16(1)(a)); and

—

an information statement of the debtor’s statutory rights and obligations — Form 5 (“Things You Should Know About Your Proposed Credit Contract”) (s 16(1)(b)).

When the credit provider gives the debtor a copy of the credit contract to sign and return to the credit provider, the debtor should also be given a copy of the contract document for the debtor to keep (s 20(1)). This copy does not have to be signed by the debtor or the credit provider. No further copy of the contract document is then required (s 20(3)). Method 2 — written offer by debtor accepted in writing by credit provider Before the debtor makes an offer to enter into the credit contract (ie, before the debtor signs the offer document), the debtor must be given: —

the precontractual statement (s 16(1)(a)); and

—

an information statement of the debtor’s statutory rights and obligations — Form 5 (“Things You Should Know About Your Proposed Credit Contract”) (s 16(1)(b)). [page 141]

When the credit provider gives the debtor a copy of the credit contract to sign and return to the credit provider, the debtor should also be given a copy of the contract document for the debtor to keep (s 20(1)). This copy does not have to be signed by the debtor or the credit provider. No further copy of the contract document is then required (s 20(3)). Method 3 — written offer by credit provider, accepted by conduct of debtor or person authorised by the debtor Before the credit contract is entered into (ie, before the credit

provider’s offer is accepted by the conduct of the debtor), the debtor must be given: —

the precontractual statement (s 16(1)(a)); and

—

an information statement of the debtor’s statutory rights and obligations — Form 5 (“Things You Should Know About Your Proposed Credit Contract”) (s 16(1)(b)).

No further copies of the contract need to be given to the debtor after they have accepted by their conduct the credit provider’s written offer. [20.15] Joint debtors Section 194 provides a number of rules relating to the giving of notices and other documents (s 194(1)). Under s 194(4), joint debtors, mortgagors or guarantors may nominate one joint debtor, mortgagor or guarantor to receive notices on behalf of all of them. Under s 194(5), joint debtors, mortgagors or guarantors may consent to receiving single copies addressed to two or more of them jointly. Prior to the Consumer Credit (Queensland) Amendment Act 1998, there was some doubt as to whether s 171 of the UCCC (s 194 of the Code) permitted a credit provider to give a copy of the credit contract (under s 20) to the nominated person only. The note to s 194(1) now states that s 20 is an example of the sections to which s 194 applies. (Note, however, that the notices nomination provisions do not apply to precontractual statements: s 194(1)(b).) According to s 206(4), notes to the Code do not form part of the Code. However, notes would constitute extrinsic material. Section 15AB of the Acts Interpretation Act 1901 (Cth) sets out the circumstances in which extrinsic material may be used. This includes situations of ambiguity and the confirmation of ordinary meaning. (The equivalent provision relating to use of extrinsic material in the UCCC was found in cl 8 of Sch 2 of the UCCC.) [20.20] Precontractual obligations Note that, if the s 16(1)(a) precontractual statement is also the proposed contract document (as permitted by s 16(5)), giving the prospective debtor the copy of the contract required by s 20(1) also satisfies the precontractual requirements of s 16(1)(a) (see [16.05]). However, if there are joint debtors in such a case, each one must receive a copy of the

contract as the joint debtor nomination provisions in s 194 do not apply to precontractual statements (see s 194(1)(b)). [20.25] Copies of mortgages and guarantees Section 20 deals only with copies of contract documents. Credit providers are also required to give copies of mortgages and guarantees (ss 43 and 57).

[page 142]

When debtor may terminate contract 21 (1) [Termination before credit] Although a credit contract has been made, the debtor may nevertheless, by written notice to the credit provider, terminate the contract unless: (a) any credit has been obtained under the contract; or (b) a card or other means of obtaining credit provided to the debtor by the credit provider has been used to acquire goods or services for which credit is to be advanced under the contract. 21 (2) [Fees or charges] Nothing in this section prevents the credit provider from retaining or requiring payment of fees or charges incurred before the termination and which would have been payable under the credit contract. ________________________________________ [Editorial note: UCCC s 19 — apart from numbering the section is unchanged.]

COMMENTARY ON SECTION 21 [21.05] Outline At general law, unless a party has agreed for consideration (or under seal) not to withdraw an offer, they can withdraw it by notice to the offeree at any time before the offeree’s acceptance has been manifested by communication or conduct. The revocation will only be effective, however, when it is communicated to the offeree. (See, generally, J W Carter and D J

Harland, Contract Law in Australia, 4th ed, LexisNexis Butterworths, Sydney, 2002, pp 41–62.) Once a contract is made, it binds all parties. The general law position is effectively modified by s 21 of the Code. However, under s 21 a debtor may, by giving written notice to the credit provider, terminate a credit contract even after it has been made. However, if credit has been obtained or a card or other means of obtaining credit has been used to acquire goods or services for which credit is to be advanced under the contract, that written notice of termination will be ineffective. [21.10] Fees or charges Credit providers may still collect or retain fees or charges incurred under the credit contract before it is terminated, whether or not they have actually been paid before termination (s 21(2)). Regulation 79A(2)(b) expressly provides that those fees and charges are not subject to the general prohibition on “exit fees” in reg 79A (see [R79A.05]). Examples of fees and charges that a credit provider would be entitled to retain or collect are establishment fees, valuation fees, legal fees incurred in forming the credit contract and search fees. [21.15] “Termination” “Termination” of a contract is defined in s 204 of the Code to include the discharge or rescission of the contract. [21.20] “Obtain” Section 21 is the only provision of the Code that refers to “obtaining” credit. Credit is, presumably, “obtained” by the debtor when it is “provided” by the credit provider. [21.25] Consumer Credit (Queensland) Amendment Act 1998 Section 19 of the UCCC (s 21 of the Code) was amended by the Consumer Credit (Queensland) Amendment Act to remove references to the concept of an “attempt to obtain” credit. This phrase was considered “imprecise” and there was some uncertainty as to its application. Prior to the amendment, [page 143] there was provision for a debtor to terminate a credit contract before the

credit had been utilised. One test of utilisation was whether credit had been “attempted to be obtained”. The explanatory notes to the Consumer Credit (Queensland) Amendment Act explain that the section was amended: … so as to remove any reference to credit being “attempted to be obtained” and in lieu providing that the debtor cannot terminate the contract if a card or other means of obtaining credit provided to the debtor by the credit provider has been used to acquire goods or services for which credit is to be advanced under the contract.

The phrase “acquire goods and services” in s 21 is not defined. Presumably it refers to the act of entering into a contract for the purchase of goods and services, using the card (or other means of obtaining credit) as the method of payment. [21.30] Acceptance A binding credit contract will only be made where the offer to enter into such a contract is accepted. The general law principles with respect to acceptance apply. See Halsbury’s Laws of Australia, LexisNexis, 110 Contract II Formation of Contract, [110-240]–[110-410]. Where, however, the offer to enter into a credit contract is made by the credit provider, it cannot be accepted on behalf of the debtor by the credit provider, or a person associated with a credit provider (s 199(2)). If this Code requirement is contravened, the credit provider or an associated person who purports to enter into a credit contract on behalf of another person is guilty of an offence and liable to a maximum penalty of 50 units (s 199(3)). A person is associated with a credit provider if: (a) the person and the credit provider are related bodies corporate under the Corporations Act 2001 (Cth); (b) the person is a supplier in respect of whom the credit provider is a linked credit provider; or (c) the person is an officer, agent or employee of the credit provider or of any such related body corporate or supplier, acting in that capacity (s 204(2)).

Offence for noncompliance 22 (1) [Offences] A credit provider must not: (a) enter into a credit contract that contravenes a requirement of this Division; or (b) otherwise contravene a requirement of this Division. Criminal penalty: 100 penalty units. 22 (2) [Strict liability offence] Subsection (1) is an offence of strict liability. Note: For strict liability, see section 6.1 of the Criminal Code.

22 (3) Subsection (1) does not apply to a contravention of a requirement of section 18B. [subs (3) insrt Act 130 of 2012 s 3 and Sch 2 item 14, eff 1 Mar 2013]

________________________________________ [page 144] [Editorial note: UCCC s 20 provided as follows: Offence for noncompliance 20 A credit provider must not— (a) enter into a credit contract that contravenes a requirement of this Division; or (b) otherwise contravene a requirement of this Division. Maximum penalty — 100 penalty units.]

COMMENTARY ON SECTION 22 [22.05] Outline A maximum penalty of 100 penalty units is payable if a credit provider contravenes the requirements of Div 1 of Pt 2 (ss 14–22). Under the NCCP Act regime changes, a failure to comply with s 22(1) was made an offence of strict liability by the insertion of s 22(2). (See paras 17 and 18 of the “Overview of the National Credit Code” for commentary on

penalty units and strict liability offences.) This is a criminal penalty which may be imposed in addition to civil penalties, such as those imposed for breaching a s 17 “key requirement” (see s 111) or orders for a credit provider to make restitution or pay compensation to any person affected by a contravention of the Code (s 124). [22.10] Application A breach of any of the following requirements could result in a criminal penalty under s 22 being applicable: the contract must be in writing (s 14); precontractual disclosure obligations (s 16); contractual disclosure obligations (eg, amount of credit, annual percentage rate, insurance and business introduction commissions, repayments, fees and charges, default rates, enforcement expenses etc) (s 17); or contract alterations are to be initialled in the margin next to the alteration (s 19). [22.15] Reverse mortgages Section 22(2) states that a breach of s 18B attracts the penalties under s 18B(4) and (5) rather than s 22.

DIVISION 2 — DEBTOR’S MONETARY OBLIGATIONS Prohibited monetary obligations — general 23 (1) [Fees or charges limited by Code] A credit contract (other than a small amount credit contract) must not impose a monetary liability on the debtor: (a) in respect of a credit fee or charge prohibited by this Code; or (b) in respect of an amount of a fee or charge exceeding the amount that may be charged consistently with this Code; or

in respect of an interest charge under the contract exceeding the (c) amount that may be charged consistently with this Code. Note 1: A penalty may be imposed for contravention of a key requirement in this subsection, but only at the time the credit contract is entered into: see Part 6. Note 2: This subsection also applies to liabilities imposed contrary to section 133BI of the National Credit Act: see subsection (7) of that section. [subs (1) am Act 84 of 2011 s 3 and Sch 1 items 20 and 21, eff 1 July 2012; Act 130 of 2012 s 3 and Sch 4 item 3, eff 1 July 2013]

[page 145] 23 (2) Civil effect Any provision of a credit contract that imposes a monetary liability prohibited by subsection (1) is void to the extent that it does so. If an amount that is prohibited by subsection (1) is paid, it may be recovered. 23 (3) [Fees or charges unauthorised by contract] A credit fee or charge cannot be charged in respect of a credit contract unless the contract authorises it to be charged. 23 (4) Civil effect If an amount that is prohibited by subsection (3) is paid, it may be recovered. [s 23 am Act 130 of 2012 s 3 and Sch 4 item 2, eff 1 July 2013]

________________________________________ [Editorial note: UCCC s 21 provided as follows: Prohibited monetary obligations 21 (1) [Fees and charges limited by Code] A credit contract must not impose a monetary liability on the debtor— (a) in respect of a credit fee or charge prohibited by this Code; or (b) in respect of an amount of a fee or charge exceeding the amount that may be charged consistently with this Code; or (c) in respect of an interest charge under the contract exceeding the amount that may be charged consistently with this Code. 21 (2) Civil effect Any provision of a credit contract that imposes a monetary liability prohibited by subsection (1) is void to the extent that it does so. If an amount that is prohibited by subsection (1) is paid, it may be recovered.

21 (3) [Fees and charges unauthorised by contract] A credit fee or charge cannot be charged in respect of a credit contract unless the contract authorises it to be charged. 21 (4) Civil effect If an amount that is prohibited by subsection (3) is paid, it may be recovered.]

COMMENTARY ON SECTION 23 [23.05] Outline A credit contract must not impose a monetary liability on the debtor that is not consistent with the Code. Section 23 also prohibits the imposition of credit fees and charges that are not authorised under the credit contract. [23.06] Small amount credit contracts See commentary at [17.26] and [23A.05]. Section 23A prohibits certain monetary obligations for SACCs. Amendments have been made by the Enhancements Act to s 23, specifically its heading and content, to ensure that it does not apply to SACCs. [23.10] Fees or charges With the exception of reg 79A, which prohibits certain termination charges, credit providers are free to charge any kind of fee or charge, as long as in doing so they disclose them fully to the debtor and do not breach s 23(1) or (3). Section 23(1) prevents a credit contract imposing any of the monetary liabilities discussed below: a credit fee or charge prohibited by the Code (s 23(1)(a)) — the Regulations may specify credit fees or charges that credit providers are prohibited from charging debtors (s 31). Until 1 July 2011, there are no fees or charges so specified. However, from 1 July 2011, reg 79A prohibits fees or charges provided for in credit contracts entered into on or after 1 July 2011 and to be paid on or in relation to the termination of the credit contract, where any of the amount of credit provided is secured over residential property (other than “break fees” and “discharge fees”, as [page 146] defined in that regulation, or where the credit contract is terminated

before any credit has been provided under the credit contract) (see [R79A.05]). The Code does not currently prohibit the charging of any other fee or charge falling outside the Code’s definition of “credit fees or charge” (and nor does it permit the Regulations to prohibit the charging of any such fee or charge). Prior to the Consumer Credit (Queensland) Amendment Act 1998, s 21(1)(a) of the UCCC (s 23(1)(a) of the Code) referred to a “fee or charge”. Since then it refers to “a credit fee or charge”, as only a credit fee or charge may be the subject of regulations under s 31; a fee or charge of an amount exceeding the amount that may be charged consistently with the Code (s 23(1)(b)) — this would prohibit, for example, a fee or charge in breach of s 32 or a credit fee or charge that is increased without complying with the requirements of s 66. Although it is not expressly stated in the Code, s 23(1)(b) would not appear to extend to fees which, under s 78, may be declared unconscionable. This view was accepted in Director of Consumer Affairs Victoria v City Finance Loans (2006) ASC ¶155-080; [2005] VCAT 1989. Section 78 does not prohibit the imposition of such fees, but rather gives the court the power to annul or reduce an unconscionable fee, so a fee which is held by a court to be unconscionable is not of itself inconsistent with the Code, but is rather simply subject to court review. This is distinct from, for example, a fee which is prohibited (s 31), a credit fee or charge which is not authorised by the contract (s 23(3)), or a change to a fee or charge which has not properly been notified (see also [78.15]); an interest charge under the contract exceeding the amount that may be charged consistently with the Code (s 23(1)(c)) — Div 3 of Pt 2 contains the Code’s requirements for interest charges (see, in particular, ss 28 and 30). Certain jurisdictions have prescribed a maximum annual percentage rate that may be charged under a regulated credit contract (see [28.40]). If a credit contract imposes an obligation to pay interest in breach of those sections, the prohibition in s 23(1)(c) is breached.

[23.15] Penalty Any provision in a credit contract that contravenes s 23(1) is void (s 23(2)). If a debtor pays an amount under that provision, the debtor may recover that amount. [23.20] Credit fee or charge Section 23(3) states that a credit fee or charge cannot be charged unless it is authorised under the credit contract (see [17.45] for a discussion of “credit fee or charge”). Any credit fee or charge paid by a debtor in contravention of s 23(3) may be recovered (s 23(4)). [23.25] Key requirement Section 23(1) is a key requirement (see s 111(1)(i) and (2)(f)). Consequently, the Pt 6 civil penalty provisions will apply if a credit contract imposes a monetary liability in breach of s 23(1), in addition to a debtor’s right to recover any prohibited monetary liability that they have paid (see s 23(2)). However, in connection with a credit contract s 23(1) is only a key requirement “at the time the credit contract is entered into” (see s 111(1)(i)). Presumably then, [page 147] if a credit contract is amended at a later point in time and that amendment imposes a monetary liability prohibited by s 23(1), the amendment will not itself amount to a breach of a key requirement. However, any amounts paid pursuant to the amended credit contract that are prohibited by s 23(1) can be recovered by the debtor under s 23(2). In connection with a continuing credit contract, s 23(1) is a key requirement at any time. Note that the s 23(1) prohibition applies to obligations imposed under a credit contract or amounts charged under a contract. Section 24 imposes a criminal penalty in the form of a fine (currently a maximum of 100 penalty units) for breaching s 23(1) or imposing a monetary liability that is not consistent with the Code, or if a credit provider requires or accepts payment of an amount greater than the amount it is entitled to receive in accordance with the Code. The NCCP Act regime changes made s 24(1) an offence of strict liability by the insertion of s 24(2).

[23.30] What is the credit contract? Three judgments have considered the meaning of “credit contract”: Macquarie Credit Union Ltd v Director-General, Dept of Fair Trading (1998) 2 ACCR 676; (1998) ASC ¶155-014 (Fair Trading Tribunal (then the Commercial Tribunal) of New South Wales); Flood v Police Department Employees’ Credit Union (1999) ASC ¶155-028 (Fair Trading Tribunal (then the Commercial Tribunal) of New South Wales); and Police Department Employees’ Credit Union v Flood (1999) ASC ¶155-034; [1999] NSWSC 885; BC9905483 (Supreme Court of New South Wales). [23.35] Summary of cases on meaning of credit contract In Macquarie Credit Union Ltd v Director-General, Dept of Fair Trading (1998) 2 ACCR 676; (1998) ASC ¶155-014, a brochure referred to a cheque dishonour fee. The loan terms did not disclose that fee. The said that: the contract consisted of both the brochure and the loan terms; but the contract document consisted only of the loan terms. This meant that the fee (set out in the brochure) was “payable under the contract” but was not “disclosed” in the “contract document”. The tribunal said this was a breach of s 15(G) of the UCCC (s 17(8) of the Code). There were a number of consequential breaches, which are described below at [23.45]. Flood v Police Department Employees’ Credit Union (1999) ASC ¶155028 (tribunal) and Police Department Employees’ Credit Union v Flood (1999) ASC ¶155-034; [1999] NSWSC 885; BC9905483 (supreme court) involved a pre-UCCC continuing credit contract. In this case, the credit union’s membership rules imposed an overdraft service fee. The contract did not refer to it. A transitional notice was given under reg 48 of the UCCC Regulation in preparation for the UCCC commencing to apply to the contract, and that notice did not refer to the fee. The tribunal ((1999) ASC ¶155-028) said the contract consisted of the loan

terms only, once the UCCC commenced to apply to it, and not the membership rules. [page 148] The tribunal effectively reached this conclusion on the basis of the parol evidence rule. That rule says that if the parties execute a written contract, then their contract consists only of the terms in the credit contract. The tribunal said that from the time the UCCC applied to the contract, because the fee was not disclosed in the contract, it was not authorised under the contract. In the tribunal’s view, this was a breach of s 21(3) of the UCCC (s 23(3) of the Code). The tribunal also held that there were consequential breaches of s 21 of the UCCC (s 23 of the Code) because, as a result of charging an unauthorised fee, the credit provider had charged an excessive amount for fees and interest. On appeal, the Supreme Court of New South Wales disagreed (Police Department Employees’ Credit Union v Flood (1999) ASC ¶155-034; [1999] NSWSC 885; BC9905483). The court said the contract consisted of the loan terms and the membership rules. It held there were no key requirement breaches. The court concluded that: in considering a pre-UCCC contract, it is necessary to take into account all “arrangements” between the parties which would have been in the loan terms disclosure, if the loan had been taken after the UCCC commenced; and on that basis, the membership rules formed part of the contract document. Macquarie is correct to the extent that it says the credit contract can extend beyond the loan terms. In both Flood and Macquarie, the contract consisted of the loan terms and another document (ie, the credit union’s rules or a brochure). It is not correct to say that the parol evidence rule restricts the contract to the loan terms; there is an exception to that rule which allows evidence to be given of the factual environment in which the contract is made. The Code (and the UCCC before it) also expressly contemplate that

the contract document can consist of more than one document (see s 16(6) of the Code and the definition of “contract document” in s 204 of the Code). Applying the reasoning of the supreme court in Flood, the correct result in both Macquarie and Flood is that there were no “key requirement” breaches of s 15(G) of the UCCC (s 17(8) of the Code) or s 21 of the UCCC (s 23 of the Code). (For a discussion of the meaning and effect of key requirement breaches, see [111.05] and following). The only breaches of the UCCC were of its requirements for the form in which disclosures must be made, and they are not key requirements. In Macquarie, a case involving a credit contract entered into after the UCCC commenced, the fee should have been disclosed in the financial table of the loan terms, but was instead disclosed in a brochure forming part of the contract. Flood establishes that the brochure was therefore correctly regarded as part of the contract document. This amounted to a breach of s 14(4) and (6) of the UCCC (s 16(4) and (6) of the Code), s 16 of the UCCC (s 18 of the Code) and reg 13 of the UCCC Regulation (reg 72 of the Regulations) — but not the key requirements in s 15(G) of the UCCC (s 17(8) of the Code) or s 21 of the UCCC (s 23 of the Code). In Flood, a case involving a credit contract that was entered into before the UCCC commenced but which subsequently became regulated by the UCCC, the fee in question should have been disclosed in the “transitional notice” required to [page 149] be given to the debtors under reg 48 of the UCCC Regulation. The fact that it was not so disclosed amounted to a breach of reg 48 of the UCCC Regulation only, and not a breach of the key requirement in s 21 of the UCCC (s 23 of the Code). [23.40] Analysis of Flood and its implications The New South Wales Supreme Court’s judgment in Police Department Employees’ Credit Union v Flood (1999) ASC ¶155-034; [1999] NSWSC 885; BC9905483 provides an

important interpretation of s 21 of the UCCC (s 23 of the Code). In particular, the court found that: when considering pre-UCCC contracts, it was not appropriate to consider only the contract document; it was necessary to take into account all those arrangements between the parties which, had the transaction been entered into after the commencement of the UCCC, should have been set out in the written contract (this part of the decision is not relevant for the purposes of the Code); and it was not possible, in respect of one fee, to breach both s 21(1)(b) and (3) of the UCCC (s 23(1)(b) and (3) of the Code). Facts Pamela Flood brought a case against the Police Department Employees’ Credit Union under s 102(1) of the UCCC (s 112(1) of the Code) for alleged breaches of key requirements of the UCCC. She alleged that an overdrawn service fee charged in respect of her continuing credit contract was not authorised by the contract. She argued that this meant that the credit union had contravened a number of sections of the UCCC, including some key requirements (see below). Flood joined the credit union in October 1994 by opening a savings account. In her application form, she agreed to be bound by and pay any charges required by the rules of the credit union (and any amendments to those rules). In 1995, Flood entered into a continuing credit contract, which contained a declaration in which Flood acknowledged that she was subject to the rules of the credit union. In 1993, the rules had been amended to include a provision which allowed for an overdrawn service fee to be charged on an overdrawn account. This fee was first charged on Flood’s account in April 1995, prior to the commencement of the UCCC. Findings of the Commercial Tribunal (Flood v Police Department Employees’ Credit Union (1999) ASC ¶155-028) The findings of the Commerical Tribunal of New South Wales are summarised as follows: The credit contract consisted solely of the contract document. The rules did not form part of the credit contract. As the overdrawn

service fee was imposed under the rules only, the overdrawn service fee did not form part of the credit contract. Flood’s continuing credit contract (entered into before the UCCC commenced) became regulated by the UCCC as a pre-UCCC continuing credit contract (reg 43 of the UCCC Regulation). The credit union had breached the UCCC equivalent of s 23(3) of the Code by imposing a credit fee or charge not authorised by the credit contract and consequentially contravened the key requirements of the UCCC equivalent of s 23(1)(b) and (c) of the Code (all related in some way to the unlawful charging of the overdrawn service fee). [page 150] As a further consequence, the UCCC equivalents of s 28 (interest charges), s 34(3) (statement balances) and s 34(6) (interest charges) were breached. The breach of the UCCC equivalent of s 34(6), being a contravention of a key requirement, resulted from showing interest charges in the statements of account that were not calculated in accordance with the requirements of the UCCC. Further breaches by the credit union were found in relation to the UCCC equivalents of s 34(10) (insurance payments) and s 88 (default notice). (See commentary on those sections for further details on the tribunal’s findings in relation to those matters.) The tribunal then ordered that a civil penalty was payable by the credit union to Flood under the UCCC equivalents of ss 113, 114 and 115(1). Findings of the Supreme Court of New South Wales (Police Department Employees’ Credit Union v Flood (1999) ASC ¶155-034; [1999] NSWSC 885; BC9905483) In the opinion of the Supreme Court, the overdrawn service fee was a part of the pre-UCCC continuing credit contract. It was wrong for the tribunal to proceed on the basis that the overdrawn service fee was not payable under the credit contract. Flood was contractually bound to pay the overdrawn service fee.

When considering a pre-UCCC continuing credit contract, the supreme court held that the tribunal should have taken into account all the arrangements between the parties which, had the contract been entered into after the commencement of the UCCC, would have been required to be set out in the written contract. The pre-UCCC continuing credit contract (which also included the rules imposing the overdrawn service fee) continued in force once the UCCC commenced to apply to it, even though it did not itself contain all the information required by s 15 of the UCCC (s 17 of the Code). The UCCC required the sending of “transitional notices” for such contracts within three months of the Code’s commencement setting out the information required by ss 14 and 15 of the UCCC (ss 16 and 17 of the Code). The notice sent for Flood’s contract failed to disclose the overdrawn service fee. The supreme court noted that this meant that the notice breached reg 48 of the UCCC Regulation — but this issue was not raised before the tribunal. The court held, in relation to s 21 of the UCCC (s 23 of the Code): the imposition of the overdrawn service fee was authorised by the contract and so s 21(3) of the UCCC (s 23(3) of the Code) was not breached; and it is not possible to base a breach of s 21(1) of the UCCC (s 23(1) of the Code) on a breach of s 21(3) of the UCCC (s 23(3) of the Code): section 21(3) of the UCCC (s 23(3) of the Code) applies where the contract does not authorise the imposition of the relevant fee or charge; and section 21(1)(b) of the UCCC (s 23(1)(b) of the Code) applies when the contract imposes the relevant fee or charge. The court also held that there were no consequential breaches of the UCCC equivalents of s 34(3), (6) or (10) (see analysis at [34.45] and [34.95]). [page 151]

Implications of Flood It is important to realise that the contract in Flood was a pre-UCCC contract. The UCCC itself provided transitional provisions for contracts made before the commencement of the UCCC. The major point of difference between the reasoning of the tribunal and the supreme court concerned the content of the contract. The tribunal, based on the parol evidence rule, found that the membership rules were not part of the credit contract. The supreme court, on the other hand, held that the contract included the rules. Since much of the dispute concerned whether the overdrawn service fee was “payable under the contract”, these different views of contract content were sufficient to dispose of many issues. The supreme court view seems logical. The tribunal view would have the practical effect of forcing pre-UCCC contracts to conform to the UCCC requirements in aspects where there was no such requirement before the UCCC. For example, at the time that Flood entered into the credit contract with the credit union, it was both reasonable and legal to impose the overdrawn service fee by means of the membership rules. To require, as the tribunal did, that the fee be incorporated into the document is to require that the pre-UCCC contract comply with post-UCCC requirements. [23.45] Analysis of Macquarie and its implications The content of the contract was also an issue in Macquarie Credit Union Ltd v DirectorGeneral, Dept of Fair Trading (1998) 2 ACCR 676; (1998) ASC ¶155-014. The Commercial Tribunal of New South Wales there found that material extraneous to the written document was part of the contract. Duggan has criticised Macquarie for ignoring the parol evidence rule and endorsed the approach of the tribunal in Flood in applying it. (See A J Duggan, An Analysis of the Latest Credit Code Cases, paper given at Consumer Credit Update 1999, Business Law Education Centre, 12 March 1999.) In Macquarie, the credit union provided debtors with a brochure Terms and Conditions — Loans when they applied for the loan. While this brochure referred to the cheque dishonour fee and the third party fees that were payable by the debtor, it did not form part of the formal contract document, nor were the fees mentioned in the contract document. The credit union argued that s 15(G) of the UCCC (s 17(8) of the Code)

only concerned fees and charges which were expressed to be “payable under” the contract. The tribunal rejected this argument, stating that the credit contract could conceivably be broader than the contract terms set out in the “contract document” and that it was necessary to distinguish the two. On the facts of this case, the tribunal held that the bargain between the debtor and the credit union (ie, the credit contract) was constituted by both the contract document and the brochure. It was found that the credit union had breached the key requirement in s 15(G) of the UCCC (s 17(8) of the Code) by failing to disclose the debtor’s liability for the cheque dishonour fee and the third party fees. The credit union also breached the key requirement in s 15(E) of the UCCC (s 17(6) of the Code) by failing to disclose in the contract document the total amount of interest charges payable under the contract. [page 152] In Macquarie, the tribunal held that the contract and the contract document were not necessarily “conterminous” (ie, there may be contractual terms that are not contained in the contract document). There is nothing in the reasoning of the tribunal or the supreme court in Flood that disagrees in principle with this proposition, and it is a proposition that can be readily applied to contracts which are partly written and partly oral. What is curious about the decision in Macquarie is the tribunal’s view that the brochure containing reference to the cheque dishonour fee (which is clearly a “document” in the normal sense of the word) was not part of the contract document. As between the credit union and the customer there was no evidence that the cheque dishonour fee was referred to anywhere other than in the brochure. If the cheque dishonour fee was payable under the credit contract, why then was the only document that referred to the fee not a part of the credit contract document? The tribunal’s views are even more curious in view of the UCCC’s express recognition (in s 12(4) of the UCCC (s 14(4) of the Code)) that a credit contract may consist of more than one document. Logically speaking, either:

the brochure should have been considered to be part of the credit contract document, in which case there would have been no breach of s 15(G) or s 21 of the UCCC (which are key requirements) (ss 17(8) and 23 of the Code), but rather breaches of s 14(4) and (6) of the UCCC (s 16(4) and (6) of the Code), s 16 of the UCCC (s 18 of the Code) and reg 13 of the UCCC Regulation (reg 72 of the Regulations) (which are not key requirements); or the parol evidence rule should have been applied to exclude terms and conditions from outside the loan terms (see A J Duggan, An Analysis of the Latest Credit Code Cases, paper given at Consumer Credit Code Update 1999, Business Law Education Centre, 12 March 1999). [23.50] Is it possible to breach both s 23(1) and (3)? The tribunal in Flood (see [23.35]) held that the credit union had simultaneously breached both s 21(1) and (3) of the UCCC (s 23(1) and (3) of the Code). In summary, the tribunal held: section 21(3) of the UCCC (s 23(3) of the Code) was breached because the credit union imposed a credit fee or charge that was not authorised by the credit contract; and as a consequence of breaching s 21(3) of the UCCC (s 23(3) of the Code), the credit union had also contravened s 21(1)(b) of the UCCC (s 23(1)(b) of the Code) (excessive fee) and s 21(1)(c) of the UCCC (s 23(1)(c) of the Code) (excessive interest charge). The Supreme Court in Flood came to a different conclusion (see [23.35]). The court held that the imposition of the credit fee or charge in question was authorised by the credit contract. As a result, there was no breach of s 21(3) of the UCCC (s 23(3) of the Code) (see [23.30]–[23.45]). In addition, the supreme court found that it is not possible to base a breach of s 23(1)(b) of the Code on a breach of s 23(3) of the Code: [page 153]

section 23(3) (which provides that a credit fee or charge cannot be charged unless it is authorised under the credit contract) applies where the contract does not authorise the relevant fee or charge and it is charged; and section 23(1)(b) (which applies to a fee or charge exceeding the amount that may be charged consistently with the Code) applies when the contract imposes the relevant fee or charge, but the amount actually charged exceeds the amount that may be charged consistently with the Code. The supreme court’s interpretation of s 23 seems logical and resolves at least some of the interpretation difficulties in s 23.

Prohibited monetary obligations — small amount credit contracts 23A (1) A small amount credit contract must not impose a monetary liability on the debtor: (a) in respect of an interest charge (including a default rate of interest) under the contract; or (b) in respect of a fee or charge prohibited by this Code; or (c) in respect of an amount of a fee or charge exceeding the amount that may be charged consistently with this Code. 23A (2) If a provision of a small amount credit contract imposes a monetary liability prohibited by subsection (1) then: (a) each provision (the void provisions) of the contract that imposes a monetary liability of a kind referred to in that subsection (whether or not the liability is imposed consistently with this Code) is void to the extent that the provision relates to the liability; and (b) the debtor may recover as a debt due to the debtor any amount paid to the credit provider under the void provisions to the extent that the amount relates to the liability.

[s 23A insrt Act 130 of 2012 s 3 and Sch 4 item 4, eff 1 July 2013]

COMMENTARY ON SECTION 23A [23A.05] Outline The Enhancements Act introduced specific regulation of SACCs. These are non ADI issued credit contracts of less than $2000 for a term of between 16 days and one year. The Explanatory Memorandum explains (at paras 4.17 and 4.18): 4.17

A definition of small amount credit contract will be included in section 5 of the NCCP Act. It is defined as a credit contract: that is not a continuing credit contract; where the credit provider is not an Authorised Deposit-taking Institutions (ADI); that is not secured by a mortgage (over any type of property); where the credit limit is a maximum of $2,000 (or any other figure prescribed by the regulations); where the term of the contract is 2 years or less (or any term prescribed by the regulations); and1 where the contract meets any other requirements that may be prescribed by regulations.

[page 154] 4.18

A power to change aspects of the definition under the regulations has been introduced to allow flexibility in the application of the consequent obligations. Credit providers may adopt different legal structures in relation to their contracts according to whether or not they consider it preferable for their contracts to be subject to the obligations applying to small amountcredit contracts. The regulation-making power will allow the Commonwealth to respond more promptly to such responses, where necessary.

The NCCP Act sets out additional conduct obligations for: credit assistance providers — a new Div 7 of Pt 3-1; credit providers — a new Pt 3-2C. Reports by the Senate Economics Committee issued on 7 December 2011 and the Parliamentary Joint Committee on Corporations and Financial Services issued on 13 February 2012 expressed concerns about SACCs.

There has been a perception in the past that they are a relatively expensive form of credit for debtors who are general thought to be disadvantaged and least able to afford this type of credit product (sometimes known as “pay-day loans”). Following numerous submissions by SACC providers as to the nature of their business and the characteristics of debtors who make use of short term small amount loans, significant changes were made to the proposed regulation of SACCs before the passing of the Enhancements Act. The following requirements apply to SACCs from 1 March 2013 (items marked ††† commenced later, on 1 July 2013): website disclosures (to be prescribed) advising of the alternative sources of funds that might be available (NCCP Act s 124A); a prohibition on credit contracts with a term of 15 days or less, not offered by an ADI; SACC credit providers must obtain and review bank statements of a proposed SACC debtor for a three-month period prior to deciding whether to make the SACC; there is a rebuttable presumption that a debtor will be unable to repay an SACC without hardship if they are currently in default under another SACC, or if they have had two or more SACCs in the previous 90 days; ††† SACC credit providers will be remunerated not on the basis of traditional interest charges, but by maximum fees based on the amount of credit given to the debtor and the time period of the SACC outstanding loan that any part of the loan is outstanding; and ††† the maximum amount that can be charged in relation to a nondefaulting SACC is an upfront fee of 20 per cent of the amount actually given to the debtor, plus a maximum of four per cent of that value for each month of the loan. (For defaulting SACCs, default fees and enforcement expenses may be charged. Other than enforcement expenses, there is a cap on all charges under the contract of 200 per cent of the original amount provided to the SACC debtor (inclusive of the fees paid when not in default)).

[page 155] [23A.10] Explanatory Memorandum Chapter 4 of the Explanatory Memorandum to the Enhancements Act discusses the requirements introduced by the Enhancements Act for SACCs. It notes the introduction of specific obligations on SACC providers to disclose alternatives to SACCs and comply with multiple SACC prohibitions. Prior to the Enhancements Act, the NCCP Act did not include such requirements for SACCs. [23A.15] Other Code provisions See also the following Code provisions dealing specifically with SACCs: ss 17(4), 17(6), 23, 23A, 27A, 31(2), 31A, 31B, 32A, 39A, 39B, 39C and 114(1A), and definitions in s 204. [23A.20] Prohibitions Section 23A prohibits a credit provider of an SACC from charging, under the contract, the following: interest charges — irrespective of whether there has been a default by the debtor; fees and charges prohibited by the Code (some fees are permitted — see s 31A) (the prohibition does not include the establishment fees and monthly fees permitted under s 31A); and an amount that is greater than the amount of a permitted fee or charge — for example, overcharging a government fee. If a credit provider contravenes s 23A(1), then it will lose its entitlement to all fees and charges under the SACC. This includes the permitted establishment fee and permitted monthly fee (see s 31A). The credit provider is therefore not only required to refund the amount of any excess fee, but cannot retain any amounts including those that would otherwise be permitted by s 31A. The debtor can also recover that amount from the credit provider. [23A.25] Summary tables of SACC requirements The tables below provide a high-level overview of the requirements introduced by the Enhancements Act in relation to SACCs. The tables set out the new obligations of a credit provider and the restrictions on fees and charges for SACCs.

Table 1: Changes to NCCP Act Small amount credit contracts — commenced on 1 March 2013 Item Key obligation

Summary

Section reference (NCCP Act)

1

Definition of small amount credit contract (SACC)

A non-ADI issued, nons 5(1) continuing credit contract where the credit limit is $2000 or less and the term of the contract is at least 16 days but not longer than 1 year

2

Credit provider — website disclosure

Credit provider’s website must s 133CB include a prescribed statement which advises the proposed debtor of the availability of financial counselling services and alternative financing

[page 156] 3

Engaging in certain activity is Failure to comply with the s 180(1)(b) an offence and court can make above requirements attracts certain orders civil and criminal penalties of $340,000 and $8,500 respectively for each offence

Table 2: Changes to the Code Caps on costs etc for credit contracts — commenced on 1 July 2013 Item Key obligation 1

Prohibited monetary obligations

Summary

Section reference (Code)

Under SACCs, a credit provider is prohibited from charging: interest (including default rates);

s 23A

any fee or charge that is not an approved fee or charge; a fee or charge that exceeds the amount prescribed by the Code. 2

Approved fees and charges

A credit provider is only

s 31A

and their limits

allowed to charge the following fees for an SACC: a permitted establishment fee (this must not exceed 20% of the adjusted credit amount); a permitted monthly fee (this must not exceed 4% of the adjusted credit amount); fees payable upon default up to a maximum prescribed amount; and government fees and charges.

3

Definition of adjusted credit amount

Adjusted credit amount is the s 204(1) amount of credit provided under the contract but does not include the permitted establishment fee or permitted monthly fee, or any other prohibited fees under the Code. Effectively, this is the amount that a debtor receives at the time of the contract formation

[page 157] 4

Limit on amount that may be recovered if there is a default under an SACC

The total of the permitted s 39B establishment and monthly fees and the default fee can, at most, only be equal to twice the adjusted credit amount (not including enforcement costs). This is a significant restriction on the amount a credit provider can charge

5

Restrictions on payments to third parties from the amount borrowed

An amount borrowed under s 39A the credit contract cannot be used to pay a person prescribed by the Regulations

6

Maximum interest rate cap of 48%

A maximum interest rate cap s 32A of 48% pa will apply to all credit contracts except SACCs

and contracts offered by an ADI 7

Consequences of a breach of the above prohibition

A fee or charge will be void to s 23A the extent that it is prohibited under the Code. The debtor may be able to recover the amount paid to the credit provider as a debt

[23A.30] Definition of an SACC A credit contract will be an SACC if it satisfies all of the following conditions (s 5 of the NCCP Act): the contract is not a continuing credit contract (eg, credit cards); the credit provider is not an ADI; the debtor’s obligations are not secured by a mortgage; the credit limit of the contract is $2000 or less (this can be varied by the Regulations); the term of the contract is at least 16 days but not longer than 1 year (this can be varied by the Regulations); the contract meets any other requirements under the Regulations (none currently prescribed). [23A.35] Changes to the Code The Enhancements Act introduced changes to the Code to introduce the restrictions below in relation to SACCs: Prohibited monetary obligations Section 23A prohibits a credit provider from imposing the following obligations on a debtor under an SACC: —

any interest charge (including default interest);

—

a fee or charge prohibited by the Code; and [page 158]

—

a fee or charge that exceeds the amount prescribed by the

Code. Section 31A provides that only the following fees and charges may be charged for SACCs: —

permitted establishment fee — a fee that reflects the credit provider’s reasonable costs of determining the application for credit and the initial administrative costs of providing credit. The permitted establishment fee must not exceed 20 per cent of the adjusted credit amount (adjusted credit amount is explained below);

—

permitted monthly fee — a fee that is payable on a monthly basis starting on the day the contract is entered into. The permitted monthly fee must not exceed four per cent of the adjusted credit amount;

—

fees and charges that are payable in an event of a default in payment (limitations on these fees are discussed below); and

—

a government fee, charge or duty that is payable in relation to the contract.

The maximum permitted establishment and monthly fees are represented as a percentage of adjusted credit amount. This is the amount of credit provided under the contract but does not include the permitted establishment fee or permitted monthly fee, or any other prohibited fees under the Code. Generally, the adjusted credit amount will equal the amount actually provided to the debtor. However, this statement will not hold true where there is a government charge payable. For example, consider an SACC where the: —

amount of credit is $1000;

—

permitted establishment fee is $85;

—

permitted monthly fee is $15 and this is deducted from the amount of credit; and

—

government charge is $10.

In the above case, by entering into a credit contract, the debtor will receive $890 from the credit provider, but the adjusted credit amount will be $900. Therefore, the maximum permitted establishment fee and permitted monthly fee that a credit provider could charge is $180 and $36 respectively. (It should be noted that by changing the amount of permitted establishment and monthly fees, the adjusted credit amount will change automatically.) Section 39B also limits the amount of fees that a credit provider can charge in case of a default. Pursuant to s 39B(1), if there is a default, the maximum amount that a credit provider can recover under the credit contract will be twice the adjusted credit amount. In the above example, the maximum amount that the credit provider could recover even after charging the default fee will be $1800. The amount recovered will not include enforcement expenses, such as fees paid to a debt collector or expenses reasonably incurred by the credit provider. (A credit provider can recover enforcement expenses reasonably incurred by a credit provider.) [page 159] Prohibited payments The Enhancements Act prohibits use of any part of the amount of credit provided under an SACC to pay a person prescribed by the Regulations. The Explanatory Memorandum states that this provision is to address the practice whereby the amount of credit is increased to allow a payment to a third party who has an arrangement with the credit provider. In such cases, the debtor is required to pay a large fee at the start of the contract and also pay additional interest due to the increased loan amount. Although the Regulations currently do not prescribe any third parties under this

provision, it is government’s intention to respond promptly to the need to introduce any regulation. Maximum interest rate cap The Enhancements Act also introduced a maximum interest rate cap of 48 per cent per annum on credit contracts (see further commentary on ss 32A, 32AA and 32B). This cap will not apply to SACCs and contracts offered by an ADI. In calculating the interest rate for the purposes of the cap, all fees and charges will be taken into account (except for government fees and charges). These fees and charges will include any fees paid to the credit provider or a third party for introduction services (eg, brokers) (see further commentary on ss 32A, 32AA and 32B). Consequences of contravention of the above provisions If an SACC imposes a fee or charge which is not permitted under the Code, then that fee or charge will be void to the extent that it is prohibited under the Code. The debtor may be able to recover the addition amount paid to the credit provider as a debt (s 23A(2)). Furthermore, by entering into an SACC that charges a fee prohibited under the Code, a credit provider will be committing an offence and may be liable for a criminal penalty of $17,000 for each contravention (s 24(1A)). A credit provider who imposes a prohibited monetary liability will lose their right to all fees and charges (including the establishment fee and monthly fees). Therefore, the credit provider must refund the amount of any excess charge, but also cannot retain any amounts they would otherwise be permitted to retain under s 31A (s 23A(2)). This is to ensure strict compliance by credit providers (see para 5.19 of the Explanatory Memorandum). [23A.40] Responsible lending conduct Chapter 3 of the NCCP Act regulates responsible lending conduct applicable to credit providers and credit assistance providers. The Enhancements Act introduced specific responsible lending conduct obligations on credit providers and credit assistance providers who offer SACCs.

Website disclosures If a credit provider’s website can be used to apply or make an enquiry about an SACC, then the website must comply with the requirements prescribed by the Regulations. The Explanatory Memorandum states that the requirement will be to include a prescribed statement on the website. The prescribed statement will disclose the following: the availability of sources of financial assistance (eg, financial counselling services and specialist consumer legal advice services); and [page 160] alternative and cheaper sources of credit (low cost loan schemes designed for low-income earners such as those receiving Centrelink payments). A credit provider will be required to make this statement available when a proposed debtor applies to makes an enquiry about an SACC. Similar obligations will also apply to credit assistance providers if the website represents that they provide or are able to provide credit assistance in relation to SACCs. Failure to comply with this obligation attracts civil penalties of $340,000 and criminal penalties of $8,500. [23A.45] Proposed regulation — National Consumer Credit Protection Amendment (Small Amount Credit Contracts) Regulation 2014 (Cth) (proposed SACC Regulation) At the time of writing, Treasury is seeking comments on an exposure draft of a proposed SACC Regulation. It is designed to avoid anti-avoidance activity thought to exist around small amount lending. The proposed SACC Regulation: clarifies the boundaries between small amount and medium amount credit contracts, to ensure that the small amount lending cap applies to contracts where the debtor receives a maximum amount of $2000 in their hand, with fees;

confirms that credit providers cannot rely on the exemption for short-term credit (s 6(5) of the Code) to remain unlicensed while levying fees and charges in excess of what is allowed under the cap on costs for SACCs; and addresses avoidance practices where credit providers establish a brokerage arm to their business, in which the broker only arranges credit with the related credit provider, in order to charge brokerage fees that are not included in the calculation of the amount payable under the cap. (See Exposure Draft (06/01/2014) and explanatory statement to the National Consumer Credit Protection Amendment (Small Amount Credit Contracts) Regulation 2014 (Cth).) [23A.50] Subsequently, the National Consumer Credit Protection Regulations 2010 (Cth) (NCCP Regulations) was amended by the National Consumer Credit Protection Amendment (Small Amount Credit Contracts) Regulations 2014 (Cth) (2014 SACC Amendment Regulations) on 12 June 2014. From the relevant explanatory statement, these amendments attempted to address and remove certain avoidance practices in the industry. In summary there are four main amendments made to the NCCP Regulations by the 2014 Amendment Regulations which have been briefly summarised below. The 2014 SACC Amendment Regulations insert new reg 4D which clarifies what credit contracts will be a SACC and a MACC. A credit contract will be a SACC if it provides for an amount up to $2,000 “cash in hand” to the debtor despite what the credit amount is. In other words, the total amount of credit under a SACC may be more than $2,000 if a debtor is also charged fees and charges as long as the debtor receives $2,000 or less cash in hand. Under the 2014 SACC Amendment Regulations (reg 4D), a credit limit may be a maximum of $2,480 and still be a SACC. This credit limit would

[page 161] consist of $2,000 that the debtor will receive (“cash in hand”), a 20% establishment fee ($400) and a 4% monthly fee paid upfront ($80). This is relevant to the maximum fees a credit provider may charge as: —

under a SACC, credit providers are permitted to charge maximum fees of up to 20% of an adjusted credit amount as an “upfront fee” and 4% of an adjusted credit amount as a monthly fee; and

—

MACCs may have an interest rate up to 48%.

The 2014 SACC Amendment Regulations insert new reg 5A which seeks to prevent the practice of credit providers utilising the exemption available for low-cost short term credit contracts available under s 6(1) of the NCC to charge fees in excess of fees permitted under the NCC. For example, a “membership fee” where such a fee is a prerequisite to a borrower accessing a credit contract. The 2014 SACC Amendment Regulations insert new reg 51 which seeks to close a loophole whereby credit providers that provided a continuing credit contract arranged for a debtor to enter into a new continuing credit contract each time they required a further advance. Some credit providers relied on this practice to enable the credit provider to charge a further fee of $200 each time the person entered into a new continuing credit contract. The 2014 SACC Amendment Regulations insert new reg 79AE which seeks to remove the practice of credit providers establishing a brokerage arm to arrange SACCs with the credit provider. Some credit providers sought to charge brokerage fees through such a brokerage arm as these fees were not included in the calculation of the amount payable under the maximum permitted fees for SACCs. The 2014 Amendment Regulations seek to prevent such a practice

by prohibiting “prescribed persons” from requiring or accepting payment of a fee or charge in relation to a SACC. “Prescribed persons” now include a person that introduced a debtor to a credit provider or a person that was introduced to a debtor by a credit provider. 1 The Enhancements Act as enacted provides that the term of a small amount credit contract is at least 16 days but not longer than 1 year.

Offences related to prohibited monetary obligations — credit providers 24 (1) [Offences] A credit provider must not: (a) enter into a credit contract on terms imposing a monetary liability prohibited by subsection 23(1); or (b) require or accept payment of an amount in respect of a monetary liability that cannot be imposed consistently with this Code. Criminal penalty: 100 penalty units. 24 (1A) A credit provider must not: (a) enter into a small amount credit contract on terms imposing a monetary liability prohibited by subsection 23A(1); or (b) require or accept payment of an amount in respect of a monetary liability that cannot be imposed consistently with this Code. Criminal penalty: 100 penalty units. [subs (1A) insrt Act 130 of 2012 s 3 and Sch 4 item 6, eff 1 July 2013]

[page 162] 24 (2) [Strict liability offence] Subsections (1) and (1A) are offences of strict liability. Note: For strict liability, see section 6.1 of the Criminal Code.

[subs (2) am Act 130 of 2012 s 3 and Sch 4 item 7, eff 1 July 2013] [s 24 am Act 130 of 2012 s 3 and Sch 4 item 5, eff 1 July 2013]

________________________________________ [Editorial note: UCCC s 22 provided as follows: Offences related to prohibited monetary obligations 22 A credit provider must not— (a) enter into a credit contract on terms imposing a monetary liability prohibited by section 21(1); or (b) require or accept payment of an amount in respect of a monetary liability that cannot be imposed consistently with this Code. Maximum penalty — 100 penalty units.]

COMMENTARY ON SECTION 24 [24.05] Outline Section 24 imposes a criminal penalty in the form of a fine (currently a maximum of 100 penalty units) for breaching s 23(1) or imposing a monetary liability that is not consistent with the Code, or if a credit provider requires or accepts payment of an amount greater than the amount it is entitled to receive in accordance with the Code. The NCCP Act regime changes made s 24(1) an offence of strict liability by the insertion of s 24(2). (See paras 17 and 18 of the “Overview of the National Credit Code” for commentary on penalty units and strict liability offences.) [24.10] Small amount credit contracts Section 24(1A) was inserted by the Enhancements Act to create a criminal penalty of 100 penalty units for a breach of s 23A, or for a credit provider requiring or accepting payments in breach of the prohibition. See commentary on s 23A. Section 24(1A) is an offence of strict liability. This is to ensure strict compliance by credit providers with the cap on costs.

Offences related to prohibited monetary obligations — credit assistance providers

24A (1) A person must not provide credit assistance to a consumer by: (a) suggesting that the consumer apply for a particular small amount credit contract with a particular credit provider; or (b) assisting the consumer to apply for a particular small amount credit contract with a particular credit provider; if the person knows, or is reckless as to whether, the contract will contravene subsection 23A(1). Criminal penalty: 50 penalty units. 24A (2) If a person provides credit assistance to a consumer that is prohibited by subsection (1): (a) the consumer is not liable (and is taken never to have been liable) to pay any fees or charges to the person in relation to: (i)

the credit assistance; or

(ii) any other services provided by the person in connection with the credit assistance; and [page 163] (b) the consumer may recover as a debt due to the consumer the amount of any such fees or charges paid by the consumer to the person. [s 24 insrt Act 130 of 2012 s 3 and Sch 4 item 8, eff 1 July 2013]

COMMENTARY ON SECTION 24A [24A.05] Outline Section 24A was introduced by the Enhancements Act. See further commentary on s 23A. Section 24 relates to prohibited monetary obligations for credit assistance providers. [24A.10] Effect Section 24A introduced strict penalties against providers of credit assistance where they suggest or arrange a credit contract, and they

either know or are reckless as to whether the cost charged under that contract willexceed the monetary limits introduced by s 23A. The Explanatory Memorandum to the Enhancements Act provides (at para 5.22) that this provision is to address situations where small amount credit providers have commercial relationships with brokers who may direct consumers to that credit provider irrespective of the cost, or where the credit provider has adopted a legal structure that they consider avoids the cap, but where the broker may not be willing to assume the same risks as the credit provider. [24A.15] Penalties A contravention of s 24A(1) carries a penalty of up to 50 penalty units and is an offence of strict liability. If a debtor is required to pay or pays an amount to the credit assistance provider for credit services provided in contravention of s 24A(1), then the debtor is either not liable to pay such an amount or, if already paid, recover the amount from the credit assistance provider.

Loan to be in money or equivalent 25 (1) [Full provision of funds] A credit provider must not under a credit contract pay an amount to or in accordance with the instructions of the debtor unless the payment is in cash or money’s worth and is made in full without deducting an amount for interest charges under the contract. Criminal penalty: 100 penalty units. 25 (2) [Strict liability] Subsection (1) is an offence of strict liability. Note: For strict liability, see section 6.1 of the Criminal Code.

25 (3) [First interest payment] The regulations may provide that subsection (1) does not apply to the deduction of an amount for the first payment of interest charges under the contract. ________________________________________ [Editorial note: UCCC s 23 provided as follows: Loan to be in money or equivalent

23 (1) [Full provision of funds] A credit provider must not under a credit contract pay an amount to or in accordance with the instructions of the debtor unless the payment is in cash or money’s worth and is made in full without deducting an amount for interest charges under the contract. Maximum penalty — 100 penalty units.

[page 164] 23 (2) [First interest payment] The regulations may provide that subsection (1) does not apply to the deduction of an amount for the first payment of interest charges under the contract.]

COMMENTARY ON SECTION 25 [25.05] Outline Section 25 contains a prohibition which requires that: amounts paid by a credit provider under a credit contract at the direction of the debtor must be in cash or money’s worth (s 25(1)) — the phrase “money’s worth” is not defined in the Code, but would include a cheque or similar payment instrument; and any payment in cash or money’s worth must be paid in full, without any upfront deduction of interest charges (s 25(1)) — this reinforces (and, arguably, merely duplicates) the prohibition in s 29(1) on debiting or requiring the payment of interest in advance. Section 25(3) authorises the making of regulations that exempt from that prohibition the deduction of an amount for the first payment of interest charges. [25.10] Interest deduction Regulation 75 states that s 25(1) does not prohibit the deduction of the first payment of interest charges under a credit contract, but only if the deduction relates to interest charges for a period which is less than the normal period for which interest charges are to be periodically debited to the debtor’s account. [25.15] Penalties A contravention of s 25(1) carries a penalty of up to 100 penalty units. The NCCP Act regime changes made s 25(1) an offence of strict liability by the insertion of s 25(2). (See paras 17 and 18 of the

“Overview of the National Credit Code” for commentary on penalty units and strict liability offences.)

Early payments and crediting of payments 26 (1) [Early payments] A credit provider must accept any payment under a credit contract that is made before it is payable under the contract unless the contract prohibits its early payment. Criminal penalty: 100 penalty units. 26 (2) [Crediting payments] A credit provider must credit each payment made under a credit contract to the debtor as soon as practicable after receipt of the payment. Criminal penalty: 100 penalty units. 26 (3) [Strict liability offences] Subsections (1) and (2) are offences of strict liability. Note: For strict liability, see section 6.1 of the Criminal Code.

26 (4) [Non-acceptance of payment] Despite subsection (2), a credit provider is not required to credit a payment under a credit contract before it is payable under the contract if the contract prohibits its early payment and: (a) the credit provider informs the debtor, as soon as practicable after the credit provider becomes aware of the payment, that it will not be credited to the debtor (or that any credit will be reversed) until it becomes payable under the contract, and the debtor elects to leave the payment with the credit provider; or [page 165] (b) the credit provider informs the debtor, before accepting the payment, that it will not be credited to the debtor until it becomes payable under the contract; or

(c) the credit provider refunds the payment to the debtor. 26 (5) [Paying out contract] A credit contract may not, under this section, prohibit the paying out of the contract at any time under section 82. 26 (6) A credit contract for a reverse mortgage may not prohibit an early payment that: (a) is made in the circumstances described in paragraph 86A(1)(a); and (b) is of the amount described in paragraph 86A(1)(b). [subs (6) insrt Act 130 of 2012 s 3 and Sch 2 item 15, eff 18 Sep 2012]

________________________________________ [Editorial note: UCCC s 24 provided as follows: Early payments and crediting of payments 24 (1) [Early payments] A credit provider must accept any payment under a credit contract that is made before it is payable under the contract unless the contract prohibits its early payment. Maximum penalty — 100 penalty units. 24 (2) [Crediting payments] A credit provider must credit each payment made under a credit contract to the debtor as soon as practicable after receipt of the payment. Maximum penalty — 100 penalty units. 24 (3) [Non-acceptance of payment] Despite subsection (2), a credit provider is not required to credit a payment made under a credit contract before it is payable under the contract if the contract prohibits its early payment and— (a) the credit provider informs the debtor, as soon as practicable after the credit provider becomes aware of the payment, that it will not be credited to the debtor (or that any credit will be reversed) until it becomes payable under the contract, and the debtor elects to leave the payment with the credit provider; or (b) the credit provider informs the debtor, before accepting the payment, that it will not be credited to the debtor until it becomes payable under the contract; or (c) the credit provider refunds the payment to the debtor. 24 (4) [Paying out contract] A credit contract may not, under this section, prohibit the paying out of the contract at any time under section 75.]

COMMENTARY ON SECTION 26 [26.05] Outline A credit provider must accept any payment under a credit contract that is made before it is actually payable under the contract, unless

the contract prohibits early payment. A maximum criminal penalty of 100 penalty units can be imposed if this requirement is breached (s 26(1)) (see para 17 of the “Overview of the National Credit Code” for commentary on penalty units). Section 24 of the UCCC (s 26 of the Code) was amended by the Consumer Credit (Queensland) Amendment Act 1998 to facilitate electronic payments. Prior to the Consumer Credit (Queensland) Amendment Act, a credit provider was allowed to refuse to credit a payment made early but only if it informed the debtor, before receiving a payment, that a given payment would not be credited immediately but at a later date (and the credit contract prohibited early payment). With electronic payment systems, a credit provider does not necessarily have an opportunity to refuse payment prior to the payment being made (as the credit provider may not have had any warning that the payment was to be made). As amended, s 24 of the UCCC (s 26 of the Code) allows a credit provider to: inform the debtor, as soon as possible after receiving the payment, that the payment will not be credited until it becomes payable under the contract, and the debtor chooses the leave the payment with the credit provider; or [page 166] inform the debtor, prior to accepting the payment, that the payment will not be credited until it becomes payable under the contract (and the debtor elects to make the payment); or provide a refund of the early payment to the debtor. If the credit provider cannot do either of these things, there will be a breach of s 26(1) unless the payment is refunded. Because of the cumulative requirements of s 26(4), informing the debtor (before accepting the payment) requires a specific disclosure in relation to the

specific payment that is offered — something additional to the contractual statement that early payments are prohibited. Whether or not a credit contract prohibits partial prepayment, the debtor has a right to repay the contract in full at any time under s 75. If the credit provider informs the debtor, after receiving the payment, that the payment will not be credited immediately, the debtor must be given an opportunity to elect whether to leave the payment with the credit provider in the intervening period before it is credited. The credit provider will be obliged to refund the early payment if the debtor decides not to leave it with the credit provider. [26.06] Right to pay out credit contract A debtor or guarantor may pay out a credit contract at any time. A credit contract may not prohibit the early payout of a contract (s 26(5)) but it may prevent early repayment of part of the amount of credit (s 26(4)). The amount required for the payout of a credit contract (other than a continuing credit contract) must be calculated in the manner set out in s 82(2). The right to pay out the credit contract does not prevent the credit provider from imposing early termination charges if these are provided for in the contract (see s 82(2)(d)) and are not prohibited by reg 79A. [26.10] Crediting payments Each payment must be credited to the debtor as soon as practicable after receipt. A criminal penalty of up to 100 penalty units can be imposed if this requirement is breached (s 26(2)) and this is an offence of strict liability (see para 17 of the “Overview of the National Credit Code” for commentary on penalty units and strict liability offences). The Code does not define what is meant by “as soon as practicable”. It could mean, for example, either: as soon as it is theoretically possible to credit the payment (using the most up-to-date technology and without regard to current computer system operating times, the practice of batch processing etc); or

as soon as reasonably possible, having regard to normal practice in the finance industry and the operation and capabilities of the credit provider’s computer system and procedures. There are arguments to support both views. However, the purpose of s 26(2) seems clearly to be to ensure that when a debtor makes a payment to a credit provider, the debtor receives the benefit of that payment straight away, and that the credit provider does not hold the debtor’s payment without giving the debtor the benefit of it. The most important practical aspect of this would be to ensure that, [page 167] for the purposes of interest calculation, the debtor’s unpaid balance is adjusted to reflect their payment. Section 26(2) requires this to occur “as soon as practicable”. Where payment transactions are assigned an effective date for interest calculation purposes of no later than the date when the payment was actually made by the debtor (as distinct from its processing date, which may be the same or a later date), s 26(2) will be satisfied, because s 39 provides that transactions are taken to have occurred on their effective date. Payments which, when processed, are given an effective date for interest calculation purposes of the date they are physically made, as opposed to the date they are processed, should therefore comply with s 26(2), but credit providers should carefully examine their processing of payments where effective dating is not used. That is, credit providers must assess whether they satisfy s 26 in the case of payments which alter the unpaid daily balance for interest calculation purposes from the date they are processed, if this is later than the date they are made. It is a question of fact (and not law) as to whether a credit provider’s payment processing satisfies this Code requirement. [26.11] Overpayments If a debtor repays to the credit provider more than the total amount of principal, interest, fees and charges required to be paid under

the contract, and the payment is accepted by the credit provider, there could be a breach of the Code attracting a penalty of up to 100 penalty units $10,000 (s 24). Accordingly, if any overpayment is made by a debtor, it must be refunded immediately. If the debtor owes the credit provider money under another credit contract, any surplus might be applied against that other credit contract, unless the debtor has directed that it must not be, or this would be contrary to an agreement between the credit provider and the debtor (s 190). [26.12] Debtor reimbursement of third party fees When a debtor must reimburse the credit provider for fees or charges “paid or payable” to a third party, the amount the credit provider charges the debtor must not, under s 32, exceed the actual amount payable by the credit provider. This limitation applies only to third party fees that a credit provider incurs and passes on to a debtor, and not to third party fees incurred and absorbed by a credit provider. [26.15] Exception However, a payment need not be credited before it is due if the contract prohibits its early payment, and: as soon as possible after becoming aware of the payment, the credit provider informs the debtor that the payment will not be credited until it becomes payable under the contract and the debtor elects to leave the payment with the credit provider; or before accepting the payment, the credit provider informs the debtor that the payment will not be credited to the debtor until it becomes due under the contract; or the credit provider refunds the early payment to the debtor (s 26(4)). [page 168] In other words, a clause in a credit contract prohibiting early payment will

not alone be sufficient to satisfy the requirement referred to in the second bullet above. In addition, the credit provider must either: inform the debtor, as soon as practicable after receiving the payment, that the payment will not be immediately credited; or not accept the early payment unless it has already informed the debtor that the payment will not be immediately credited; or refund the early payment. Presumably, this applies even where someone other than the debtor made the payment. The Code does not define what “accept” means in this context. [26.20] Early payout A credit contract cannot forbid the early payment of the whole amount owing under it (ss 26(5) and 82(1)). However, the Code contemplates that credit providers may recover any early payment or early termination fees provided for in the credit contract (s 82(2)(d)), but they can be set aside if a court or tribunal determines that they are unconscionable (s 78; see [78.05]). Note also the prohibition (from 1 July 2011) on certain early termination fees relating to credit contracts secured by mortgages over residential property, set out in reg 79A (see [R79A.05]). The debtor or guarantor may, however, apply to the court for a review of a fee or charge payable on early termination of a credit contract or a fee or charge for prepayment of an amount under a credit contract on the grounds that the fee or charge is unconscionable (ie, it exceeds a reasonable estimate of the credit provider’s loss arising from the early termination or prepayment, including the credit providers average reasonable administrative costs in respect of the termination or prepayment) (see s 78). [26.25] Other requirements Section 190 prescribes requirements in relation to the appropriation of payments where a debtor owes money under two or more credit contracts with the same credit provider (see [190.05]). [26.30] Strict liability The NCCP Act regime amendments introduced s 26(3) — making s 26(1) and (2) offences of strict liability. (See para 18 of the “Overview of the National Credit Code” for commentary on strict liability offences.)

[26.35] Reverse mortgages Section 26(5) states that s 26 (about debtors making payments before they are due) does not apply to payments made under s 86A (about the ability of a debtor to make payments which terminate their reverse mortgage).

Regulations about residential investment property 26A The regulations may provide that section 25 or 26 applies in relation to a provision of credit covered by subparagraph 5(1)(b)(ii) or (iii) as if specified provisions were omitted, modified or varied as specified in the regulations. ________________________________________ [Editorial note: There was no comparable UCCC provision.]

[page 169] COMMENTARY ON SECTION 26A [26A.05] Outline Section 26A was introduced by the NCCP Act regime. It states that the Regulations may provide that s 25 or s 26 applies as if specified provisions were omitted, modified or varied (as specified in the Regulations), but only in relation to a provision of credit: wholly or predominantly to purchase, renovate or improve residential property for investment purposes; or to refinance credit that has been provided wholly or predominantly to purchase, renovate or improve residential property for investment purposes. As at the date of this commentary, no regulations modifying the application of s 25 or s 26 in relation to such credit have been made. See also para 20 of the “Overview of the National Credit Code” in the introductory pages of this publication.

DIVISION 3 — INTEREST CHARGES Definitions relating to interest 27 (1) [Definitions] In this Code: annual percentage rate under a credit contract means a rate specified in the contract as an annual percentage rate. daily percentage rate means the rate determined by dividing the annual percentage rate by 365. default rate means a higher annual percentage rate permitted by section 30. unpaid balance under a credit contract at any time means the difference between all amounts credited and all amounts debited to the debtor under the contract at that time. unpaid daily balance for a day under a credit contract means the unpaid balance under the contract at the end of that day. 27 (2) [End of day] A credit contract may specify, for the purposes of payments or any other purposes under the contract, when a day ends. Different times of the day may be specified for different purposes. ________________________________________ [Editorial note: UCCC s 25 provided as follows: Definitions relating to interest 25 (1) [Definitions] In this Code— annual percentage rate under a credit contract means a rate specified in the contract as an annual percentage rate; daily percentage rate means the rate determined by dividing the annual percentage rate by 365; default rate means a higher annual percentage rate permitted by section 28; unpaid balance under a credit contract at any time means the difference between all amounts credited and all amounts debited to the debtor under the contract at that time; unpaid daily balance for a day under a credit contract means the unpaid balance under the

contract at the end of that day.

[page 170] 25 (2) [End of day] A credit contract may specify, for the purposes of payments or any other purposes under the contract, when a day ends. Different times of the day may be specified for different purposes.]

COMMENTARY ON SECTION 27 [27.05] Outline Section 27 defines a number of terms used in Div 3. The maximum amount of interest that may be payable under the Code is the amount calculated by applying a “daily percentage rate” to the “unpaid daily balance”. The meaning of “unpaid daily balance” is qualified by s 39. Section 39(1) states that a debit or credit made by a credit provider to a debtor’s account is taken to have been made, and has effect, on the date assigned to the debit or credit, not on the date on which it is processed. Section 39(2) makes it clear that a credit provider may subsequently adjust debits or credits to a debtor’s account, and the account balances, so as to accurately reflect the legal obligations of the debtor and the credit provider. Despite being used frequently in the Code, the terms “interest”, “interest charges” and “rate” are not defined. As such these terms are to be afforded their ordinary meaning (see [3.40]). In the absence of s 39(1) and (2), it would be unclear whether the s 27 definitions of “unpaid balance” and “unpaid daily balance” meant the difference between the debits and credits actually posted to the debtor’s account at the end of each day (ie, midnight). If that were the case, there could be no “backdating” of a debit for the purposes of calculating interest for a particular day even when that debit related to the provision of an amount of credit on a previous day. The definitions on their own are also unclear as to whether retrospective adjustments could be made to a debtor’s account to correct processing errors and reflect dishonoured payments. Section 39 makes it clear that, subject to certain conditions, backdating of transactions and account corrections are permissible.

Section 39(3) imposes the following limitations on the right of the credit provider to backdate entries or make account corrections: The assignment or adjustment must be consistent with the credit contract. The adjustment must not result in an interest charge that exceeds the maximum allowed by the Code. The assignment or adjustment must not infringe s 26 of the Code, which requires the crediting of payments as soon as practicable. The assignment of the date on which an interest charge is taken to be debited must not result in the debit taking place before a time permitted under the Code or the Regulations. Credit providers should include a clause in their credit contracts stating that they may backdate debits and credits or make account corrections, given that s 39(3) does not permit a credit provider to do those things if to do so would: not be consistent with the credit contract (s 39(3)(a)); or result in an interest charge that is more than the maximum amount permitted by the Code, as calculated on the basis of debit or credits to a debtor’s account consistent with the credit contract (s 39(3) (b)). See further [39.05]–[39.20]. [page 171] [27.10] General principles Division 3 prescribes the following principles in relation to the calculation of interest: As stated at [27.05] above, the maximum amount of interest that may be payable is the amount determined by applying a daily percentage rate to the unpaid daily balance. However, interest can be calculated at monthly, quarterly or six-

monthly rests using the average daily balance during the period. Credit providers must not require payment of or debit interest in advance. Default interest cannot be charged unless the debtor defaults in payment and can be charged only on the amount in default and while the default continues. There are limited circumstances in which the balance of the amount owing may be accelerated and default interest charged on that accelerated amount. The Regulations may provide that these provisions are omitted, modified or varied in respect of credit provided for investment in residential property. See discussion at [26A.05]. See also discussion at [28.15]–[28.10] below. [27.15] Default rate As to whether a default rate is an “annual percentage rate” for the purposes of the Code, see [33.25]. [27.20] Penalties If a contract imposes an obligation to pay interest charges in breach of the Div 3 requirements, this would be a prohibited monetary obligation under s 23(1) (see [23.10] and [23.15] above). This will be a breach of a “key requirement” for the purposes of the Pt 6 civil penalties regime (s 111(1)(i) and (2)(f)). In addition, the civil penalty in s 23(2) may apply (see [23.15]) and a criminal penalty of up to 100 penalty units may be imposed for entering into acredit contract imposing a monetary liability prohibited by s 23(1) (s 24(1)(a) — see [24.05]). (See para 17 of the “Overview of the National Credit Code” for commentary on penalty units.) [27.25] Day end Section 27(2) allows a credit provider to specify, for the purposes of payments under a credit contract, when a day ends. Section 27(2) allows a credit provider to specify when a day ends for different purposes (eg, for crediting of payments or for determining an unpaid balance on which interest will be calculated). Different times may be specified for different purposes. The former reg 61 of the UCCC Regulation permitted a credit provider to specify, for any purpose under a credit contract, when a day ends. That

regulation was incorporated into s 25(2) of the UCCC (s 27(2) of the Code) by the Consumer Credit (Queensland) Amendment Act 1998. Section 25(2) of the UCCC (s 27(2) of the Code), as amended by the Consumer Credit (Queensland) Amendment Act, permits a credit contract to specify that a day ends at different times for different purposes. This means, for example, that a credit provider can specify a day end of other than midnight for the purpose of calculating the unpaid daily balance on which interest for that day will be calculated. In the absence of s 27(2), it would be unclear under the Code whether a credit provider would have to wait until midnight and process all payments made [page 172] by any means up until midnight, before it could calculate the unpaid daily balance of a debtor’s credit account for the purpose of calculating interest. [27.30] Section 71(3) notice Among other information, the Regulations prescribes that a notice under s 71(3) has to include details of the unpaid balance at the date of the notice. As s 27 defines “unpaid daily balance” as the unpaid balance at the end of that day, practical impossibilities arise in determining this amount for the day of notice. To overcome this, industry practice has been to use the unpaid balance amount from the start of business on the day of the notice (see [71.25]).

Application of this Division 27A This Division does not apply to a small amount credit contract. [s 27A insrt Act 130 of 2012 s 3 and Sch 4 item 9, eff 1 July 2013]

COMMENTARY ON SECTION 27A [27A.05] Outline The Enhancements Act introduced a regime specifically for SACCs. See commentary on s 23A.

Limit on interest charges 28 (1) [Maximum interest charge] The maximum amount of an interest charge that may be imposed or provided for under a credit contract is: (a) where only one annual percentage rate applies to the unpaid balances under the contract — the amount determined by applying the daily percentage rate to the unpaid daily balances; or (b) in any other case — the sum of each of the amounts determined by applying each daily percentage rate to that part of the unpaid daily balances to which it applies under the contract. 28 (2) [Non-daily calculations] However, an interest charge under a credit contract for a month, a quarter or half a year may be determined by applying the annual percentage rate or rates, divided by 12 (for a month), by 4 (for a quarter) or by 2 (for half a year), to the whole or that part of the average unpaid daily balances to which it applies. The regulations may provide for the calculation of unpaid daily balances in these circumstances. 28 (3) [Default rates] This section does not prevent the imposition of a default rate of interest permitted by section 30. ________________________________________ [Editorial note: UCCC s 26 provided as follows: Limit on interest charges 26 (1) [Maximum interest charge] The maximum amount of an interest charge that may be imposed or provided for under a credit contract is— (a) where only one annual percentage rate applies to the unpaid balances under the contract — the amount determined by applying the daily percentage rate to the unpaid daily balances; or

[page 173] (b) in any other case — the sum of each of the amounts determined by applying each daily percentage rate to that part of the unpaid daily balances to which it applies

under the contract. 26 (2) [Non-daily calculations] However, an interest charge under a credit contract for a month, a quarter or half a year may be determined by applying the annual percentage rate or rates, divided by 12 (for a month), by 4 (for a quarter) or by 2 (for half a year), to the whole or that part of the average unpaid daily balances to which it applies. The regulations may provide for the calculation of unpaid daily balances in these circumstances. 26 (3) [Default rates] This section does not prevent the imposition of a default rate of interest permitted by section 28.]

COMMENTARY ON SECTION 28 [28.05] Outline Section 28(1) prescribes the maximum amount of interest charges that may be imposed under a credit contract. However, s 28(2) permits interest to be calculated on a monthly, quarterly or six-monthly basis according to the average unpaid daily balance for the period. [28.10] Maximum annual percentage rates See [28.40] and commentary on ss 32A, 32AA and 32B for discussion of maximum annual percentage rates. [28.15] Maximum interest charge For all contracts where only one annual percentage rate (APR) applies to the unpaid balances, interest charged for each day must not be more than:

In any other case, interest charges must not be more than the sum of each amount determined by applying:

These are the formulae which may be used when interest is calculated on a daily basis (s 28(1)(a), (b)). [28.20] Other permitted method Interest may, but need not, be calculated on a monthly, quarterly or six-monthly basis using the average unpaid daily balance for the period. In those cases, the APR is divided by 12, 4 or 2 and is then applied to the average unpaid daily balances for the whole of a period or

for part only of a period (eg, if a contract is paid out part way through an interest period or if the APR changes during the period) (s 28(2), reg 76.) The formulae to use are:

[page 174]

The effect of this is that interest charges for months, quarters and half years can be calculated on the basis that all months, quarters and half years are of the same length (because the APR is simply divided by 12, 4 or 2). However, the average unpaid daily balance in a period must be calculated on the actual number of days in the period (see reg 76(2)). If the last day of the month, quarter or half year falls on a non-business day, the average unpaid daily balance for the month, quarter or half year may be calculated without reference to the unpaid daily balance for the nonbusiness day. (However, they must be included in the next period (reg 76(4) and (5)).) [28.25] Predetermined credit charges The effect of Div 3 is that predetermined credit charge contracts (which were permitted by the Credit Act 1984) could not be offered under the UCCC or the Code (subject to s 30A introduced by the NCCP Act regime). However, reg 49 under the UCCC allowed credit providers to enter into predetermined credit charge credit contracts (other than continuing credit contracts) if they were entered into within 12 months after the commencement of the UCCC (ie, before 1 November 1997) and the contract provided that, at the end of its term, a

refund was to be made to the debtor of the amount (if any) by which the amount of interest charges that had been paid exceeded the amount of interest charges that would have been payable if the contract complied with ss 26 and 27 of the UCCC. [28.30] Lump sum credit charges The maximum amount of interest that may be charged under a credit contract which applies an APR to the unpaid balance is the amount determined when applying the daily percentage rate to the unpaid daily balances. In McKenzie v Smith; Lenehan v Smith (1998) ASC ¶155-025 (see [3.20]), both of the contracts at issue imposed a flat interest rate of 10 per cent per annum calculated as a lump sum, rather than on the unpaid daily balance. The Commercial Tribunal of New South Wales held that this was a breach of s 26 of the UCCC (s 28 of the Code). (See also Associated Premium Funding Pty Ltd v Various Debtors (2003) ASC ¶155062; [2003] VCAT 1492 at [56].) There is nothing to prevent interest charges being calculated daily or even debited to the loan account daily (which would result in daily compounding of interest, unless the debtor pays interest daily). However, the Code requires a statement of account to show each individual amount of interest debited to the [page 175] account. A monthly statement for a 30-day month for an account with daily debited interest would therefore have to show 30 separate interest debits (s 34(6)(a)). Section 30 permits the charging of default interest in certain circumstances (see [30.05]). Section 30A allows for the Regulations to vary Div 3 as it applies to residential investment loans (see also reg 78). Contracts for residential investment loans may therefore require interest to be paid in advance. [28.31] Maximum annual percentage rate The Enhancements Act

introduced rules regulating the permitted maximum annual percentage rate — it must not exceed 48 per cent. See commentary on ss 32A, 32AA and 32B. See also Div 5A of the Code for additional rules relating to SACCs (ss 39A–39C). [28.35] State-specific maxima — UCCC position Three states and territories placed further caps on the amount of interest that could be charged by way of an APR under a credit contract to which the UCCC applied. In New South Wales, s 11 of the Consumer Credit (New South Wales) Act 1995 (NSW) provided that the UCCC Regulation may prescribe a maximum APR for a credit contract or class of credit contracts to which the UCCC applied. Similar provisions exist or existed in s 8B(1) of the Consumer Credit Act 1995 (ACT); s 14 of the Consumer Credit (Queensland) Act 1994 (Qld); s 12 of the Consumer Credit (South Australia) Act 1995 (SA); and s 12 of the Consumer Credit (Western Australia) Act 1996 (WA). Only in New South Wales and the Australian Capital Territory, however, did the respective regulations make such provision. In both cases, the maximum APR prescribed was 48 per cent (see reg 7 of the Consumer Credit (New South Wales) Special Provisions Regulation 2002 (NSW) and reg 5 of the Consumer Credit Regulations 1996 (ACT)). In Victoria, s 39 of the Consumer Credit (Victoria) Act 1995 (Vic) provided that a credit contract was unenforceable if the rate of interest exceeded 48 per cent. Furthermore, s 40 provided that a mortgage relating to a credit contract would be void if the interest rate exceeded 30 per cent. Section 11 of the Consumer Credit (New South Wales) Act 1995 (NSW) also provided that, in the case of a short-term contract, the UCCC Regulation may require interest charges and all credit fees and charges under the contract to be included for the purpose of calculating the maximum APR under the contract for the purposes of considering whether or not the maximum APR is exceeded. Similar provisions existed in s 8B(2) of the Consumer Credit Act 1995 (ACT). However, only in New South Wales were such regulations made. Under the Consumer Credit (New South Wales) Special Provisions Regulation 2002 (NSW), reg 9 provided that, for the purposes of s 11 of the Consumer Credit

(New South Wales) Act 1995, short-term credit had the same meaning as under s 7 of the UCCC. Regulation 8 provided that all credit fees and charges under a short-term credit contract were to be included for the purpose of calculating the maximum APR. The maximum percentage rate for such contracts was given by the following formula: [page 176]

where: n

is the number of repayments per annum to be made under the credit contract, except that: if repayments are to be made weekly or fortnightly, n is to be 52.18 or 26.09 respectively; and if the contract does not provide for a constant interval between repayments, n is to be derived from the interval selected for the purposes of the definition of j mentioned below;

r

is the solution of the following:

where: j

is the time, measured as a multiple (not necessarily integral) of the interval between contractual repayments that will have elapsed since the first amount of credit is provided under the credit contract, except that if the contract does not provide for a constant interval between repayments an interval of any kind is to be selected by the credit provider as the unit of time;

t

is the time, measured as a multiple of the interval between contractual repayments (or other interval so selected), that will elapse between the time when the first amount of credit is

provided and the time when the last repayment is to be made under the contract; Aj

is the amount of credit to be provided under the contract at time j (the value of j for the provision of the first amount of credit is taken to be zero);

Rj

is the repayment to be made at time j;

Cj

is the fee or charge (if any) payable by the debtor at time j (j is taken to be zero for any such fee or charge payable before the time of the first amount of credit provided) in addition to the repayments Rj, being a credit fee or charge that is ascertainable when the APR is calculated.

The maximum APR had to be correct to at least the nearest one hundredth of one per cent per annum. In the application of the above formulae, reasonable approximations were permitted if it would be impractical or unreasonably onerous to make a calculation. The tolerances and assumptions under ss 158–160 of the UCCC (ss 180–182 of the Code) applied to the calculation for the maximum APR. For the purposes of the maximum APR: the amount of credit was to be the amount (or the maximum amount) required by the debtor; and the term for which credit is provided was to be the term (or the maximum term) required by the debtor. [page 177] In Tasmania and the Northern Territory, there was no provision under the UCCC for the prescription of a maximum interest rate. [28.40] Maximum annual percentage rates — Code position Under the Code, before the Enhancements Act (see [28.31]) above, the states and territories continued to retain responsibility for the regulation and enforcement of maximum interest rates for Code-regulated contracts.

New South Wales, the Australian Capital Territory, Queensland and Victoria had imposed caps on allowable interest rates. In New South Wales, cl 5 of Sch 3 to the Credit (Commonwealth Powers) Act 2010 (NSW) prohibited a credit provider from entering into a credit contract if the APR exceeded 48 per cent. Clause 7 of the same schedule set out the method for calculating the maximum APR. This is identical to the method which applied under the UCCC (see [28.35]). Clause 6 of the same schedule specified that the maximum APR was to be enforced in essentially the same way as it was under the UCCC regime. In Queensland, the equivalent provisions were in ss 32, 34 and 33 of the Credit (Commonwealth Powers) Act 2010 (Qld). It should, however, be noted that the method for calculating the maximum APR differed slightly. In Victoria, s 39 of the Consumer Credit (Victoria) Act 1995 (Vic) continued to apply and prohibited a credit provider from entering into a credit contract where the APR exceeded 48 per cent. Any credit contract with an APR exceeding 48 per cent was unenforceable. Furthermore, s 40 of that Act provided that a mortgage securing a credit contract was void if the interest rate under the credit contract exceeded 30 per cent. In other words, the maximum interest rate in Victoria for unsecured credit was 48 per cent and for secured credit it was 30 per cent. In the Australian Capital Territory, the Fair Trading (Australian Consumer Law) Act 1992 (ACT) and Fair Trading Regulation 2009 (ACT) introduced an interest rate cap of 48 per cent. All interest charges and credit fees and charges under a credit contract were to be taken into account in calculating the interest rate. The following table identifies the legislation of the states and territory that imposed an interest rate cap for credit contracts regulated by the Code, before the Enhancements Act. The table also sets out the charges included in calculating the interest rate for the purposes of the cap: Jurisdiction

Legislation

Interest rate cap and method of calculation

ACT

Fair Trading (Australian Interest rate cap of 48% pa. In calculating the interest rate, the following will be taken into account: all interest charges; and

Consumer Law) Act 1992 (ACT) and Fair Trading Regulation 2009 (ACT) NSW

credit fees and charges under the credit contract.

Credit (Commonwealth Interest rate cap of 48% pa. In calculating the Powers) Act 2010 interest rate, the following will be taken into (NSW) account:

[page 178] all interest charges; other amounts (whether or not payable under the contracts), including: — credit fees and charges; — introduction costs paid by the debtor; — any amounts payable by the debtor to a third party for any service, if the credit provider introduced the debtor to the third party; and — any other amounts payable by the debtor to the credit provider. QLD

Credit (Commonwealth Interest rate cap of 48% pa. In calculating the Powers) Act 2010 (Qld) interest rate, the following will be taken into account: all interest charges; and credit fees and charges under the credit contract.

Vic

Consumer Credit (Victoria) Act 1995 (Vic)

Interest rate cap of 48% pa. In calculating the interest rate, the following will be taken into account: all interest charges.

Under the UCCC (the predecessor to the Code), the application of the state legislation depended on the residence of the debtor. That is, if a debtor was ordinarily a resident of New South Wales at the time they entered into a credit contract, then that loan was subject to the interest rate caps imposed by New South Wales (which, at that time, were drafted more narrowly). However, following the transition to the Code, the application of the stateimposed interest rate caps became less clear. Although the relevant state and territory legislation notes that the state-imposed interest rate caps will apply

to credit contracts regulated by the Code, they do not specify which state legislation will apply to a particular credit contract. Due to this ambiguity, it was possible that the applicable state legislation and the relevant interest rate cap may be assessed on the basis of: (a) the state in which the debtor resides; (b) the state in which the credit provider is taken to conduct the business of providing credit; or (c) the state in which the credit contract is formed. The state in which the debtor resides should determine which interest rate cap legislation (or lack thereof) applies. Consequently, if a debtor resides in New South Wales, then the New South Wales interest rate cap legislation will apply — for [page 179] contracts entered into before the Enhancements Act. If the debtor resided in Western Australia, Tasmania or South Australia — no interest rate cap applied before the Enhancements Act (see reg 36). In South Australia, Western Australia, the Northern Territory and Tasmania, before the Enhancements Act there was no provision for, or anticipation of, the prescription of a maximum interest rate. See [28.31] for a summary of the position following the Enhancements Act. [28.45] Case Dept of Consumer and Employment Protection v Chequecash Pty Ltd [2009] WASC 18; BC200900406.

Early debit or payment of interest charges prohibited

29 (1) [Prohibition of early charge] A credit provider must not, at any time before the end of a day to which an interest charge applies, require payment of or debit the interest charge. 29 (2) [Late charge permitted] A credit contract may provide for an interest charge to become payable or be debited at any time after the day to which it applies. 29 (3) [First interest payment] The regulations may provide that subsection (1) does not apply to the first payment of interest charges under a credit contract. 29 (4) [Exceptions] This section does not apply to the debit of an interest charge under a credit contract before the end of the period to which the charge applies if: (a) the charge is debited on the last day of the period; and (b) the amount debited is not treated by the credit provider as part of the unpaid daily balance for that day for the purpose of calculating interest charges under the contract. ________________________________________ [Editorial note: UCCC s 27 — apart from numbering the section is unchanged.]

COMMENTARY ON SECTION 29 [29.05] Outline A credit provider must not require the payment of, or debit, interest before the end of the day to which the interest relates (ie, interest cannot be charged in advance). The only exceptions are for the first payment of interest under the contract, if it is for a period less than the normal interest period under the contract (ie, there is a broken first interest period) (s 29(1) and (3), reg 77), and in relation to credit provided wholly or predominantly for residential investment property purposes (s 30A, reg 78). (Note that, under the UCCC, there was a further very limited exception — see [28.25].) However, on the last day of an interest period, interest for that interest period may be debited to an account provided that it is not included in the balance for interest calculations on that day (s 29(4)).

The former reg 62 under the UCCC made it clear that interest could be debited for the last day of a statement period on that day, but only if it was not added to the unpaid balance for that last day for the purpose of calculating the amount of interest which is debited on that day. The Consumer Credit (Queensland) Amendment Act 1998 (Qld) incorporated this rule into the UCCC by inserting a new s 27(4) into the UCCC (s 29(4) of the Code) to ensure “that interest could [page 180] be debited on the last day of the period to which the interest charge applies”. One proviso is that this amount of interest debited on the last day of the period must not be “treated by the credit provider as part of the unpaid daily balance for that day for the purpose of calculating interest charges under the contract” (s 29(4)(b)). [29.10] Capitalisation Unpaid interest charges for a period may be added to the unpaid daily balance immediately after the end of that period (s 29(2)). The Code thus permits interest to be capitalised daily (or at any other longer interval such as weekly or monthly, if the credit provider wishes to do this). However, every debit of interest charges must be separately itemised on the account statement so that the debtor can see the effects of the capitalisation (s 34(6)(a)). [29.15] Day end A contract may specify when a day ends (which can be a particular time during the day) for any purpose under the contract (ie, payments or withdrawals) (s 27(2)). Often credit providers state in their contracts that, if a payment date falls on a non-business day, the debtor must pay on the last business day before the due date. This is not allowed under the Code if the payment includes a charge for interest in respect of days which have not yet ended. This is because of the prohibition on requiring payment of interest in advance. In this case, interest should become payable on the due date, or the first business day after the due date. However, there is nothing to stop the debtor paying, and the credit provider receiving, the full instalment

amount on the last business day before a due date that falls on a non-business day, provided that the amount of the payment that would otherwise be applied in respect of interest payable in the following non-business day(s) is instead applied in reduction of the principal amount. [29.20] Transaction date Any transaction on a debtor’s account is taken to have been made on the date assigned to the transaction, not on the date that the transaction is processed (s 39). Any date assignment must be consistent with the credit contract and the Code (s 39). [29.25] Voluntary payments in advance Although the Code prohibits a credit provider from requiring payment or debiting of interest in advance, there is no reason why a debtor cannot make payments of interest in advance if they wish to do so.

Default interest 30 (1) [Default “under the contract”] A credit contract may not provide that an annual percentage rate applicable under a credit contract to any part of the unpaid balance will differ according to whether the debtor is in default under the contract. 30 (2) [Default “in payment’] However, a credit contract may provide for such a differential rate if the higher rate is imposed only in the event of default in payment, in respect of the amount in default and while the default continues. ________________________________________ [Editorial note: UCCC s 28 — apart from numbering the section is unchanged.]

[page 181] COMMENTARY ON SECTION 30

[30.05] Outline Section 30 prohibits the common pre-UCCC practice under which debtors were required to pay a specified rate of interest (the higher rate), but receive a discount (to a lower rate) for timely payment. This practice meant that a debtor paid the lower rate of interest on the balance outstanding if they paid on time, but the higher rate was applied to the whole balance outstanding if a payment was late. Instead, s 30 permits the charging of default interest only: if the contract permits it; if the debtor defaults in payment; on the amount in default; and while the default continues. This applies to a default in paying either an instalment or an accelerated amount. [30.10] Accelerated amount However, additional provisions apply before a credit provider can accelerate any part of the debt and, consequently, before default interest can become payable on the accelerated amount. In particular, an acceleration clause can only operate if a default notice explaining the effect of the acceleration clause is given and the default is not remedied within the time (minimum 30 days) specified in the notice. There are limited exceptions (see [93.25]). [30.15] Unjust transaction An excessive default rate may cause a court or tribunal to hold that a credit contract is unjust (s 76(2)(o) — see [76.05]–[76.15]). [30.20] General law of penalties Section 30 does not change the general law of penalties. Even though the Code permits a default rate to be charged, that rate may be struck down if a court determines that it exceeds a genuine estimate of the loss occasioned by the default and that it therefore constitutes a penalty.

Regulations about residential investment property 30A The regulations may provide that this Division applies in relation to a provision of credit covered by subparagraph 5(1)(b)(ii) or (iii) as if specified provisions were omitted, modified or varied as specified in the regulations. ________________________________________ [Editorial note: There was no comparable UCCC provision.]

COMMENTARY ON SECTION 30A [30A.05] Outline The combined effect of s 30A and reg 78 is that Div 3 of Pt 2 applies to the provision of credit for certain purposes as if s 29 were omitted. This means that s 29 does not apply to a provision of credit: wholly or predominantly to purchase, renovate or improve residential property for investment purposes; or [page 182] to refinance credit that has been provided wholly or predominantly to purchase, renovate or improve residential property for investment purposes (except where, at the time the credit contract is entered into, the predominant use of the residential property is not for investment purposes). Consequently, contracts for residential investment loans may require interest to be paid in advance. See also para 20 of the “Overview of the National Credit Code”.

Regulations about credit card contracts 30B (1) The regulations may make provision in relation to any of the following matters relating to interest charges under credit card contracts:

the day from which a daily percentage rate may be applied, and the (a) balance (or the part of a balance) to which it may be applied; (b) how matters relating to interest charges may be described in: (i)

credit card contracts; and

(ii) other documents or advertisements published or broadcast by or on behalf of licensees who are credit providers under credit card contracts. 30B (2) Regulations made for the purpose of subsection (1) may: (a) provide for offences against the regulations; and (b) provide for civil penalties for contraventions of the regulations. 30B (3) The penalties for offences referred to in paragraph (2)(a) must not be more than 50 penalty units for an individual or 250 penalty units for a body corporate. 30B (4) The civil penalties referred to in paragraph (2)(b) must not be more than 500 penalty units for an individual or 2,500 penalty units for a body corporate. 30B (5) This Division has effect subject to regulations made for the purpose of subsection (1). [s 30B insrt Act 84 of 2011 s 3 and Sch 1 item 22, eff 1 July 2012]

________________________________________ [Editorial note: There was no comparable UCCC provision.]

COMMENTARY ON SECTION 30B [30B.05] Outline The Regulations may make provision about any of the matters listed in s 30B regarding credit card contracts (none are currently prescribed).

DIVISION 4 — FEES AND CHARGES

Prohibited credit fees or charges 31 (1) The regulations may specify credit fees or charges or classes of credit fees or charges that are prohibited for the purposes of this Code. 31 (2) Subsection (1) does not apply to a small amount credit contract. [subs (2) insrt Act 130 of 2012 s 3 and Sch 4 item 11, eff 1 July 2013] [s 31 am Act 130 of 2012 s 3 and Sch 4 item 10, eff 1 July 2013]

________________________________________ [Editorial note: UCCC s 29 — apart from numbering the section is unchanged.]

[page 183] COMMENTARY ON SECTION 31 [31.05] Outline Regulation 79A prohibits, in relation to credit contracts entered into on or after 1 July 2011, fees or charges payable on or in relation to the termination of the credit contract, where any of the amount of credit provided is secured over residential property (other than “break fees” and “discharge fees”, as defined in that regulation, or where the credit contract is terminated before any credit has been provided under the credit contract) (see [R79A.05]). See commentary on the definition of “credit fees and charges” at [17.45] and commentary on s 78. Additionally, establishment fees, break costs and early termination fees may be reviewed under the Code. Early termination fees are also the subject of an ASIC regulatory guide (RG 220: Early termination fees for residential loans: Unconscionable fees and unfair contract terms). The regulatory guide is available on ASIC’S website: www.asic.gov.au. [31.10] Small amount credit contracts The Enhancements Act introduces a regulatory regime for SACCS. See commentary on s 23A. The Explanatory Memorandum explains (at para 5.25):

5.25

Section 31 of the Code provides a power to make regulations prohibiting credit providers from imposing particular credit fees or charges, or particular classes of such fees or charges. The changes proposed in section 23A would mean that providers of small amount credit contracts will not be able to impose any credit fees of charge other than those expressly permitted under section 31A. There is a consequent need to amend this provision so that the regulation-making power does not apply to small amount credit contracts. [Schedule 4, items 10 and 11, section 31]

Restrictions on fees and charges for small amount credit contracts 31A (1) A small amount credit contract must not impose or provide for fees and charges if the fees and charges are not of the following kind: (a) a permitted establishment fee; (b) a fee or charge (a permitted monthly fee) that is payable on a monthly basis starting on the day the contract is entered into; (c) a fee or charge that is payable in the event of a default in payment under the contract; (d) a government fee, charge or duty payable in relation to the contract. Note: See section 39B for the maximum amount that may be recovered by the credit provider if there is a default in payment under the contract.

31A (1A) Despite subsection (1), a small amount credit contract must not impose or provide for a permitted establishment fee if any of the amount of credit to be provided under the contract is to refinance any of the amount of credit provided to the debtor under another small amount credit contract. 31A (2) Permitted establishment fee A permitted establishment fee is a fee or charge the amount of which must not exceed 20% of the adjusted credit amount in relation to the small amount credit contract. [page 184] 31A (3) Maximum amount of permitted monthly fee The amount of a

permitted monthly fee that may be imposed or provided for under a small amount credit contract must not exceed 4% of the adjusted credit amount in relation to the contract. [s 31A insrt Act 130 of 2012 s 3 and Sch 4 item 12, eff 1 July 2013]

COMMENTARY ON SECTION 31A [31A.05] Outline Section 31A was introduced by the Enhancements Act. The Explanatory Memorandum explains (at paras 5.26–5.28): 5.26

Section 31A prohibits a provider of a small amount credit contract from charging fees and charges other than: an establishment fee that can be a maximum of 10 per cent of the adjusted credit amount [now 20 per cent]; monthly fees that can be a maximum of 2 per cent of the adjusted credit amount [now four per cent]; fees payable in the event of default; and a government fee, charge or duty payable in relation to the contract. [Schedule 4, item 12, section 31A]

5.27

The adjusted credit amount is defined in section 204 of the Code as the first amount of credit that is to be provided under the contract (excluding fees). The meaning of this term is discussed in detail at paragraph 5.56, but in substance it refers to the amount of money that the debtor will receive under the contract.

5.28

The prohibition applies to all fees and charges imposed or provided for under the contract. It is therefore not restricted to credit fees and charges as defined in section 204 of the Code. The use of the broader term is deliberately used to restrict the debtor’s liability under a small amount credit contract, by only allowing credit providers to charge those amounts specifically listed in subsection 31A(1).

Credit provider or prescribed person must not require or accept payment of a fee or charge in relation to a small amount credit contract etc 31B (1) A credit provider, or a person prescribed by the regulations, must not require or accept payment by the debtor of a fee or charge in relation to: (a) a small amount credit contract; or (b) the provision of the amount of credit under a small amount credit

contract; or (c) a thing that is connected with a small amount credit contract or the provision of the amount of credit under such a contract. Criminal penalty: 100 penalty units. 31B (2) Subsection (1) does not apply if the fee or charge is: (a) a fee or charge that may be imposed or provided for by the small amount credit contract under section 31A; or (b) a fee or charge prescribed by the regulations. 31B (3) If a credit provider or person contravenes subsection (1): (a) the debtor is not liable (and is taken never to have been liable) to make the payment to the credit provider or person; and [page 185] (b) the debtor may recover as a debt due to the debtor the amount of any payment made by the debtor to the credit provider or person. [s 31B insrt Act 130 of 2012 s 3 and Sch 4 item 12, eff 1 July 2013]

COMMENTARY ON SECTION 31B [31B.05] Outline Section 31B reflects the prohibitions established by s 31A. See further commentary on s 23A.

Fees or charges in relation to third parties 32 (1) When this section applies This section applies if a fee or charge is payable by a debtor to the credit provider for an amount (the third party amount) payable or paid by the credit provider to another person, body or agency.

32 (2) Third party amount ascertainable at time of debtor payment If, when the fee or charge is paid by the debtor to the credit provider, the third party amount is ascertainable, then the amount of the fee or charge must not exceed the third party amount. 32 (3) Third party amount not ascertainable at time of debtor payment If: (a) when the fee or charge is paid by the debtor to the credit provider, the third party amount is not ascertainable; and (b) after the fee or charge is paid, the credit provider ascertains the third party amount; and (c) the third party amount is less than the amount of the fee or charge paid; then the credit provider must refund or credit the difference to the debtor. 32 (4) Determining third party amount The third party amount is to be determined by: (a) taking into account any discount, rebate or other allowance that is received or receivable by the credit provider or a related body corporate (within the meaning of the Corporations Act 2001); and (b) disregarding any rebate on tax payable by the credit provider or a related body corporate (within the meaning of that Act). [s 32 subst Act 130 of 2012 s 3 and Sch 1 item 30, eff 1 Mar 2013]

________________________________________ [Editorial note: UCCC s 30 provided as follows: Fees or charges passed on to other parties 30 (1) [Limit of actual amount] A fee or charge payable by a debtor for an amount payable or to reimburse an amount paid by the credit provider to another person, body or agency is not to exceed the actual amount payable or paid by the credit provider if that amount is ascertainable when the fee or charge is paid by the debtor. The actual amount payable is to be determined after taking into account any discount or other rebate or other applicable allowance received or receivable by the credit provider or a related body corporate within the meaning of the Corporations Act. 30 (2) [Refund when actual amount known] If the actual amount paid by the credit provider to another person was not ascertainable when the debtor paid an amount to the credit provider

for the fee or charge and is less than the amount paid by the debtor, the credit provider must refund or credit the difference to the debtor. 30 (3) [Tax of credit provider] Nothing in this section requires a rebate on tax payable by the credit provider or a related body corporate to be taken into account in determining the actual amount payable or paid by a credit provider.]

COMMENTARY ON SECTION 32 [32.05] Outline When a credit provider must pay a fee or charge to another person whom the debtor is to reimburse, the amount the credit provider charges [page 186] the debtor must not exceed the actual amount payable by the credit provider. That is, s 32 only applies to third party fees that a credit provider incurs and passes onto a debtor. It does not apply to third party fees incurred and absorbed by a credit provider. The amount payable must be determined after taking into account any discounts, rebates or other allowance the credit provider is given (s 32(1)). Any excess must be refunded if a fee deducted in advance turns out to be less than expected (s 32(2)). The primary intention of s 32 appears to be to prevent credit providers retaining any commissions or rebates received in relation to lenders mortgage insurance. Section 32 also means that credit providers can only pass on to the debtors the exact amounts of fees payable to third parties for stamp duty, registration fees and other government duties. Section 30 of the UCCC (s 32 of the Code) was amended by the Consumer Credit (Queensland) Amendment Act 1998 to clarify that the section applies both to amounts paid and amounts payable. The explanatory notes to the Consumer Credit (Queensland) Amendment Act state that this does not change the underlying policy of the section but merely removes a possible interpretation ambiguity. Section 32 applies to amounts paid and amounts payable.

Section 32 of the Code was repealed and substituted with a new version by the Enhancements Act. This was to mirror the language of the new s 176D of the NCCP Act that was introduced by the Enhancements Act. [32.10] Fee for service Section 32(1) does not prohibit a credit provider charging a separate fee for a genuine service provided by it in connection with a matter where a fee is incurred by a credit provider and payable to a third party, so long as that fee has no element of a commission, discount, rebate or other allowance receivable by the credit provider from a third party (eg, a credit provider’s cheque book fee may be made up of components for a credit provider’s third party printing costs, stamp duty on the cheque book, and the credit provider’s average costs of providing the cheque book and processing a number of cheques equal to the number in the cheque book). Prior to the Consumer Credit (Queensland) Amendment Act 1998 (Qld), s 30 of the UCCC (s 32(1) of the Code) applied to a fee or charge payable by a debit “in respect of an amount payable” by the credit provider to another person. The meaning of the words “in respect of” was critical to determine whether the pre-Consumer Credit (Queensland) Amendment Act s 30 of the UCCC (s 32(1) of the Code) permitted a credit provider to charge a separate fee for a genuine service provided by it in connection with a matter where a disbursement is incurred and paid to a third party. The substitution of those words (“in respect of”) with the word “for” removed the pre-Consumer Credit (Queensland) Amendment Act uncertainty as to whether a credit provider could charge such a genuine service fee. In Associated Premium Funding Pty Ltd v Various Debtors (2003) ASC ¶155-062; [2003] VCAT 1492, contracts which stated an amount of stamp duty payable that exceeded the amount the credit provider was obliged to pay the State Revenue [page 187] Office were held to breach the requirements of the UCCC. In Kontaxis v Hondros [2002] NSWCTTT 752, it was held that s 30(1) of the UCCC (s 32(1) of the Code) did not prohibit a credit provider from charging a debtor

for the staff time involved in carrying out a credit check and registering a bill of sale. The amounts were charged in addition to the credit check fee and bill of sale (REVS) fee that were paid as disbursements by the credit provider to the relevant third parties involved. The amounts were included in the credit contract as a lump sum combined with the relevant disbursement. They were included under the heading of “Credit fees and charges retained by us” pursuant to s 15(G) of the UCCC (s 17(8) of the Code), as well as the section of the contract relating to the disbursement of the amount of credit. The New South Wales Consumer, Trader and Tenancy Tribunal held that the fees and charges were not in breach of the UCCC. See also [17.45]. [32.15] Lenders mortgage insurance Credit providers cannot benefit from any discount or commission they are offered by an insurer in relation to lenders mortgage insurance (ie, they can only require the debtor to pay the actual amount of the premium paid to the insurer). Lenders mortgage insurance is insurance taken out by a credit provider to cover any loss it suffers if the proceeds on the sale of a property mortgaged to secure a credit contract are not sufficient to cover the debt owed under that contract to the credit provider. Credit providers may require lenders mortgage insurance to be taken out in relation to a particular loan. (This is permitted under the Code — see s 143, which refers to “mortgage indemnity insurance”, the name formerly given to lenders mortgage insurance.) A credit provider in these circumstances may require a debtor to pay the premium for lenders mortgage insurance to it, but the credit provider must then pass on the payment in full (ie, without any discount, rebate or other allowances) to the insurance company providing that insurance. The words “discount or other rebate or other applicable allowance” in s 32(1) are broad in their coverage and clearly include a commission received by a credit provider. Consequently, s 32(1) limits the amount of the fee that a credit provider can pass on to debtors for lenders mortgage insurance to the actual amount payable by the credit provider after deducting amounts receivable by way of commission from the insurer or after taking into account any discount or rebate.

The intention of s 30 of the UCCC (s 32 of the Code) was explained in the second reading speech for the Consumer Credit (New South Wales) Act 1995 (NSW), by the Minister for Consumer Affairs and Minister for Women: Clause 30 reflects the Code’s response to an unacceptable practice. It has been noted that credit providers have in some instances inflated a fee or charge due to a third party that is passed on by the credit provider, thereby retaining for themselves that amount in excess of the actual amount payable by the third party. This is considered to be a totally unacceptable practice, and is prohibited by the provisions of this clause.

Note that this would not prohibit a credit provider from collecting a fee for arranging that insurance. Assuming that fee was correctly disclosed in the credit contract (and, if applicable, the statements of account for credit contracts) in accordance with the Code disclosure requirements for credit fees and charges, [page 188] credit providers would be permitted to collect that fee under the Code. (See [17.45] for a discussion of the obligation to disclose credit fees and charges in credit contracts, and [34.60] for a discussion of the obligation to disclose credit fees and charges in statements of account.) [32.20] Consumer credit insurance Consumer credit insurance premiums are generally payable by the debtor, and therefore are not in the nature of a fee paid by a credit provider to a third party, for which the credit provider then claims reimbursement from the debtor. Consequently, s 32 does not prohibit credit providers collecting commissions for consumer credit insurance. (See [145.05]–[145.20] for a discussion of the maximum amount of commission which can be paid in respect of consumer credit insurance.) Section 30(4) of the UCCC was deleted by the Consumer Credit (Queensland) Amendment Act 1998. It previously stated that s 30(1) of the UCCC does not prevent a credit provider collecting commissions for consumer credit insurance. In light of s 135 of the UCCC (s 145 of the Code) (which expressly states a credit provider may receive a commission from an insurer), the explanatory notes to the Consumer Credit (Queensland)

Amendment Act explain that it was considered that the provision in s 30(4) of the UCCC was unnecessary and potentially confusing.

DIVISION 4A — ANNUAL COST RATE OF CERTAIN CREDIT CONTRACTS [Div 4A insrt Act 130 of 2012 s 3 and Sch 4 item 13, eff 1 July 2013]

Prohibitions relating to credit contracts if the annual cost rate exceeds 48% 32A (1) Entering into a credit contract A credit provider must not enter into a credit contract if the annual cost rate of the contract exceeds 48%. Criminal penalty: 50 penalty units. 32A (2) Provision of credit assistance A person must not provide credit assistance to a consumer by suggesting that the consumer apply, or assisting the consumer to apply, for a particular credit contract with a particular credit provider if the person knows, or is reckless as to whether, the annual cost rate of the contract exceeds 48%. Criminal penalty: 50 penalty units. 32A (3) If a person provides credit assistance to a consumer that is prohibited by subsection (2): (a) the consumer is not liable (and is taken never to have been liable) to pay any fees or charges to the person in relation to: (i)

the credit assistance; or

(ii) any other services provided by the person in connection with the credit assistance; and (b) the consumer may recover as a debt due to the consumer the amount of any such fees or charges paid by the consumer to the person.

32A (4) Application This section does not apply if: (a) the credit provider is an ADI; or (b) the credit contract is a small amount credit contract or bridging finance contract. [page 189] COMMENTARY ON SECTION 32A [32A.05] Outline The Explanatory Memorandum to the Enhancements Act (at paras 5.29–5.32) explains: 5.29

The Enhancements Bill introduces a different cap on costs for all other contracts other than small amount credit contracts. Section 32A will introduce a prohibition on a credit provider entering into a credit contract where the annual cost rate exceeds 48 per cent. [Schedule 4, item 13, subsection 32A(1)]

5.30

As with the caps on small amount credit contracts, strict penalties are introduced for providers of credit assistance where they suggest or arrange a credit contract, and they either know or are reckless as to whether the cost charged under that contract will exceed the cap. [Schedule 4, item 13, subsections 32A(2) and (3)]

5.31

The 48 per cent cap does not apply in the following circumstances: where the credit provider is an ADI (to give this class of credit providers certainty where they may otherwise inadvertently breach the cap, particularly in relation to contracts where both credit and debit facilities are provided); where the credit contracts is a small amount credit contracts (as the cap in section 31A will apply); or where the credit contracts is a bridging finance contract (where a combination of a short term and relatively high upfront costs may result in the 48 per cent cap being exceeded). [Schedule 4, item 13, subsection 32A(4)]

5.32

A definition of a bridging finance contract is included in the Enhancements Bill. It is defined as a contract where: at the time the contract is made the debtor: —

reasonably expects to receive a lump sum before the end of the contract; and

—

intends to use that sum as far as possible to meet their obligations under the contract; and

if the regulation prescribe any conditions, those conditions are meet [sic]. [Schedule 2, item 5, subsection 204(1)]

[32A.10] Key requirement The Explanatory Memorandum to the Enhancements Act explains (at para 5.52): 5.52

The amendments will provide that a contravention of the annual cost rate requirement in section 32A will be a breach of a key requirement under section 111. The effect of this amendment is that it enables a debtor or guarantor to seek a penalty up to a maximum of all credit charges, and also enables ASIC to seek a penalty of up to $500,000. The amount of the penalty depends on a range of factors, and, in this context, would be likely to include the number of contracts affected, whether the overcharging was deliberate or not, and the steps taken by the credit provider to rectify the situation. For example, if the cap was regularly exceeded because the credit provider deliberately elected to overcharge debtors, the penalty could be expected to be greater than if the overcharging was an isolated occurrence. [Schedule 4, items 16 and 17, subsection 111(1) and paragraph 111(2)(f)]

[page 190] [32A.15] Before the Enhancements Act Before the Enhancements Act, neither the NCCP Act nor the Code regulated the maximum amount that can be charged under credit contracts. In the Australian Capital Territory, New South Wales and Queensland there was a cap of 48 per cent in force, which included interested fees and charges. In Victoria, there was a 48 per cent interest rate cap that excluded fees and charges. There was no cap in place in the Northern Territory, South Australia, Tasmania or Western Australia. (See further [28.40].)

Prohibition relating to the annual cost rate of credit contracts — later increases of the annual percentage rate etc 32AA (1) If: (a) a credit provider is a party to a credit contract (other than a small amount credit contract or bridging finance contract); and (b) the credit provider is not an ADI; and

either or both of the following things (the varied matters) occur (c) after the contract is entered into: (i)

the annual percentage rate under the contract increases;

(ii) an amount referred to in subsection 32B(3) that is prescribed by the regulations increases; the credit provider contravenes this subsection if the annual cost rate of the contract would have exceeded 48% at the time the contract was entered into if that or those varied matters had been taken into account at that time for the purposes of calculating the annual cost rate of the contract. 32AA (2) A credit provider must not contravene subsection (1). Criminal penalty: 50 penalty units. COMMENTARY ON SECTION 32AA [32AA.05] Outline Section 32AA reinforces s 32A by prohibiting later increases of the annual percentage rate.

Calculation of annual cost rate 32B (1) The annual cost rate of a credit contract must be calculated as a nominal rate per annum, together with the compounding frequency, using the formula: where: n

is the number of repayments per annum to be made under the credit contract (annualised if the term of the contract is less than 12 months), except that: (a) if repayments are to be made weekly — n is 52.18; and (b) if repayments are to be made fortnightly — n is 26.09; and (c) if the contract does not provide for a constant interval

between repayments — n is to be derived from the interval selected for the purposes of the definition of j in subsection (2). r

is the solution of the equation specified in subsection (2). [page 191]

32B (2) The equation for the purposes of the definition of r in subsection (1) is:

where: Aj

is the amount of credit to be provided under the credit contract at time j (the value of j for the provision of the first amount of credit is taken to be zero).

Cj

is the credit cost amount (if any) for the credit contract that is payable by the debtor at time j in addition to the repayments Rj.

F

is: (a) if the credit contract is a medium amount credit contract — $400 (or such other amount as is prescribed by the regulations); or (b) if the credit contract is not a medium amount credit contract and an amount is prescribed by the regulations in relation to the contract — that amount; or (c) otherwise — $0.

j

is the time, measured as a multiple (not necessarily integral) of: (a) if the credit contract does not provide for a constant interval between contractual repayments — an interval of any kind selected by the credit provider as the unit of time; or

(b) otherwise — the interval between contractual repayments that will have elapsed since the first amount of credit is provided under the credit contract. Rj

is the repayment to be made at time j.

t

is the time, measured as a multiple of the interval between contractual repayments (or other interval so selected), that will elapse between: (a) the time when the first amount of credit is provided under the credit contract; and (b) the time when the last repayment is to be made under the contract.

32B (3) Credit cost amount The credit cost amount for the credit contract is the sum of the following amounts if they are ascertainable: (a) the amount of credit fees and charges payable in relation to the contract; (b) the amount of a fee or charge payable by the debtor (whether or not payable under the contract) to: (i)

any person (whether or not associated with the credit provider) for an introduction to the credit provider; or

(ii) any person (whether or not associated with the credit provider) for any service if the person has been introduced to the debtor by the credit provider; or (iii) the credit provider for any service relating to the provision of credit, other than a service referred to in subparagraph (ii); (c) any other amount prescribed by the regulations. 32B (4) For the purposes of subsection (3), the amounts referred to in that subsection: (a) include an amount that is payable even if the credit is not provided; but (b) do not include an amount of a government fee, charge or duty

payable in relation to the credit contract. 32B (4A) Despite subsection (3), the regulations may provide that a specified amount, or an amount included in a specified class, is not an amount referred to in paragraph (3)(a) or (b). 32B (5) Tolerances and assumptions etc The annual cost rate must be correct to at least the nearest one hundredth of 1% per annum. [page 192] 32B (6) In calculating the annual cost rate, reasonable approximations may be made if it would be impractical or unreasonably onerous to make a precise calculation. Example: If repayments are to be made on a fixed day each month, it may be assumed that repayments will be made on that day each month even though the credit contract provides for payment on the preceding or succeeding business day when the due date is not a business day.

32B (7) The tolerances and assumptions under sections 180 to 182 apply to the calculation of the annual cost rate. 32B (8) Continuing credit contracts If the credit contract is a continuing credit contract, the following assumptions also apply to the calculation of the annual cost rate of the contract: (a) that the debtor has drawn down the maximum amount of credit that the credit provider has agreed to provide under the contract; (b) that the debtor will pay the minimum repayments specified in the contract; (c) if credit is provided in respect of payment by the credit provider to a third person in relation to goods or services or cash supplied by that third person to the debtor from time to time — that the debtor will not be supplied with any further goods or services or cash; (d) if credit is provided in respect of cash supplied by the credit

provider to the debtor from time to time — that the debtor will not be supplied with any further cash. COMMENTARY ON SECTION 32B [32B.05] Outline The Explanatory Memorandum to the Enhancements Act explains (at paras 5.33–5.37): 5.33

Section 32B sets out the formula for calculating whether or not the 48 per cent annual cost rate has been exceeded. This formula largely adopts the model currently in force in New South Wales, pursuant to Division 2 of the Credit (Commonwealth Powers) Act (NSW) 2010. [Schedule 4, item 13, section 32B]

5.34

The use of an existing formula avoids the need for changes by credit providers who currently have developed practices to comply with the New South Wales cap on costs.

5.35

Section 32B will, however, allow for amounts to be prescribed by regulation that would need to be taken into account in calculating the annual cost rate. The introduction of this regulation-making power will enable the Government to quickly respond to attempts to circumvent the objective of these reforms. [Schedule 4, item 13, paragraph 32B(3)(c)]

5.36

This power is provided in recognition, in the Australian jurisdictions that have a cap on costs, of the development of a range of methods of charging the borrower additional amounts that do not meet the definition of costs to be included in calculating the cap in State or Territory legislation. Credit providers have adopted a range of practices in order to be able to generate a return of more than 48 per cent while still complying with the cap.

5.37

A contravention of the annual cost rate requirement in section 32A will be a consequential breach of the current prohibition in section 23 on credit providers charging amounts in excess of those allowed under the Code.

[32B.10] Medium amount credit contracts (MACCs) MACCS are defined in s 204. The definition is relevant to the maximum annual cost rate prescribed by ss 32A and 32AA. Section 32B prescribes the calculation of the annual cost rate for MACCs. An MACC is to be contracted with the Code’s [page 193] requirements for SACCs introduced by the Enhancements Act (see commentary on s 23A).

DIVISION 5 — CREDIT PROVIDER’S OBLIGATION TO ACCOUNT Statements of account 33 (1) [Periodic statements] A credit provider that provides credit must give to the debtor, or arrange for the debtor to be given, periodic statements of account in accordance with this Division. Criminal penalty: 100 penalty units. 33 (2) [Maximum period] The maximum period for a statement of account is: (a) in the case of a credit card contract — 40 days; or (aa) in the case of a continuing credit contract for a reverse mortgage — 12 months; or (b) in the case of any other continuing credit contract — 40 days or such longer period, not exceeding 3 months, as is agreed by the credit provider and the debtor; or (ba) in the case of a reverse mortgage not involving a continuing credit contract — 12 months; or (c) in any other case — 6 months. [subs (2) am Act 84 of 2011 s 3 and Sch 1 item 23, eff 1 July 2012; Act 130 of 2012 s 3 and Sch 2 items 16, 17, eff 1 Mar 2013]

33 (3) [Exceptions] A statement of account need not be given if: (a) the credit is provided under a credit contract for which the annual percentage rate is fixed for the whole term of the contract and under which there is no provision for varying the rate; or (b) no amount has been debited or credited to the account during the statement period (other than debits for government charges, or duties, on receipts or withdrawals) and the amount outstanding is zero or below a level fixed by the regulations; or

the credit provider wrote off the debt of the debtor under the credit (c) contract during the statement period and no further amount has been debited or credited to the account during the statement period; or (d) the debtor was in default under the credit contract (not being a continuing credit contract) during the statement period and the credit provider has commenced enforcement proceedings; or (e) the debtor was in default under a continuing credit contract during the preceding 120 days, or during the statement period and the 2 immediately preceding statement periods, whichever is the shorter time, and the credit provider has, before the commencement of the statement period, exercised a right not to provide further credit under the contract and has not provided further credit during the period; or (f)

the debtor has died or is insolvent and the debtor’s personal representative or trustee in bankruptcy has not requested a statement of account.

33 (4) [Separate statement] A separate statement of account may, but need not, be given in respect of each or any number of the credit facilities provided under a credit contract. 33 (5) [Strict liability offence] Subsection (1) is an offence of strict liability. Note: For strict liability, see section 6.1 of the Criminal Code.

________________________________________ [Editorial note: UCCC s 31 provided as follows:

[page 194] Statements of account 31 (1) [Periodic statements] A credit provider that provides credit must give to the debtor, or arrange for the debtor to be given, periodic statements of account in accordance with this Division. Maximum penalty — 100 penalty units. 31 (2) [Maximum period] The maximum period for a statement of account is— (a) in the case of a continuing credit contract under which credit is ordinarily obtained only by the use of a card — 40 days; or (b) in the case of any other continuing credit contract — 40 days or such longer period, not exceeding 3 months, as is agreed by the credit provider and the debtor; or (c) in any other case — 6 months. 31 (3) [Exceptions] A statement of account need not be given if— (a) the credit is provided under a credit contract for which the annual percentage rate is fixed for the whole term of the contract and under which there is no provision for varying the rate; or (b) no amount has been debited or credited to the account during the statement period (other than debits for government charges, or duties, on receipts or withdrawals) and the amount outstanding is zero or below a level fixed by the regulations; or (c) the credit provider wrote off the debt of the debtor under the credit contract during the statement period and no further amount has been debited or credited to the account during the statement period; or (d) the debtor was in default under the credit contract (not being a continuing credit contract) during the statement period and the credit provider has commenced enforcement proceedings; or (e) the debtor was in default under a continuing credit contract during the preceding 120 days, or during the statement period and the 2 immediately preceding statement periods, whichever is the shorter time, and the credit provider has, before the commencement of the statement period, exercised a right not to provide further credit under the contract and has not provided further credit during the period; or (f)

the debtor has died or is insolvent and the debtor’s personal representative or trustee in bankruptcy has not requested a statement of account.

31 (4) [Separate statement] A separate statement of account may, but need not, be given in respect of each or any number of the credit facilities provided under a credit contract.]

COMMENTARY ON SECTION 33 [33.05] Outline Section 33 requires credit providers to give debtors statements of account, unless one of the exceptions in s 33(3) applies. Section

33(2) prescribes the statement frequencies for Code regulated credit contracts. Credit providers must refer not only to the Code, but also to any applicable industry codes of practice (eg, the Code of Banking Practice (2013) and the Customer Owned Banking Code of Practice (January 2014)) and the ePayments Code (cl 7) in order to determine their obligations to provide periodic statements. For example, credit providers who are also banks that subscribe to the Code of Banking Practice (2013) are required (under cl 24.4) to provide individuals and small businesses, whose loan or other credit account is not otherwise regulated by the Code, with statements of account in accordance with the Code, with some exceptions (cll 26.1 and 26.4 of the Code of Banking Practice (2013)). Each additional source of regulation singles out one aspect of a financial product as the feature which attracts regulation (eg, the Code covers consumer credit, the industry codes of practice refer to “deposit” accounts, and the ePayments Code focuses on electronic funds transfer aspects of accounts). Given the increasing complexity and flexibility of today’s financial products, it is not unusual for a single product to include elements which are covered by all three sources of regulation. [page 195] [33.10] When sent Section 33(2) specifies the maximum periods for statements of account to be given to debtors of various types of credit contracts. The maximum periods are: credit card contracts under which credit is ordinarily obtained only by the use of a card (eg, Visa or MasterCard) — at least every 40 days (s 33(2)(a)); a continuing contract for a reverse mortgage — 12 months; other continuing credit contracts (eg, overdrafts) — at least every three months, but if the statement frequency is more than 40 days,

the longer period must be agreed to by the parties (eg, in the credit contract terms and conditions) (s 33(2)(b)); a reverse mortgage that is not a continuing credit contract — 12 months; all other credit contracts (eg, home and personal loans) — at least every six months (s 33(2)(c)). It is unclear from the Code whether the maximum periods for statements in s 33(2) relate to the length of a statement period or the maximum time between each statement given to a debtor. The reference to “maximum periods” in s 33(2) arguably means the length of a statement period, as: section 34(2) requires the disclosure in statements of the start and end dates of the statement period; and section 17(10) requires the disclosure in credit contracts of the frequency with which statements of account are to be provided to the debtor. Presumably then, if the time periods in s 33(2) relate to the maximum time between each statement given to a debtor, s 33(2) would refer to the maximum “frequency”, and not “period”, for statements. Note that s 17(10) of the Code requires a credit contract (and a precontractual statement) to state the frequency with which statements of account are to be provided to the debtor (see [17.55]). Consequently, if a credit provider decides to change the frequency with which it gives statements of account, this may be either a unilateral change by the credit provider (depending on whether the credit contract gives the credit provider the power to make this change) (see [68.05]) or a change by agreement and the requirements in s 71(1) will need to be satisfied (see [71.05]). The Code of Banking Practice (2013) (cl Banking Code of Practice (January 2014) account for deposit accounts to be provided least every six months (or more often by circumstances.

26) and the Customer Owned (cl 16) require statements of by relevant credit providers at agreement) except in limited

Under the Code of Banking Practice (2013), a statement must be sent at

least every six months unless: the deposit account is a passbook account; or it has been agreed that: —

some other method will be used to record the transactions; or

—

a statement need not be provided; or

—

no amount has been debited or credited during the statement period (other than debits for government charges, or duties on receipts or withdrawals); or

—

the bank, after taking reasonable steps, is unable to locate the debtor; or [page 196]

—

the credit provider is unable, after taking reasonable steps, to locate the debtor.

Under the Customer Owned Banking Code of Practice (January 2014), the statement must be sent at least every six months unless the debtor requests otherwise (cl 16), or there are obligations under consumer credit or other laws (see cll 16 and 18). Under the ePayments Code, the debtor must be sent an account statement at least every six months, unless the facility: is a passbook account, where there is no charge for manually updating the passbook or checking the account balances and activity electronically (cl 7.1(a)); or has a zero balance and no transactions have occurred during the statement period (cl 7.1(b)). Debtors must also be offered the choice of receiving a statement more often (cl 7.2) and on request (cl 7.3). Note also cl 7.2, which provides that cll 7.1–7.6 of the ePayments Code do not apply to a low value facility.

The requirements of the industry codes of practice are clearly less stringent than those of the Code. For accounts which are deposit accounts only, the industry codes of practice alone should apply. However, for accounts which involve the provision of regulated credit as well as deposits (such as overdrafts and some of the innovative housing loan accounts that are now available), the whole account is likely to be governed by the Code, and Code requirements will have to be observed for the whole account. It is interesting to observe that the “passbook” exemption referred to above is available to any account for which a passbook has been provided. There are passbook accounts available on which transactions can be made without requiring the debtor to produce their passbook (eg, ATM or EFT transactions), and it would appear that these also enjoy the “passbook” exemption, presumably on the basis that the passbook will subsequently be updated to record those other transactions. [33.15] “Give” Note the requirements of s 196 as to when a notice or other document is taken to be “given”. Those requirements will apply to the giving of statements of accounts (see [196.05]). [33.20] When not sent Section 33(3) specifies when statements do not have to be given. They do not have to be given if: the annual percentage rate is fixed for the life of the contract and no rate variation is permitted (s 33(3)(a)); the balance is below $10 and no amount has been debited or credited during the statement period (other than debits for government charges or duties on receipts or withdrawals) (s 33(3) (b), reg 79). (Note that a statement must be given even if minimal charges, such as an account keeping fee, are debited, unless the credit provider writes them off); the debt was written off during the statement period and no further debits or credits were made (s 33(3)(c)); a debtor is in default under a non-continuing credit contract and enforcement proceedings have been commenced (s 33(3)(d));

[page 197] a debtor under a continuing credit contract has been in default for the shorter of: —

120 days; or

—

the current statement period and the two proceeding statement periods;

and the credit provider has exercised its right not to provide further credit in a previous statement period and has not provided further credit during the current statement period (s 33(3)(e)); or the debtor has died or is insolvent and the debtor’s personal representative or trustee in bankruptcy (respectively) has not requested that a statement be issued (s 33(3)(f)). [33.25] Fixed-rate loans The exemption in s 33(3)(a) means that there is no requirement to send a statement of account for a fixed-rate loan. However, the exemption does not expressly state that it will apply to such a loan if it includes both a fixed annual percentage rate (APR) and also a fixed default rate for late payments. However, the better view is that the reference to “annual percentage rate” in s 33(3)(a) includes a default rate, so that statements of account need not be given for fixed-rate loan contracts with fixed default rates as well as fixed APRs. (Note that the exemption is not limited to credit contracts with only one fixed APR.) The Code clearly regards a default rate as being an APR. For example: The definition of default rate in s 27 states that a default rate is a “higher annual percentage rate”. Section 30 also refers to a default rate as being an APR. Section 34(6)(b) requires the disclosure in a statement of account of the annual percentage rate or rates, and s 34 does not contain a separate provision requiring the disclosure in statements of a default rate. The reference to “annual percentage rate” in s 34(6)(b) must include a default rate, otherwise the Code would not require

the disclosure in statements of any applicable default rate, which would be in conflict with the Code’s underlying disclosure philosophy. Section 70 includes a reference substantially similar to that in s 33(3)(a). The reference to credit contracts with a fixed APR in s 70(1) must be interpreted to apply to credit contracts with both a fixed APR and a default rate. Otherwise, the s 70(1) prohibition would not apply to such credit contracts, which would clearly not be in keeping with its intended effect. The above examples suggest that references in the Code to “annual percentage rate” are to be interpreted as including a default rate, unless the context clearly suggests otherwise. For example, s 17 contains separate provisions regarding the disclosure of the APR (s 17(4)) and the default rate (s 17(11)). The s 17(4) reference to APR logically does not include a default rate, as otherwise s 17 would require the disclosure in a credit contract of a default rate twice. This is clearly not intended by s 17. [33.30] Written off The Code does not define “written off”. In line with normal accounting practice, it must mean more than simply regarding the debt as [page 198] a problem or bad debt, and must involve a decision on the part of the credit provider that the debt will not be recovered and that no further recovery action will be taken, with corresponding accounting and computer system entries being made to record this. [33.35] Enforcement proceedings The exemption in s 33(3)(d) applies if a debtor is in default under a credit contract and the credit provider has commenced enforcement proceedings. This exemption is not limited to enforcement proceedings commenced against the debtor and would include enforcement proceedings commenced against a guarantor.

[33.40] Continuing credit contract default The exemption in s 33(3)(e) requires a continuous default, but there is no requirement that it must be the same default. [33.45] Death and insolvency No statement need be provided where the debtor has died or is insolvent unless the debtor’s personal representative or trustee in bankruptcy (as appropriate) has requested that a statement be given. Hence the onus is on the personal representative or trustee to request that the credit provider give a statement. [33.50] Debtors who cannot be located If a credit provider does not have the current contact address for a debtor, the credit provider is not automatically relieved from the Code requirements to give a statement of account to that debtor, unless one of the exemptions in s 33(3) applies. Under s 194(2), a credit provider is relieved of its obligation to give a “notice or other document” if the credit provider: has already made a reasonable attempt to give the document to the recipient at an appropriate address (see s 195 and [194.10]); and has reasonable grounds to believe that the recipient can no longer be contacted at that address. [33.55] Statement cycle commencement The Code does not state whether the first statement cycle should commence from the date the contract is formed or the first drawdown date. The safest interpretation to ensure Code compliance with the maximum statement frequencies in s 33(2) is that the first statement cycle should commence no later than the date the credit contract is formed (rather than commencing from the date the loan is drawn down). [33.60] Duplicate statement fee If a credit provider charges a fee for issuing duplicate statements, this fee must be disclosed and authorised in the credit contract where it is a credit fee or charge. It will be for credit contracts without a debit facility, but arguably a duplicate statement fee is not a credit fee or charge for credit contracts with both debit and credit facilities (see discussion at [17.40]).

[33.65] Multiple credit facilities If a credit contract includes multiple credit facilities (eg, a portion of the credit contract is a revolving line of credit and another is a fixed term amortising home loan), a credit provider may give a [page 199] combined statement relating to the credit facilities offered under that credit contract (s 33(4)). The credit provider may either give a combined statement or separate statements. Section 33(4) enacts former transitional reg 64 under the UCCC. In addition, “contract” is defined in s 204 of the Code as including a series or combination of contracts. Consequently, if the debtor had a series of “add on” contracts, a credit provider could give one combined statement for all of those contracts or separate statements for each of them. [33.70] Continuing credit contracts — key requirements and civil penalties Some of the continuing credit contract statement requirements are “key requirements” (s 111(2)). Civil penalties in the form of monetary fines or possibly loss of interest for the relevant statement periods apply if the key requirements are not met (see s 111 and following). The key requirements relating to statements are that: statements of account disclose the interest charges debited during the statement period and when the interest was debited (s 34(6)(a), reg 109); statements of account set out the annual percentage rate or rates and any change since the last periodic statement, if those changes are required to be notified (s 34(6)(b)); and the opening balance must not be greater than the closing balance of the last periodic statement (unless no statement of account was given for the previous period) (s 35). There are no key requirements for statements in relation to contracts other than continuing credit contracts.

[33.75] Penalties Failure to comply with s 33(1) carries a maximum criminal penalty of 100 penalty units. Under the NCCP Act regime changes, failure to comply with s 33(1) was made an offence of strict liability by the insertion of s 33(5). (See paras 17 and 18 of the “Overview of the National Credit Code” for commentary on penalty units and strict liability offences.) [33.80] Reverse mortgages Section 33(2) states that the maximum period for a reverse mortgage statement of account is 12 months (whether or not the reverse mortgage is a continuing credit contract).

Information to be contained in statements of account 34 (1) [Matters required] A statement of account must contain the following matters. 34 (2) Statement period A statement of account must contain the dates on which the statement period begins and ends. 34 (3) Balances A statement of account must contain the opening and closing balances (indicating the amount owed by the debtor at the beginning and at the end of the statement period). 34 (4) Credit provided A statement of account must contain particulars of each amount of credit provided by the credit provider to the debtor during the statement period. [page 200] 34 (5) Identity of supplier In the case of a credit card contract, a statement of account must contain the identity of the supplier if the credit was provided for any cash, goods or services supplied by another person. [subs (5) am Act 84 of 2011 s 3 and Sch 1 item 24, eff 1 July 2012]

34 (6) Interest charges In the case of a credit contract other than a small amount credit contract, a statement of account must contain: (a) the amount of the interest charge debited to the debtor’s account during the statement period and when the interest was debited; and (b) the annual percentage rate or rates and, if required by Part 4, details of any change since the last statement period. Note: A penalty may be imposed for contravention of a key requirement in this subsection: see Part 6. [subs (6) am Act 130 of 2012 s 3 and Sch 4 item 14, eff 1 July 2013]

34 (7) Fees and charges A statement of account must contain particulars of any fees and charges debited to the debtor’s account during the statement period. 34 (8) Payments to or from account A statement of account must contain: (a) particulars of each amount paid by the debtor to the credit provider, or credited to the debtor, during the statement period; and (b) particulars of any amount transferred to or from the account to which the statement relates or to or from any other account maintained under or for the purposes of the credit contract. 34 (9) Amounts payable by debtor If a minimum amount is payable by the debtor under a continuing credit contract, a statement of account must contain a statement of the amount and the date by which it is due. 34 (10) Insurance payments If payment to an insurer is made during the statement period under a credit-related insurance contract that is agreed to be financed under the credit contract, a statement of account must contain: (a) the name of the insurer, the amount paid to the insurer and the kind of insurance; and (b) if the credit provider is aware of any commission to be paid by the insurer in relation to the insurance contract — the amount of the commission expressed either as a monetary amount or as a proportion of the premium, if ascertainable when the statement is given;

(if not previously disclosed in accordance with this Code). In the case of consumer credit insurance that includes a contract of general insurance within the meaning of the Insurance Contracts Act 1984: (c) it is sufficient compliance with paragraph (a) if the statement of account contains the name of the general insurer, the total amount payable to the insurers and the kind of insurance; and (d) it is sufficient compliance with paragraph (b) if the statement of account contains the total amount of commission (expressed as a monetary amount or as a proportion of the premium) to be paid by the insurers. 34 (11) Alterations A statement of account must contain any correction of information in a previous statement of account. 34 (12) Other A statement of account must contain any other information required by the regulations. Note: Sections 180 to 182 set out the tolerances and assumptions applicable to matters required to be included in statements of accounts.

________________________________________ [Editorial note: UCCC s 32 provided as follows: Information to be contained in statements of account 32 A statement of account must contain the following matters— 32 (A) Statement period The dates on which the statement period begins and ends.

[page 201] 32 (B) Balances The opening and closing balances (indicating the amount owed by the debtor at the beginning and at the end of the statement period). 32 (C) Credit provided Particulars of each amount of credit provided by the credit provider to the debtor during the statement period. 32 (D) Identity of supplier In the case of a continuing credit contract under which credit is ordinarily obtained only by the use of a card — the identity of the supplier if the credit was provided for any cash, goods or services supplied by another person. 32 (E) Interest charges

(a) The amount of the interest charge debited to the debtor’s account during the statement period and when the interest was debited. (b) The annual percentage rate or rates and, if required by Part 4, details of any change since the last statement period. 32 (F) Fees and charges Particulars of any fees and charges debited to the debtor’s account during the statement period. 32 (G) Payments to or from account (a) Particulars of each amount paid by the debtor to the credit provider, or credited to the debtor, during the statement period. (a) Particulars of any amount transferred to or from the account to which the statement relates or to or from any other account maintained under or for the purposes of the credit contract. 32 (H) Amounts payable by debtor If a minimum amount is payable by the debtor under a continuing credit contract, a statement of the amount and the date by which it is due. 32 (I) Insurance payments If payment to an insurer is made during the statement period under a credit-related insurance contract that is agreed to be financed under the credit contract — (a) the name of the insurer, the amount paid to the insurer and the kind of insurance; and (b) if the credit provider is aware of any commission to be paid by the insurer in relation to the insurance contract — the amount of the commission expressed either as a monetary amount or as a proportion of the premium, if ascertainable when the statement is given; (if not previously disclosed in accordance with this Code). In the case of consumer credit insurance that includes a contract of general insurance within the meaning of the Insurance Contracts Act 1984 (Cwlth)— (i)

it is sufficient compliance with paragraph (a) if the statement of account contains the name of the general insurer, the total amount payable to the insurers and the kind of insurance; and

(ii) it is sufficient compliance with paragraph (b) if the statement of account contains the total amount of commission (expressed as a monetary amount or as a proportion of the premium) to be paid by the insurers. 32 (J) Alterations Any correction of information in a previous statement of account. 32 (K) Other Any other information required by the regulations. Note: Sections 158 to 160 set out the tolerances and assumptions applicable to matters required to be included in statements of accounts.]

COMMENTARY ON SECTION 34 [34.05] Outline Section 34 sets out the minimum content requirements for periodic statements of account which must be given by the credit provider to the debtor in accordance with Div 5 of Pt 2. Statements of account may

include additional information. It should be noted that the Code does not prescribe particular wording to be used to describe the information which is required to be disclosed in statements of account. The disclosure requirements of s 32 of the UCCC (s 34 of the Code) were considered in Flood v Police Department Employees’ Credit Union (1999) ASC ¶155-028 (tribunal) and Police Department Employees’ Credit Union Ltd v Flood (1999) ASC ¶155-034; [1999] NSWSC 885; BC9905483 (supreme court). The Commercial Tribunal of New South Wales and New South Wales Supreme Court considered the application of s 32 of the UCCC (s 34 of the Code) where a credit provider had incorrectly debited certain fees and charges. The supreme court held that s 32 of the UCCC (s 34 of the Code) requires a statement to accurately report [page 202] the state of the account as detailed in the credit provider’s records. This is the case even if the debit and credit entries set out in the credit provider’s records are not in accordance with the debtor’s contract. The statement must reflect what was actually done, even if what was done was contrary to the terms of the contract or contrary to the requirements of the Code. The statement must disclose the charges debited and amounts or payments credited, according to the credit provider’s records. The supreme court’s justification of this interpretation of s 32 of the UCCC (s 34 of the Code) is that the debtor can only be fully informed of the state of the account and in a position to take remedial steps if they receive in their statement full disclosure of what has occurred in the credit provider’s record. If unauthorised fees and charges are debited to an account, there will not necessarily be a consequential breach of the statement requirements in s 32 of the UCCC (s 34 of the Code) (see further [23.40]). The Supreme Court’s view that s 34(3) is a factual requirement, one that is there for providing information to the debtor, not only makes good common sense, it also recognises that unauthorised charges are better dealt with by specific provisions in the Code. The result is better for both parties. The

credit provider has an objective measure of what is required in the statement, and the debtor has information necessary to detect and correct errors and unauthorised charges. The clear purpose of s 34(3) under this interpretation is to provide information to the debtor, information that may be relevant for challenging some fees imposed. If unauthorised fees and charges are debited to an account, they will not necessarily be a consequential breach of the statement requirements in s 34. [34.10] Form The Code does not prescribe a statement form to be used by credit providers. [34.15] Print size Section 184(1) of the Code and reg 110 require that a “credit contract, mortgage or guarantee or a notice”, to the extent that it is printed or typed, must be in a print or type of “not less than 10 point”. The Code does not expressly state that this print size requirement applies to statements of account and information printed on statements of account. Section 184(1) itself does not specifically refer to statements. It seems, on balance, that the s 184 print size requirements do not apply to statements. The Code distinguishes between “notices” and “statements” (see s 180). Some provisions of the Code refer to “notices” only, and their context is such that those provisions are clearly not intended to extend to statements (eg, s 183(2)). [34.20] Statement period dates Section 34(2) requires the statement of account to contain the dates on which the statement period begins and ends. This may be achieved by including in the statement of account a reference to the “statement start date” and the “statement end date”, or by referring to the statement period as being “from” a particular date “to” a particular date. [34.25] Balances Section 34(3) requires the statement of account to contain the opening balance (being the amount owed on the first day of the statement period) and the closing balance (being the amount owed on the last day of the statement period). The statement of account need not refer to the “opening [page 203]

balance” or “closing balance” by name. An entry of the sort described as “balance brought forward” would clearly comply with the requirement for the statement of account to contain the opening balance. Similarly, an entry of the sort described as “balance” alongside the “statement end date” would clearly comply with the requirement for the statement of account to contain the closing balance. It should be noted that the opening balance shown in each successive statement of account must not exceed the closing balance shown in the last statement of account (see the commentary on s 35 at [35.05]). [34.30] “Particulars” of credit provided Section 34(4) requires the statement of account to include “particulars” of each amount of credit provided by the credit provider to the debtor during the statement period. Although it is not clear what the word “particulars” means in s 34, in the context of s 34(4) it would appear to require the statement of account to contain sufficient information in relation to each transaction which relates to the provision of credit such that a debtor can ascertain from the statement of account what the particular transaction relates to and the date of each such transaction. The requirements of s 34(4) may be met by showing on the statement of account each debit entry which relates to the provision of credit and a running balance of the account together with a description of each amount of credit provided. Credit providers may use descriptions such as “cash withdrawal”, “facility drawdown” and “loan advance” to comply with the requirements of s 34(4). Entries of the sort described as “miscellaneous withdrawal” and “miscellaneous debit” would not appear to comply with the requirement for the statement of account to contain “particulars” of each amount of credit provided during the statement period. However, it is open for a court or tribunal to find that the requirements of s 34(4) mean that the statement of account need only contain each amount of credit provided and the date that each amount of credit was provided. [34.35] Foreign currency transactions In relation to a foreign currency transaction, s 34(4) means that in addition to the information referred to at [34.25], the statement of account should also contain the amount of credit

provided in foreign currency and in Australian dollars. It is also arguable that s 34(4) requires the statement of account to contain the foreign currency conversion rate. However, this may not be essential to comply with s 34(4) as it might be possible for a debtor to calculate that rate by reference to the foreign currency transaction amount and the Australian dollar transaction amount, assuming all other information required by s 34 is shown on the statement. [34.40] Identity of supplier Section 34(5) requires the statement of account to contain the identity of the supplier if credit is provided for any cash, goods or services supplied by a person other than the credit provider in the case of a continuing credit contract under which credit is ordinarily obtained only by use of a card. The requirements of s 34(5) do not apply except in the case of a continuing credit contract. Additionally, where credit is ordinarily obtained under a continuing credit contract but not ordinarily only by use of a card (eg, the facility has cheque book access) the requirements of s 34(5) do not apply. Section 180 [page 204] provides some assistance in relation to the information required when identifying the supplier (see commentary on s 180 at [180.5]). This would include the business name, trading name or full legal name of the supplier. Statement of account entries such as “cash advance — ABC Bank Pty Ltd, Sydney” and “purchase — XYZ Hardware, Adelaide” are examples of entries that credit providers have adopted to comply with this requirement. [34.45] Interest charges Section 34(6)(a) requires the statement of account for a credit contract other than an SACC to contain the amount of the interest charge debited to the debtor’s account during the statement period and when the interest was debited. Although s 34(6)(a) only requires the statement of account to contain the amount of the interest charge debited to the account and when the interest charge was debited, it would appear to be safer to distinguish between “ordinary” interest charges and “default” interest charges. This would allow debtors to determine whether interest charges

including default interest charges have been correctly calculated in accordance with the requirements of the Code. Examples of statement entries which would comply with the requirements of s 34(6)(a) include “12/11/10 interest charge $300”, and “30/11/10 default interest charge $25”. [34.46] Small amount credit contracts Section 34(6) was amended by the Enhancements Act to exclude an SACC from the operation of that section. The Explanatory Memorandum explains (at para 5.38): 5.38

Subsection 34(6) of the Code prescribes requirements in relation to the disclosure of interest charges in a statement of account. The changes proposed in section 23A would mean that providers of small amount credit contracts will not be able to impose interest charges. As a result there is a consequent need to exempt small amount credit contracts from subsection 34(6). [Schedule 4, item 14, subsection 34(6)]

[34.50] Interest offset accounts The effect of reg 109(2) is that the statement of account must disclose the net interest charge debited to the account during the statement period where it is affected by a loan account offset arrangement. The statement of account must also show the amount by which the net interest differs from the interest charge that would otherwise have been payable under the credit contract if the interest charge had not been affected by the loan account offset arrangement. [34.55] Interest rates Section 34(6)(b) requires the statement of account to contain the annual percentage rate or rates (except for SACCs — see [34.46]) which includes any default rate which applied during the statement period. If the annual percentage rate (including any default rate which applied during the statement period) changed during the statement period and two or more different rates are applied to any part of the loan balance during the statement period, the credit provider must include in the statement of account all rates that applied to any part of the loan balance during the statement period. [34.60] Changes in interest rates Section 34(6)(b) also requires the statement of account to contain details of any change in the annual percentage rate [page 205]

or rates since the last statement period if required by Pt 4. The commentary on s 64 (see [64.05]) sets out the requirements of Pt 4 in relation to notification of interest rate changes. In summary, credit providers must give debtors notice of an increase in the annual percentage rate or rates either by written notice not later than the day on which the change in the annual percentage rate or rates takes effect, or by: publishing a notice in a newspaper circulating throughout each state and territory not later than the day on which the change in the annual percentage rate or rates takes effect; and giving the debtor particulars of the new annual percentage rate or rates and making it clear to the debtor that the rate has changed before or when the next statement of account is sent to the debtor after the change takes effect. If credit providers elect to notify debtors of changes in interest rates by newspaper advertisement, and by including in statements of account particulars of the new annual percentage rate or rates, they must adopt a statement entry which complies with the requirements of s 64(2). An example of an entry which credit providers have adopted to comply with this requirement is: Interest rate changed from X% to Y% effective Z where

X = the old interest rate; Y = the new interest rate; and Z = the date on which the change takes effect.

[34.61] “Debtor’s account” Where the debtor has more than one account with the credit provider (eg, a loan account and savings account), some confusion may arise as to the disclosure of interest payments in relation to the credit contract which are debited to an account other than the credit account (eg, debited to a savings account). The Code does not prohibit the debiting of interest charges and other fees and charges to an account other than the loan account. However, it is uncertain from the Code whether such an amount is “debited to the debtor’s account” within the meaning of s 34.

There is a good argument that a statement of account for a loan account need not disclose interest charges and other fees and charges which have not been debited to the loan account. However, this view is not free from doubt. There are two main areas of concern. First, s 34(6) is a key requirement where the loan is a continuing credit contract. Section 34(6)(a) provides that a statement of account must contain the amount of interest debited to the debtor’s account during the statement period and when the interest was debited. Section 34(7) provides that a statement of account must contain particulars of any fees and charges debited to the debtor’s account during the statement period. Second, s 34(8) (b) might be interpreted to require disclosure of these amounts. Section 34(8) (b) provides that a statement of account must contain particulars of any amount “transferred” to or from any other account maintained under or for the purposes of the credit contract. [page 206] In view of this, credit providers should err on the side of caution and either continue to debit these amounts to the loan account or, if the amounts are debited to another account, set out in its statement of account for the loan account the: amount of interest charged under the loan contract during the statement period; amount of each fee or charge charged under the loan contract during the statement period; details of the account to which the interest and fees and charges were debited; and date of each such debit. Note that this disclosure would not make it necessary to actually have transactions on the loan account in relation to these items. [34.65] Particulars of fees and charges Section 34(7) requires the statement

of account to contain particulars of any fees and charges debited to the debtor’s account during the statement period. Again, it is not clear what the word “particulars” means in this section. However, it is clear that an entry of the type described as “miscellaneous fee” would not comply with the requirements of this section. Credit providers must use statement entries which are sufficient to identify the fee or charge so that debtors can determine what the fee or charge relates to. To avoid any confusion in this regard, credit providers should use consistent fee descriptions on credit contracts and statements of account (ie, if the fee or charge is described in the credit contract, the same description should be used on the statement of account if that fee is debited to the account). It should be noted that the requirements of s 34(7) are not limited to credit fees and charges — they extend to any fees and charges debited to the account during the statement period whether they are or are not credit fees and charges. [34.70] Payments to or from the account Section 34(8)(a) requires the statement of account to contain particulars of each amount paid by the debtor to the credit provider, or credited to the debtor, during the statement period. This extends to each amount that was taken to be paid or credited to the debtor during the statement period in accordance with s 39 (see the commentary on statements of account and effective dating at [34.105]). The requirement to give “particulars” means that credit providers must include in statements of account sufficient information such that the debtor can ascertain from the statement of account what the particular transaction relates to. An entry of the type described as “miscellaneous deposit” would not comply with this requirement. [34.75] Multiple cheque deposits It is unclear whether a statement entry of the type described as “multiple cheque deposits” used where a number of cheque deposits are aggregated and only the total of those cheques is shown on the statement of account would comply with the requirements of s 34(8) (a). The term “particulars” suggests detailed information rather than a mere summary. In respect of a multiple cheque deposit, it appears that the statement of account must contain (at the very least) the date of the deposit and the amount of each chequedeposited. Obviously there are additional particulars of a cheque that could be given (eg, the date of the cheque, the

drawer, the bank on which the cheque is drawn and the cheque number) although it is unlikely that all of this information would be [page 207] required in order to comply with s 34(8)(a). [34.80] Information contained in more than one document There is uncertainty about whether credit providers can include in statements of account an entry of the type described as “as per separate credit advice” and include details of the credit transaction in a separate credit advice. It is clear that the entry “as per separate credit advice” would not of itself be sufficient “particulars” of the amount paid or credited to the debtor and would not comply with the requirements of s 34(8)(a). The Code does not contain any specific provision which clearly allows a credit provider to comply with s 34 by including the required information in two or more documents. If the separate credit advice is sent to the debtor separately, this would probably not comply with the requirements of this section as the statement of account will not contain sufficient particulars of each amount paid or credited to the debtor. On the other hand, it appears that there would be less risk of noncompliance if the statement of account was sent together with each separate credit advice referred to on the statement of account. In this case, it would be arguable that each separate credit advice would be viewed by a court or tribunal as constituting part of the statement of account and assuming that the separate credit advice contained sufficient particulars, the information contained in the credit advice and the statement of account arguably would comply with the requirements of s 34(8)(a). [34.85] Transfers Section 34(8)(b) requires the statement of account to contain particulars of any amount “transferred” to or from the account to which the statement relates, or to or from any other account maintained under or for the purposes of the credit contract. The use of the word “transferred” is somewhat puzzling. It seems to refer to something other than just “debits” and “credits”, because where “debits”

and “credits” are contemplated, the Code refers to them expressly (see, for example, the definition of “unpaid balance” in s 27). Perhaps it is intended to be wider than this, and refer, for example, to fees and charges that may arise in respect of the account but be debited to another account. It is also necessary to read down the literal meaning of s 34(8)(b) because, at its broadest, it could be interpreted to require an account statement under s 34 to include a full statement for every linked account (eg, a deposit account from which repayments are drawn). It appears that s 34(8)(b) requires sufficient information to be disclosed in the statement of account to allow the debtor to identify the origin and destination of transfers between accounts. While quoting an account number in the statement entry would certainly comply with this section, provided the statement of account gives the debtor sufficient information to identify the origin and destination of the transfer, the credit provider should comply with this requirement even if the statement entry does not include an account number. An entry of the type described as “2/11/10 transfer to account number XYZ $300” would clearly comply with the requirements of this section, although this is not the only type of entry which would comply with this requirement. [34.90] Minimum payment If a minimum amount is payable by the debtor under a continuing credit contract, the statement of account must contain a [page 208] statement of the amount and date by which it is due (s 34(9)). [34.95] Insurance payments If an amount is paid to an insurer during the statement period under a credit related insurance contract that is agreed to be financed under the credit contract, the statement of account must contain the: insurer’s name; kind of insurance; amount paid to the insurer; and

commission to be paid by the insurer (amount or percentage of premium, if ascertainable when the statement is given) if the credit provider is aware of any; (but only if this information has not been previously disclosed in the accordance with the Code) (s 34(10)). A change consistent with the amendment to s 15(N) of the UCCC (s 17(15) of the Code) (see [17.80]) was made to s 32(I) of the UCCC (s 34(10) of the Code) by the Consumer Credit (Queensland) Amendment Act 1998, which applies in situations where general insurance is provided as part of a creditrelated insurance policy. The amendment provides that it is sufficient if the identity of the general insurer is given, and the kind of insurance and total amounts of both premium paid and commission are disclosed. This reduced disclosure regime is optional, so credit providers may choose to fully disclose premiums and commissions paid to each insurer involved. For example, where both general and life insurance is financed by a consumer credit contract, the statement would only need to refer to the identity of the general insurer, the sum of the premiums payable and the sum of the commissions paid by the insurers. Further it would need to refer to the kinds of insurance provided (ie, that general and life insurance has been provided to the debtor). [34.100] Alterations The statement of account must contain any correction of information in a previous statement of account (s 34(11)). The effect of s 34(11) is that the statement of account must contain every correction (whether made on the same or on a different day to the date of processing the original entry to which the correction relates) for the period in which the effective date of the correction falls. The Consumer Credit (Queensland) Amendment Act 1998 did not introduce into the UCCC an equivalent of reg 63(4) under the UCCC. That regulation required details of any credit or debit adjustments made in one interest cycle in respect of interest accrued and debited in a previous interest cycle to be disclosed on the statement of account for the period in which the adjustment is made. Presumably this is because details of those adjustments are required to be disclosed anyway under s 34(11). (Note that statements of

account do not need to disclose an adjustment to interest that has accrued but not yet been debited to the account.) [34.105] Statements of account and effective dating Many credit providers “backdate” transactions when they are processed. That is, a transaction may have a processing date that is different from the date the transaction is treated as being “effective” for interest calculation purposes. The Code expressly [page 209] contemplates this. Section 39 states that a debit or a credit made by a credit provider to a debtor’s account is taken to have been made, and has effect on the date assigned to the debit or credit, not on the date on which it is processed (s 39(1)). Statements of account must show details of all transactions given an effective date that falls within the statement period (s 34(4) and (8)). For example, a statement for 1 May–31 May must show all debits and credits given an effective date of 1 May–31 May. Consequently, statement production should not take place until a sufficient time after the statement period ends to ensure that all transactions that in the ordinary course are given an effective date falling within that statement period (ie, all effective dated transactions other than one-off corrections and adjustments) are processed and can be included in the statement for that period (see also commentary on s 39). Effective dating may be prospective as well as retrospective. For example, a credit provider whose computer system processes transactions only five days a week may anticipate interest which is due to be debited on, say, a Saturday by debiting the interest on the preceding Friday and assigning this debit an effective date of the Saturday. This is permitted by the Code provided it is consistent with the credit contract, and does not result in the debtor paying more interest than permitted by the Code (s 39) (see [39.05] for a further discussion of effective dating). [34.106] Minimum repayment warning Regulation 79B was first enacted

by the National Consumer Credit Protection Amendment Regulations 2011 (No 6). That Regulation introduced a requirement for credit providers to provide a minimum repayment warning on the front page of a credit card statement. (See [R79B.05] for a further discussion of minimum repayment warning.) [34.110] Summary of content requirements — periodic statements Content

Section (Code)

The Code requires a periodic statement of account to contain: 1

Opening date: The date of the first day of the statement period. This may be achieved by including a reference to the “statement start date” or by referring to the statement period as being from “x” to “y” (where “x” is the date of the first day of the statement period).

s 34(2)

2

Statement date: The date of the last day of the statement period. This may be achieved by including a reference to the “statement end date” or by referring to the statement period as being from “x” to “y” (where “y” is the date of the last day of the statement period).

s 34(3)

3

Opening balance: The amount owed on the first day of the statement period. The statement does not need to refer to the “opening balance” by name (although such an entry would certainly comply with this Code requirement). An entry of the sort described as “balance brought forward” would also comply with this requirement.

s 34(3)

[page 210] 4

Closing balance: The amount owed on the last day of the statement period. The statement does not need to refer to the “closing balance” by name (although such an entry would certainly comply with this Code requirement). An entry of the sort described as “balance” alongside the “statement end date” would also comply with this requirement.

s 34(3)

5

Credit provided: Particulars of each amount of credit provided during the statement period. This requires the statement of account to contain sufficient information in relation to each transaction which relates to the provision of credit such that a debtor can ascertain from the statement of account what the particular transaction relates to and the date of each such transaction. This can be achieved by showing on the statement of account each debit entry which relates to the provision of credit and a running balance of the account together with a description of each amount of

s 34(4)

credit provided. Descriptions such as “cash withdrawal”, “facility drawdown” and “loan advance” may be used. Entries of the sort described as “miscellaneous withdrawal” and “miscellaneous debit” would not appear to comply with the requirement for the statement of account to contain “particulars” of each amount of credit provided. 6

Identity of supplier: The statement of account must contain the identity of the supplier if credit is provided for any cash, goods or services supplied by a person other than the credit provider in the case of a continuing credit contract under which credit is ordinarily obtained only by use of a card. These requirements only apply in the case of a continuing credit contract. Additionally, where credit is ordinarily obtained under a continuing credit contract but not ordinarily only by use of a card (eg, the facility has cheque book access) these requirements do not apply. Section 180 provides some assistance in relation to the information required when identifying the supplier. This would include the business name, trading name or full legal name of the supplier. Statement of account entries such as “cash advance — ABC Bank Pty Ltd, Sydney” and “purchase — XYZ Hardware, Adelaide” are examples of entries that credit providers have adopted to comply with this requirement.

s 34(5)

7

Interest charges: The amount of interest debited to the debtor’s account during the statement period and when it was debited. If default interest is to be charged by the credit provider in accordance with s 30(2) of the Code, the statement must distinguish between “ordinary” and “default” interest charges. This will enable debtors to determine from their statement of account whether interest charges have been calculated in accordance with the Code (in particular, s 30(2)). Examples of statement entries which would

s 34(6)(a), reg 109

[page 211] comply with the requirements of s 34(6)(a) include “12/11/10 interest charge $300”, and “30/11/10 default interest charge $25”. Where the interest charge is affected by an interest offset arrangement, the statement of account must disclose the net interest charge debited to the account during the statement period. It must also show the amount by which the net interest differs from the interest charge that would otherwise have been payable under the contract if the interest charge had not been affected by the interest offset arrangement.

reg 109

8

Interest charges: The annual percentage rate or rates and, if required by Pt 4 of the Code, details of any change since the last statement period (this requirement does not apply to SACCs — see [34.45] and [34.46]).

s 34(6)(b)

9

Annual percentage rate: The statement of account must contain the

s 64

annual percentage rate or rates (including any default rate) which applied during the statement period. If the annual percentage rate (including any default rate) changed during the statement period and two or more different rates are applied to any part of the loan balance during the statement period, the credit provider should include in the statement of account all rates that applied to any part of the loan balance during the statement period. In addition to this requirement, the credit provider must give debtors notice of an increase in the annual percentage rate or rates by written notice not later than the day on which the increase in the annual percentage rate or rates takes effect. This may be done by writing to the debtor or by: publishing a notice in a newspaper circulating throughout each state and territory not later than the day on which the increase in the annual percentage rate or rates takes effect; and giving the debtor particulars of the new annual percentage rate or rates and making it clear to the debtor that the rate has changed before or when the next statement of account is sent to the debtor after the increase takes effect. If a credit provider elects to notify debtors of changes in interest rates by newspaper advertisement and including in statements of account particulars of the new annual percentage rate or rates, it must adopt a statement entry which complies with the requirements of s 64(2). An example of an entry which may be adopted to comply with this requirement is: “Interest rate changed from X% to Y% effective Z” where: X = the old interest rate; Y = the new interest rate; and Z = the date on which the change takes effect. Section 69 states in effect that a credit provider may simply give notice of the new interest rate as long as:

s 69

[page 212] the notice makes it clear that the matter has changed; or a new set of terms and conditions for the credit contract is issued. 10

Fees and charges: Particulars of any fees and charges (including stamp duty and other government charges) debited to the account during the statement period. This requirement extends to any fees and charges debited to the account during the statement period whether or not they are “credit fees or charges” as defined in s 204 of the Code. Statement entries must be used which are sufficient to identify each fee or charge so that

s 34(7)

debtors can determine what each fee or charge relates to. Examples of such entries are “Application fee”, “Mortgage stamp duty” and “Transaction charge”. Consistent fee descriptions on credit contracts and statements of account should be used. 11

Payments: Particulars of each amount taken to have been paid by the debtor or credited to the debtor during the statement period. The requirement to give “particulars” of each amount paid by the debtor to the credit provider means that it must include in statements of account sufficient information such that the debtor can ascertain from the statement of account what the particular transaction relates to. An entry of the type described as “cash payment” or “cheque payment” would be a sufficient description of the transaction. However, an entry of the type described as “miscellaneous deposit” would probably not comply with this requirement. The requirements of s 34(8)(a) extend to each amount taken to be paid or credited to the debtor during the statement period in accordance with s 39.

ss 34(8)(a), s 39

12

Transfer: Particulars of any amount transferred to or from any account maintained under or for the purposes of the credit contract (including the account covered by the statement) (see [34.85]).

s 34(8)(b)

13

Amounts payable by debtor: If a minimum amount is payable by the debtor under a continuing credit contract, a statement of the amount and the date by which it is due.

s 34(9)

14

Insurance premiums and commissions: If an amount is paid to an insurer during the statement period under a credit related insurance contract that is agreed to be financed under the credit contract, the: insurer’s name;

s 34(10)

kind of insurance; amount paid to the insurer; and commission to be paid by the insurer (amount or percentage of premium, if ascertainable when the statement is given) if the credit provider is aware of any (if not previously disclosed in accordance with the Code). Where general insurance is provided as part of a credit related insurance policy, it is sufficient compliance with s 34(10) if the statement includes the name of the general insurer, the total amount payable to the insurers, the kind of insurance and the total commission to be paid by the insurers.

[page 213] The details required by s 34(10) must be included in the statement of account if they are not disclosed in the credit contract. 15

Corrections: Any correction of information in a previous statement of

account made during the statement period. The statement of account must contain every correction (whether made on the same or on a different day to the date of processing the original entry to which the correction relates) for the period in which the effective date of the correction falls. 16

Adjustments: Prior to the Consumer Credit (Queensland) Amendment Act 1998 and the Amending Regulation, reg 63(4) under the UCCC required credit providers to include in the statement of account any adjustment made to debits or credits to the debtor’s account during the statement period. Note: There is no equivalent provision under s 36A of the UCCC introduced by the amendment Act which replaced reg 63, nor under s 39 of the Code. Consequently, the Code does not replicate the former UCCC requirements to include in the statement of account any adjustments made to debits or credits to the debtor’s account during the statement period. However, a credit provider must still show adjustments if they are “corrections” (see 14 above and [34.100]).

17

Foreign currency transactions: In relation to a foreign currency transaction, s 34(4) means that, in addition to the information referred to at 5 above, the statement of account should also contain the amount of credit provided in foreign currency and in Australian dollars. It is also arguable that s 34(4) requires the statement of account to contain the foreign currency conversion rate. However, it may not be essential to comply with s 32(4) as a debtor may be able to calculate that rate by reference to the foreign currency transaction amount and the Australian dollar transaction amount.

ss 34(11) and 39

Opening balance must not exceed closing balance of previous statement 35 (1) [Restriction on opening balance] The opening balance shown in each successive statement of account must not exceed the closing balance shown in the last statement of account. Note: A penalty may be imposed for contravention of a key requirement in this section: see Part 6.

35 (2) [When particulars to be provided] However, if no statement of account was given for the previous period, the next statement of account required to be given by this Code may have an opening balance that exceeds the closing balance for the previous statement and must provide the

particulars referred to in subsections 34(4) to (12) in relation to any immediately preceding periods for which statements were not given. ________________________________________ [Editorial note: UCCC s 33 provided as follows:

[page 214] Opening balance must not exceed closing balance of previous statement 33 (1) [Restriction on opening balance] The opening balance shown in each successive statement of account must not exceed the closing balance shown in the last statement of account. 33 (2) [When particulars to be provided] However, if no statement of account was given for the previous period, the next statement of account required to be given by this Code may have an opening balance that exceeds the closing balance for the previous statement and must provide the particulars referred to in section 32(C)–(K) in relation to any immediately preceding periods for which statements were not given.]

COMMENTARY ON SECTION 35 [35.05] Outline Section 35 requires that the opening balance in a statement of account must not be more than the closing balance of the last statement unless no statement was required for the previous period (ie, one of the exceptions to the sending of a statement of account set out in s 33(3) applies). The only circumstances in which the opening balance could exceed the closing balance of the previous statements without breaching s 35 is if either s 33(3)(b), (c), (d) or (e) applied for one or more previous statement periods and consequently no statement was given for those periods. In those circumstances, if statements of account are again required to be given to a debtor under s 33, the particulars required by s 34(4)–(12) must also be provided in the next statement for the period when no statement(s) was given. [35.10] Key requirement Section 35 is a key requirement for continuing credit contracts (s 111(2)(h)).

Statement of amount owing and other matters 36 (1) [Content of statement] A credit provider must, at the request of a debtor or guarantor and within the time specified by this section, provide a statement of all or any of the following: (a) the current balance of the debtor’s account; (b) any amounts credited or debited during a period specified in the request; (c) any amounts currently overdue and the dates they became due; (d) any amount currently payable and the date it becomes due. Criminal penalty: 100 penalty units. [subs (1) am Act 130 of 2012 s 3 and Sch 1 items 31, 32, eff 1 Mar 2013]

36 (2) [Time for statement] The statement must be given: (a) within 14 days, if all information requested relates to a period 1 year or less before the request is given; or (b) within 30 days, if any information requested relates to a period more than 1 year before the request is given. 36 (3) [Oral statement; exceptions] A statement under this section may be given orally but if the request for the statement is made in writing the statement must be given in writing. 36 (4) [Joint debtors and guarantors] In the case of joint debtors or guarantors, the statement under this section need only be given to a debtor or guarantor who requests the statement and not, despite section 194, to each joint debtor or guarantor. 36 (5) [Further written statement] A credit provider is not required to provide a further written statement under this section if it has, within the 3 months before the request is given, given such a statement to the person requesting it.

[page 215] 36 (6) [Amounts credited, debited, overdue or payable] Except where otherwise ordered by the court on the application of the debtor or guarantor, a credit provider is not required to provide information in a statement under this section about amounts credited or debited, or which were overdue or payable, more than 7 years before the request is given unless those amounts are currently overdue and payable. 36 (7) [Strict liability offence] Subsection (1) is an offence of strict liability. Note: For strict liability, see section 6.1 of the Criminal Code.

________________________________________ [Editorial note: UCCC s 34 provided as follows: Statement of amount owing and other matters 34 (1) [Content of statement] A credit provider must, at the request of a debtor or guarantor and within the time specified by this section, provide a statement of all or any of the following — (a) the current balance of the debtor’s account; (b) any amounts credited or debited during a period specified in the request; (b) any amounts credited or debited during a period specified in the request; (d) any amount currently payable and the date it became due. Maximum penalty — 100 penalty units. 34 (2) [Time for statement] The statement must be given— (a) within 14 days, if all information requested relates to a period 1 year or less before the request is given; or (b) within 30 days, if any information requested relates to a period more than 1 year before the request is given. 34 (3) [Oral statement; exceptions] A statement under this section may be given orally but if the request for the statement is made in writing the statement must be given in writing. 34 (3A) [Joint debtors and guarantors] In the case of joint debtors or guarantors, the statement under this section need only be given to a debtor or guarantor who requests the statement and not, despite section 171, to each joint debtor or guarantor. 34 (4) [Further written statement] A credit provider is not required to provide a further written statement under this section if it has, within the 3 months before the request is given, given such a statement to the person requesting it. 34 (5) [Amounts credited, debited, overdue or payable] Except where otherwise ordered by

the Court on the application of the debtor or guarantor, a credit provider is not required to provide information in a statement under this section about amounts credited or debited, or which were overdue or payable, more than 7 years before the request is given unless those amounts are currently overdue and payable.]

COMMENTARY ON SECTION 36 [36.05] Outline Section 36 of the Code requires that a credit provider must be able to give a debtor or guarantor a statement showing any or all of: the current balance of the debtor’s account (s 36(1)(a)); any amounts credited or debited during a period specified in the request (this includes all credits and debits assigned an effective date falling within the period specified) (s 36(1)(b)) (see [39.15] for an explanation of the concept of “effective dating”); any amounts which are currently overdue and when each such amount became due (s 36(1)(c)); and any amount which is currently payable and the date it became due (s 36(1)(d)). The Enhancements Act amended the operation of s 36(1)(c) and (d) to clarify that any overdue amounts must be accompanied by notice of the date they became due, and amounts currently payable must be accompanied by notice of the date they are due. [page 216] [36.10] When given A statement on request must be able to be produced and given to the customer within the times required by the Code, namely: within 14 days, if all information requested relates to a period one year or less before the request is given; or otherwise, within 30 days, (s 36(2)). Note the requirements in s 196 for the giving of notices or other

documents, which would apply to statements required to be given under s 36 (see [196.05]). [36.15] Oral or written statements Credit providers may provide the information orally after an oral request but, if a written request is made, they must provide a written statement (s 36(3)). A credit provider should ensure its staff keep file notes of oral requests for statements under s 36 and of their oral response. This may protect credit providers from allegations of breaches of s 36. [36.20] Joint debtors or guarantors Where there are joint debtors or guarantors and one of the joint debtors or guarantors requests a statement under s 36, the credit provider need only provide the statement to that person (as opposed to all joint debtors or guarantors involved) (s 36(4)). This rule is not affected by the provisions of s 194. [36.25] Exception to written statements A written statement need not be given if: a written statement has already been given on request within the last three months in response to a request by the same person making the current request (s 36(5)); or the transactions occurred or amounts were due and payable more than seven years before and are not currently due and payable (unless a court orders otherwise). In this case, a credit provider only needs to state the current balance of the debtor’s account (s 36(6)). Read literally, s 36(5) would mean that a debtor would not be entitled to receive a s 36 statement if, within the preceding three months, the debtor had already requested and received a s 36 statement, even if the earlier s 36 statement related to different information. This cannot have been the intention of s 36(5), and the section should be read to mean that credit providers do not have to give a s 36 statement in relation to the same information that was contained in a s 36 statement given within the preceding three months. [36.30] Contents of statements The requirements in s 36(1) relating to the

content of statements on request raise the following issues: calculations — although not expressly required by the Code, the current balance of the debtor’s account should be calculated in a manner that is consistent with s 82, that is, by adding the amount of credit and all interest charges and other fees and charges payable by the debtor up to the date as at which the balance is given, and subtracting payments made under the contract up to that date (see [82.05]–[82.15]); and relevant amounts — credit providers are only required to give information about amounts which are currently overdue or payable as at the statement date (see s 36(1)(c) and (d)); however, if those amounts became overdue and payable before the period specified to be covered by the statement, the credit provider will need to show when and how those [page 217] amounts became overdue and payable. This disclosure may be complex if there has been a series of non-payments or part payments of instalments due. [36.35] Statement form The Code does not prescribe the form that a statement given under s 36 must take and nor does it prohibit such a statement containing additional information. It can therefore take any form. It could even take the form of a number of statements of account given under s 33, with the relevant information highlighted and a covering letter giving summary details. [36.40] Statements and effective dating Credit providers must ensure that statements produced under s 36 for a specified period are produced at a time by which all effective dated transactions assigned a date falling within that period have in the usual course been processed. Many credit providers “backdate” transactions when they are processed. That is, a transaction may have a processing date that is different from the date the transaction is treated

as being “effective” for interest calculation purposes. The Code expressly contemplates this. Section 39 states that a debit or a credit made by a credit provider to a debtor’s account is taken to have been made, and has effect, on the date assigned to the debit or credit, not on the date on which it is processed (s 39(1)). At the same time, credit providers must also comply with the Code’s requirements for the times by which a statement under s 36 must be given to a customer (s 36(1) and (2) and s 39) (see [39.05] for a further discussion of effective dating). This can cause difficulties if a transaction is to be effectively dated into the specified period, but the credit provider does not have the relevant information at the end of the deadline for providing the s 36 statement (this is unlikely to be common in practice). [36.45] Fees The Code does not prohibit a credit provider from charging a fee for producing a statement on request under s 36. However, any fee for producing the statement must be disclosed in the credit contract (and the precontractual statement) if it is a credit fee or charge (see [17.45]). [36.50] Penalty Failure to comply with s 36(1) carries a criminal penalty of up to 100 penalty units. Under the NCCP act regime changes, failure to comply with s 36(1) was made an offence of strict liability by the insertion of s 36(7). (See paras 17 and 18 of the “Overview of the National Credit Code” for commentary on penalty unit and strict liability offences.)

Court may order statement to be provided 37 If a statement is not provided within the time required by this Division, the court may, on the application of the debtor or guarantor, order the credit provider to provide the statement or itself determine the amounts in relation to which the statement was sought. ________________________________________ [Editorial note: UCCC s 35 — apart from numbering the section is unchanged.]

COMMENTARY ON SECTION 37

[37.05] Outline A court may, on the application of a debtor or guarantor, order a credit provider to provide a statement that has not been provided within [page 218] the time required by Div 5. Alternatively, the court can itself determine the amounts that would otherwise appear in the statements. [37.10] What statements are covered? It is unclear whether the reference to “statement” in s 37 refers to a statement required to be given under s 33, or a statement required to be given under s 36, or both. The Commercial Tribunal of New South Wales in Flood v Police Department Employees’ Credit Union (1999) ASC ¶155-028 said that “[s 35 of the UCCC (s 37 of the Code)] is preceded by s 34 [of the UCCC (s 36 of the Code)] and should be read in conjunction with it”, which, although not conclusive, tends to indicate that the tribunal considered that s 37 relates only to s 36. The use of the word “sought” at the end of s 37 also tends to support this view, because statements under s 33 (unlike s 36 statements) are not generally “sought”. [37.15] Effect of court determination It is also unclear what effect will be created if a court determines the amounts that would otherwise appear in the statements. Presumably, if the amounts are determined by a court, it will not be open to a credit provider to later issue a statement that contradicts those amounts.

Disputed accounts 38 (1) [Particulars of liability] If a debtor, by written notice to a credit provider, disputes a particular liability entered against the debtor under a credit contract, the credit provider must give the debtor a written notice explaining in reasonable detail how the liability arises.

38 (2) [Exceptions] A written notice need not be given if the credit provider agrees with the debtor as to the disputed amount and gives the debtor a written notice advising of the agreed liability. 38 (3) [Time for notice: continuing credit contract] If in the case of a continuing credit contract the disputed entry appears in a statement of account in which a date for payment of the amount of the account, or part of that amount, is shown, the notice of dispute must be given to the credit provider on or before that date. 38 (4) [Time for notice: other] In the case of any other credit contract for which a statement of account is given, the notice of dispute must be given to the credit provider within 30 days after the day the debtor receives the statement of account in which the amount, or part of that amount, is first shown. [subs (4) am Act 130 of 2012 s 3 and Sch 1 item 33, eff 1 Mar 2013]

38 (5) [Time for notice: no statement of account] In the case of a credit contract in respect of which a statement of account need not be and is not given for the period to which the disputed liability relates, the notice of dispute must be given to the credit provider not later than 3 months after the day the contract ends. [subs (5) am Act 130 of 2012 s 3 and Sch 1 item 34, eff 1 Mar 2013]

38 (6) [Enforcement proceedings] The credit provider must not begin enforcement proceedings on the basis of a default arising from the disputed liability until the period of 30 days, starting on the day the credit provider gives the written explanation or advice as to agreement, has expired. Criminal penalty: 50 penalty units. [subs (6) am Act 130 of 2012 s 3 and Sch 1 items 35, 36, eff 1 Mar 2013]

[page 219] 38 (7) [Application to court] A debtor or credit provider may apply to the court to have the court determine a disputed liability and, if satisfied that a

liability is genuinely disputed, the court may determine the matters in dispute and make such consequential orders as it thinks just. 38 (8) [Leave to commence proceedings] If an application is made to the court under this section within 30 days after the explanation is given, the credit provider must not, without leave of the court, begin enforcement proceedings on the basis of a default arising from the disputed liability. Criminal penalty: 50 penalty units. 38 (9) [Strict liability offence] Subsections (6) and (8) are offences of strict liability. Note: For strict liability, see section 6.1 of the Criminal Code. [subs (9) am Act 130 of 2012 s 3 and Sch 1 item 37, eff 1 Mar 2013]

38 (10) [Effect on other disputes] This section does not affect a dispute not dealt with, or not arising, under this section. ________________________________________ [Editorial note: UCCC s 36 provided as follows: Disputed accounts 36 (1) [Particulars of liability] If a debtor, by written notice to a credit provider, disputes a particular liability entered against the debtor under a credit contract, the credit provider must give the debtor a written notice explaining in reasonable detail how the liability arises. 36 (2) [Exceptions] A written notice need not be given if the credit provider agrees with the debtor as to the disputed amount and gives the debtor a written notice advising of the agreed liability. 36 (3) [Time for notice: continuing credit contract] If in the case of a continuing credit contract the disputed entry appears in a statement of account in which a date for payment of the amount of the account, or part of that amount, is shown, the notice of dispute must be given to the credit provider on or before that date. 36 (4) [Time for notice: other] In the case of any other credit contract for which a statement of account is given, the notice of dispute must be given to the credit provider within 30 days of receiving the statement of account in which the amount, or part of that amount, was first shown. 36 (4A) [Time for notice: no statement of account] In the case of a credit contract in respect of which a statement of account need not be and is not given for the period to which the disputed liability relates, the notice of dispute must be given to the credit provider not later than 3 months after the end of the contract. 36 (5) [Enforcement proceedings] The credit provider must not begin enforcement

proceedings on the basis of a default arising from the disputed liability until at least 30 days have elapsed from the time the written explanation or advice as to agreement was given. 36 (6) [Application to Court] A debtor or credit provider may apply to the Court to have the Court determine a disputed liability and, if satisfied that a liability is genuinely disputed, the Court may determine the matters in dispute and make such consequential orders as it thinks just. 36 (7) [Leave to commence proceedings] If an application is made to the Court under this section within 30 days after the explanation is given, the credit provider must not, without leave of the Court, begin enforcement proceedings on the basis of a default arising from the disputed liability. Maximum penalty — 50 penalty units. 36 (8) [Effect on other disputes] This section does not affect a dispute not dealt with, or not arising, under this section.]

COMMENTARY ON SECTION 38 [38.05] Outline A debtor (but not a guarantor) may dispute a liability under a credit contract by written notice: under a continuing credit contract — before the due date on the statement of account (s 38(3)); under any other contract where a statement has been issued, within 30 days of receiving the statement of account on which the liability was first shown (s 38(4)); or [page 220] under any contract where a statement of account did not need to be and was not issued for the period to which the dispute relates — within three months after the end of the contract (s 38(5)). If the credit provider agrees with the debtor as to the disputed amount, it need only give a written notice of the agreed liability (s 38(2)). If the credit provider does not agree, it must give a written notice explaining in reasonable detail how the liability arises (s 38(1)). Section 38 deals with the procedures to be followed where a particular liability is disputed by the debtor. Section 38(3) deals with disputes relating to continuing credit contracts. Section 38(4) provides that, where a statement

has been issued in respect of the disputed account, the notice of dispute must be given to the credit provider within 30 days from when the statement that first showed the amount that is in dispute was issued. [38.10] Enforcement proceedings The credit provider cannot begin enforcement proceedings until 30 days after it gives the written explanation or agrees the amount (s 38(6)). The Code does not give any remedy to a credit provider dealing with the situation where a debtor may continuously dispute particular liability so as to prevent enforcement proceedings. [38.15] Court resolution If either the debtor or credit provider asks the court, within 30 days after the written explanation is given by the credit provider, to decide on the disputed liability, the credit provider may only enforce the liability with the leave of the court (s 38(8)). The court can determine the matters in dispute and make consequential orders (s 38(7)). Failure to comply with s 38(8) carries a criminal penalty of 50 penalty units. Under the NCCP Act regime changes, failure to comply with s 38(8) was made an offence of strict liability by the insertion of s 38(9). (See paras 17 and 18 of the “Overview of the National Credit Code” for commentary on penalty units and strict liability offences.) [38.20] Effect of application under s 112 The Commercial Tribunal of New South Wales in Flood v Police Department Employees’ Credit Union (1999) ASC ¶155-028 was of the view that “s 36 [of the UCCC (s 38 of the Code)] should be construed so as not to apply in circumstances where either of the parties to the credit contract have a [sic] [s 101 of the UCCC (s 112 of the Code)] application before the tribunal in relation to the point raised”. The tribunal was of the view that s 101 of the UCCC (s 112 of the Code) is the “central dispute resolution mechanism” under the Code, and that the other dispute resolution mechanisms in the Code (such as s 36 of the UCCC (s 38 of the Code)) should be treated as subsidiary to s 101 of the UCCC (s 112 of the Code) so as to assist “in the orderly resolution of disputes”. [38.25] Form of notice The tribunal in Flood considered whether a notice of disputed liability under s 36 of the UCCC (s 38 of the Code) should contain an express indication that it is given under s 36 of the UCCC (s 38 of the

Code). The tribunal said: “While it is not essential under s 36 [of the UCCC (s 38 of the Code)] that there be such an indication, the absence of such an indication in a letter written by a solicitor (as distinct from the debtor) is a factor which weighs against a conclusion that the dispute is one arising under the section”. [page 221] [38.30] External dispute resolution and the courts It is not clear how s 38 will interact in practice with the NCCP Act regime’s EDR scheme requirements (see para 5.7 of the “Overview of the National Consumer Credit Protection Act (NCCP Act) regime”). The intention of the legislation in relation to this question is set out in the explanatory memorandum to the NCCP Act (at paras 4.6–4.9). The explanatory memorandum to the NCCP Act notes that state tribunals no longer have jurisdiction to hear Code cases (see [112.06]). There was therefore some concern that it would be too costly for consumers to bring disputes before the courts which have jurisdiction to hear Code cases. According to the explanatory memorandum (at para 4.9), the new dispute resolution framework seeks to address those concerns and: … wherever possible, parties will be encouraged to resolve disputes without resorting to litigation. It is expected that courts would generally only be utilised where internal dispute resolution and external dispute resolution processes have not resolved the matter, or where external dispute resolution is considered inappropriate.

Dating and adjustment of debits and credits in accounts 39 (1) [Date when credit or debit has effect] For the purposes of this Code and the credit contract, a debit or a credit made by a credit provider to a debtor’s account is taken to have been made, and has effect, on the date assigned to the debit or credit, not on the date on which it is processed.

39 (2) [Adjustment] A credit provider may subsequently adjust debits or credits to a debtor’s account, and the account balances, so as to accurately reflect the legal obligations of the debtor and the credit provider. 39 (3) [Exceptions] However, subsections (1) and (2) do not permit a debit or a credit to be assigned a date other than the date on which it is processed, or the subsequent adjustment of a debit or a credit or account balance, if: (a) the assignment or adjustment is not consistent with the credit contract; or (b) the adjustment results in an interest charge that is more than the maximum amount permitted by the Code, as calculated on the basis of debits or credits to a debtor’s account consistent with the credit contract; or (c) the assignment or adjustment results in a contravention of section 26; or (d) the assignment of the date on which an interest charge is taken to be debited results in a debit being taken to be done before a time permitted under this Code. 39 (4) [Effect on liability] An adjustment by a credit provider under subsection (2) does not affect any liability of a credit provider under Part 6. ________________________________________ [Editorial note: UCCC s 36A provided as follows: Dating and adjustment of debits and credits in accounts 36A (1) [Date when credit or debit has effect] For the purposes of this Code and the credit contract, a debit or a credit made by a credit provider to a debtor’s account is taken to have been made, and has effect, on the date assigned to the debit or credit, not on the date on which it is processed. 36A (2) [Adjustment] A credit provider may subsequently adjust debits or credits to a debtor’s account, and the account balances, so as to accurately reflect the legal obligations of the debtor and the credit provider. 36A (3) [Exceptions] However, subsections (1) and (2) do not permit a debit or a credit to be assigned a date other than the date on which it is processed, or the subsequent adjustment of a debit or

[page 222] a credit or account balance, if— (a) the assignment or adjustment is not consistent with the credit contract; or (b) the adjustment results in an interest charge that is more than the maximum amount permitted by the Code, as calculated on the basis of debits or credits to a debtor’s account consistent with the credit contract; or (c) the assignment or adjustment results in a contravention of section 24; or (d) the assignment of the date on which an interest charge is taken to be debited results in a debit being taken to be done before a time permitted under this Code. 36A (4) [Effect on liability] An adjustment by a credit provider under subsection (2) does not affect any liability of a credit provider under Part 6.]

COMMENTARY ON SECTION 39 [39.05] Outline Section 36A of the UCCC (s 39 of the Code) was inserted by the Consumer Credit (Queensland) Amendment Act 1998 (Qld) and effectively incorporates the provisions of reg 63 under the UCCC. As explained in the explanatory notes to the Consumer Credit (Queensland) Amendment Act 1998, the principal purpose of that section was to ensure that the Code does not prohibit the practice of “effective dating” of entries in debtors’ accounts. Under s 39, a debit or credit is taken to have been made by a credit provider on the date assigned to it by the credit provider. A credit provider may later adjust debits and credits where necessary to reflect the legal obligations of the parties. Prior to this amendment, the UCCC was silent on two practical issues associated with the processing of transactions to a debtor’s account. One is the practice known as “effective dating”, and the other is the treatment of corrections to customers’ accounts. Section 39 (incorporating the former reg 63) makes provision for both. [39.10] Regulation 63 under the UCCC Section 39 incorporates the substance of the former transitional reg 63 under the UCCC. However, no equivalent to reg 63(4) has been implemented. Regulation 63(4) stated that “a statement of account must set out any adjustments made under this section

during the statement period”. Presumably, the omission of the substance of reg 63(4) is because adjustments are disclosable in statements of account under s 34(11) anyway (see [34.100]). In addition, no equivalent to the former transitional reg 63(6) under the UCCC has been implemented. This provided that reg 18 under the UCCC (reg 77 of the Code) was not affected by the provisions of reg 63. Regulation 77 of the Code states that a credit provider may debit the first interest payment to an account before it is due in certain circumstances (see [29.05]–[29.15] and commentary on reg 77). This omission is of no significance. Regulation 63(6) under the UCCC itself simply stated what would have been the case if that regulation had not been made. [39.15] Effective dating Effective dating occurs when a credit provider treats a transaction as having been made on a date other than the date on which the transaction is actually processed by the credit provider. For example, a payment made by a customer on a non-business day (perhaps by making a deposit on a weekend through an automatic teller machine) may not be processed by the credit provider until the next business day, but the credit provider may nevertheless treat [page 223] the payment as having been made on the date it was actually made (ie, on the non-business day) — the credit provider gives the transaction an “effective date” of the non-business day. Effective dating may also occur where a credit provider corrects an error in previous processing. For example, if a debtor makes a withdrawal from an account of $100 on 1 April, but this is incorrectly recorded and processed as a withdrawal of $110 and the mistake is not discovered until 6 April, the credit provider may reverse the incorrect $110 entry and in its place record, effective on 1 April, the correct withdrawal of $100. However, corrections do not necessarily have to involve effective dating (see below). Section 39 expressly permits credit providers to give effective dates to

transactions. In the absence of s 39, s 27 of the Code would appear to prevent effective dating, because s 27 defines “unpaid daily balance” to be the unpaid balance at the end of the day. Interpreted literally, this would mean the unpaid balance actually recorded at midnight on that day, and it does not appear to contemplate subsequent adjustments or corrections. Other interpretations of s 27 are available but s 39 removes doubt as to which interpretation is correct. If a credit provider does “effective date” a transaction, s 39 provides as follows: For the purposes of the Code, the transaction is regarded as having occurred on its effective date, and the date on which it was actually processed is irrelevant. This is subject to the requirements set out in the bullet point immediately below. Section 39(1) is expressed to apply “for the purposes of the Code”, which would include all purposes in connection with the Code. The credit provider’s right to assign a date to a transaction is subject to the general requirements of the Code, and must also be consistent with the credit contract. In particular: —

the credit contract should expressly contemplate that transactions may be assigned an effective date which is the same as or different from the date on which the transaction is actually processed. This will help to ensure compliance with s 39(3)(a) and (b); and

—

effective dating must not result in an infringement of the sections of the Code dealing with crediting of payments (s 26), the maximum permitted amount of interest charges (s 28) and the charging of interest in advance (s 29).

Interest must be calculated and charged on the basis of the transaction’s “effective date”. This may require an adjustment of interest accrued and/or debited between the effective date and the processing date. Failure to do so may lead to a breach of s 28. Credit providers are not expressly required by the Code to “effective date” all transactions, although s 26 does require payments to be credited to the

debtor as soon as practicable after they are actually made. It is not clear how ss 26 and 39 are to be read together, but the better view would seem to be that, provided the credit contract is clear on the matter, transactions effected on a non-business day may be processed and made effective on the next business day (but not later). Credit providers who effective date transactions must also take care when producing account statements, because s 34 requires account statements to show all transactions that took place within a statement period, and the effect of s 39(1) is that transactions may fall within a statement period for the purposes of the Code, even though they are not processed until some time later (see [34.110]). [page 224] [39.20] Corrections Without s 39 it would be unclear how credit providers should deal with corrections of entries previously made to a debtor’s account. The same principles apply to account corrections as to effective dating, namely that corrections must be consistent with the credit contract (ie, they may be made only if the result is that originally envisaged by the credit contract) and with the Code (ie, corrections must not lead to infringement of the provisions of the Code dealing with payments and interest such as ss 23–31). Making a correction to an account may, but does not necessarily have to, involve effective dating. A correction made in the manner described at [39.15] involves the credit provider “reconstructing” its records so that after the correction the account, on its face, will show no evidence of the error and subsequent correction. However, a credit provider may also correct an error by making an adjustment to the account on a subsequent date, but without “reconstructing” the account. In the example given above, the credit provider might adjust the customer’s account to correct the error, by showing a credit of $10 on 6 April, and an interest adjustment (also dated 6 April) to correct the effect of the initial error. In both cases, after 6 April the customer will be in the same position as if the error had not been made, but the customer’s account record will look different depending on which approach is adopted by the credit provider. Although an account correction does not have to be effective dated, interest calculations will have to be adjusted if

necessary to comply with the other provisions of the Code. Adjustments of interest which have already been debited to the debtor’s account must be shown on the account statement for the period during which the adjustment was made (see [34.100]).

DIVISION 5A — ADDITIONAL RULES RELATING TO SMALL AMOUNT CREDIT CONTRACTS [Div 5A insrt Act 130 of 2012 s 3 and Sch 4 item 15, eff 1 July 2013]

Limit on the application of amount of credit provided under a small amount credit contract 39A (1) No part of the amount of credit provided under a small amount credit contract may be applied to pay an amount (the prohibited credit amount) to: (a) the credit provider; or (b) a person prescribed by the regulations. 39A (2) Subsection (1) does not apply to: (a) an amount of a permitted establishment fee, or a permitted monthly fee, payable in relation to the small amount credit contract; or (b) an amount of a government fee, charge or duty payable in relation to the small amount credit contract; or (ba) if some or all of the amount of credit (the refinanced amount) is to refinance some or all of the amount of credit provided by the credit provider to the debtor under another small amount credit contract — the refinanced amount; or (c) an amount prescribed by the regulations. 39A (3) If subsection (1) is contravened in relation to a small amount credit

contract: (a) the debtor is not liable (and is taken never to have been liable) to repay the prohibited credit amount to the credit provider; and (b) the debtor may recover as a debt due to the debtor any amount paid to the credit provider to the extent that it relates to the prohibited credit amount. [page 225] COMMENTARY ON SECTION 39A [39A.05] Outline See commentary on s 23A for a description of the NCCP Act and the Code requirements for the SACCs regime introduced by the Enhancements Act. The Explanatory Memorandum to the Enhancements Act explains (at paras 5.39–5.45): 5.39

A credit provider under a small amount credit contract (or any person prescribed by the regulations) will be prohibited from receiving any part of the amount of the credit provided under the contract. [Schedule 4, item 15, subsection 39A(1)]

5.40

Any amount of credit provided under the contract retained or paid to the credit provider or to any person prescribed by the regulations is defined as a prohibited credit amount. [Schedule 4, item 25, subsection 204(1)]

5.41

The intention of this prohibition is to address existing practices that have developed following the introduction of similar caps on credit contracts in some States and the Australian Capital Territory. The purpose of the provision is to prevent credit providers from increasing the amount that must be paid by the debtor under the contract through, for example, practices such as requiring the debtor to also purchase goods or services at inflated prices, with the cost of those goods or services included in the amount of credit provided under the contract.

5.42

This practice enables a credit provider to obtain a higher return in two ways: first, the debtor must pay an inflated price for the goods relative to the cost to the credit provider of providing them; and, second, the debtor pays interest on the cost of the goods or services.

5.43

Similar arrangements between credit providers and third parties have developed to avoid the restriction on costs, so that the amount of credit is increased by fees or amounts payable to those third parties (with commercial arrangements between those parties in relation to the charging of the fees or costs). The regulation-making power, that will enable payments to prescribed third parties to be included in the prohibited credit amount, will enable the Government to respond promptly to any such practices. [Schedule 4, item 15, paragraph 39A(1)(b)]

5.44

Subsection 39A(2) provides that this prohibition does not apply to the permitted establishment and monthly fee, government fees or charges or to any types of payments permitted by regulations (so that credit providers can include those charges in the amount of credit provided (although subject to other restrictions). [Schedule 4, item 15, subsection 39A(2)]

5.45

The regulation-making power will enable exemptions from the prohibition to be made where it would be appropriate for the credit provider to pass on the cost to the debtor. [Schedule 4, item 15, paragraph 39A(2)(c)]

Limit on amount that may be recovered if there is default under a small amount credit contract 39B (1) If there is a default in payment under a small amount credit contract, the maximum amount that may be recovered (whether by repayments under the contract or otherwise) by the credit provider in relation to the contract must not exceed an amount that is twice the adjusted credit amount in relation to the contract. [page 226] 39B (2) Any provision of the small amount credit contract that confers a greater right is void to the extent that it does so. If an amount is in fact recovered in excess of this limitation, it may be recovered back. 39B (3) This section does not apply to enforcement expenses. COMMENTARY ON SECTION 39B [39B.05] Outline1 See commentary in s 23A for a description of the NCCP Act and Code requirements for the SACCs regime introduced by the Enhancements Act. The Explanatory Memorandum to the Enhancements Act explains (at paras 5.46–50.50): 5.46

The effect of Section 39B is to cap the amount the credit provider can charge by way of default fees, by specifying that the maximum amount that can be recovered under a contract in the event of default by the borrower must not exceed an amount that is twice the adjusted credit amount. [Schedule 4, item 15, subsection 39B]

5.47

The effect of this provision is that the total of the permitted establishment and monthly fees and the default fees can, at most, only be equal to twice the adjusted credit amount. For example, in relation to a small amount credit contract where the adjusted credit amount was $1000 and the period of the contract was four months, the total of the establishment and monthly fees would be $180. If the debtor then defaulted the total amount the credit provider could recover would be $1000, or a maximum of $820 in default fees.

5.48

If a term of a small amount credit contract allows the credit provider to recover default fees in excess of the maximum amount, that term or provision is void to the extent it authorises the credit provider to collect the excess. The credit provider would, however, still be allowed to receive or retain default fees up to the maximum amount. [Schedule 4, item 15, subsection 39B(2)]

5.49

The rate at which default fees can be charged is not regulated by the Enhancements Bill. However, credit providers would be subject to other requirements that apply more broadly (including common law principles that the default fees must reflect their loss from any default by the debtor).

5.50

The restriction on the maximum amount that can be recovered under a contract — so that this figure must not exceed an amount that is twice the adjusted credit amount — does not apply to enforcement expenses. [Schedule 4, item 15, subsection 39B(3)]

1 The example in the Explanatory Memorandum discusses the proposed limits of an establishment fee of 10 per cent and monthly fees of 2 per cent. These fees were revised to 20 per cent and 4 per cent respectively in the Enhancements Act.

Credit provider must do prescribed things if a default in payment by direct debit occurs 39C (1) If: (a) the amount of repayments under a small amount credit contract are to be paid by way of direct debit; and (b) the direct debit has been authorised by the debtor; and (c) a default in the payment of an amount of a repayment occurs; the credit provider must do the things prescribed by the regulations. Criminal penalty: 50 penalty units. 39C (2) In this section, direct debit has the same meaning as in section 87.

[page 227] COMMENTARY ON SECTION 39C [39C.05] Outline See commentary in s 23A for a description of the NCCP Act and Code requirements for the SACCs regime introduced by the Enhancements Act. Section 39C was introduced by the Enhancements Act.

DIVISION 6 — CERTAIN TRANSACTIONS NOT TO BE TREATED AS NEW CONTRACTS [Div 6 subst Act 130 of 2012 s 3 and Sch 1 item 38, eff 1 Mar 2013]

Changes etc under contracts 40 If: (a) there is: (i)

a change to an existing credit contract that results in further credit being provided; or

(ii) a deferral or waiver of an amount under an existing credit contract; or (iii) a postponement relating to an existing credit contract; and (b) the change, deferral, waiver or postponement is made in accordance with this Code or the existing credit contract; then the change, deferral, waiver or postponement is not to be treated as creating a new credit contract for the purposes of this Code. ________________________________________ [Editorial note: UCCC s 37 — apart from numbering the section is unchanged.]

COMMENTARY ON SECTION 40

[40.05] Outline Section 40 makes it clear that a change to a credit contract, or a deferral or waiver or postponement of an amount under a credit contract, does not create a new credit contract. This applies only if the change, deferral, waiver or postponement complies with the Code’s requirements or is made in accordance with the contract itself. This is an important provision as it makes it clear that changes, deferrals, waivers or postponement of this kind do not require the contract formation provisions of the Code to be followed again. The Enhancements Act amended s 40 to clarify its operation and ensure consistency with s 175J, which applies to consumer leases (see [40.15]). [40.10] “Credit contract” Section 40 is expressed to apply only to “credit contracts” — contracts for the provision of credit to which the Code applies (s 4). This suggests that s 40 does not apply where the credit provided under the original credit contract was not credit of a kind to which the Code applies (but which later becomes credit to which the Code applies). Accordingly, if credit is initially provided under a contract which is not regulated by the Code and, pursuant to a variation to that contract, credit is subsequently provided in circumstances where the Code does apply, the contract formation provisions of the Code (eg, ss 14–22) will apply to the subsequent provision of credit. For example, if credit is provided under a contract for less than 62 days (in circumstances where it would not be subject to the Code: s 6(1)), and that contract is subsequently varied to extend the [page 228] period to, say, six months, the variation should be treated as if it were a new contract. Merely satisfying the requirements of Pt 4 will not comply with the Code. If an amount of credit or credit limit is increased under a credit contract, and the Code’s requirements for the increase are not complied with (see [67.15] and [71.20]), the effect of s 40 is that the provision of the increased credit is pursuant to a new credit contract. In these circumstances, a credit provider will breach s 67(4) (increase in credit limit) or s 71(3) (increase in

amount of credit) (as applicable) and the ss 16 and 17 precontractual and contractual disclosure requirements. [40.15] Consumer leases See commentary on s 175J. Prior to the Enhancements Act, s 40 included a provision (s 40(2)) stating that an existing credit contract in the context of s 40 included an existing consumer lease. The Enhancements Act repealed s 40(2) and introduced s 175J dealing with changes to consumer leases.

[page 229]

Part 3 — Related mortgages and guarantees DIVISION 1 — MORTGAGES Application of Division 41 This Division applies to a mortgage (under which the mortgagor is a natural person or a strata corporation) which secures obligations under a credit contract or related guarantee, whether or not it also secures other obligations (see section 7). ________________________________________ [Editorial note: There was no comparable UCCC provision.]

COMMENTARY ON SECTION 41 [41.05] Outline The Code applies only to mortgages given by individuals or strata corporations to the extent they secure credit contracts or guarantees which are regulated by the Code (s 7). Therefore, the Code will not apply to all mortgages granted by individuals; it will apply only to mortgages granted by individuals which secure amounts due under: credit contracts with individuals or strata corporations where the credit is for personal, domestic or household purposes or for the purpose of purchasing, renovating or improving residential property for investment purposes (or to refinance such residential investment credit); and guarantees given by individuals or strata corporations in support of such credit contracts. For example, the Code would not regulate a mortgage provided by a

director of a company to secure (via a guarantee) a loan to the company nor would it apply to a mortgage given by a company to secure (via a guarantee) a loan given to a director.

Form of mortgage 42 (1) [Signed document in writing] A mortgage must be in the form of a written mortgage document that is signed by the mortgagor. 42 (2) [Compliance] It is sufficient compliance with subsection (1) if: (a) the mortgage is contained in a credit contract signed by the mortgagor; or (b) one of the documents comprising the mortgage document is signed by the mortgagor (and the other documents are referred to in the signed document). 42 (3) [Goods mortgage] However, a goods mortgage need not be in the form of a written mortgage document if the credit provider lawfully had possession of the goods that are subject to the mortgage before the mortgage was entered into, otherwise than because the credit provider supplied the goods (for example, the goods were held by way of security). 42 (4) [Enforceability] A mortgage is not enforceable unless it complies with this section. [page 230] ________________________________________ [Editorial note: UCCC s 38 — apart from numbering the section is unchanged.]

COMMENTARY ON SECTION 42 [42.05] Outline See [41.05].

[42.10] Definition “Mortgage” is defined in s 204 of the Code to include: any interest in, or power over, property securing obligations of a debtor or guarantor; a credit provider’s title to land or goods subject to a sale by instalments; or certain contracts containing options to purchase goods, but does not include a consumer lease. Paragraph (a) of the definition covers interests in and powers over any land, goods, choses in action, money or other property (see definition of “property” in s 204 of the Code). The effect of para (a) of the definition of “mortgage” and the limited exclusion for a banker’s rights to combine accounts referred to at [42.15] below is that a contractual right of set-off should be treated as a mortgage for the purposes of the Code. Although a contractual right of set-off does not create a proprietary interest in a deposit (Re Charge Card Services Ltd [1987] Ch 150; [1986] 3 All ER 289; [1986] 3 WLR 697 and Re Bank of Credit & Commerce International SA (No 8) [1996] Ch 245; [1996] 2 All ER 121; [1996] 2 WLR 631 (CA); affirmed in Re Bank of Credit & Commerce International SA (No 8) [1998] AC 214; [1997] 4 All ER 568; [1997] 3 WLR 909; (1997) 15 ACLC 3107 (HL)), it would fall within the wide definition in para (a) of the definition of “mortgage” in s 204 and outside the exemption in para (b) of reg 64(1) (see also commentary on reg 64). The effect of para (b) of the definition of “mortgage” is that a reservation of title to land sold under a terms contract or goods the subject of a conditional sale contract will be treated as a mortgage. Goods mortgage usually a PPSA “security interest” A Code-regulated mortgage of goods will usually be a “security interest” that is eligible for registration under the PPSA, and will usually be a security interest in “consumer property” under the PPSA. Contractual right of set-off is a “mortgage” for the purposes of the Code

A contractual right of set-off should be treated as a mortgage for the purposes of the Code. This is because it would fall: within the wide definition in para (a) of the definition of “mortgage” in s 204; and outside the exemption in para (b) of reg 64(1) (under which a banker’s right to combine accounts is deemed to not be a “mortgage” under the Code). This position may be contrasted with the treatment of contractual rights of set-off under the PPSA. Under the PPSA, neither a contractual right of set-off nor a right to combine accounts is a security interest (PPSA s 8(1)(d)), although a [page 231] “flawed asset” (such as a deposit where withdrawal is subject to a condition, or at the discretion of the financial institution) would be a security interest if it in substance secures payment or fulfilment of an obligation). The PPSA position that a flawed asset may be a security interest has clarified the position of contractual “letters of set-off” as customarily used in consumer financial transactions (where deposited funds could not be withdrawn without the consent of the credit provider and could be set off against a debit balance in certain circumstances). Some earlier case law had made the status and effect of these arrangements uncertain (see Re Charge Card Services Ltd [1987] Ch 150; [1986] 3 All ER 289; [1986] 3 WLR 697 and Re Bank of Credit and Commerce International SA (No 8) [1996] Ch 245; [1996] 2 All ER 121 (CA); [1996] 2 WLR 631; affirmed in Re Bank of Credit and Commerce International SA (No 8) [1998] AC 214; (1997) 15 ACLC 3107; [1997] 4 All ER 568; [1997] 3 WLR 909 (HL)). In the case of the rights of an ADI over a deposit by way of flawed asset (eg, possibly where the depositor’s right to call for repayment is subject to the ADI’s discretion), the ADI may be able to “control” the account to the

exclusion of others, effectively giving the ADI a strong security for PPSA purposes. Other items considered “mortgages” for the purposes of the Code The Code treats any sale of goods or land by instalments (where the credit provider retains title to the goods or land) as being an absolute sale and mortgage-back, whether the form of the transaction is as a sale by instalments, a finance lease, or a hire purchase arrangement (s 9). Accordingly, any proprietary interest of the credit provider (such as a reservation of title) in goods or land that are subject to an instalment sale contract is also treated as a mortgage under the Code (see para (b) of the definition of “mortgage” in s 204). See further [42.30]. [42.15] Regulations Section 7(3) permits the Regulations to exclude types of mortgages from the Code’s application. Regulation 64 prescribes that the Code does not apply to the following mortgages: any mortgage relating to perishable goods, livestock, primary produce or food stuffs (however, the disclosure obligations in ss 16 and 17 of the Code apply to this type of mortgage); a banker’s right to combine accounts; and a lien or charge arising by operation of any Act or law or by custom. See commentary on reg 64 for detailed discussion on the width of the exclusion in relation to bankers’ rights to combine accounts in reg 64(1)(b). Sections 42–53 prescribe specific requirements for mortgages that secure credit contracts or guarantees which are regulated by the Code. [42.20] Not enforceable or void Section 42(4) states a mortgage is not enforceable unless it complies with s 42. This can be compared with s 44 which states that a mortgage is “void” if it does not describe or identify the property which is subject to that mortgage. A mortgage which is not “enforceable” is one under which rights are in existence but the credit provider is not in a position to exercise those rights in respect of the property

which the mortgage purports to cover. On the other hand, the statement in s 44 that a mortgage is “void” means [page 232] that the mortgage never came into existence. That is, it is void ab initio or of no legal effect. Thus, the credit provider has never had any security rights over the property which the mortgage purports to cover. The different words in ss 42(4) and 44 may nevertheless lead to the same practical result. A mortgage rendered “void” and a mortgage rendered “not enforceable” both mean that a credit provider does not have effective security over the property of the debtor. However, the fact that a mortgage is void or not enforceable does not relieve the debtor from the obligation to repay the debt under the credit contract which the mortgage attempted to secure. Moreover, it may be possible for a credit provider to take action to render enforceable a mortgage that is, by virtue of s 42, unenforceable (eg, by obtaining the signature of the mortgagor on the mortgage document). On the other hand, a mortgage which is void for failure to specify the mortgaged property cannot be made effective merely by amending it to describe or identify the mortgaged property. In practice, most credit contracts which contemplate security contain an agreement by the debtor (or a guarantor) to provide security over the specified property of the debtor (or the guarantor). That contractual obligation may be enforceable by the credit provider against the debtor. If the guarantor has also signed the credit contract and acknowledged that they will grant a mortgage, that contractual obligation may also be enforceable by the credit provider against the guarantor. Subject to the terms of the credit contract (eg, if it contains a “further assurance” clause), a credit provider may be able to compel a debtor or guarantor to sign an enforceable mortgage which complies with s 42. [42.25] Legibility Note that the s 184 and reg 110 requirements of legibility, clear expression and print or type size requirements also apply to mortgages. When the UCCC came into force, these provisions applied to credit contracts, guarantees and notices only. This was later changed by the e-Commerce Act

to also include mortgages. Even before this change was made, it was open to the court to decide that a credit contract, mortgage or guarantee was unjust under s 76. The non-exclusive grounds for a court to give that determination include s 76(2)(g) (the form of the mortgage and the intelligibility of the language in which it is expressed). [42.30] Personal property securities law The PPSA regulates the registration of personal property securities. Personal property can include everything except land, fixtures, and water rights. For example, it includes all types of goods (such as cars, ships, planes, mining equipment and farm machinery), shares, units, contractual rights and intellectual property (including trademarks and designs). Chapter 4 of the PPSA (except ss 117 and 118) applies to Code-regulated mortgages over goods (described as “security interests” in the PPSA). It contains specific procedural requirements where a security interest is enforced. These requirements relate to issues including the sale process, dealing with the proceeds of sale, and notices to the mortgagor (called “grantor” in the PPSA). Where both the PPSA and the Code apply concurrently, many of these PPSA provisions will be taken to have been complied with in an enforcement scenario if the corresponding provisions of the Code have been complied with. [page 233] Part 4 of the PPSR specifies these Code provisions. If mortgaged property is covered by both the PPSA and the NCCP Act, the security interest should be registered in the PPS register. This will protect the mortgagee’s position against other creditors, and (in some cases) a purchaser for value “taking free” or the mortgagee’s interest. The registration requirements are set out in Ch 5 of the PPSA. Because a Code-regulated security interest will usually relate to property that is predominantly used for personal or domestic purposes, it will not

usually be possible to contract out of enforcement provisions under PPSA (see PPSA s 115(1)). Limited application of “purchase money security interests” Under the PPSA, one important concept is the “purchase money security interest” (PMSI) (PPSA s 14). Usually, security interests will have priority based on their order of registration. However, a properly registered PMSI will have priority over earlier-registered security interests that are not PMSIs. This is intended to allow a financier of a newly acquired piece of equipment to have rights in that equipment which will override the holder of an earlier general security agreement. (Note that the concept of a “general security interest” will not usually be relevant in a consumer credit context, as “all property” mortgages and “future property” mortgages are restricted under the Code). Lenders (and lessors where applicable) should note that PMSIs have more limited application for Code-regulated credit. For the limited categories of goods that are required or permitted to be registered using a “serial number” as defined in the PPSA — such as a motor vehicle with a vehicle identification number — registration as a PMSI is possible (PPSA s 14(2a)). For other types of goods, a security interest will not qualify as a PMSI if (at the time the interest attaches to the goods), the grantor intends to use them predominantly for personal, domestic or household purposes (PPSA s 14(2) (c)). Serial numbered goods Lenders and lessors of goods should be aware of registration requirements for goods that may be described by a PPSA “serial number” under the PPSR. In general, for serial numbered goods, if the secured party’s interest cannot be found in the register by means of a search on that serial number, a purchaser for value may “take free” of the interest (PPSA s 44). This can deprive the secured party of the benefit of their security — including a lessor’s ownership interest. The “taking free” rule will not apply, however, if the purchaser is involved in the transaction that gave rise to the security interest, or acquires the goods as inventory (such as for purposes of re-supply in the course of a business).

Copy of mortgage for mortgagor 43 (1) [Written mortgage] If a mortgage is in the form of a written mortgage document and is not part of a credit contract, the credit provider must give the mortgagor a copy to keep, in the form in which it was made, within 14 days after it is made. 43 (2) [Exceptions] This section does not apply if the credit provider has previously given the mortgagor a copy of the mortgage document to keep. [page 234] ________________________________________ [Editorial note: UCCC s 39 — apart from numbering the section is unchanged.]

COMMENTARY ON SECTION 43 [43.05] Outline The mortgagor must be provided with copies of the mortgage. Precise requirements differ depending on whether or not the mortgage is part of a credit contract. If a mortgage is not part of the credit contract, s 43 prescribes when a copy of the mortgage must be given to the mortgagor: The credit provider must give the mortgagor a copy of the mortgage (for the mortgagor to keep) in the form in which it was made within 14 days after a mortgage is made (ie, signed by the mortgagor(s) and returned to the credit provider) (s 43(1)). The copy must show the signatures of all parties (and this probably includes the signature of the credit provider, in jurisdictions where mortgagees sign mortgages) as the words used in s 43(1) — “in the form in which it was made” — include the signatures of parties, as well as the words of the document. It may be a photocopy. If the mortgagor has already been given a copy of the “mortgage document” to keep, the obligation described in para (a) above does

not arise (s 43(2)). This may occur, for example, where a mortgagor is given a copy of the mortgage document to keep at the same time that they are given a copy to sign and return to the credit provider. The copy does not have to be signed by the credit provider or the mortgagor. Note that the words “in the form in which it was made” are omitted from s 43(2) (see [43.10]). Note that if a registered memorandum is to be used to mortgage real property, the mortgagee must ensure that the mortgagor receives a copy of the registered memorandum (this is a legal requirement independent of the Code). Section 43 refers to the copy being given “within” 14 days, as opposed to “not later than” — the wording in ss 20 and 57 dealing with the requirement to give copies of credit contracts and guarantees respectively. It is difficult to understand why different terminology is used in s 43 and, in practice, “within” and “not later than” should be treated as having the same meaning. [43.10] Form in which it was made Section 43(1) requires that a credit provider must give the mortgagor a copy of the mortgage “in the form in which it was made”. Mortgages are commonly in the form of a deed, and as such they will be made once a copy (signed and sealed by the mortgagor) is sent to the mortgagee. (This is also likely to be the position if a mortgage is in the form of an agreement, particularly if it is not required to be signed by the mortgagee, although there is no clear authority on this point.) This applies even if the mortgage is not dated until a later time and even if the credit provider has not signed it yet. That is, the credit provider must ensure that the mortgagor receives an identical copy of the mortgage to that which the mortgagor has signed and returned to the credit provider. For example, if the mortgagor makes any alteration on the mortgage, the credit provider will need to send a photocopy of that [page 235] mortgage to the mortgagor within 14 days after it is made. This will be the case even if the credit provider gave the mortgagor two copies of the

mortgage document, one for them to sign and return to the credit provider and the other for them to keep (as described in the second bullet point of the list at [43.05], above). [43.15] Registered mortgage memorandum If a credit provider uses a memorandum of common provisions, and provides a copy of that document to the mortgagor before the mortgage is made, s 43 arguably does not require that the credit provider also give the mortgagor a copy of the memorandum of common provisions after the date on which the mortgage is made (although the credit provider will need to provide a copy of the signed mortgage form once it has been executed). This is because giving the mortgagor a copy of the memorandum of common provisions before the mortgage is signed and a copy of the signed memorandum form within 14 days after it is signed will have the result that the mortgagor will have received, within the 14-day period required by s 43, documents which together constitute the mortgage document. This conclusion results from an interpretation of the words “within 14 days after it is made” in s 43, the interpretation of the word “within” in P & M Productions Pty Ltd v Leasing Ltd [1992] 1 Qd R 264 at 275; (1990) Q ConvR 54-380 and Fryar & Simpson v Systems Services Pty Ltd (1994) 125 ALR 592 at 601; 57 IR 225 at 234; 1 IRCR 246, and from the fact that s 43 does not expressly require the separate documents that constitute the signed mortgage to be given to the mortgagor at the same time, provided that by the end of the statutory 14-day period the mortgagor has at some time received a copy of each document constituting the mortgage. [43.20] Joint mortgagors Section 194 provides a number of rules relating to the giving of notices and other documents (s 194(1)). Under s 194(4), joint debtors, mortgagors or guarantors may nominate one joint debtor, mortgagor or guarantor to receive notices and other documents on behalf of all of them. Under s 194(5) joint debtors, mortgagors or guarantors who live at the same address may consent to receiving single copies addressed to them all jointly. Prior to the Consumer Credit (Queensland) Amendment Act 1998, there was some doubt as to whether the UCCC equivalent of s 194 permitted a credit provider to give a copy of the mortgage (under s 43) to the nominated

person only. The note (introduced by the amendment Act) to s 194(1) states that s 43 is an example of the sections to which s 194 applies. Until its repeal by the Enhancements Act (see [206.05]–[206.15]), s 206(4) of the Code stated that notes did not form part of the Code. However, notes would constitute extrinsic material that could be used to aid the interpretation of the Code in accordance with ordinary principles of statutory interpretation. (See [57.25] with regard to joint guarantors). It is arguable then that a credit provider could rely on the s 194 notices nomination/consent procedure and, in the case of joint mortgagors, give a single copy of the mortgage: to the person nominated (in the case of a notices nomination); or addressed to all joint mortgagors (in the case of a consent). [page 236] However, in the case of joint mortgagors the prudent course is arguably to give (for general law reasons independent of the Code) each party a copy of the mortgage (prior to signing) so that they are aware of the terms on which they are granting their mortgage.

Mortgages over all property void 44 (1) [To describe or identify property] A mortgage that does not describe or identify the property which is subject to the mortgage is void. 44 (2) [Otherwise void] Without limiting subsection (1), a provision in a mortgage that charges all the property of the mortgagor is void. ________________________________________ [Editorial note: UCCC s 40 — apart from numbering the section is unchanged.]

COMMENTARY ON SECTION 44

[44.05] Outline A provision in a mortgage that mortgages all the property of the mortgagor is void (s 44(2)). The mortgage must describe or identify the property being mortgaged (s 44(1)). For this reason, a “general security agreement” referred to in the PPSA will usually not be suitable for transactions regulated by the Code. To be legally valid, a Code-regulated mortgage must specifically describe the property that is mortgaged. A mortgage will be void to the extent that it is Code-regulated and purports to cover all goods of the mortgagor at any time or from time to time. A corollary of this is that if the description of property to be mortgaged is not sufficiently precise, a provision purporting to mortgage the property will be void. Where it is desired that a mortgage should cover not a specific asset, but rather a class of goods currently owned by the mortgagor (or to be acquired), it is not clear what level of description is sufficient. A description such as “all share certificates/certificates of title deposited by the mortgagor with the credit provider at any time” may not be sufficient. However, “all share certificates issued in XYZ Pty Ltd in favour of the mortgagor” should be sufficient. A cautious credit provider will obtain a fresh mortgage over any additional specific documents which are deposited with the credit provider in order to avoid the consequences of s 45(1). [44.10] Void A mortgage that does not describe or identify the property which is subject to the mortgage is void to the extent it secures a regulated contract. Because of the effect of s 7(2), s 44 does not render an entire mortgage void. The mortgage will be void only to the extent that it secures a regulated credit contract or related guarantee. (See [42.20] for a discussion of the meaning of “void”, as compared to “not enforceable” in s 42(4)). [44.15] Mortgages of deposited documents Credit providers need to take particular care when entering into mortgages of deposited documents. A mortgage of deposited documents frequently does not describe the particular documents

[page 237] deposited. Instead, it allows any document which the mortgagee accepts to be secured. Section 44 requires that the particular documents deposited must be identified. [44.20] “Describe or identify” Section 44(1) requires that the mortgage “describe or identify” the property subject to the mortgage. Similarly, mortgages of future property will not be void under s 45(1) if the mortgage relates to property or a class of property “described or identified” in the mortgage (s 45(2)(b)). The requirements of s 44(1) and 45(2)(b) are similar. See [45.20] for detailed discussion on what is required to satisfy this requirement in relation to mortgages of future or after acquired property.

Restriction on mortgage of future property 45 (1) [Where void] A provision in a mortgage to the effect that the mortgagor creates or agrees to create a mortgage over or in respect of property or a class of property that is to be, or may be, acquired by the mortgagor after the mortgage is entered into is void. 45 (2) [Exceptions] However, this section does not apply: (a) to a provision in a mortgage of property that is to be acquired wholly or partly with the credit provided under the credit contract secured by the mortgage; or (b) to a provision in a mortgage relating to property or a class of property (whether or not ascertained) described or identified in the mortgage; or (c) to a provision in a mortgage relating to goods acquired in replacement for, or as additions or accessories to, other goods subject to the mortgage; or (d) to any other provision specified by the regulations. ________________________________________

[Editorial note: UCCC s 41 — apart from numbering the section is unchanged.]

COMMENTARY ON SECTION 45 [45.05] Outline A provision in a mortgage to the effect that the mortgagor creates or agrees to create a mortgage over future property will be void except in the circumstances set out at [45.10] (s 45(1)). [45.10] Exceptions The restriction on mortgaging future property does not apply: if the future property is about to be bought wholly or partly with the credit provided under the secured credit contract (s 45(2)(a)); where the future property is described or identified in the mortgage (s 45(2)(b)); to goods that replace mortgaged goods or are accessories to the mortgaged goods (eg, if a roof rack is later fixed on a mortgaged car, the mortgage can then attach to the roof rack) (s 45(2)(c)); and to any other provisions specified by the Regulations — none have yet been specified (s 45(2)(d)). [45.15] Liens/mortgages of deposited documents It is not clear what description is sufficient to describe or identify the property in a mortgage. [page 238] A description such as “all share certificates/certificates of title deposited by the mortgagor with the credit provider at any time” may not be sufficient. However, a description such as “all share certificates issued by XYZ Pty Ltd in favour of the mortgagor” should be sufficient. The concern is that if the description is not adequately precise, the mortgage will be void. A cautious credit provider will obtain a fresh mortgage over any additional specific documents which are deposited with the credit provider in order to avoid the consequences of s 45(1).

[45.20] Case Law Partners Mortgages Pty Ltd (in liq) v Jeremy [2008] QCA 010; BC200800399.

Mortgages and continuing credit contracts 46 (1) [Where void] A provision in a mortgage to the effect that goods supplied from time to time under a continuing credit contract are subject to the mortgage is void. 46 (2) [Exception] However, this section does not apply to a provision in a mortgage relating to specified goods securing payment of a debt under a continuing credit contract. ________________________________________ [Editorial note: UCCC s 42 — apart from numbering the section is unchanged.]

COMMENTARY ON SECTION 46 [46.05] Outline A provision in a mortgage to the effect that goods supplied from time to time under a continuing credit contract are subject to the mortgage is void (s 46(1)). However, it is permissible to include a provision in a mortgage relating to specified goods securing payment of a debt under a continuing credit contract (s 46(2)).

All accounts mortgages 47 (1) [Validity] In addition to securing credit provided by the credit contract or proposed credit contract, or securing obligations under a related guarantee or proposed related guarantee, to which a mortgage initially applies, the mortgage may contain a provision that secures credit provided under another future credit contract or future related guarantee. 47 (2) [Enforceability] Any such mortgage is unenforceable in relation to such a future credit contract or future related guarantee unless the credit provider has:

(a) given the mortgagor a copy of the contract document of the credit contract or proposed credit contract or a copy of the guarantee or proposed guarantee to which the mortgage is to relate; and (b) subsequently obtained from the mortgagor a written acceptance of the extension of the mortgage or obtained acceptance in some other form provided for by the regulations. 47 (3) [Exclusion of s 42] Section 42 (Form of mortgage) does not apply to an extension of a mortgage under this section. [page 239] ________________________________________ [Editorial note: Comparative provision UCCC s 43 provided as follows: All accounts mortgages 43 (1) [Validity] In addition to securing credit provided by the credit contract or proposed credit contract, or securing obligations under a related guarantee or proposed related guarantee, to which a mortgage initially applies, the mortgage may contain a provision that secures credit provided under another future credit contract or future related guarantee. 43 (2) [Enforceability] Any such mortgage is unenforceable in relation to such a future credit contract or future related guarantee unless the credit provider has— (a) given the mortgagor a copy of the contract document of the credit contract or proposed credit contract or a copy of the guarantee or proposed guarantee to which the mortgage is to relate; and (b) subsequently obtained from the mortgagor a written acceptance of the extension of the mortgage or obtained acceptance in some other form provided for by the regulations. 43 (3) [Exclusion of s 38] Section 38 (Form of mortgage) does not apply to an extension of a mortgage under this section.]

COMMENTARY ON SECTION 47 [47.05] Outline “All money” mortgages that secure all amounts that the mortgagor owes the mortgagee on any account, whether currently, in the future or contingently, will be unenforceable to the extent that they do not meet the Code requirements (see [47.10] and s 47(2)).

[47.10] Requirements for enforceability An “all money” mortgage will be unenforceable in relation to money owing under a future credit contract or a future guarantee unless the credit provider: first gives the mortgagor a copy of the credit contract or the proposed credit contract or a copy of the guarantee or proposed guarantee to which the mortgage relates (s 47(2)(a)); and obtains the mortgagor’s written acceptance that the mortgage is to extend to that credit contract or guarantee, or obtains acceptance in some other form provided for by the Regulations (none currently prescribed) (s 47(2)(b)). [47.15] “Another future credit contract” The word “another” in this phrase must be an error, because it has no apparent meaning in the context in which it is used in s 47(1). [47.20] Initial obligations It is unclear whether s 47(1) is intended to apply if the initial obligations secured by the mortgage are not obligations to which the Code applies. The words “to which the mortgage initially applies” in s 47(1) suggest that s 47 is not intended to apply if the initial obligations are not regulated by the Code. [47.25] Timing Section 47 does not prescribe that the copy documents must be provided to the mortgagor, and the acceptance of the extension of the mortgage must be obtained from the mortgagor, before the further credit is provided to the debtor.

[page 240]

Third party mortgages prohibited 48 (1) [Prohibition] A credit provider must not enter into a mortgage to secure obligations under a credit contract unless each mortgagor is a debtor under the contract or a guarantor under a related guarantee.

48 (2) [Exception] A credit provider must not enter into a mortgage to secure obligations under a guarantee unless each mortgagor is a guarantor under the guarantee or a debtor under the related credit contract. 48 (3) [Enforceability] A mortgage which does not comply with this section is unenforceable. 48 (4) [Order discharging mortgage] The court may, on the application of a party to a mortgage that is unenforceable because of this section, order that the credit provider takes such steps as are necessary to discharge the mortgage. 48 (5) [Proposed contract or guarantee] In this section, a reference to a credit contract or guarantee includes a reference to a proposed credit contract or proposed guarantee. ________________________________________ [Editorial note: UCCC s 44 — apart from numbering the section is unchanged.]

COMMENTARY ON SECTION 48 [48.05] Outline Third party mortgages (ie, mortgages which secure the payment of a third party’s debt without the mortgagor giving a guarantee of the debt or otherwise being liable personally to repay that debt) are prohibited. In other words, each mortgagor under a mortgage securing a credit contract must be either the debtor under the credit contract or the guarantor under a guarantee of the credit contract (s 48(1) and (2)). Note that a guarantee and a mortgage may be contained in the one document (s 55(2)). [48.10] Unregulated credit A mortgage that does not comply with s 48 is unenforceable (s 48(3)). However, if the mortgage secures both credit regulated by the Code and non-regulated credit, the effect of both s 48(3) and (4) and s 7(2) is that: a mortgage which does not comply with s 48 is still enforceable with regards to any unregulated credit contract or guarantee which it secures; and

a court could not order that a mortgage be discharged (in accordance with s 48(4)) to the extent that it secures any unregulated credit contract. [48.15] Proposed credit contract or guarantee Section 48(5) clarifies that the third party mortgage prohibition will be breached if a third party mortgage is entered into before the making of the credit contract or guarantee to which it relates. (The Consumer Credit (Queensland) Amendment Act 1998 introduced this change as s 44(5) of the UCCC (now s 48(5) of the Code)).

Maximum amount which may be secured 49 (1) [Limit under credit contract] A mortgage is void to the extent that it secures an amount, in relation to any credit contract which it secures, that exceeds the sum of the amount of the liabilities of the debtor under the credit contract and the reasonable enforcement expenses of enforcing the mortgage. [page 241] 49 (2) [Limit under guarantee] A mortgage is void to the extent that it secures an amount, in relation to any guarantee which it secures, that exceeds the limit of the guarantor’s liability under the guarantee and the reasonable enforcement expenses of enforcing the mortgage. 49 (3) [Effect on all accounts mortgage] This section does not affect a provision of a mortgage permitted by section 47. ________________________________________ [Editorial note: UCCC s 45 provided as follows: Maximum amount which may be secured 45 (1) [Limit under credit contract] A mortgage is void to the extent that it secures an amount, in relation to any credit contract which it secures, that exceeds the sum of the amount

of the liabilities of the debtor under the credit contract and the reasonable enforcement expenses of enforcing the mortgage. 45 (2) [Limit under guarantee] A mortgage is void to the extent that it secures an amount, in relation to any guarantee which it secures, that exceeds the limit of the guarantor’s liability under the guarantee and the reasonable enforcement expenses of enforcing the mortgage.] 45 (3) [Effect on all accounts mortgage] This section does not affect a provision of a mortgage permitted by section 43.]

COMMENTARY ON SECTION 49 [49.05] Outline The maximum amount that a mortgage may secure is the sum of the: amount of the liabilities of the debtor under the credit contract; and reasonable enforcement expenses of enforcing the mortgage. A mortgage is void to the extent that it secures a greater amount (s 49(1)). A mortgage is void to the extent that it secures an amount, in relation to any guarantee which it secures, that exceeds the limit of the guarantor’s liability under the guarantee and the reasonable enforcement expenses of enforcing the mortgage (s 49(2)). [49.10] Reasonable enforcement expenses Section 107 limits a credit provider’s right to recover enforcement expenses to enforcement expenses reasonably incurred by the credit provider (see [107.05]). Sections 107 and 49, to this extent, duplicate each other. “Enforcement expenses” is defined in s 204 of the Code to include expenses incurred by the mortgagee in preserving or maintaining property subject to the mortgage (including insurance, rates and taxes payable for the property), but only if the expenses are incurred after a breach occurs and are authorised by the mortgage. Care needs to be taken in drafting credit contracts and mortgages to ensure that the credit provider can recover from the mortgagor the amount of credit and all reasonable expenses it incurs in relation to the credit contract and the mortgage securing that contract. Particular care needs to be taken with legal expenses and default interest clauses in mortgages. One approach is not to include legal expenses or default interest clauses in the mortgage, but instead deal with them in the credit contract.

[49.15] Guarantees Section 49(2) does not expressly state that a mortgage may secure the expenses of enforcing a guarantee against the guarantor. However, [page 242] the combined effect of ss 49(2) and 60(1) means that a mortgage given by a guarantor can secure the expenses connected with the enforcement of a guarantee. However, s 60(1) limits the enforcement expenses to reasonable enforcement expenses and s 107 of the Code limits enforcement expenses to those enforcement expenses reasonably incurred by the credit provider. Accordingly, the enforcement expenses must be reasonable enforcement expenses reasonably incurred by the credit provider.

Prohibited securities 50 (1) [Employee remuneration or benefits] A mortgage cannot be created over employees’ remuneration or employment benefits or benefits under a superannuation scheme unless the regulations permit it to do so. 50 (2) [Essential household property] A mortgage cannot be created over goods that are essential household property unless: (a) the mortgagee supplied the goods to the mortgagor as part of a business carried on by the mortgagee of supplying goods and the mortgagor has not, as a previous owner of the goods, sold them to the mortgagee for the purposes of the supply; or (b) the mortgagee is a linked credit provider of the person who supplied the goods to the mortgagor. 50 (3) [Regulations] For the purposes of subsection (2), essential household property includes goods of a type prescribed under the regulations. 50 (4) [Similarity to Bankruptcy Regulations] A type of goods may be prescribed under subsection (3) only if the type is similar to a type of

household property mentioned in regulations made under subparagraph 116(2)(b)(i) of the Bankruptcy Act 1966. 50 (5) [Goods used in earning income] A mortgage cannot be created over goods that are property used by the mortgagor in earning income by personal exertion if the goods do not have a total value greater than the relevant limit. 50 (6) [Types of prohibited securities] An obligation under a credit contract cannot be secured by a cheque, or bill of exchange or promissory note, endorsed or issued by the debtor or guarantor. 50 (7) [Void] A mortgage or security is void to the extent that it contravenes this section. 50 (8) [Definitions] In this section: antique item means an item of household property the market value of which is substantially attributable to its age or historical significance. essential household property means household property as prescribed under regulations made under subparagraph 116(2)(b)(i) of the Bankruptcy Act 1966. goods does not include antique items. relevant limit, in relation to goods, means the limit prescribed from time to time under the Bankruptcy Regulations 1966 for the purposes of subparagraph 116(2)(c)(i) of the Bankruptcy Act 1966 for goods of that type. ________________________________________ [Editorial note: UCCC s 46 provided as follows: Prohibited securities 46 (1) [Employee remuneration or benefits] A mortgage cannot be created over employees’ remuneration or employment benefits or benefits under a superannuation scheme unless the regulations permit it to do so.

[page 243]

46 (2) [Negotiated instrument] An obligation under a credit contract cannot be secured by a cheque, or bill of exchange or promissory note, endorsed or issued by the debtor or guarantor. 46 (3) [Void] A mortgage or security is void to the extent that it contravenes this section.]

COMMENTARY ON SECTION 50 [50.05] Outline A mortgage cannot be taken over: employees’ remuneration or employment benefits or benefits under a superannuation scheme unless permitted by the Regulations (none is currently permitted) (s 50(1)); essential household property (as defined in the Bankruptcy Regulations 1996 (Cth) reg 6.03 (other than antique items) plus any additional goods of a type prescribed in the Regulations, although nothing has been prescribed as yet), unless the mortgagee: —

supplied the goods as part of a business of supplying goods and the mortgagor had not previously sold the goods to the mortgagee for the purposes of the supply (s 50(2)(a)); or

—

is a linked credit provider of the supplier of the goods (s 50(2)(b)) (see also commentary on linked credit providers at [127.10]); or

goods used by the mortgagor in earning income by personal exertion if their total value does not exceed $3600 (for the financial year commencing 1 July 2013 with the amount being indexed for subsequent financial years in accordance with movements in the Consumer Price Index) (s 50(5) and (8); Bankruptcy Regulations 1996 reg 6.03B). The goods listed in the second and third bullet points above were introduced into the Code as part of the NCCP Act regime changes (ie, equivalent provisions to s 50(2)–(5) and 50(8) were not found in the UCCC). In addition, obligations under regulated credit contracts cannot be secured by a cheque, bill of exchange or promissory note endorsed or issued by the debtor or guarantor (s 50(6)). No doubt this restriction is included in the Code

to prevent credit providers avoiding the Code’s enforcement provisions by, say, simply suing on the cheque. Section 50(1) and (6) is similar to ss 119 and 120 of the Credit Act. However, the Credit Act prohibition against mortgaging an interest under a will (s 150 of the Credit Act) is not included in the Code.

Assignment or disposal of mortgaged property by mortgagor 51 (1) [Consent of credit provider required] A mortgagor must not assign or dispose of property that is subject to a mortgage without the credit provider’s consent or the authority of the court under subsection (3). Criminal penalty: 50 penalty units. 51 (2) [Withholding consent] The credit provider must not unreasonably withhold consent or attach unreasonable conditions to the consent (but a condition requiring security over property of an equivalent kind and value is not to be regarded as unreasonable). [page 244] 51 (3) [Disposal of property on approval of court] The court may, on application by a mortgagor, authorise the mortgagor to dispose of mortgaged property on conditions determined by the court if: (a) the credit provider fails within a reasonable time to reply to a request for consent to do so by the mortgagor; or (b) consent is unreasonably withheld, or unreasonable conditions are attached to the consent. 51 (4) [Strict liability offence] Subsection (1) is an offence of strict liability. Note: For strict liability, see section 6.1 of the Criminal Code.

________________________________________

[Editorial note: UCCC s 47 provided as follows: Assignment or disposal of mortgaged property by mortgagor 47 (1) [Consent of credit provider required] A mortgagor must not assign or dispose of property that is subject to a mortgage without the credit provider’s consent or the authority of the Court under subsection (3). Maximum penalty — 50 penalty units. 47 (2) [Withholding consent] The credit provider must not unreasonably withhold consent or attach unreasonable conditions to the consent (but a condition requiring security over property of an equivalent kind and value is not to be regarded as unreasonable). 47 (3) [Disposal of property on approval by Court] The Court may, on application by a mortgagor, authorise the mortgagor to dispose of mortgaged property on conditions determined by the Court if— (a) the credit provider fails within a reasonable time to reply to a request for consent to do so by the mortgagor; or (b) consent is unreasonably withheld, or unreasonable conditions are attached to the consent.]

COMMENTARY ON SECTION 51 [51.05] Outline Section 51(1) prohibits a mortgagor from assigning or disposing of the mortgaged property without the consent of the credit provider or the authority of the court. A criminal penalty of up to 50 penalty units can be imposed if s 51(1) is breached. Under the NCCP Act regime changes, this is made a strict liability offence (s 51(4)). (See paras 17 and 18 of the “Overview of the National Credit Code” for commentary on penalty units and strict liability offences). A credit provider must not unreasonably withhold its consent to an assignment or disposal of mortgaged property or attach unreasonable conditions to its consent (s 51(2)). But it can require any one or more of the following: security over property of equivalent kind and value (s 51(2)); breaches of the mortgage and related credit contract to be remedied (s 52(2)); the purchaser or assignee to take over liability under the mortgage (s 52(3)); and payment of its reasonable costs (including stamp duty and legal

fees) (s 52(4)). A mortgagor can apply to the court for authorisation to dispose of mortgaged property and the court can impose conditions on that disposal, if a credit provider unreasonably withholds consent to the disposal, attaches unreasonable conditions or fails to respond within a reasonable time to a mortgagor’s request for consent to dispose of the mortgaged property (s 51(3)). [page 245] [51.10] Assign or dispose “Assign” is not defined in the Code. “Dispose” is defined in s 204 to include selling, parting with possession of or destroying the property. The granting of a subsequent mortgage could well be regarded as an assignment for the purposes of s 51.

Conditions on consent to assignment or disposal of property subject to mortgage 52 (1) [Power to impose conditions] As a condition of granting consent to an assignment or disposal of property subject to a mortgage, the credit provider may make any or all of the requirements set out in this section. This section does not limit any other requirements that may be made by the credit provider. 52 (2) [Breaches to be remedied] The credit provider may require any breaches of the credit contract to which the mortgage relates and of the mortgage to be remedied. 52 (3) [Agreement on assignment] The credit provider may require the mortgagor and the assignee or person to whom the property is disposed to execute and deliver to the credit provider an agreement relating to the assignment or disposal in a form approved by the credit provider under which, without prejudicing or affecting the liability of the mortgagor, the

assignee or person to whom the property is disposed agrees with the credit provider: (a) to be personally liable to pay the amounts due or that become due under the mortgage; and (b) to perform and observe all other requirements and conditions of the mortgage. 52 (4) [Payment of reasonable costs] The credit provider may require the mortgagor and the assignee or person to whom the property is disposed to pay the reasonable costs (if any) incurred by the credit provider for: (a) stamp duty in respect of the assignment or disposal agreement, or any other document the credit provider reasonably requires to be executed in connection with the assignment or disposal; and (b) fees payable to a duly qualified lawyer. ________________________________________ [Editorial note: UCCC s 48 provided as follows: Conditions on consent to assignment or disposal of property subject to mortgage 48 (1) [Power to impose conditions] As a condition of granting consent to an assignment or disposal of property subject to a mortgage, the credit provider may make any or all of the requirements set out in this section. This section does not limit any other requirements that may be made by the credit provider. 48 (2) [Breaches to be remedied] The credit provider may require any breaches of the credit contract to which the mortgage relates and of the mortgage to be remedied. 48 (3) [Agreement on assignment] The credit provider may require the mortgagor and the assignee or person to whom the property is disposed to execute and deliver to the credit provider an agreement relating to the assignment or disposal in a form approved by the credit provider under which, without prejudicing or affecting the liability of the mortgagor, the assignee or person to whom the property is disposed agrees with the credit provider— (a) to be personally liable to pay the amounts due or that become due under the mortgage; and (b) to perform and observe all other requirements and conditions of the mortgage.

[page 246]

48 (4) [Payment of reasonable costs] The credit provider may require the mortgagor and the assignee or person to whom the property is disposed to pay the reasonable costs (if any) incurred by the credit provider for— (a) stamp duty in respect of the assignment or disposal agreement, or any other document the credit provider reasonably requires to be executed in connection with the assignment or disposal; and (b) fees payable to a duly qualified legal practitioner.]

COMMENTARY ON SECTION 52 [52.05] Outline Section 52 sets out some requirements that a credit provider can make as a condition of granting consent to an assignment or disposal of mortgaged property. The s 52 requirements are not exhaustive. That is, the credit provider can impose other conditions to its consent providing they are not unreasonable (see s 51(2) and discussion at [51.05]). [52.10] Examples A credit provider may require that any breaches of the credit contract to which the mortgage relates, and of the mortgage, be remedied (s 52(2)). Also, a credit provider may, without prejudicing the liability of the mortgagor, require that any assignee become personally liable to pay amounts due under the mortgage and to perform and observe all other requirements of the mortgage (s 52(3)). In some circumstances, it might appear unreasonable that a credit provider require that both the assignor and the assignee remain bound under the mortgage. Nevertheless, despite s 51, it appears that s 52 would allow a credit provider to impose such a condition on any consent it may be required to give to the assignment.

Offence for noncompliance 53 (1) [Contravention of ss 41-53] A credit provider must not: (a) enter into a mortgage that contravenes a requirement of this Division; or (b) otherwise contravene a requirement of this Division. Criminal penalty: 50 penalty units. 53 (2) [Mortgage void or unenforceable] A credit provider must not enter

into a mortgage that is void or unenforceable, or that includes a provision that is void or unenforceable, because of this Division. Criminal penalty: 50 penalty units. 53 (3) [Strict liability offences] Subsections (1) and (2) are offences of strict liability. Note: For strict liability, see section 6.1 of the Criminal Code.

________________________________________ [Editorial note: UCCC s 49 provided as follows: Offence for noncompliance 49 (1) [Contravention of ss 38–49] A credit provider must not— (a) enter into a mortgage that contravenes a requirement of this Division; or (b) otherwise contravene a requirement of this Division. 49 (2) [Mortgage void or unenforceable] A credit provider must not enter into a mortgage that is void or unenforceable, or that includes a provision that is void or unenforceable, because of this Division. Maximum penalty — 50 penalty units.]

[page 247] COMMENTARY ON SECTION 53 [53.05] Outline Section 53 is a general penalty provision. It makes it an offence for a credit provider to breach a requirement of Div 1 of Pt 3. It also makes it an offence for a credit provider to enter into a mortgage that contravenes the Division or is void or unenforceable because of the Division, or includes a provision that is void or unenforceable because of the Division. Each offence carries a penalty of up to 50 penalty units. Under the NCCP Act regime changes, these were made offences of strict liability by the insertion of s 53(3). (See paras 17 and 18 of the “Overview of the National Credit Code” for commentary on penalty units and strict liability offences).

DIVISION 2 — GUARANTEES Application of Division 54 This Division applies to a guarantee (under which the guarantor is a natural person or a strata corporation) to the extent to which it guarantees obligations under a credit contract, whether or not it also guarantees other obligations (see section 8). ________________________________________ [Editorial note: There was no comparable UCCC provision.]

COMMENTARY ON SECTION 54 [54.05] Outline The Code applies only to guarantees of regulated credit contracts. The guarantor and the debtor must each be either an individual or strata corporation before the Code can apply (s 8). Therefore, the Code will not apply to all guarantees granted by individuals. It will apply only to guarantees which secure the repayment of credit contracts entered into by individuals or strata corporations for personal, domestic and household purposes or for the purpose of purchasing, renovating or improving residential property for investment purposes (or to refinance such credit). For example, the Code would not regulate a guarantee provided by a director of a company to secure a loan to the company. Contrast this with the application of the Code of Banking Practice (2013) (cl 31) or the Customer Owned Banking Code of Practice (January 2014) (cl 12). The Code does not apply to any guarantee by the supplier under a tied loan contract or a tied continuing credit contract (reg 65).

Form of guarantee 55 (1) [Guarantee in writing] A guarantee must be in writing signed by the guarantor.

55 (2) [Guarantee contained in mortgage] It is sufficient compliance with subsection (1) if the guarantee is contained in a mortgage signed by the guarantor. 55 (3) [Regulations] The regulations may make provision for or with respect to the content of guarantees and the way they are expressed. [page 248] 55 (4) [Enforceability] A guarantee is not enforceable unless it complies with this section and regulations made under this section. ________________________________________ [Editorial note: UCCC s 50 — apart from numbering the section is unchanged.]

COMMENTARY ON SECTION 55 [55.05] See [54.05]. [55.10] Definition “Guarantee” is defined in s 204 of the Code as including “an indemnity (other than one arising under a contract of insurance)”. [55.15] Form A guarantee: must be in writing (s 55(1)); must be signed by the guarantor (s 55(1)); must contain a warning (in the form of a box as indicated in the Code prescribed Form 8 document) which: —

must be set out immediately above (and on the same page as) the place where the guarantor is to sign the guarantee (s 55(3), reg 81, Form 8); and

—

if the guarantors are to sign the guarantee document on separate pages, must be set out on each such page.

A guarantee is not enforceable unless it complies with these requirements

(s 55(4)) (see [42.20] for a discussion of the meaning of “not enforceable”). [55.20] Legibility The s 184 and reg 110 requirements of legibility, clear expression, and print or type size requirements apply to guarantees. Therefore, a guarantee must be easily legible, in not less than 10 point print, and must be clearly expressed. [55.25] Mortgage document A guarantee may be contained in a mortgage document signed by the guarantor if all other requirements set out at [55.15] and [55.20] are satisfied (s 55(2)). Even though a mortgage and a credit contract may be contained in the same document (s 42(2)), s 55 does not contain a provision expressly permitting a guarantee to be contained in a credit contract — the prudent course for credit providers is to assume the Code does not permit a guarantee to be contained in a credit contract.

Disclosure 56 (1) [Documents to be provided] Before a guarantee is signed by the guarantor, the credit provider must give to the prospective guarantor: (a) a copy of the contract document of the credit contract or proposed credit contract; and (b) a document in the form prescribed by the regulations explaining the rights and obligations of a guarantor. 56 (2) [Enforceability] A guarantee is not enforceable unless paragraph (1) (a) is complied with. [page 249] ________________________________________ [Editorial note: UCCC s 51 provided as follows: Disclosure 51 (1) [Documents to be provided] Before a guarantee is signed by the guarantor, the credit

provider must give to the prospective guarantor— (a) a copy of the contract document of the credit contract or proposed credit contract; and (b) a document in the form prescribed by the regulations explaining the rights and obligations of a guarantor. 51 (2) [Enforceability] A guarantee is not enforceable unless subsection (1)(a) is complied with.]

COMMENTARY ON SECTION 56 [56.05] Outline Before a guarantee is signed, the credit provider must give the guarantor: a copy of the credit contract or the proposed credit contract (s 56(1) (a)); and the Code prescribed Form 9 Information statement explaining the rights and obligations of the guarantor. The Form 9 document may be in the form of a separate document or part of the guarantee document (ie, the Form 9 information can be included in the guarantee) (s 56(1)(b); reg 82, Form 9). Note that it is arguable that the debtor’s consent is necessary before the credit provider gives the guarantor a copy of the debtor’s credit contract and consequently credit providers should include an appropriate consent in the debtor’s loan application form (see Privacy Act 1988 (Cth) and Privacy (Credit Reporting Code) 2014 (version 1.2)). [56.10] Documents before guarantee signed A credit provider must give the documents referred to in s 56(1) to the guarantor before the guarantor executes the guarantee. Prior to the Consumer Credit (Queensland) Amendment Act 1998, the corresponding provision in the UCCC simply provided that the guarantor must be given a copy of the guarantee and any related credit contract before the guarantee took effect. The explanatory notes to the Consumer Credit (Queensland) Amendment Act suggest that it was: … arguable that the requirements of [the former provision] may be met where the guarantor signs the guarantee before being provided with the contract to which the guarantee relates and that where

that happens the only consequence is that the guarantor’s liability is postponed until the contract document and information statement are provided.

The section as it now stands specifies that the copies must be provided before the guarantee is signed. Credit providers who are also banks may be subject to a duty under cl 31.4 of the Code of Banking Practice (2013) to provide prominent notice to guarantors that, among other things, there are financial risks involved with providing guarantees. The Customer Owned Banking Code of Practice (January 2014) contains a similar duty (cl 12.4). [page 250] [56.15] Alteration of credit contract The Code is silent as to what procedure should be followed if a credit contract is altered after the guarantee is signed, but prior to the execution of a credit contract. Section 58(1)(b) expressly contemplates that this may happen, and allows a guarantor to withdraw from their guarantee if the credit contract alteration is “material”. Presumably then, although not expressly stated in the Code, the implication of s 58(1) is that s 56 is still complied with if a copy of the credit contract is given to the guarantor before the guarantee is signed, but that credit contract is later altered before it is signed. The impact of the alteration is that, if it is material, the guarantor can withdraw from their guarantee at any time. Where a guarantee has been signed and the credit contract document previously given to the guarantor has been altered, the prudent course of action for the credit provider (particularly where the alteration is material) is to obtain a new guarantee, complying with the requirements of s 56.

Copies of documents for guarantor 57 (1) [Credit provider to give] A credit provider must, not later than 14

days after a guarantee is signed and given to the credit provider, give the guarantor: (a) a copy of the guarantee signed by the guarantor; and (b) a copy of the credit contract or proposed credit contract. 57 (2) [Exceptions] Paragraph (1)(a) does not apply if the credit provider has previously given the guarantor a copy of the guarantee document to keep and paragraph (1)(b) does not apply if the credit provider has previously given the guarantor a copy of the credit contract or proposed credit contract to keep. ________________________________________ [Editorial note: UCCC s 52 provided as follows: Copies of documents for guarantor 52 (1) [Credit provider to give] A credit provider must, not later than 14 days after a guarantee is signed and given to the credit provider, give the guarantor— (a) a copy of the guarantee signed by the guarantor; and (b) a copy of the credit contract or proposed credit contract. 52 (2) [Exceptions] Subsection (1)(a) does not apply if the credit provider has previously given the guarantor a copy of the guarantee document to keep and subsection (1)(b) does not apply if the credit provider has previously given the guarantor a copy of the credit contract or proposed credit contract to keep.]

COMMENTARY ON SECTION 57 [57.05] Outline Not later than 14 days after a guarantee is signed and given to the credit provider, the credit provider must give the guarantor a copy of the signed guarantee and a copy of the related credit contract or proposed credit contract (if a copy has not previously been given) (s 57). However, s 57 does not require that a credit provider give to the guarantor any mortgages or other securities that secure the credit contract to which the guarantee relates (assuming the guarantor is not the mortgagor under those securities). [page 251]

[57.10] Relationship between ss 56 and 57 Section 56(1)(a) requires the credit provider to give the guarantor a copy of the credit contract or the proposed credit contract before the guarantee is signed. Section 57(1)(b) requires the credit provider to give the guarantor a copy of the credit contract or proposed credit contract not later than 14 days after the guarantee is signed and given to the credit provider, unless the credit provider has previously given the guarantor a copy of the credit contract or proposed credit contract to keep. It seems, then, that the only circumstances in which s 57(1)(b) will have any application are: where the credit provider, in complying with s 56(1)(b) did not give the guarantor a copy of the credit contract or proposed credit contract to keep (ie, the guarantor is given a copy of the related credit contract before signing their guarantee, but not to keep); or where the actual credit contract differs from the document that was given to the guarantor under s 56(1)(b) (but, as noted above at [56.15], the prudent course to follow in this case is to obtain a new guarantee in accordance with s 56). [57.15] Procedures Set out below are two approaches to compliance with s 57. The credit provider may: give the guarantor a copy of the guarantee document and the credit contract or proposed credit contract to keep, before the guarantee is signed (s 57(2)). For example, a credit provider may send two copies of a guarantee document and a copy of the related credit contract to the guarantor. The guarantor may execute and return one copy of the guarantee and retain the other (with the related credit contract) for their own records. In this situation, the credit provider is under no obligation to give the guarantor another copy of the guarantee document and another copy of the related credit contract. The provision of copies for the guarantor to keep prior to the execution of the guarantee is sufficient to comply with s 57; or (if the guarantor has not been given copies of the guarantee and credit contract to keep) give the guarantor a copy of the guarantee signed by the guarantor and a copy of the credit contract or

proposed credit contract not later than 14 days after the guarantee is signed and given to the credit provider (s 57(1)). In summary, the credit provider must give the guarantor copies of the guarantee and credit contract documents before the guarantee is executed or not later than 14 days after its execution. [57.20] Documents to be given to guarantor The following is a summary of documents that must be given to a guarantor if they are giving a guarantee which secures a Code-regulated credit contract: before the guarantee is signed: —

a copy of the credit contract or proposed credit contract (s 56(1)(a)); and

—

a copy of the Form 9 information statement (“Things you should know about guarantees”) (s 56(1)(b)); [page 252]

not later than 14 days after the guarantee is signed and given to the credit provider (either or both of them may be given before the guarantee is signed): —

a copy of the guarantee (it must be a copy signed by the guarantor if it is given after the guarantee is signed) (s 57(1)); and

—

a copy of the credit contract or proposed credit contract (s 57(2));

if the guarantor is also a mortgagor, the credit provider must also comply with s 43. [57.25] Joint guarantors Section 194 provides a number of rules relating to the giving of notices and other documents. Under s 194(4), joint debtors, mortgagors or guarantors may nominate one joint debtor, mortgagor or guarantor to receive notices on behalf of all of them. Under s 194(5), joint

debtors, mortgagors or guarantors living at the same address may consent to receiving single copies addressed to them all jointly. Prior to the Consumer Credit (Queensland) Amendment Act 1998, there was some doubt as to whether the UCCC provision corresponding to s 194 permitted a credit provider to give a copy of the credit contract and guarantee (under s 56 or s 57) to the nominated person only. The note to s 194(1) states that ss 56 and 57 are examples of the sections to which s 194 applies. Until its repeal by the Enhancements Act (see [206.05]–[206.15]), s 206(4) of the Code stated that notes did not form part of the Code. However, notes would constitute extrinsic material which could be used to aid the interpretation of the Code in accordance with ordinary principles of statutory interpretation. (See [43.20] with regard to joint mortgagors). The ordinary meaning of “document” would naturally include reference to a guarantee or credit contract. Hence, one may be able to rely on s 194 in respect of the giving of copies of guarantee or contract documents. Section 57 obliges a credit provider to give a copy of the guarantee or contract documents either before or within 14 days after the execution of a contract. Before the execution of the guarantee, the potential guarantor could not truly be described as a joint guarantor. Hence there is still some doubt in the application of s 57 as it interacts with s 194. It would appear to be prudent for a credit provider to give a copy of the guarantee or contract documents to all joint guarantors.

Guarantor may withdraw before credit is provided 58 (1) [Withdrawal on written notice] Although a guarantee has been made, the guarantor may nevertheless, by written notice to the credit provider: (a) withdraw from the guarantee at any time before credit is first provided under the credit contact; or (b) withdraw from the guarantee after credit is first provided under the contract if the credit contract made differs in some material respect

from the proposed credit contract given to the guarantor before the guarantee is signed. 58 (2) [Permissible withdrawal] The guarantor may withdraw from a guarantee under this section to the extent only that it guarantees obligations under the credit contract. [page 253] 58 (3) [Subject to increase in liability] This section is subject to section 61. ________________________________________ [Editorial note: UCCC s 53 provided as follows: Guarantor may withdraw before credit is provided 53 (1) [Withdrawal upon written notice] Although a guarantee has been made, the guarantor may nevertheless, by written notice to the credit provider— (a) withdraw from the guarantee at any time before credit is first provided under the credit contract; or (b) withdraw from the guarantee after credit is first provided under the contract if the credit contract made differs in some material respect from the proposed credit contract given to the guarantor before the guarantee is signed. 53 (2) [Permissible withdrawal] The guarantor may withdraw from a guarantee under this section to the extent only that it guarantees obligations under the credit contract. 53 (3) [Subject to increases in liability] This section is subject to section 56.]

COMMENTARY ON SECTION 58 [58.05] Outline A guarantor may withdraw from a guarantee: before any credit is provided under the guaranteed credit contract (s 58(1)(a)); or if a signed credit contract is materially different from the proposed credit contract which the guarantor is given before giving the guarantee (s 58(1)(b)). Under the UCCC regime, in Western Australia, s 53(1)(a) of the UCCC

(the equivalent of s 58(1)(a) of the Code) contained a further condition precedent which had to be satisfied before a guarantor could withdraw from the guarantee: the debtor also had to have terminated the credit contract in accordance with s 19 of the UCCC (the equivalent of s 21 of the Code) (see [21.05]–[21.20]) or the debtor must not have entered into a contract with another person in reliance on the availability of the credit subject to the guarantee. Therefore, in Western Australia, if a guarantor purported to withdraw from a guarantee, in addition to the internal checks required to be carried out by a credit provider referred to at [58.10] below, both the guarantor and the credit provider had to ascertain whether the debtor had terminated the credit contract in accordance with s 19 of the UCCC (the equivalent of s 21 of the Code) or whether the debtor had entered into any other contract. The guarantor can withdraw by giving written notice to the credit provider (s 58(1)). A guarantor can only withdraw from a guarantee of a “credit contract”. Consequently, s 58 does not affect non-Code regulated credit contracts to which the guarantee relates (s 58(2)). Section 58 is subject to s 61, which deals with an increase in a guarantor’s liabilities (s 58(3)). [58.10] Implications Section 58 is similar to ss 143 and 144 of the Credit Act. Consequently, as was the case with Credit Act-regulated loans, credit providers under Code-regulated loans must carry out internal checks to ensure that any related guarantee has not been withdrawn before they first provide credit under a guaranteed credit contract. This can cause problems in practice if a [page 254] guarantor gives a written withdrawal notice to a branch of a credit provider other than the branch which is arranging for credit to be made available. Credit providers may consider including in their guarantees a requirement

that any notice of withdrawal from a guarantee is given to a specified address of the credit provider, although this may constitute an attempt to contract out of the provisions of s 195. Attempts to contract out of a provision of the Code are rendered void by s 191. Prior to the Consumer Credit (Queensland) Amendment Act 1998, s 53(1) (b) of the UCCC (now s 58(1)(b) of the Code) gave a guarantor the right to withdraw if the credit contract differed in a material respect from the precontractual statement given to the guarantor. This right was removed as the Code does not contain an obligation to give the precontractual statement to the guarantor in the first place. [58.15] Effect of s 58(3) The effect of s 58(3) is that, if a credit contract is changed, but the credit provider complies with s 61(1)(a) and (b), the guarantor cannot withdraw from the guarantee on the grounds of s 58(1)(b), namely that the credit contract now differs from the original form of the contract. Note, however, that s 61 does not apply to s 63(2)(a) and (b), Div 1 of Pt 4 (other than s 67(4) or s 68), or s 74(2) or s 96(2). On a literal reading of ss 58(3) and 61(2), if any of the variations referred to in s 61(2) occurred between the time the guarantor is given the proposed credit contract and the time the credit contract is made, the guarantor would have the right to withdraw from the guarantee. This cannot have been the intention behind s 58(3); perhaps s 58(3) was intended to read “This section is subject to s 61(1)”. [58.20] Changes to the proposed credit contract Section 58(1)(b) gives the guarantor the right to withdraw from the guarantee, even after credit is first provided, if the credit contract made differs in some material respect from the proposed credit contract previously given to the guarantor under s 56(1)(b) or s 57(1)(b). The use of the word “made” indicates that it is only variations made between the time the proposed contract document was given to the guarantor and the time when the credit contract is formed that give the guarantor rights under s 58(1)(b). Unless s 58(1)(b) is read in this way, it would mean that any material variation to the credit contract, made at any time during the term of the contract, would give the guarantor the right to withdraw from the guarantee. Section 58(1)(b) does not acknowledge any

right of the guarantor to agree to proposed variations to the credit contract, and any attempt to obtain the guarantor’s consent to a variation of the credit contract would be struck down under s 191 of the Code as an attempt to modify or avoid the effect of the Code. If s 58(1)(b) were read as extending to variations made at any time during the term of the credit contract, it would mean in effect that a new guarantee would have to be taken each time there was a material variation to the credit contract. There is no indication that this was the intention behind s 58(1)(b). Similarly to s 58 of the Code, cl 28.11 of the Code of Banking Practice 2013 requires credit providers who are also banks to allow prospective guarantors to withdraw from the guarantee at any time before the credit is first provided under the relevant credit contract; or to withdraw after credit is first provided, if the [page 255] credit contract differs in a material respect from the proposed credit contract given to the guarantor before the guarantee was signed (but only to the extent the guarantee guarantees obligations under the credit contract).

Extension of guarantee 59 (1) [Permissible extension] In addition to guaranteeing obligations under a credit contract or proposed credit contract to which a guarantee initially applies, a guarantee may contain a provision that makes credit provided under another future credit contract subject to the guarantee. 59 (2) [Enforceability] Any such guarantee is unenforceable in relation to such a future credit contract unless the credit provider has: (a) given the guarantor a copy of the contract document of that future credit contract; and (b) subsequently obtained from the guarantor a written acceptance of the extension of the guarantee or obtained acceptance in some other

form provided for by the regulations. 59 (3) [Exclusion of s 55] Section 55 (Form of guarantee) and section 56 (Disclosure) do not apply to an extension of a guarantee under this section. ________________________________________ [Editorial note: UCCC s 54 provided as follows: Extension of guarantee 54 (1) [Permissible extension] In addition to guaranteeing obligations under a credit contract or proposed credit contract to which a guarantee initially applies, a guarantee may contain a provision that makes credit provided under another future credit contract subject to the guarantee. 54 (2) [Enforceability] Any such guarantee is unenforceable in relation to such a future credit contract unless the credit provider has— (a) given the guarantor a copy of the contract document of that future credit contract; and (b) subsequently obtained from the guarantor a written acceptance of the extension of the guarantee or obtained acceptance in some other form provided for by the regulations. 54 (3) [Exclusion of s 50] Section 50 (Form of guarantee) and section 51 (Disclosure) do not apply to an extension of a guarantee under this section.]

COMMENTARY ON SECTION 59 [59.05] Outline Section 59 is similar to s 47 in respect of all accounts mortgages, in that it does not prohibit an “all accounts” guarantee, but prescribes requirements that must be met before a guarantee will be enforceable in relation to a future credit contract. Credit provided under a “future credit contract” (in addition to a credit contract which is already guaranteed) can be secured by the guarantee only if the guarantor: has first received a copy of the additional credit contract; and has given a written acceptance of the extension of the guarantee, or the credit provider obtains their acceptance in some other form prescribed by the Regulations (none is currently prescribed) (s 59(2)).

Provided the above s 59 disclosures are met, the disclosures made under s 56 are not required. Note that cl 31.13 of the Code of Banking Practice 2013 places similar obligations on credit providers who are also banks who subscribe to the Code of Banking Practice 2013. See also cl 12.12 of the Customer Owned Banking Code of Practice January 2014, which contains a similar obligation. [page 256] [59.10] Form 9 Section 59(3) does not require the Form 9 information statement (which is required to be given to a guarantor under s 56(1)(b)) to be given to the guarantor when a guarantee is extended to a further credit contract. [59.15] Initial obligations Like s 47, it is unclear whether s 59 is intended to apply if the initial obligations to which the guarantee applies are not regulated by the Code. The words “to which a guarantee initially applies” in s 59(1) suggest that s 59 is not intended to apply if the initial obligations are not regulated by the Code. [59.20] Timing Like s 47, s 59 does not prescribe that the copy documents must be provided to the guarantor, and that the acceptance of the extension of the guarantee must be obtained, before the additional credit is provided to the debtor. However, credit providers should complete those procedures before any additional credit is provided to a debtor.

Limitation of guarantor’s liability 60 (1) Total amount for which guarantor can be liable A guarantee is void to the extent that it secures an amount, in relation to a credit contract to which this Code applies, that exceeds the sum of the amount of the liabilities of the debtor under the credit contract and the reasonable expenses of enforcing the guarantee, or any lesser amount agreed between the credit provider and the guarantor.

60 (2) Unenforceable contracts Nothing in subsection (1) prevents a credit provider from enforcing a guarantee relating to liabilities under a credit contract that is unenforceable solely because of the debtor’s death, insolvency or incapacity. 60 (3) Debtors under 18 years of age A guarantee which guarantees the liability of a debtor who was under 18 years of age when the liability was incurred cannot be enforced against the guarantor unless it contains a prominent statement to the effect that the guarantor may not be entitled to an indemnity against the debtor. 60 (4) Guarantor may limit liabilities under continuing credit contract In the case of a continuing credit contract, a guarantor may, by notice to the credit provider, limit the guarantee so that it applies only to liabilities related to credit previously provided to the debtor under the credit contract (including any liabilities not yet debited to the debtor’s account) and such further amount (if any) as the guarantor agrees to guarantee. 60 (5) Guarantee must not limit indemnity A guarantee is void to the extent that it limits the guarantor’s right to indemnity from the person whose liability the guarantor has guaranteed or it postpones or otherwise purports to limit the guarantor’s right to enforce the indemnity against the person. 60 (6) Effect of section This section does not affect a provision of a guarantee permitted by section 59. ________________________________________ [Editorial note: UCCC s 55 provided as follows: Limitation of guarantor’s liability 55 (1) Total amount for which guarantor can be liable A guarantee is void to the extent that it secures an amount, in relation to a credit contract to which this Code applies, that exceeds the sum of

[page 257] the amount of the liabilities of the debtor under the credit contract and the reasonable expenses

of enforcing the guarantee, or any lesser amount agreed between the credit provider and the guarantor. 55 (2) Unenforceable contracts Nothing in subsection (1) prevents a credit provider from enforcing a guarantee relating to liabilities under a credit contract that is unenforceable solely because of the debtor’s death, insolvency or incapacity. 55 (3) Debtors under 18 years of age A guarantee which guarantees the liability of a debtor who was under 18 years of age when the liability was incurred cannot be enforced against the guarantor unless it contains a prominent statement to the effect that the guarantor may not be entitled to an indemnity against the debtor. 55 (4) Guarantor may limit liabilities under continuing credit contract In the case of a continuing credit contract, a guarantor may, by notice to the credit provider, limit the guarantee so that it applies only to liabilities related to credit previously provided to the debtor under the credit contract (including any liabilities not yet debited to the debtor’s account) and such further amount (if any) as the guarantor agrees to guarantee. 55 (5) Guarantee must not limit indemnity A guarantee is void to the extent that it limits the guarantor’s right to indemnity from the person whose liability the guarantor has guaranteed or it postpones or otherwise purports to limit the guarantor’s right to enforce the indemnity against the person. 55 (6) Effect of section This section does not affect a provision of a guarantee permitted by section 54.]

COMMENTARY ON SECTION 60 [60.05] Outline Section 60 regulates the content of guarantees. [60.10] Total liability A guarantee is void to the extent that it secures an amount, relating to a regulated credit contract, that exceeds the sum of: the amount of the debtor’s liabilities under the credit contract; and the reasonable expenses of enforcing the guarantee, or any lesser amount agreed between the credit provider and the guarantor: s 60(1). [60.15] Reasonable enforcement expenses See [49.15]. The combined effect of ss 60(1) and 49(2) of the Code means that a mortgage given by a guarantor can secure the reasonable expenses connected with the enforcement of the guarantee. [60.20] Unenforceable contract Section 60(2) sets out exceptions to the strict rule in s 60(1) which states that a guarantee is void to the extent that it

secures an amount greater than the credit provider’s liability under the credit contract and the reasonable expenses of enforcing the guarantee. Section 60(2) allows a credit provider to enforce a guarantee in respect of a credit contract that is unenforceable due to the debtor’s death, insolvency or incapacity (and, prior to the Consumer Credit (Queensland) Amendment Act 1998, “any other act or omission of the debtor”. That phrase had an uncertain meaning and has since been deleted). [60.25] Debtors under 18 years A guarantee which guarantees a liability of a debtor who is under 18 years of age when the liability was incurred cannot be enforced against the guarantor unless it contains a prominent statement that the guarantor may not have a right of indemnity against the debtor: s 60(3). Credit providers should include this statement in their standard form guarantees so that [page 258] they will be enforceable if they are used when the debtor is under 18 years of age. The statement must be “prominent”. The Code does not give any guidance as to what may satisfy this requirement. Credit providers might include the statement immediately above or below where the guarantor is to sign (as required by s 140(2) of the Credit Act). [60.30] Guarantor may limit liabilities under continuing credit contract A guarantor of a continuing credit contract may, by notice to the credit provider, limit the guarantee so that it only applies to credit previously provided to the debtor (including any liabilities incurred by the debtor but not yet debited to their account) and such further amount (if any) as the guarantor agrees to guarantee: s 60(4). [60.35] Indemnity A guarantee is void to the extent that it limits the guarantor’s right of indemnity against the debtor. At law, a guarantor is entitled to an indemnity from the debtor if the guarantee is granted at the express or implied request of the debtor. Many standard form guarantees prohibit the guarantor enforcing their right of indemnity against the debtor

until the beneficiary of the guarantee has been paid in full. This is not permitted under the Code: s 60(5).

Increase in guarantor’s liabilities 61 (1) [When liabilities increased] If the terms of a credit contract are changed to increase or allow for an increase in liabilities, the liabilities of a guarantor under a guarantee that secures those liabilities are not increased unless: (a) the credit provider gives to the guarantor a written notice setting out particulars of the change in the terms of the credit contract; and (b) the credit provider has subsequently obtained from the guarantor a written acceptance of the extension of the guarantee to those increased liabilities or obtained acceptance in some other form provided for by the regulations. 61 (2) [Exclusion of section] This section does not apply to an increase in liabilities resulting from: (a) a change of a kind referred to in paragraph 63(2)(a) or (b); or (b) a change of which notice is required to be given under Division 1 of Part 4 (not being a change referred to in subsection 67(4) or section 68); or (c) a change under subsection 74(2) or a postponement under subsection 96(2); or (d) a deferral or waiver of a debtor’s obligations for a period not exceeding 90 days. ________________________________________ [Editorial note: UCCC s 56 provided as follows: Increase in guarantor’s liabilities 56 (1) [When liabilities increased] If the terms of a credit contract are changed to increase or allow for an increase in liabilities, the liabilities of a guarantor under a guarantee that secures those liabilities are not increased unless—

(a)

the credit provider gives to the guarantor a written notice setting out particulars of the change in the terms of the credit contract; and

(b) the credit provider has subsequently obtained from the guarantor a written acceptance of the extension of the guarantee to those increased liabilities or obtained acceptance in some other form provided for by the regulations.

[page 259] 56 (2) [Exclusion of section] This section does not apply to an increase in liabilities resulting from— (a) a change of a kind referred to in section 58(2)(a) or (b); or (b) a change of which notice is required to be given under Division 1 of Part 4 (not being a change referred to in section 62(3) or 63); or (c) a change under section 68(2) or a postponement under section 88(2); or (d) a deferral or waiver of a debtor’s obligations for a period not exceeding 90 days.]

COMMENTARY ON SECTION 61 [61.05] Outline If the terms of a credit contract are changed to increase, or allow for an increase in, liabilities (because, for example, the term of that contract is varied), the guarantor does not guarantee the increased liability unless the credit provider first gives the guarantor written notice of the credit contract variation and then obtains the guarantor’s written acceptance to the guarantee being extended to cover the increased liability: s 61(1). Note that the Regulations may prescribe some form other than written acceptance by which the guarantor may accept the extension of their guarantee, but none has been prescribed at this stage: s 61(1)(b). Section 61 is similar to s 59; s 61 deals with an increase in liabilities owing to a change in the credit contract, whereas s 59 deals with an increase in the guarantor’s liability because the guarantee is extended to cover an additional credit contract. [61.10] No acceptance required Section 61(2) states that the guarantor’s acceptance is not required if the debtor’s liability increases as a result of: a change to a new annual percentage rate if both the new rate and when it takes effect were set out in the contract (see s 63(2)(a));

an increase in the debtor’s repayment amount, if this increase was set out in the contract (see s 63(2)(b)); a change for which notice is required to be given under Div 1 of Pt 4 (not being a change referred to in s 67(4) (increase in the credit amount under a continuing credit contract), or s 68 (other unilateral changes by credit providers)). That is, the guarantor’s acceptance is not required if the debtor’s liability increases because of a change in: —

the interest rate;

—

the way interest is calculated or applied (including a change in or the abolition of an interest-free period);

—

the amount, frequency, timing or calculation of instalments or minimum repayments; or

—

the amount, frequency or timing of credit fees or charges (including the introduction of a new credit fee or charge);

a change under s 74(2) — a court-ordered change made due to hardship suffered by the debtor; a change resulting from a postponement ordered by the court under s 96(2); or a change following a deferral or waiver of the debtor’s obligations for a period not exceeding 90 days.

[page 260] [61.15] Particulars The Code does not define what is meant by “particulars of the change” in s 61(1)(a). This arguably requires a statement of either the: old and new position (eg, “changed from X to Y”); or extent of the change (eg, “deferred by Z”). The prudent course is to assume, for example, that it is not sufficient to give a guarantor a copy of a revised credit contract. Rather, the guarantor must be given notice of the actual changes to the credit contract, which arguably includes details of the existing contract term to be changed (eg, current interest rate option) and details of the term as changed (eg, the new interest rate option). This interpretation is due to the fact that there is no equivalent to s 71(5) in respect of the notice to be given to a guarantor in order to satisfy s 61. Section 71(5) allows a credit provider to give a debtor “particulars only of a matter as changed”, as long it is made clear that a change has occurred, following an agreed change to a credit contract. In regard to guarantors, it is not sufficient merely to give particulars of the matter “as changed” if the change to the credit contract may increase the guarantor’s liability. The written notice must contain “particulars” of the change in terms in order to satisfy s 61. Section 61 does not require that this notice be provided before the change is agreed. However, if a credit provider makes the change unconditionally before providing the notice and obtaining written acceptance from the guarantor, it may be difficult in practice to subsequently obtain such acceptance.

Offence for noncompliance 62 (1) [Contravention of ss 54-62] A credit provider must not:

(a)

enter into a guarantee that contravenes a requirement of this Division; or

(b) otherwise contravene a requirement of this Division. 62 (2) [Guarantee void or unenforceable] A credit provider must not enter into a guarantee that is void or unenforceable, or that contains a provision that is void or unenforceable, because of this Division. Criminal penalty: 50 penalty units. 62 (3) [Strict liability offences] Subsections (1) and (2) are offences of strict liability. Note: For strict liability, see section 6.1 of the Criminal Code.

________________________________________ [Editorial note: UCCC s 57 provided as follows: Offence for noncompliance 57 (1) [Contravention of ss 50-57] A credit provider must not— (a) enter into a guarantee that contravenes a requirement of this Division; or (b) otherwise contravene a requirement of this Division. 57 (2) [Guarantee void or unenforceable] A credit provider must not enter into a guarantee that is void or unenforceable, or that contains a provision that is void or unenforceable, because of this Division. Maximum penalty — 50 penalty units.]

COMMENTARY ON SECTION 62 [62.05] Outline Section 62 in relation to guarantees is similar to s 53 relating to mortgages. That is, a criminal penalty of up to 50 penalty units may be incurred [page 261] if a credit provider enters into a guarantee that is void or unenforceable or contains a provision that is void or unenforceable because of Div 2 of Pt 3 (s

62(2)). Section 62(1) prohibits a credit provider from entering into a guarantee that contravenes a requirement of Div 2 of Pt 3. A breach of s 62(1) is also liable to a maximum criminal penalty of up to 50 penalty units. Under the NCCP Act regime changes, failure to comply with s 62(1) or (2) was made an offence of strict liability by the insertion of s 62(3). (See paras 17 and 18 of the “Overview of the National Credit Code” for commentary on penalty units and strict liability offences).

[page 263]

Part 4 — Changes to obligations under credit contracts, mortgages and guarantees DIVISION 1 — UNILATERAL CHANGES BY CREDIT PROVIDER Application of Division 63 (1) [Unilateral changes] This Division applies only to changes made unilaterally by a credit provider under a credit contract, mortgage or guarantee. 63 (2) [Exceptions] This Division does not apply to the following changes under a credit contract: (a) a change to a new annual percentage rate payable under the contract (not being a rate determined by referring to a reference rate), if both the new rate and when it takes effect are ascertainable from the contract; (b) an increase in the amount of repayments, if the increase occurs automatically, as specified by the contract, and both the amount of the increase and when it takes effect are ascertainable from the contract; (c) an increase in the term of a credit contract, if the increase occurs only because of an increase in the annual percentage rate or rates payable under the contract; (d) a change made under Division 3. 63 (3) [Limit on powers conferred] Nothing in this Division confers on a

credit provider or a debtor any power or right to change the credit contract or its terms in addition to those conferred by the contract. ________________________________________ [Editorial note: UCCC s 58 — apart from numbering the section is unchanged.]

COMMENTARY ON SECTION 63 [63.05] Outline The Code contains detailed provisions relating to changes to obligations under credit contracts, mortgages and guarantees (see ss 63–81). Changes can be unilateral by the credit provider, agreed between a credit provider and debtor or imposed by a court. [63.10] “Change” A “change” may be: a unilateral change in matters which vary in line with the terms of the credit contract, mortgage or guarantee, without requiring an amendment to those terms (eg, a change in the variable interest rate) or a unilateral change which does vary those terms, where the credit provider has a power to vary — the requirements in Div 1 of Pt 4 apply; or an agreed variation which is a change requiring amendment to the terms of the credit contract, mortgage or guarantee (eg, a change in the method of calculating interest) — this can be a change agreed between a credit provider and a debtor, in which case the requirements of Div 2 of Pt 4 apply (this is referred to below as an “agreed change”); or [page 264] a change on the grounds of hardship (this is referred to below as a “hardship change”), or a court-imposed change to an unjust transaction, in which case Div 3 of Pt 4 applies. A credit provider wishing to make a change to a contract must determine if

the change is a unilateral change permitted by the contract, in which case the requirements of Div 1 of Pt 4 apply, or if the change is a change to the terms of the contract that must be agreed between the parties, in which case the requirements of Div 2 of Pt 4 apply. [63.15] Unilateral changes The Code does not confer on a credit provider or a debtor any power or right to change the credit contract or its terms in addition to those conferred by the contract (s 63(3)). (There was a limited exception to this under the transitional provisions for the UCCC). If a credit provider wishes to make a unilateral change to a credit contract, that contract must confer on the credit provider the power to make a change under the contract unilaterally (s 63(3)). The Code does not prohibit unilateral changes by credit providers except changes to early termination and prepayment fees under fixed-rate contracts (s 70). However, strict obligations apply for notifying unilateral changes. These are contained in Div 1 of Pt 4 (see ss 63–70). Notice requirements for unilateral changes vary, as summarised below: there are detailed advance or same-day notice requirements for most unilateral changes; many changes which reduce the debtor’s obligations only need confirmatory notice after the change; and no notice is needed for interest changes which reduce the debtor’s liability or for other changes which are specifically set out in the contract (such as stepped interest rates). [63.20] Types of unilateral changes In the context of unilateral changes that a credit provider may make, the decision of the Federal Court in Marks, Kinross, McCullagh & Williamson v GIO Australia Holdings Ltd (1996) 63 FCR 304; (1996) ATPR 41-471; (1996) ASC (Digest) ¶56-343; BC9600181 (Marks) should be considered. In that case a credit contract contained a common variation clause along the following lines: [The credit provider] may, on giving prior notice to the Customer, vary any of these terms and conditions as it sees fit.

Prior to the introduction of unfair contract terms provisions in the ASIC Act (see [63.21]), credit providers generally thought that such a clause would be effective to allow them to make such changes as they desired from time to time to the terms of the credit contract. This may have been the case, but the decision in Marks indicates that some caution should be exercised in relying on or applying such a clause. Einfeld J said that, in his view, the words quoted above have an inherent limitation and must be read down. He said that: If a contract allows for the unilateral variation of any term or condition whatsoever, it ceases to be a bargain between the parties. It would be a gamble, the borrower virtually placing a bet that the [credit provider] would honour its so-called contractual

[page 265] obligations. In essence, the contract would have no efficacy if at the whim of one party it could be cancelled or otherwise made impossible for the borrower to comply with by the unilateral amendment of one or more of its terms.

Einfeld J said that the credit provider, therefore, cannot in fact “vary any term”. He said: For instance, the [credit provider] could not vary the repayment period, or without cause (such as default by the borrower) cancel the facility and demand immediate repayment. Nor could it unilaterally alter the security it held, nor raise the borrower to the higher interest rate without cause, nor suddenly declare that the family home was no longer satisfactory security without a reasonable occurrence such as a decline in that home’s value relative to the loan account. Nor could the [credit provider] switch the underlying 90-day bank bill rate to, say, the 180-day bill rate, or switch the customer to fixed-rate funding.

He even appeared to suggest that such a clause could imply a total failure of consideration from the credit provider. (Note that an appeal was brought from the decision of Einfeld J in GIO Australia Holdings Ltd v Marks (1996) 70 FCR 559; (1997) ATPR 41-544; BC9605543. The Full Federal Court reversed the decision on other grounds, but did not contradict or dispute the comments of Einfeld J cited above. A subsequent appeal to the High Court was unsuccessful, and the comments of Einfeld J were not referred to: see Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494; 158 ALR 333; [1998] HCA 69; BC9805922.

Credit providers should therefore exercise care in making unilateral changes to credit contracts. The Code recognises that unilateral changes may be made, but does not go further than the general law by authorising any kind of unilateral change. That is, ss 63 and 68 do not purport to give any general power to make unilateral changes over and above that which is contained in the credit contract, mortgage or guarantee. General law restrictions on the effect of such terms in contractual documents would therefore also apply to documents governed by the Code. Note also the impact on unilateral changes clauses of the unfair contract terms provisions in the ASIC Act (see [63.21]). Any unilateral change which a credit provider makes to a credit contract is governed by ss 63–70. However, a credit provider only has the right to make unilateral changes if that right is set out in the contract itself (ss 63(3) and 68(1)). See further [63.21]. The power of a credit provider to unilaterally vary the interest rate under a credit contract was considered in the United Kingdom case of Paragon Finance plc v Staunton; Paragon Finance plc v Nash [2002] 2 All ER 248; [2002] 1 WLR 685; [2001] 2 All ER (Comm) 1025; [2001] EWCA Civ 1466 (CA). (Leave to appeal to the House of Lords was refused: Paragon Finance plc v Nash [2002] 1 WLR 2263). In that case, the credit contracts between the credit provider and the defendants contained a clause which provided that interest would be charged: … at such rate as the Company shall from time to time apply to the category of business to which the Company shall consider that the mortgage belongs and may accordingly be increased or decreased by the Company at any time.

On the basis of this clause, the credit provider increased the interest rate on the defendants’ loans until it was between four and five percentage points above the [page 266] prevailing market rates. The defendants defaulted on their repayments, and the credit provider enforced the mortgage. The defendants counter-claimed

for orders that their credit contracts be reopened, on the grounds that they were extortionate credit bargains. The court found that the power of a credit provider to set interest rates from time to time was not completely unfettered and that, in order to give effect to the reasonable expectations of the parties, it was an implied term of each credit contract that the discretion to vary interest rates should not be exercised dishonestly, for an improper purpose, capriciously, arbitrarily or in a way in which no reasonable mortgagee would do. The reason the credit provider had increased the interest rates to such an extent was to overcome its own financial difficulties. It was held that, because the credit provider had increased interest rates as a result of commercial considerations, the credit provider had not breached the implied term of the credit contract. Sections 63–70 set out the notices that must be given to debtors in cases of unilateral changes. In general, 20 days’ written notice must be given of unilateral changes made by a credit provider. However, certain changes require no notice (see below). [63.21] “Unfair” unilateral rights In the context of unilateral changes, it is important also to take into account the unfair contract terms provisions in the ASIC Act (Pt 2, Div 2, Subdiv BA). These specifically indicate that a unilateral right to vary a contract may be “unfair” (see s 12BH(1)(d)). Also, note ASIC’s guidance (in regulatory guide RG 220 — available from www.asic.gov.au) regarding unilateral variation of early termination fees (paras RG 220.88–RG 220.93). Credit providers should resist including in their credit contracts “open-ended” unilateral variation rights clauses. Instead, the unilateral variation rights clause should specify the types of unilateral variations that may be made and on what basis. [63.22] Notice requirement Except for the changes listed below, for which no notice is required (see [63.25]), the credit provider must give the debtor notice in the required form either before, at the time of or after the change takes effect, as the Code requires. Sections 63–70 set out the notices that must be given to debtors in cases of unilateral changes. In general, 20 days’ written notice must be given of unilateral changes made by a credit provider

(s 68). Different notice periods apply in respect of certain specific types of changes listed in ss 64–67. See further [63.30]. [63.25] Which changes need no notice? No notice is required for the following changes under credit contracts: a change to the annual percentage rate (APR) (not being a rate determined by referring to a reference rate) if the new rate and when it takes effect are specified in the contract (s 63(2)(a)); increases in the amount of repayments, if the increase occurs automatically under the contract and both the amount of the increase and when it takes effect are specified in the contract (s 63(2)(b)); [page 267] an increase in the term of a contract caused only by an increase in the APR (s 63(2)(c)); a change in the way interest is calculated or applied under the contract if the change reduces the debtor’s obligations (s 64(5)); a reduction in APR (s 64(5)); changes on the ground of hardship and unjust transactions (Div 3 of Pt 4); and changes to the amount, frequency or time of payment of, or a change in the method of calculation of, instalments or minimum repayments while no repayment of the amount of credit provided is required (eg, in the case of an interest-only loan) (s 65(5)). [63.30] Notice periods Notice periods generally start from the time the person receives the notice — they do not include the time taken in delivering the notice (see s 196). If a credit provider is posting a notice, they may need to allow up to seven days to cover delivery time. Also, the day the actual

change takes effect is excluded (see s 218(2)). The notice need not specify when the change will take effect. [63.35] What may not be changed? If the annual percentage rate is fixed for a specified term (including the whole term) under a credit contract: a unilateral change in the early termination fee or prepayment fee (including a change in the method of calculation) which increases the early termination fee or the prepayment fee is not permitted (s 70(1)); but the Regulations may permit such a change in certain circumstances (although no regulations have been made for this purpose) (s 70(2)). The reference to contracts with a fixed APR must include contracts with both a fixed APR and a default rate, otherwise the prohibition in s 70(1) could be avoided by a credit provider simply including a default rate in credit contracts with fixed APRs.

Interest rate changes 64 (1) Notification of interest rate changes A credit provider must, not later than the day on which a change in the annual percentage rate or rates payable under a credit contract takes effect, give to the debtor written notice setting out: (a) the new rate or rates or, if a rate is determined by referring to a reference rate, the new reference rate; and (b) any information required by the regulations. Criminal penalty: 100 penalty units. 64 (2) Notification by publication Notice under subsection (1) may be given by publishing the notice in a newspaper circulating throughout each State and Territory. A credit provider that gives notice in accordance with this subsection must give to the debtor particulars of the change before or when the next statement of account is sent to the debtor after the change takes effect.

Criminal penalty: 100 penalty units. 64 (3) Changes in reference rates Subsection (1) does not apply to a change in a rate that is determined by referring to a reference rate if the changed reference rate is notified (whether or not by the credit provider) in a newspaper circulating throughout each State and Territory not later than the date the change takes effect. [page 268] 64 (4) Notification of other interest changes A credit provider must, not later than 20 days before a change in the manner in which interest is calculated or applied under a credit contract (including a change in or abolition of any interest free period under the contract) takes effect, give to the debtor written notice setting out: (a) particulars of the change; and (b) any information required by the regulations. Criminal penalty: 100 penalty units. 64 (5) Interest rate reductions Subsections (1) and (4) do not apply to a change that reduces the obligations of the debtor under the credit contract. 64 (6) Strict liability offences Subsections (1), (2) and (4) are offences of strict liability. Note: For strict liability, see section 6.1 of the Criminal Code.

64 (7) Application This section applies whether or not the change is a change to the terms of the contract. ________________________________________ [Editorial note: UCCC s 59 provided as follows: Interest rate changes 59 (1) [Notification of interest rate changes] A credit provider must, not later than the day on

which a change in the annual percentage rate or rates payable under a credit contract takes effect, give to the debtor written notice setting out— (a) the new rate or rates or, if a rate is determined by referring to a reference rate, the new reference rate; and (b) any information required by the regulations. Maximum penalty — 100 penalty units. 59 (2) [Notification by publication] Notice under subsection (1) may be given by publishing the notice in a newspaper circulating throughout this jurisdiction. A credit provider that gives notice in accordance with this subsection must give to the debtor particulars of the change before or when the next statement of account is sent to the debtor after the change takes effect. Maximum penalty — 100 penalty units. 59 (3) [Changes in reference rates] Subsection (1) does not apply to a change in a rate that is determined by referring to a reference rate if the changed reference rate is notified (whether or not by the credit provider) in a newspaper circulating throughout this jurisdiction not later than the date the change takes effect. 59 (4) [Notification of other interest changes] A credit provider must, not later than 20 days before a change in the manner in which interest is calculated or applied under a credit contract (including a change in or abolition of any interest free period under the contract) takes effect, give to the debtor written notice setting out— (a) particulars of the change; and (b) any information required by the regulations. Maximum penalty — 100 penalty units. 59 (5) [Interest rate reductions] Subsections (1) and (4) do not apply to a change that reduces the obligations of the debtor under the credit contract. 59 (6) [Application] This section applies whether or not the change is a change to the terms of the contract.]

COMMENTARY ON SECTION 64 [64.05] Outline Section 64 prescribes the notice requirements if a credit provider makes a unilateral change to the APR applying under a credit contract or a reference rate applying under a credit contract. The requirements vary depending on whether the change increases or reduces a debtor’s obligations under the contract. The notification requirements of interest rate changes include changes in the default interest rate (as a default rate is also an APR — see definition in s 27(1) and [33.25]). [page 269]

Section 64 requires credit providers to give advance notice of the following unilateral interest rate changes (the particular notice requirements vary depending on the nature and effect of the interest rate changes): changes in how interest is calculated or applied (including a change in any interest-free period); and changes in the APR or any applicable reference rate — unless the change reduces the debtor’s obligations, or where any of the exceptions in s 63(2) apply. The types of changes to interest payable under a credit contract, and the procedure to be followed in relation to each type of change are set out below. [64.10] Increase in the annual percentage rate Interest rate changes may be notified by newspaper advertisement circulating throughout each state and territory (setting out the new rate or rates or, if a rate is determined by referring to a reference rate, the new reference rate) no later than the day on which the change takes effect. If the change is notified to debtors in this way, debtors must be given particulars of the change before or when the next statement of account is sent after the change takes effect (s 64(1) and (2)). (Note the requirement for newspaper circulation to be in each state and territory. Previously, under the UCCC, the newspaper needed to be circulating only in the relevant state or territory). If the credit provider makes it clear to the debtor that the rate has changed, or issues to the debtor a new set of terms and conditions relating to the credit contract, the credit provider is only required to give the debtor particulars of the new rate or rates or, if a rate is determined by referring to a reference rate, the new reference rate (s 69). Alternatively, if a credit provider does not wish to notify the interest rate change by newspaper advertisement, it must give debtors a written notice setting out the new rate or rates or, if a rate is determined by referring to a reference rate, the new reference rate (and any prescribed information — none is currently prescribed). That notice must be received not later than the day on which the rate change takes effect (s 64(1)). If the interest rate is based on a reference rate plus a margin, the Code

requires that notice (whether or not by the credit provider) of the reference rate increase need only be notified by newspaper advertisement circulating throughout each state or territory not later than the date the change takes effect. No other notice need be given (s 64(3)). Note that, if an APR change causes an increase in instalment amounts, 20 days’ written notice of the changed amount must be given to the debtor (s 65(1)), unless the increase occurs automatically under the contract, and both the amount and timing of the increase are ascertainable from the contract (s 63(2)(b)). Consequently, some changes cannot take effect simply by giving a newspaper notice unless the change is accommodated by extending the term of the loan and leaving the repayment amounts unchanged. In some cases, the credit provider might change an APR on a specified day, and delay changes in repayment amount to a later date after individual notices have been provided. [page 270] Debtors or guarantors may apply to the court to review unilateral changes in the APR, and the court may reduce or annul the change if it decides that the change is unconscionable (see s 78). Also, see discussion of the Paragon Finance case at [63.20]. The Code does not indicate what “particulars of the interest rate change” means. Section 69 offers some assistance (see [69.05]). Various descriptions could be given and an example of a description that should satisfy the Code particulars of the change requirement is: On [date] the interest rate payable under your [account] changed to [y%]. [64.15] Reference rate Section 204 defines “reference rate” as meaning a benchmark, index or other reference rate. Credit providers can rely on s 64(3) in connection with notifications of changes to both their own reference rates and changes to the external reference rates of another party that applies to the credit provider’s credit contracts.

[64.20] Manner of calculation If there is a change in the manner in which interest is calculated or applied (including a change in or abolition of any interest-free period under the contract) that increases or does not change the debtor’s obligations, the credit provider must give written notice to the debtor setting out particulars of the change (and any prescribed information) not later than 20 days before the change takes effect (s 64(4)). Twenty days (and not 30 days) notice of a change in the manner in which interest is calculated or applied is now sufficient following amendments made to the UCCC by the Consumer Credit (Queensland) Amendment Act 1998. This permits changes to be notified by messages on periodic statements of account and not by separate notices. Industry codes of practice have similar notice requirements, although cl 20 of the Code of Banking Practice (2013) requires 30 days’ notice. Clause 17 of the Customer Owned Banking Code of Practice (January 2014) requires 20 days’ notice. Note that cl 20 of the Code of Banking Practice (2013) is stated not to apply to a banking service regulated by the Code. [64.25] Rate ascertainable from contract No notice is required of a change to a new APR (not being a rate determined by referring to a reference rate) if both the new rate and when it takes effect are ascertainable from the contract (s 63(2)(a)). [64.30] Reduction in obligations No notice is required of a change that reduces the obligations of the debtor (s 64(5)). [64.35] Change to contract The interest rate change notification requirements in s 64 apply whether or not the change is a change to the terms of a credit contract (s 64(7)). [64.40] “Throughout” If notice of a change is given taking advantage of s 64(2), notice must be published in a newspaper circulating “throughout” each state and territory. Placing the notice in a newspaper that only circulates in part of a state or territory, or in only some states or territories, will not suffice.

[page 271] [64.45] Penalties The penalty for failure to comply with the Code’s requirements for notifying interest rate changes is a criminal penalty of up to 100 penalty units (s 64(1), (2) and (4)). Under the NCCP Act regime changes, the insertion of s 64(6) made failure to comply with any of s 64(1), (2) or (4) offences of strict liability. (See paras 17 and 18 of the “Overview of the National Credit Code” for commentary on penalty units and strict liability offences). Failure to comply with the notice requirements in s 64 does not necessarily invalidate the change itself. However, the credit provider would be exposed to a claim for compensation or restitution under s 124. This would depend on whether the debtors involved had suffered any loss as a result of the breach of the applicable Code obligation.

Repayment changes 65 (1) Notification of repayment changes A credit provider must, not later than 20 days before a change in the amount or frequency or time for payment of, or a change in the method of calculation of, instalments or minimum repayments, under a credit contract takes effect, give to the debtor written notice setting out: (a) particulars of the change; and (b) any information required by the regulations. Criminal penalty: 100 penalty units. 65 (2) Repayment reductions Subsection (1) does not apply to a change that reduces the obligations of the debtor, or extends the time for payment, under the credit contract. The credit provider must, however, give particulars of any such change before or when the next statement of account is sent to the debtor after the change takes effect. Criminal penalty: 100 penalty units.

65 (3) [Method of calculation changed] If the amount or frequency or time for payment of instalments or minimum repayments is not specified in the credit contract but is determined by a method of calculation so specified, this section requires the credit provider to give particulars only of any change in that method of calculation. 65 (4) Strict liability offences Subsections (1) and (2) are offences of strict liability. Note: For strict liability, see section 6.1 of the Criminal Code.

65 (5) Application This section does not apply to a change that occurs while the credit contract does not require any repayment of the amount of credit provided. 65 (6) [Application] This section applies whether or not the change is a change to the terms of the contract. ________________________________________ [Editorial note: UCCC s 60 provided as follows: Repayment changes 60 (1) Notification of repayment changes A credit provider must, not later than 20 days before a change in the amount or frequency or time for payment of, or a change in the method of calculation of, instalments or minimum repayments, under a credit contract takes effect, give to the debtor written notice setting out— (a) particulars of the change; and (b) any information required by the regulations. Maximum penalty — 100 penalty units.

[page 272] 60 (2) Repayment reductions Subsection (1) does not apply to a change that reduces the obligations of the debtor, or extends the time for payment, under the credit contract. The credit provider must, however, give particulars of any such change before or when the next statement of account is sent to the debtor after the change takes effect. Maximum penalty — 100 penalty units. 60 (2A) [Method of calculation changed] If the amount or frequency or time for payment of instalments or minimum repayments is not specified in the credit contract but is determined by

a method of calculation so specified, this section requires the credit provider to give particulars only of any change in that method of calculation. 60 (2B) [Exclusion of section] This section does not apply to a change that occurs while the credit contract does not require any repayment of the amount of credit provided. 60 (3) Application This section applies whether or not the change is a change to the terms of the contract.]

COMMENTARY ON SECTION 65 [65.05] Outline Section 65 prescribes the notice requirements if a credit provider makes a unilateral change to the debtor’s repayment obligations under a credit contract. Again, the notice requirements vary depending on whether the change increases (or does not change) or reduces a debtor’s obligations under the credit contract. The types of changes to repayments under a credit contract and the procedure to be followed in relation to each type of change are set out below. Also, see [63.21]. [65.10] Increase or no change in obligation If there is a change in the amount, frequency or time for payment of, or a change in the method of calculation of, instalments or minimum repayments that either increases or does not change the debtor’s obligations, a credit provider must give written notice to the debtor setting out the particulars of the change (and any prescribed information — none is currently prescribed) not later than 20 days before the change takes effect (s 65(1)). However, if that change may cause a guarantor’s liability to be increased, the credit provider should also comply with s 61 (see [61.05]–[61.15]). If a credit provider makes it clear to the debtor that the matter has changed, or issues to the debtor a new set of terms and conditions relating to the credit contract, the credit provider is only required to give the debtor particulars of the matter as changed (s 69). If there is an increase in the amount of repayments if the increase occurs automatically as specified by the contract, and both the amount of the increase and when it takes effect are ascertainable from the contract, then no notice is required (s 63(2)(b)).

[65.15] Reduction in obligations If there is a change in the amount, frequency or time for payment of, or a change in the method of calculation of, instalments or minimum repayments that reduces the obligations of the debtor or extends the time for payment, the credit provider need only give particulars of the change before or when the next statement of account is sent to the debtor after the change takes effect (s 65(2)). [page 273] Again, if the credit provider makes it clear to the debtor that the matter has changed, or issues to the debtor a new set of terms and conditions relating to the credit contract, the credit provider is only required to give the debtor particulars of the matter as changed (s 69). [65.20] Method of calculation If the amount or frequency or time for payment of instalments or minimum repayments is not specified in the credit contract but is determined by a method of calculation specified in the contract, the credit provider need only give particulars of the changes to the method of calculation (s 65(3)). This provision was inserted into the UCCC by the Consumer Credit (Queensland) Amendment Act 1998. [65.25] Interest-only loans During any period when the credit contract does not require any repayment of the amount of credit provided (eg, in the case of an interest-only loan), no advance notice of changes to the repayment obligations is required (s 65(5)). Where a debtor has an interest-only loan, the amount of each repayment will differ if the account balance varies. Where the amount of interest for an interest period is not known until the end of the last day of that interest period, it will be impossible for credit contracts to require the debtor to pay, at the end of each interest period, the amount of interest actually accrued. This is because the amount of interest payable will not be known until that day, and it will therefore not be possible to give 20 days’ notice of the amount payable. There is, of course, nothing to stop the debtor actually paying the amount

due. (Section 26 expressly requires the credit provider to accept such a payment, unless the credit contract provides otherwise). [65.30] Automatic increases If there is an increase in the amount of repayments and the increase occurs automatically as specified by the contract, and both the amount of the increase and when it takes effect are ascertainable from the contract, no notice is required (s 63(2)(b)). [65.35] Change to contract The repayment change notification requirements in s 65 apply whether or not the change is a change to the terms of a credit contract (s 65(6)). [65.40] “Next statement of account” Section 65(2) allows notice of repayment changes that reduce a debtor’s obligations to be given “when the next statement of account is sent to the debtor”. For some fixed-rate loans, statements of account are not required (s 33(3)(a)). It is not clear in this case how the credit provider should comply with s 65(2). Perhaps the safest approach would be to notify the debtor as soon as possible after the change is made (s 218(5)). Another option may be to generate a special statement of account for this purpose, but credit providers may not have their computer systems geared up to do this. In practice, however, this may not really be an issue because the kinds of credit contracts that are eligible for the exemption in s 33(3)(a) are probably not, in most cases, going to be the subject of unilateral changes of the kind referred to in s 65. [page 274] [65.45] Penalties The penalty for failure to comply with the Code’s requirements for notifying repayment changes is a criminal penalty of up to 100 penalty units (s 65(1) and (2)). Under the NCCP Act regime changes, s 65(1) and (2) are made offences of strict liability by the insertion of s 65(4). (See paras 17 and 18 of the “Overview of the National Credit Code” for commentary on penalty units and strict liability offences). Failure to comply with the notice requirements in s 65 does not necessarily

invalidate the change itself. However, the credit provider would be exposed to a claim for compensation or restitution under s 124. This would depend on whether the debtors involved had suffered any loss as a result of the breach of the applicable Code obligation. [65.50] NCCP Act regime changes Section 65 was amended in conjunction with the introduction of the NCCP Act regime so that where a change reduces the obligations of the debtor or extends the time for payments, the credit provider can give notice in the next statement of account. Also, where payments are determined according to a method of calculation and only the method of calculation is included in the credit contract, the credit provider is only required to give notice of the change to the method of calculation. These are changes to the notice requirements which applied under the UCCC.

Credit fees and charges changes 66 (1) Notification of credit fees and charges changes A credit provider must, not later than 20 days before a change in the amount of a credit fee or charge (including a new credit fee or charge), or a change in the frequency or time for payment of a credit fee or charge, under a credit contract takes effect, give to the debtor written notice setting out: (a) particulars of the change; and (b) any information required by the regulations. Criminal penalty: 100 penalty units. 66 (2) Notification by publication Notice relating to a change in the amount of a credit fee or charge (including a new credit fee or charge) may be given by publishing the notice in a newspaper circulating throughout each State and Territory. A credit provider that gives notice in accordance with this subsection must give particulars of the change before or when the next statement of account is sent to the debtor after the change takes effect. Criminal penalty: 100 penalty units. 66 (3) Credit fee or charge reductions Subsection (1) does not apply to a change that reduces the obligations of the debtor, or extends the time for

payment, under the credit contract. The credit provider must, however, give particulars of any such change before or when the next statement of account is sent to the debtor after the change takes effect. Criminal penalty: 100 penalty units. 66 (4) Strict liability offences Subsections (1), (2) and (3) are offences of strict liability. Note: For strict liability, see section 6.1 of the Criminal Code.

66 (5) Application This section applies whether or not the change is a change to the terms of the contract. ________________________________________ [Editorial note: UCCC s 61 provided as follows:

[page 275] Credit fees and charges changes 61 (1) Notification of credit fees and charges changes A credit provider must, not later than 20 days before a change in the amount of a credit fee or charge (including a new credit fee or charge), or a change in the frequency or time for payment of a credit fee or charge, under a credit contract takes effect, give to the debtor written notice setting out— (a) particulars of the change; and (b) any information required by the regulations. Maximum penalty — 100 penalty units. 61 (2) Notification by publication Notice relating to a change in the amount of a credit fee or charge (including a new credit fee or charge) may be given by publishing the notice in a newspaper circulating throughout this jurisdiction. A credit provider that gives notice in accordance with this subsection must give particulars of the change before or when the next statement of account is sent to the debtor after the change takes effect. Maximum penalty — 100 penalty units. 61 (3) Credit fee or charge reductions Subsection (1) does not apply to a change that reduces the obligations of the debtor, or extends the time for payment, under the credit contract. The credit provider must, however, give particulars of any such change before or when the next statement of account is sent to the debtor after the change takes effect. Maximum penalty — 100 penalty units. 61 (4) Application This section applies whether or not the change is a change to the terms of

the contract.]

COMMENTARY ON SECTION 66 [66.05] Outline Section 66 prescribes the notice requirements if a credit provider makes a unilateral change to the credit fees and charges payable under a credit contract. Again, the notice requirements vary depending on whether the change increases (or does not change) or reduces a debtor’s obligations under the contract. The types of changes to credit fees and charges and the procedure to be followed in relation to each type of change are set out below. Note that a credit fee or charge includes a government charge, other than government charges and duties on receipts or withdrawals (see definition of “credit fees and charges” in s 204). However, a change in a credit fee or charge payable to a third party, where that change is beyond the control of the credit provider, need not be notified under s 66 (eg, a change to duties announced by the Office of State Revenue). This is because s 63(1) restricts the application of s 66 to changes made unilaterally by the credit provider under the credit contract. Also, see [63.21]. [66.10] Changes in credit fees and charges If there is a change in the amount of a credit fee or charge (including a new credit fee or charge), or a change in the frequency or time for payment of a credit fee or charge, the credit provider is to give written notice to the debtor setting out particulars of the change (and any prescribed information — none is currently prescribed) not later than 20 days before the change takes effect (s 66(1)). Particulars of the change may be given by a description of the position before and after the change was made. If the credit provider makes it clear to the debtor that the matter has changed, or issues to the debtor a new set of terms and conditions relating to the credit contract, the credit provider is only required to give the debtor particulars of the matter as changed (s 69). [page 276]

Notice relating to a change in the amount of a credit fee or charge (including a new credit fee or charge) may also be given by publishing the notice in a newspaper circulating throughout each state and territory, and giving particulars of the change before or when the next statement of account is sent to the debtor after the change takes effect (s 66(2)). (Note the requirement for newspaper circulation to be in each state and territory. Previously, under the UCCC, the newspaper needed to be circulating only in the relevant state or territory). Where this method of giving notice is adopted, the requirement to give particulars of the change will be satisfied by the credit provider giving the debtor particulars of the matter as changed if the credit provider: makes it clear to the debtor that the matter has changed (this could be done in a newspaper advertisement); or issues the debtor with a new set of terms and conditions relating to the credit contract (s 69). However, if the change may cause a guarantor’s liability to be increased, the credit provider should also comply with s 61 (see [61.05]–[61.15]). [66.15] Reduction in obligations If there is a change that reduces the obligations of the debtor or extends the time for payment, the credit provider must give particulars of the change before or when the next statement of account is sent to the debtor after the change takes effect (s 66(3)). Again, where the credit provider makes it clear to the debtor that the matter has changed or issues the debtor with a new set of terms and conditions relating to the credit contract, the credit provider is only required to give particulars of the matter as changed (s 69). [66.20] Change to contract The credit fees and charges change notification requirements in s 66 apply whether or not the changes are changes to the terms of a credit contract (s 66(5)). [66.25] “Next statement of account” See [65.45] for a discussion of the issues that arise in connection with accounts that are exempt from the Code’s requirement to send statements of account. In practice, this may be more of

an issue in connection with credit fees and changes than in connection with repayment matters. The combination of ss 33(3)(a) and 66(3) may have the perverse result that reductions in credit fees and changes are not passed on to fixed-rate loan customers in order to avoid the possibility of non-compliance with s 66(3). [66.30] “Throughout” See [64.40]. [66.35] Penalties The penalty for failure to comply with the Code’s requirements for notifying repayment changes is a criminal penalty of up to 100 penalty units (s 66(1), (2) and (3)). Under the NCCP Act regime changes, s 66(1), (2) and (3) are made offences of strict liability by the insertion of s 66(4). (See paras 17 and 18 of the “Overview of the National Credit Code” for commentary on penalty units and strict liability offences). [page 277] Failure to comply with the notice requirements in s 66 does not necessarily invalidate the change itself. However, the credit provider would be exposed to a claim for compensation or restitution under s 124. This would depend on whether the debtors involved had suffered any loss as a result of the breach of the applicable Code obligation. [66.40] Industry codes of practice Clause 20 of the Code of Banking Practice (2013) requires 30 days’ written notice when: new fees or charges (other than government charges) are to be introduced; the minimum balance to which an account keeping fee applies is varied; the method by which interest is calculated is varied; the balance ranges within which interest rates apply to a deposit account are varied; or the frequency with which interest is debited or credited is varied.

Other changes to the terms and conditions need only personal written notice or advertisement in national or local media no later than the day on which the change takes effect. However, cl 20.6 states that the cl 20 requirements do not apply to a banking service regulated by the Code. Clause 17 of the Customer Owned Banking Code of Practice (January 2014) requires 20 days’ notice if a credit union or mutual building society intends to: introduce a fee or charge; increase a fee or charge; reduce the number of fee-free transactions permitted on the account; change the manner in which interest is calculated; change the minimum balance to which an account-keeping fee applies; or change the circumstances when interest is credited or debited to an account. Increases in interest on credit facilities are to be notified no later than the day they take effect. Clause 17.2 also states “we will advise you of any new minimum payment amount”, but it does not specify a time when this notice must be given. Notice may be given by a variety of methods depending on the nature and extent of the change. Reductions in fees or charges need no notice; confirmation of the change when the credit union, mutual bank or mutual building society “next communicates” with the customer is sufficient “subject to any applicable laws” (cl 17.3). Changes to the terms and conditions may be notified in a member newsletter, on the credit union, mutual bank or mutual building society’s website, or via an account statement, in addition to personal written notice or media advertisement. Clauses 4.11 and 4.15 of the ePayments Code requires 20 days’ notice of certain changes and no notice requirements for other changes (cl 4.16).

[66.45] Variations of government charges A credit fee or charge includes a government charge, other than government charges and duties on receipts or withdrawals (see definition of “credit fees and charges” in s 204). However, a change in a credit fee or charge payable to a third party, where that change is beyond the control of the credit provider, need not be notified under [page 278] s 66 (eg, a change to duties announced by a stamp duty office). This is because s 63(1) restricts the application of s 66 to changes made unilaterally by the credit provider under the credit contract. (Section 63(1) applies to all the changes contemplated in ss 63–70 set out in Pt 4, Div 1). The Code excludes government charges on receipts or withdrawals from the “credit fees and charges” definition, so changes in, for example, the amount of a government duty payable on receipts or withdrawals is only required to be notified under the Code of Banking Practice (2013) (cll 20.1 and 20.2) and not the Code. (Clause 17 of the Customer Owned Banking Code of Practice (January 2014) does not specifically refer to changes to government duties — but note cl 17.3). Changes to any other government charges that are “credit fees and charges” payable under the contract would have to be notified by 20 days’ written notice if s 66 applies. Clause 20 of the Code of Banking Practice (2013) requires personal written notice or a media advertisement if government charges are introduced or varied, except where the change is publicised by the government or a representative agency. Clause 17.4 of the Customer Owned Banking Code of Practice (January 2014) states that a credit union, mutual bank or mutual building society may notify a customer of changes to their account referred to in cl 17 by advertisement in the national or local media, or in writing to the customer, through an account statement, a newsletter or its website. (However, as noted above, the Customer Owned Banking Code of Practice (January 2014) includes no specific express obligation to notify changes to

government fees and charges. But note cl 17.3: “We will notify you of other changes to your account when we next communicate with you (subject to any applicable laws)” — presumably that communication will be through any of the methods identified in cl 17.4). [66.50] Case Permanent Custodians Ltd v Upston (2007) ASC 155-083; (2007) Q ConvR 667; [2007] NSWSC 223; BC200701913.

Changes to credit limits etc in continuing credit contracts 67 (1) [Continuation of contract] If a credit provider decides not to provide any further credit under a continuing credit contract, the credit contract continues in force in relation to any credit previously provided under the contract. However, this subsection does not prevent the termination of the contract if otherwise permitted by this Code or the contract. 67 (2) [Notice to debtor] A credit provider must, unless the debtor is in default under the contract, as soon as practicable after deciding not to provide any further credit or to reduce the credit limit, give to the debtor a written notice to that effect if such notice has not previously been given. Criminal penalty: 100 penalty units. 67 (3) [Strict liability offence] Subsection (2) is an offence of strict liability. Note: For strict liability, see section 6.1 of the Criminal Code.

67 (4) [Increase in limit on request] A credit provider may increase the credit limit under a continuing credit contract only at the request of the debtor or with the written consent of the debtor. ________________________________________ [page 279]

[Editorial note: UCCC s 62 provided as follows: Changes to credit limits etc in continuing credit contracts 62 (1) [Continuation of contract] If a credit provider decides not to provide any further credit under a continuing credit contract, the credit contract continues in force in relation to any credit previously provided under the contract. However, this subsection does not prevent the termination of the contract if otherwise permitted by this Code or the contract. 62 (2) [Notice to debtor] A credit provider must, unless the debtor is in default under the contract, as soon as practicable after deciding not to provide any further credit or to reduce the credit limit, give to the debtor a written notice to that effect if such notice has not previously been given. Maximum penalty — 100 penalty units. 62 (3) [Increase in limit on request] A credit provider may increase the credit limit under a continuing credit contract only at the request of the debtor or with the written consent of the debtor.]

COMMENTARY ON SECTION 67 [67.05] Outline Section 67 prescribes the notice requirements that must be followed if there is a change to a credit limit in a continuing credit contract. Section 71(1) and (3) prescribe the notice requirements for increases in the amount of credit under a non-continuing credit contract (see [71.25]). [67.06] Credit limit increase invitations See also commentary on regs 28LH and 28LI regarding additional rules for the giving of credit limit increase invitations, and para 8 of the “Overview of the National Consumer Credit Protection Act (NCCP Act) regime” in the introductory pages of this text. Sections 133BE and 133BF of the NCCP Act regulate the making of credit limit invitation offers. (Note also that s 133BH of the NCCP Act and reg 28LJ require credit providers to notify debtors of the use of a credit card in excess of the credit limit.) These changes were introduced by the National Consumer Credit Protection Amendment (Home Loan and Credit Cards) Act 2011 (Cth), which commenced on 1 July 2012. [67.10] Reduction in credit limit or no further credit If a credit provider decides not to provide any further credit, or to reduce the credit limit, under a continuing credit contract, and the debtor is not in default, the credit provider must give the debtor a written notice as soon as practicable (s 67(2)). However, if a credit provider decides not to provide any further credit under a

continuing credit contract, the credit contract continues in force in relation to any credit previously provided under the contract, although the contract can be terminated if otherwise permitted by the Code or the credit contract (s 67(1)). [67.15] Increase in credit limit A credit provider can only increase the credit limit under a continuing credit contract at the request of the debtor or with the written consent of the debtor (s 67(4)). If credit providers write to their customers offering unsolicited increases in credit limits for continuing credit contracts, the increased limit can only take effect if the customer gives their written consent. This provision reflects the concerns which have been expressed for some time by consumer groups and regulators in relation to debtor over-commitment. Responsible lending obligations will also apply under the [page 280] NCCP Act. Amendments were made to Ch 3 of the NCCP Act specifically dealing with increases in credit limit processes — see para 8 of the “Overview of the National Consumer Credit Protection Act (NCCP Act) regime” in the introductory pages of this text. If a credit provider and a debtor agree to increase the debtor’s credit limit, the procedures regarding agreed changes (including the giving of a notice under s 71(1)) must be followed (see [71.05]–[71.30]). See further [67.06]. The courts have in the past provided some protection to credit providers in connection with these concerns. In Godfrey v National Australia Bank (2001) ASC ¶155-053; [2001] NSWSC 977; BC200107531, the Supreme Court of New South Wales accepted that a credit provider had no duty under the UCCC to ascertain from a debtor whether they could pay in accordance with the terms of the contract in relation to a preapproved increase in credit limit. In Godfrey, the credit provider invited the debtor to request an increase in credit limit under his continuing credit contract. The debtor submitted a preapproved acceptance certificate, which was in the form of a request to the credit provider to change his credit limit to $12,000. The credit provider

accepted the request but did not know the debtor was in financial difficulties. Notwithstanding those difficulties, the debtor had reduced the debit balance to almost zero, indicating to the credit provider that he was able to pay in accordance with the terms of the contract and without substantial hardship. The implications of this case have been countered in the Australian Capital Territory by amendments (now repealed) to the Fair Trading Act 1992 (see [67.20]) and now by the inclusion of responsible lending obligations in the NCCP Act. Under the NCCP Act s 128, before increasing the credit limit of a consumer under a credit contract, the credit provider must make reasonable enquiries about the consumer and assess whether the loan is “unsuitable” (including, but not limited to, an assessment of whether the consumer would be able to repay the loan without substantial hardship). Although s 67(4) is relatively simple in theory, it can have a real effect on customer service issues (eg, if a debtor applies for an increased limit over the telephone). The credit provider needs to have clear procedures in place, and staff need to be adequately trained to ensure that a credit limit is only increased in response to a request from the debtor, and that the request is properly recorded, and that an appropriate “unsuitability assessment” is carried out. If a credit provider agrees to increase the credit limit of a credit contract in respect of which a guarantee has been obtained, the credit provider should also comply with s 61 or the guarantee will not apply to the additional credit (see [61.05]–[61.15]). [67.20] Unsolicited credit contracts and increases in credit limits in the Australian Capital Territory In November 2002, the Legislative Assembly for the Australian Capital Territory introduced amendments to the Fair Trading Act 1992 (ACT) (Fair Trading Act) to regulate unsolicited credit contracts and increases in credit card limits. These provisions were repealed with effect from 1 January 2011 with the commencement of the Australian Consumer Law. Section 28A, discussed below, was repealed by the Fair Trading (Australian Consumer Law) Amendment Act 2010 (ACT). [page 281]

Section 28A(1) of the Fair Trading Act provided that a credit provider must not enter into a credit contract with a debtor unless the credit provider had carried out a satisfactory assessment of the debtor. Section 28A(2) prevented a credit provider from increasing the amount of credit available under a credit contract unless: the debtor had requested the increase in writing, or the credit provider had offered the debtor the increase and the debtor had accepted the offer in writing; and the credit provider had carried out a satisfactory assessment process. The Fair Trading Act defined “satisfactory assessment process” to mean an assessment of the debtor’s financial situation sufficient to satisfy a diligent and prudent credit provider that the debtor had a reasonable ability to repay the amount of credit provided. The amendments were designed to target the practice of some financial institutions of offering and granting increases in credit limits, usually on credit cards, without carrying out an adequate assessment of the debtor’s capacity to repay. The amendments built on s 76(2)(l) of the Code, which allows courts to reopen unjust transactions on the grounds of hardship if the credit provider failed to undertake a proper credit assessment before entering into the contract. This has now been covered by amendments to the NCCP Act and Regulations (see further commentary at [67.06] and [67.15]). [67.25] Card reissues It is commonplace that credit cards are issued for a specified period (eg, one or two years) and therefore require periodical reissue. The decision whether or not to reissue a card will depend, among other things, on the manner in which the debtor has conducted their account. The decision whether or not to issue the card is made close to, but at a time before, the expiry date of the old card. Consider the following example. A credit card is due to expire on 30 November and would, in the normal course of events, be reissued. The credit provider decides one month before the expiry of the card whether or not to

reissue the card. On 31 October, the debtor is in default under the card (eg, by virtue of having exceeded their approved credit limit or being in arrears of minimum payment requirements). The credit provider therefore decides not to reissue the card. Between 31 October and 30 November, the debtor remedies the default so that the account is now operating within the terms of the credit contract. On 30 November, the account is therefore not in default, yet the debtor does not receive a new card. What is the credit provider’s position under the Code? Section 67(2) provides that the credit provider must, unless the debtor is in default under the contract, as soon as practicable after deciding not to provide any further credit or to reduce the credit limit, give to the debtor a written notice to that effect if such notice has not previously been given. It appears from s 67(2) that, provided the debtor is in default at the time the decision is made not to provide any further credit, written notice to the debtor of the credit provider’s decision is not a Code requirement. This would appear to be the case even if the time at which the withdrawal of credit occurs is later than the date of the decision. [page 282] It is possible that the credit provider would, if the debtor has remedied the default by the expiry date of the card, decide to go ahead with the reissue of the card. In these circumstances, credit providers will have to decide whether, under the circumstances of the particular case, the original credit contract has come to an end and the reissue of the card requires a new contract to be documented, or whether, on the other hand, the existing contract remains on foot. If a new contract is documented, responsible lending obligations will apply under the NCCP Act. See further [67.15]. [67.30] Penalty The penalty for failure to comply with the requirements in s 67 for notifying changes to credit limits is a criminal penalty of up to 100 penalty units (s 67(2)). Under the NCCP Act regime changes, s 67(2) is made an offence of strict liability by the insertion of s 67(3). (See paras 17 and 18 of the “Overview of the National Credit Code” for commentary on penalty

units and strict liability offences.) In addition, it is possible that a debtor could make a claim for compensation or restitution under s 124.

Changes to tenancy protection in credit contracts for reverse mortgages 67A A purported change to a credit contract for a reverse mortgage that makes provision for a person other than the debtor to occupy the reverse mortgaged property is void so far as the change purports to: (a) remove a provision required by subsection 17(15A) to be contained in the contract document; or (b) vary the contract so as to limit: (i)

the ability of the debtor to nominate to the credit provider a person who is to be allowed to occupy the reverse mortgaged property (whether alone or with other persons); or

(ii) the rights of a person nominated by the debtor to the credit provider to occupy the property. [s 67A insrt Act 130 of 2012 s 3 and Sch 2 item 18, eff 1 Mar 2013]

________________________________________ [Editorial note: There was no comparable UCCC provision.]

COMMENTARY ON SECTION 67A [67A.05] Outline The Enhancements Act introduced a specific regime for reverse mortgages into the Code. See commentary on s 13A for a discussion of the reverse mortgage tenancy protection requirements. See also commentary on ss 18A, 18B and 18C. The Explanatory Memorandum to the Enhancements Act explains (at para 3.76): 3.67 A purported change to a reverse mortgage contract is void to the extent that it: removes a provision required to be in the contract by subsection

17(15A) [Schedule 2, item 18, paragraph 67A(a)]; or [page 283] varies the contract so as to limit the ability of a debtor to nominate to the credit provider a person who is to be allowed to occupy the property or varies the rights they are provided under the contract (so that if a debtor entered into the contract because they had the right to later be able to nominate a non-titleholding resident, that right cannot be taken away). [Schedule 2, item 18, paragraph 67A(b)]

Other unilateral changes by credit provider 68 (1) [Notice of change] A credit provider must not exercise a power under a credit contract, mortgage or guarantee to unilaterally change its terms without giving to the other party, not less than 20 days before the change takes effect, written notice setting out: (a) particulars of the change in the terms of the credit contract, mortgage or guarantee; and (b) any information required by the regulations. Criminal penalty: 100 penalty units. 68 (2) [Exceptions] Subsection (1) does not apply to a change that reduces the obligations of the debtor, or extends the time for payment, under the credit contract. The credit provider must, however, give particulars of any such change before or when the next statement of account is sent to the debtor after the change takes effect. Criminal penalty: 100 penalty units. 68 (3) [Strict liability offences] Subsections (1) and (2) are offences of strict liability. Note: For strict liability, see section 6.1 of the Criminal Code.

68 (4) [Exclusion of section] This section does not apply to a change of which notice is required to be given under section 64, 65, 66 or 67 (or which would be required to be so given but for an exception provided in any such section) or which is referred to in subsection 67(4). ________________________________________ [Editorial note: UCCC s 63 provided as follows: Other unilateral changes by credit provider 63 (1) [Notice of change] A credit provider must not exercise a power under a credit contract, mortgage or guarantee to unilaterally change its terms without giving to the other party, not less than 20 days before the change takes effect, written notice setting out— (a) particulars of the change in the terms of the credit contract, mortgage or guarantee; and (b) any information required by the regulations. Maximum penalty — 100 penalty units. 63 (2) [Exceptions] Subsection (1) does not apply to a change that reduces the obligations of the debtor, or extends the time for payment, under the credit contract. The credit provider must, however, give particulars of any such change before or when the next statement of account is sent to the debtor after the change takes effect. Maximum penalty — 100 penalty units. 63 (3) [Exclusion of section] This section does not apply to a change of which notice is required to be given under section 59, 60, 61 or 62 (or which would be required to be so given but for an exception provided in any such section) or which is referred to in section 62(3).]

COMMENTARY ON SECTION 68 [68.05] Outline Section 68 requires that a credit provider must give notice of other unilateral changes, not being a change specifically referred to in ss 64, 65, 66 or 67. See also [63.20] and [63.21]. [page 284] [68.10] Increase in obligations If a change to a credit contract, mortgage or guarantee increases or does not alter the obligations of the debtor, the credit provider must give written notice to the debtor setting out particulars of the change in the terms of the credit contract, mortgage or guarantee (and any

prescribed information) not less than 20 days before the change takes effect (s 68(1)). Where the credit provider makes it clear to the debtor that the matter has changed or issues the debtor with a new set of terms and conditions relating to the credit contract, the credit provider is only required to give particulars of the matter as changed (s 69). If the unilateral change increases the obligations of a debtor under a credit contract in respect of which a guarantee has been obtained, the credit provider should also comply with s 61 (see [61.05]–[61.15]). [68.15] Reduction in obligations If a change reduces the obligations of the debtor or extends the time for payment under the credit contract, the credit provider must give particulars of any change before or when the next statement of account is sent to the debtor after the change takes effect (s 68(2)). Again, if the credit provider makes it clear to the debtor that the matter has changed or issues to the debtor a new set of terms and conditions relating to the credit contract, the credit provider is only required to give particulars of the matter as changed (s 69). [68.20] “Next statement of account” See [65.45] and [66.25]. [68.25] Penalties The penalty for failure to comply with the Code’s requirements for notifying other unilateral changes (other than those referred to in ss 64, 65, 66 or 67, or those which are covered by an exception in one of those sections) is a criminal penalty of up to 100 penalty units (s 68(1) and (2)). Under the NCCP Act regime changes, s 68(1) and (2) are made offences of strict liability by the insertion of s 68(3). (See paras 17 and 18 of the “Overview of the National Credit Code” for commentary on penalty units and strict liability offences). Failure to comply with the notice requirements in s 68 does not necessarily invalidate the change itself. However, the credit provider would be exposed to a claim for compensation or restitution under s 124. This would depend on

whether the debtors involved had suffered any loss as a result of the breach of the applicable Code obligation.

Particulars of matters as changed only required to be given under this Division in certain cases 69 The credit provider may, under section 64, 65, 66 or 68, give a person particulars only of a matter as changed instead of particulars of the change, but only if the credit provider: (a) makes it clear to the person that the matter has changed; or (b) issues to the person a new set of terms and conditions relating to the credit contract, mortgage or guarantee. [page 285] ________________________________________ [Editorial note: UCCC s 63A provided as follows: Particulars of matters as changed only required to be given under this Division in certain cases 63A The credit provider may, under section 59, 60, 61 or 63, give a person particulars only of a matter as changed instead of particulars of the change, but only if the credit provider— (a) makes it clear to the person that the matter has changed; or (b) issues to the person a new set of terms and conditions relating to the credit contract, mortgage or guarantee.]

COMMENTARY ON SECTION 69 [69.05] Outline Section 69 implements former UCCC transitional regs 66–69. Section 69 states that the credit provider may, under ss 64, 65, 66 or s 68, “give a person particulars only of a matter as changed instead of particulars of the change”. The credit provider must make it clear that the matter has changed or issue a new set of terms and conditions relating to the credit contract, mortgage or guarantee.

See [61.15] for a discussion of the difference between “particulars of the change” and “particulars of the matter as changed”.

Prohibited increases in liabilities 70 (1) [Fixed annual percentage] If the annual percentage rate under a credit contract is currently fixed for a specified term (including the whole term) of the contract, the contract cannot be changed unilaterally by a credit provider so as to increase, or change the method of calculation of a fee or charge so as to increase, a fee or charge: (a) payable by the debtor on early termination of the credit contract; or (b) payable on prepayment of an amount under the credit contract. 70 (2) [Permissible increases prescribed] The regulations may prescribe circumstances in which such a change is permitted. ________________________________________ [Editorial note: UCCC s 64 — apart from numbering the section is unchanged.]

COMMENTARY ON SECTION 70 [70.05] Outline If the annual percentage rate (APR) is fixed for a specified term under a credit contract: a unilateral change which increases any early termination fee or prepayment fee payable under that credit contract is not permitted (including a fee that applies to an early partial prepayment) (s 70(1)); but the Regulations may permit a change in certain circumstances (although no regulations have been made for this purpose) (s 70(2)). The reference to contracts with a fixed APR must include contracts with both a fixed APR and a default rate, otherwise the prohibition in s 70(1)

could be avoided by a credit provider simply including a default rate in credit contracts with fixed APRs. See also discussion at [33.25].

[page 286]

DIVISION 2 — CHANGES BY AGREEMENT OF PARTIES Changes by agreement 71 (1) [Written notice of change] If the parties under an existing credit contract, mortgage or guarantee agree to change its terms, the credit provider must, not later than 30 days after the date of the agreement, give to the other party under the agreement a written notice setting out: (a) particulars of the change in the terms of the credit contract, mortgage or guarantee; and (b) any information required by the regulations. Criminal penalty: 100 penalty units. [subs (1) am Act 130 of 2012 s 3 and Sch 1 item 39, eff 1 Mar 2013]

71 (2) [Exceptions] Subsection (1) does not apply to a change which defers or otherwise reduces the obligations of the debtor for a period not exceeding 90 days or to an agreement to increase the amount of credit under a credit contract. 71 (3) [Notice of matters prescribed] If the parties under a credit contract (other than a continuing credit contract) propose to increase the amount of credit under the contract by agreement, the credit provider must also, before the agreement is made, give to the debtor a written notice containing the information required by the regulations. Criminal penalty: 100 penalty units. 71 (4) [Exclusion of section] This section does not apply to a change made

under Division 3. 71 (5) [Particulars to be notified] The credit provider may, under subsection (1), give a person particulars only of a matter as changed instead of particulars of the change, but only if the credit provider: (a) makes it clear to the person that the matter has changed; or (b) issues to the person a new set of terms and conditions relating to the credit contract, mortgage or guarantee. 71 (6) [Strict liability offences] Subsections (1) and (3) are offences of strict liability. Note: For strict liability, see section 6.1 of the Criminal Code.

________________________________________ [Editorial note: UCCC s 65 provided as follows: Changes by agreement 65 (1) [Written notice of change] If the parties under a credit contract, mortgage or guarantee agree to change its terms, the credit provider must, not later than 30 days after the date of the agreement, give to the other party under the agreement a written notice setting out— (a) particulars of the change in the terms of the credit contract, mortgage or guarantee; and (b) any information required by the regulations. Maximum penalty — 50 penalty units. 65 (2) [Exceptions] Subsection (1) does not apply to a change which defers or otherwise reduces the obligations of the debtor for a period not exceeding 90 days or to an agreement to increase the amount of credit under a credit contract. 65 (3) [Notice of matters prescribed] If the parties under a credit contract (other than a continuing credit contract) propose to increase the amount of credit under the contract by agreement, the credit provider must also, before the agreement is made, give to the debtor a written notice containing the information required by the regulations. Maximum penalty — 100 penalty units. 65 (4) [Exclusion of section] This section does not apply to a change made under Division 3. 65 (5) [Particulars to be notified] The credit provider may, under subsection (1), give a person particulars only of a matter as changed instead of particulars of the change, but only if the credit provider— (a) makes it clear to the person that the matter has changed; or (b) issues to the person a new set of terms and conditions relating to the credit contract, mortgage or guarantee.]

[page 287] COMMENTARY ON SECTION 71 [71.05] Outline The Code does not offer any guidance as to when a change to a credit contract should be treated as creating a new credit contract; however, the appropriate test would seem to be to consider both the intention of the parties and the extent of the change. When doubt exists as to whether the appropriate course is to vary the contract or enter into a new contract, the prudent course would be to enter into a new contract, although this will trigger responsible lending obligations under the NCCP Act (and will, potentially, impact on guarantee and other security arrangements). The Enhancements Act amended s 71(1) to clarify that it applies to changes made under existing credit contracts. [71.10] Agreed changes Section 71 prescribes notice requirements that must be followed if the parties to a credit contract, mortgage or guarantee agree to change its terms. The s 71 requirements differ depending on whether the change is an increase in the amount of credit under a credit contract, any other change to a credit contract or any change to a mortgage or guarantee. Where a credit provider makes it clear to a debtor that the matter has changed or issues the debtor with a new set of terms and conditions relating to the credit contract, the credit provider is only required to give particulars of the matter as changed (eg, “changed to Z” rather than “changed from Y to Z”) (s 71(5)). However, if a credit provider and a debtor agree to change a credit contract, and if this change may result in an increase in a guarantor’s liability, s 61 must be complied with if the guarantor’s liability is to be so increased. Section 61 requires, among other things, “particulars of the change” to be given to the guarantor. The s 71(5) exception does not apply so that the guarantor only needs to be given particulars of the matter as changed (see [61.05]–[61.15]). [71.15] Reduction in obligations If a change defers or otherwise reduces the obligations of the debtor for a period not exceeding 90 days, no notice is required (s 71(2)).

[71.20] Changes to credit contracts, mortgages or guarantees other than an increase in the amount of credit The credit provider must give written notice to the debtor, mortgagor or guarantor setting out particulars of the change (and any prescribed information — none is currently prescribed) not later than 30 days after the date of the agreement to change the terms (s 71(1)), unless the change is made under Pt 4, Div 3 for reasons of hardship (s 71(4)). If a credit provider gives a copy of a written notice setting out the agreed change to a debtor at the time the change is agreed (ie, the debtor is given two copies of the notice — one to sign and return to the credit provider and the other to keep), s 71(1) does not require the credit provider to also give a copy of the notice to the debtor after the date on which the change is agreed. This conclusion results from an interpretation of the words “not later than 30 days after the date of the agreement” in s 71(1). Where the credit provider makes it clear to the debtor that the matter has changed or issues the debtor with a new set of terms and conditions relating to the credit contract, the credit provider is only required to give particulars of the matter as changed (eg, “changed to Z” rather than “changed from Y to Z”) (s 71(5)). A [page 288] similar rule applies to changes agreed between the credit provider and a mortgagor or guarantor. If a change relates to a credit contract in respect of which a guarantee has been obtained, and the change may increase the guarantor’s obligations, the credit provider should also comply with s 61 (see [61.05]–[61.15]). [71.25] Increase in the amount of credit If the parties propose to increase the amount of credit under a non-continuing credit contract then, in addition to the notice requirements set out at [71.20], the credit provider must also (ie, in addition to giving notice under s 71(1)) give the debtor a written notice containing prescribed information before the agreement is made (s 71(3)).

Although it was not explicit prior to the Consumer Credit (Queensland) Amendment Act 1998 (Qld), the UCCC did not appear to require this notice to be given if there was an increase in a credit limit under a continuing credit contract — the notice was only required where there was an increase in the amount of credit under a non-continuing credit contract. (For requirements regarding increasing a credit limit under a continuing credit contract, see [67.06] and [67.15].) This point was clarified in the UCCC by the Consumer Credit (Queensland) Amendment Act, and s 71(3) of the Code now expressly states that the notice requirements in s 71(3) do not apply to an increase in the credit limit under a continuing credit contract. For the purposes of a notice under s 71(3), the following information (if it is ascertainable) is prescribed (reg 83(1)): (a) the date of the change in the contract; (b) the unpaid daily balance at the date of the notice;1 (c) the amount by which the amount of credit will be increased in accordance with the agreement. [Note that the amount of credit does not include: any interest charge under the contract; or any fee or charge that: —

is to be or may be debited to the debtor’s account after credit is first provided under the agreement to increase the amount of credit; and

—

is not payable in connection with the making of the agreement, or the making of the mortgage or guarantee related to the agreement (see s 3(2) and [3.20])];

(d) the persons, bodies or agents (including the credit provider) to whom the amount referred to in paragraph (c) is to be paid and the amounts payable to them; (e) the total of the amounts mentioned in paragraphs (b) and (c); (f)

details of any change to the annual percentage rate;

(g) details of any credit fees or charges that will be payable after the change in the contract; (h) current repayment details, being: (i)

the number of repayments yet to be made; and

(ii) the amount of each of those repayments; and (iii) the total amount of those repayments yet to be paid; (i)

the repayment details once the agreement is made, being: (i)

the number of repayments yet to be made once the agreement is made; and [page 289]

(ii) the amount of each of those repayments; and (iii) the total amount of those repayments; and (iv) details of any changes in the times or frequency of repayment; … [In relation to paras (h) and (i), the requirement to include the total amount of repayments yet to be made applies only if the credit contract would, on the assumptions permitted to be made by the Code, be paid out within seven years of the date of that notice (reg 83(2) and ss 180 and 182)] (j)

if commission is to be paid by or to the credit provider for the introduction of credit business or business financed by the increased amount of credit under the contract (reg 83(1) and s 17(14)): (i)

a statement of that fact;

(ii) the person by whom the commission is payable; (iii) the person to whom the commission is payable; and (iv) the amount if ascertainable;

(k) the proposed increase in the term of the contract; and (l)

the proposed new expiry date for the contract.

[71.30] Increases and comparison rate Part 9A of the UCCC introduced requirements to provide comparison rate schedules (see [157.05]). These requirements do not apply under the Code. Part 9A did not require a credit provider to give a debtor a comparison rate schedule in relation to an increase in the amount of credit under the credit contract. Under UCCC s 146K(5), a credit provider was required to ensure that the relevant comparison rate schedule accompanied an application for credit sent or given by the credit provider to a prospective debtor. There are strong arguments that s 146K(5) applied only to the initial application for credit. These are summarised below: The comparison rate schedule was a tool to allow consumers to compare the cost of different credit products provided by different credit providers. Where a consumer is seeking to increase the amount of credit under their existing credit contract, they are not deciding which consumer credit product to acquire. A comparison rate schedule was therefore unnecessary in these circumstances. Part 9A required provision of comparison rate schedules in relation to “consumer credit products”. Part 9A did not contemplate a separate comparison rate schedule for a variation to a credit contract. The UCCC already provided for different disclosures when entering into a credit contract (s 15 of the UCCC) and when increasing the amount of credit under an existing credit contract (s 65 of the UCCC). It was consistent in this approach to interpret the mandatory comparison rate requirements differently for applications for new credit as distinct from applications to increase the amount of credit under an existing credit contract. [71.35] Examples of agreed changes Changes by agreement of the parties include, for example:

a switch to a different interest option (by agreement); a changed repayment amount; a partial release of security; a substitution of security; [page 290] a change of debtor’s name; a changed payment due date; a change in interest rate (by agreement); changes in loan term (by agreement); and taking additional securities. [71.40] Non-continuing credit contracts As stated at [71.25], s 71(3) applies to non-continuing credit contracts (eg, home loans and personal loans that are not continuing credit contracts). Consequently, increases in the amount of credit under contracts (other than continuing credit contracts) entered into by individuals or strata corporations wholly or predominantly for personal, domestic or household purposes or residential investment purposes (see ss 3 and 5) must be documented to comply with s 71(3). For example, a customer with a home loan who wishes to increase the amount of credit under the loan must be given a s 71(3) notice. Continuing credit contracts A credit provider may only increase the limit under a continuing credit contract at the request of the debtor or with the written consent of the debtor. The procedures in s 71(1) must be followed in that case. (Note that the Code distinguishes between the “credit limit” of a continuing credit contract and the “amount of credit” under a non-continuing credit contract. The amount of credit under a continuing credit contract will increase each time there is a drawdown under the contract. This explains why s 71(3) applies only to increases in the amount of credit for a non-continuing credit contract).

[71.45] Top-ups and redraws The practice whereby credit providers allow debtors to reborrow repaid amounts under existing loan contracts requires careful analysis for Code purposes. Names such as “top-ups”, “redraws”, “add-ons”, “credit refunds”, etc are common, and it is important to understand exactly what is being referred to in each case because the Code requirements may be different, depending on what is actually happening. Responsible lending obligations may also apply under the NCCP Act, depending on what is actually taking place. It is first of all necessary to determine whether the contract under which the “reborrowing” is taking place is a continuing credit contract or not. If it is a continuing credit contract, then the amount of credit provided under the contract should be regarded as a “credit limit” rather than an “amount of credit”. This is important for documentary purposes as an increase in the amount of credit requires a s 71(3) notice to be given, whereas an increase in the credit limit would require only a simple confirmation not later than 30 days after the agreement is made (s 71(1)). Some “traditional” home loans (ie, amortising principal and interest) allow debtors who have repaid in excess of their scheduled repayments the ability to redraw those excess amounts. However, the debtor is required, at all times, to keep within the projected amortising balance of the loan. This is in contrast to other types of loans which permit redrawing up to the original amount of the loan. These products are more in the nature of an overdraft, as they are based on a fixed limit which may be used at the debtor’s discretion, rather than a reducing limit based on scheduled principal and interest repayments over a specified term. The former type of “traditional” loan, although it permits redrawing, would not constitute continuing credit for the purposes of the Code. This is because the [page 291] definition in s 204 of the Code of “continuing credit contract” includes the

requirement that “the amount of available credit ordinarily increases as the amount of credit is reduced”. In the case of a “traditional” loan, the amount of available credit does not “ordinarily” increase as those regular repayments are made. The amount of available credit will only increase if the debtor makes extraordinary payments (ie, payments over and above the payments they are required to make). The Code therefore appears to regulate reborrowing in the following way: When the debtor has a fixed (ie, not amortising) limit, and is entitled to reborrow amounts at will up to the specified limit, the contract will be a continuing credit contract and redrawings within the approved limit are not required to be separately documented under the Code changes regime. If, however, the credit limit is increased, this may be done only with the consent of or at the request of the debtor (s 67(3)) and requires confirmatory notice under s 71(1). Where the debtor has a “traditional” amortising loan, with the ability to redraw amounts which have been paid over and above the minimum required repayments, it is arguable that a redrawing could constitute an increase in the amount of credit, thereby requiring documentation under s 71(3). On balance, it would seem that s 71(3): should not apply to a redraw facility where the redraw is exercisable as of right or subject to certain objective conditions not requiring any consent on the part of the credit provider; but may well apply to a redraw request which requires the credit provider’s discretionary consent (ie, where approval for the redrawing may be given or withheld in the absolute discretion of the credit provider). [71.50] Liability of guarantors Note that the Code contains requirements that must be met before the liabilities of a guarantor will be increased following a change to the terms of a credit contract that increase or allow for an increase in the debtor’s liabilities (s 61) (see [61.05]–[61.15]).

[71.55] Refinancing In the case of non-continuing credit contracts, debtors may be provided with further funds in one of two ways: an increase in the amount of credit under the existing credit contract; or paying out the existing credit contract and entering into a new credit contract with a higher amount of credit. Where there is an increase in the amount of credit under the existing contract, the procedures described under [71.25] must be followed. Where a new credit contract is entered into, the entire contract formation procedure must be repeated with regard to the new credit contract. [71.60] Penalties The penalty for failure to comply with the Code’s requirements for notifying changes by agreement is a criminal penalty of up to 100 penalty units. Under the NCCP Act regime changes, s 71(1) and (3) are made offences of strict liability by the insertion of s 71(6). (See paras 17 and 18 of the “Overview of the National Credit Code” for commentary on penalty units and strict liability offences). [page 292] [71.65] Case Bahadori v Permanent Mortgages Pty Ltd (2008) 72 NSWLR 44; [2008] NSWCA 150; BC200805005. 1 “Unpaid daily balance” for a day is defined in s 27 as the “unpaid balance under the contract at the end of that day”. However, at the time of disclosure (ie, the date of the notice) it will obviously be impossible to ascertain the unpaid balance at the end of that day. To deal with this problem, industry practice has been to use the unpaid balance amount from the start of the business day on the variation disclosure date (see [27.25]).

DIVISION 3 — CHANGES ON GROUNDS OF HARDSHIP AND UNJUST TRANSACTIONS

Changes on grounds of hardship 72 (1) Hardship notice If a debtor considers that he or she is or will be unable to meet his or her obligations under a credit contract, the debtor may give the credit provider notice (a hardship notice), orally or in writing, of the debtor’s inability to meet the obligations. Note: If the debtor gives the credit provider a hardship notice, there may be requirements (beyond those in section 88) that the credit provider must comply with before beginning enforcement proceedings — see section 89A.

72 (2) Further information Within 21 days after the day of receiving the debtor’s hardship notice, the credit provider may give the debtor notice, orally or in writing, requiring the debtor to give the credit provider specified information within 21 days of the date of the notice stated in the notice. The information specified must be relevant to deciding: (a) whether the debtor is or will be unable to meet the debtor’s obligations under the contract; or (b) how to change the contract if the debtor is or will be unable to meet those obligations. 72 (3) The debtor must comply with the requirement. Note: The credit provider need not agree to change the credit contract, especially if the credit provider: (a) does not believe there is a reasonable cause (such as illness or unemployment) for the debtor’s inability to meet his or her obligations; or (b) reasonably believes the debtor would not be able to meet his or her obligations under the contract even if it were changed.

72 (4) Notice of decision on changing credit contract The credit provider must, before the end of the period identified under subsection (5), give the debtor a notice: (a) that is in the form (if any) prescribed by the regulations and records the fact that the credit provider and the debtor have agreed to change the credit contract; or (b) that is in the form (if any) prescribed by the regulations and states: (i)

the credit provider and the debtor have not agreed to change

the credit contract; and (ii) the reasons why they have not agreed; and (iii) the name and contact details of the approved external dispute resolution scheme of which the credit provider is a member; and (iv) the debtor’s rights under that scheme. Civil penalty: 2,000 penalty units. 72 (5) The credit provider must give the notice before the end of the period identified using the table. [page 293] Period for giving notice If: 1 The credit provider does not require information under subsection (2) 2 The credit provider requires information under subsection (2) but does not receive any information in compliance with the requirement 3 The credit provider requires information under subsection (2) and receives information in compliance with the requirement

The period is: 21 days after the day of receiving the hardship notice 28 days after the stated date of the notice under subsection (2) 21 days after the day of receiving the information

72 (6) Regulations may prescribe shorter periods for credit contracts The regulations may provide for subsections (2), (3), (4) and (5) to have effect in relation to credit contracts prescribed by the regulations as if a particular reference in subsections (2) or (5) to a number of days were a reference to a lesser number of days prescribed by the regulations. [s 72 subst Act 130 of 2012 s 3 and Sch 1 item 1, eff 1 Mar 2013]

________________________________________ [Editorial note: UCCC s 66 provided as follows: Changes on grounds of hardship 66 (1) General principle A debtor who is unable reasonably, because of illness, unemployment or other reasonable cause, to meet the debtor’s obligations under a credit contract and who reasonably expects to be able to discharge the debtor’s obligations if the terms of the contract were changed in a manner set out in subsection (2) may apply to the credit provider for such a change. 66 (2) Changes An application by a debtor must seek to change the terms of the contract in one of the following ways— (a) extending the period of the contract and reducing the amount of each payment due under the contract accordingly (without a change being made to the annual percentage rate or rates); (b) postponing during a specified period the dates on which payments are due under the contract (without a change being made to the annual percentage rate or rates); (c) extending the period of the contract and postponing during a specified period the dates on which payments are due under the contract (without a change being made to the annual percentage rate or rates). 66 (3) Application This section and sections 67 to 69 do not apply to a credit contract under which the maximum amount of credit that is or may be provided is more than $125 000 (or such other amount as may be prescribed by the regulations).]

COMMENTARY ON SECTION 72 [72.01] Outline A debtor can apply to a credit provider to change a contract on hardship grounds although certain thresholds may apply depending on the amount of credit and when the credit contract was originally made. Credit providers need to be aware that, if they agree to reduce or defer a debtor’s payment obligations, the Code’s provisions on changes on hardship grounds may apply. Further, a court can change the terms of a contract on the grounds of hardship. [72.02] UCCC, NCC and Enhancements Act hardship regimes The hardship provisions in s 72 apply to credit contracts. (Similar principles are set out in s 177B for consumer leases). A debtor can apply to a credit provider to change a contract on hardship grounds, although, as stated at [72.01], certain thresholds may apply depending on the amount of credit and when the credit contract was

originally made. Credit providers need to be aware that, if they agree to reduce or defer a debtor’s payment [page 294] obligations, the Code’s provisions on changes on hardship grounds may apply. Further, a court can change the terms of a contract on the grounds of hardship. A hardship variation may be sought if the debtor is not able to meet the terms of their credit contract for a reasonable cause, but would be able to meet them if the contract were varied. In general, a debtor can seek a postponement of repayments for an agreed period (with the outstanding balance continuing to accrue interest), an extension to the original term and a reduction in repayment amounts, or a combination of these. The Consumer Credit and Corporations Legislation Amendment (Enhancements) Bill 2011 (Cth) was introduced to Parliament in September 2011, passed both Houses in August 2012 and received Royal Assent on 18 September 2012 as the Consumer Credit Legislation Amendment (Enhancements) Act 2012 (Cth) (Enhancements Act). The Enhancements Act revised the hardship regime from 1 March 2013 by removing: all thresholds relating to hardship applications in respect of such applications, and broadening the circumstances in which a debtor can request a hardship variation; all limitations on the kinds of changes that could be made under a hardship application; the requirement that the debtor would be able to comply with the credit contract if it were changed; and the requirement that there is a reasonable cause, such as illness or unemployment, for the debtor’s inability to meet their obligations under the credit contract. In addition, a hardship variation would not be able to “reduce the amount

ultimately payable by the debtor to the credit provider under the contract” (s 74(2)(a), as amended by the Enhancements Act). Credit providers who are also banks that subscribe to the Code of Banking Practice (2013) are required to comply with cl 28 of that Code — cl 28.6 specifically refers to the Code. Clause 24 of the Customer Owned Banking Code of Practice (January 2014) deals with debtors of credit unions, mutual banks and mutual building societies who are experiencing financial difficulties — it says these banking institutions will work with a debtor who is experiencing financial difficulties to assist them overcome such difficulties, whether or not the debtor has a right to seek a hardship variation under consumer credit laws. Similar financial hardship principles are reflected in s 177B, which relates to consumer leases (and was introduced by the Enhancements Act). The key changes introduced by the Enhancements Act to the hardship regime include: there are no limitations on the types of hardship variations that can be requested; hardship notices can be given orally or in writing; the timing requirements and process for assessing a hardship application have changed; and enforcement proceedings cannot commence until the credit provider has considered a debtor’s hardship request — external dispute resolution [page 295] (EDR) schemes such as the Financial Ombudsman Service (FOS) and Credit Ombudsman Service (COSL) usually require credit providers not only to stop enforcement proceedings while they consider complaints, but also to stop enforcement proceedings as soon as it appears that the debtor could be in hardship.

The hardship provisions of the Code prior to the Enhancements Act changes (pre-Enhancement Act Code rules) apply to contracts entered into between 1 July 2010 and 28 February 2013. Likewise, the relevant UCCC hardship provisions apply to contracts entered into before 1 July 2010, although these rules are quite similar to the pre-Enhancements Act Code rules. The Enhancements Act hardship rules apply to contracts entered into after 1 March 2013. However, as the Enhancements Act hardship rules provide a stricter regime, it is possible for a credit provider to opt to apply the same rules to all contracts rather than having two separate hardship procedures, depending on the date of contracts and whether or not a contract falls within the pre-Enhancing Act Code rules. The Explanatory Memorandum to the Enhancements Act compares the key features of the Enhancements Act changes to the hardship regime in the following table (at para 2.6): New law [after 1 March 2013] All debtors have a statutory right to request a hardship variation regardless of the amount of credit that is provided under their contract. There are no limits to the form of hardship variation that can be requested, making it easier for consumers to engage with their credit provider. Credit providers must respond to an outstanding application for a hardship variation before commencing enforcement proceedings. Hardship rules

Current law [before March 2013] The debtor only has a statutory right to request a hardship application where the amount of credit provided is less than $500,000. An application for hardship variation must seek to change the contract in one of three ways stipulated in the Code. Credit providers are not required to respond to applications for hardship variations before they can commence enforcement proceedings.

[page 296] Which rules apply? The date of the credit contract or consumer lease determines which rules apply. [72.03] Table of financial hardship variation requests requirements (Note: The hardship rules for consumer leases are set out in s 177B). Financial hardship variation requests Contracts between 1 July 2010 and 28 February 2013

Contracts after 1 March 2013 A debtor or lessee can provide a hardship notice by simply informing the lessor (or credit provider) of their inability to meet the obligations under their contract Note: Hardship notice can be provided orally

1.

Hardship request

A hardship application must specify the type of change that the debtor/lessee is seeking

2.

Grounds of change

The changes that the lessee may request are limited to: extending the period of the consumer lease and reducing payments

The changes that a debtor/credit provider or a lessor/lessee may agree are not specified. Credit providers and lessors need to positively consider suitable changes to the contract that can postponing the days on which assist the lessee Credit providers payment is due and lessors should develop extending the period of the policies and guidelines listing acceptable changes

consumer lease and postponing payments 3.

Information request

A credit provider or lessor is not required to request additional information to assess a hardship request

Credit providers and lessors may request information in order to assess a hardship request

4.

Decision

A credit provider or lessor must assess the hardship application and provide a notice as set out at 5 and 6 below within 21 days of receiving the hardship application

A credit provider or lessor must assess the hardship request and provide a notice as set out at 5 and 6 below within the following time frames: if no additional information is required from the debtor/lessee — within 21 days of receiving the hardship notice

[page 297] if additional information requested from the debtor/lessee but not provided — within 28 days from the date the information was requested if additional information requested from the debtor/lessee and provided — within 21 days of receiving the additional information 5.

Notice — if the debtor and credit provider or lessee and lessor agree to a change:

Regulations exempt the credit provider/lessor from notifying the debtor/lessee in writing that the parties have agreed to change the consumer lease until 1 March 2014 If the variation is not a simple arrangement, the credit provider/lessor must provide a written notice to the debtor/lessee and any guarantor setting out particulars of the changes to the terms of the contract within 30 days of entering into the agreement A simple arrangement is an agreement that defers or reduces payment for or less than 90 days

6.

Notice – if the debtor and credit provider or lessee and lessor do not agree to a change, then the notice

that they have not agreed to the change the name and contact details of the credit provider/lessor’s external dispute resolution scheme

must include:

the debtor/lessee’s rights under that scheme the reasons for not agreeing to the change Such a notice must be provided within the periods set out above in “Decision”. It is suggested that a pro forma letter be drafted and used

7.

Courts and EDR

EDR terms of reference require a stay on enforcement proceedings when the credit provider/lessor considers a hardship request or the debtor/lessee has lodged a complaint

All enforcement proceedings must be stayed while considering a hardship request A debtor/lessee may complain to EDR if not satisfied with the creditor provider’s/lessor’s assessment of a hardship request

[page 298] [72.04] UCCC — WA position In Western Australia, the UCCC expressly provided that the government consumer agency may, if requested in writing by a debtor, assist a debtor in making an application for a change, and in any related negotiations with the credit provider (UCCC s 66(1a)). Credit providers who were also banks that subscribed to the Code of Banking Practice were required to inform customers, if applicable, that the hardship variation provisions of the UCCC could apply to their circumstances (cl 25.2 of the version of the Code of Banking Practice that applied during the UCCC). Although that version of the Code of Banking Practice did not state this, this reference to the UCCC can probably be taken to include a reference to the Code. [72.05] Under the UCCC and NCC before the Enhancements Act The debtor could apply on hardship grounds only if the maximum amount of credit that could be provided was below a certain threshold amount. Until April 2004, the threshold was $125,000. After that date, the threshold under the UCCC was a variable amount defined by reference to the average loan for new dwellings in New South Wales. The threshold under the Code (introduced by the NCCP Act regime amendments) was $500,000 or any

higher amount prescribed. (None was prescribed prior to the commencement of the Enhancements Act hardship regime on 1 March 2013). The hardship provisions (ss 72–75) also applied to consumer leases (s 177(1)(a)). Following the Enhancements Act, hardship principles for consumer leases are set out in s 177B. [72.06] Continued application of UCCC floating threshold for carried over instruments As discussed at [1.10], the Code applies from its commencement on 1 July 2010 to all “carried over instruments” — credit contracts and consumer leases that were UCCC regulated and were on foot immediately before that commencement. However, some provisions of the UCCC were effectively preserved for those carried over instruments. Item 3(5) of Sch 1 of the National Consumer Credit Protection (Transitional and Consequential Provisions) Act (Transitional Act) provides as follows: 3(5) Despite subitem (2), subsection 72(5) of the [Code] does not apply in relation to a carried over instrument. Instead, the following provision applies from commencement to a carried over instrument as if the provision were section 72(5) of the [Code]: Application This section and sections 73 to 75 do not apply to a credit contract under which the maximum amount of credit that is or may be provided is more than an amount equal to 110% of the amount of the average loan size for the purchase of new dwellings in New South Wales as set out in the Table of Housing Finance Commitments in the most recent publication entitled Housing Finance, Australia, as published from time to time by the Australian Bureau of Statistics.

This means that the UCCC floating threshold discussed below will continue to apply to carried over instruments (COIs). See [72.11]. [72.07] UCCC floating threshold In April 2004, the Ministerial Council of Consumer Affairs approved the adjustment of the threshold from a fixed amount of $125,000 to a floating threshold linked to an Australian Bureau of Statistics index of mortgage levels in Sydney. The amending legislation [page 299] itself referred not to Sydney exclusively, but an amount equal to 110 per cent of the amount of the average loan size for the purchase of new dwellings in

New South Wales. That figure is set out from time to time in the Australian Bureau of Statistics publication Housing Finance (Catalogue No 5609, updated monthly). At the time the amendment came into force (5 November 2004), the threshold was $340,670. Historical data on the hardship threshold is available by searching for the term “hardship threshold” at www.asic.gov.au. The changes made to s 66(3) of the UCCC by virtue of reg 22A of the UCCC Regulation meant that the threshold would automatically keep pace with changes to inflation and the cost of housing, and removed the need for the Code to be regularly updated. [72.10] Application of s 72 before the Enhancements Act commencement (1 March 2013) The types of contracts that could be changed on hardship grounds at the debtor’s request were credit contracts where the “maximum amount of credit” that was, or could be, provided was below a certain threshold, being: Loans made under the UCCC and COIs —

for requests made before 5 November 2004 — less than $125,000;

—

for requests made after 5 November 2004 — less than an amount equal to 110 per cent of the amount of the average loan size for the purchase of new dwellings in New South Wales as provided for in the Australian Bureau of Statistics publication Housing Finance (Catalogue No 5609, updated monthly)) (s 66(3) of the UCCC and reg 22A of the UCCC Regulation; Transitional Act — see [72.06]);

—

for loans made under the UCCC, the indexed threshold applies even where an application is made after commencement of the Code;

Loans made under the Code (ie, post NCCP Act regime changes and before 1 March 2013) —

less than $500,000 (or any higher amount prescribed).

As stated above, from 1 March 2014, the Enhancements Act removed all

thresholds relating to hardship applications (although COIs will still have a threshold). [72.11] Which hardship threshold applies? Where a hardship variation application was made under the UCCC, there was some debate about how to ascertain the relevant hardship threshold. It was unclear whether it was the threshold at the date of the application that was relevant or the threshold at the date of the credit contract. This issue was considered in Perpetual Trustees Victoria Ltd v Monas [2010] NSWSC 1156; BC201008283. (The case actually related to an application to which the Transitional Act applied, but the transitional hardship provisions discussed at [72.06] have the same effect as the equivalent provisions in the UCCC and the UCCC Regulation.) Davies J found that the relevant date for considering the threshold was the date the contract was made, not the date of the hardship application. This was on the basis that if the relevant threshold was the one in force when the application was made, changes to the threshold might mean that a debtor would not be eligible for relief one day but might be the next (among other reasons). Tying the threshold to the date of the credit contract gives the result that both parties to a contract know at the outset whether the debtor [page 300] will ever be entitled to apply for a hardship variation. There is nothing to suggest that the same position will not also apply to hardship applications under the Code itself. [72.12] Interpretation of maximum amount of credit — before the Enhancements Act The phrase “maximum amount of credit” in s 72(5) of the Code could be interpreted narrowly to suggest that ss 72–75 applied only to non-continuing credit contracts as the term “amount of credit” is generally interpreted as applying to non-continuing credit (see [3.35]). If “amount of credit” is given its narrowest meaning in s 72 (ie, applying only to non-continuing credit), ss 72–75 could never apply to continuing credit. In addition, it is impossible to ascertain what the “maximum amount”

of credit will be under a continuing credit contract because it will depend on how much use is made of the credit available under the credit contract. That is, in the case of continuing credit, there is no limit on the amount of credit that may actually be provided over the life of a continuing credit contract. For example, a $50,000 overdraft may be drawn, repaid and redrawn a number of times with the result that more than $500,000 of credit is provided under that contract. In order for ss 72–75 to apply to continuing credit, either the: phrase “maximum amount of credit” must be interpreted as including “credit limit”; or limitation in s 72(5) of the Code must be interpreted only as a limitation in respect of non-continuing credit contracts (ie, contracts which have an “amount of credit” rather than a credit limit) and as not limiting the way that ss 72–75 apply to continuing credit (ie, ss 72–75 apply to all continuing credit regulated by the Code). Credit providers who adopt this interpretation will not risk breaching the Code. [72.15] Grounds for change — before the Enhancements Act The debtor could apply to the credit provider on the grounds of: illness; unemployment; or other reasonable cause; and reasonably expected to be able to satisfy their contractual obligations if the contract terms were changed in the way they requested. Other reasonable cause could include a general deterioration in a debtor’s financial situation (see Jones v ANZ Banking Group Ltd [2004] NSWCTTT 381). A short term of imprisonment was held to be a reasonable ground for a s 66 of the UCCC (s 72 of the Code) application (McNally v ANZ Banking Group Ltd (2001) ASC ¶155-047). In Ward-Miller v Perpetual Trustees Australia Ltd (2001) ASC ¶155-046, the Fair Trading Tribunal of New South Wales considered and granted a

hardship application. The applicants’ small food business had failed and Mrs Ward-Miller had to leave work when her son was born with disabilities. The tribunal found that the applicants’ failure to meet their loan repayments was reasonable but their situation had since improved and they could meet their commitments if the loan was restructured. However, the tribunal did not address the issues raised by [page 301] Perpetual Trustees of the high loan to value ratio, nor of the applicants’ delay in notifying the mortgage manager of their inability to meet repayments until significant arrears were reached. In Garnar v Capital Finance Australia Ltd [2003] VC 1171, the loan contract was altered by the tribunal due to a combination of factors including illness, unemployment, family responsibilities and the applicant’s financial commitments to his three sons and in keeping the family home. [72.20] Types of changes — before the Enhancements Act The debtor could request the following types of changes (s 72(2)): extension of the contract term and reduction of each payment due with no change in the annual percentage rate (APR); postponement for a specified period of payment due dates with no change in the APR; extension of the contract term and postponement for a specified period of payment due dates with no change in the APR. In Jones v ANZ Banking Group Ltd [2004] NSWCTTT 381, the Consumer, Trader and Tenancy Tribunal of New South Wales held that a reduction in the amount of debt of $6000 was not justified or intended by ss 66 and 68 of the UCCC (ss 72 and 74 of the Code). In that case, an amendment was made to the interest payable on the balance of two credit cards which were the subject of the application.

[72.21] Notice of change — before the Enhancements Act If a debtor made a hardship application, the credit provider must, within 21 days of its receipt, have given written notice to the debtor setting out whether or not the credit provider agreed to the change and, if the credit provider rejected the application, provided details of the credit provider’s external dispute resolution scheme, the debtor’s rights under that scheme and the reasons for not agreeing to the change (s 72(3)). [72.22] Penalties The penalty for failing to comply with the Code’s requirements for notifying responses to hardship applications was a criminal penalty of up to 30 penalty units. Under the NCCP Act regime changes, s 72(3) is made an offence of strict liability by the insertion of s 72(4). (See paras 17 and 18 of the “Overview of the National Credit Code” for commentary on penalty units and strict liability offences). [72.25] Credit (Home Finance Contracts) Act 1984 (NSW) Relief under s 72 may not be available for home finance contracts and mortgages, or guarantees relating to home finance contracts entered into before the commencement of the UCCC. However, similar remedies may be available for home finance contracts under $125,000 under s 5 of the Credit (Home Finance Contracts) Act 1984 (NSW). [72.40] External dispute resolution The NCCP Act regime introduces compulsory external dispute resolution (EDR) membership for credit providers [page 302] (see para 5.7 of the “Overview of the National Consumer Credit Protection Act (NCCP Act) regime”). If the credit provider refuses a hardship variation request, there is a strong possibility that the debtor will take the matter to EDR. This is because the credit provider must inform the debtor of their right to take the matter to EDR when they notify the debtor of their decision (see [72.21]). See also [38.30].

[72.45] Enhancements Act hardship regime The following is a brief outline of the stages of the hardship process introduced by the Enhancements Act. The stages in responding to a hardship request are now clearer. Basically, as soon as a debtor provides a hardship notice, this informs the credit provider that the debtor will not be able to meet their payments. The credit provider should then request the information it needs to make a decision within 21 days. A hardship notice can be given orally or in writing. The debtor will be required to provide the requested information within 21 days of the request. The credit provider will then make a decision to change, or not change, the credit contract. There are notice requirements after the credit provider (or lessor under s 177B) has made the decision. The essence of the change is that the onus for hardship requests has moved on to the credit provider/lessor. A debtor only needs to state that theycannot make repayments, and the credit provider must collect all the information it needs to assess the hardship request and what may be most suitable for the debtor. An important change is that a debtor only has to give the credit provider notice that they are in hardship. This can be orally or in writing, and they only have to state that they will be unable to meet their obligations under the credit contract. This is important because as soon as the debtor gives this “hardship notice”, the credit provider is unable to commence enforcement proceedings until completing the hardship process. A credit provider can no longer require a debtor to complete a written hardship application before considering a hardship application. The onus is on the credit provider to obtain the information it needs from the debtor to assess the hardship request. Hardship applications (old) — before 1 March 2013 Under the old regime, a debtor had to lodge a hardship application to initiate the hardship process. This was a fairly narrow procedure. The debtor had to seek to change the terms of the contract by either extending the contract term and reducing payments, postponing payments for a certain time, or extending the contract term and postponing payments for a certain time without a change being made to the annual percentage rate or rates. Hardship notices (new) — after 1 March 2013 The types of changes that can be made to a credit contract are no longer specified. Accordingly, the

credit provider and the debtor are open to agree to any change. This is a major change as it places an obligation on the credit provider to come up with alternatives that can assist the debtor. Once a debtor has lodged a hardship notice, the credit provider may request information from the debtor in order to decide whether to change the credit contract. [page 303] The credit provider must request the information from the debtor within 21 days of receiving the hardship notice. The information that the credit provider may request must be relevant to the debtor’s ability to meet payments and how the contract should be changed. Note that a credit provider may ask for information. It is likely that it is generally required for the credit provider to request information, unless it has all the required information already. It may often be likely that the debtor previously gave a hardship notice and provided information and is now giving notice on the same basis. The debtor must provide information within 21 days of the credit provider’s request otherwise the credit provider can make a decision on the available information. The credit provider has to assess the information provided by the debtor and notify the debtor whether it agrees to change the credit contract. The new rules make the point that the credit provider does not need to change the contract if they do not believe there is a reasonable cause, such as illness or unemployment, for the debtor’s inability to meet their obligations, or if the debtor would not be able to meet the obligations under the contract even if it were changed. The old rules (pre-Enhancements Act Code rules) provided that a debtor could only lodge a hardship application if it fell into one of these categories, so what is the practical difference? These changes were implemented to make it easier for a debtor to initiate the hardship process. The onus is now on the credit provider to consider a debtor’s circumstances once they have given notice of their hardship rather

than restricting the debtor to making a request only if it falls within the circumstances listed — in which case the credit provider may never have been required to consider a hardship application falling outside those circumstances (however, note cl 28 of the Code of Banking Practice (2013) and cl 24 of the Customer Owned Banking Code of Practice (January 2014) — see [72.02]). If the credit provider has agreed to change the credit contract, it then only has to notify the debtor that it has agreed to change the credit contract, either orally or in writing. These new notices came into effect on 1 March 2014. If the credit provider does not agree to change the credit contract, it then has to notify the debtor of the: reasons why it has not agreed to change; details of the credit provider’s EDR scheme; and debtor’s rights under that scheme. This is similar to the notification requirements under the old rules. The credit provider must notify the debtor of its decision as follows: if the credit provider did not request any information from the debtor, within 21 days of the debtor’s hardship notice; if the credit provider requested information from the debtor but the debtor did not respond, within 28 days from the date the credit provider requested the information; if the credit provider requested information from the debtor and received a response, 21 days from the day of receiving the information. [page 304] [72.50] Hardship decision Credit contract changed Once a decision has been made to change a credit

contract, the Enhancements Act provides that the credit provider no longer needs to give a written notice of the change. The credit provider also does not have to give written notice of the details of the change if it is a simple arrangement. A simple arrangement is an agreement that defers or reduces payments for or less than 90 days. However, if it is not a simple arrangement a provider will have to give written notice setting out the particulars of the change within 30 days. Credit contract not changed If the credit contract is not changed, the credit provider may find that the next step is external dispute resolution (EDR) or, less commonly, legal action. Once EDR action has finished, the credit provider may continue with enforcement proceedings. If a credit provider does not agree to change the credit contract during EDR, it must wait 14 days before continuing with enforcement proceedings. This is a strict liability offence. This does not affect the requirement to give a debtor 30 days from the date of an s 88 default notice to remedy the default. The exception to this requirement is when it is believed that the debtor is about to remove or dispose of mortgaged goods without the credit provider’s permission or when urgent action is required to protect the security of those goods. In those circumstances, the credit provider may take possession of the mortgaged goods. As before, the courts will be able to review a credit provider’s decision and EDR will play a similar role. If an EDR scheme considers that a debtor should have been offered a hardship variation, then the possible remedies it may impose on a credit provider include the reversal of default fees, default interest and any fees that a debtor has incurred because the credit provider did not offer the debtor a hardship variation. In assessing complaints, an EDR scheme may request and review file notes

for background about the dispute. If the file notes demonstrate that the debtor informed the credit provider of their financial troubles, then an EDR scheme may consider this to be a hardship notice. [72.55] New hardship rules for credit contracts and consumer leases — comparison of Code sections Credit contracts (sections) Consumer leases (sections) 72 Changes on grounds of hardship 177B Changes on grounds of Hardship notice hardship Hardship notice [page 305] 1.

If a debtor considers that he 1. If a lessee considers that he or she is or will be unable or she is or will be unable to meet his or her to meet his or her obligations under a credit obligations under a contract, the debtor may consumer lease, the lessee give the credit provider may give the lessor notice notice (a hardship notice), (a hardship notice), orally orally or in writing, of the or in writing, of the lessee’s debtor’s inability to meet inability to meet the the obligations. obligations. Note: If the debtor gives the Note: If the lessee has credit provider a hardship given the lessor a hardship notice, there may be notice, there may be extra requirements (beyond those requirements (beyond those in s 88) that the credit in s 179D) that the lessor provider must comply with must comply with before before beginning beginning enforcement enforcement proceedings proceedings — see s 179F. — see s 89A. Further information Further information 2. Within 21 days after the 2. Within 21 days after the

3.

day of receiving the debtor’s hardship notice, the credit provider may give the debtor notice, orally or in writing, requiring the debtor to give the credit provider specified information within 21 days of the date of the notice stated in the notice. The information specified must be relevant to deciding: (a) whether the debtor is or will be unable to meet the debtor’s obligations under the contract; or (b) how to change the contract if the debtor is or will be unable to meet those obligations. The debtor must comply with the requirement. Note: The credit provider need not agree to change the credit contract, especially if the credit provider:

(a) does not believe there is a reasonable cause (such as illness or unemployment) for the debtor’s inability to meet his or her obligations; or (b) reasonably believes the debtor would not be able to meet his or

day of receiving the lessee’s hardship notice, the lessor may give the lessee notice, orally or in writing, requiring the lessee to give the lessor specified information within 21 days of the date of the notice stated in the notice. The information specified must be relevant to deciding: (a) whether the lessee is or will be unable to meet the lessee’s obligations under the lease; or (b) how to change the lease if the lessee is or will be unable to meet those obligations. 3.

The lessee must comply with the requirement. Note: The lessor need not agree to change the consumer lease, especially if the lessor:

(a) does not believe there is a reasonable cause (such as illness or unemployment) for the lessee’s inability to meet his or her obligations; or (b) reasonably believes the lessee would not be able to meet his or her obligations under

her obligations under the contract even if it were changed.

the lease even if it were changed.

[page 306] Notice of decision on changing credit Notice of decision on changing contract consumer lease 4. The credit provider must, 4. The lessor must, before the before the end of the period end of the period identified identified under subsection under subsection (5), give (5), give the debtor a the lessee a notice: notice: (a) that is in the form (if (a) that is in the form (if any) prescribed by the any) prescribed by the regulations and regulations and records the fact that records the fact that the credit provider and the lessor and the the debtor have agreed lessee have agreed to to change the credit change the consumer contract; or lease; or (b) that is in the form (if (b) that is in the form (if any) prescribed by the any) prescribed by the regulations and states: regulations and states: (i) the credit (i) the lessor and the provider and the lessee have not debtor have not agreed to change agreed to change the consumer the credit lease; and contract; and (ii) the reasons why (ii) the reasons why they have not they have not agreed; and agreed; and (iii) the name and contact details of (iii) the name and

contact details of the approved the approved external dispute external dispute resolution resolution scheme scheme of which of which the the lessor is a credit provider is member; and a member; and (iv) the lessee’s rights (iv) the debtor’s under that rights under that scheme. scheme. Civil penalty: 2,000 Civil penalty: 2,000 penalty units. penalty units. 5. The credit provider must 5. The lessor must give the give the notice before the notice before the end of the end of the period identified period identified using the using the table. table. Period for giving notice Period for giving notice If: The period If: The period is: is: 1 The credit 21 days after 1 The lessor 21 days after provider the day of does not the day of does not receiving the require receiving the require hardship information hardship information notice under notice under subsection subsection (2) (2) [page 307] 2

The credit provider requires information

28 days after 2 the stated date of the notice under

The lessor requires information under

21 days after the day of receiving the

under subsection subsection hardship subsection (2) (2) but does notice (2) but does not receive not receive any any information information in in compliance compliance with the with the requirement requirement 3 The credit 21 days after 3 The lessor 21 days after provider the day of requires the day of requires receiving the information receiving the information information under hardship under subsection notice subsection (2) and (2) and receives receives information information in in compliance compliance with the with the requirement requirement Regulations may prescribe shorter Regulations may prescribe shorter periods for credit contracts periods for consumer leases 6. The regulations may 6. The regulations may provide for subsections (2), provide for subsections (2), (3), (4) and (5) to have (3), (4) and (5) to have effect in relation to credit effect in relation to contracts prescribed by the consumer leases prescribed regulations as if a particular by the regulations as if a reference in subsection (2) particular reference in or (5) to a number of days subsection (2) or (5) to a were a reference to a lesser number of days were a number of days prescribed reference to a lesser by the regulations. number of days prescribed

by the regulations. 73 Notice of change 177C Notice of change 1. A credit provider that 1. A lessor that enters into an enters into an agreement agreement with a lessee to with the debtor on any such change the consumer lease application must, not later as a result of a hardship than 30 days after the date notice by the lessee must, of the agreement, give to not later than 30 days after the debtor, and any the date of the agreement, guarantor under a guarantee give to the lessee a written related to the contract, a notice setting out: written notice setting out: (a) particulars of the (a) particulars of the change in the terms of change in the terms of the credit contract; and the lease; and (b) any information (b) any information required by the required by the regulations. regulations. Criminal penalty: 50 Criminal penalty: 50 penalty units. penalty units. [page 308] 2.

The credit provider may, under subsection (1), give a person particulars only of a matter as changed instead of particulars of the change, but only if the credit provider: (a) makes it clear to the person that the matter has changed; or (b) issues to the person a

2.

The lessor may, under subsection (1), give the lessee particulars only of a matter as changed instead of particulars of the change, but only if the lessor: (a) makes it clear to the lessee that the matter has changed; or (b) gives to the lessee a

new set of terms and new set of terms and conditions relating to conditions relating to the credit contract. the lease. 3. Subsection (1) is an offence 3. Subsection (1) is an offence of strict liability. of strict liability. Note: For strict liability, see Note: For strict liability, section 6.1 of the Criminal see section 6.1 of the Code. Criminal Code. 74 Changes by court 177D Changes by court 1. If the credit provider does 1. If a lessor does not change not change the credit a consumer lease as a result contract in accordance with of a hardship notice by a the application, the debtor lessee, the lessee may apply may apply to the court to to the court to change the change the terms of the terms of the lease. credit contract. 2. The court may, after 2. The court may, after allowing the applicant, the allowing the applicant and credit provider and any the lessor a reasonable guarantor a reasonable opportunity to be heard: opportunity to be heard, by (a) by order change the order change the credit lease (but not so as to contract in a manner set out reduce the amount in section 72, and make ultimately payable by such other orders as it the lessee to the lessor thinks fit, or refuse to under the lease), and change the credit contract. make such other orders as it thinks fit; or (b) refuse to change the lease 3. The court may, if it thinks it 3. The court may, if it thinks appropriate in the it appropriate in the circumstances, stay any circumstances, stay any enforcement proceedings enforcement proceedings under the credit contract, under the lease, and make

and make such other orders such other orders as it as it thinks fit, until the thinks fit, until the application has been application has been determined. determined. 75 Credit provider may apply for 177E Lessor may apply for variation of change variation of change 1. A credit provider under a 1. A lessor under a consumer credit contract that has been lease that has been changed changed by an order under by an order under subsection 74(2) may apply subsection 177D(2) may to the court for an order apply to the court for an varying or revoking the order varying or revoking order. the order. [page 309] 2.

3.

A credit provider subject to a stay of enforcement proceedings or other order under subsection 74(3) may apply to the court for an order varying or revoking the stay or order. On an application under this section, the court may vary or revoke the order or stay to which the application relates as it thinks fit, or may refuse the application.

2.

3.

A lessor subject to a stay of enforcement proceedings or other order under subsection 177D(3) may apply to the court for an order varying or revoking the stay or order. On an application under this section, the court may vary or revoke the order or stay to which the application relates as it thinks fit, or may refuse the application.

[72.60] Recap — key hardship changes To recap — the key changes to hardship in relation to credit contracts are set out below: 1.

There are no limitations on the types of hardship variations that can

be requested. In the past, the changes were limited to extending the period of the contract, reducing the repayments, postponing the due date, or a combination of all three. The amended s 72 does not specify the types of changes that can be made to a credit contract. Accordingly, the credit provider and the debtor are open to agree to any change. This puts an obligation on the credit provider to come up with alternatives to assist the debtor. 2.

Hardship notices can be given orally or in burden to the credit provider to recognise suffering hardship, and proactively offer circumstances where the debtor seems to repayments.

writing. This shifts the when a debtor may be hardship variations in be struggling to make

3.

The timing requirements and process for assessing a hardship application have changed. There are strict timelines for the credit provider, which include: requesting additional information from the debtor — this must be done within two days of receiving the hardship notice; assessing the hardship application and responding to the debtor — if the debtor does not provide the additional information, then 28 days from the date the information was requested; if the debtor does provide the additional information, then 21 days from the day of receiving the information.

4.

Credit providers cannot commence enforcement proceedings until they have considered a debtor’s hardship application. This has not had a major impact, as EDR schemes required credit providers not only to stop enforcement proceedings while they considered a complaint, but also to stop enforcement proceedings as soon as it appeared that the debtor could be in hardship.

5.

The hardship threshold of $500,000 was abolished. That is, for all credit contracts regulated by the Code, debtors can request hardship variations.

It is important to note that the amended s 72 applies to credit contracts entered into after 1 March 2013. However, it is open to credit providers to

apply the new rules to all credit contracts to make it easier from a process and procedural perspectively. [page 310] [72.65] Cases Permanent Custodians Ltd v Upston (2007) ASC 155-083; (2007) NSW ConvR 56-178; [2007] NSWSC 223; BC200701913; RHG Mortgage Corp Ltd v Cran [2009] QSC 183; BC200905984.

Legislation as at 28 February 2013, applicable to agreements made prior to 1 March 2013.

Changes on grounds of hardship 72 (1) General principle A debtor who is unable reasonably, because of illness, unemployment or other reasonable cause, to meet the debtor’s obligations under a credit contract and who reasonably expects to be able to discharge the debtor’s obligations if the terms of the contract were changed in a manner set out in subsection (2) may apply to the credit provider for such a change. 72 (2) Changes An application by a debtor must seek to change the terms of the contract in one of the following ways: (a) extending the period of the contract and reducing the amount of each payment due under the contract accordingly (without a change being made to the annual percentage rate or rates); (b) postponing during a specified period the dates on which payments are due under the contract (without a change being made to the annual percentage rate or rates); (c) extending the period of the contract and postponing during a specified period the dates on which payments are due under the

contract (without a change being made to the annual percentage rate or rates). 72 (3) Credit provider’s notice about change If the debtor makes an application, the credit provider must, within 21 days after the day of receiving the application, give the debtor a written notice: (a) that states whether or not the credit provider agrees to the change; and (b) if the credit provider does not agree to the change — that states: (i)

the name of the approved external dispute resolution scheme of which the credit provider is a member; and

(ii) the debtor’s rights under that scheme; and (iii) the reasons for not agreeing to the change. Criminal penalty: 30 penalty units. 72 (4) Subsection (3) is an offence of strict liability. Note: For strict liability, see section 6.1 of the Criminal Code.

72 (5) Application This section and sections 73 to 75 do not apply to a credit contract under which the maximum amount of credit that is or may be provided is more than: (a) $500,000; or (b) if the regulations prescribe a higher amount — that amount.

Notice of change 73 (1) [Written notice] A credit provider that enters into an agreement with the debtor to change the credit contract as a result of a hardship notice by the debtor must, not later than 30 days after the date of the agreement, give to the

debtor, and any guarantor under a guarantee related to the contract, a written notice setting out: (a) particulars of the change in the terms of the credit contract; and (b) any information required by the regulations. Criminal penalty: 50 penalty units. [subs (1) am Act 130 of 2012 s 3 and Sch 1 item 2, eff 1 Mar 2013]

[page 311] 73 (2) [Particulars to be given] The credit provider may, under subsection (1), give a person particulars only of a matter as changed instead of particulars of the change, but only if the credit provider: (a) makes it clear to the person that the matter has changed; or (b) issues to the person a new set of terms and conditions relating to the credit contract. 73 (3) [Strict liability offence] Subsection (1) is an offence of strict liability. Note: For strict liability, see section 6.1 of the Criminal Code.

________________________________________ [Editorial note: UCCC s 67 provided as follows: Notice of change 67 (1) [Written notice] A credit provider that enters into an agreement with the debtor on any such application must, not later than 30 days after the date of the agreement, give to the debtor, and any guarantor under a guarantee related to the contract, a written notice setting out— (a) particulars of the change in the terms of the credit contract; and (b) any information required by the regulations. Maximum penalty — 50 penalty units. 67 (2) [Particulars to be given] The credit provider may, under subsection (1), give a person particulars only of a matter as changed instead of particulars of the change, but only if the credit provider— (a) makes it clear to the person that the matter has changed; or (b) issues to the person a new set of terms and conditions relating to the credit contract.]

Legislation as at 28 February 2013, applicable to agreements made prior to 1 March 2013.

Notice of change 73 (1) A credit provider that enters into an agreement with the debtor on any such application must, not later than 30 days after the date of the agreement, give to the debtor, and any guarantor under a guarantee related to the contract, a written notice setting out: (a) particulars of the change in the terms of the credit contract; and (b) any information required by the regulations. Criminal penalty: 50 penalty units. 73 (2) The credit provider may, under subsection (1), give a person particulars only of a matter as changed instead of particulars of the change, but only if the credit provider: (a) makes it clear to the person that the matter has changed; or (b) issues to the person a new set of terms and conditions relating to the credit contract. 73 (3) Subsection (1) is an offence of strict liability. Note: For strict liability, see section 6.1 of the Criminal Code.

COMMENTARY ON SECTION 73 — BEFORE 1 MARCH 2013 [73.05] Outline Not later than 30 days after the change is agreed, the credit provider must give the debtor, and any guarantor under a related guarantee, written notice of particulars of the change, and any information required by the Regulations (none is currently prescribed). The credit provider is only required to give the debtor (and any guarantor) particulars of the matter as changed if the credit provider: makes it clear to the debtor (or guarantor) that the matter has changed; or issues the debtor (or guarantor) with a new set of terms and conditions relating to the credit contract (s 73(2)).

[page 312] [73.10] Penalties A failure to comply with s 73(1) carries a criminal penalty of 50 penalty units. Under the NCCP Act regime changes, failure to comply with s 73(1) was made an offence of strict liability by the insertion of s 73(3). (See paras 17 and 18 of the “Overview of the National Credit Code” for commentary on penalty units and strict liability offences, and s 6(1) of the Criminal Code Act 1995 (Cth)).

Changes by court 74 (1) [Application to court] If the credit provider does not change the credit contract as a result of a hardship notice by the debtor, the debtor may apply to the court to change the terms of the credit contract. [subs (1) am Act 130 of 2012 s 3 and Sch 1 item 3, eff 1 Mar 2013]

74 (2) The court may, after allowing the applicant, the credit provider and any guarantor a reasonable opportunity to be heard: (a) by order change the credit contract (but not so as to reduce the amount ultimately payable by the debtor to the credit provider under the contract), and make such other orders as it thinks fit; or (b) refuse to change the credit contract. [subs (2) subst Act 130 of 2012 s 3 and Sch 1 item 4, eff 1 Mar 2013]

74 (3) [Stay of proceedings] The court may, if it thinks it appropriate in the circumstances, stay any enforcement proceedings under the credit contract, and make such other orders as it thinks fit, until the application has been determined. ________________________________________ [Editorial note: UCCC s 68 provided as follows:

Changes by Court 68 (1) [Application to Court] If the credit provider does not change the credit contract in accordance with the application, the debtor may apply to the Court to change the terms of the credit contract. 68 (2) [Discretion of Court] The Court may, after allowing the applicant, the credit provider and any guarantor a reasonable opportunity to be heard, by order change the credit contract in a manner set out in section 66, and make such other orders as it thinks fit, or refuse to change the credit contract. 68 (3) [Stay of proceedings] The Court may, if it thinks it appropriate in the circumstances, stay any enforcement proceedings under the credit contract, and make such other orders as it thinks fit, until the application has been determined.]

Legislation as at 28 February 2013, applicable to agreements made prior to 1 March 2013.

Changes by court 74 (1) If the credit provider does not change the credit contract in accordance with the application, the debtor may apply to the court to change the terms of the credit contract. 74 (2) The court may, after allowing the applicant, the credit provider and any guarantor a reasonable opportunity to be heard, by order change the credit contract in a manner set out in section 72, and make such other orders as it thinks fit, or refuse to change the credit contract. 74 (3) The court may, if it thinks it appropriate in the circumstances, stay any enforcement proceedings under the credit contract, and make such other orders as it thinks fit, until the application has been determined. [page 313] COMMENTARY ON SECTION 74 — BEFORE 1 MARCH 2013 [74.05] Outline If the credit provider refuses an application made by a debtor on hardship grounds, the debtor may apply to the court to change the terms of

their credit contract. Section 74 prescribes what the court may then do if the debtor applies to the court to change the terms. [74.10] What will the court do? The court will hear the arguments of the debtor, any guarantor and the credit provider, and may: change the contract in the manner set out in s 72 (before 1 March 2013 — see [72.20]); or make other orders; or refuse to change the contract; and if appropriate, stay enforcement proceedings or make some other order until the result of the application has been decided. [74.15] “Such other orders as it thinks fit” — before the Enhancements Act Section 74(2) apparently gives the court the power to make orders which go beyond the changes that are allowed under s 72 (before the Enhancements Act). This would be a strange result — it would be preferable for s 74(2) to be interpreted so as to give the court only the power to make “other orders” that are ancillary to, or consequential on, a change of the kind referred to in s 72(2). [74.20] When can proceedings be commenced? In McNally v ANZ Banking Group Ltd (2001) ASC ¶155-047, the Fair Trading Tribunal of New South Wales held that the issue of as 80 of the UCCC (s 88 of the Code) default notice by the credit provider and the acceleration of loan repayments did not preclude a hardship application under s 68 of the UCCC (s 74 of the Code — before the Enhancements Act). In Edwards v National Australia Bank (2001) ASC ¶155-049; [2001] VCAT 36, the Victorian Civil and Administrative Tribunal held that relief for hardship under ss 66–68 of the UCCC (ss 72–74 of the Code — before the Enhancements Act) relates not to judgment debts but to the credit contract and therefore cannot be given after a judgment enforcing payment of a credit contract has been handed down. Section 68(3) of the UCCC (s 74(3) of the Code — before the Enhancements Act) allows a stay in any proceedings at any point before judgment is handed down. [74.25] Costs In McNally v ANZ Banking Group Ltd, the tribunal held that

the costs of defending a hardship application under s 68 of the UCCC (s 74 of the Code — before the Enhancements Act) were not enforcement expenses that could be recovered by the credit provider. The tribunal also held that, to the extent that they are included in the enforcement expenses clause in the credit contract, such clause is unjust pursuant to s 70 of the UCCC (s 76 of the Code — before the Enhancements Act). [74.30] After the Enhancements Act The Explanatory Memorandum to the Enhancements Act explains (at para 2.15): [page 314] 2.15 Where a credit provider does not agree to change the terms of the credit contract, a debtor still has the option to apply to a court for a change in the terms pursuant to section 74 of the Code. The court is restricted from making any order that reduces the total amount ultimately payable by the debtor under the credit contract, and is therefore confined to orders affecting the amount and timing of individual payments made under the credit contract. [74.35] Cases Permanent Custodians Ltd v Upston (2007) ¶ASC 155-083; (2007) NSW ConvR 56-178; [2007] NSWSC 223; BC200701913; Homestart Finance v Hayter [2007] SASC 367; BC200711605.

Credit provider may apply for variation of change 75 (1) [Application to court] A credit provider under a credit contract that has been changed by an order under subsection 74(2) may apply to the court for an order varying or revoking the order. 75 (2) [Application where stay of proceedings] A credit provider subject to

a stay of enforcement proceedings or other order under subsection 74(3) may apply to the court for an order varying or revoking the stay or order. 75 (3) [Discretion of court] On an application under this section, the court may vary or revoke the order or stay to which the application relates as it thinks fit, or may refuse the application. ________________________________________ [Editorial note: UCCC s 69 provided as follows: Credit provider may apply for variation of change 69 (1) [Application to Court] A credit provider under a credit contract that has been changed by an order under section 68(2) may apply to the Court for an order varying or revoking the order. 69 (2) [Application where stay of proceedings] A credit provider subject to a stay of enforcement proceedings or other order under section 68(3) may apply to the Court for an order varying or revoking the stay or order. 69 (3) [Discretion of Court] On an application under this section, the Court may vary or revoke the order or stay to which the application relates as it thinks fit, or may refuse the application.]

COMMENTARY ON SECTION 75 [75.05] Outline The credit provider can: if proceedings have been stayed, or if the court has made an order under s 74(3), apply to the court for a change in that order; or if the credit contract has been varied by the court, apply to the court for a change in or cancellation of the variation; and the court may in its discretion change or cancel the orders or changes or may refuse to do so. This section allows credit providers to take some action in circumstances where the original court order may no longer be appropriate. For example, in Mathis v La Trobe Investment Services Aust Pty Ltd [2004] NSWCTTT 803, a credit provider asked the New South Wales Consumer, Trader and Tenancy Tribunal to overturn orders staying enforcement proceedings. The credit provider successfully argued that the tribunal did not have jurisdiction to make the orders staying the

[page 315] proceedings because, among other things, the threshold set out in s 66(3) of the UCCC (s 72(5) of the Code — before the Enhancements Act) did not apply.

Court may reopen unjust transactions 76 (1) Power to reopen unjust transactions The court may, if satisfied on the application of a debtor, mortgagor or guarantor that, in the circumstances relating to the relevant credit contract, mortgage or guarantee at the time it was entered into or changed (whether or not by agreement), the contract, mortgage or guarantee or change was unjust, reopen the transaction that gave rise to the contract, mortgage or guarantee or change. 76 (2) Matters to be considered by court In determining whether a term of a particular credit contract, mortgage or guarantee is unjust in the circumstances relating to it at the time it was entered into or changed, the court is to have regard to the public interest and to all the circumstances of the case and may have regard to the following: (a) the consequences of compliance, or noncompliance, with all or any of the provisions of the contract, mortgage or guarantee; (b) the relative bargaining power of the parties; (c) whether or not, at the time the contract, mortgage or guarantee was entered into or changed, its provisions were the subject of negotiation; (d) whether or not it was reasonably practicable for the applicant to negotiate for the alteration of, or to reject, any of the provisions of the contract, mortgage or guarantee or the change; (e) whether or not any of the provisions of the contract, mortgage or guarantee impose conditions that are unreasonably difficult to comply with, or not reasonably necessary for the protection of the legitimate interests of a party to the contract, mortgage or guarantee;

(f)

whether or not the debtor, mortgagor or guarantor, or a person who represented the debtor, mortgagor or guarantor, was reasonably able to protect the interests of the debtor, mortgagor or guarantor because of his or her age or physical or mental condition;

(g) the form of the contract, mortgage or guarantee and the intelligibility of the language in which it is expressed; (h) whether or not, and if so when, independent legal or other expert advice was obtained by the debtor, mortgagor or guarantor; (i)

the extent to which the provisions of the contract, mortgage or guarantee or change and their legal and practical effect were accurately explained to the debtor, mortgagor or guarantor and whether or not the debtor, mortgagor or guarantor understood those provisions and their effect;

(j)

whether the credit provider or any other person exerted or used unfair pressure, undue influence or unfair tactics on the debtor, mortgagor or guarantor and, if so, the nature and extent of that unfair pressure, undue influence or unfair tactics;

(k) whether the credit provider took measures to ensure that the debtor, mortgagor or guarantor understood the nature and implications of the transaction and, if so, the adequacy of those measures; (l)

whether at the time the contract, mortgage or guarantee was entered into or changed, the credit provider knew, or could have ascertained by reasonable inquiry at the time, that the debtor could not pay in accordance with its terms or not without substantial hardship;

(m) whether the terms of the transaction or the conduct of the credit provider is justified in the light of the risks undertaken by the credit provider; (n) for a mortgage — any relevant purported provision of the mortgage that is void under section 50; [page 316]

(o) the terms of other comparable transactions involving other credit providers and, if the injustice is alleged to result from excessive interest charges, the annual percentage rate or rates payable in comparable cases; (p) any other relevant factor. 76 (3) Representing debtor, mortgagor or guarantor For the purposes of paragraph (2)(f), a person is taken to have represented a debtor, mortgagor or guarantor if the person represented the debtor, mortgagor or guarantor, or assisted the debtor, mortgagor or guarantor to a significant degree, in the negotiations process prior to, or at, the time the credit contract, mortgage or guarantee was entered into or changed. 76 (4) Unforeseen circumstances In determining whether a credit contract, mortgage or guarantee is unjust, the court is not to have regard to any injustice arising from circumstances that were not reasonably foreseeable when the contract, mortgage or guarantee was entered into or changed. 76 (5) Conduct In determining whether to grant relief in respect of a credit contract, mortgage or guarantee that it finds to be unjust, the court may have regard to the conduct of the parties to the proceedings in relation to the contract, mortgage or guarantee since it was entered into or changed. 76 (6) Application This section does not apply: (a) to a matter or thing in relation to which an application may be made under subsection 78(1); or (b) to a change to a contract under this Division. 76 (7) This section does apply in relation to a mortgage, and a mortgagor may make an application under this section, even though all or part of the mortgage is void under subsection 50(3). 76 (8) [subs (8) rep Act 130 of 2012 s 3 and Sch 5 item 11, eff 1 Mar 2013] ________________________________________ [Editorial note: UCCC s 70 provided as follows:

Court may reopen unjust transactions 70 (1) Power to reopen unjust transactions The Court may, if satisfied on the application of a debtor, mortgagor or guarantor that, in the circumstances relating to the relevant credit contract, mortgage or guarantee at the time it was entered into or changed (whether or not by agreement), the contract, mortgage or guarantee or change was unjust, reopen the transaction that gave rise to the contract, mortgage or guarantee or change. 70 (2) Matters to be considered by Court In determining whether a term of a particular credit contract, mortgage or guarantee is unjust in the circumstances relating to it at the time it was entered into or changed, the Court is to have regard to the public interest and to all the circumstances of the case and may have regard to the following— (a) the consequences of compliance, or noncompliance, with all or any of the provisions of the contract, mortgage or guarantee; (b) the relative bargaining power of the parties; (c) whether or not, at the time the contract, mortgage or guarantee was entered into or changed, its provisions were the subject of negotiation; (d) whether or not it was reasonably practicable for the applicant to negotiate for the alteration of, or to reject, any of the provisions of the contract, mortgage or guarantee or the change; (e) whether or not any of the provisions of the contract, mortgage or guarantee impose conditions that are unreasonably difficult to comply with, or not reasonably necessary for the protection of the legitimate interests of a party to the contract, mortgage or guarantee; (f)

whether or not the debtor, mortgagor or guarantor, or a person who represented the debtor, mortgagor or guarantor, was reasonably able to protect the interests of the debtor, mortgagor or guarantor because of his or her age or physical or mental condition;

(g) the form of the contract, mortgage or guarantee and the intelligibility of the language in which it is expressed;

[page 317] (h) whether or not, and if so when, independent legal or other expert advice was obtained by the debtor, mortgagor or guarantor; (i)

the extent to which the provisions of the contract, mortgage or guarantee or change and their legal and practical effect were accurately explained to the debtor, mortgagor or guarantor and whether or not the debtor, mortgagor or guarantor understood those provisions and their effect;

(j)

whether the credit provider or any other person exerted or used unfair pressure, undue influence or unfair tactics on the debtor, mortgagor or guarantor and, if so, the nature and extent of that unfair pressure, undue influence or unfair tactics;

(k) whether the credit provider took measures to ensure that the debtor, mortgagor or guarantor understood the nature and implications of the transaction and, if so, the

adequacy of those measures; (l)

whether at the time the contract, mortgage or guarantee was entered into or changed, the credit provider knew, or could have ascertained by reasonable inquiry of the debtor at the time, that the debtor could not pay in accordance with its terms or not without substantial hardship;

(m) whether the terms of the transaction or the conduct of the credit provider is justified in the light of the risks undertaken by the credit provider; (n) the terms of other comparable transactions involving other credit providers and, if the injustice is alleged to result from excessive interest charges, the annual percentage rate or rates payable in comparable cases; (o) any other relevant factor. 70 (3) Representing debtor, mortgagor or guarantor For the purposes of subsection (2)(f), a person is taken to have represented a debtor, mortgagor or guarantor if the person represented the debtor, mortgagor or guarantor, or assisted the debtor, mortgagor or guarantor to a significant degree, in the negotiations process prior to, or at, the time the credit contract, mortgage or guarantee was entered into or changed. 70 (4) Unforeseen circumstances In determining whether a credit contract, mortgage or guarantee is unjust, the Court is not to have regard to any injustice arising from circumstances that were not reasonably foreseeable when the contract, mortgage or guarantee was entered into or changed. 70 (5) Conduct In determining whether to grant relief in respect of a credit contract, mortgage or guarantee that it finds to be unjust, the Court may have regard to the conduct of the parties to the proceedings in relation to the contract, mortgage or guarantee since it was entered into or changed. 70 (6) Application This section does not apply to a change in the annual percentage rate or rates payable under a contract, or to an establishment fee or charge or other fee or charge, in respect of which an application may be made under section 72 (Court may review unconscionable interest and other charges). This section does not apply to a change to a contract under this Division. 70 (7) Meaning of unjust In this section, unjust includes unconscionable, harsh or oppressive.]

COMMENTARY ON SECTION 76 [76.05] Outline The Code’s reopening provision in s 76 allows a court to reopen credit transactions. This includes transactions resulting in credit contracts, mortgages, guarantees or consumer leases (s 177(1)(a)), and credit provided by pawnbrokers or trustees of estates (s 6(9) and (10)), which are unjust (which includes unconscionable, harsh or oppressive). While s 76 is based on the provisions of the Contracts Review Act 1980 (NSW), it does not exclude the operation of that Act in relation to credit contracts which are regulated by the Code. Nor does the Code exclude the application of general

legal and equitable principles in relation to such contracts (see [76.20]) or other applicable legislation (see [76.65]) such as the unfair contract terms regime (see para 7 of the “Overview of the National Consumer Credit Protection Act (NCCP Act) regime”). Section 76 gives a court wider powers than the similar Credit Act provisions (Pt 9, ss 146–149): [page 318] section 204 defines “unjust” to include unconscionable, harsh or oppressive, whereas the equivalent Credit Act definition is exclusive, and not inclusive (see [76.10]); the Code provision entitles a court to look at a guarantee, as well as a credit contract, mortgage or consumer lease, to determine if injustice exists; and the Code includes some additional factors that a court can consider to determine if injustice exists (eg, s 76(2)(k), (l), (m), (n) and (o)) (see [76.15]). There is no monetary limit on transactions which may be reopened under s 76. The effect of s 76(1) is that a court makes two determinations: first, it determines if a credit contract, mortgage, guarantee or consumer lease is unjust; and second, if it does so determine, the court considers whether the transaction that gave rise to the contract, mortgage, guarantee or consumer lease (or any change to them) should be reopened. If a court does reopen a transaction, it may then take any of the actions set out in s 77 (see [77.05]). [76.10] Unjust “Unjust” used to be defined in the now repealed s 76(8) as “includes unconscionable, harsh or oppressive”. The Enhancements Act moved this same definition to s 204 of the Code. The effect of the inclusive

definition of “unjust” in s 204 is that a contract could be unjust if it is neither unconscionable, harsh nor oppressive. The Code’s inclusive definition departs from the exclusive definition in s 145 of the state Credit Acts (the predecessor regime to the UCCC and the Code). The Code definition adopts the definition in the Contracts Review Act 1980 (NSW). The inclusive definition of “unjust” has been held to have a wider meaning than the exclusive definition in the Credit Act (see Custom Credit Corporation Ltd v Lupi [1992] 1VR 99; (1991) ASC ¶56-024 and Custom Credit Corp Ltd v Gray [1992] 1 VR 540; (1991) ASC ¶56-096). Consequently, case law on the definition of “unjust” in the Contracts Review Act 1980 (NSW) is likely to have more relevance to the Code’s definition of “unjust” than case law on the Credit Act definition. What is involved is a weighing and balancing of competing considerations; the purpose of the Code as a consumer protection statute and the need to hold parties to their bargains (McKenzie v Smith; Lenehan v Smith (1998) ASC ¶155-025). Section 76(2)(a)–(p) lists a number of matters that a court may consider in determining whether a credit contract, mortgage, guarantee or consumer lease is unjust (ie, it is not obliged to consider any of them, and may consider additional facts arising out of a particular application) (see [76.15]). In addition, s 76 directs the court as follows: the court is to have regard to the public interest (s 76(2)). The concept of public interest is not defined in the Code. Public interest may represent the underlying consumer protection purpose of the Code or the need to keep parties to their bargains (see Murphy J in Custom Credit Corp Ltd v Lupi [1992] 1 VR 99; (1991) ASC ¶56024 and Dale v Nichols Constructions Pty Ltd [2003] QDC 453 at [105]); [page 319] the court must not consider any injustice arising from circumstances that were not reasonably foreseeable when the

contract, mortgage, guarantee or consumer lease was entered into or changed (s 76(4)). In McKenzie v Smith; Lenehan v Smith (1988) ASC ¶155-025, the Commercial Tribunal of New South Wales noted that a contract will not be unjust simply because of a failure to comply with the Code. Cases on the definition of “unjust” in the Contracts Review Act 1980 (NSW) and the terms of s 76 suggest the following principles may be applied to determining if a contract, mortgage, guarantee or consumer lease is “unjust” in the context of the Code: (a) The definition of “unjust” is not exclusive, and the word “unjust” is not limited to the “tautological trinity” of “unconscionable, harsh or oppressive” (per McHugh JA in West v AGC (Advances) Ltd (1986) 5 NSWLR 610 at 621; (1986) ASC ¶55-500; (1986) NSW ConvR 55-306, in relation to the identical definition of “unjust” in the Contracts Review Act 1980 (NSW)). (b) The applicant need not demonstrate any unfair or unjust conduct on the part of the lender — the contract, mortgage, guarantee or consumer lease itself must be unjust (see West v AGC (Advances) Ltd (1986) 5 NSWLR 610 at 621; (1986) ASC ¶55-500; (1986) NSW ConvR 55-306; Beneficial Finance Corp Ltd v Karavas (1991) 23 NSWLR 256; (1991) ASC ¶56-062; (1991) Aust Contract R 90-001; (1991) NSW ConvR 55-580 and Baltic Shipping Co, the Mikhail Lermontov v Dillon (1991) 22 NSWLR 1; (1991) ASC ¶56-039; (1991) ATPR (Digest) 46-068). (c) In West v AGC (Advances) Ltd (1986) 5 NSWLR 610 at 621; (1986) ASC ¶55-500; (1986) NSW ConvR 55-306; McHugh JA held that a contract may be unjust under the Contracts Review Act 1980 (NSW) because of the way it operates in relation to the claimant or because of the way it was made or both. McHugh JA also stated (at 621): …thus a contract may be unjust …. because its terms, consequences or effects are unjust. This is substantive injustice. Or a contract may be unjust because of the unfairness of the methods used to make it. This is procedural injustice.

This interpretation of s 70 of the UCCC (s 76 of the Code) was endorsed in McKenzie v Smith; Lenehan v Smith (1988) ASC ¶155025. (d) Section 76 allows a court to consider all the circumstances of the entry into a credit contract, mortgage, guarantee or consumer lease (or the time of any change to them) but not any circumstance that was not reasonably foreseeable at the time they were made (or changed). However, it is the document or its provisions that must be unjust, not a transaction (or precontractual activity) of which that document forms part. That is, a contract, mortgage, guarantee or consumer lease can be unjust if it is the result of unfair conduct in the terms that a party has imposed on the other. In West v AGC (Advances) Ltd (1986) 5 NSWLR 610; (1986) ASC ¶55-500; (1986) NSW ConvR 55-306, McHugh JA stated (in relation to the Contracts Review Act 1980 (NSW) definition of “unjust”) (at 622): [page 320] …a contract will not be unjust as against a party unless the contract or one of its provisions is the product of unfair conduct on his part either in the terms which he has imposed or in the means which he has employed to make the contract.

(See also Beneficial Finance Corp Ltd v Karavas (1991) 23 NSWLR 256; (1991) ASC ¶56-062; (1991) Aust Contract R 90001; (1991) NSW ConvR 55-580). Furthermore, the fact that a party cannot afford a loan is not itself sufficient to find the loan contract unjust. There needs to be “something more” (Australian Society Group Financial Services (NSW) Ltd v Bogan (1989) ASC ¶55-938). In considering whether there is “something more”, the tribunal turned to examine the documents which the applicant executed. The document signed by the applicant had several warnings alerting the applicant to sign only if further clarification was not needed, if a copy of the agreement had been obtained, and if the applicant understood the

situations where the offer could be withdrawn before acceptance. Accordingly, the tribunal found it difficult to accept the applicant was unaware of the contents of the loan contract. (e) If the provisions of a credit contract, mortgage, guarantee or consumer lease are not unfair or unreasonable, it is difficult to see how such procedural shortcomings as inequality of bargaining power or lack of independent advice could render the contract or a provision of it “unjust” (West v AGC (Advances) Ltd (1986) 5 NSWLR 610; (1986) ASC ¶55-500; (1986) NSW ConvR 55-306). In the case of Mah v Esanda Ltd [2004] NSWCTTT 448, the Consumer, Trader and Tenancy Tribunal of New South Wales held that inequality in bargaining power is, in itself, insufficient to lead to a finding that a loan was unjust. An applicant is required to provide some evidence that the credit provider abused or in some way took advantage of its position. Hence, the fact that the borrower was 19 years of age and received no legal advice is, of itself, insufficient to establish that the loan was unjust. Absence of legal advice does not render the contract unjust where the terms of the resulting contract are not unjust. Further, Paull SM found that little turned on the facts that: the applicant was 19 years old; there was evidence that the debtor did not have the terms of the loan contract sufficiently explained to her (when no evidence was forthcoming of being pressured to execute the documents); the debtor did not receive legal advice (when there was no direct requirement under the UCCC (and is no direct requirement under the Code) for such advice to be obtained); the debtor did not receive a copy of the terms and conditions that applied to her loan (even though the debtor had signed those terms and conditions); and the credit provider was unaware the debtor was unable to

finance the loan contract (when the credit provider had asked the debtor for [page 321] the information, verified her employment details, and had the debtor execute the document in which the information was recorded). (f)

A credit contract, mortgage, guarantee or consumer lease will not be unjust simply because one of the criteria of s 76(2) applies to the circumstances of the case. Those criteria must be considered in light of all the circumstances of the case. A contract, mortgage, guarantee or consumer lease may be unjust even if none of the s 76(2) criteria are present (see Esanda Finance Corp Ltd v Murphy (1989) ASC ¶55-703; BC8902397; Custom Credit Corp Ltd v Lynch [1993] 2 VR 469; (1993) ASC ¶56-201).

The time to determine if the circumstances surrounding the credit contract, mortgage, guarantee, or consumer lease are unjust is the time when it was entered into or changed. Future events or circumstances can only be taken into account if they were reasonably foreseeable at the time the contract, mortgage, guarantee or consumer lease was entered into or changed (s 76(4)). This point was confirmed in the UCCC context in Moschella v Aussie Car Loans and Esanda Finance [2003] NSWCTTT 384. The credit was provided for the purchase of a vehicle. One of the conditions of the credit contract was that the vehicle be insured. The applicant was subsequently unable to obtain insurance. The Consumer, Trader and Tenancy Tribunal of New South Wales held that the requirement did not make the contract unjust since the failure of the applicant to obtain insurance was not foreseeable at the time when the contract was entered into. (The equivalent provision to s 76(4) in the Contracts Review Act 1980 (NSW) has been interpreted in such a way that it equates “foreseeable” with “foreseen” (eg, see West v AGC (Advances) Ltd (1986) 5 NSWLR 610; (1986) ASC ¶55-500; (1986) NSW ConvR 55-306). However, other conduct

occurring after that time may be taken into account by the court in determining whether to grant relief (s 76(5)). The equitable jurisdiction to set aside guarantees executed by wives to secure their husband’s business debts, and to relieve against forfeiture is considered separately at [76.20]. The specific cases of low documentation (“low doc”) loans and reverse mortgages are considered separately at [76.40] and [76.45]. [76.15] Section 76(2) criteria Section 76(2) lists a number of factors that a court may consider to determine whether a contract, mortgage or guarantee is unjust. Section 76 (and in particular s 76(2)) in effect obliges a credit provider to find out about their prospective debtor and their circumstances. However, when considering whether a term of a contract, mortgage, guarantee or consumer lease is unjust, a court is not obliged to have regard to any particular criteria listed in s 76(2). The court must consider the public interest and all the circumstances of the case, and then may have regard to the criteria listed. The mere fact that one or more of the criteria listed in s 76(2)(a)–(o) is present does not automatically make a credit contract, mortgage, guarantee or consumer lease unjust. Issues arising out of some of those criteria are discussed below (unless indicated below, similar criteria are contained in the Credit Act 1984 (s 147(2)) or the Contracts Review Act 1980 (NSW) (s 9(2)): [page 322] (a) Section 76(2)(b) — the relative bargaining power of the parties. The equivalent Credit Act 1984 and Contracts Review Act 1980 (NSW) criteria refer to the material inequality in the bargaining power of the parties. Factors which may be considered under this criterion in relation to an individual presumably include: any vulnerability or disadvantage of the debtor;

economic circumstances, literacy, language difficulties or special susceptibility to pressure imposed by the other party; age, physical or mental incapacity; and experience in commercial matters. (See McKenzie v Smith; Lenehan v Smith (1988) ASC ¶155-025). Logically, to establish injustice it will not be sufficient to simply show inequality of bargaining position. It is inevitable in consumer credit transactions that the credit provider will be in a superior bargaining position and consequently injustice should only be found to exist if that superior position is abused. (b) Section 76(2)(c) — whether the provisions of the contract, mortgage, guarantee or consumer lease were the subject of negotiation. Given that standard forms are commonly used in consumer credit transactions, the absence of negotiation over the terms of the contract cannot be seen as conclusive evidence of injustice. On the other hand, the fact of negotiation is not of itself protection against injustice. In addition, given the wide use of standard forms in consumer credit transactions, it is clearly not in the public interest to suggest that all standard form contracts are unjust. Similar considerations should apply to s 76(2)(d) (see McKenzie v Smith; Lenehan v Smith (1998) ASC ¶155-025). (c) Section 76(2)(f) — whether the debtor, mortgagor, guarantor or consumer lessee (or a person representing them) was reasonably able to protect their interests because of their age, or physical or mental condition. If an applicant seeks to rely on this criterion, some evidence of the extent of the disability must be produced. It is generally accepted that mere age or illness is not sufficient and that there must be a connection between the relevant factor and a reasonable ability to protect the interests of the debtor. (d) Section 76(2)(g) — form and intelligibility of the credit contract, mortgage, guarantee or consumer lease (see also s 184). This criterion acts as an incentive to credit providers to ensure that their consumer credit documents are clearly expressed in plain English.

Many credit providers have already adopted this approach, and those that have not should do so in order to protect their own interest by adhering to an emerging industry standard of plain English consumer credit documents. However, judges and consumers no doubt have different views as to what constitutes clear expression (see, for example, the comments of Fullager J in Morlend Finance Corporation (Vic) Pty Ltd v Westendorp [1993] 2 VR 284 at 309; (1993) ASC ¶56-200). This criterion may also lead to a court considering whether the documents under consideration set out full details of the [page 323] financing arrangement (ie, see Roberts v Australian Guarantee Corp (1986) ASC ¶55-515 at 56,754; McKenzie v Smith; Lenehan v Smith (1988) ASC ¶155-025). (e) Section 76(2)(h) — whether independent legal advice was obtained. The Code does not require that independent legal advice be obtained but, if it is, this reduces the chance that a finding of injustice may be made. However, in Lewis v Ormes [2005] NSWCTTT 481, the fact that the debtors had received and ignored independent legal advice not to enter the transaction did not deprive the transaction of its unjust character. Both the practical and legal effect of the provisions of the document under consideration should be explained if the independent advice is to be effective. (Appeal to the New SouthWales Supreme Court was dismissed: Ormes v Lewis (No 2) [2006] NSWSC 659; BC200605031). Logically, an incomplete, careless or inaccurate explanation will not be sufficient. Credit providers should consider requiring that legal advice be obtained in the case of “special” consumer credit transactions (eg, transactions involving persons who may require a higher level of protection due to their lack of education, cultural background, emotional dependency such as where a family member grants security in respect of another family member’s loan,

language difficulties, etc) (see McKenzie v Smith; Lenehan v Smith (1988) ASC ¶155-025). An example of the effect of such factors can be found in Maisano v Car & Home Finance Pty Ltd (2006) ASC 155-078; [2005] VCAT 1755. In St George Bank Ltd v Trimarchi [2004] NSWCA 120; BC200402026, the Full Bench of the New South Wales Supreme Court considered a similar provision regarding independent legal advice in s 9(2)(h) of the Contracts Review Act 1980 (NSW). The case considered the position of the parents of a debtor, whose potential liability as guarantors increased from $600,000 to $2.6 million under a loan and mortgage refinancing arrangement (“second mortgage”) when an initial mortgage for speculative property investments went into default. Upon default under the second mortgage, the bank sought to enforce the loan agreement and mortgage. The parents challenged the bank and sought orders that the loan agreement and mortgage be declared void and/or unenforceable as being an unjust contract under the Contracts Review Act 1980 (NSW) in so far as it applied to them. The parents both had limited education and command of English, difficulty in understanding technical words and poor literacy. Their knowledge of business affairs was poor. During the negotiation of the second mortgage, they were represented by their son and had no direct contact with the bank manager. They relied on their son, although he acted entirely in his own interests. The bank, who recommended the parents obtain independent advice, made no attempts to ascertain whether independent advice was ever obtained. On appeal, the bank argued unsuccessfully that the trial judge was required, but failed, to find that the bank knew that the parents had not received independent financial or legal advice. Mason P confirmed that such a finding was not necessary; the relevant fact was that the bank was [page 324]

on notice of these matters and failed to take steps to confirm that the advice had been received. Mason P clarified that the trial judge did not assert that it is “universally incumbent on a lender to ensure that a debtor obtains independent legal or financial advice”, but noted that it is a factor which needs to be given appropriate weight when considering the application of the Contracts Review Act. Similar considerations should be taken into account in respect of s 76(2)(h) of the Code. See also a discussion of the relief available to a married woman whose husband has caused her to enter into a guarantee for his debts at [76.20]. (f)

Section 76(2)(j) — unfair pressure, undue influence or unfair tactics. This criterion is broader than its equivalents in the Credit Act 1984 and the Contracts Review Act 1980 (NSW). In the Code criterion, the unfair pressure or tactics, or undue influence can be exercised by any person, including the credit provider (including its employees or agents). (Under the other Acts, it can only be exerted by the lender or a party to the document the subject of the injustice application or a person acting on their behalf.) However, the New South Wales Court of Appeal has interpreted the equivalent criteria in the Contracts Review Act broadly (see Beneficial Finance Corp Ltd v Karavas (1991) 23 NSWLR 256; (1991) ASC ¶56-062; (1991) Aust Contract R 90-001; (1991) NSW ConvR 55-580; Nguyen v Taylor (1992) 27 NSWLR 48; (1992) ASC H56-157; (1992) Aust Contract R 90-015; (1992) NSW ConvR 55-631). This criterion invokes the equitable doctrine of undue influence which is extended by “unfair pressure” and “unfair tactics” (see [76.20]). Note that credit providers who are also banks that subscribe to the Code of Banking Practice (2013) are required to act “fairly and reasonably” towards their customers in an ethical and consistent manner (cl 2.2). Code of Banking Practice obligations form part of the bank’s contractual obligations to its customers.

(g) Section 76(2)(k) — understanding of the nature and implications of the transaction. The Credit Act 1984 and the Contracts Review Act

1980 (NSW) do not contain identical criteria. Presumably it is unlikely that this criterion would support an injustice claim where a credit provider has complied with the Code’s precontractual and contractual disclosure obligations (see ss 16 and 17), and no other special factor exists (eg, the debtor, mortgagor, guarantor or lessee is not someone who requires a higher level of protection) (see (e) above). This argument applies equally to the criterion in s 76(2)(o) — if full precontractual disclosure is made, and the credit provider has not in some way “locked in” the debtor to taking its credit (ie, by charging an excessive application fee before completing the disclosure information), a credit provider should arguably not be penalised simply because a debtor has not compared the information set out in that disclosure with the cost of credit offered by other credit providers, so as to enter into a competitive credit arrangement (see McKenzie v Smith; Lenehan v Smith (1988) ASC ¶155-025). In Small v Gray [2004] NSWSC 97; BC200400764, a mortgage was found to be unjust for the purposes of the Contracts Review Act for a number of reasons, including the failure to explain to the debtor the implications

[page 325] attached to signing a business purpose declaration apart from stating that “the loan is not governed by the scope of the Consumer Credit Code”. (h) Section 76(2)(l) — whether the credit provider considered the debtor’s (or lessee’s) capacity to repay. The Credit Act 1984 and the Contracts Review Act 1980 (NSW) do not contain an identical criterion (McKenzie v Smith; Lenehan v Smith (1988) ASC ¶155025). This criterion is an incentive against credit providers using creditscoring techniques relying solely or predominantly on factors not relevant to a debtor’s capacity to repay (eg, length of time at current address, whether telephone connected, etc) when conducting credit assessments or looking only to the value of the loan security to determine the ability for the loan to be repaid (or lease obligations to be met). Looking only at the value of security is commonly known as “equity skimming” or “asset-based lending”. This criterion suggests that credit providers must consider a debtor’s financial commitments, income and expenditure (and perhaps also job stability) when accessing credit applications. A credit provider’s practices in considering a debtor’s capacity to repay will also be affected by the responsible lending obligations in the NCCP Act. Note also that a credit provider is only required to make “reasonable enquiry”. Section 76(4) has particular application to this criterion. In addition, s 199(4) may also apply, and consequently only the knowledge of an officer, agent or employee of a credit provider acting in that capacity and in connection with the transaction in question will be imputed to it. Credit providers can have additional liability with the involvement of a third party mortgage broker in circumstances where the broker acts as an agent or credit representative of the credit provider to assess the debtor’s ability to repay, particularly where the mortgage broker obtains

incentives for signing up new business. As the obligation to enquire into the debtor’s capacity to repay falls predominantly on the lender, they should take reasonable and prudent precautions under their credit representative appointment arrangements to ensure that broker representatives act diligently and in accordance with clearly defined processes and criteria in respect of credit worthiness. Section 76(2)(l) is particularly relevant to “low doc” or “no doc” loans (see [76.40]). The practice of increasing credit card limits without the credit provider enquiring into the cardholder’s capacity to pay is no longer possible under the NCCP Act responsible lending regime and is discussed at [76.50]. [76.20] Equitable jurisdiction to reopen transactions It is not within the scope of this text to deal comprehensively with general equitable principles and remedies. There are, however, a number of specific instances in which equity will reopen parts of transactions in order to grant relief. This jurisdiction is often drawn on by courts and tribunals seeking to give effect to the statutory expressions “unjust” and “unconscionable, harsh and oppressive”. (a) Setting aside unconscionable guarantees Courts have been willing to consider setting aside guarantees provided by a married woman where her husband has caused her to enter into a guarantee for his debts, and the conduct of the credit provider is found to be in some way unconscionable (Yerkey v Jones (1939) 63 CLR 649; 13 ALJR 84; [1939] ALR 62; BC3900003 per Dixon J). This issue is considered briefly here. [page 326] In Yerkey v Jones, Dixon J considered in what circumstances a guarantee may be set aside where a wife becomes her husband’s surety but does not understand the effect or nature of the guarantee. According to Dixon J, if “the creditor takes adequate steps to inform [the wife] and reasonably supposes that she has an adequate comprehension of the

obligations she is undertaking and an understanding of the effect of the transaction, the fact that she has failed to grasp some material part of the document, or, indeed, the significance of what she is doing” will deny her access to an equitable remedy to set the guarantee aside. If a wife receives independent advice on a transaction, then, according to Dixon J, “the circumstances would need to be very exceptional before the creditor would be held bound by any equity which might otherwise arise from the husband’s conduct and his wife’s actual failure to understand the transaction”. It was thought that Yerkey v Jones had been superseded by the general principles of unconscionable conduct. The notion that wives suffered from domination by their husbands seemed a notion from the past. The House of Lords in Barclays Bank plc v O’Brien [1994] 1 AC 180; [1993] 4 All ER 417; [1993] 3 WLR 786; [1994] ANZ ConvR 182 refused to affirm the basis of Yerkey v Jones. In spite of those doubts, the High Court reaffirmed the validity of Yerkey v Jones. In Garcia v National Australia Bank Ltd (1998) 194 CLR 395; 155 ALR 614; [1998] HCA 48; BC9803588, the High Court held that when a wife guarantees the debt of a company of which she and her husband are both directors, and she had not sought prior independent legal or other expert advice in relation to the transaction before signing the guarantee, it would be unconscionable for a credit provider to enforce a contract of guarantee against the guarantor if: the guarantor “did not understand the purport and effect of the transaction”; the transaction was voluntary (“in the sense that the guarantor obtained no gain from the contract the performance of which was guaranteed”); the credit provider knew that the guarantor was the wife of the debtor (“the credit provider is to be taken to have understood that, as a wife, the guarantor may repose trust and confidence in her husband in matters of business and therefore to have understood that the husband may not fully and accurately explain the purport and effect of the transaction to his wife”); and yet the credit provider “did not itself take steps to explain the

transaction to the wife or find out that a [third party] had explained it to her”. (Garcia v National Australia Bank Ltd at [31] per Gaudron, McHugh, Gummow and Hayne JJ). In the specific facts of that case, the High Court found that Mrs Garcia had no involvement in the company whose debt she guaranteed, nor did she receive any benefit from the company, despite the fact that she was named a director. She was misled by her husband to sign the guarantee as he had made her believe the transaction was risk-free. She did not receive prior legal or other independent advice in relation to the transaction, nor did the bank manager explain to her what the transaction involved. The High Court decided that, in such circumstances, it [page 327] would be unconscionable for the bank to enforce its guarantee against Mrs Garcia, even though it had no knowledge of how the husband had misled Mrs Garcia. It is not necessary for the court to presume undue influence or to characterise the husband as the agent of the credit provider (as the House of Lords did in Barclays Bank plc v O’Brien). The essence of the principle lies in the relationship of trust and confidence that exists between the guarantor and the debtor, and the credit provider’s knowledge of this relationship. In Garcia, the High Court specifically restricted the application of these principles to the marriage relationship, but reserved its decision as to whether these principles should apply to other significant domestic relationships, such as de facto relationships. The court stated (at [22]) that “it may be that the principles applied in Yerkey v Jones will find application to other relationships more common now than was the case in 1939 — to long term and publicly declared relationships short of marriage between members of the same or of opposite sex”. This position is as yet unresolved, and awaits the determination of the High Court. Bryson J in State Bank of New South Wales Ltd v Hibbert (2000) 9 BPR 17,543; (2000) Aust Contract R 90-119; [2000]

NSWSC 628; BC200003810 suggested that there is no judicial authority to extend the application of Garcia beyond the marriage relationship. However, the Victorian Court of Appeal in Kranz v National Australia Bank Ltd (2003) 8 VR 310; [2003] ANZ ConvR 481; [2003] VSCA 92; BC200304101, and Wilson J in ANZ Banking Group Ltd v Alirezai [2004] ANZ ConvR 132; (2004) Q ConvR 54-601; [2004] QCA 006; BC200400178 considered that it is possible to extend Garcia to all relationships of “trust and confidence”, at least to the extent that the credit provider is aware that the intending surety reposed such trust and confidence in the debtor. The High Court in Garcia determined that the Yerkey v Jones principle was not simply a specific example of the more general principle of unconscionability espoused in the case of Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447; 46 ALR 402; [1983–84] ANZ ConvR 169; BC8300072. In Amadio, the court considered whether a guarantee should be set aside for unconscionability on the grounds that a credit provider knowingly exploited a special disadvantage of a guarantor where that special disadvantage was of a kind that “seriously affect[ed] the ability of the innocent party to make a judgment as to his or her own best interests, when the other party knew or ought to know the existence of that condition or circumstance and of its effects on the innocent party” (per Mason J at CLR 462; ALR 413). Following the High Court’s judgment in Garcia, it is evident that this is a separate and distinct ground of unconscionability on which guarantors may seek to rely. (b) Relief against forfeiture and penalties Courts of equity have long granted relief against provisions which result in forfeiture of a proprietary interest or require payment of a monetary penalty. The basis for the equitable jurisdiction was the notion that a person should not use legal or contractual rights to take unconscionable or unconscientious advantage of another. Relief against forfeiture frequently arises in the case of vendor term contracts under which a purchaser takes possession of a property but pays the purchase price in instalments, title not being transferred until the last instalment is paid. In such

[page 328] cases, if the vendor terminated the contract for default by the purchaser in making payments under the contract, at law an action may lie for the purchaser to recover the instalments (but not the deposit) for total failure of consideration (McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457; 39 ALR 381; 7 ALJR 94; BC3300017). This action can, however, be excluded by a contractual forfeiture provision, expressly providing for the vendor to retain instalments paid. Equity may, however, grant relief against the forfeiture by the purchaser of its equitable estate in the property. The court will not readily grant relief against loss of a contract for sale validly rescinded by the vendor for breach of an essential condition, and will only intervene where the vendor has caused or contributed to a circumstance rendering it unconscionable for the vendor to insist on its legal right to terminate as an answer to a suit for specific performance (Stern v McArthur (1988) 165 CLR 489 at 502–3; 81 ALR 463; (1988) V ConvR 54-325; BC8802646 per Mason CJ; Tanwar Enterprises Pty Ltd v Cauchi (2003) 217 CLR 315; 201 ALR 359; [2003] HCA 57; BC200305798 at [37], [38], [59], [60]). The jurisdiction is not concerned with injustice at the time of entry into the contract. In cases where relief is sought not against forfeiture of a proprietary interest in land but against loss of the instalments paid (where a contractual forfeiture provision applies), different considerations apply. In such cases, it will depend on the ability of the purchaser to challenge successfully the vendor’s right to rely on the forfeiture provision. There is considerable doubt as to whether and, in what circumstances, relief may be granted in the absence of specific performance being available. Is the provision liable to be characterised as “penal” in nature (to the extent it enables the vendor to retain more than a genuine pre-estimate of loss), or do equitable principles of relief against unconscionable reliance on legal rights apply? It has been held that instalments can be recovered if the forfeiture clause is “penal” in nature and it would be conscionable in the circumstances for the vendor to retain the instalments (Stockloser v Johnson [1954] 1 QB 476; [1954] 1 All ER 630; [1954] 2 WLR 439 per Denning and Somervell LJJ). However, in that case,

Romer LJ held that relief will only be granted if the purchaser remains ready and willing to perform, and it is unconscionable for the vendor to retain the instalments. This issue remains unresolved in Australia, although the comments of the High Court in Tanwar suggest that the view of Romer LJ may be preferred. A purchaser has an equitable lien securing the payments made (Hewett v Court (1983) 149 CLR 639; 46 ALR 87; 1 ACLC 768; BC8300065), but Tanwar expressly reserved the question of whether that lien is necessarily lost on termination of the contract for breach of an essential condition (at [52]). These difficulties were sought to be neatly avoided in the context of UCCC contracts by the purchaser claiming that the contractual provision providing for forfeiting of instalments paid under a vendor term contract rendered the contract “unjust” for the purposes of s 70 of the UCCC (s 76 of the Code). In Lewis v Ormes [2005] NSWCTTT 481, it was claimed that a clause providing for forfeiture of the deposit and all instalments paid “as liquidated damages for non-performance of the contract” rendered the contract unjust. The Consumer, Trader and Tenancy Tribunal of New South Wales expressed “unease” at the fact that if a purchaser defaulted at the second last payment, the vendor could retain all instalments paid together with the property. Connolly SM ruled that the [page 329] “draconian provisions” of the clause together with the vendor’s failure to make enquiries as to the purchaser’s ability to pay were determinative, and held the contract unjust. Compensation was awarded to the purchasers, being the instalments paid less a notional rent. (Appeal to the New South Wales Supreme Court was dismissed: Ormes v Lewis (No 2) [2006] NSWSC 659; BC200605031). [76.25] How to reduce risk To reduce the risk of a court reopening a credit contract, mortgage or guarantee under s 76, credit providers should ensure that: the content of standard terms and conditions in credit contracts,

mortgages, guarantees and consumer leases is easy to understand and fair; standard terms and conditions comply with unfair contract terms legislation (including the ASIC Act); they pay attention to any disabilities or handicaps which might affect their customers, mortgagors and guarantors; staff are trained sufficiently to give accurate explanations; staff and agents do not use unfair pressure; independent advice is obtained particularly for guarantors;

whenever

appropriate

—

credit assessment tools such as “credit scoring” are not exclusively used if they rely only on matters such as whether the debtor (or lessee) has a telephone and how long they have lived at the same address, and do not consider the debtor’s capacity to repay; the responsible lending obligations of the NCCP Act are observed; they always act reasonably in the circumstances in relation to credit contracts, mortgages, guarantees and consumer leases after they have been entered into or changed. This is because, in determining whether to grant relief in respect of a credit contract, mortgage or guarantee that a court finds to be unjust, it may have regard to the conduct of the parties since the contract, mortgage or guarantee was entered into or changed (s 76(5)); and broker representatives or other agents who act on behalf of the credit provider act prudently and diligently and enter into detailed credit representative arrangements, and in accordance with clearly defined processes and criteria set out by the credit provider in respect of creditworthiness and in accordance with the terms of their appointment as credit representatives. [76.30] Who can claim? The debtor, mortgagor, guarantor or lessee can apply to the court to reopen the transaction which was unjust. The court will consider the circumstances prevailing both at the time of entry into a contract,

mortgage, guarantee or consumer lease and when any change (whether or not by agreement) was made to them to decide whether a term was unjust. Circumstances which were not reasonably foreseeable at that time are disregarded by the court (s 76(4) — see [76.10]). [76.35] Exclusions from application of s 76 A s 76 application cannot be made in respect of any of the matters listed in s 76(6). Note that those matters include a change on hardship grounds (see ss 72–75). [page 330] [76.36] Mortgages A s 76 application can be made in relation to a mortgage (s 76(7)). A mortgagor may make a s 76 application even where all or part of the mortgage is void under s 50(3). In determining whether a mortgage is unjust, a court may have regard to any purported provision of a mortgage that is void under s 50 (s 76(2)(n)). [76.40] Low documentation loans A traditional feature of mortgage lending in Australia has been the thorough assessment of a debtor’s credentials before credit is provided. However, increasingly lenders have offered “low documentation” or “Lo Doc” loans. As the name suggests, these loans require less documentation than conventional loans and involve the credit provider conducting a less rigorous inquiry into the debtor’s savings history, income and ability to service the loan. However, they are less common following the introduction of the NCCP Act responsible lending regime. Under the “traditional” Lo Doc arrangement, the debtor will provide the creditor provider with representations about their income and savings and the creditor provider will take this information at face value rather than attempting to have it verified by objective third party sources. This obviously leads to the possibility that the debtor will, either innocently or intentionally, misstate income and other details on their loan application. For these and other reasons, low documentation loans are considered by regulators to have a higher incidence of default than regular loans: see Proposed Changes to the

Risk Weighting of Residential Mortgage Lending — Discussion Paper, APRA, November 2003. Lo Doc loans and the NCCP regime Lo Doc loans raise interesting issues under the NCCP Act responsible lending regime. These kinds of loans are not prohibited by the NCCP Act — it is a question of balancing the requirements. Clearly, “No Doc” lending would be risky as that involves very little or no checking or verification of a debtor’s capacity to repay on which to base an “unsuitability assessment”. Lo Doc loans in a modified form (ie, with a moderate amount of verification) arguably can satisfy the NCCP Act responsible lending requirements. In most cases, it is suggested that the minimum document requirements and verification should include: the last 6–12 months’ of statements of a bank or other account; the last tax return for a debtor who is self-employed or a call to the debtor’s employer to verify the fact of employment and amount of income; and independent verification of the debtor’s dependents. Reopening unjust credit contracts It is possible that a credit provider’s reliance on representations made by a loan applicant could allow a court to reopen a credit contract on the grounds that it is unjust in accordance with s 76(1) of the Code. In determining whether the contract was unjust, s 76(2) requires the court to have regard to “the public interest and to all the circumstances of the case”. The effect of s 76, in particular s 76(2), is to oblige the credit provider to find out about their debtors and their individual circumstances. Section 76(2) (l) states that the court may have regard to whether the credit provider knew, or could have ascertained by reasonable inquiry, that the debtor could not pay within the terms of the loan or not without substantial hardship. How this relates to low [page 331] documentation loans, where only minimal or no enquiries are made, is not

entirely clear. However, in the second reading speech on the Queensland Consumer Credit Bill (which enacted the UCCC), it was noted that the provision was “intended to deal with those lenders who conspicuously lend without making proper enquiries into the debtor’s ability to repay” (emphasis added). Section 76(2)(l) would seem to require credit providers to go beyond simply using “credit scoring” techniques or looking at the value of the secured property as measures of the debtor’s ability to repay. Although they are concerned with the debtor’s financial situation, these measures in some cases may not accurately reflect the debtor’s actual ability to repay. Credit providers should make enquiries that are reasonably prudent in the circumstances. If an applicant has misstated their financial affairs, and there is nothing to arouse the suspicion of the credit provider, it is likely that the court will consider the credit provider to have discharged its Code obligation to make reasonable enquiries and opt not to reopen the contract. However, where the circumstances are such that a reasonable credit provider would suspect that the debtor is being untruthful, the credit provider may be obligated to undertake further investigation and obtain independent verification. In the absence of any special circumstances, it is unlikely that a court would exercise its power under s 76 to reopen a credit contract merely by virtue of the fact that it is a low documentation loan. Note, however, the court would be required to consider all the circumstances of the case, not just those matters listed in s 76(2), to determine whether or not the contract should be reopened. Further, the simple presence of one of the factors in s 76(2) will not of itself result in the contract being reopened; it is simply one factor, of many, to be considered. Credit providers’ practices in relation to low documentation loans vary. Some ask the applicant to give a full statement of their financial position but do not seek any evidence to verify the information given by the customer. Credit providers in these circumstances may have protected themselves against the consequences of s 76(2)(l), unless there is something about the information provided by the applicant that would give a reasonable credit provider cause to doubt the accuracy of that information as credit providers

should be entitled to assume, unless there is evidence to the contrary, that their customers are honest. It is doubtful, however, that this would satisfy the NCCP Act responsible lending obligations. Other credit providers simply ask the applicant to sign a declaration to the effect that the customer will be able to repay the loan without undue hardship. While credit providers in these circumstances have taken some steps to assure themselves of the applicant’s capacity to repay, there is a stronger argument that the credit provider needs to do more than this in order to have made “reasonable enquiry of the debtor” about their capacity to repay and again it is doubtful whether the NCCP Act responsible lending obligations would be satisfied in the absence of further verification steps. Given the rapid growth in the “low doc” (and “no doc”) loan market in recent years, it would seem to be only a matter of time before a court will be required to interpret s 76(2)(l). [76.45] Reverse mortgages See commentary on s 13A at [13A.10]. It is unclear as to whether reverse mortgages raise s 76 issues, but, on its face, s 76 [page 332] covers a “mortgage” as defined in s 204. The s 204 definition does not preclude reverse mortgages Under s 76(2)(l), the court is empowered to reopen a transaction where the credit provider knew or could have reasonably ascertained that the debtor could not repay the credit amount within its terms or without incurring substantial hardship. It is unlikely that requiring the sale of the house on the debtor’s death or requiring that the loan be repaid should the debtor move out of the house would be found to constitute hardship. However, on its face, a forced sale or an eviction of the debtor during their lifetime may constitute hardship. Another potential s 76 issue arises from the fact that the provision of the loan will not be dependent on the debtor earning an income. It might be said

that if the only way a debtor can repay the loan is by selling their home, the transaction necessarily involves hardship. This may render “reverse mortgages” at higher risk of being unjust or unconscionable under s 76 than other ordinary credit contracts. It is also interesting to consider whether it is possible for a debtor who has died to suffer hardship because of the terms of repayment of their reverse mortgage. To avoid further problems, the reverse mortgage should be structured carefully to satisfy all the Code requirements for reverse mortgages — so that where, for example, a husband and wife own a house jointly but only one is debtor, the death of the debtor will not render the survivor homeless. Prudent reverse mortgage credit providers will also ensure that their mortgages contain a “no negative equity” covenant — that is, a clause which provides that the debtor (or their estate) is not liable to repay more than the value of the mortgaged property at the time of repayment. This is a requirement of the Senior Australians’ Equity Release Association of Lenders (SEQUAL) Code of Conduct: see www.sequal.com.au. The SEQUAL Code of Conduct contains a number of other provisions designed to ensure that reverse mortgage products are fair. The Enhancements Act introduced specific reforms to the regulation of reverse mortgages. See commentary on s 13A. (See also the “Overview of the National Consumer Credit Protection Act (NCCP Act) regime”). [76.50] Adjustment of credit card limits Before the commencement of the NCCP Act, there had been concerns that credit card issuers had an interest in offering increased credit limits to existing cardholders, and in some cases might do so without enquiring into the cardholder’s capacity to pay. Credit card issuers simply check the cardholder’s repayment history, rather than checking the cardholder’s assets and liabilities. This issue was highlighted in Godfrey v National Australia Bank Ltd (2001) ASC ¶55-053; [2001] NSWSC 977; BC200107531, a New South Wales Supreme Court appeal, where the court dismissed an application under s 70 of the UCCC (s 76 of the Code). In Godfrey, the National Australia Bank (NAB) issued the applicant debtor with a MasterCard in 1986 and subsequently increased the debtor’s credit limit to $9000 in 1996, and further to $12,000 in 1999. At the time of these

credit limit increases, the debtor’s business was running at a loss, and the debtor was relying on income from the Department of Social Security. Two weeks before NAB accepted the second credit limit increase request, the debtor managed to reduce a credit card debt of $9000 to $0.01, drawing on other debts and loans from relatives. According to the debtor, if NAB had made sufficient enquiries in either 1996 or 1999, the [page 333] debtor would have informed NAB that he was running his business at a loss and that he could not afford the credit limit increases. Cooper AJ stated that the court will examine many criteria to determine whether a credit contract or variation is unjust under s 70 of the UCCC (s 76 of the Code). The “affordability” for the debtor, mentioned above, is only one such criteria. Cooper AJ made the findings set out below, under s 70(2) of the UCCC (s 76(2) of the Code): The debtor was under no obligation to draw on the increased credit limits. The relative bargaining power of the parties seemed to be equal in relation to the increased credit limits, since the debtor had full capacity to decide whether he took advantage of the increased credit limits (s 70(2)(b) and (k) of the UCCC; s 76(2)(b) and (k) of the Code). The debtor was under no compulsion to accept the credit limit increases (s 70(2)(c) and (d) of the UCCC; s 76(2)(c) and (d) of the Code). There was no suggestion that the debtor sought independent legal advice, or other expert advice. However, the debtor had managed his credit card since 1986, and was aware of his obligations under it (s 70(2)(h) of the UCCC; s 76(2)(h) of the Code). The NAB did take adequate measures to ensure that the debtor understood the nature and implications of the transactions. NAB

sent letters setting out details of the credit limit increases (s 70(2) (k) of the UCCC; s 76(2)(k) of the Code). At the time of the contract, NAB did not know that the debtor could not pay in accordance with its terms (s 70(2)(l) of the UCCC; s 76(2)(l) of the Code). According to Cooper AJ, the history of the debtor’s credit card, and in particular the reduction of the debt to $0.01 on 7 April 1999, indicated that the debtor could repay his debts. His Honour did not make any comment on the fact that NAB could have made enquiries of the debtor. Although the debtor’s credit card history did show “the possibility of some difficulty from time to time” this did not demonstrate substantial hardship. NAB was not aware of the debtor’s difficulties in making payments. NAB was entitled to rely on the debtor’s credit card history to determine whether or not to offer an increased credit limit. Relevantly, s 70(4) of the UCCC (s 76(4) of the Code) provides: In determining whether a credit contract is unjust the court is not to have regard to any injustice arising from circumstances that were not reasonably foreseeable when the contract was entered into or changed.

In the case of Jones v ANZ Banking Group Ltd [2004] NSWCTTT 381, a debtor sought an order under s 70 of the UCCC (s 76 of the Code) that, by making unsolicited offers to increase his credit card limits, ANZ had encouraged him to increase the indebtedness without proper reference to his financial situation. The claimant contended that those offers were made at times when his income was very low and, had proper enquiry been made as to his income, the limits may not have been increased. The court rejected these arguments, without requiring any evidence to be presented by the respondent as to whether the change was unjust, [page 334] as the applicant failed to provide sufficient reliable evidence of his income at the time of the increases in his credit limit. In this case, however, the

applicant was successful in obtaining a court ordered amendment to the repayment terms of the credit card (see [72.15]). Credit providers must also observe the NCCP Act responsible lending requirements when increasing credit card limits. The NCCP Act has been amended with effect from 1 July 2012 to further regulate the setting of credit card limits by giving consumers more say over nominating their own credit limit and preventing offers of credit limit increases unless the consumer has consented to receiving such offers. These proposals (and others relating to credit card “over-limit” fees, the allocation of repayments, consistent interest charging industry-wide and better disclosure) were indicated in the Federal Government’s “Fairer, Simpler Banking” policy fact sheet issued on 15 August 2010. See further para 8 of the “Overview of the National Consumer Credit Protection Act (NCCP Act) regime”. [76.51] Increasing credit card limits — additional Australian Capital Territory requirements Prior to the NCCP changes commencing on 1 July 2012 referred to above, the Australian Capital Territory specifically amended its Fair Trading Act 1992 (ACT) to require credit providers that enter into a continuing credit contract for a credit card with a debtor, or increase the amount of credit available under a continuing credit contract for a credit card, to carry out satisfactory assessments of applicants. Additionally, any increase in an existing limit must be requested by the debtor, or must be offered to the debtor and accepted by the debtor in writing (s 28A(2)). (These provisions have, however, been repealed with effect from 1 January 2011). A “satisfactory assessment process” was an assessment of the debtor’s financial situation sufficient to satisfy a diligent and prudent credit provider that the debtor has a reasonable ability to repay the amount of credit provided or to be provided (s 28A(3)). An assessment process will only be satisfactory if the credit provider asks the debtor for a statement of financial position including: income; existing credit accounts; and

repayment commitments (s 28A(4)). The Australian Capital Territory’s Fair Trading Act extended to conduct outside the territory by bodies corporate incorporated or carrying on business in the territory. The Act purported to regulate the conduct of credit providers who operate within the Australian Capital Territory, and also outside of the territory. Significant sanctions for breach existed, including fines of up to $500,000 and a right for people who suffered loss or damage flowing from the breach to bring an action for damages, and scope for a court to make orders including orders declaring contracts (or parts of them) void, varying the terms of contracts, directing refund or repayment of money, or refusing to enforce a provision of a contract. The Australian Capital Territory was alone in passing these amendments to its Fair Trading Act. As a result of the introduction of the NCCP Act responsible lending obligations, other states and territories did not follow the Australian [page 335] Capital Territory in imposing additional pre-loan assessment requirements. As noted, the Australian Capital Territory repealed these requirements, effective 1 January 2011. [76.55] Interest and maximum annual percentage rates Although there is no explicit mention of interest or annual percentage rates among the factors that a court may consider in determining whether a contract, mortgage or guarantee is unjust, they are probably caught within the question of whether the terms of the transaction or the conduct of the credit provider is justified in the light of the risks undertaken by the credit provider (s 76(2)(m)). However, it is still possible that a court would find that an annual percentage rate was unjustly high in light of the risks undertaken by the credit provider notwithstanding the rate being lower than the maximum allowable

annual percentage rate. See further commentary on s 32A regarding the annual percentage rate, which must not exceed a maximum of 48 per cent. In Garas v Maharaj [2004] NSWSC 1157; BC200408595, Gzell J considered whether an interest rate of 20 per cent was an unjust term under the Contracts Review Act 1980 (NSW). While recognising the principle in West v AGC (Advances) Ltd (1986) 5 NSWLR 610; (1986) ASC ¶55-500; (1986) NSW Conv R 55-306 that the Act is to be interpreted liberally, Gzell J emphasised that a contract is not unjust simply because one party has made a good bargain and the other a bad one, provided the terms of the contract are reasonable and the parties had a real or informed choice to enter into the contract (see also Citicorp Australia Ltd v O’Brien (1996) 40 NSWLR 398; (1996) ASC ¶56-359; (1996) NSW ConvR 55-794; BC9605016). Mr and Mrs Maharaj had moved into premises on the understanding that the finance that they had arranged at 9.25 per cent per annum, would cover the purchase price and additional expenses. After moving in, they were told by their real estate agent that their house had not “made valuation”. As well as moving in, the Maharajs had enrolled their children in nearby schools. Mr Maharaj told the agent that they could not afford to contribute further funds and asked whether they would have to move out. The real estate agent arranged for them to meet Mr Garas, who offered to provide them funding for the shortfall at 20 per cent per annum interest. Gzell J found that Mr Maharaj did not regard 20 per cent per annum as excessive. He had experienced high interest rates on a previous loan and rejected the offer of the agent to move into another house that would have “made valuation”. Gzell J observed that Mr Maharaj could have declined the offer of finance at 20 per cent per annum and “moved out and sought alternative accommodation in the area of the schools to buy or rent”. Although it was their first acquisition of a house, and neither Mr nor Mrs Maharaj was sophisticated in such dealings, Gzell J found that there was no inequality in bargaining power to justify relief under the Contracts Review Act, nor was there any unconscionability on the part of Mr Garas, including on the basis of special vulnerability of the type referred to in Yerkey v Jones (1939) 63 CLR 649; [1939] ALR 62; 13 ALJR 84; BC3900003 and Garcia v National Australia Bank Ltd (1998) 194 CLR 395; 155 ALR 614; [1998] HCA 48; BC9803588.

[page 336] [76.65] Other relevant legislation Subdivision C of Div 2 of Pt 2 of the ASIC Act also applies to credit contracts or mortgages securing credit contracts, and confers on the court a number of powers in relation to consumer protection (refer to s 12BAA(7)(k) of the ASIC Act and reg 2B of the ASIC Regulations 2001 (Cth)). The types of credit to which the ASIC Act applies go beyond the types of credit to which the Code applies, with the ASIC Act specifically including transactions not regulated by the Code (eg, a mortgage to secure an overdraft facility). The ASIC Act also treats mortgages that secure obligations under credit facilities as a separate credit facility, moving away from the concept of “related mortgages” and “related guarantees” used in the Code. The ASIC Act prohibits a person from engaging in conduct in connection with the supply of financial services that is “unconscionable” within the meaning of the unwritten law (s 12CA) or as that concept is modified by ss 12CB and 12CC of the ASIC Act. In the case of ss 12CB and 12CC, the court is allowed to take into account a number of factors in making a determination of unconscionability. These factors, listed in ss 12CB(2) and 12CC(2) and (3) of the ASIC Act, are similar to those listed in s 76(2) of the Code. Whereas the Code is concerned with the question of whether the contract itself is unjust, the ASIC Act is concerned with unconscionable “behaviour”. Although the ASIC Act may be relevant to circumstances in which the Code or the Contracts Review Act 1980 (NSW) do not apply, it is unlikely to produce a significantly different outcome. However, it might be argued that, because the ASIC Act only purports to deal with “unconscionable” behaviour rather than contracts that are “unjust” (the definition of which includes “unconscionable”), it is actually narrower in its applicability than the Code. The Contracts Review Act, discussed above at [76.05]–[76.15], contains provisions of substantial similarity to ss 76 and 77 of the Code, particularly ss 7, 8 and 9 of the Act. Contracts to which the Code applies are also subject to the unfair contracts provisions contained in Subdiv BA of Div 2 of Pt 2 of the ASIC Act. This

may provide an alternative way of dealing with certain problematic scenarios not adequately handled by the Code. [76.70] Unfair contracts legislation The national unfair contract terms regime was introduced with effect from 1 July 2010 and, insofar as it applies to financial products and contracts for the supply of financial services, is found in ss 12BF–12BM of the ASIC Act. It applies to standard form consumer contracts, which will encompass most retail loan and security documents (ie, most Code-regulated documents) except those relating to residential investment loans. Unfair terms and financial products From 1 July 2010, the ASIC Act has also included a statutory unfair contract terms regime, which will usually apply to Code-regulated credit contracts, consumer leases and mortgages, and may apply to Code-regulated guarantees. A key criterion for the application of the ASIC Act unfair contract terms regime is whether the relevant document is a “standard form contract”. In relation to financial products (such as credit contracts and consumer leases), the regime applies to any standard form contract: [page 337] which is itself a financial product or which is a contract for the supply (or possible supply) of financial services; and where at least one of the parties to the contract is an individual who is acquiring the product or service wholly or predominantly for personal, domestic or household use or consumption. The Australian Consumer Law contains the part of the regime that applies to goods and services other than financial products. What is a “standard form contract”? The term “standard form contract” is not defined — this was a deliberate policy in order to try to prevent companies from structuring their contracts to fall outside any prescriptive

definition. Rather, a contract is presumed to be a standard form contract unless a party can prove otherwise (s 12BK(1) of the ASIC Act). In determining whether a contract is a standard form contract, certain factors must be taken into account, including whether: one of the parties has all or most of the bargaining power relating to the transaction; the contract was prepared by one party before any discussion relating to the transaction occurred between the parties; there was an effective opportunity to negotiate the terms of the contract; and a party was, in effect, required either to accept or reject the terms of the contract in the form in which they were presented. See s 12BK(2) of the ASIC Act. Some terms cannot be reviewed By virtue of s 12BI(1) of the ASIC Act, the regime does not apply to terms that: define the main subject matter of the contract; are required or expressly permitted by law; or set the upfront price payable under the contract, and certain contracts (such as the constitution of a company, managed investment scheme, or other kind of body). The upfront price is defined to be consideration that is provided (or to be provided) for the supply under the contract and which is disclosed when or before the contract is entered into (s 12BI(2) of the ASIC Act). In relation to credit contracts, the consideration is expressly stated to include the principal that is owed under the contract (s 12BI(3) of the ASIC Act). The upfront price does not include any other consideration that is contingent on the occurrence or non-occurrence of a particular event (s 12BI(2) of the ASIC Act). Thus it appears that contingent fees such as early termination fees and break costs would not be part of the upfront price and would therefore be subject to the unfair terms regime. This interpretation is

reflected in ASIC’s regulatory guide on such fees (RG 220 Early termination fees for residential loans: Unconscionable fees and unfair contract terms). Any term of a standard form consumer contract entered into (or renewed) after 1 July 2010 will be void if that term is unfair — however, the rest of the contract will continue to operate if it is capable of doing so without the unfair term (s 12BF(1) and (2) of the ASIC Act). [page 338] What is an “unfair” term? By virtue of s 12BG(1) of the ASIC Act, a term will be unfair if it: would cause significant imbalance in the parties’ rights and obligations; is not reasonably necessary to protect the legitimate business interests of the party who would be advantaged; and would cause detriment (financial or otherwise) if relied on. A term is presumed not to be reasonably necessary to protect the legitimate business interests of a party unless that party proves otherwise (s 12BG(4) of the ASIC Act). In determining whether a term is unfair, a court must take into account the: extent to which the term is transparent (ie, the extent to which it is expressed in reasonably plain language, legible, presented clearly and readily available to the party affected by it); and contract as a whole. See s 12BG(2) of the ASIC Act. As stated above in [76.65], Contracts Review Act 1980 (NSW) ss 7, 8 and 9 are substantially similar to ss 76 and 77 of the Code. [76.75] Remedies for unfairness or dishonesty by providers of credit services The Enhancements Act introduced a new s 180A into the NCCP

Act. The Explanatory Memorandum to the Enhancements Act explains (at paras 2.28–2.56): 2.28 Item 10 inserts section 180A into the NCCP Act. This provision introduces a remedy for unfairness or dishonesty by providers of credit services, and sets out matters relevant to a court determining whether conduct has been unfair or dishonest. [s 180A] 2.29 The court will have power to make orders where it is satisfied that: a person (the defendant) provided a credit service to a consumer (the plaintiff); the defendant engaged in conduct that was connected with the provision of the service and that was unfair or dishonest; and the conduct had one or more of the following results: —

the consumer entered into a credit contract, consumer lease, mortgage or guarantee that they would not have entered into had the conduct not occurred;

—

the consumer entered into a credit contract, consumer lease, mortgage or guarantee with different terms to one that they would have entered into apart from the conduct; or

—

the consumer became liable to pay fees or costs to the defendant or a third party.

[s 180A] 2.30 The conduct may precede or follow the provision of the credit service, provided that it is connected with the provision of those services. 2.31 The requirement that the unfair or dishonest conduct had a result listed in paragraph 180A(1)(c) is to be determined objectively. For example, if the defendant engaged in unfair conduct in relation to the supply of goods, and subsequently arranged a credit contract to

finance the purchase of those goods, it could be reasonably concluded that their unfair conduct had the result the consumer entered into that contract as a result of the unfair conduct. [page 339] 2.32 The term engage in conduct is defined as meaning the doing of an act or omitting to perform an act, and would therefore encompass conduct such as failing, unfairly or dishonestly, to disclose information to the consumer. [s 204(1)] 2.33 If the defendant engaged in unfair or dishonest conduct a court can make orders: that the defendant take, or refrain from taking specified action; that the defendant pay the plaintiff a specified amount; that a specified sum is not due or owing by the plaintiff to the defendant; and orders that the court thinks are appropriate to redress the unfairness or dishonesty, or to prevent the defendant from profiting from the plaintiff in connection with the unfairness or dishonesty. [s 180A(2)] 2.34 The power of the court to make orders to prevent the provider of credit services from profiting from their unfairness or dishonesty recognises that the provider of credit services may not be remunerated directly by the consumer, but may receive, and be motivated by, financial benefits such as commissions from third parties. The purpose of giving the court the power to require them to disgorge these payments ensures these persons should not be able to profit from unfair or dishonest conduct in situations where the consumer was not charged a fee.

[s 180A(2)(d)] 2.35 The court may not, however, make an order that affects a credit contract, consumer lease, mortgage or guarantee to which the conduct related. Consumers have other remedies available to them in the NCCP Act in relation to credit providers and lessors, including where the transaction was unjust. Determining whether conduct was unfair or dishonest 2.36 Section 180A sets out elements that the court must consider in determining whether conduct was unfair or dishonest, but does not limit the matters to which the court may have regard. A person providing credit services may therefore still have engaged in conduct that was unfair or dishonest even where none of the factors listed in subsection 180A(4) are present. 2.37 The effect of subsection 180A(3) is that the existence of factors listed in subsection 180A(4) will in all cases be relevant to a court considering whether conduct was unfair or dishonest. 2.38 However, these factors are not prerequisites or necessary to a finding that conduct was unfair or dishonest. For example, it would not be necessary to find a consumer was under a special disadvantage (as discussed in paragraph 180A(4)(a)) in order for conduct by the provider of credit services to be unfair or dishonest. 2.39 The first element is whether the consumer was at a special disadvantage in dealing with the person in relation to the transaction [s 180A(4)(a)]. The concept of special disadvantage refers to the consumer being in a position where they are unable to protect their own interests, as discussed in Commercial Bank of Australia v Amadio (1983) 151 CLR 447. 2.40 The special disadvantage may exist in relation to: the provision of the credit service; a credit contract, consumer lease, mortgage or guarantee to which the conduct related; and

any other contract requiring the consumer to make payments, for the purposes of which it is reasonable to expect that the consumer would or did enter into such a credit contract, consumer lease, mortgage or guarantee. 2.41 The special disadvantage may exist in relation to all of these three categories or only a single one. [page 340] 2.42 The court must consider whether the consumer was a member of a class whose members were more likely than others to be at such a disadvantage. [s 180A(4)(b)] 2.43 Where the plaintiff was a member of such a class, the court must determine whether a reasonable person would consider that the defendant’s conduct was directed at that class [s 180A(4)(c)]. The purpose of this provision is to address practices where a credit service provider will target a class of persons (for example, elderly or commercially unsophisticated persons) on the basis the perceived characteristics of the class mean that individuals within it are more likely to succumb to unfair or dishonest conduct (irrespective of whether the credit service provider is aware that any particular individual under the class was under a special disability). 2.44 Another element is whether the plaintiff was unable or considered themselves unable to be able to enter into a credit contract, consumer lease, mortgage or guarantee other than with the credit provider, lessor, mortgagee or beneficiary to whom the conduct related [s 180A(4)(d)]. Where a plaintiff either had, or considered themselves to have, no other choices they are at greater risk of entering into transactions that exploit this vulnerability. 2.45 A credit service provider may have contributed to this belief by, for example, representing that they can arrange credit or a consumer lease irrespective of the circumstances of the consumer, in order to

attract potential clients who would then be prepared to accept whatever terms are offered, irrespective of the cost. 2.46 Another element is whether the conduct involved a technique that in good conscience should not have been used, or that manipulated the plaintiff [s 180A(4)(e)]. These terms may largely overlap in practice, and are primarily intended to address coercive or manipulative marketing techniques. 2.47 Some providers of credit services use sophisticated marketing techniques designed to persuade consumers to enter into a contract. This process can be incremental rather than overt through, for example, a series of questions, where the consumer is directed or guided, through those techniques, to a position where it becomes increasingly difficult for the consumer to refuse to enter into the transaction (but where the conduct may not meet the higher threshold required by remedies such as unconscionability or duress). 2.48 The court must also consider whether the defendant could determine or significantly influence either the terms of a credit contract, consumer lease, mortgage or guarantee to which the conduct related or any other contract where it is reasonable to expect the consumer entered into the credit contract or consumer lease to finance their liability under that other contract. [s 180A(4) (g)] 2.49 The term ‘determine or significantly influence’ is used to describe situations where the provider of credit services has the capacity to actively influence the terms of a transaction beyond ordinary negotiations. It would clearly apply in situations where the provider of credit services may have an agreement with a third party in which they can fix the price or cost within limits specified in the agreement, or subject to a right of veto by the third party. Example 2.1 A broker attracts potential customers through running wealth creation seminars. Attendees are encouraged to purchase investment properties, and to have finance arranged by the broker. However, the broker has an arrangement with the developer selling the

properties that it will receive as commission 50 per cent of the amount of the purchase price in excess of a base price. The broker does not tell the consumer about this arrangement and it can be presumed that they were unlikely

[page 341] to have agreed to purchase the units, either at all or for the price for which they purchased it, had this been the case. This conduct would therefore be unfair or dishonest. 2.50 The final element the court must consider is whether the terms of the transaction were less favourable to the consumer than the terms of a comparable transaction [s 180A(4)(g)]. This factor recognises the role of the provider of credit services in arranging credit or consumer leases, and, commonly, in arranging other transactions as well (for example, for the purchase or supply of goods or services). If the consumer could have entered into a comparable transaction with more favourable terms, this may suggest that they entered into the less favourable contract as a result of unfair or dishonest conduct. 2.51 Applications for orders can only be made within 6 years after the defendant first started engaging in the conduct. The court can only make an order under this section where either a plaintiff or ASIC specifically applies for such an order. [s 180A(5)] 2.52 ASIC may make an application on behalf of a plaintiff where the plaintiff has given their consent in writing, before the application is made [s 180A(6)]. ASIC can apply on behalf of more than one plaintiff provided they all consent (for example, where they are members of a class as described in paragraph 180A(4)(b)). 2.53 Where a provider of credit services engages in unfair or dishonest conduct, and it has a successful outcome, they can be expected to repeat that conduct. Section 180A is therefore intended to address both individual and systemic conduct that is unfair or dishonest, and to enable ASIC to take action where a provider of credit

services has engaged in similar unfair or dishonest conduct towards different consumers. 2.54 Where the court orders that the defendant pay an amount to the plaintiff, the plaintiff may recover this amount as a debt due to them. [s 180A(7)] 2.55 This section does not apply to credit assistance by a person who is, or becomes, a credit provider under the contract to which the assistance relates. The section also does not apply to lessors under a consumer lease to which the assistance relates, mortgagees under a mortgage connected to the credit contract to which the assistance relates, or beneficiaries of a guarantee connected to the credit contract to which the assistance relates. [s 180A(8)] 2.56 This provision is necessary as the definition of providing credit assistance in section 8 of the NCCP Act can include credit providers or lessors (where they engage in conduct as described in that section in relation to credit contracts or consumer leases where they will be the provider). Consumer [sic] are provided with remedies in the Code and in other legislation against credit providers and lessors. [76.80] Cases Paciocco v Australia and New Zealand Banking Group Limited [2014] FCA 35; Perpetual Trustees Victoria Ltd v van den Heuvel (2009) 14 BPR 26,749; [2009] NSWSC 57; BC200900803; National Australia Bank Ltd v Burness [2007] NSWSC 247; BC200701982; Perpetual Trustees Australia v Richards (unreported judgment); Australian Capital Providers Pty Ltd v Wakelin [2009] QSC 167; BC200905403; RHG Mortgage Corp Ltd v Cran [2009] QSC 183; BC200905984; Permanent Mortgages Pty Ltd v Cook (2006) ASC ¶155-082; [2006] NSWSC 1104; BC200608529; Permanent Custodians Ltd v Leybourne [2009] NSWSC 288; BC200902885; Cook v Permanent Mortgages Pty Ltd (2007) ASC ¶155-085; [2007] NSWCA 219; BC200706866; King Mortgages Pty Ltd v Nader (2008) ASC ¶155-089; [2008] NSWSC 108; BC200800736; Commonwealth Bank of Australia v Clune (unreported judgment); Ormes v Lewis [2006] NSWSC 16;

[page 342] BC200600260; Guardian Mortgages Pty Ltd v Miller (2004) 12 BPR 22,833; [2004] NSWSC 1236; BC200408878; Cash Solutions (Aust) Pty Ltd v Turner [2008] QDC 108.

Orders on reopening of transactions 77 The court may, if it reopens a transaction under this Division, do any one or more of the following, despite any settlement of accounts or any agreement purporting to close previous dealings and create a new obligation: (a) reopen an account already taken between the parties to the transaction; (b) relieve the debtor and any guarantor from payment of any amount in excess of such amount as the court, having regard to the risk involved and all other circumstances, considers to be reasonably payable; (c) set aside either wholly or in part or revise or alter an agreement made or mortgage given in connection with the transaction; (d) order that the mortgagee takes such steps as are necessary to discharge the mortgage; (e) give judgment for or make an order in favour of a party to the transaction of such amount as, having regard to the relief (if any) which the court thinks fit to grant, is justly due to that party under the contract, mortgage or guarantee; (f)

give judgment or make an order against a person for delivery of goods to which the contract, mortgage or guarantee relates and which are in the possession of that person;

(g) make ancillary or consequential orders. ________________________________________ [Editorial note: UCCC s 71 provided as follows:

Orders on reopening of transactions 71 The Court may, if it reopens a transaction under this Division, do any one or more of the following, despite any settlement of accounts or any agreement purporting to close previous dealings and create a new obligation— (a) reopen an account already taken between the parties; (b) relieve the debtor and any guarantor from payment of any amount in excess of such amount as the Court, having regard to the risk involved and all other circumstances, considers to be reasonably payable; (c) set aside either wholly or in part or revise or alter an agreement made or mortgage given in connection with the transaction; (d) order that the mortgagee takes such steps as are necessary to discharge the mortgage; (e) give judgment for or make an order in favour of a party of such amount as, having regard to the relief (if any) which the Court thinks fit to grant, is justly due to that party under the contract, mortgage or guarantee; (f)

give judgment or make an order against a person for delivery of goods to which the contract, mortgage or guarantee relates and which are in the possession of that person;

(g) make ancillary or consequential orders.]

COMMENTARY ON SECTION 77 [77.05] Outline If a court decides that a term is unjust, it can make orders to: reopen an account already taken between the parties; reduce an amount payable by a debtor or guarantor; set aside or vary an agreement or mortgage; order discharge of a mortgage; and [page 343] make orders for the benefit of the parties, including ordering the delivery of goods, and make any ancillary or consequential orders. [77.10] Court’s power An order may be made under s 77 in some cases regardless of the wishes and intentions of the parties. Section 77 allows the

court to ignore any prior settlement of account or agreement purporting to close previous dealings and create a new obligation. It seems, however, that a court may: not ignore an agreement made under s 72, since none of the changes contemplated by s 72 appears to fall within the matters that the court is, under s 77, entitled to disregard. If the court were entitled to disregard matters other than those specified in s 77, it would be inappropriate to mention those matters, and s 77 would be drafted differently; and ignore an agreement purporting to close previous dealings only if the agreement also creates “a new obligation”. [77.15] Cases Perpetual Trustees Victoria Ltd v van den Heuvel (2009) 14 BPR 26,749; [2009] NSWSC 57; BC200900803; Perpetual Trustees Australia v Richards (unreported judgment); Ormes v Lewis [2006] NSWSC 16; BC200600260.

Court may review unconscionable interest and other charges 78 (1) [Matters “unconscionable”] The court may, if satisfied on the application of a debtor or guarantor that: (a) a change in the annual percentage rate or rates under a credit contract to which subsection 64(1) or (4) applies; or (b) an establishment fee or charge; or (c) a fee or charge payable on early termination of a credit contract; or (d) a fee or charge for a prepayment of an amount under a credit contract; is unconscionable, annul or reduce the change or fee or charge and may make ancillary or consequential orders. 78 (2) [Annual percentage rate] For the purposes of this section, a change

to the annual percentage rate or rates is unconscionable if and only if it appears to the court that: (a) it changes the annual percentage rate or rates in a manner that is unreasonable, having regard to any advertised rate or other representations made by the credit provider before or at the time the contract was entered into, the period of time since the contract was entered into and any other consideration the court thinks relevant; or (b) the change is a measure that discriminates unjustifiably against the debtor when the debtor is compared to other debtors of the credit provider under similar contracts. 78 (3) [Establishment fee] In determining whether an establishment fee or charge is unconscionable, the court is to have regard to whether the amount of the fee or charge is equal to the credit provider’s reasonable costs of determining an application for credit and the initial administrative costs of providing the credit or is equal to the credit provider’s average reasonable costs of those things in respect of that class of contract. 78 (4) [Fee payable on termination] For the purposes of this section, a fee or charge payable on early termination of the contract or a prepayment of an amount under the credit contract is unconscionable if and only if it appears to the court that it exceeds a reasonable estimate of the credit provider’s loss arising from the early termination or prepayment, including the credit provider’s average reasonable administrative costs in respect of such a termination or prepayment. [page 344] ________________________________________ [Editorial note: UCCC s 72 provided as follows: Court may review unconscionable interest and other charges 72 (1) [Matters “unconscionable”] The Court may, if satisfied on the application of a debtor or guarantor that—

(a) a change in the annual percentage rate or rates under a credit contract to which section 59(1) or (4) applies; or (b) an establishment fee or charge; or (c) a fee or charge payable on early termination of a credit contract; or (d) a fee or charge for a prepayment of an amount under a credit contract; is unconscionable, annul or reduce the change or fee or charge and may make ancillary or consequential orders. 72 (2) [Annual percentage rate] For the purposes of this section, a change to the annual percentage rate or rates is unconscionable if and only if it appears to the Court that— (a) it changes the annual percentage rate or rates in a manner that is unreasonable, having regard to any advertised rate or other representations made by the credit provider before or at the time the contract was entered into, the period of time since the contract was entered into and any other consideration the Court thinks relevant; or (b) the change is a measure that discriminates unjustifiably against the debtor when the debtor is compared to other debtors of the credit provider under similar contracts. 72 (3) [Establishment fee] In determining whether an establishment fee or charge is unconscionable, the Court is to have regard to whether the amount of the fee or charge is equal to the credit provider’s reasonable costs of determining an application for credit and the initial administrative costs of providing the credit or is equal to the credit provider’s average reasonable costs of those things in respect of that class of contract. 72 (4) [Fee payable on termination] For the purposes of this section, a fee or charge payable on early termination of the contract or a prepayment of an amount under the credit contract is unconscionable if and only if it appears to the Court that it exceeds a reasonable estimate of the credit provider’s loss arising from the early termination or prepayment, including the credit provider’s average reasonable administrative costs in respect of such a termination or prepayment.]

COMMENTARY ON SECTION 78 [78.05] Outline A debtor or guarantor can apply to the court for a review of unilateral changes in the annual percentage rate made by the credit provider, or for a review of establishment fees, early termination fees or prepayment fees which the debtor or guarantor believes are unconscionable. If the court decides that the change, or the fees and charges are unconscionable, the court may annul or reduce the change or fee or charge. Termination charges are also affected by reg 79A (see [R79A.05]). [78.10] Annual percentage rate change Note that s 78(1)(a) relates only to changes in annual percentage rates. If a debtor wishes to assert that the initial

annual percentage rate (APR) under their contract was unjust, they would need to make an application under s 76 (see in particular s 76(2)(o)). A change in the APR will be unconscionable only if it appears to the court that: it changes the APR in a manner that is unreasonable, having regard to any advertised rate or other representations made by the credit provider before or at the time the contract was entered into, the period of time since the contract was entered into and any other consideration the court thinks relevant (s 78(2)(a)); or the change is a measure that discriminates unjustifiably against the debtor when the debtor is compared to other debtors of the credit provider under similar contracts (s 78(2)(b)). [page 345] [78.15] “Establishment fee” The Code does not define “establishment fee”. Presumably it extends to any fee charged in connection with an application for credit, assessment of an application, establishment of an account or actual provision of the credit, regardless of the name actually given to the fee. The Code refers to the reasonableness of the establishment fee. This may necessitate an examination by credit providers of the components of their establishment fees, both internal and external, to ascertain their relationship to the actual cost of establishing the loan. An establishment fee will not be unconscionable merely because it exceeds the credit provider’s reasonable costs of establishment, although s 78(3) does require such a comparison to be made as part of considering whether the fee is unconscionable (Director of Consumer Affairs Victoria v City Finance Loans (2006) ASC ¶155-080; [2005] VCAT 1989). In that case, Morris P stated he was unable to discern an intention in s 72 of the UCCC (s 78 of the Code) that profit could only be earned from interest and that fees could only be levied to recover costs. [78.20] Precontractual conduct It may be possible to make a claim in relation to precontractual conduct even where an application fee has been

paid but no binding credit contract entered into. In McCarty v Yarra Capital Group (2002) ASC ¶155-054; [2002] VCAT 95, in the course of dismissing a claim made under the UCCC on the basis that the credit contract was for business purposes (under s 6 of the UCCC (s 5 of the Code)), McKenzie DP made a number of interesting observations about the possible application of the UCCC to precontractual conduct. The case left it open as to whether debtors are able to challenge establishment or application fees on the basis of unconscionability even where no credit contract was ever entered into. For instance, where an application fee encapsulates fees relating to the provision of credit (as opposed to an administration fee for handling the application), and that credit is not subsequently provided, debtors may argue that this component of the fee is unconscionable and may be able to seek relief to recover that amount. In this case the matter was not conclusively determined. [78.25] Amounts paid to third parties If a credit provider’s establishment fee (or application or commitment fee) includes components for amounts that will be paid to third parties (eg, valuation fees, legal fees, etc), the credit provider need not: separately disclose those amounts; or ensure that the component of its establishment fee representing that third party expense is the actual amount payable to the third party. However, it must consider whether it is able to demonstrate that the establishment fee does not exceed its reasonable costs of determining an application for credit and its reasonable initial administrative costs of providing the loan (or the average reasonable costs of those things for a class of contract) (s 78(3)). Obviously, this will not be the case if the part of its fee for third party expenses significantly exceeds the actual amounts paid to third parties. If a credit provider is unable to show that the establishment fee does not exceed the reasonable costs referred to above, it would be open to a court to decide that the fee is unconscionable, and then annul or reduce it. [page 346]

[78.30] Break costs and early termination fees An early termination or prepayment fee or charge will be unconscionable only if it appears to the court that it exceeds a reasonable estimate of the credit provider’s loss arising from the early termination or prepayment (including the credit provider’s average reasonable administrative costs of such a termination or prepayment) (s 78(4)). Unlike establishment fees, early termination loss calculations cannot be averaged over a class of contracts. For loans made after 30 June 2011, reg 79A changes the position. Only limited kinds of termination fees may be charged, whether or not a credit provider suffers a relevant loss (see [R79A.05]). However, s 78 continues to be applicable to break fees and discharge fees that may be charged under reg 79A. In exercising this jurisdiction it is likely that a court will be mindful of common law principles of relief against penalties, which prevent recovery of sums payable on breach of contract that exceed a genuine pre-estimate of loss (Dunlop Pneumatic Tyre Co Ltd v New Garage & Motor Co Ltd [1915] AC 79 at 86–88; [1914–15] All ER Rep 739; (1914) 83 LJKB 1574; 111 LT 862 per Lord Dunedin). The Code does not define “loss”. “Loss” could be interpreted in a number of ways, for example: as an actual loss of money — for instance, if a discounted rate represented a negative interest rate (ie, where the interest rate offered to debtors was less than the credit provider’s cost of funds); as a loss of expected profit — this can be quite readily demonstrated where a debtor takes out a fixed-rate loan, terminates the loan during the fixed-rate period and, at the time of termination, the rate at which the credit provider could relend that amount for the remainder of the fixed term has fallen. This is a classic fixedrate break cost; as the loss a creditor provider incurs by reducing its margin from its “normal” margin for a period on an expectation that the debtor will continue the loan for, say, a minimum of three years after the discount period during which time the overall return on the loan

will equate to its “normal” expected return (eg, “honeymoon rate” loans). It is likely that a flat early termination fee calculated, for example, on a number of months’ interest would be held by a court to be unconscionable. “Honeymoon rate” loans Prior to the introduction of reg 79A (see [78.32], in the case of loans such as “honeymoon rate” loans, where a credit provider makes available credit initially at a discounted rate with an expectation that the loan will be kept on foot for a period of time after the discounted rate period and that, if it is not, the credit provider will suffer a loss, it was unclear whether a fee charged by a credit provider to recover that loss would be unconscionable under s 78(4). It could be argued that, if a credit provider chooses to offer a lower margin for a period, it cannot then be said that the credit provider has suffered a loss if the customer pays the amount required by the credit provider during that period, and then repays the loan. It could be argued that the credit provider has received what they were entitled to receive, and has not suffered any loss. On the other hand, a court may have been prepared to accept an argument that a credit provider has suffered a loss if the contract which it enters into is based on an agreement of the parties have agreed that the credit provider is to derive a certain rate of return [page 347] which that is dependent on the loan being kept on foot for a period of time after the discounted rate period and that, if the loan is not kept on foot for this period, the credit provider will suffer loss. This was not necessarily inconsistent with the debtor’s right to pay out the credit contract at any time (s 82(1)), as that right is not expressed to be free of all consequences. Indeed, s 78(4) expressly recognises that the exercise by a debtor of their right to pay out a credit contract early may result in a loss to the credit provider, and that the credit provider is entitled to be compensated for that loss. However, with the introduction of reg 79A, “honeymoon rate” loans have declined. [78.31] ASIC’s approach to early termination fees ASIC issued a

regulatory guide indicating the general approach it will take to early termination fees (including break costs and deferred establishment fees) in the light of s 78 of the Code and also the unfair contract terms provisions of the ASIC Act (see RG 220 Early termination fees for residential loans: Unconscionable fees and unfair contract terms — available from www.asic.gov.au). In RG 220, ASIC also gives other guidance on disclosure of those fees. In general, ASIC expresses a view that loss of expected profit, general overhead, and marketing expenses should not be regarded as “losses” mentioned in s 78, and suggests that similar tests would be applied under the unfair contract terms regime in the ASIC Act. However, unrecouped establishment costs can be said to flow from early termination. The ASIC guidance is summarised below: Application of s 78 All fees payable on early termination which would not be payable if the loan ran its full course will be subject to review under s 78(4). This clarifies that ASIC will generally apply the s 78(4) test — and not the s 78(3) test, relating to establishment fees — to fees known as deferred establishment fees (para RG220.29). Early termination fees and break costs must reflect the credit provider’s loss arising from the early termination or other prepayment — ie, only losses caused by the early termination or prepayment may be recouped (para RG220.30). In ASIC’s view, the fee should not recover any lost profit, marketing costs (also known as “churn” costs) or product development costs (para RG220.36). However, break costs in relation to fixed-rate loans are permissible, as are certain administrative costs, unrecouped costs arising from early termination of a “honeymoon” or introductory interest rate loan and loss in respect of unrecouped establishment costs (para RG220.30). Types of unrecouped establishment costs that may be charged on early termination include costs of processing the loan application and preparing the documentation, lenders mortgage insurance premium, disbursements and certain overheads, costs of obtaining

funding and commissions paid to brokers, etc (para RG220.33). Credit providers are expected to keep records of their fee calculations (para RG220.38), and these may need to be produced to ASIC (para RG220.39). [page 348] Early termination fees should be prominently disclosed (para RG220.109). Unfair contract terms ASIC considers that early termination fees are not part of the “upfront price” payable under the credit contract. Accordingly, ASIC considers that such fees can be reviewed for unfairness under the ASIC Act (para RG220.54). If an early termination fee reflects the credit provider’s reasonable costs arising from the termination, it is likely to be reasonably necessary to protect the credit provider’s legitimate interests and therefore the fee is unlikely to be unfair (paras RG220.70 and RG220.71). A term allowing the credit provider to unilaterally vary an early termination fee or when it applies, without any limits on the exercise of the right, is likely to be unfair. A term allowing an increase in a deferred establishment fee is also likely to be unfair (as it relates to establishment costs that have already been incurred, the amount of which should therefore be known) (para RG220.89). Disclosure ASIC indicates that the imposition of early termination fees should be “transparent” as well as meeting Code disclosure requirements (paras RG220.123 and RG220.124). For example, early termination fees should be explained in plain English with no legal or industry jargon, the dollar amount should be given where this is possible and, if not, the method of calculation together with meaningful worked examples (para RG220.106). The fees should be disclosed

before the contract is entered into — for example, in pamphlets and brochures as well as the precontractual financial information statement (para RG220.103). The regulatory guide suggests wording for prominent warnings (para RG220.110). However, it notes that transparency alone will not save an unfair term from being unfair. [78.32] ASIC Report 300 On 18 September 2012, ASIC released Report 300: Review of early termination fees for residential loans entered into before 1 July 2011 (the Report), setting out its findings on the early termination fees charged by 20 credit providers on residential loans before they were prohibited from 1 July 2011. The review assessed credit providers’ compliance with the obligations under the NCCP Act, the Code and the ASIC Act following publication of ASIC’s guidance in regulatory guide RG 220 Early termination fees for residential loans: Unconscionable fees and unfair contract terms. Broadly, the Report concluded that: credit providers were generally aware of their obligations and had taken steps to ensure compliance; some credit providers seemed to believe that the NCCP provisions about review of early termination fees commenced with the NCC — even though these provisions were in place under the UCCC; larger credit providers generally had robust systems for verifying that early termination fees did not exceed a reasonable estimate of their losses — [page 349] however, ASIC was concerned that some small credit providers thought their size meant that devoting resources to such verification was not practical; early termination fee structures varied significantly, both between credit providers and between different products offered; and

less than one per cent of instances where an early termination fee had been charged since 1 July 2010 had resulted in a complaint to credit providers. The Report recommended that credit providers take note of the following best practice tips to avoid early termination fees being declared fair or unconscionable: ensure that early termination fees only seek to recover unrecovered establishment costs or losses, which decrease over the life of the loan; maintain discrete cost accounting records for unrecovered establishment costs and independently audit these on a regular basis; review such fees on an individual loan-by-loan basis to ensure that the fee does not exceed a reasonable estimate of the credit provider’s losses; and ensure that termination fees on loans resulting from internal refinancing take into account any reduced establishment costs for the loan. [78.33] Regulation 79A prohibition Regulation 79A of the Regulations prohibits a credit provider charging a fee at the termination of a credit contract with limited exception. The changes were implemented by the National Consumer Credit Protection Amendment Regulations 2011 (No 2) (Cth) and National Consumer Credit Protection Amendment Regulations 2011 (No 3) (Cth). A credit provider cannot charge an exit fee including an early termination for credit contracts entered into after 1 July 2011, where the credit under the contract is secured over residential property. Exceptions The prohibition does not apply to a: break fee; discharge fee; or

fee incurred prior to the termination of a credit contract that is terminated before any credit has been provided under the contract. Regulation 79A defines a break fee as a fee charged by a credit provider on early repayment of an amount provided under a fixed rate loan, being part of the credit provider’s loss that is as a result of the difference in interest rates. The explanatory statement to reg 79A clarified that a credit provider can calculate the break costs using the wholesale interest rates rather than the interest rates offered to debtors at the time of the repayment. This calculation is consistent with the market practices and the guidelines issued by the Financial Ombudsman Service. “Discharge fee” is defined as a credit fee or charge that reimburses the credit provider for the reasonable administrative costs of terminating the credit contract. These costs appear to be the costs incurred by a credit provider around the time of termination. The intention of the regulation appears to be that a credit provider cannot recover costs it incurred at the time of the loan origination as discharge costs (even if these would be recognised as economic costs). Accordingly, a credit provider may not be able to recoup origination costs. [page 350] Senate report In May 2011, the Senate Economic References Committee submitted a report to the Senate titled Competition within the Australian Banking Sector. The committee in its majority report recommended that the Commonwealth Government should not enforce an immediate ban on exit fees because it may lead to higher upfront fees for the debtors. The report expressed a view that the ban would lead to non-bank credit providers charging higher upfront fees leading to a reduction in competition. (A Senate motion to disallow reg 79A was narrowly defeated in June 2011.) Practical impact Historically, some credit providers have sought to charge fees where a loan is repaid in full within a relatively short period (usually

three to five years) after being taken out. Such fees were often based on the costs at loan origination, amortising after the first several years, on the basis that short-term loans were not profitable to the credit provider, having regard to low margins and high fixed origination costs, and a view that there were costs flowing from earlier than expected termination. With the introduction of the prohibition, a credit provider will not be able to recover these costs. [78.35] Prohibited monetary obligations It is unclear whether establishment or early termination fees referred to in s 78(3) and (4), which may become the subject of an application under s 78, could be a prohibited monetary obligation for the purposes of s 23 or s 24. However, on balance, it is likely that those fees are not intended to be caught by ss 23 or 24. The Code does not prohibit the imposition of those fees. Also, it is unlikely that s 23(1)(b) is intended to have the result that, if a court finds that a fee is unconscionable, the fee is then deemed to be an amount which may not be charged consistently with the Code. Moreover, s 23 makes express provision for the consequences where a credit contract imposes a monetary liability on the debtor in respect of an amount of a fee or charge exceeding the amount that can be charged consistently with the Code. Section 23(2) makes the relevant provision of the contract void to the extent that it imposes a prohibited monetary liability, and allows the prohibited amount to be recovered by the debtor. Section 78, however, also expressly provides for the consequences of an unconscionable fee being levied. Section 78 empowers the court to “annul or reduce the fee or charge” and to make ancillary or consequential orders. If an unconscionable fee or charge is covered by s 23(1)(b) and (2), the court’s powers under s 78(1) would essentially be meaningless, because the unconscionable amount of the fee or charge would already have been invalidated under s 23(2), and there would be no scope left for the court to reduce or annul it because it would already be void. It seems that the Code intends s 78 to operate quite separately from s 23. The Code does not prohibit the charging of an establishment or early termination fee and, until a fee is found to be unconscionable, it is a fee which is being charged consistently with the Code. If it had been the intention of the legislature to provide that the imposition of a fee which was later held to be unconscionable constituted

a prohibited monetary obligation, this should have been made clear in the drafting. This view was accepted by Morris P in Director of Consumer Affairs Victoria v City Finance Loans (2006) ASC ¶155-080; [2005] VCAT 1989 in respect of establishment and [page 351] application fees. In relation to fees payable on termination, this position was changed on 1 July 2011 (see [R79A.05]). [78.40] Reopening Note that an annual percentage rate change, or the imposition of an early termination fee or establishment fee cannot be subject to a reopening application under s 76. This is because of s 76(6) which specifically excludes that change, and those fees which may become the subject of an application under s 78, from the operation of s 76. [78.45] Personal property security law Compliance with Code notice requirements for repossession and disposal of goods under ss 102 and 104 will be taken to be compliance with notice obligations under s 128, 130, 131 and 132 of the PPSA. However, a voluntary surrender of goods under s 85 of the Code is not referred to in the PPSA or PPSR. Accordingly, it is not clear whether a debtor’s choice to surrender mortgaged goods to a credit provider constitutes “seizure” of the goods under Pt 4.3 of the PPSA, particularly if the debtor is not in default under the credit contract when the goods are surrendered (see ss 123(1) and 124(1)(b) of the PPSA). If the debtor is in default under the credit contract, the credit provider may be able to seize the goods for PPSA purposes by providing a notice to the debtor under PPSA s 124(2)(a). If the debtor is not in default, PPSA Pt 4 may not apply to the disposal of the goods (s 128(1) of the PPSA). Because Code-regulated goods mortgages will usually relate to goods predominantly used for personal, domestic or household use, the PPSA

(where it applies) will require that the goods be sold (ss 128(2)(a) of the PPSA), consistent with the Code’s s 85 requirement. [78.50] Case Volpes v Permanent Custodians Ltd [2005] NSWSC 827; BC200506082.

Applications by ASIC 79 (1) [Application of section] This section applies if ASIC considers that it is in the public interest to make an application under this Division. 79 (2) [Public interest] ASIC may make an application under this Division and has standing to represent the public interest. 79 (3) [Scope of application] The application: (a) may apply to any one or more credit contracts; and (b) may apply to all or any class of credit contracts entered into by a credit provider during a specified period (for example, all credit contracts entered into during a specified period that are affected by a specified matter for which relief is sought). ________________________________________ [Editorial note: There was no comparable UCCC provision.]

COMMENTARY ON SECTION 79 [79.05] Outline This section (which was inserted by the NCCP Act regime changes) provides that, if it considers it to be in the public interest, ASIC may apply [page 352] to the court in relation to an unjust or unconscionable contract under Div 3 of Pt 4 of the Code.

The application may apply to one or more credit contracts and may apply to all or any class of credit contracts entered into by a credit provider during a specified period. The explanatory memorandum to the National Consumer Credit Protection Bill 2009 (Cth) states (at para 1393) that: It is not intended that an application by ASIC would oust the rights of a debtor, mortgagor or guarantor to bring an action; for example, if ASIC succeeds in obtaining a declaration that certain conduct is unjust, then individual borrowers or guarantors may be able to rely on that finding to seek individual relief according to the facts of their situation.

[79.10] Unfair terms regime applies concurrently Note that s 79 of the Code exists side by side with the unfair contract terms regime in the ASIC Act (see para 7 of the “Overview of the National Consumer Credit Act (NCCP Act) regime”). ASIC may apply to the court under s 12GND of the ASIC Act for a declaration that a particular term or terms of a contract are unfair, and a credit provider may then be injuncted from relying or attempting to rely on that term (s 12GD of the ASIC Act).

Time limit 80 (1) [Application within 2 years] An application (other than an application under section 78) may not be brought under this Division more than 2 years after the relevant credit contract is rescinded or discharged or otherwise comes to an end. 80 (2) [Application for review where “unconscionable’] An application under section 78 may not be brought more than 2 years after the relevant change takes effect or fee or charge is charged under the credit contract or the credit contract is rescinded or discharged or otherwise comes to an end. ________________________________________ [Editorial note: UCCC s 73 provided as follows: Time limit 73 (1) [Application within 2 years] An application (other than an application under section

72) may not be brought under this Division more than 2 years after the relevant credit contract is rescinded or discharged or otherwise comes to an end. 73 (2) [Application for review where “unconscionable”] An application under section 72 may not be brought more than 2 years after the relevant change takes effect or fee or charge is charged under the credit contract or the credit contract is rescinded or discharged or otherwise comes to an end.]

COMMENTARY ON SECTION 80 [80.05] Outline Applications relating to hardship, unjustness and unconscionability must be made: generally, within two years after the discharge of the relevant contract; or for an application regarding unconscionable fees, charges or interest rate increases, within two years after the increased annual percentage rate is [page 353] applied or the fee or charge is charged, or within two years after the contract is rescinded, terminated or otherwise comes to an end, whichever happens first. These time units are not likely to restrict changes on the grounds of hardship, since those changes are only relevant while the contract is on foot, and applications for changes on hardship grounds will not be made after a contract has been discharged. Prior to the Consumer Credit (Queensland) Amendment Act 1998 (Qld), s 73 of the UCCC (s 80 of the Code) referred to the date on which the credit provider had written off the debt. This was considered ambiguous in the light of industry practice where internal debt write-offs may be reversed in certain circumstances. Section 80 now refers to the contract being rescinded, discharged or otherwise coming to an end. [80.10] Case Perpetual Trustees Australia v Richards (unreported judgment).

Joinder of parties 81 (1) [Third party orders] If it appears to the court that a person other than a credit provider or a mortgagee (a third party) has shared in the profits of, or has a beneficial interest prospectively or otherwise in, a credit contract or mortgage that the court holds to be unjust, the court may make an order about the third party that the court considers appropriate. 81 (2) [Joinder of third party] However, before making an order about the third party, the court must: (a) join the third party as a party to the proceedings; and (b) give the third party an opportunity to appear and be heard in the proceedings. ________________________________________ [Editorial note: UCCC s 74 — apart from numbering the section is unchanged.]

COMMENTARY ON SECTION 81 [81.05] Outline Section 81 gives a court the power to join third parties to proceedings. However, a third party can only be joined if they are someone other than a credit provider or mortgagee. In addition, they must have shared in the profit of, or have had a beneficial interest in, the credit contract or mortgage the court holds to be unjust. Section 81 covers only findings of injustice under s 76 and does not extend to findings of unconscionability under s 78 (ie, the third party cannot be heard in the proceedings on the question of any s 78 unconscionability). The court must already have found the credit contract or mortgage to be unjust before it may exercise its powers under s 81. However, courts have powers outside the Code to join new parties to proceedings. Section 81 may be of particular relevance to securitisation programs involving Code-regulated credit. [81.10] Mortgagee Section 81(1) appears to contemplate that a person other than the credit provider may be a mortgagee under a mortgage to which the

Code applies. In the context of consumer credit it would be unusual for the mortgagee to be anyone other than the credit provider.

[page 355]

Part 5 — Ending and enforcing credit contracts, mortgages and guarantees DIVISION 1 — ENDING OF CREDIT CONTRACT BY DEBTOR ETC [Div 1 heading subst Act 130 of 2012 s 3 and Sch 2 item 19, eff 18 Sep 2012]

Subdivision A — Paying out contract etc [Subdiv A heading insrt Act 130 of 2012 s 3 and Sch 2 item 19, eff 18 Sep 2012]

Debtor’s or guarantor’s right to pay out contract 82 (1) [Pay out at any time] A debtor or guarantor is entitled to pay out the credit contract at any time. 82 (2) [Amount due on pay out] The amount required to pay out a credit contract (other than a continuing credit contract) is the total of the following amounts: (a) the amount of credit; (b) the interest charges and all other fees and charges payable by the debtor to the credit provider up to the date of termination; (c) reasonable enforcement expenses; (d) early termination charges, if provided for in the contract; less any payments made under the contract and any rebate of premium under section 148. ________________________________________

[Editorial note: UCCC s 75 provided as follows: Debtor’s or guarantor’s right to pay out contract 75 (1) [Pay out at any time] A debtor or guarantor is entitled to pay out the credit contract at any time. 75 (2) [Amount due on pay out] The amount required to pay out a credit contract (other than a continuing credit contract) is the total of the following amounts— (a) the amount of credit; (b) the interest charges and all other fees and charges payable by the debtor to the credit provider up to the date of termination; (c) reasonable enforcement expenses; (d) early termination charges, if provided for in the contract; less any payments made under the contract and any rebate of premium under section 138.]

COMMENTARY ON SECTION 82 [82.05] Outline A debtor or guarantor may pay out a credit contract at any time. Section 82(2) sets out the amount to pay out a credit contract, other than a continuing credit contract (see [82.30]). A credit contract may not prohibit the early payout of a contract (s 26(5)) but it may prevent early repayment of part of the amount of credit (s 26(4)). The amount required for the payout of a credit contract (other than a continuing credit contract) must be calculated in the manner set out in s 82(2). The right to pay out the credit contract does not prevent [page 356] the credit provider from imposing early termination charges if these are provided for in the contract (see s 82(2)(d)) and are not prohibited by reg 79A (see [R79A.05]). The debtor or guarantor may, however, apply to the court for a review of a fee or charge payable on early termination of a credit contract or a fee or charge for a prepayment of an amount under a credit contract on the grounds that the fee or charge is unconscionable (ie, it exceeds a reasonable estimate of the credit provider’s loss arising from the early termination or prepayment, including the credit provider’s average

reasonable administrative costs in respect of the termination or prepayment) (see s 78 and [78.31]). [82.10] Amount required to pay out the credit contract Section 82(2) sets out the amount required to pay out a credit contract (other than a continuing credit contract) (see s 204 principal definitions for the meaning of a continuing credit contract). This amount is the total of: the amount of credit provided; the interest charges and all fees and charges payable by the debtor to the credit provider up to the date of termination; reasonable enforcement expenses; and early termination charges, if provided for in the contract, less any payments made under the credit contract, and a proportionate rebate for consumer credit insurance premiums paid in respect of the obligations of the debtor under the contract for its expired term (see s 204 definition of “consumer credit insurance”, and s 148 and reg 94 for the calculation of the proportionate rebate of the premium). [82.15] Method of calculation Taken literally, s 82 could be interpreted to mean that the calculation of the payout figure must actually be made including all amounts charged to the customer and paid by the customer over the life of the loan. For example, all interest debited to the account and subsequently paid by the debtor would have to be actually included in the calculation. The issue is whether there must be a calculation which actually includes all matching debits and credits, or whether a calculation made simply using outstanding debits will comply with the Code. A common approach is to base the calculation on outstanding debits (as opposed to all debits and credits, the majority of which would negate each other) at the time of the calculation, as affected by amounts to become payable in future and future entitlements of the debtor. The resulting figure

will be exactly the same — because the sum of all matching debits and credits will be zero. There would therefore appear to be little point in requiring the actual calculation to show all debits and credits to the account over the life of the loan (which, in the case of a 30-year housing loan will amount to a large number of transactions) when the same figure can be obtained by a much simpler calculation. Section 82(2) is concerned only with the amount required to pay out the credit contract and, provided the correct amount is obtained, there would appear to be some degree of latitude (at least to the extent of ignoring matching debits and credits) in the method of calculation. [page 357] [82.20] Net or gross amount to be paid There is a question as to whether or not s 82(2) permits the payout amount to be made in gross (with the debtor paying the amount outstanding to the credit provider, and the credit provider, at the same time, paying a separate rebate cheque for the consumer credit insurance premium to the debtor), or whether it must be net (with the debtor only paying a cheque for the net amount, and the credit provider not paying a cheque at all). The language of s 82 suggests that only the net amount must be paid — however, the language of s 148 (which refers to the rebate amount being “paid” or “credited” to the debtor) suggests that gross amounts may be paid. In the circumstances, the safest approach would be to have the debtor pay the net amount and then for the credit provider to ask the insurer to pay it an amount equivalent to the rebate. The intention of the Code (as evidenced by ss 82 and 148) appears to be to require the credit provider to be responsible for ensuring the debtor receives the benefit of any insurance rebate, and for the creditor provider to be responsible for recovering the amount of the rebate from the insurer. [82.25] Meaning of reasonable enforcement expenses Reasonable enforcement expenses are those internal and external enforcement expenses which are reasonably incurred by the credit provider (see s 107). “Enforcement expenses” are defined in s 204 in relation to a mortgage as

including expenses incurred by the mortgagee in preserving or maintaining property subject to the mortgage (including insurance, rates and taxes payable for the property) but only if the expenses are incurred after a breach occurs and are authorised by the mortgage. [82.30] Continuing credit contract Section 82(2) does not apply to continuing credit contracts. The payout figure for a continuing credit contract would be determined by calculating the amount owing under the terms of the contract. The credit provider must also pay the debtor any applicable insurance rebate (s 148(2)) but, as s 82 does not apply, it would seem that any insurance rebate need not be deducted from the payout figure (see s 204 for the meaning of a continuing credit contract). [82.35] “At any time” Credit providers are entitled to require notice to be given before a credit contract is paid out, and such a notice requirement should not infringe the requirement in s 82(1) that a debtor or guarantor be entitled to pay out the credit contact at any time.

Statement of pay out figure 83 (1) [Written statement on request] A credit provider must, at the written request of a debtor or guarantor, provide a written statement of the amount required to pay out a credit contract (other than a continuing credit contract) as at such date as the debtor or guarantor specifies. If so requested, the credit provider must also provide details of the items which make up that amount. [subs (1) am Act 130 of 2012 s 3 and Sch 1 item 40, eff 1 Mar 2013]

83 (2) [Contents of statement] The statement must also contain a statement to the effect that the amount required to pay out the credit contract may change according to the date on which it is paid. [page 358] 83 (3) [7 days to comply] A credit provider must give a statement,

complying with this section, within 7 days after the day the request is given to the credit provider. Criminal penalty: 50 penalty units. [subs (3) am Act 130 of 2012 s 3 and Sch 1 item 41, eff 1 Mar 2013]

83 (4) [Joint debtors or guarantors] In the case of joint debtors or guarantors, the statement under this section need only be given to a debtor or guarantor who requests the statement and not, despite section 194, to each joint debtor or guarantor. 83 (5) Subsection (3) is an offence of strict liability. Note: For strict liability, see section 6.1 of the Criminal Code. [subs (5) am Act 130 of 2012 s 3 and Sch 1 item 42, eff 1 Mar 2013]

________________________________________ [Editorial note: UCCC s 76 provided as follows: Statement of pay out figure 76 (1) [Written statement upon request] A credit provider must, at the written request of a debtor or guarantor, provide a written statement of the amount required to pay out a credit contract (other than a continuing credit contract) as at such date as the debtor or guarantor specifies. If so requested, the credit provider must also provide details of the items which make up that amount. 76 (2) [Contents of statement] The statement must also contain a statement to the effect that the amount required to pay out the credit contract may change according to the date on which it is paid. 76 (3) [7 days to comply] A credit provider must give a statement, complying with this section, within 7 days after the request is given to the credit provider. 76 (4) [Joint debtors or guarantors] In the case of joint debtors or guarantors, the statement under this section need only be given to a debtor or guarantor who requests the statement and not, despite section 171, to each joint debtor or guarantor. Maximum penalty — 50 penalty units.]

COMMENTARY ON SECTION 83 [83.05] Outline The debtor or guarantor may write to the credit provider at any time and ask for a written statement of the amount required to pay out a

credit contract (other than a continuing credit contract) as at such date as the debtor or guarantor specifies. In this written request, they may also ask for details of the items which make up the payout amount. The credit provider must then provide a written statement of the payout amount (including details of the items which make up the payout amount if so requested) within seven days after receiving the written request. The payout statement should state the date as at which the information contained in the statement is disclosed, so as to obtain the benefit of s 180(1). [83.10] Method of calculation The s 83 estimated payout figure should be calculated using the same methodology as used for calculating the s 82 actual payment figure, even though the two figures, calculated in respect of the same date, may be different. The figures may be different because the s 83 figure is only an estimate, and must be made on the basis of assumptions about, for example, fees and charges (including the amount of any break costs) that will actually be payable, the timing and amount of repayments up to the actual payout date, and the effects of any interest offset arrangements. [83.15] Assumptions In some cases it is impossible for a credit provider to give a debtor the information required by s 83 without making a number of assumptions, some of which are not expressly permitted by the Code. The only [page 359] assumptions which the Code expressly permits to be made for the purposes of calculating a payout figure under s 83 are that: the annual percentage rate will not change (s 180(2)); the debtor will make repayments on time (s 180(2)(c) and (3)); there will be no change to the fees and charges and no new fees and charges will be introduced (s 180(4)(a));

the debtor will pay fees and charges on time (s 180(4)(b)); repayments or payments of fees and charges will be made on the due date even if that date is not a business day (reg 108(1)); and there is no loan set-off arrangement in place (reg 109(1)). The Code also allows certain tolerances in the calculation of the payout figure — the payout figure will be taken to comply with the Code if it is within the following tolerances: Interest charges, repayment amounts and government fees and charges may be overstated (reg 106(4)). Disclosures are taken to be correct if they are correct as at a date stated in the document in which the disclosure is made (s 180(1) (b)). Assumptions that are not expressly permitted by the Code, and that may need to be made by credit providers when calculating payout figures, include that: the loan is in order at the time the calculation is carried out; all repayments will be made on a monthly basis; all interest charges are debited on the last day of the month; accounts with interest only repayments have the exact amount of monthly interest credited to them each month from the debtor’s designated account (although this is probably implicit in the assumptions permitted by s 180(2), (3) and (4) and reg 108); and only the regular periodical fees and charges will apply, and that there will be no extraordinary fees (such as a dishonour fee), as it will be impossible to predict what fees and charges will apply between the date the payout figure is requested and the payout date itself. It would seem, on balance, that a credit provider may, for the purposes of calculating a payout figure under s 83, make assumptions in addition to those expressly permitted by the Code because:

the s 83 payout figure may not be able to be calculated without making these assumptions; and there is nothing in the Code that expressly prohibits the making of these assumptions. If the assumptions are reasonable in all the circumstances, figures disclosed in the statement which have been calculated on the basis of those assumptions should comply with the Code, because there would appear to be no other way of complying with s 83. It would also assist if the assumptions were referred to in the s 83 statement. [83.20] Requirement to give details The Code does not define what is meant by “details of the items which make up that amount”. A reasonable view would be to assume this means a breakdown of the amount into principal, interest, and fees and charges. However, it is open to a court to interpret “details” so as to require that the details reflect the items in the paragraphs of s 82(2). [page 360] [83.25] Statement that amount may change The payout statement must contain a statement to the effect that the amount required to pay out the credit contract may change according to the date on which it is paid. [83.30] Joint debtors Section 83(4) provides that, where a joint debtor or guarantor requests a statement of the payout figure in respect of a credit contract, it is sufficient to simply provide that statement to the person who has requested it (as opposed to all joint debtors or guarantors). [83.35] Penalty If the credit provider fails to provide a payout statement within the time required, a maximum criminal penalty of 50 penalty units may be imposed by the court. Under the NCCP Act regime changes, s 83(1) and (3) are made offences of strict liability by the insertion of s 83(5). (See paras 17 and 18 of the “Overview of the National Credit Code” for commentary on penalty units and strict liability offences.) However, the

Enhancements Act amended s 83 to remove one of two previous overlapping criminal offences in s 83; the offence in s 83(1) was removed. Also, the credit provider risks the possibility that the debtor or guarantor may apply to court to determine the amount payable in accordance with s 84 (see [84.05]–[84.20]). Alternatively, a debtor may request compensation in accordance with s 124 of the Code for breach of a non-key requirement. In Berckelman v DaimlerChrysler Services Aust Pty Ltd [2004] NSWCTTT 715, the Consumer, Trader and Tenancy Tribunal of New South Wales awarded as compensation the amount of interest charged by the credit provider since the date of the failure to provide a payout figure under the equivalent of s 124 of the Code. [83.40] Continuing credit contracts Section 83 does not apply to continuing credit contracts.

Court may determine pay out figure if credit provider does not provide a pay out figure 84 (1) [Determination by court] If the credit provider does not provide a statement of the amount required to pay out a credit contract (other than a continuing credit contract) in accordance with this Part after a request is duly made by a debtor or guarantor, the court may, on the application of the debtor or guarantor, determine the amount payable on the date of determination, the amount by which it increases daily and the period for which the determination is applicable. 84 (2) [Discharge of contract] The credit contract is discharged if an amount calculated in accordance with the determination is tendered to the credit provider within the applicable period. ________________________________________ [Editorial note: UCCC s 77 — apart from numbering the section is unchanged.]

COMMENTARY ON SECTION 84

[84.05] Outline If a credit provider fails to provide a debtor or guarantor with a statement of the amount required to pay out a credit contract (other than a continuing credit contract), the debtor or guarantor may seek a determination of the amount payable and the applicable daily rate. [page 361] [84.10] Relationship with s 83 A credit provider who fails to provide a debtor or guarantor with a written statement of the payout amount within seven days of the date of request (as required by s 83) may incur the penalty of 50 penalty units referred to in s 83 and also risks the possibility that the debtor or guarantor may apply to court to determine the amount payable in accordance with s 84. (See para 17 of the “Overview of the National Credit Code” for commentary on penalty units.) The credit contract will be discharged if the amount determined by the court is paid to the credit provider (s 84(2)). [84.15] “In accordance with this Part” Section 83 imposes an obligation on the credit provider to include in the written statement: the amount required to pay out the credit contract (s 83(1)); (if requested by the debtor or guarantor) details of the items which make up that amount (s 83(1)); and a statement to the effect that the amount required to pay out the credit contract may change according to the date on which it is paid (s 83(2)). The statement must be provided within seven days of the date of request (s 83(3)). It appears that a debtor or guarantor may apply to court under s 84 if the credit provider fails to comply with any of these requirements. Section 84 permits a court application if a credit provider has failed to provide a written statement of the amount required to pay out a credit contract “… in accordance with this Part”. Therefore, a debtor or guarantor has the right to apply to court for a determination if the statement that the amount required to pay out the credit contract may change (as required by s 83(2)) is

inadvertently omitted from the written statement, or if the written statement, although correct, is provided late; although in practice it would seem that this would be unlikely to happen as long as the debtor or guarantor has actually been given the correct payout figure. [84.20] Continuing credit contracts Section 84 does not apply to continuing credit contracts.

Surrender of mortgaged goods and goods subject to sale by instalments 85 (1) General principle If: (a) a credit contract takes the form of a sale of goods by instalments and title in the goods does not pass until all instalments are paid; or (b) the credit provider has a mortgage over goods of the debtor or guarantor; the debtor or mortgagor may give written notice of an intention to return the goods to the credit provider or, if the goods are in the credit provider’s possession, require the credit provider in writing to sell the goods. 85 (2) Delivery of goods A debtor or mortgagor may return the goods to the credit provider at the credit provider’s place of business during ordinary business hours within 7 days of the date of the notice or within such other period or at such other time or place as may be agreed with the credit provider. 85 (3) Notice of value The credit provider must, within 14 days after a debtor or mortgagor returns the goods or requires the credit provider to sell the goods, give the debtor or mortgagor a written notice containing the estimated value of the goods and any other information required by the regulations. [page 362]

85 (4) Return or sale of goods If the debtor or mortgagor, within 21 days after the notice under subsection (3) is given, requests by written notice return of the goods to the debtor or mortgagor or withdraws the requirement to sell the goods (and the debtor is not in default under the terms of the credit contract), the credit provider must return to the debtor or mortgagor any goods returned by the debtor or mortgagor and must not comply with the requirement. 85 (5) Nominated purchaser The debtor or mortgagor may, within 21 days after the notice under subsection (3) is given, nominate in writing a person who is prepared to purchase the goods from the credit provider at the estimated value or at any greater amount for which the credit provider has obtained a written offer to buy the goods. The credit provider must offer to sell the goods to that person for the estimated value or, if there is a written offer to buy the goods for a greater amount, that amount. 85 (6) Sale of goods by credit provider The credit provider must, if the goods are not required to be returned under subsection (4), as soon as reasonably practicable (or at such other time as the credit provider and the debtor or mortgagor agree) sell the goods in accordance with subsection (5) or, if no buyer is nominated or the nominated buyer under that subsection does not buy the goods, for the best price reasonably obtainable. 85 (7) Amount to be credited to debtor or mortgagor The credit provider must credit the debtor or mortgagor with a payment equivalent to the proceeds of the sale less any amounts which the credit provider is entitled to deduct from those proceeds. On the sale of the goods, the amount required to pay out the contract becomes due. 85 (8) Deductions from proceeds A credit provider that sells mortgaged goods under this section is entitled to deduct from the proceeds of that sale only the following amounts: (a) the amount currently secured by the mortgage in relation to the credit contract or guarantee, not being more than the amount required to discharge the contract or guarantee; (b) the amount payable to discharge any prior mortgage to which the goods were subject;

(c) the amounts payable in successive discharge of any subsequent mortgages to which the goods were subject and of which the credit provider had notice; (d) the credit provider’s reasonable enforcement expenses; (e) the expenses reasonably incurred by the credit provider in connection with the possession and sale of the mortgaged goods. 85 (9) Notice of amount credited and other matters The credit provider must give the debtor or mortgagor a written notice stating the gross amount realised on the sale, the net proceeds of the sale, the amount credited to the debtor or mortgagor and the amount required to pay out the credit contract or the amount due under the guarantee. 85 (10) Offence — credit provider A credit provider that contravenes a requirement of this section commits an offence. Criminal penalty: 50 penalty units. 85 (11) Strict liability offence Subsection (10) is an offence of strict liability. Note: For strict liability, see section 6.1 of the Criminal Code.

________________________________________ [Editorial note: UCCC s 78 provided as follows: Surrender of mortgaged goods and goods subject to sale by instalments 78 (1) General principle If— (a) a credit contract takes the form of a sale of goods by instalments and title in the goods does not pass until all instalments are paid; or (b) the credit provider has a mortgage over goods of the debtor or guarantor; the debtor or mortgagor may give written notice of an intention to return the goods to the credit provider or, if the goods are in the credit provider’s possession, require the credit provider in writing to sell the goods.

[page 363]

78 (2) Delivery of goods A debtor or mortgagor may return the goods to the credit provider at the credit provider’s place of business during ordinary business hours within 7 days of the date of the notice or within such other period or at such other time or place as may be agreed with the credit provider. 78 (3) Notice of value The credit provider must, within 14 days after a debtor or mortgagor returns the goods or requires the credit provider to sell the goods, give the debtor or mortgagor a written notice containing the estimated value of the goods and any other information required by the regulations. 78 (4) Return or sale of goods If the debtor or mortgagor, within 21 days after the notice under subsection (3) is given, requests by written notice return of the goods to the debtor or mortgagor or withdraws the requirement to sell the goods (and the debtor is not in default under the terms of the credit contract), the credit provider must return to the debtor or mortgagor any goods returned by the debtor or mortgagor and must not comply with the requirement. 78 (5) Nominated purchaser The debtor or mortgagor may, within 21 days after the notice under subsection (3) is given, nominate in writing a person who is prepared to purchase the goods from the credit provider at the estimated value or at any greater amount for which the credit provider has obtained a written offer to buy the goods. The credit provider must offer to sell the goods to that person for the estimated value or, if there is a written offer to buy the goods for a greater amount, that amount. 78 (6) Sale of goods by credit provider The credit provider must, if the goods are not required to be returned under subsection (4), as soon as reasonably practicable (or at such other time as the credit provider and the debtor or mortgagor agree) sell the goods in accordance with subsection (5) or, if no buyer is nominated or the nominated buyer under that subsection does not buy the goods, for the best price reasonably obtainable. 78 (7) Amount to be credited to debtor or mortgagor The credit provider must credit the debtor or mortgagor with a payment equivalent to the proceeds of the sale less any amounts which the credit provider is entitled to deduct from those proceeds. On the sale of the goods, the amount required to pay out the contract becomes due. 78 (8) Deductions from proceeds A credit provider that sells mortgaged goods under this section is entitled to deduct from the proceeds of that sale only the following amounts— (a) the amount currently secured by the mortgage in relation to the credit contract or guarantee, not being more than the amount required to discharge the contract or guarantee; (b) the amount payable to discharge any prior mortgage to which the goods were subject; (c) the amounts payable in successive discharge of any subsequent mortgages to which the goods were subject and of which the credit provider had notice; (d) the credit provider’s reasonable enforcement expenses; (e) the expenses reasonably incurred by the credit provider in connection with the possession and sale of the mortgaged goods. 78 (9) Notice of amount credited and other matters The credit provider must give the debtor or mortgagor a written notice stating the gross amount realised on the sale, the net proceeds of the sale, the amount credited to the debtor or mortgagor and the amount required to pay out the credit contract or the amount due under the guarantee.

78 (10) Offence — credit provider A credit provider that contravenes a requirement of this section is guilty of an offence. Maximum penalty (subsection (10)) — 50 penalty units.]

COMMENTARY ON SECTION 85 [85.05] Outline A debtor or mortgagor may require a credit provider to sell mortgaged goods, or to sell goods to be purchased by instalments by the debtor or mortgagor. Section 85 sets out the procedure to be followed if a debtor or mortgagor requires the credit provider to sell the goods. [85.10] Sale The goods are to be returned to the credit provider within seven days of the date of the debtor or mortgagor’s initial notice to the credit provider requiring the sale of the goods. Within a further 14 days, the credit provider must notify the debtor or mortgagor of the estimated value of the goods. Within the next 21 days, the debtor or mortgagor may require the return of the goods or [page 364] withdraw the request to sell the goods. Alternatively, within that 21-day period, the debtor or mortgagor may nominate a purchaser who is prepared to purchase the goods at the value estimated by the credit provider or any greater amount. The credit provider must sell the goods for the best price reasonably obtainable if they are not required to be returned to the debtor or mortgagor, or if no buyer is nominated. The sale proceeds, less permitted deductions, must be credited to the debtor or mortgagor. Permitted deductions from the sale proceeds are set out in s 85(8). [85.15] Written notices Regulation 84 requires that the written notice under s 85(3) must contain the estimated value of the goods and must also include the information set out in Form 10 of the Regulations. Form 10 sets out the rights and obligations of the debtor or mortgagor and the options available. In providing an estimate, it is not sufficient that the credit provider gives an estimated value of like goods. The estimate must relate to the value of the

actual goods in question. The reason for this is that the estimate given by the credit provider may impact on the debtor’s or mortgagor’s decision of whether or not to exercise their right under s 85(5). In the case of McGregor v BMW Finance Australia Ltd [2003] NSWCTTT 380, the New South Wales Consumer, Trader and Tenancy Tribunal interpreted the equivalent s 78(3) of the UCCC as a “requirement that the credit provider give a genuine estimate of the actual vehicle that the debtor or mortgagor returned to it” (at [29]). After the credit provider has sold goods, a further notice must be given under s 85(9) setting out the gross and net sale proceeds, the amount credited to the debtor or mortgagor and the net amount due under the credit contract. [85.20] Print type The print type of all notices served under s 85 must be not less than 10 point (s 184(1)(b) and reg 110). [85.25] Notice and notice periods Notices required by s 85 must be served in accordance with s 195 and will be taken to be given at times calculated in accordance with s 196. See s 218 to ascertain how to calculate the commencement and end of the periods specified in s 85. [85.30] “As soon as reasonably practicable” and “for the best price reasonably obtainable” These terms are not defined in the Code. Section 85(6) requires that the credit provider sell the goods as soon as reasonably practicable only if the debtor or mortgagor has nominated a purchaser in accordance with s 85(5). Otherwise, the credit provider is required to sell the goods for the best price reasonably obtainable. However, the effect of s 86(1) is that a court may order a credit provider to credit the debtor with an amount exceeding the net sale proceeds if the court is not satisfied that the credit provider sold the goods as soon as reasonably practicable and for the best price reasonably obtainable. Therefore, despite the express words of s 85(6), a credit provider should attempt to sell the goods both as soon as reasonably practicable and for the best price reasonably obtainable. [page 365]

The obligation imposed on a mortgagee by s 85(6), to sell goods for the best price reasonably obtainable and as soon as reasonably practicable, is similar to the obligation previously imposed on a mortgagee by s 114 of the Credit Act to exercise the power of sale: as soon after it became entitled to exercise it as is reasonable and practicable in the circumstances; and so as to receive the best price reasonably obtainable. It is not clear whether these obligations displace the obligations generally imposed on a mortgagee exercising a power of sale. In Australia, although a mortgagee must sell in good faith (ANZ Banking Group Ltd v Bangadilly Pastoral Co Pty Ltd (1978) 139 CLR 195; 19 ALR 519; 52 ALJR 529; BC7800044), it is not clear whether a mortgagee is also required to take reasonable care to obtain a proper price or the true market value for the mortgaged property (Cuckmere Brick Co Ltd v Mutual Finance Co Ltd [1971] Ch 949; [1971] 2 All ER 633; [1971] 2 WLR 1207). This debate is now largely irrelevant in the corporate context (see s 420A of the Corporations Act, which imposes an obligation on a mortgagee in possession to sell a mortgaged property for an amount not less than the market value of the property, or if the property does not have a market value, the best price that is reasonably obtainable). See also s 131 of the PPSA which requires a mortgagee to sell the mortgaged property for the market value, or otherwise for the best price reasonably obtainable at the time of disposal. A credit provider should sell repossessed goods at their retail secondhand value to achieve the best price obtainable (Harrison v Mercantile Credits Ltd (1987) ASC ¶55-537). However, in the case of motor vehicles where licensing provisions may impede a credit provider from obtaining the retail secondhand value, a credit provider is not expected to sell as a licensed motorcar trader (Gray v Custom Credit Ltd (1989) ASC ¶55-947), but is expected to take the next best course of action to ensure that the best price reasonably obtainable is obtained (Harrison v Mercantile Credits Ltd, above). It is not sufficient for a credit provider who has repossessed a motor vehicle to expose it for sale for two to three weeks in a storage yard filled with vehicles stored for a like purpose (McWha v Nissan Finance Corp Ltd

(1995) ASC 56-325 and Custom Credit Corporation Ltd v Van Delft [1965] WAR 237). The rule that a mortgagee could sell at any time of his or her choice (Pendlebury v Colonial Mutual Life Assurance Society Ltd (1912) 13 CLR 676; 18 ALR 124; BC1200066), has been displaced by the obligation to sell as soon as reasonably practicable. Therefore, a mortgagee may not delay a sale in order to receive a better price. In Gray v Custom Credit Ltd (1989) ASC ¶55-947, a claim that a motor vehicle had been sold too quickly was rejected. The mortgagee’s auctioneers sold at a particular auction because, if the vehicle had not been sold at that auction, it would have been necessary to sell the vehicle either at Christmas (which was not a good time to sell) or in January when the vehicle would have been one year older. There is no obligation imposed on a credit provider to carry out work that will substantially improve the sale price before any sale (Gray v Custom Credit Ltd (1989) ASC ¶55-947). However, if the work required is of only a minimal cost when compared with the expected and foreseeable increased sale price, a mortgagee may not be able to establish that he or she has achieved the best price reasonably obtainable if he or she fails to undertake that work (Wilson v AGC Ltd (No 2) (1987) ASC ¶55-606 and Henry & Henry v AGC Ltd [1985] WAR 137). [page 366] [85.35] Acceleration clause Section 85(7) contains an exception to the requirement that the amount payable under a credit contract cannot be accelerated without the issue of a default notice. The amount required to pay out the credit contract or the amount due under the guarantee becomes due when goods are sold. The original s 78(7) of the UCCC stated that the “total amount payable under the contract” became due on the sale of such goods by the credit provider. According to the explanatory notes to the Consumer Credit (Queensland) Amendment Act 1998 (Qld): The expression [total amount payable under the contract] is considered to be ambiguous as,

literally, it can mean either the total amount payable under the contract disregarding any payments made or, alternatively, the total amount remaining payable at the relevant time.

That subsection was changed by the Consumer Credit (Queensland) Amendment Act to refer more simply to the “amount required to pay out the contract”. This wording has carried through to s 85 of the Code. [85.40] Enforcement expenses The amounts specified in s 85(8)(a)–(e) may be deducted from sale proceeds. Section 85(8)(d) refers to the credit provider’s reasonable enforcement expenses. That term is defined in s 204 to include preservation and maintenance expenses incurred after a breach occurs and which are authorised by the mortgage. Therefore, mortgages may specify that the return of the goods to the credit provider in accordance with s 85 is a breach of the mortgage so that any further expenses incurred by the credit provider can be recovered from the debtor or mortgagor. Otherwise, expenses incurred by the credit provider may not be enforcement expenses and therefore may not be deductible from sale of proceeds. Section 78(8)(e) of the UCCC provided that the expenses reasonably incurred by the credit provider in connection with the possession and sale of the mortgaged goods may be deducted from the sale proceeds. Prior to this, there was some concern that, where the goods had been voluntarily delivered up in a situation in which the debtor was not in default, the other provisions dealing with credit provider costs (ie, para (d) dealing with reasonable enforcement expenses) would not apply. Section 78(9) of the UCCC was reworded by the Consumer Credit (Queensland) Amendment Act 1998 (Qld) to encompass goods mortgaged by a guarantor as well as by a debtor. [85.45] Penalties A failure to comply with s 85 carries a criminal penalty of 50 penalty units. Under the NCCP Act regime changes, failure to comply with s 85 was made an offence of strict liability by the insertion of s 85(11). (See paras 17 and 18 of the “Overview of the National Credit Code” for commentary on penalty units and strict liability offences.)

Compensation to debtor or mortgagor

86 (1) [On sale of goods] The court, on application by the debtor or mortgagor, may order a credit provider to credit the debtor or mortgagor with a payment, fixed by the court, exceeding the [page 367] net proceeds of sale if it is not satisfied that the credit provider sold the goods as soon as reasonably practicable (or at such other time as the credit provider and debtor or mortgagor agreed) for the best price reasonably obtainable. 86 (2) [Where prior mortgage] On application by the debtor or mortgagor, the mortgagee under any prior mortgage to which the goods are subject or the mortgagee under any subsequent mortgage of which the credit provider has notice, the court, if not satisfied that the credit provider complied with section 85, may make an order requiring the credit provider to compensate the debtor or mortgagor or the relevant mortgagee for any loss suffered as a result. 86 (3) [Onus of proving compliance] The onus of proving that section 85 was complied with is on the credit provider. ________________________________________ [Editorial note: UCCC s 79 provided as follows: Compensation to debtor or mortgagor 79 (1) [On sale of goods] The Court, on application by the debtor or mortgagor, may order a credit provider to credit the debtor or mortgagor with a payment, fixed by the Court, exceeding the net proceeds of sale if it is not satisfied that the credit provider sold the goods as soon as reasonably practicable (or at such other time as the credit provider and debtor or mortgagor agreed) for the best price reasonably obtainable. 79 (2) [Where prior mortgage] On application by the debtor or mortgagor, the mortgagee under any prior mortgage to which the goods are subject or the mortgagee under any subsequent mortgage of which the credit provider has notice, the Court, if not satisfied that the credit provider complied with section 78, may make an order requiring the credit provider to compensate the debtor or mortgagor or the relevant mortgagee for any loss suffered as a result. 79 (3) [Onus of proving compliance] The onus of proving that section 78 was complied with is on the credit provider.]

COMMENTARY ON SECTION 86

[86.05] Outline Section 86 allows the court to order that the debtor or mortgagor be credited with an amount which exceeds the net sale proceeds if the court is not satisfied that the credit provider sold the goods as soon as reasonably practicable for the best price reasonably obtainable. Alternatively, the court might order that the credit provider pay compensation to a debtor or guarantor or to any prior mortgagee, or any subsequent mortgagee of which the credit provider had notice. [86.10] Manner of sale The Code does not provide for any specific manner of sale. Compare s 86 with s 106 (see [106.10]). [86.15] Onus of proof The onus of proving that the credit provider exercised the power of sale in accordance with s 85 lies on the credit provider. A credit provider should therefore ensure that it has sufficient evidence to discharge this onus.

Subdivision B — Ending of reverse mortgage by credit provider receiving value of reverse mortgaged property [Subdiv B insrt Act 130 of 2012 s 3 and Sch 2 item 20, eff 18 Sep 2012]

Application of this Subdivision 86A (1) This Subdivision applies in relation to a credit contract for a reverse mortgage and a mortgage securing the debtor’s obligations under the contract if: [page 368] (a) the debtor’s accrued liability (whether or not due and payable) under the contract is more than the amount (the adjusted market value) worked out under subsection (2) for the reverse mortgaged property; and (b) the credit provider receives an amount at least equal to the adjusted

market value for the reverse mortgaged property either: (i)

as a payment accepted from the debtor under the credit contract; or

(ii) as proceeds of the sale by the credit provider of the reverse mortgaged property. 86A (2) The adjusted market value for the reverse mortgaged property is the amount worked out by: (a) working out the market value of the property in accordance with the regulations (if any); and (b) adjusting that value in accordance with the regulations (if any). Regulations for the purposes of paragraph (b) may prescribe different adjustments to be made in different circumstances. ________________________________________ [Editorial note: There was no comparable UCCC provision.]

COMMENTARY ON SECTION 86A [86A.05] Outline The Enhancements Act introduced Subdiv B into Pt 5, Div 1, which relates to a debtor’s liability at the end of a reverse mortgage (whether by sale of the mortgaged property or other payment by the debtor). [86A.10] Explanatory Memorandum The Explanatory Memorandum to the Enhancements Act explains (at paras 3.79–3.83): 3.79 The Subdivision introduces a statutory ‘no negative equity’ guarantee, so that the debtor cannot be required, subject to specific exceptions, to pay more than the market value of any property that is mortgaged to the credit provider. 3.80 In summary, the Subdivision introduces requirements so that where the credit provider receives an amount equal to the adjusted market value of the property that is secured under the reverse mortgage: the effect of such a payment will be to discharge the debtor’s

liability to the credit provider; the credit provider must not demand or accept payments in excess of the adjusted market value, and must refund any such payments; and exceptions to these restrictions are introduced (for example, where the debtor deliberately damaged the secured property). 3.81 Where a credit provider receives an amount at least equal to the adjusted market value of the reverse mortgage property, the debtor’s obligations and the mortgage securing those obligations is discharged. [Schedule 2, item 20, sections 86A and 86B] 3.82 A credit provider may receive those amounts either as a payment from the debtor or the proceeds of the sale of the reverse mortgaged property. [Schedule 2, item 20, subparagraphs 86A(b)(i) and (ii)] 3.83 This allows a debtor to voluntarily pay out a reverse mortgage contract if they repay an amount at least equal to the property’s market value.

[page 369]

Discharge of debtor’s obligations under credit contract and discharge of mortgage 86B (1) The debtor’s obligations under the credit contract are discharged by force of this subsection. 86B (2) The mortgage securing those obligations is discharged by force of this subsection. Note: This section does not apply in some cases: see section 86E.

________________________________________ [Editorial note: There was no comparable UCCC provision.]

COMMENTARY ON SECTION 86B [86B.05] Outline The payment of the adjusted market value discharges the debtor’s liability under their reverse mortgage and also discharges the mortgage over their property. See also [86A.05]–[86A.10].

Credit provider must pay debtor excess of receipt over adjusted market value for reverse mortgaged property 86C If the amount received by the credit provider exceeds the adjusted market value for the reverse mortgaged property, the credit provider must pay the excess to the debtor. Note 1: If the credit provider contravenes this requirement, the court may order the credit provider to compensate anyone affected by the contravention: see section 124. Note 2: This section does not apply in some cases: see section 86E.

________________________________________ [Editorial note: There was no comparable UCCC provision.]

COMMENTARY ON SECTION 86C [86C.05] Outline If a reverse mortgage is terminated under s 86A, a credit provider must refund any payments received in excess of the market value, and must not demand or accept further payments under the contract.

Credit provider must not demand or accept further payments 86D (1) The credit provider must not: (a) purport to require payment under the credit contract; or (b) accept a payment purportedly under the credit contract.

Note 1: If the credit provider contravenes this requirement, the court may order the credit provider to compensate anyone affected by the contravention: see section 124. Note 2: This section does not apply in some cases: see section 86E.

86D (2) To avoid doubt, subsection (1) does not apply to the payment (if any) that is described in subparagraph 86A(1)(b)(i) and caused this Subdivision to apply. [page 370] ________________________________________ [Editorial note: There was no comparable UCCC provision.]

COMMENTARY ON SECTION 86D [86D.05] Outline See commentary on s 86C.

Cases in which sections 86B, 86C and 86D do not apply 86E Sections 86B, 86C and 86D do not apply if: (b) the debtor engaged in fraud, or made a misrepresentation, relating to the reverse mortgage before, at or after the time the credit contract was made; or (c) circumstances prescribed by the regulations exist. ________________________________________ [Editorial note: There was no comparable UCCC provision.]

COMMENTARY ON SECTION 86E [86E.05] Outline Section 86E sets out circumstances where the payment of an amount equal to the adjusted market value will not terminate a reverse

mortgage contract and the credit provider may seek further payment from the debtor.

Relationship between this Subdivision and other provisions 86F This Subdivision does not limit any of the other provisions of this Division. ________________________________________ [Editorial note: There was no comparable UCCC provision.]

COMMENTARY ON SECTION 86F [86F.05] Outline Section 86F states that Subdiv B does not limit any other provisions of Pt 5, Div 1.

Subdivision C — Notice of first direct debit default [Subdiv C heading insrt Act 130 of 2012 s 3 and Sch 2 item 20, eff 18 Sep 2012]

One-off notice to be given the first time a direct debit default occurs 87 (1) [Application of section] This section applies if: (a) a debtor authorises payment of an amount for a credit contract by direct debit; and (b) default occurs; and (c) it is the first occasion the default occurs. 87 (2) [Direct debit default notice] The credit provider must give the debtor, and any guarantor, a direct notice, complying with this section, within 14 days of the default occurring.

Criminal penalty: 50 penalty units. [subs (2) am Act 130 of 2012 s 3 and Sch 1 item 43, eff 1 Mar 2013]

[page 371] 87 (3) [Contents of notice] The notice must contain the information prescribed under the regulations. [subs (3) am Act 130 of 2012 s 3 and Sch 1 item 44, eff 1 Mar 2013]

87 (4) [Strict liability offence] Subsection (2) is an offence of strict liability. Note: For strict liability, see section 6.1 of the Criminal Code.

87 (5) [Other notice requirements not affected] This section does not affect any other requirement under this Code to give a notice. 87 (6) [subs (6) rep Act 130 of 2012 s 3 and Sch 5 item 12, eff 1 Mar 2013] ________________________________________ [Editorial note: There was no comparable UCCC provision.]

COMMENTARY ON SECTION 87 [87.05] Outline Section 87 was introduced by the NCCP Act regime changes. It has no equivalent provision in the UCCC. The section requires a credit provider under a credit contract, for which a direct debit arrangement has been authorised, to give the debtor and any guarantor a notice the first time a default occurs. The notice only needs to be provided once for each direct debit authority. The Enhancements Act amended s 87 to omit references to a direct debit default notice, and instead, refer to a notice complying with the section. [87.10] Timing of notice The notice must be given within 10 business days (14 days) of the default occurring. Regulation 69 provides that a credit provider does not have to issue the notice if the default is rectified within the

time allowed for the notice to be given. Essentially, this allows credit providers to avoid sending notices to the debtor/guarantor where the default is rectified within seven business days (which allows three days for postage of the notice). If a credit provider does not send a notice, on the basis that the default has been rectified, the default will not be considered the “first” default under s 87, and the obligation to send a notice will arise on the next direct debit default that occurs for that authority. [87.15] Form of notice The notice must include the information set out in Form 11 of the Regulations (see reg 85). This information aims to serve as a “red flag” for the debtor that there is a problem with their direct debit authority. [87.20] Penalties If the credit provider fails to provide the debtor and guarantor (if relevant) with a notice containing the information within the time required, a maximum criminal penalty of 50 penalty units may be imposed. Under the NCCP Act regime changes, failure to comply with s 87(2) was made an offence of strict liability by the insertion of s 87(4). (See paras 17 and 18 of the “Overview of the National Credit Code” for commentary on penalty units and strict liability offences.) [87.25] Meaning of direct debit Prior to its repeal, s 87(6) defined “direct debit” as the debiting of the payment amount under a credit contract against an account with a financial institution, as specified and authorised in writing by the debtor, that is processed through the Bulk Electronic Clearing System. [page 372] Bulk Electronic Clearing System was defined in s 87(6) as the system established by the Australian Payments Clearing Association to manage the conduct of the exchange and settlement of bulk electronic low value transactions and includes any replacement system. [87.30] Implementation issues This provision requires credit providers to be able to identify the first time a default occurs for a direct debit arrangement

and then send separate notices to each debtor and guarantor under the credit contract. This presents a significant challenge to credit providers whose IT systems might not easily link a credit contract to a direct debit arrangement to each individual debtor and guarantor. The exemption in reg 69 further complicates the issue — if credit providers wish to take advantage of the exemption, which allows a significant reduction in the number of notices sent, their IT systems not only need to identify and link each element described above, but also register when a default is rectified, link that back to the correct direct debit authority, and note that the authority is not yet considered to have experienced its “first” direct debit default.

DIVISION 2 — ENFORCEMENT OF CREDIT CONTRACTS, MORTGAGES AND GUARANTEES Requirements to be met before credit provider can enforce credit contract or mortgage against defaulting debtor or mortgagor 88 (1) Enforcement of credit contract A credit provider must not begin enforcement proceedings against a debtor in relation to a credit contract unless: (a) the debtor is in default under the credit contract; and (b) the credit provider has given the debtor, and any guarantor, a default notice, complying with this section, allowing the debtor a period of at least 30 days from the date of the notice to remedy the default; and (c) the default has not been remedied within that period; and (d) if the credit contract is for a reverse mortgage, the credit provider has spoken to one of the following persons by telephone or in person in that period and has thus both confirmed that the debtor received the default notice and informed the person of the consequences of failure to remedy the default, or has made

reasonable efforts to do so: (i)

the debtor;

(ii) a practising lawyer representing the debtor; (iii) a person with a power of attorney relating to the debtor’s financial affairs. Criminal penalty: 50 penalty units. Note: If a debtor or guarantor has given a credit provider a hardship notice or a postponement request there may be extra requirements that the credit provider must comply with before beginning enforcement proceedings: see sections 89A and 94. [subs (1) subst Act 130 of 2012 s 3 and Sch 2 item 21, eff 1 Mar 2013]

88 (2) Enforcement of mortgage A credit provider must not begin enforcement proceedings against a mortgagor to recover payment of money due or take possession of, sell, appoint a receiver for or foreclose in relation to property subject to a mortgage, unless: (a) the mortgagor is in default under the mortgage; and (b) the credit provider has given the mortgagor a default notice, complying with this section, allowing the mortgagor a period of at least 30 days from the date of the notice to remedy the default; and [page 373] (c) the default has not been remedied within that period. (d) if the mortgage secures an obligation under a credit contract for a reverse mortgage, the credit provider has spoken to one of the following persons by telephone or in person in that period and has thus both confirmed that the mortgagor received the default notice and informed the person of the consequences of failure to remedy the default, or has made reasonable efforts to do so: (i)

the mortgagor;

(ii) a practising lawyer representing the mortgagor;

a person with a power of attorney relating to the mortgagor’s (iii) financial affairs. Criminal penalty: 50 penalty units. Note: If a mortgagor has given a credit provider a postponement request there may be extra requirements that the credit provider must comply with before beginning enforcement proceedings: see section 94. [subs (2) subst Act 130 of 2012 s 3 and Sch 2 item 21, eff 1 Mar 2013]

88 (3) Default notice requirements A default notice must contain a prominent heading at its top stating that it is a default notice and specify: (a) the default; and (b) the action necessary to remedy the default; and (c) a period for remedying the default; and (d) the date after which enforcement proceedings in relation to the default, and, if relevant, repossession of mortgaged property may begin if the default has not been remedied; and (e) that repossession and sale of mortgaged property may not extinguish the debtor’s liability; and (f)

the information prescribed by the regulations about the debtor’s right to: (i)

give a hardship notice under section 72; or

(ii) give a postponement request under section 94; or (iii) make an application to the court under sections 74 and 96; and (g) the information prescribed by the regulations about: (i)

the approved external dispute resolution scheme of which the credit provider is a member; and

(ii) the debtor’s rights under that scheme; and (h) that a subsequent default of the same kind that occurs during the period specified for remedying the original default may be the subject of enforcement proceedings without further notice if it is not remedied within the period; and

(i)

that, under the Privacy Act 1988, a credit reporting body (within the meaning of that Act) may collect and hold default information (within the meaning of that Act) in relation to the default; and

(j)

any other information prescribed by the regulations.

[subs (3) am Act 130 of 2012 s 3 and Sch 1 items 5, 55, eff 1 Mar 2013; Act 197 of 2012 s 3 and Sch 5 item 131, eff 13 Mar 2014]

88 (4) Combined notices Default notices that may be given under subsections (1) and (2) may be combined in one document if given to a person who is both a debtor and a mortgagor. 88 (5) When default notice not required A credit provider is not required to give a default notice or to wait until the period specified in the default notice has elapsed, before beginning enforcement proceedings, if: (a) the credit provider reasonably believes that it was induced by fraud on the part of the debtor or mortgagor to enter into the credit contract or mortgage; or (b) the credit provider has made reasonable attempts to locate the debtor or mortgagor but without success; or (c) the court authorises the credit provider to begin the enforcement proceedings; or (d) the credit provider reasonably believes that the debtor or mortgagor has removed or disposed of mortgaged goods under a mortgage related to the credit contract or under the [page 374] mortgage concerned, or intends to remove or dispose of mortgaged goods, without the credit provider’s permission or that urgent action is necessary to protect the mortgaged property. [subs (5) am Act 130 of 2012 s 3 and Sch 1 item 45, eff 1 Mar 2013]

88 (6) Non-remedial default If the credit provider reasonably believes that a default is not capable of being remedied:

(a) the default notice need only specify the default; and (b) the credit provider may begin the enforcement proceedings after the period of 30 days from the date of the notice. [subs (6) am Act 130 of 2012 s 3 and Sch 1 item 46, eff 1 Mar 2013]

88 (7) [Strict liability offences] Subsections (1) and (2) are offences of strict liability. Note: For strict liability, see section 6.1 of the Criminal Code.

88 (7A) Some defaults are not a basis for a default notice So far as a notice purporting to be a default notice relates to an alleged default under a credit contract for a reverse mortgage that is an event described in subsection 18A(3), the notice is not a default notice for the purposes of any of the following provisions: (a) subsections (1) and (2) of this section; (b) section 93. Note: This has the effect that:

(a) if the credit provider begins enforcement proceedings relating to the alleged default the credit provider will contravene subsection (1) or (2) of this section (unless subsection (5) of this section applies); and (b) section 93 will affect the operation of an acceleration clause on the basis of the alleged default. [subs (7A) insrt Act 130 of 2012 s 3 and Sch 2 item 22, eff 1 Mar 2013]

88 (7B) To avoid doubt, subsection (7A) does not affect the status of the notice as a default notice for the purposes of section 89, 94 or 95. [subs (7B) insrt Act 130 of 2012 s 3 and Sch 2 item 22, eff 1 Mar 2013]

88 (8) Other law about mortgages not affected This section is in addition to any provision of any other law relating to the enforcement of real property or other mortgages and does not prevent the issue of notices to defaulting mortgagors under other legislation. Nothing in this section prevents a notice

to a defaulting mortgagor under other legislation being issued at the same time, or in the same document, as the default notice under this section. Note: By virtue of subsection 183(2), a notice may contain information required to be given under other legislation or be included in a notice given under other legislation.

________________________________________ [Editorial note: UCCC s 80 provided as follows: Requirements to be met before credit provider can enforce credit contract or mortgage against defaulting debtor or mortgagor 80 (1) Enforcement of credit contract A credit provider must not begin enforcement proceedings against a debtor in relation to a credit contract unless the debtor is in default under the credit contract and— (a) the credit provider has given the debtor, and any guarantor, a default notice, complying with this section, allowing the debtor a period of at least 30 days from the date of the notice to remedy the default; and (b) the default has not been remedied within that period. Maximum penalty — 100 penalty units.

[page 375] 80 (2) Enforcement of mortgage A credit provider must not begin enforcement proceedings against a mortgagor to recover payment of money due or take possession of, sell, appoint a receiver for or foreclose in relation to property subject to a mortgage, unless the mortgagor is in default under the mortgage and— (a) the credit provider has given the mortgagor a default notice, complying with this section, allowing the mortgagor a period of at least 30 days from the date of the notice to remedy the default; and (b) the default has not been remedied within that period. Maximum penalty — 100 penalty units. 80 (3) Default notice requirements A default notice must specify the default and the action necessary to remedy it and that a subsequent default of the same kind that occurs during the period specified in the default notice for remedying the original default may be the subject of enforcement proceedings without further notice if it is not remedied within the period. 80 (3A) Combined notices Default notices that may be given under subsections (1) and (2) may be combined in one document if given to a person who is both a debtor and a mortgagor. 80 (4) When default notice not required A credit provider is not required to give a default notice or to wait until the period specified in the default notice has elapsed, before beginning enforcement proceedings, if— (a) the credit provider believes on reasonable grounds that it was induced by fraud on

the part of the debtor or mortgagor to enter into the credit contract or mortgage; or (b) the credit provider has made reasonable attempts to locate the debtor or mortgagor but without success; or (c) the Court authorises the credit provider to begin the enforcement proceedings; or (d) the credit provider believes on reasonable grounds that the debtor or mortgagor has removed or disposed of mortgaged goods under a mortgage related to the credit contract or under the mortgage concerned, or intends to remove or dispose of mortgaged goods, without the credit provider’s permission or that urgent action is necessary to protect the mortgaged property. 80 (5) Non-remedial default If the credit provider believes on reasonable grounds that a default is not capable of being remedied— (a) the default notice need only specify the default; and (b) the credit provider may begin the enforcement proceedings after the period of 30 days from the date of the notice. 80 (6) Other law about mortgages not affected This section is in addition to any provision of any other law relating to the enforcement of real property or other mortgages and does not prevent the issue of notices to defaulting mortgagors under other legislation. Nothing in this section prevents a notice to a defaulting mortgagor under other legislation being issued at the same time, or in the same document, as the default notice under this section. Note: By virtue of section 161(2) a notice may contain information required to be given under other legislation or be included in a notice given under other legislation.]

COMMENTARY ON SECTION 88 [88.05] Outline The Code does not confer enforcement rights and remedies on a credit provider. Those rights and remedies are conferred on a credit provider by the credit contract, mortgage or guarantee. However, the Code restricts the way in which the credit provider may exercise those enforcement rights and remedies. The restrictions are set out in s 88(1) (in relation to a credit contract) and (2) (in relation to a mortgage), s 90 (in relation to a guarantee) and s 98 (in relation to a goods mortgage). The credit contract, mortgage or guarantee cannot relieve the credit provider from these restrictions (s 191). The purpose of these provisions is “to give debtors a last opportunity prior to commencement of proceedings to get their account in order” (Commercial Tribunal of New South Wales in Flood v Police Department Employees’ Credit Union (1999) ASC ¶155-028). Section 88 does not prevent a credit provider from contacting the debtor to seek recovery of the unpaid debt during the 30-day period after a s 88 notice is issued.

[page 376] Indeed, it may be in the debtor’s interests for the credit provider to inform the debtor of the seriousness of the situation. However, credit providers must take care to ensure that any such contact does not amount to intimidation or harassment of the debtor. [88.06] “Reasonably believes” The Enhancements Act amended s 88(5)(a) and (d) and s 88(6) to change the phrase “believes on reasonably grounds” to “reasonably believes”. The Explanatory Memorandum to the Enhancements Act notes (at para 2.96) that the Code did use both expressions for the same concept and it is preferable to use only one (similar changes were also made to s 93). [88.10] “Enforcement proceedings” Section 88(1) prevents a credit provider from beginning enforcement proceedings until a default notice has been served and the other requirements of s 88 have been met. The term “enforcement proceedings” is defined in s 204 to mean court proceedings to recover a payment due, the taking possession of property under a mortgage or the taking of any other action to enforce a mortgage (see [204.40]). Section 88(8) makes it clear that notice under other legislation (eg, real property legislation) may be issued at the same time, or in the same document, as notice under s 88 of the Code. The credit provider must not begin enforcement proceedings against a debtor in relation to a credit contract unless: the debtor is in default under the credit contract; a default notice has been served and other requirements of s 88 have been met; and the default has not been remedied by the expiration of the time period specified in the default notice (at least 30 days from the date of the default notice) (s 80(1)). Section 88(8) makes it clear that notice under other legislation (eg, real

property legislation) may be issued at the same time, or in the same document, as notice under s 88. [88.15] When a default notice is not required A credit provider need not give a debtor a default notice, or wait until the expiration of the time period specified in the default notice, if the circumstances set out in s 88(5) exist. Those circumstances, which closely follow the circumstances in which it was not necessary to serve a notice under s 107 of the Credit Act, reflect the importance to a mortgagee of being able to act quickly in the specified circumstances. Although the circumstances in s 88(5) may exist, the real property legislation in a state or territory may not relieve the credit provider from serving a written notice on a debtor or mortgagor before commencing enforcement proceedings. Arguably, if a credit provider cannot locate an unsecured guarantor, a credit provider may be relieved by s 194(2) or may have to apply under s 93(2)(c) to the court for relief from the obligation to serve the notice on the guarantor. This is because s 93(2)(b) only exempts the credit provider from the default notice requirement if the debtor or mortgagor (the definitions in s 204 of those terms do not include an unsecured guarantor) cannot be located. It appears that the last word in s 88(5)(d) should be “goods” and not “property”. [page 377] [88.20] Default notice The default notice required by the Code may be issued at the same time, or in the same document, as any other notice required by any other law relating to the enforcement of real property mortgages (eg, notices required by Land Titles Act 1925 (ACT) s 93; Real Property Act 1900 (NSW) s 57; Land Title Act 1994 (Qld); Real Property Act 1886 (SA) s 132 (which also applies in the Northern Territory); Land Titles Act 1980 (Tas);Transfer of Land Act 1958 (Vic) s 76; Transfer of Land Act 1893 (WA) ss 106 and 108; and Property Law Act 1969 (WA) s 59). Further, the default notice required by the Code may contain information required to be given under any other law (s 183(2)), such as the PPSA.

Therefore, the Code allows the default notice required by the Code to be combined with a default notice required by any other law relating to the enforcement of real property or personal property. However, it may be that, owing to differences in state and territory legislation, it would not be possible to have a single form of combined notice which could be used in all jurisdictions. There may also be difficulties where credit is secured by a mortgage of properties in multiple jurisdictions (see [183.20]). Default notices under s 88(1) and (2) may be issued together. That is, one notice may be issued to a person who is both a debtor and mortgagor (s 88(4)). [88.25] Print type The print type of any default notice must not be less than 10 point (s 184(1))(b) and reg 110). [88.30] Contents of default notice The default notice must allow the debtor a period of at least 30 days from the date of the notice to remedy the default (s 88(1)(a)). The default notice must state the default (see [88.35]) (s 88(3) and (6)), the action necessary to remedy the default (this is not required if the default is not capable of remedy: s 88(3)), and that any further default of the same kind which occurs during “the period specified for remedying the original default” may be subject to enforcement proceedings without any further notice if it is not remedied within that period (s 88(3)). As a result of changes to the UCCC default notice requirements which were introduced by the NCCP Act regime changes, the default notice must now also include: the period the defaulter has to remedy the default (the defaulter has at least 30 days from the date of the default notice to remedy it: s 88(1)(a) and (2)(a)), when enforcement proceedings may begin if the default has not been remedied (including any repossession of mortgaged property); a statement that repossession may not extinguish the debtor’s liability; the information contained in Form 12 of the Regulations (eg, advising the debtor of their rights to apply for a hardship variation,

negotiate a postponement of the credit provider’s exercise of its rights or take the matter to external dispute resolution); a statement that the debt may be included in a credit reporting agency’s credit information file (if the debt is overdue for 60 days or more and the credit provider has taken steps to recover the debt); that a subsequent default of the same kind that occurs during the period specified for remedying the original default may be the subject of enforcement proceedings without further notice if it is not remedied within the period; and [page 378] any other information prescribed by the regulations (at the time of writing, only Form 12 has been prescribed (reg 86) (see [R86.05]). If a credit provider believes on reasonable grounds that the default is not capable of being remedied, the default notice need only specify the default (s 88(5)). However, the Code does not give any guidance as to which defaults are not capable of being remedied. Defaults which are not capable of being remedied would include any default which is outside the power of the debtor or the mortgagor to remedy (eg, the loss or destruction of mortgaged property). Also, if an acceleration clause (see s 92) is to operate, the default notice must contain an additional statement of the manner in which the liabilities of the debtor or mortgagor would be affected by the operation of the acceleration clause and also a statement of the amount required to pay out the contract as accelerated (s 93). It is also interesting to note that further defaults which occur before or after the period allowed to remedy defaults will apparently have to be the subject of a separate default notice. Prior to the Consumer Credit (Queensland) Amendment Act 1998, s 80(3) of the UCCC required that the period to be specified in the notice was 30 days. This was not necessarily consistent with s 80(1) and (2) which permitted a credit provider to commence enforcement proceedings if at least

30 days had passed since the issue of the default notice. Section 80(3) of the UCCC was amended by the Consumer Credit (Queensland) Amendment Act to correspond with the wording of s 80(1) and (2). The explanatory notes to the Amendment Act explain: The former s 80(3) is drafted in terms which assume that a default notice under either section 80(1) or (2) [s 88(1) or (2) of the Code] will allow the debtor or mortgagor a period of exactly 30 days from the date of the notice to remedy the default. However, both section 80(1) and (2) [s 88(1) and (2) of the Code] provide that the default notice must allow a period of at least 30 days from the date of the notice. Credit providers frequently ensure that they are in compliance with those subsections by allowing more than the bare 30 days. The amendment to section 80(3) [s 88(3) of the Code] is intended to remedy that problem.

Section 88(3) of the Code now refers to “the period specified”. [88.35] Default The default must be specified with sufficient particularity to enable the debtor to know what is required to remedy the default. However, the effect of reg 106(4) is that if a credit provider cannot determine, or has difficulty determining, an interest charge, a repayment or a credit fee or charge then the credit provider will not contravene the Code if the credit provider decides to overstate the amount. Therefore, a default notice will not be invalid as a result of a demand being made for a sum of money in excess of that in respect of which default had occurred. Regulation 106(4) restates (for the purpose of s 180(1)(a)) the general law that a default notice is not invalid if it demands a sum of money in excess of that in respect of which default has occurred (Bunbury Foods Pty Ltd v National Bank of Australasia Ltd (1984) 153 CLR 491; 51 ALR 609; 2 ACLC 188; BC8400546; [page 379] Campbell v Commercial Banking Co of Sydney (1879) 2 LR (NSW) L 375; 40 LT 137; Mir Bros Projects Pty Ltd v 1924 Pty Ltd (1980) 2 NSWLR 907; 1 BPR 9503). In contrast, the decisions on s 107 of the Credit Act in Wilson v AGC Ltd (1987) ASC ¶55-598 and Wilson v AGC Ltd (No 2) (1987) ASC ¶55-606, Mercantile Credits Ltd v Patterson (1986) ASC ¶55-516, and later in Equuscorp Pty Ltd v Rigert (2003) ASC ¶155-061; [2003] VSC 343;

BC200305764 and Equuscorp Pty Ltd v Olsen (2005) ASC ¶155-072; [2004] VSC 454; BC200407466 proceeded on the basis that a demand notice would be invalid if it required payment of amounts greater than the correct amount. That debate (whether the general law prevailed over s 107 of the Credit Act) may be largely irrelevant in respect of Code-regulated contracts because reg 106(4) expressly permits the overstatement of interest charges, repayments and credit fees or charges that are government fees or government charges (but only in the context of s 180(1)(a) of the Code). In First Option Credit Union v Williams [2005] NSWSC 855; BC200506398 (on a notice of motion), Harrison AJ held that both views — that the inclusion of the repayment due after the deadline was fatal or that it was merely a further default for which notice is not required — are arguable. In Flood v Police Department Employees’ Credit Union (1999) ASC ¶155028, the Commercial Tribunal of New South Wales said: There must be a strict connection between the default referred to in the default proceedings and the default notice … it is to be expected that the enforcement proceedings would be for the amount specified in the notice, possibly with some small adjustment to take account of further interest charges or inadequate part payment.

In Flood, the debtor argued that a demand made seven months before enforcement proceedings began did not satisfy the requirements of s 80 of the UCCC (s 88 of the Code). The demand was for an amount considerably smaller than the amount in respect of which enforcement proceedings were commenced. Flood is not authority for the proposition that a default notice may understate the amount owing, but it does state that the amount in respect of which enforcement proceedings are commenced may exceed the amount stated in a default notice. [88.40] Non-remediable default The Code does not give any guidance as to which defaults are not capable of being remedied. Defaults which are not capable of being remedied would include any default which is outside the power of the debtor or the mortgagor to remedy (eg, the loss or destruction of mortgaged property). [88.45] Other laws The effect of s 88(8) is that a credit provider must satisfy the requirements of any other law relating to the enforcement of real property

or other mortgages, in addition to the requirements imposed on the credit provider by the Code. Therefore, in addition to the requirements of the Code, the credit provider must observe any requirements as to the mode of service, the address for service, or the time during which the default must remain unremedied before enforcement proceedings can commence, which are imposed by other legislation. For a case considering the interaction of and conflict between state-based bill of sale legislation and the UCCC, see Cook v Capital Finance Australia Ltd (2004) 138 FCR 345; [2004] FCA 784; BC200404963. [page 380] [88.50] “Of the same kind” The Code gives no guidance as to the meaning of the phrase “of the same kind” in s 88(3). Interpreted broadly, a default notice served in respect of a failure to pay an amount due would not be remedied if any monetary default remained outstanding at the end of the period specified in the default notice. Interpreted narrowly, the default would not be remedied if a payment due of the type specified in the default notice (eg, an instalment of rates) remained unpaid at the end of the period specified in the default notice. [88.55] Service of default notices Default notices must be served in accordance with s 195 of the Code. At least 30 days notice must be given for the debtor to remedy the default. Nominations and consents made in accordance with s 194(4) and (5) of the Code by joint debtors, mortgagors or guarantors do not apply to default notices (s 194(1)(c)). It follows that default notices must be served on (and addressed to) each individual debtor, mortgagor or guarantor. [88.60] Date of default notices The date of any default notice will be determined in accordance with s 196. This will not always be the date shown on the default notice (under s 196, the date of the notice is taken to be the later of the date that it would normally be delivered in the ordinary course of post and the date that the notice “bears”). Note that the period during which defaults may be remedied starts to run from the “date of the notice”.

[88.65] Notice period See s 218 to ascertain how to calculate the commencement and end of the 30 day period. [88.70] Effect of non-compliance Failure to give a default notice in accordance with s 88 attracts a criminal penalty of 50 penalty units. Under the NCCP Act regime changes, s 88(1) and (2) are offences of strict liability by the insertion of s 88(7). (See paras 17 and 18 of the “Overview of the National Credit Code” for commentary on penalty units and strict liability offences.) Restitution or compensation may also be ordered under s 124. However, it is not clear from the Code itself whether enforcement proceedings begun by a credit provider without having complied with s 88 are still valid. The Code generally provides expressly for the civil consequences of particular types of non-compliance (see, for example, ss 23(4), 144(3) and 145(5)), and makes general provision for civil consequences (where no specific civil consequence is prescribed) in s 124, so there is a strong inference that enforcement proceedings begun in breach of s 88 are not thereby automatically invalidated. Nor is the Code explicit as to whether enforcement proceedings can be stayed in these circumstances. [88.75] Costs In McNally v ANZ Banking Group Ltd (2001) ASC ¶155-047, the Fair Trading Tribunal of New South Wales held that the costs incurred in issuing a s 80 notice under the UCCC (equivalent to s 88 of the Code) are property enforcement expenses within the meaning of the UCCC and, where this term is used in the credit contract, within the meaning of the contract. [88.80] Mortgages The credit provider must not begin enforcement proceedings against a mortgagor to recover payment of money due or take [page 381] possession of, sell, appoint a receiver for or foreclose in relation to mortgaged property unless the mortgagor: is in default under the mortgage;

has been given a default notice; and has not remedied the default by the expiration of the time period specified in the default notice (at least 30 days from the date of the default notice) (s 80(2)). Although PPSA s 123(1) allows a secured party under a PPSA security interest to seize the goods when a grantor is in default, the right to take possession of the goods cannot be exercised until the expiry of the s 88 notice period under the Code, if applicable. Further, the Code includes restrictions on the rights of a credit provider for Code-regulated goods mortgages to enter onto residential premises for the purpose of seizing goods. [88.85] Privacy Act reforms The Privacy Act Amendment (Enhancing Privacy Protection) Act 2012 (Cth) repealed the original s 88(3)(i) and substituted it with a new s 88(3)(i). The original wording was: (i)

that, under the Privacy Act 1988, the debt may be included in a credit reporting agency’s credit information file about the debtor if: (i)

the debt remains overdue for 60 days or more; and

(ii) the credit provider has taken steps to recover all or part of the debt; and (j)

any other information prescribed by the regulations.

The amendment was made to reflect the new comprehensive credit reporting regime introduced by the privacy amendments, which commenced on 12 March 2014. (See also s 179D(2)(b).) [88.90] Reverse mortgages There is one extra requirement to be satisfied before a credit provider can enforce a reverse mortgage. The credit provider must contact or make reasonable attempts to contact the debtor or mortgagor (or their lawyer, or a person who has a power of attorney over their financial affairs (s 88(1) and (2)). The contact must have taken place during the period starting from the date that the credit provider issues the s 88 default notice and the 30 days allowed

under that notice for the recipients to remedy the default. The contact must be in person or by telephone. The Explanatory Memorandum to the Enhancements Act explains (at paras 3.91 and 3.92): 3.91 These additional requirements in relation to contacting debtors and mortgagor about defaults recognises the impact age and declining health may have on this class of borrowers, their reliance on others to assist or advise them, and the consequent need for greater requirements on credit providers in respect of potentially senile delinquents. For example: many reverse mortgage borrowers may better understand that they are in default and how to remedy it when this is disclosed to them verbally, rather than in writing; and [page 382] a default occurring during a period that a debtor is temporarily absent from the reverse mortgaged property due to circumstances such as illness or hospitalisation, is more likely to be resolved when the credit provider attempts to personally contact the debtor. 3.92 A breach of this requirement will attract a criminal penalty of 50 penalty units. Further, under s 88(7A), if a credit provider issues a default notice for a default because the debtor has not complied with a contract term prohibited under s 18A, then the notice is not a valid default notice under s 88(1) and (2) or s 93 (although the notice will still be effective for ss 89, 94 or s 95). See further commentary on s 93A regarding additional matters to be included in the default notice. [88.95] Cases The courts have primarily addressed the question of enforcement proceedings begun in breach of s 88 and whether they are still

valid (see [88.70] above) by indirectly using its powers to dispense with the requirement of a credit provider to issue a default notice before commencing enforcement proceedings (NCCP Act s 99(5)). As a defective default notice does not always have an impact on the outcome of the case, the courts have demonstrated a willingness to dispense with the requirement. It has been said that the overriding criteria is the “justice of the case” (Commonwealth Bank v Selfby Fullgrabe (2011) 275 LSJS 420; [2011] SASC 102; BC201105029) and the courts have demonstrated a willingness to allow proceedings to continue if it is consistent with the just, quick and cheap resolution of the real issues in proceedings. Factors that a court have taken into consideration include: whether the credit provider held a belief that the Code applied to a credit contract (and, we presume, whether the belief was a reasonable one) (Bank of Queensland Ltd v Dutta [2010] NSWSC 574; BC201005295; Wolfe v Permanent Custodians [2012] VSC 275; BC201207771; nature of the defect and whether a debtor has been disadvantaged by the defect (see, eg, St George Bank Ltd v McCormack (No 2) [2008] SASC 39; BC200806600; Commonwealth Bank v Selfby Fullgrabe (2011) 275 LSJS 420; [2011] SASC 102; BC201105029); and whether the defendants had made out any defences under the Code (Bank of Queensland Ltd v Dutta [2010] NSWSC 574; BC201005295). See also Permanent Custodians Ltd v Upston (2007) ASC ¶155-083; Q ConvR 667; [2007] NSWSC 223; BC200701913; Benjamin v Ashikian (2007) ASC ¶155-086; [2007] NSWSC 735; BC200705347; Hamafam Pty Ltd v Saadullah (2007) ASC ¶155-087; [2007] NSWSC 818; BC200706016; Australian Capital Providers Pty Ltd v Wakelin [2009] QSC 167; BC200905403; Crawford v Shakespeare Haney Securities Ltd [2008] QCA 363; BC200810338; Shakespeare Haney Securities v Crawford [2009] 2 Qd R 156; [2009] QCA 085; BC200902421; Permanent Mortgages Pty Ltd v Cook (2006) ASC ¶155-082; [2006] NSWSC 1104; BC200608529; King

Mortgages Pty Ltd v Nader (2008) ASC ¶155-089; [2008] NSWSC 108; BC200800736; First Option Credit Union v Williams [2005] NSWSC 855; BC200506398; Wakefield v Ribbera [2008] VSC 124; BC200802809.

[page 383]

Defaults may be remedied 89 (1) [Power to remedy default] If a default notice under section 88 states that the credit provider intends to take action because the debtor or mortgagor is in default under the credit contract or mortgage, the debtor, mortgagor or guarantor may remedy the default within the period specified in the notice, and the contract or mortgage is then reinstated and any acceleration clause cannot operate. [subs (1) am Act 130 of 2012 s 3 and Sch 1 item 47, eff 1 Mar 2013]

89 (2) [Continuing default] A debtor, mortgagor or guarantor does not remedy the default if, at the end of the period, the debtor or mortgagor is in default under the credit contract or mortgage because of the breach specified in the notice or because of a subsequent breach of the same type. ________________________________________ [Editorial note: UCCC s 81 — apart from numbering the section is unchanged.]

COMMENTARY ON SECTION 89 [89.05] Outline It is difficult to see what (apart from confusion) s 89 adds to ss 88 and 93. Section 89 provides that if a default notice under s 88 states that the credit provider intends to take action because the debtor or mortgagor is in default: the debtor, mortgagor or guarantor may remedy the default within the period specified in the notice; the contract or mortgage is then reinstated; and

any acceleration clause cannot operate. To be properly remedied, the default has to remain remedied at the end of the period, and there must not be any other breach of the same type which is not remedied at the end of the period (s 89(2)). However, even without ss 89, 88(1) and (2) would allow the debtor or mortgagor the opportunity to remedy the default within the period specified in the default notice, and s 93 would prevent an acceleration clause from operating if the default has been remedied within the specified period. The reference to the contract or mortgage being “reinstated” tends to suggest that the contract or mortgage has been terminated, but it is unlikely a credit provider would terminate (as opposed to seeking to enforce) a credit contract or mortgage until the outstanding debt had been recovered. Section 89 also seems to suggest that, if a default has been remedied within the specified period, whatever action has already been taken by the credit provider in reliance on the default (eg, suspending further drawings) is thereby nullified — but only if the default notice contains a statement that “the credit provider intends to take action because the debtor or mortgagor is in default”. This would suggest that credit providers should not include such a statement in their default notices because they can then avoid the result in the second bullet above (ie, “reinstatement”). Nevertheless, it would be prudent for credit providers to include in their default notices a statement that they intend to take action, because this is in fact why the default notice is being served in the first place, and debtors and mortgagors should be left in no doubt as to the consequences of failure to remedy the breach. In addition, s 88(3) requires the default notice to state that a default of the same kind which occurs within “the period specified in the default notice for remedying the original default” (see [88.30]) may be the subject of enforcement proceedings. This could be construed as a statement of intention to take action, so it might as well be explicit. [page 384] [89.10] “Of the same type” It is not clear why s 88(3) refers to “subsequent

default of the same kind” while s 89(2) refers to “subsequent breach of the same type”.

Effect of hardship notices on enforcement 89A (1) This section applies if: (a) a credit provider is required to give a default notice under section 88 before beginning enforcement proceedings; and (b) before or after the credit provider gives the default notice, the debtor gives the credit provider a hardship notice (the current hardship notice) under section 72; and (c) either: (i)

in the 4 months before the day the current hardship notice is given, the debtor had not given the credit provider another hardship notice; or

(ii) in that 4-month period, the debtor had given the credit provider one or more other hardship notices, but the credit provider reasonably believes that the basis on which the current hardship notice was given is materially different from the bases on which the other hardship notices were given. 89A (2) The credit provider must not begin enforcement proceedings against the debtor unless: (a) the credit provider has given the debtor a notice under paragraph 72(4)(b), in response to the current hardship notice, stating that the credit provider and debtor have not agreed to change the credit contract; and (b) the period of 14 days, starting on the day the credit provider gives the notice under paragraph 72(4)(b), has expired. Criminal penalty: 50 penalty units. Note: The credit provider must allow the debtor at least 30 days from the date of the default notice to remedy the default — see section 88. The 14-day period in subsection (2) may end before, at the same time as, or after the end of the period for remedying the default specified in the default notice.

89A (3) However, the credit provider may take possession of mortgaged goods if the credit provider reasonably believes that: (a) the debtor or mortgagor has removed or disposed of the mortgaged goods, or intends to remove or dispose of them, without the credit provider’s permission; or (b) urgent action is necessary to protect the goods. 89A (4) Subsection (2) is an offence of strict liability. Note: For strict liability, see section 6.1 of the Criminal Code. [s 89A insrt Act 130 of 2012 s 3 and Sch 1 item 6, eff 1 Mar 2013]

________________________________________ [Editorial note: There was no comparable UCCC provision.]

COMMENTARY ON SECTION 89A [89A.05] Outline The Enhancements Act introduced a new s 89A to restrict a credit provider from commencing enforcement action against a debtor until they have responded to any hardship notice under s 72. The Explanatory Memorandum to the Enhancements Act explains (at paras 2.18–2.24): [page 385] 2.18 A credit provider will be prohibited from commencing enforcement action where the following conditions apply: they are required to serve a default notice under section 88; the debtor has given a current hardship notice under section 72; and the debtor has not previously given a hardship notice or had given one not materially different from the current hardship

notice in the four month period before the current hardship notice was given. [s 89A(1)] 2.19 The credit provider cannot begin enforcement proceedings until they have given the debtor notice of their refusal to negotiate and 14 days have passed from the day on which this notice was given. [s 89A(2)] 2.20 Under the current section 88, the credit provider must allow the debtor at least 30 days from the date of the default notice to remedy the default. The 14 day period from the day the lessor gave the hardship notice may therefore occur before, during, or after the 30 day period. 2.21 A breach of this section will attract a criminal penalty of 50 penalty units and is an offence of strict liability. [s 89A(2) and (4)] 2.22 The imposition of a strict liability offence is appropriate since: it is important that debtors have certainty regarding whether or not their credit provider will negotiate or intends to commence enforcement proceedings; the requirement to give the debtor notice is procedural, so that the credit provider should be able to comply with it in all circumstances; and it significantly enhances ASIC’s ability to enforce this requirement. 2.23 However, the credit provider may take possession of any mortgaged goods if the credit provider believes on reasonable grounds that: the debtor has, without the credit provider‘s permission, removed or disposed of the mortgaged goods, or intends to do so; or urgent action is necessary to protect the goods. [s 89A(3)]

2.24 The burden rests on the credit provider to show that they held this belief on reasonable grounds. Repossession of mortgaged goods has a serious consequence for the debtor, mortgagor or guarantor. Credit providers should therefore only be able to rely on these exceptions where they reasonably believe circumstances to be in existence which establish the requisite belief. [s 89A(2) and (3)]

Requirements to be met before credit provider can enforce guarantee against guarantor 90 (1) [Pre-conditions to enforcement] A credit provider must not, under a guarantee, enforce a judgment against a guarantor unless: (a) the credit provider has obtained a judgment against the debtor for payment of the guaranteed liability and the judgment remains unsatisfied for 30 days after the credit provider has made a written demand for payment of the judgment debt; or (b) the court has relieved the credit provider from the obligation to obtain a judgment against the debtor on the ground that recovery from the debtor is unlikely; or (c) the credit provider has made reasonable attempts to locate the debtor but without success; or [page 386] (d) the debtor is insolvent. Criminal penalty: 50 penalty units. 90 (2) [Strict liability offence] Subsection (1) is an offence of strict liability. Note: For strict liability, see section 6.1 of the Criminal Code.

________________________________________ [Editorial note: UCCC s 82 provided as follows:

Requirements to be met before credit provider can enforce guarantee against guarantor 82 A credit provider must not, under a guarantee, enforce a judgment against a guarantor unless— (a) the credit provider has obtained a judgment against the debtor for payment of the guaranteed liability and the judgment remains unsatisfied for 30 days after the credit provider has made a written demand for payment of the judgment debt; or (b) the Court has relieved the credit provider from the obligation to obtain a judgment against the debtor on the ground that recovery from the debtor is unlikely; or (c) the credit provider has made reasonable attempts to locate the debtor but without success; or (d) the debtor is insolvent. Maximum penalty — 50 penalty units.]

COMMENTARY ON SECTION 90 [90.05] Enforcing a guarantee The restrictions imposed on a credit provider by s 88(1) and (2) before the credit provider may commence enforcement proceedings against a debtor or a mortgagor do not apply to a credit provider intending to commence enforcement proceedings against a guarantor (unless, of course, the guarantor is also a mortgagor). The Code does impose an obligation on a credit provider to serve a default notice on a guarantor (s 88(1)(a)), but this is not a prerequisite to the credit provider taking enforcement action against a guarantor. However, the credit provider may not enforce a judgment against a guarantor unless it has complied with the requirements of s 90. Clause 28.14 of the Code of Banking Practice (2013) places similar obligations on credit providers who are also banks who subscribe to that code. [90.10] Sections 88 and 90 The relationship between ss 88 and 90 of the Code is unclear. When a credit provider seeks to enforce a mortgage provided by a guarantor, s 90 will not restrict the enforcement of the mortgage unless the credit provider is required to obtain judgment against the guarantor before any sale of the mortgaged property. For example, the credit provider would have to comply with s 90 if it were necessary, before the sale of the mortgaged property, to obtain and enforce an order for vacant possession of the mortgaged property against the guarantor. [90.15] Notice period See s 218 to ascertain how to calculate the

commencement and end of the 30 day period. [90.20] Penalties A failure to comply with s 90(1) carries a criminal penalty of 50 penalty units. Under the NCCP Act regime changes, failure to comply with s 90(1) was made an offence of strict liability by the insertion of s 90(2). (See paras 17 and 18 of the “Overview of the National Credit Code” for commentary on penalty units and strict liability offences.)

[page 387]

Requirements to be met before credit provider can repossess mortgaged goods 91 (1) [Where amount owing less than 25% of credit or $10,000] A credit provider must not, without the consent of the court, take possession of mortgaged goods if the amount currently owing under the credit contract related to the relevant mortgage is less than 25% of the amount of credit provided under the contract or $10,000, whichever is the lesser. Criminal penalty: 100 penalty units. 91 (2) [Exceptions] However, the restriction does not apply: (a) to a continuing credit contract; or (b) if the credit provider believes on reasonable grounds that the debtor has removed or disposed of the mortgaged goods, or intends to remove or dispose of them, without the credit provider’s permission or that urgent action is necessary to protect the goods. 91 (3) [Strict liability offence] Subsection (1) is an offence of strict liability. Note: For strict liability, see section 6.1 of the Criminal Code.

91 (4) [Burden of proof] In any proceedings in which it is established that a credit provider has taken possession of mortgaged goods contrary to

subsection (1), the burden of establishing that the possession of the goods was lawfully taken by virtue of subsection (2) lies on the credit provider. 91 (5) [Acceptance of surrendered goods] Nothing in this section prevents a credit provider from accepting the return of goods under section 85. ________________________________________ [Editorial note: UCCC s 83 provided as follows: Requirements to be met before credit provider can repossess mortgaged goods 83 (1) [Where amount owing less than 25% of credit or $10,000] A credit provider must not, without the consent of the Court, take possession of mortgaged goods if the amount currently owing under the credit contract related to the relevant mortgage is less than 25% of the amount of credit provided under the contract or $10 000, whichever is the lesser. Maximum penalty — 100 penalty units. 83 (2) [Exceptions] However, the restriction does not apply— (a) to a continuing credit contract; or (b) if the credit provider believes on reasonable grounds that the debtor has removed or disposed of the mortgaged goods, or intends to remove or dispose of them, without the credit provider’s permission or that urgent action is necessary to protect the goods. 83 (3) [Burden of proof] In any proceedings in which it is established that a credit provider has taken possession of mortgaged goods contrary to subsection (1), the burden of establishing that the possession of the goods was lawfully taken by virtue of subsection (2) lies on the credit provider. 83 (4) [Acceptance of surrendered goods] Nothing in this section prevents a credit provider from accepting the return of goods under section 78.]

COMMENTARY ON SECTION 91 [91.05] Repossession The purpose of s 91 is to ensure that, where a credit contract is near its end and the debt has been substantially repaid, the right to take possession of any mortgaged goods should be exercised only with the consent of the court. Accordingly, s 91 provides that a credit provider may not take possession of mortgaged goods if the amount owing under the credit contract is less than 25 per cent of the initial amount of credit provided or $10,000, whichever is the lesser. [page 388]

[91.10] Exceptions However, the exceptions to the prohibition in s 91 are as follows: the credit provider may repossess mortgaged goods with court consent (s 91(1)); the restriction does not apply to a continuing credit contract (s 91(2)(a)); the restriction does not apply if the credit provider believes on reasonable grounds: —

that the debtor has removed or disposed of the goods or intends to do so without the credit provider’s permission; or

—

that urgent action is necessary to protect the mortgaged goods (s 91(2)(b));

the restriction does not apply to a mortgage of goods lawfully in the credit provider’s possession (reg 64(3)); and where the mortgaged goods are surrendered under s 85. [91.15] “Court” See [112.06] for commentary on the “court”. [91.20] “Dispose” The term “dispose” is defined in s 204 to include a sale, a parting with possession, or the destruction of property. [91.25] Burden of proof The effect of s 91(4) is that the onus of establishing that the possession of any goods was lawfully taken lies on the credit provider. [91.30] Penalties A failure to comply with s 91(1) carries a criminal penalty of 100 penalty units. Under the NCCP Act regime changes, failure to comply with s 91(1) was made an offence of strict liability by the insertion of s 91(3). (See paras 17 and 18 of the “Overview of the National Credit Code” for commentary on penalty units and strict liability offences.) [91.35] Case Allen’s Asphalt Pty Ltd v SPM Group Pty Ltd [2010] 1 Qd R

202; (2009) 255 ALR 588; [2009] QCA 134; BC200904291.

Acceleration clauses 92 [s 92 rep Act 130 of 2012 s 3 and Sch 5 item 13, eff 1 Mar 2013] COMMENTARY ON REPEALED SECTION 92 [92.01] Enhancements Act Section 92 was repealed by the Enhancements Act with effect from 1 March 2013. The term “acceleration clause” is now defined in s 204(1). [92.05] “Acceleration clause” The term“acceleration clause” was formerly defined in s 92(1). Section 92(1)(a) referred to “automatic” acceleration clauses (ie, clauses that purport to operate without the need for any action on the part of the credit provider) and s 92(1)(b) referred to “non-automatic” acceleration clauses (ie, clauses that only operated at the discretion of the credit provider). The Code restricts the operation of any acceleration clause. The restrictions on the operation of acceleration clauses are set out in s 93 of the Code. [page 389] [92.10] “On demand facility” Prior to its repeal, s 92 stated that the restrictions on the operation of an acceleration clause set out in the Code did not apply to an “on demand facility” (last paragraph of definition of “acceleration clause” in s 92(1)). The term “on demand facility” was, itself, defined in s 92(2). Prior to its repeal, s 92 meant that a credit provider need not comply with the restrictions on the operation of an acceleration clause in s 93 of the Code before calling up an “on demand facility”.

Requirements to be met before credit provider can enforce an acceleration clause

93 (1) [Operation of clause] An acceleration clause is to operate only if the debtor or mortgagor is in default under the credit contract or mortgage and: (a) the credit provider has given to the debtor and any guarantor, or to the mortgagor, a default notice under section 88; and (b) the default notice contains an additional statement of the manner in which the liabilities of the debtor or mortgagor under the contract or mortgage would be affected by the operation of the acceleration clause and also of the amount required to pay out the contract (as accelerated); and (c) the default has not been remedied within the period specified in the default notice (unless the credit provider reasonably believes that the default is not capable of being remedied). [subs (1) am Act 130 of 2012 s 3 and Sch 1 item 48, eff 1 Mar 2013]

93 (2) [Clause operates without default notice or time expiry] However, a credit provider is not required to give a default notice under section 88 or to wait until the period specified in the default notice has elapsed before bringing an acceleration clause into operation, if: (a) the credit provider reasonably believes that it was induced by fraud on the part of the debtor or mortgagor to enter into the contract or mortgage; or (b) the credit provider has made reasonable attempts to locate the debtor or mortgagor but without success; or (c) the court authorises the credit provider not to do so; or (d) the credit provider reasonably believes that the debtor or mortgagor has removed or disposed of mortgaged goods under a mortgage related to the credit contract or the mortgage concerned, or intends to remove or dispose of mortgaged goods, without the credit provider’s permission or that urgent action is necessary to protect the goods. [subs (2) am Act 130 of 2012 s 3 and Sch 1 item 48, eff 1 Mar 2013]

93 (3) [Section additional to other remedies] This section is in addition to any provision of any other law relating to the enforcement of real property

mortgages and does not prevent the issue of notices to defaulting mortgagors under other legislation. ________________________________________ [Editorial note: UCCC s 85 provided as follows: Requirements to be met before credit provider can enforce an acceleration clause 85 (1) [Operation of clause] An acceleration clause is to operate only if the debtor or mortgagor is in default under the credit contract or mortgage and— (a) the credit provider has given to the debtor and any guarantor, or to the mortgagor, a default notice under section 80; and (b) the default notice contains an additional statement of the manner in which the liabilities of the debtor or mortgagor under the contract or mortgage would be affected by the operation of the acceleration clause and also of the amount required to pay out the contract (as accelerated); and

[page 390] (c) the default has not been remedied within the period specified in the default notice (unless the credit provider believes on reasonable grounds that the default is not capable of being remedied). 85 (2) [Clause operates without default notice or time expiry] However, a credit provider is not required to give a default notice under section 80 or to wait until the period specified in the default notice has elapsed before bringing an acceleration clause into operation, if— (a) the credit provider believes on reasonable grounds that it was induced by fraud on the part of the debtor or mortgagor to enter into the contract or mortgage; or (b) the credit provider has made reasonable attempts to locate the debtor or mortgagor but without success; or (c) the Court authorises the credit provider not to do so; or (d) the credit provider believes on reasonable grounds that the debtor or mortgagor has removed or disposed of mortgaged goods under a mortgage related to the credit contract or the mortgage concerned, or intends to remove or dispose of mortgaged goods, without the credit provider’s permission or that urgent action is necessary to protect the goods. 85 (3) [Section additional to other remedies] This section is in addition to any provision of any other law relating to the enforcement of real property mortgages and does not prevent the issue of notices to defaulting mortgagors under other legislation.]

COMMENTARY ON SECTION 93

[93.05] Outline Section 93 sets out the conditions which must be satisfied before any acceleration clause may operate. The term “acceleration clause” is defined in s 204 (see [204.01]). [93.10] Acceleration Before an acceleration clause in a credit contract or mortgage may operate: the debtor or mortgagor must be in default under the credit contract or mortgage; the credit provider must give to the debtor, mortgagor or guarantor a default notice complying with s 88 of the Code; and the default notice must include the following additional information: —

the effect of the acceleration clause on the debtor’s or mortgagor’s liability; and

—

the amount required to pay out the credit contract (as accelerated); and

—

the default must not have been remedied within the period stated in the default notice (unless the credit provider believes on reasonable grounds that the default is not capable of being remedied).

The Enhancements Act amended s 93 to change the phrase “believes on reasonable grounds” to “reasonably believes”. The Code formerly used both expressions for the same concept and it is preferable to use only one. See also [88.06]. [93.15] Effect of acceleration clause The Code does not give any guidance as to the meaning of the words “… the manner in which the liabilities of the debtor or mortgagor under the contract or mortgage would be affected by the operation of the acceleration clause” in s 93(1)(b). As a minimum, it would seem that two limbs under s 93(1)(b) must be satisfied: First, the notice should explain that the entire amount of the credit

contract or mortgage will become due and payable at the end of the [page 391] period specified in the default notice, and that default interest will be payable on the entire amount outstanding at the end of that period. To satisfy this first limb, the prudent approach is to outline the effect of the acceleration of both the credit contract and the mortgage. However, where a notice only, for example, outlines the effect of the acceleration clause under the credit contract, this may be enough to satisfy the first limb on the basis that the section only requires the creditor to outline the effect of the acceleration clause on the credit contract “or” the mortgage. There is no cumulative requirement. Second, the language of s 93(1)(b) clearly states that the creditor must outline the “amount required to pay out the contract (as accelerated)”. While compliance with this clause appears simple when applied to a single credit contract, the Code fails to provide guidance where two or more credit contracts are secured by the same mortgage. Unlike the first limb, it would seem that, as no reference is made to a mortgage under the second limb, no requirement would exist on the creditor to outline the total amount owing under the mortgage as accelerated. That is, the total amount under the two or more credit contracts. Obviously, where two or more credit contracts exist, and are secured by the same mortgage, the creditor will need to prepare two separate notices that satisfy both limbs of s 93(1)(b). [93.20] “Amount required to pay out the contract (as accelerated)” It would appear, on balance, that the accelerated amount should be stated as at a date disclosed in the notice rather than as at the end of the remedy period allowed in the default notice, because this is consistent with s 180(1)(b) and also because of the practical difficulties involved in calculating an amount that will be owing at some time (possibly an unspecified number of days) in

the future. It may be prudent to state in the notice that the actual payout figure may vary depending on when the payment is made. [93.25] Exceptions If it is not necessary to serve a default notice on a debtor or mortgagor (see s 88(5)), it is also not necessary to comply with the requirements of s 93 in relation to the operation of the acceleration clause (s 93(2)). Also, if a default notice is served, an acceleration clause will operate before the expiration of the period referred to in the default notice, if it was not necessary to serve the default notice (s 93(2)). If the credit provider believes on reasonable grounds that the default cannot be remedied, the acceleration clause will operate without the need to wait for the expiration of the period specified in the default notice (s 93(1)(c)). The words “before bringing an acceleration clause into operation” in s 93(2) are unfortunate, as they may suggest that s 93(2) applies only in the case of non-automatic acceleration clauses as referred to in s 92 prior to its repeal, and which are now defined in s 204 (see s 92(1)(b)). This can hardly have been the intention of s 93(2). [page 392] [93.30] Other laws The effect of s 93(3) is that a credit provider must satisfy the requirements of any other law relating to the enforcement of real property mortgages in addition to the requirements imposed on the credit provider by s 93 of the Code. [93.35] Case Permanent Custodians Ltd v Upston (2007) ASC ¶155-083; (2007) Q ConvR 667; [2007] NSWSC 223; BC200701913.

Extra requirements for enforcing reverse mortgage if debtor’s liability exceeded value of reverse mortgaged property 93A (1) This section applies in relation to a credit contract for a reverse mortgage and a mortgage securing the debtor’s obligations under the contract if: (a) Subdivision B of Division 1 applies in relation to the contract and the mortgage (see section 86A); and (b) just before the amount was received by the credit provider as described in paragraph 86A(1)(b), the debtor’s accrued liability described in paragraph 86A(1)(a) exceeded that amount; and (c) one or more of the conditions in section 86E are met (so that sections 86B, 86C and 86D do not apply). 93A (2) If section 88 requires the credit provider to give the debtor or mortgagor a default notice before beginning enforcement proceedings to recover any of the excess, the credit provider must not begin them unless: (a) the default notice given to the debtor or mortgagor specifies: (i)

the amount received by the credit provider; and

(ii) the debtor’s accrued liability just before that amount was received; and (iii) the conditions in section 86E that are met; and (b) if the credit provider knows of a practising lawyer acting for the debtor or mortgagor and the credit provider gave the debtor or mortgagor the default notice by means other than giving it to the lawyer — the credit provider has given the lawyer a copy of the default notice at the same time as, or as soon as practicable after, giving the debtor or mortgagor the notice. Criminal penalty: 50 penalty units. [s 93A insrt Act 130 of 2012 s 3 and Sch 2 item 23, eff 18 Sep 2012]

________________________________________ [Editorial note: There was no comparable UCCC provision.]

COMMENTARY ON SECTION 93A [93A.05] Outline The Enhancements Act introduced s 93A as part of a specific regime for reverse mortgages. See further commentary on s 13A. The Code now contains a number of provisions dealing specifically with reverse mortgages — see [13A.25] for a complete list of sections relevant to reverse mortgages. [93A.10] Explanatory Memorandum Section 93A applies to reverse mortgages where the liability of the debtor or mortgagor can exceed the adjusted market value because a s 86D exemption applies. [page 393] The Explanatory Memorandum to the Enhancements Act explains (at para 3.96): 3.96 If a credit provider is required under Section 88 of the NCCP Act to give a debtor or mortgagor a default notice before beginning enforcement proceedings, the default notice sent by the credit provider must include the following additional matters: the amount received by the credit provider; the debtor’s liability under the reverse mortgage contract just before that amount was received; and the ground or grounds under section 86D under which they are seeking payments in excess of the adjusted market value (such as deliberate damage or fraud or misrepresentation by the debtor).

DIVISION 3 — POSTPONEMENT OF ENFORCEMENT PROCEEDINGS Postponement of exercise of rights 94 (1) Postponement request A debtor, mortgagor or guarantor who has been given a default notice under section 88 or a demand for payment under section 90 may, at any time before the end of the period specified in the notice or demand, request (a postponement request), orally or in writing, that the credit provider negotiate a postponement of: (a) the enforcement proceedings; or (b) any action taken under such proceedings; or (c) the operation of any applicable acceleration clause. [subs (1) subst Act 130 of 2012 s 3 and Sch 1 item 7, eff 1 Mar 2013]

94 (2) Credit provider’s notice about postponement If the debtor, mortgagor or guarantor gives the postponement request, the credit provider must, within 21 days after the day of receiving the request, give the person a written notice: (a) that states whether or not the credit provider agrees to negotiate a postponement; and (b) if the credit provider does not agree to negotiate — that states: (i)

the name of the approved external dispute resolution scheme of which the credit provider is a member; and

(ii) the person’s rights under that scheme; and (iii) the reasons for not agreeing to negotiate. Criminal penalty: 30 penalty units. [subs (2) am Act 5 of 2011 Sch 1 and s 3 item 67, eff 22 Mar 2011; Act 130 of 2012 s 3 and Sch 1 item 8, eff 1 Mar 2013]

94 (3) Enforcement proceedings If the debtor, mortgagor or guarantor gives

the postponement request, the credit provider must not begin enforcement proceedings unless: (a) the credit provider has given the debtor, mortgagor or guarantor a notice under subsection (2) in response to the postponement request; and (b) the period of 14 days, starting on the day the credit provider gives the notice under subsection (2), has expired. Criminal penalty: 50 penalty units. Note: The credit provider must allow the debtor or mortgagor at least 30 days from the date of the default notice to remedy the default — see section 88. The 14-day period in subsection (3) may end before, at the same time as, or after the end of the period for remedying the default specified in the default notice. [subs (3) subst Act 130 of 2012 s 3 and Sch 1 item 9, eff 1 Mar 2013]

[page 394] 94 (4) However, the credit provider may take possession of mortgaged goods if the credit provider reasonably believes that: (a) the debtor or mortgagor has removed or disposed of the mortgaged goods, or intends to remove or dispose of them, without the credit provider’s permission; or (b) urgent action is necessary to protect the goods. [subs (4) subst Act 130 of 2012 s 3 and Sch 1 item 9, eff 1 Mar 2013]

94 (5) Subsections (2) and (3) are offences of strict liability. Note: For strict liability, see section 6.1 of the Criminal Code. [subs (5) insrt Act 130 of 2012 s 3 and Sch 1 item 9, eff 1 Mar 2013]

________________________________________ [Editorial note: UCCC s 86 provided as follows: Postponement of exercise of rights 86 (1) [Negotiation of postponement of proceedings] A debtor, mortgagor or guarantor who has been given a default notice under Division 2 or a demand for payment under section 82

may, at any time before the end of the period specified in the notice or demand, negotiate with the credit provider a postponement of the enforcement proceedings or any action taken under such proceedings or of the operation of any applicable acceleration clause. 86 (2) [Application] This Division does not apply to a credit contract in respect of which the maximum amount of credit that is or may be provided is more than $125 000 (or such other amount as may be prescribed by the regulations).]

COMMENTARY ON SECTION 94 [94.05] Postponement Section 94 of the Code provides that a debtor or mortgagor who has been given a default notice under Div 2, or a guarantor who has been given a demand for payment under s 90, may seek a postponement of the enforcement proceedings, or of the operation of any acceleration clause, at any time before the end of the period specified in the default notice or the demand for payment. It is interesting to note that s 90 makes no provision for making demand on the guarantor for payment. Section 94(1) is therefore presumably referring to a demand for payment of amounts owing in respect of a judgment of the kind referred to in s 90. If a debtor gives a postponement request, the credit provider must not begin enforcement proceedings unless they have responded to the postponement request and 14 days have passed since they gave that response. [94.10] Exceptions — Code position Prior to the Enhancements Act, for credit contracts entered into on or after 1 July 2010, the right to seek a postponement of enforcement proceedings or the operation of any acceleration clause was not available if the maximum amount of credit that may be provided under the credit contract was more than $500,000 (or any higher amount prescribed by the Regulations) (s 94(4)). There was no regulation increasing this ceiling amount. The Enhancements Act removed the $500,000 threshold from 1 March 2013. That removal affects all credit contracts that have been entered into on or after 1 July 2010. The Enhancements Act also made minor wording changes to s 94 so that “it operates more clearly” (at para 2.25 of the Explanatory Memorandum). [page 395]

Exceptions — UCCC position For credit contracts entered into before 1 July 2010, the right to seek postponement was subject to the floating ceiling which applied under the UCCC (s 86(2) of the UCCC and reg 23A of the UCCC Regulations). Thus, for those credit contracts, there is no right to seek postponement if the maximum amount of credit that may be provided under the contract is more than 110 per cent of the amount of the average loan for the purchase of new dwellings in New South Wales (for this purpose under the UCCC, the New South Wales figure was used as the benchmark throughout Australia). That figure is set out from time to time in the Australian Bureau of Statistics publication Housing Finance (Catalogue No 5609, updated monthly). The “floating ceiling” in reg 23A of the UCCC Regulations allowed the limit to change so that it automatically kept pace with inflation without the need to regularly update the relevant provision of the UCCC. It is not clear why this approach was not followed in the Code prior to the Enhancements Act. This postponement ceiling was relevant in the case of Mathis v La Trobe Investment Services Australia Pty Ltd [2004] NSWCTTT 803, where the tribunal dismissed the case for lack of jurisdiction because the credit amount exceeded the prescribed limit imposed by s 86(2) of the UCCC. [94.12] Continued application of UCCC exception for carried over instruments As discussed at [1.10], the Code applies from its commencement on 1 July 2010 to all “carried over instruments” (COIs) — credit contracts and consumer leases that were UCCC-regulated and on foot immediately before that commencement. However, some provisions of the UCCC were effectively preserved for those COIs. Item 3(6) of Sch 1 of the Transitional Act provides as follows: 3(6) Despite subitem (2), subsection 94(4) of the new Credit Code does not apply in relation to a carried over instrument. Instead, the following provision applies from commencement in relation to a carried over instrument as if the provision were subsection 94(4) of the [Code]: 94(4) This Division does not apply to a credit contract in respect of which the maximum amount of credit that is or may be provided is more than an amount equal to 110% of the amount of the average loan size for the purchase of new dwellings in New South Wales as set out in the Table of Housing Finance Commitments in the most recent publication entitled Housing Finance, Australia, as published from time to time by the Australian Bureau of Statistics.

This means that the UCCC “floating ceiling” discussed above will continue to apply to carried over instruments. See [94.10]. [94.15] “Enforcement proceedings” The term “enforcement proceedings” is defined in s 204 (see [204.35]). [94.20] “Acceleration clause” The term “acceleration clause” is defined in s 204 (see [204.01]). [94.25] External dispute resolution If the right to seek postponement is exercised (see [94.05]) s 94(2) of the Code requires that the credit provider provides the person with a written notice that states whether or not the credit [page 396] provider agrees to negotiate a postponement. If the credit provider does not agree to negotiate the postponement, the notice must also state the name of the credit provider’s external dispute resolution (EDR) scheme, the rights of the person under the EDR scheme as well as the reasons for not agreeing to negotiate. The credit provider must provide the notice within 21 days after receiving the request. [94.30] Penalties A contravention of s 94(2) carries a criminal penalty of 30 penalty units. Under the NCCP Act regime changes, failure to comply with s 94(2) was made an offence of strict liability by the insertion of s 94(3). (See paras 17 and 18 of the “Overview of the National Credit Code” for commentary on penalty units and strict liability offences.)

Effect of negotiated postponement 95 (1) [Default notice treated as if not given] A default notice under section 88 or a demand for payment under section 90 is taken, for the purposes of this Code, not to have been given or made if a postponement is

negotiated with the credit provider and the debtor, mortgagor or guarantor complies with the conditions of postponement. [subs (1) am Act 130 of 2012 s 3 and Sch 1 item 49, eff 1 Mar 2013]

95 (2) [Condition of postponement: costs] It is a condition of any postponement negotiated with a credit provider after the credit provider has taken possession of property subject to a mortgage that the mortgagor pay the reasonable costs of the credit provider in taking possession of the property. 95 (3) [Notice of conditions] A credit provider must give written notice of the conditions of a postponement referred to in subsection (1) not later than 30 days after agreement is reached on the postponement. The notice must set out the consequences under subsection (6) if the conditions of the postponement are not complied with. Criminal penalty: 100 penalty units. [subs (3) am Act 5 of 2011 Sch 1 and s 3 item 68, eff 22 Mar 2011]

95 (4) [Strict liability offence] Subsection (3) is an offence of strict liability. Note: For strict liability, see section 6.1 of the Criminal Code.

95 (5) [When notice not required] A credit provider that is required to give notice under section 71 in relation to a postponement is not required to comply with subsection (3). 95 (6) [Further default notice] If any of the conditions of a postponement are not complied with, a credit provider is not required to give a further default notice under this Code to the debtor, mortgagor or guarantor with whom the postponement was negotiated before proceeding with enforcement proceedings. ________________________________________ [Editorial note: UCCC s 87 provided as follows: Effect of negotiated postponement 87 (1) [Default notice treated as if not given] The default notice or demand for payment is taken, for the purposes of this Code, not to have been given or made if a postponement is

negotiated with the credit provider and the debtor, mortgagor or guarantor complies with the conditions of postponement. 87 (2) [Condition of postponement: costs] It is a condition of any postponement negotiated with a credit provider after the credit provider has taken possession of property subject to a mortgage that the mortgagor pay the reasonable costs of the credit provider in taking possession of the property.

[page 397] 87 (3) [Notice of conditions] A credit provider must give written notice of the conditions of a postponement referred to in subsection (1) not later than 30 days after agreement is reached on the postponement. The notice must set out the consequences under subsection (5) if the conditions of the postponement are not complied with. Maximum penalty — 100 penalty units. 87 (4) [When notice not required] A credit provider that is required to give notice under section 65 in relation to a postponement is not required to comply with subsection (3). 87 (5) [Further default notice] If any of the conditions of a postponement are not complied with, a credit provider is not required to give a further default notice under this Code to the debtor, mortgagor or guarantor with whom the postponement was negotiated before proceeding with enforcement proceedings.]

COMMENTARY ON SECTION 95 [95.05] Outline A default notice or demand is taken not to have been given if the debtor, mortgagor or guarantor complies with the conditions of any negotiated postponement. The credit provider must provide the debtor, mortgagor or guarantor (presumably depending on who applied for the postponement) with written notice of the conditions of the postponement not later than 30 days after the agreement is reached (s 95(3)). The notice must specify that the credit provider may resume enforcement proceedings without giving another default notice if any of the postponement conditions are not complied with (s 95(3)). (Note that the s 95(3) cross-reference to subs (5) should be to subs (6).) The Enhancements Act amended s 95(1) to omit references to a default notice or demand for payment, and to clarify its operation by referring to a default notice under s 88 or a demand for payment under s 90.

[95.10] Conditions Section 95 deals with the postponement of enforcement proceedings. It is likely that a credit provider, in return for agreeing to postpone enforcement proceedings, will require the debtor, mortgagor or guarantor to comply with certain conditions. Indeed, s 95(2) expressly reflects this. Section 95(3) requires the credit provider to give written notice of the conditions of a postponement “referred to in subsection (1)”. It is not clear whether this means the postponement referred to in s 95(1), or simply the conditions referred to in s 95(1) or whether the notice must refer to all the conditions of the postponement (including the condition in s 95(2)) or just to the conditions other than the condition in s 95(2). It would be prudent for the notice to include the s 95(2) condition. If the conditions attaching to the postponement involve a change to the terms of a credit contract, mortgage or guarantee, the credit provider is required to give notice under s 71. [95.15] Agreed changes Section 95(5) provides that notice under s 95(3) is not required if a notice is required to be given under s 71. Both sections (ss 95(3) and 71) are similar to the extent that they require the credit provider to give a written notice setting out changes to the terms of the contract. However, the contents of the notices are different. In particular, a notice under s 95(3) is required to state the consequences under s 95(6) of a failure to comply with the conditions of a postponement, namely that the credit provider may recommence enforcement proceedings without having to give another default notice. A debtor, mortgagor or [page 398] guarantor who receives a s 71 notice rather than a s 95 notice is not required to receive this warning, even though they could be subject to the recommencement of enforcement proceedings without notice under s 95(6). Note that a credit provider will apparently still have rights under s 95(6) even if it fails to comply with the notice requirement in ss 71 and 95(3). [95.20] Costs Any postponement negotiated after the credit provider has

taken possession of mortgaged property is on the condition that the mortgagor pays the reasonable costs of the credit provider in taking possession of the mortgaged property (s 95(2)). [95.25] Penalties A failure to comply with s 95(3) carries a criminal penalty of 100 penalty units. Under the NCCP Act regime changes, failure to comply with s 95(3) was made an offence of strict liability by the insertion of s 95(4). (See paras 17 and 18 of the “Overview of the National Credit Code” for commentary on penalty units and strict liability offences.)

Postponement by court 96 (1) [Application for postponement] If the debtor, mortgagor or guarantor is unable to negotiate a postponement, the debtor, mortgagor or guarantor may apply to the court for a postponement. 96 (2) [Discretion to grant or refuse] The court may, after allowing the applicant, the credit provider and any debtor, mortgagor or guarantor concerned a reasonable opportunity to be heard, order or refuse to order the postponement to which the application relates and may make such other orders as it thinks fit. 96 (3) [Stay of proceedings] The court may, if it thinks it appropriate in the circumstances, stay any enforcement proceedings under the credit contract or mortgage until the application has been determined. ________________________________________ [Editorial note: UCCC s 88 — apart from numbering the section is unchanged.]

COMMENTARY ON SECTION 96 [96.05] Court application A debtor, mortgagor or guarantor may apply to court for a postponement if the debtor, mortgagor or guarantor fails to negotiate the postponement with the credit provider (s 96(1)). The court may order or refuse to order the postponement and may make such order as the court thinks fit (s 96(2)). The Code does not say what the court should

consider in deciding whether to make or refuse an order under s 96, but frivolous or vexatious claims are likely to be thrown out. In Edwards v National Australia Bank (2001) ASC ¶155-049; [2001] VC 36, the Victorian Civil and Administrative Tribunal held that this provision does not allow the tribunal to retrospectively set aside previous steps to enforce the repayment of the loan. The tribunal, however, also held that in this context, “enforcement proceedings, or any action taken under such proceedings” in s 94 do include enforcement of a judgment arising out of those proceedings. The tribunal refused to postpone future action because of the debtor’s delay in bringing the proceedings. [page 399] In the case of Williams v Bank of Western Australia Ltd [2004] NSWCTTT 581, the applicant sought an order under the UCCC equivalent of s 96 to prevent enforcement action under the UCCC, although the matter was never decided as the tribunal was held not to have jurisdiction as the contract was not for consumer purposes (see [5.25]). [96.10] “Court” See [112.06] for commentary on the “court”. Note that exceptions apply to the right to seek a postponement of enforcement proceedings or the operation of any acceleration clause. A postponement will not be available if the maximum amount of credit that may be provided under the credit contract is more than a prescribed amount (see [94.10]). [96.15] Stay enforcement proceedings As an interim measure, the court may stay any enforcement proceedings under the credit contract or mortgage until the application for the postponement has been determined (s 96(3)).

Credit provider may apply for variation of postponement order 97 (1) [Application for variation] A credit provider that is subject to an

order under this Division may apply to the court for variation of the order. 97 (2) [Discretion to vary] On such an application, the court may vary the order to which the application relates as it thinks fit or may refuse to vary the order or may revoke the order. ________________________________________ [Editorial note: UCCC s 89 — apart from numbering the section is unchanged.]

COMMENTARY ON SECTION 97 [97.05] Outline Any credit provider that is subject to an order under Div 3 may apply to the court for a variation of the order (s 97(1)). On such an application, the court may vary, refuse to vary or revoke the order (s 97(2)). [97.10] “Court” See [112.06] for commentary on the “court”.

DIVISION 4 — ENFORCEMENT PROCEDURES FOR GOODS MORTGAGED Information as to location of mortgaged goods 98 (1) [Notice to disclose goods] A credit provider may, by written notice to a mortgagor under a goods mortgage, require the mortgagor to inform the credit provider, within 7 days after the day the notice is given to the mortgagor, where the mortgaged goods are and, if the mortgaged goods are not in the mortgagor’s possession, to give the credit provider all information in the mortgagor’s possession that might assist the credit provider to trace the goods. [subs (1) am Act 130 of 2012 s 3 and Sch 1 item 50, eff 1 Mar 2013]

98 (2) [Contravention] A mortgagor who contravenes a notice under this section commits an offence. Criminal penalty: 50 penalty units.

[page 400] 98 (3) [Strict liability offence] Subsection (2) is an offence of strict liability. Note: For strict liability, see section 6.1 of the Criminal Code.

________________________________________ [Editorial note: UCCC s 90 provided as follows: Information as to location of mortgaged goods 90 (1) [Notice to disclose goods] A credit provider may, by written notice to a mortgagor under a goods mortgage, require the mortgagor to inform the credit provider within 7 days where the mortgaged goods are and, if the mortgaged goods are not in the mortgagor’s possession, to give the credit provider all information in the mortgagor’s possession that might assist the credit provider to trace the goods. 90 (2) [Contravention] A mortgagor who contravenes a notice under this section is guilty of an offence. Maximum penalty — 50 penalty units.]

COMMENTARY ON SECTION 98 [98.05] Outline The Code imposes additional restrictions on enforcing mortgages over goods. For example, s 91 of the Code provides that a credit provider may not, without the consent of the court, take possession of mortgaged goods if the amount owing under the credit contract is less than 25 per cent of the amount of initial credit provided or $10,000, whichever is the lesser. See commentary on s 91. [98.10] Location of mortgaged goods A credit provider may ask the mortgagor in writing to tell the credit provider within seven days (after the day notice is given to the mortgagor) where the mortgagor is keeping any mortgaged goods (s 98(1)). If the mortgaged goods are not in the mortgagor’s possession, the credit provider may ask the mortgagor to provide the credit provider with all information in the mortgagor’s possession that might assist the credit provider to trace the goods. A mortgagor who does not comply with s 98 may incur a criminal penalty of up to 50 penalty units. Under the NCCP Act regime changes, s 98(2) is made an offence of strict liability by the insertion of s 98(3). (See paras 17 and 18 of the “Overview of the

National Credit Code” for commentary on penalty units and strict liability offences.) [98.15] “Goods mortgage” The term “goods mortgage” is defined in s 204 to mean a mortgage over goods. “Goods” is also defined in that section and does not include anything declared by the Regulations not to be goods for the purposes of the Code. No goods have been declared for this purpose by the Regulations. [98.20] Print type and notice period See reg 110 to determine print type and s 218 on how to calculate the commencement and end of any period.

Entry to residential property to take possession of goods 99 (1) [Court authority or consent of occupier] A credit provider, or an agent of a credit provider, must not enter any part of premises used for residential purposes for the purpose of taking possession of mortgaged goods under a goods mortgage unless: [page 401] (a) the court has authorised the entry; or (b) the occupier of the premises has, after being informed in writing of the provisions of this section, consented in writing to the entry. 99 (2) [Deemed consent] The regulations may provide for procedures for the obtaining and giving of consent for the purposes of this section and may set out the circumstances in which consent is or is not taken to have been given. 99 (3) [Contravention] If premises are entered in contravention of this section by a credit provider or an agent of a credit provider, the credit provider commits an offence. Criminal penalty: 50 penalty units.

99 (4) [Strict liability offence] Subsection (3) is an offence of strict liability. Note: For strict liability, see section 6.1 of the Criminal Code.

________________________________________ [Editorial note: UCCC s 91 provided as follows: Entry to residential property to take possession of goods 91 (1) [Court authority or consent of occupier] A credit provider, or an agent of a credit provider, must not enter any part of premises used for residential purposes for the purpose of taking possession of mortgaged goods under a goods mortgage unless— (a) the Court has authorised the entry; or (b) the occupier of the premises has, after being informed in writing of the provisions of this section, consented in writing to the entry. 91 (2) [Deemed consent] The regulations may provide for procedures for the obtaining and giving of consent for the purposes of this section and may set out the circumstances in which consent is or is not taken to have been given. 91 (3) [Offence] If premises are entered in contravention of this section by a credit provider or an agent of a credit provider, the credit provider is guilty of an offence. Maximum penalty (subsection (3)) — 50 penalty units.]

COMMENTARY ON SECTION 99 [99.05] Outline A credit provider or its agent must not enter premises used for residential purposes to repossess goods unless: the credit provider has court authority; or the occupier of the premises has consented in writing to the entry, after being informed in writing of his or her rights under the Code. [99.10] Residential premises The terms “premises” and “residential purposes” used in s 99(1) of the Code are not defined in the Code. It is likely that they would be interpreted widely to include any property used by a person as a residence. Section 95 of the Credit Act prohibited the entry by a mortgagee or its agent on “premises” to repossess goods. Section 95 of the Credit Act did not require that the premises be used for residential purposes. The word “premises” has been interpreted widely to include any kind of structure or building. Courts have restricted the term to exclude bare farm land (Maunsell v Olins [1975] AC 373; [1975] 1 All ER 16).

[99.15] Occupier’s consent Regulation 87 prescribes the following conditions for consent of the occupier to entry of his or her premises: consent will be taken to have been given if a request for entry has been made in writing or by calling at the premises concerned; [page 402] if the request is made personally, it must be made between 8 am and 8 pm on a day other than a Sunday or public holiday; consent in writing must be given on Form 13 signed by the occupier (see [99.20] if there is more than one occupier); and the Form 13 consent must be presented to the occupier for signature alone: it may not be presented for signature with any other document. [99.20] Each occupier’s consent Although the issue is not expressly addressed in the Code or in the Regulations, it seems implicit in s 99 that a credit provider must obtain the consent (either personally or by an agent) in the required form of each adult occupier of the premises. [99.25] Only occupier’s consent The Code requires the credit provider to obtain the consent of each occupier of the premises to be entered for the purpose of taking possession of mortgaged goods. It will not be necessary to obtain the consent of the mortgagor or owner if the premises are occupied by someone other than the mortgagor or owner. [99.30] Authority of court The court can waive the requirement for the occupier’s consent or order someone in possession of goods to deliver them to the credit provider at a specified place and time (ss 99(1)(a) and 101(1)). See commentary at [112.06] in relation to the “court”. [99.35] Penalty If premises are entered in contravention of s 99, a criminal penalty of 50 penalty units may be incurred. Under the NCCP Act regime changes, s 99(3) is made an offence of strict liability by the insertion of s

99(4). (See paras 17 and 18 of the “Overview of the National Credit Code” for commentary on penalty units and strict liability offences.)

Court may order entry 100 The court may, on the application of a credit provider that is entitled to take possession of mortgaged goods, authorise the credit provider to enter residential premises for the purpose of taking possession of mortgaged goods. ________________________________________ [Editorial note: UCCC s 92 — apart from numbering the section is unchanged.]

COMMENTARY ON SECTION 100 [100.05] Outline A credit provider entitled to take possession of mortgaged goods may apply to the court for authority to enter residential premises to take possession of those goods. It is very odd that s 99 appears to contemplate that the court may authorise a credit provider or a credit provider’s agent to enter residential premises, but s 100 confers power on the court only to authorise a credit provider to enter residential premises. The courts will no doubt interpret their authority in accordance with their understanding of the purpose and intention of ss 99 and 100. [page 403] [100.10] Entitled to take possession of goods To apply under s 100, the credit provider must be entitled to take possession of the mortgaged goods. Although the issue is not addressed in the Code or in the Regulations, the entitlement to take possession of goods must presumably arise under the mortgage. [100.15] “Court” See commentary at [112.06] in relation to the “court”.

Order for possession 101 (1) [Court order for delivery] The court may, on the application of a credit provider that is entitled to take possession of mortgaged goods, order a person who has possession of the goods to deliver them to the credit provider at a specified time or place or within a specified period. 101 (2) [Variation for delivery] The court may, on the application of a credit provider or other person required to deliver goods to a credit provider, by order vary the place at which or time or period within which goods must be delivered to the credit provider. 101 (3) [Contravention] A person who contravenes an order under this section commits an offence. Criminal penalty: 30 penalty units. 101 (4) [Strict liability offence] Subsection (3) is an offence of strict liability. Note: For strict liability, see section 6.1 of the Criminal Code.

________________________________________ [Editorial note: UCCC s 93 provided as follows: Order for possession 93 (1) [Court order for delivery] The Court may, on the application of a credit provider that is entitled to take possession of mortgaged goods, order a person who has possession of the goods to deliver them to the credit provider at a specified time or place or within a specified period. 93 (2) [Variation of delivery] The Court may, on the application of a credit provider or other person required to deliver goods to a credit provider, by order vary the place at which or time or period within which goods must be delivered to the credit provider. (3) [Contravention] A person who contravenes an order under this section is guilty of an offence. Maximum penalty (subsection (3)) — 30 penalty units.]

COMMENTARY ON SECTION 101 [101.05] Outline A credit provider entitled to take possession of mortgaged goods may apply to court for an order that the person who has possession of

the goods deliver them to the credit provider at a specified place and time. That person need not be the mortgagor. [101.10] Entitled to take possession of goods To apply under s 101, the credit provider must be entitled to take possession of the mortgaged goods (see [100.10]). [101.15] “Court” For commentary on the “court”, see [112.06]. [page 404] [101.20] Penalty A failure to comply with s 101 carries a criminal penalty of 30 penalty units. The NCCP Act regime changes amended s 101 to make s 101(3) an offence of strict liability (s 101(4)). (See paras 17 and 18 of the “Overview of the National Credit Code” for commentary on penalty units and strict liability offences.)

Procedures to be followed by credit provider after taking possession of goods 102 (1) Notice to be given A credit provider that has taken possession of goods under a mortgage must, within 14 days after doing so, give the mortgagor a written notice containing the following matters: (a) the estimated value of the goods; (b) the enforcement expenses incurred up to the date on which the goods were taken into the credit provider’s possession and, if enforcement expenses are accruing while the goods remain in the credit provider’s possession, the rate of accrual; (c) a statement of the mortgagor’s rights and obligations in the form set out in the regulations. 102 (2) Goods not to be sold immediately A credit provider must not

dispose of goods taken under the mortgage within 21 days after the date of the notice, unless the court authorises the credit provider to do so. 102 (3) Effect of proceedings If at the end of that 21 day period a stay of enforcement proceedings is in force under this Code or an application under section 76 has not been determined, the credit provider must not dispose of the goods until those proceedings have been determined and any period allowed for appeal has elapsed. 102 (4) Payment during notice period The credit provider must return the goods if: (a) the amount in arrears (less any accelerated amount) and the credit provider’s reasonable enforcement expenses are paid within that 21 day period and the debtor has not committed a further default of the same kind under the credit contract; or (b) the credit contract is paid out. 102 (5) Offence A credit provider that contravenes this section commits an offence. Criminal penalty: 50 penalty units. 102 (6) [Strict liability offence] Subsection (5) is an offence of strict liability. Note: For strict liability, see section 6.1 of the Criminal Code.

________________________________________ [Editorial note: UCCC s 94 provided as follows: Procedures to be followed by credit provider after taking possession of goods 94 (1) Notice to be given A credit provider that has taken possession of goods under a mortgage must, within 14 days after doing so, give the mortgagor a written notice containing the following matters— (a) the estimated value of the goods; (b) the enforcement expenses incurred up to the date on which the goods were taken into the credit provider’s possession and, if enforcement expenses are accruing while the goods remain in the credit provider’s possession, the rate of accrual; (c) a statement of the mortgagor’s rights and obligations in the form set out in the

regulations. 94 (2) Goods not to be sold immediately A credit provider must not dispose of goods taken under the mortgage within 21 days after the date of the notice, unless the Court authorises the credit provider to do so.

[page 405] 94 (3) Effect of proceedings If at the end of that 21-day period a stay of enforcement proceedings is in force under this Code or an application under section 70 has not been determined, the credit provider must not dispose of the goods until those proceedings have been determined and any period allowed for appeal has elapsed. 94 (4) Payment during notice period The credit provider must return the goods if— (a) the amount in arrears (less any accelerated amount) and the credit provider’s reasonable enforcement expenses are paid within that 21 day period and the debtor has not committed a further default of the same kind under the credit contract; or (b) the credit contract is paid out. 94 (5) Offence A credit provider that contravenes this section is guilty of an offence. Maximum penalty (subsection (5)) — 50 penalty units.]

COMMENTARY ON SECTION 102 [102.05] Outline Before any mortgaged goods are sold, the mortgagor is given a final opportunity to make good the default or pay out the credit contract. Therefore, the Code imposes on a credit provider further restrictions before any mortgaged goods, recovered by the credit provider, may be sold. [102.10] Notice Within 14 days of taking possession of goods, the credit provider must give the mortgagor a notice setting out the estimated value of the goods (s 102(1)(a)), the enforcement expenses incurred by the credit provider (and the rate of accrual thereof) (s 102(1)(b)) and an information statement as set out in Form 14 (s 102(1)(c) and reg 88). [102.15] “Enforcement expenses” The term “enforcement expenses” is defined in s 204. The enforcement expenses to be included in the notice required by s 102 should be divided into those expenses incurred up to the date on which the credit provider took possession of the mortgaged goods, and those incurred after that date. Section 102(1)(b) requires the credit

provider to quantify those enforcement expenses incurred before the date on which the credit provider took possession of the mortgaged goods. It is only necessary to specify the rate of accrual of those enforcement expenses incurred after that date (ie, a daily, monthly or other periodic rate). [102.20] Disposal of mortgaged goods Without court authority, a credit provider may not dispose of recovered goods within 21 days of the date of the notice referred to in s 102(1) (s 102(2)). [102.25] “Date of the notice” See [88.60] for a discussion of how the date of a notice is determined. [102.30] Stay of proceedings If there has been a stay of enforcement proceedings ordered (eg, under s 96(3)), or an application made to reopen an unjust transaction, the credit provider must not sell the goods until those proceedings are over and any period of appeal elapsed (s 102(3)). [102.35] Payment during notice period The credit provider must return the goods to the mortgagor if: [page 406] the amount in arrears (less any accelerated amount) plus reasonable enforcement expenses are paid within the 21 day period and the debtor has not committed a further default of the same kind; or the credit contract is paid out. Note that, under s 102(4)(a), the debtor, mortgagor or guarantor is required to pay only the outstanding arrears and the credit provider’s reasonable enforcement expenses. It is not necessary to pay any accelerated amount. Presumably, the relevant period for the occurrence of a further default referred to in s 102(4)(a) is the 21 day period allowed for payment. Section 102(4) refers to “[payment of] the amount in arrears” rather than to curing the event of default that has led to the credit provider being in possession of the

goods. While most defaults are likely to be of a monetary nature, s 102(4) does not provide for a situation where the default is non-monetary. [102.40] Print type and notice period See reg 110 to determine print type and Pt 14, Div 5 on how to calculate the commencement and end of any period. [102.45] “Estimated value” See [85.10] and [85.30]. [102.50] “Taken possession of goods under a mortgage” Section 102 appears to apply only where the credit provider has taken possession under a mortgage. If the credit provider has possession for some other reason, presumably s 102 will not apply, but other provisions of the Code may operate instead, such as s 85. [102.55] Penalty A failure to comply with s 102 carries a criminal penalty of 50 penalty units. The NCCP Act regime changes amended s 102 to make s 102(5) an offence of strict liability (s 102(6)). (See paras 17 and 18 of the “Overview of the National Credit Code” for commentary on penalty units and strict liability offences.)

Mortgagor may nominate purchaser of goods taken by credit provider 103 (1) [Nomination within 21 days] The mortgagor may, within 21 days after the date of the notice given under section 102, nominate in writing a person who is prepared to purchase the goods from the credit provider at the estimated value or at any greater amount for which the credit provider has obtained a written offer to buy the goods. 103 (2) [Sale price] The credit provider must offer to sell the goods to that person for the estimated value or, if there is a written offer to buy the goods for a greater amount, that amount. Criminal penalty: 50 penalty units. 103 (3) [Strict liability offence] Subsection (2) is an offence of strict

liability. Note: For strict liability, see section 6.1 of the Criminal Code.

________________________________________ [Editorial note: UCCC s 95 provided as follows:

[page 407] Mortgagor may nominate purchaser of goods taken by credit provider 95 (1) [Nomination within 21 days] The mortgagor may, within 21 days after the date of the notice given under section 94, nominate in writing a person who is prepared to purchase the goods from the credit provider at the estimated value or at any greater amount for which the credit provider has obtained a written offer to buy the goods. 95 (2) [Sale price] The credit provider must offer to sell the goods to that person for the estimated value or, if there is a written offer to buy the goods for a greater amount, that amount. Maximum penalty — 50 penalty units.]

COMMENTARY ON SECTION 103 [103.05] Outline Section 103 of the Code provides the mortgagor with an opportunity to introduce a buyer to the credit provider within the 21 day period after service of the notice required by s 102. Section 103 refers only to the mortgagor and not the debtor, so if the mortgagor is a guarantor, the debtor will not have rights under s 103. [103.10] Purchase price The buyer nominated by the mortgagor must be able to purchase the goods for the credit provider’s estimated value (which will be specified in the Form 14 notice required by s 102) or any greater amount for which the credit provider has received a written offer to purchase the goods. [103.15] Sale The credit provider must offer to sell the goods to the buyer nominated by the mortgagor for the price determined in accordance with s 103(1) (s 103(2)). [103.20] Notice period See Pt 14, Div 5 to ascertain how to calculate the

commencement and end of any period. [103.25] Penalty A failure to comply with s 103(2) carries a criminal penalty of 50 penalty units. The NCCP Act regime changes amended s 103 to make s 103(2) an offence of strict liability (s 103(3)). (See paras 17 and 18 of the “Overview of the National Credit Code” for commentary on penalty units and strict liability offences.)

Sale of goods by credit provider 104 (1) [Sale procedure] The credit provider must, if payment is not made within 21 days after the date of the notice given under section 102 and that section does not prevent the sale, as soon as reasonably practicable (or at such time as the credit provider and mortgagor agree) sell the goods in accordance with section 103 or, if there is no nominated buyer or the nominated buyer under that section does not buy the goods, for the best price reasonably obtainable. 104 (2) [Surplus of sale proceeds] The credit provider must credit the mortgagor with a payment equivalent to the proceeds of the sale less any amounts which the credit provider is entitled to deduct from those proceeds. On the sale of the goods, the amount required to pay out the contract becomes due. 104 (3) [Written notice to mortgagor] A credit provider that sells mortgaged goods must give the mortgagor a written notice stating the gross amount realised on the sale, the net proceeds of the sale, the amount required to pay out the credit contract or the amount due under the [page 408] guarantee, any further recovery action proposed to be taken by the credit provider against the debtor and any other information required by the regulations.

104 (4) [Contravention] A credit provider that contravenes a requirement of this section commits an offence. Criminal penalty: 50 penalty units. 104 (5) [Strict liability offence] Subsection (4) is an offence of strict liability. Note: For strict liability, see section 6.1 of the Criminal Code.

________________________________________ [Editorial note: UCCC s 96 provided as follows: Sale of goods by credit provider 96 (1) [Sale procedure] The credit provider must, if payment is not made within 21 days after the date of the notice given under section 94 and that section does not prevent the sale, as soon as reasonably practicable (or at such time as the credit provider and mortgagor agree) sell the goods in accordance with section 95 or, if there is no nominated buyer or the nominated buyer under that section does not buy the goods, for the best price reasonably obtainable. 96 (2) [Surplus of sale proceeds] The credit provider must credit the mortgagor with a payment equivalent to the proceeds of the sale less any amounts which the credit provider is entitled to deduct from those proceeds. On the sale of the goods, the amount required to pay out the contract becomes due. 96 (3) [Written notice to mortgagor] A credit provider that sells mortgaged goods must give the mortgagor a written notice stating the gross amount realised on the sale, the net proceeds of the sale, the amount required to pay out the credit contract or the amount due under the guarantee, any further recovery action proposed to be taken by the credit provider against the debtor and any other information required by the regulations. 96 (4) [Contravention] A credit provider that contravenes a requirement of this section is guilty of an offence. Maximum penalty (subsection (4)) — 50 penalty units.]

COMMENTARY ON SECTION 104 [104.05] Outline If payment is not made during the 21 day period stipulated in s 102, and s 102 does not otherwise prevent the sale of goods (see [102.30]), the credit provider must sell the goods: as soon as reasonably practicable to any purchaser of the goods nominated by the mortgagor under s 103 and at the price determined under s 103; or

for the best price reasonably obtainable, if the bullet point above does not apply. [104.10] “Best price reasonably obtainable” The Code gives no guidance as to the meaning of “the best price reasonably obtainable”, but see [85.30]. The Code does not prescribe when goods should be sold. Presumably general law principles would apply, at least until a court determines otherwise, but see [85.30]. [104.15] “As soon as reasonably practicable” If the goods are not sold by the credit provider as soon as reasonably practicable, or at a time agreed between the credit provider and the mortgagor, and for the best price reasonably obtainable, a court may order the credit provider to pay the mortgagor an amount exceeding the net sale proceeds (see s 106(1)). Therefore, although it might be argued that s 104 imposes an obligation on a credit provider to sell the goods as [page 409] soon as reasonably practicable only if the mortgagor has nominated a buyer in accordance with s 103, it is probably safer to interpret s 104 as requiring sale as soon as reasonably practicable in all circumstances. In any event, the effect of s 106 is that an obligation to sell the goods as soon as reasonably practicable is also imposed on the credit provider when the mortgagor has not nominated a purchaser in accordance with s 103 or agreed with the credit provider a time for the sale of the goods in accordance with s 106(1). [104.20] Amount credited to mortgagor After selling the goods, the credit provider must credit the mortgagor with the proceeds of sale less any amounts which the credit provider is entitled to deduct from those sale proceeds (s 104(2)). The amounts which a credit provider is entitled to deduct from the sale proceeds are set out in s 105 (see [105.05]). [104.25] Acceleration clause for goods mortgages Section 104(2) contains an automatic acceleration clause in relation to goods mortgages. The amount

required to pay out the credit contract becomes due when mortgaged goods are sold. Any shortfall remaining after the credit provider has credited the mortgagor with net sale proceeds will be due and payable. It is not clear whether, if a goods mortgage is only part of the security held by the credit provider, the total amount required to pay out the credit contract would become due and payable. If that were correct, all amounts payable under a collateral real property mortgage would also become due and payable. The expression “amount required to pay out the contract” was inserted into the UCCC in 1998 (see the Consumer Credit (Queensland) Amendment Act 1998) to replace the previous text “total amount payable under the contract”. This change did nothing to resolve the ambiguity referred to above if the goods mortgage is only part of the security package. The explanatory notes to the Consumer Credit (Queensland) Amendment Act explained that the substitution was to ensure that s 96 of the UCCC (s 104 of the Code) used the same terminology as s 78 of the UCCC (s 85 of the Code) and to resolve the ambiguity of whether the expression meant the total amount payable under the contract, disregarding any payments made, or the total amount remaining payable at the relevant time. The s 104(2) acceleration is only necessary where either the credit contract itself has no acceleration provision, or the credit provider gave a default notice which complied with s 88, but not s 93. By the time s 104 applies, enforcement proceedings (ie, taking possession of property under the mortgage) will have begun, and for that to happen a s 88 default notice (which would normally contain the s 93 acceleration provisions) would have been given. Any acceleration clause in the credit contract would operate as soon as the period specified in the s 88 notice has elapsed. [104.30] Written notice of sale Under s 104(3), the credit provider must provide the mortgagor with a written notice stating the gross amount realised on the sale, the net proceeds of sale, the amount required to pay out the credit contract or due under the guarantee, any further recovery action proposed to be taken by the credit provider against the debtor and the further information [page 410]

required by the Regulations. Regulation 89 requires that the mortgagor be given an itemised account of each deduction made from the gross amount realised on the sale to arrive at the net proceeds of sale. The notice is slightly different from the notice required under s 85(9), although the reasons for this are not clear. [104.35] “Gross amount realised on sale” This is presumably the amount referred to in s 105 as “the proceeds of that sale”. [104.40] “Net proceeds of the sale” This is presumably the amount arrived at after deducting the amounts referred to in s 105(a)–(d) from the gross amount realised on sale. [104.45] Timing of notice The Code does not prescribe when the information required by s 104(3) and reg 89 is to be provided to the mortgagor. Nor does the Code appear to prevent the credit provider, having given notice under s 104(3) of the proposed further recovery action, from subsequently taking different action from that specified in the notice. It remains to be seen, however, how the courts will interpret this section. [104.50] Print type and notice period See reg 110 to determine print type and Pt 14, Div 5 on how to calculate the commencement and end of any period. [104.55] Penalty A failure to comply with s 104(4) carries a criminal penalty of 50 penalty units. The NCCP Act regime changes amended s 104 to make s 104(4) an offence of strict liability (s 104(5)). (See paras 17 and 18 of the “Overview of the National Credit Code” for commentary on penalty units and strict liability offences.) [104.60] PPSA If the mortgagee follows the s 104 sale process (including by giving the s 104 notice), it is deemed to comply with the obligations under PPSA ss 128 and 131 (ie, the PPSA requirements for the sale of secured property in the exercise of the secured party’s rights) (see PPSR reg 4.1). (See commentary at [42.10].)

Matters for which account can be debited after mortgagee sale of goods 105 A credit provider that sells mortgaged goods under section 104 is entitled to deduct from the proceeds of that sale only the following amounts: (a) the amount currently secured by the mortgage in relation to the credit contract, not being more than the amount required to discharge the contract; (b) the amount payable to discharge any prior mortgage to which the goods were subject; (c) the amounts payable in successive discharge of any subsequent mortgages to which the goods were subject and of which the credit provider had notice; (d) the credit provider’s reasonable enforcement expenses. ________________________________________ [Editorial note: UCCC s 97 provided as follows:

[page 411] Matters for which account can be debited after mortgagee sale of goods 97 A credit provider that sells mortgaged goods under section 96 is entitled to deduct from the proceeds of that sale only the following amounts— (a) the amount currently secured by the mortgage in relation to the credit contract, not being more than the amount required to discharge the contract; (b) the amount payable to discharge any prior mortgage to which the goods were subject; (c) the amounts payable in successive discharge of any subsequent mortgages to which the goods were subject and of which the credit provider had notice; (d) the credit provider’s reasonable enforcement expenses.]

COMMENTARY ON SECTION 105 [105.05] Outline After selling mortgaged goods, the credit provider must

credit the mortgagor with the proceeds of sale less any amounts which the credit provider is entitled to deduct from those sale proceeds (s 104(2)). The amounts which a credit provider may deduct from sale proceeds are specified in s 105: the amount currently secured by the mortgage for the credit contract (up to the amount required to discharge the contract); amounts required to discharge prior mortgages; amounts required to discharge subsequent mortgages of which the credit provider is aware; and reasonable enforcement expenses. [105.10] “Enforcement expenses” The term “enforcement expenses” is defined in ss 107 and 204.

Compensation to mortgagor 106 (1) [Default by credit provider] The court, on application by a mortgagor, may order a credit provider to credit the mortgagor with a payment, fixed by the court, exceeding the net proceeds of sale if it is not satisfied that the credit provider sold the goods as soon as reasonably practicable, or at a time agreed between the credit provider and the mortgagor, for the best price reasonably obtainable. 106 (2) [Compensation in favour of other mortgages] On application by a mortgagor, the mortgagee under any prior mortgage to which the goods are subject or the mortgagee under any subsequent mortgage of which the credit provider has notice, the court, if not satisfied that the credit provider exercised its power of sale in accordance with this Division, may make an order requiring the credit provider to compensate the mortgagor or the relevant mortgagee for any loss suffered as a result. 106 (3) [Onus of proof] The onus of proving that a power of sale was exercised in accordance with this Division is on the credit provider that exercised it.

________________________________________ [Editorial note: UCCC s 98 provided as follows: Compensation to mortgagor 98 (1) [Default by credit provider] The Court, on application by a mortgagor, may order a credit provider to credit the mortgagor with a payment, fixed by the Court, exceeding the net proceeds of sale if it is not satisfied that the credit provider sold the goods as soon as reasonably practicable, or at a time agreed between the credit provider and the mortgagor, for the best price reasonably obtainable. 98 (2) [Compensation in favour of other mortgages] On application by a mortgagor, the mortgagee under any prior mortgage to which the goods are subject or the mortgagee under any

[page 412] subsequent mortgage of which the credit provider has notice, the Court, if not satisfied that the credit provider exercised its power of sale in accordance with this Division, may make an order requiring the credit provider to compensate the mortgagor or the relevant mortgagee for any loss suffered as a result. 98 (3) [Onus of proof] The onus of proving that a power of sale was exercised in accordance with this Division is on the credit provider that exercised it.]

COMMENTARY ON SECTION 106 [106.05] Outline Section 106 of the Code allows the court to order compensation to a mortgagor if the court is not satisfied that the credit provider sold the goods as soon as reasonably practicable, or at a time agreed between the credit provider and the mortgagor, for the best price reasonably obtainable. It also provides that the mortgagor and any other prior or subsequent mortgagee of which the credit provider is aware may seek compensation for any loss arising because the credit provider failed to exercise its power of sale in accordance with Div 4 of Pt 5. This compensation would be in addition to any penalties imposed on the credit provider for failure to comply with the specific provisions of Div 4 of Pt 5. Section 106(1) and (2) duplicate each other to some extent. [106.10] Manner of sale The Code does not provide for any specific manner of sale. Therefore, a credit provider is entitled to sell the goods in any manner

it chooses provided it complies with the requirement in s 106 that the goods be sold as soon as reasonably practicable, or at a time agreed between the credit provider and the mortgagor, and for the best price reasonably obtainable. Note the distinction between the obligation imposed on a credit provider by s 106 to sell mortgaged goods “as soon as reasonably practicable or at a time agreed between the credit provider and the mortgagor” and the general law position that a mortgagee may sell when he pleases (Reliance Permanent Building Society v Harwood-Stamper [1944] Ch 362 at 372; [1944] 2 All ER 75) (see [85.30]). Where a credit provider has recovered goods, but undertakes during proceedings not to continue enforcement proceedings until after their application is decided, s 106 does not apply (Abiye v General Motors Acceptance Corp Australia [2003] VCAT 1170). [106.15] Onus of proof The onus of proving that the credit provider exercised the power of sale in accordance with Div 4 of Pt 5 lies on the credit provider. Credit providers should therefore ensure that they have sufficient evidence to discharge this onus.

DIVISION 5 — ENFORCEMENT EXPENSES Recovery of enforcement expenses 107 (1) [Reasonable enforcement costs] A credit provider must not recover or seek to recover enforcement expenses from a debtor, mortgagor or guarantor in excess of those reasonably incurred by the credit provider. Enforcement expenses of a credit provider extend to those reasonably incurred by the use of the staff and facilities of the credit provider. [page 413] 107 (2) Civil effect Any provision of the credit contract, mortgage or guarantee that appears to confer a greater right is void. If enforcement

expenses are in fact recovered in excess of this limitation, they may be recovered back. 107 (3) [Dispute over amount] If there is a dispute between the credit provider and the debtor, mortgagor or guarantor about the amount of enforcement expenses that may be recovered by the credit provider, the court may, on application by any of the parties to the dispute, determine the amount of that liability. ________________________________________ [Editorial note: UCCC s 99 — apart from numbering the section is unchanged.]

COMMENTARY ON SECTION 107 [107.05] Reasonable enforcement expenses Only enforcement expenses reasonably incurred by a credit provider may be recovered from a debtor, mortgagor or guarantor (s 107(1)). These may include internal expenses of the credit provider and would certainly include any external costs incurred by the credit provider. Prior to the Consumer Credit (Queensland) Amendment Act 1998, there was debate as to whether s 99(1) of the UCCC (s 107 of the Code) extended to a credit provider’s internal and external enforcement expenses. The explanatory notes to the Consumer Credit (Queensland) Amendment Act state: There is considerable doubt as to whether s 99(1) entitles a credit provider to recover, as enforcement expenses, expenses incurred internally by the use of staff and facilities of the credit provider as distinct from using out sourced agencies … It has been accepted that if the provision currently permits the recovery only of externally incurred expenses, the result is more likely than not disadvantageous to the debtor or guarantor as it is generally believed that the expenses incurred will be higher if external agencies are engaged.

Consequently, the section was clarified by the Consumer Credit (Queensland) Amendment Act to ensure that internal (ie, within the organisation) expenses are recoverable if those internal expenses are reasonable. Section 107(1) now states that expenses “reasonably incurred by the use of the staff and facilities of the credit provider” fall within the ambit of “enforcement expenses”. This is to provide equivalence between internal

and external (ie, third party) expenses of the credit provider. This was affirmed in Abiye v General Motors Acceptance Corp Australia [2003] VCAT 1170. Despite the clarification of s 107, care still needs to be given to the drafting of enforcement expense reimbursement clauses. A number of cases have considered whether a mortgagee may recover from a debtor its internal enforcement expenses (see, for example, Sandtara Pty Ltd v Australian European Finance Corp Ltd (1990) 20 NSWLR 82; NSW ConvR 55-530; [1990] ANZ ConvR 454; Inglis v Commonwealth Trading Bank of Australia (1973) 47 ALJR 234 and Cotterell v Stratton (1872) LR 8 Ch App 295). The cases referred to above state that the common law rule is that a mortgagee is not entitled to charge a debtor for its internal enforcement expenses, unless the parties have specifically agreed that the mortgagee may do so. Consequently, credit providers should ensure that the drafting of an enforcement expenses reimbursement clause catches the expense in question. [page 414] [107.10] Excess enforcement expenses to be repaid Any amount paid to a credit provider in excess of the limitation in s 107(1) may be recovered by the debtor, mortgagor or guarantor (s 107(2)). [107.15] Void provision Any provision in the credit contract, mortgage or guarantee which appears to confer a right to recover an amount greater than reasonable enforcement expenses is void (s 107(2)). Duggan J in Barker v Perpetual Trustees Australia Ltd (2003) 85 SASR 263; 227 LSJS 395; [2003] SASC 148; BC200302521 stated that any clause entitling a credit provider to recover enforcement expenses should be read so that it is consistent with the policy considerations inherent within the Code (at [39]). See also Bayford v St George Bank Ltd [2003] SASC 210; BC200303580. [107.20] “Enforcement expenses” The term “enforcement expenses” is defined in ss 107 and 204.

[107.25] Disputed expenses A debtor, mortgagor, guarantor or the credit provider may apply to the court to determine any dispute in relation to the amount of enforcement expenses (s 107(3)). (Note that under the UCCC regime, prior to the Consumer Credit (Queensland) Amendment Act 1998 (Qld), this provision existed in the Western Australian Code only.) [107.30] Relationship between enforcement expense and a default administration fee In Ristic v Greater Building Society Ltd [2002] NSWCA 266; BC200204578, the court considered the interrelationship of a default administration fee and enforcement expenses. The action was brought under common law and the Contracts Review Act 1980 (NSW) even though the loan agreement in question was regulated by the Code. The credit contract contained both a provision requiring the debtor to pay all reasonable enforcement expenses as well as a fixed default administration fee. The court found that the default administration fee dealt with indirect internal administration costs and the enforcement expenses dealt with direct external expenses of enforcement proceedings. The court conceived the circumstances where there may be an overlap, and stated that if duplication occurred it would probably be found to be “unreasonable”. Otherwise, the court held that the two (ie, the enforcement expenses and the default administration fee) can stand together. It is also likely that any duplication would now be considered “unfair” under the unfair contract terms provisions of the ASIC Act (Pt 2, Subdiv BA). [107.35] Case St George Bank Ltd v McCormack (2008) 253 LSJS 70; [2008] SASC 8; BC200800072.

DIVISION 6 — MORTGAGOR’S REMEDIES Mortgagor may apply to regain possession of mortgaged goods

108 (1) [Order for return of possession of goods] If a credit provider takes possession of [page 415] mortgaged goods in contravention of Division 2 or Division 4, the court may, on the application of the mortgagor, order the credit provider, at the credit provider’s expense, to return possession of the goods to the mortgagor. 108 (2) [Order where default not remedied] An order may be made under subsection (1) even though the relevant default has not been remedied. 108 (3) [Contravention] A person who contravenes an order under subsection (1) commits an offence. Criminal penalty: 30 penalty units. 108 (4) [Strict liability offence] Subsection (3) is an offence of strict liability. Note: For strict liability, see section 6.1 of the Criminal Code.

________________________________________ [Editorial note: There was no comparable UCCC provision.]

COMMENTARY ON SECTION 108 [108.05] Mortgagor’s remedies — right to regain possession of goods Part 5, Div 6 of the Code is a new division which was introduced by the NCCP Act regime changes. It deals with mortgagors’ remedies and gives a mortgagor additional rights against a credit provider who takes possession of mortgaged goods in contravention of Div 2 (Enforcement of credit contracts, mortgages and guarantees) or Div 4 (Enforcement procedures for goods mortgages). Under s 108, a mortgagor may apply to the court to regain possession of the mortgaged goods — even if the relevant default has not been remedied.

If the credit provider contravenes a court order to return the mortgaged goods, they commit an offence that carries a criminal penalty of 30 penalty units (s 108(3)). Under the NCCP Act regime changes, failure to comply with s 108(3) was made an offence of strict liability by the insertion of s 108(4). (See paras 17 and 18 of the “Overview of the National Credit Code” for commentary on penalty units and strict liability.)

Order for possession for mortgagor 109 (1) [Order for delivery of goods] The court may, when making an order under subsection 108(1), order a person who has possession of the goods to deliver them to the mortgagor at a specified time or place or within a specified period. 109 (2) [Costs of delivery] If the person is not the credit provider, the court may also order the credit provider to pay the person’s costs of delivering the goods to the mortgagor. 109 (3) [Variation] The court may, on the application of a mortgagor or other person required to deliver goods to a mortgagor, by order vary the place at which or time or period within which goods must be delivered to the mortgagor. 109 (4) [Contravention] A person who contravenes an order under this section commits an offence. Criminal penalty: 30 penalty units. 109 (5) [Strict liability offence] Subsection (4) is an offence of strict liability [page 416] Note: For strict liability, see section 6.1 of the Criminal Code.

________________________________________

[Editorial note: There was no comparable UCCC provision.]

COMMENTARY ON SECTION 109 [109.05] Order for delivery of goods Section 109 was introduced by the NCCP Act regime changes. The section provides that if the court makes an order under s 108, it may also order any person who has the goods to deliver them to the mortgagor at a specified time or place or within a specified period. If that person is not the credit provider, the credit provider may be ordered to pay the person’s costs incurred in delivering the goods to the mortgagor. If requested by the mortgagor or the person delivering the goods, the court may vary the time or place for the delivery or the period within which the goods must be delivered to the mortgagor. A person who contravenes a delivery order under s 109(1) commits an offence that carries a criminal penalty of 30 penalty units (s 109(4)). Under the NCCP Act regime changes, failure to comply with s 109(4) was made an offence of strict liability by the insertion of s 109(5). (See paras 17 and 18 of the “Overview of the National Credit Code” for commentary on penalty units and strict liability.)

Ancillary or consequential orders 110 (1) [Application of section] This section applies if the court makes an order under this Division. 110 (2) [Ancillary or consequential orders] The court may make ancillary or consequential orders it considers appropriate, including, for example, orders to restore the parties to the position they were in before the taking of possession in contravention of Division 2 or Division 4. 110 (3) [Damage caused by taking possession] Without limiting subsection (2), the court may order that the mortgagor be paid compensation for any damage to the goods because of the taking of possession. ________________________________________

[Editorial note: There was no comparable UCCC provision.]

COMMENTARY ON SECTION 110 [110.05] Other orders — including restitution or compensation If the court makes an order under s 108 or s 109, it may also make any ancillary or consequential orders it considers appropriate. This may include orders to restore parties to the position they were in before the credit provider took possession of the goods or to compensate the mortgagor for any damage caused to the goods as a result of the credit provider taking possession of them.

[page 417]

Part 6 — Penalties for defaults of credit providers DIVISION 1 — PENALTIES FOR BREACH OF KEY DISCLOSURE AND OTHER REQUIREMENTS Key requirements 111 (1) [Credit contracts] For the purposes of this Division, a key requirement in connection with a credit contract (other than a continuing credit contract) is any one of the requirements of this Code contained in the following provisions: (a) subsection 17(3); (b) subsection 17(4); (c) subsection 17(5); (d) subsection 17(6); (e) paragraphs 17(8)(a) and (b) — but only in respect of retained credit fees and charges; (f)

subsection 17(9);

(g) subsection 17(11); (h) paragraphs 17(15)(a) and (b); (ha) subsection 17(15A); (i)

subsection 23(1) — but only at the time the credit contract is entered into;

(j)

subsection 32A(1);

(k) subsection 32AA(2). [subs (1) am Act 130 of 2012 s 3 and Sch 2 item 24, eff 1 Mar 2013; s 3 and Sch 4 item 16, eff 1 July 2013]

111 (2) [Continuing credit contracts] For the purposes of this Division, a key requirement in connection with a continuing credit contract is any one of the requirements of this Code contained in the following provisions: (a) paragraph 17(3)(b); (b) subsection 17(4); (c) subsection 17(5); (d) paragraphs 17(8)(a) and (b) — but only in respect of retained credit fees and charges; (e) subsection 17(9); (ea) subsection 17(15A); (f)

subsection 23(1);

(fa) subsection 32A(1); (fb) subsection 32AA(2); (g) subsection 34(6); (h) section 35. [subs (2) am Act 130 of 2012 s 3 and Sch 2 item 25, eff 1 Mar 2013; s 3 and Sch 4 item 17, eff 1 July 2013]

111 (3) [Application] A key requirement relating to a disclosure or a statement of account extends to the requirements set out in Part 2 as to the manner in which the disclosure or statement is to be made, but does not extend to any requirements set out in the regulations. [page 418] ________________________________________ [Editorial note: UCCC s 100 provided as follows:

Key requirements 100 (1) [Credit contracts] For the purposes of this Division, a key requirement in connection with a credit contract (other than a continuing credit contract) is any one of the requirements of this Code contained in the following provisions— (a) section 15(B); (b) section 15(C); (c) section 15(D); (d) section 15(E); (e) section 15(G)(a) and (b) — but only in respect of retained credit fees and charges; (f)

section 15(H);

(g) section 15(J); (h) section 15(N)(a) and (b); (i)

section 21(1) — but only at the time the credit contract is entered into.

100 (2) [Continuing credit contracts] For the purposes of this Division, a key requirement in connection with a continuing credit contract is any one of the requirements of this Code contained in the following provisions— (a) section 15(B)(b); (b) section 15(C); (c) section 15(D); (d) section 15(G)(a) and (b) — but only in respect of retained credit fees and charges; (e) section 15(H); (f)

section 21(1);

(g) section 32(E); (h) section 33. 100 (3) [Application] A key requirement relating to a disclosure or a statement of account extends to the requirements set out in Part 2 as to the manner in which the disclosure or statement is to be made, but does not extend to any requirements set out in the regulations.]

COMMENTARY ON SECTION 111 [111.05] Outline and overview Civil penalties under Credit Act Under the precursor to the UCCC — the Credit Act — the civil penalty regime was draconian, and applied automatically upon breach. Section 42 of the Credit Act provided that the credit provider automatically lost its entitlement to credit charges under the credit contract if the credit provider failed to comply with the requirements of ss 35, 36, 39, 40(1) or s 91 of the Credit Act. The civil penalty regime under

the Credit Act directly affected the contractual relationship between the credit provider and the debtor because s 42 of the Credit Act removed the right of the credit provider to receive, and the obligation of the debtor to pay, any credit charges under the credit contract. Section 42 of the Credit Act was expressed to be subject to s 85 of the Credit Act, which permitted a credit provider to apply to the court for an order increasing the debtor’s liability. Applications under s 85 of the Credit Act could be made in relation to one contract, a class of contracts, or in relation to one or several contraventions (s 86 of the Credit Act). In making a determination under s 85 of the Credit Act, a court could determine to what extent the debtor should pay credit charges under their credit contract. Trust funds were established in Victoria, New South Wales, [page 419] Queensland and the Australian Capital Territory. If it was unreasonable to require the credit provider to adjust each debtor’s account or refund money on an individual basis, the court required payment into the fund. New South Wales, Western Australia and Queensland introduced “minor errors” provisions (s 86A of the Credit Act) under which notice of the credit provider’s application was required to be given to the relevant consumer affairs agency but not to any other person. The court could excuse a credit provider for a contravention or failure of a minor nature that was unlikely to disadvantage any debtor. The court considered factors such as the honesty of the credit provider and the nature and number of contraventions. The civil penalty regime imposed by the Credit Act supported the Act’s truth in lending objectives. A secondary function of the civil penalty regime was to compensate debtors for losses arising from any contravention. Civil penalties under the Code Unlike the Credit Act, the civil penalty regime of the Code is not automatic upon breach. This change in approach was introduced with the UCCC. Application must be made by a party to the

credit contract, the guarantor or ASIC (s 112(1)). (Under the UCCC, the power to apply to the court lay with the relevant government consumer agency, rather than ASIC (s 101(1) of the UCCC). The Code provides for civil penalties only for breaches of “key requirements”, which are identified in s 111. Generally, the key requirements relate to matters of disclosure at the time the contract is entered into, or the inclusion of prohibited amounts or, in the case of continuing credit contracts, errors in statements of account. A contravention of a key requirement does not, by itself, affect the contractual relationship between the credit provider and the debtor. The penalty which may be imposed by the court under the Code depends on who makes the initial application to the court. Whoever makes the application, the court must determine whether a contravention has occurred (s 113(1)) and may order a monetary penalty in the nature of a fine if the credit provider has contravened a key requirement (s 113(2)). If the application is made by a credit provider or ASIC (or, under the UCCC, by the government consumer agency), the fine will be paid to ASIC on behalf of the Commonwealth (s 117). (Under the UCCC, the fine was paid into a trust fund or, in the absence of such a fund, to the relevant government consumer agency (s 106 of the UCCC).) The maximum fine for any one contravention is $500,000 (s 116). On an application by the debtor or guarantor under s 112 of the Code, the maximum penalty which may be imposed by the court is generally an amount not exceeding the amount of interest charges payable under the credit contract (s 114(1)). The court can order a greater penalty by way of compensation if the debtor or guarantor can establish that the debtor has suffered a loss (s 114(2)). A civil penalty will be set off against amounts due under the credit contract or, if the credit contract has been paid out, the civil penalty will be a debt due by the credit provider to the debtor or guarantor (s 115(1)). The matters to be taken into account by the court in determining the appropriate penalty are set out in s 113(4). The scope of the inquiry to be conducted by the court under the Code to determine the appropriate penalty is wider than the inquiry previously conducted under the Credit Act because the

[page 420] court must now, if requested by the credit provider, also consider the prudential standing of the credit provider (s 113(3)). This provision was inserted to allay concerns that the magnitude of the potential penalties (especially for a widespread systemic error) could jeopardise the financial standing of a credit provider. Should a credit provider make an application? As stated above, the civil penalty regime under the Code is not automatic upon breach. Accordingly, if a credit provider becomes aware of a contravention of a key requirement, a credit provider is not under any obligation to make an application under s 112 of the Code. If the credit provider can establish that the breach is isolated or random, the credit provider may quite reasonably decide not to make an application, particularly if it rectifies the breach and fully unwinds the effect of the breach, including by compensating the debtor for any loss suffered as a result of the breach. However, if the debtor or guarantor subsequently makes an application, failure to act after a breach has been discovered may be taken into account by a court in determining an appropriate penalty (see s 113(4) (g)), as is the credit provider’s failure to make an application in respect of the previous breach (s 113(4)(h)). If the credit provider establishes that the contravention is systemic or widespread, the credit provider should bring an application under s 112 as soon as practicable. This is because: as soon as an application is made by the credit provider (or ASIC) anywhere in Australia, debtors and guarantors are precluded from making an application under s 112 in respect of the same contravention (s 112(2) — see GE Capital Finance Australia v Various Debtors (2000) ASC ¶155–036); the court’s decision as to whether there has been a contravention will bind all debtors whose contracts may be affected; the civil penalty Australia-wide will be capped at $500,000 (s 116); and section 113(4)(h) of the Code, which provides that the court will

take into account the time taken to make the application, encourages a credit provider to apply as soon as practical. UCCC position The above rationale also applied in relation to systemic breaches of the UCCC. The only difference is that, under s 101 of the UCCC, as soon as the credit provider made an application in one jurisdiction, debtors and guarantors were precluded from applying in respect of the same contravention in that jurisdiction and (apart from in Western Australia [see [112.45]) in all other jurisdictions (s 101(2) of the UCCC). [111.09] Australian credit licence implications Following the commencement of the NCCP Act, Australian credit licence (ACL) holders must also be conscious of the obligation under their ACL to have adequate arrangements and systems to ensure compliance with the “credit legislation”, including the Code (NCCP Act s 47(1)(d) and (k)). [111.10] Modification of key requirements Prior to the Consumer Credit (Queensland) Amendment Act 1998 (Qld), the transitional Regulations modified the key requirements in s 100 of the UCCC. In particular, transitional reg 72 [page 421] provided that if any requirements of ss 15, 21, 32 or 33 of the UCCC were modified by the transitional provisions in the Regulations, the key requirements in s 100 of the UCCC were also modified. Also, reg 72 provided that disclosure of government fees and charges would not be a key requirement. The Consumer Credit (Queensland) Amendment Act incorporated the substance of former transitional reg 72 into the UCCC and these changes have been carried into the Code. Section 111(1)(e) and (2)(d) of the Code specifically state that s 17(8)(a) and (b) are only key requirements in respect of retained credit fees and charges. This means, for example, that disclosures of government charges do not fall within the s 111 key requirements.

[111.15] Key requirements The civil penalty regime of the Credit Act could apply to relatively minor contraventions. In contrast, the less draconian civil penalty regime in the Code applies only if specified “key requirements” have been contravened. The key requirements are identified in s 111(1) (in relation to credit contracts) and (2) (in relation to continuing credit contracts). There is some overlap between s 111(1) and (2). [111.20] Key requirements — credit contracts In the case of credit contracts, apart from continuing credit contracts, the key requirements are: (a) section 17(3) — amount of credit: the amount of credit, to whom it is to be paid and the amounts payable to each of them (but only if both are ascertainable), and the maximum amount of credit or the credit limit or, if the contract is for the sale of land or goods by instalments, a description of the land or goods and their price; (b) section 17(4) — annual percentage rate: the annual percentage rate or rates, how they apply, and if they are determined from a reference rate, details of that reference rate; (c) section 17(5) — calculation of interest charges: the method of calculation of interest charges, and the frequency with which they are to be debited to an account; (d) section 17(6) — total interest charges: if the credit contract is for a term of seven years or less, the total interest charges payable under the credit contract; and (e) section 17(8)(a) and (b) — retained credit fees and charges: when any retained credit fees and charges are payable, and the amounts of any retained credit fees and charges or, if their amounts are not ascertainable, their method of calculation. The reference to s 17(8) in s 111(1)(e) reflects a change to the UCCC which was made by the Consumer Credit (Queensland) Amendment Act 1998 so that a failure to disclose non-retained credit fees and charges would not render the credit provider potentially liable for a civil penalty. This carve out has been carried into the Code. Retained credit fees and charges are defined in s 204

(see commentary on s 204). Examples of non-retained credit fees and charges include: … those paid by the credit provider to an unrelated third party such as valuation fees, survey fees, municipal fees and charges and, of course, government fees and charges. [Explanatory notes to the Consumer Credit (Queensland) Amendment Act 1998.]

[page 422] (f)

section 17(9) — changes to interest and credit fees and charges: a statement that the annual percentage rate or rates, and the amount or frequency of payment, may vary, or a new credit fee or charge may be imposed, and how the debtor will be informed of the variation or the new fee or charge;

(g) section 17(11) — default rate: if the contract provides for a default rate, a statement to that effect, the default rate and how it is to be applied and, if the default rate is determined from a reference rate, details of that reference rate; (h) section 17(15)(a) and (b) — insurance: if a credit provider knows that the debtor is to enter into a credit related insurance contract, and the insurance is to be financed under the credit contract, the name of the insurer and the amount payable or, if the amount payable is not ascertainable, the method of calculation; (i)

section 17(15A) — tenancy protection provision for reverse mortgages;

(j)

section 23(1) — prohibited monetary obligations: s 23(1) prohibits the imposition of credit fees or charges, interest or other charges (of a type or amount) not permitted by the Code (contravention of this prohibition is a key requirement only if it is contravened when the credit contract is entered into);

(k) section 32A(1) — annual percentage rate (APR) (s 32A(1)) prohibits a credit provider entering into a credit contract if the APR exceeds 48 per cent; and

(l)

section 32AA(2) — APR (s 32AA(2)) prohibits a non-ADI lender making certain increases to a credit contract (other than an SACC and bridging finance contract) so that the APR exceeds 48 per cent.

[111.25] Key requirements — continuing credit contracts In the case of continuing credit contracts, the key requirements are: (a) section 17(3)(b) — maximum amount of credit: the maximum amount of credit agreed to be provided or the credit limit; (b) section 17(4) — annual percentage rate (APR) (see (b) in [111.20]); (c) section 17(5) — calculation of interest charges (see (c) in [111.20]); (d) section 17(8)(a) and (b) — retained credit fees and charges (see (e) in [111.20]); (e) section 17(9) — changes to interest and credit fees and charges (see (f) in [111.20]); (f)

section 17(15A) (see (i) in [111.20]);

(g) section 23(1) — prohibited monetary obligations (see (i) in [111.20], but the key requirement is not restricted to when the credit contract is entered into); (h) section 32A(1) (see (k) in [111.20]); (i)

section 32AA(2) (see (l) in [111.20]);

(j)

section 34(6) — interest charges: amount of interest debited to the debtor’s account during a statement period and when it was debited, and the APR and details of any changes to that rate; and [page 423]

(k) section 35 — opening balance: the opening balance shown in a statement of account must not exceed the closing balance in the preceding statement of account.

[111.30] Key requirements — omissions Not all requirements of ss 17 and 34 are identified as key requirements. For example, statements as to what securities are to be provided to the credit provider (s 17(13)) and any commissions payable (s 17(14)) are excluded. Although some disclosure requirements are omitted because they are less significant (such as the credit provider’s name: s 17(2)), it is likely that the omission of the disclosure of securities and commissions can be explained on different bases. Since all mortgages (apart from a limited class of goods mortgage — see s 42(3)) must be in writing, the debtor should be aware of any securities to be granted to the credit provider. Also, undisclosed commissions may contravene secret commissions legislation in each jurisdiction. [111.35] Key requirements — Regulations A key requirement extends to the requirements set out in Pt 2 of the Code as to the manner in which the disclosure or statement is to be made, but does not extend to any requirement imposed by the Regulations (s 111(3)). [111.40] Code litigation — general observations There has certainly been far less litigation under the UCCC and the Code than was the case under the Credit Acts. Further, the role of the EDR schemes seems to have displaced the widespread active involvement of courts. Case categories However, despite the lack of widespread Code cases, cases on the interpretation of the Code generally fall into the following categories: Category 1 — test cases on the meaning of a Code section Some of the key requirements are difficult to interpret. They are not susceptible to unequivocal opinion as to what form or content will necessarily comply with the Code. As there is no provision of the Code which enables credit providers to seek declarations as to the meaning of specific sections of the Code, credit providers must adopt a “wait and see” approach; and Category 2 — cases arising from inadequate systems, documents and/or procedures Where credit providers fail to meet Code requirements, systemic breaches may result. These cases are likely to be initiated by credit providers requiring the protection of the

$500,000 penalty ceiling for any one contravention (s 116). These cases could also be commenced by ASIC, particularly if a credit provider’s lending practices are notoriously non-Code compliant. As the Code does not compel a credit provider to make an application following a key requirement breach, a credit provider will probably not file an application in respect of “one-off” or isolated errors. In such cases, if the credit provider remedies the breach (as far as it is possible to do so), makes any necessary corrections to the debtor’s account, and compensates the debtor for any loss that may have resulted from the breach, the debtor is likely to be in as good (if not better) a position as [page 424] they would have been had an application been made to the court. In these circumstances, for a random non-systemic breach there would be little to be gained for anyone in pursuing the matter any further. [111.45] Code litigation — approaching Code litigation Option 1: Arguing the case A key requirement application involves argument on both factual and legal matters. In order to support the credit provider’s “case” for no penalty or a low penalty, evidence is required (as applicable depending on the circumstances of the credit provider) to address the matters set out in s 113(4) of the Code, for example: the conduct of the credit provider and debtor before and after the credit contract was entered into; the loss or other detriment (if any) suffered by the debtor as a result of the contravention; when the credit provider first became aware, or ought reasonably to have become aware, of the contravention; and any systems or procedures of the credit provider to prevent or identify contraventions — this would involve information on

significant and thorough efforts made or steps taken by the credit provider to comply with the Code in the first instance and to ensure continuing compliance. Evidence may also be required to deal with the following matters, for example: the credit provider’s history of Code compliance; facts surrounding the making of the credit contract; facts surrounding the enforcement of the credit contract; and facts surrounding the involvement of agents. Option 2: Separation of fact and law O’Connor J of the Fair Trading Tribunal of New South Wales acknowledged in relation to UCCC cases that there may be value in separating questions of fact and law in hearings on breaches in order to minimise the significant expenses that are incurred in relation to those cases (see K O’Connor, The Experiences of the Tribunal in Dealing with the Consumer Credit Code, IIR Credit Law Conference, Sydney, 19–20 May 1999, pp 6–7). He suggested that the tribunal could assess the legal issues on the basis of “sample examples” and that if no adverse conclusion was reached, no further evidence would need to be generated. If the argument with respect to breach of a provision of the Code is a significant legal issue which has the potential to affect all credit contracts, there may be a tactical and cost advantage in seeking separate consideration of the legal issues in advance of any consideration of the appropriate penalty. If the court finds that no contravention of a key requirement occurred, there is no need to address the penalty question. Option 3: Settling the case It is important to stress that settling a matter cannot guarantee that a debtor will make no further applications in respect of the regulated credit contract. It is open to them to file an application alleging a breach of another key requirement of the Code or to seek compensation under s 124 of the Code.

[page 425] It is not possible to include as part of a settlement deed an undertaking from the debtor that they will make no further applications in respect of the regulated credit contract. To do so would almost certainly (perhaps unless it were somehow “approved” by the court as part of the settlement — see below) constitute a breach of s 191 of the Code by requiring the debtor to forego their rights under the Code. Section 191(1) of the Code states that a provision of a contract or other instrument by which a person seeks to avoid or modify the effect of the Code is void. A credit provider which engages in such conduct is guilty of an offence under s 191(3), and can be liable for a maximum penalty of up to 100 penalty units. There are two possible settlement approaches: discontinuing the key requirement breach application made to the court; or seeking consent orders from the court in relation to the key requirement breach application. [111.50] Criminal penalty regime In addition to the Code’s pecuniary penalty and compensation regime, the Code also contains a criminal penalty regime. Criminal penalties take the form of fines and imprisonment. Various provisions of the Code provide for the imposition of penalties in the form of fines if those provisions are breached. For more serious contraventions, the criminal penalties take the form of fines and imprisonment. Those penalties are in addition to any civil penalties (including a compensation order under s 124) provided for by the Code. The Code stipulates the penalty units applicable for each offence, which means that a penalty must not exceed the number of penalty units set out in the Code. The term “penalty unit” is defined in s 4AA of the Crimes Act 1914 (Cth). At the time of writing, a penalty unit is $170. However, where an offence is committed by a body corporate, s 4B(3) of the Crimes Act permits a court to impose a pecuniary penalty of up to five times the amount of the

maximum penalty that the court may impose on a natural person convicted for the same offence. For example, the Code provides for criminal penalties for breaches of the requirements of: section 33 — statements of account; section 53 — mortgage requirements; section 62 — guarantee requirements; section 68 — unilateral variation of terms by credit provider; sections 64–71 — changes to contracts; section 88 — default notices; section 90 — enforcement of guarantees; section 91 — repossession of mortgaged goods; and sections 98–106 — enforcement procedures for mortgaged goods. [111.55] Reverse mortgages The Enhancements Act amended s 111 to state that a breach of s 17(15A) will be a breach of a key requirement under s 111. [page 426] [111.60] Cases Department of Consumer and Employment Protection v Chequecash Pty Ltd [2009] WASC 18; BC200900406; Crawford v Shakespeare Haney Securities Ltd [2008] QCA 363; BC200810338.

Application for order relating to key requirements 112 (1) [Standing] A party to a credit contract or a guarantor or ASIC may apply to the court for an order under this Division. 112 (2) [One application per contravention] A debtor or guarantor may not make an application for an order under this Division in respect of a

contravention under a contract if the contravention under that contract is or has been subject to an application for an order made by the credit provider or ASIC anywhere in Australia under this Code. 112 (3) [Exception] Subsection (2) does not prevent an application from being made for an order for the payment of compensation under section 118. ________________________________________ [Editorial note: UCCC s 101 provided as follows: Application for order relating to key requirements 101 (1) [Standing] A party to a credit contract or a guarantor or the Government Consumer Agency may apply to the Court for an order under this Division. 101 (2) [One application per contravention] A debtor or guarantor may not make an application for an order under this Division in respect of a contravention under a contract if the contravention under that contract is or has been subject to an application for an order made by the credit provider or a Government Consumer Agency anywhere in Australia under this Code or a corresponding law of another jurisdiction. 101 (3) [Exception] Subsection (2) does not prevent an application from being made for an order for the payment of compensation under section 107.]

COMMENTARY ON SECTION 112 [112.05] Application Four classes of persons may make an application to a court for orders under Div 1 of Pt 6. The classes are: the credit provider; the debtor or debtors; a guarantor in relation to the contract; and ASIC. The identity of the party making the application is significant because it affects the penalty that the court may order (see ss 114 and 116). [112.06] Court jurisdiction — Code position Division 1 of Pt 4-3 of the NCCP Act confers jurisdiction for Code-related civil proceedings on the Federal Court, the Federal Magistrates Court and state and territory courts, subject to specified financial limits. In brief, state or territory courts have

jurisdiction subject to their general jurisdictional limits (including limits as to locality and subject matter); the Federal Magistrates Court has jurisdiction to make awards up to $750,000 or any other amount prescribed by the Regulations; and there are no limits on the Federal Court’s jurisdiction (NCCP Act s 187). (The explanatory memorandum explains that the Commonwealth can only confer jurisdiction on [page 427] those courts within the meaning of Ch III of the Constitution — the result of this is that a “court” for the purposes of the Code no longer includes the state and territory tribunals which could hear cases relating to the UCCC (see [112.10])). (This conferral of jurisdiction is subject to NCCP Act s 188 relating to writs of mandamus or prosecution or injunctions sought against an officer of the Commonwealth in respect of their decision to prosecute a person for an offence against the NCCP Act.) It is not clear how the $750,000 cap is to be applied if ASIC, or a credit provider, brings an application. If they apply in respect of a breach of a single key requirement, the maximum award cannot exceed $500,000 (see s 116), which would fall within the Federal Magistrates Court’s jurisdiction. However, the case is less clear where an application relates to breaches of multiple key requirements (particularly across multiple contracts) — in this case, the total potential civil penalty could exceed $750,000 (ie, a maximum of $500,000 for each key requirement type). Similarly, a court may order payment of an amount “which the court thinks fit to grant” (see s 77(e)) if ASIC brings an application in respect of one or more credit contracts (s 79(3)(a)) for the court to reopen those contracts under s 76. Again, the total award could potentially exceed $750,000. In each case, the award per individual contract may be under $750,000 — so the question arises: Is the $750,000 cap to be applied to each individual credit contract or debtor or to all similarly affected credit contracts or debtors, the subject of the application, in aggregate?

[112.07] UCCC position Under the UCCC, it was the relevant government consumer agency (rather than ASIC) which could apply to a “court” (see [112.10]) for orders under Pt 6, Div 1 of the UCCC. [112.10] UCCC court In the UCCC, “court” was defined in Sch 1 to mean “in relation to a provision of this Code … the Court or Tribunal which has by law jurisdiction under that provision”. In most jurisdictions, a tribunal was empowered to deal with applications under the UCCC. Queensland was an exception. In Queensland, s 7 required that proceedings be instituted in the court whose monetary jurisdiction was not exceeded by the total amount in dispute. If the application was made by the credit provider or the government consumer agency, the total amount in dispute could be regarded as $500,000 (the maximum civil penalty that could be awarded pursuant to s 105(1) of the UCCC), and the Supreme Court of Queensland is the only Queensland court with that monetary jurisdiction. However, it was more difficult to determine the amount in dispute if the application was made by the debtor or a guarantor. The maximum civil penalty was determined in accordance with s 103(1) of the UCCC. [112.15] “Order under this Division” Section 112 provides that parties (or a guarantor or ASIC) “may apply to the court for an order under this Division”. The orders that the court may make include: a declaration whether or not a key requirement has been contravened (s 113(1)). The court must make such a declaration upon an application being made; [page 428] an order that the credit provider pay an amount as a civil penalty (s 113(2)); an order that particulars of, or any matters relating to, an application for an order not be published (s 113(6)), or that notice of an application by ASIC or a credit provider be published in a newspaper circulating in one or more states or territories (s 119(2));

an order relating to the payment of the amount owed by the debtor or the credit provider as a result of an order for payment of a penalty (s 115(2)); an order that the credit provider compensate the debtor or guarantor for loss arising from a contravention of a key requirement (s 118); and interlocutory directions protecting the interests of the debtor or guarantor pending a final determination of the application (s 121). Unlike the regime imposed by the Credit Act, no automatic penalty flows from a breach of a key requirement. Division 1 of Pt 6 does not state that a court may order that no civil penalty be imposed notwithstanding the existence of a contravention of a key requirement. This follows, however, from the wording of s 113. Credit providers may make application for an order “under this Division” that the court impose no civil penalty in respect of a breach of a key requirement. See, for example, Fiduciary Services Ltd v Director-General of Fair Trading (1999) ASC ¶155-035; Macquarie Credit Union Ltd v Director-General, Dept of Fair Trading (1998) 2 ACCR 676; (1998) ASC ¶155-014; Suncorp-Metway Ltd v Director-General, Department of Equity and Fair Trading [2000] 2 Qd R 668; (1999) ASC ¶155-027; [1998] QSC 264; BC9806215; Re Esanda Finance Corp Ltd (2004) ASC ¶155-070; [2004] QSC 257; BC200405273. See also McKenzie v Smith; Lenehan v Smith (1998) ASC ¶155-025, where no penalty was imposed under s 102 of the UCCC (now s 113 of the Code) but orders were made under s 71 of the UCCC (now s 77 of the Code). In Commissioner for Consumer and Business Affairs v IOOF SA Credit Union Ltd (2003) 226 LSJS 205; [2003] SADC 38, it was held that where a contravention is neither deliberate nor oppressive of debtors, no penalty or a nominal penalty should be imposed. Since IOOF had spent $100,000 remedying the breaches, it was held that to impose a nominal penalty would serve no useful purpose. [112.20] Applications by debtors and guarantors If an application has been made by a credit provider or ASIC in respect of a contravention under a contract, the only order that a debtor or guarantor may seek in respect of that contravention is an order for compensation under s 118 (s 112(2) and (3)).

The words “the contravention under that contract” in s 112(2) are capable of being read narrowly to mean that a debtor or guarantor is precluded from making an application only if another application has been made in respect of the specific contravention under that debtor’s specific contract. This very narrow reading might be seen as inconsistent with the apparent purpose of the section, which is to limit the circumstances in which applications may be made by debtors and guarantors. A wide reading of the words, on the other hand, could mean that a debtor or guarantor is precluded from making an application if the credit provider or ASIC has made an application in any Australian jurisdiction in respect of a breach of the same key requirement, whether or not that application includes the particular credit contract in question. [page 429] Although the effect of s 112(2) is unclear, some support for the view that s 112(2) should be read restrictively is found in s 113(5). A middle path which would seem to be the most reasonable approach would be that a debtor or guarantor should be precluded from bringing an application in respect of a particular contravention under a credit contract if the credit provider or ASIC has brought an application in respect of the particular contravention and the debtor’s contract falls within the class of contracts referred to in the application by the credit provider or ASIC. [112.25] “Is or has been subject to an application” These words refer to the situation at the time the application is lodged by the debtor or the guarantor. Therefore, a debtor and any guarantor will be precluded from making an application under s 112(2) only if the contravention has already been dealt with or an application is current. Otherwise, a debtor or guarantor could be precluded from continuing an application if a credit provider or ASIC subsequently applies for an order. [112.30] Standing of debtors and guarantors Generally, an order under the civil penalty provisions does not directly affect the contractual relationship between the credit provider and a debtor. The debtor has no interest in the

amount which may be ordered to be paid (see s 117). This could be interpreted as meaning that debtors do not have a general right of intervention in applications by a credit provider or ASIC, except to seek compensation for loss pursuant to s 118. However, it is arguable that, if a debtor was to make an application for compensation under s 118 of the Code in the course of an application made under Pt 6 by a credit provider or ASIC, the joinder of the applications would be appropriate. Even if an application is not made by the debtor under s 118, the combination of: the power conferred by s 119(2) to advertise an application by a credit provider or ASIC; and the s 113(4) requirement that a court must consider certain matters including the conduct of the debtor and the loss or other detriment suffered by the debtor suggests that it is appropriate to join debtors who seek to participate in applications made by credit providers or ASIC. [112.35] UCCC position — s 101 Section 101 of the UCCC restricts a debtor or guarantor from applying under Pt 6, Div 1 of the UCCC if the contravention is or has been subject to an application for an order by the credit provider or government consumer agency “anywhere in Australia under this Code or a corresponding law of another jurisdiction”. However, the words “anywhere in Australia” and “or a corresponding law of another jurisdiction” were not included in s 101(2) of the UCCC enacted in Western Australia. Therefore, it seems that, under the UCCC, a debtor or guarantor would not have been precluded from applying in Western Australia if a credit provider or the government consumer agency had commenced an application in a jurisdiction other than Western Australia. It followed that if a credit provider or government consumer agency intended to prevent debtors or guarantors from applying in Western Australia in [page 430] respect of a contravention of a particular key requirement which was the

subject of an application in another jurisdiction, it was necessary to commence a separate action (or the only application) in Western Australia.

Penalty may be imposed for contravention of key requirement 113 (1) Declaration as to key requirement The court must, on an application being made, by order declare whether or not the credit provider has contravened a key requirement in connection with the credit contract or contracts concerned. 113 (2) Penalty orders The court may make an order, in accordance with this Division, requiring the credit provider to pay an amount as a penalty, if it is of the opinion that the credit provider has contravened a key requirement. 113 (3) Prudential standing The court, in considering the imposition of a penalty, must have regard primarily to the prudential standing of any credit provider concerned, or of any subsidiary of the credit provider (within the meaning of the Corporations Act 2001), if the credit provider or subsidiary takes deposits or is a borrowing corporation (within the meaning of that Act). However, the court is to have regard to that prudential standing only if the credit provider requests the court to do so. 113 (4) Other matters to be considered The court, in considering the imposition of a penalty, must have regard to the following: (a) the conduct of the credit provider and debtor before and after the credit contract was entered into; (b) whether the contravention was deliberate or otherwise; (c) the loss or other detriment (if any) suffered by the debtor as a result of the contravention; (d) when the credit provider first became aware, or ought reasonably to have become aware, of the contravention; (e) any systems or procedures of the credit provider to prevent or identify contraventions;

(f)

whether the contravention could have been prevented by the credit provider;

(g) any action taken by the credit provider to remedy the contravention or compensate the debtor or to prevent further contraventions; (h) the time taken to make the application and the nature of the application; (i)

any other matter the court considers relevant.

113 (5) Related contraventions The court must, for the purposes of determining an application for an order under this Division or the amount of a penalty, treat a contravention of a key requirement that occurs merely because of another contravention of a key requirement as being a contravention of the same kind. If a provision referred to in section 111 contains several requirements, the court must treat contraventions of more than one of those requirements as a single contravention of the one key requirement for the purposes of determining the amount of a penalty. 113 (6) Suppression of publication of application The court may, if it thinks it appropriate in the circumstances, order that particulars of or any matters relating to an application for an order under this Division not be published. ________________________________________ [Editorial note: UCCC s 102 provided as follows: Civil penalty may be imposed for contravention of key requirement 102 (1) Declaration as to key requirement The Court must, on an application being made, by order declare whether or not the credit provider has contravened a key requirement in connection with the credit contract or contracts concerned.

[page 431] 102 (2) Penalty orders The Court may make an order, in accordance with this Division, requiring the credit provider to pay an amount as a civil penalty, if it is of the opinion that the credit provider has contravened a key requirement. 102 (3) Prudential standing The Court, in considering the imposition of a civil penalty, must

have regard primarily to the prudential standing of any credit provider concerned, or of any subsidiary of the credit provider (within the meaning of the Corporations Act), if the credit provider or subsidiary takes deposits or is a corporation that is a borrower (within the meaning of that Act). However, the Court is to have regard to that prudential standing only if the credit provider requests the Court to do so. 102 (4) Other matters to be considered The Court, in considering the imposition of a civil penalty, must have regard to the following— (a) the conduct of the credit provider and debtor before and after the credit contract was entered into; (b) whether the contravention was deliberate or otherwise; (c) the loss or other detriment (if any) suffered by the debtor as a result of the contravention; (d) when the credit provider first became aware, or ought reasonably to have become aware, of the contravention; (e) any systems or procedures of the credit provider to prevent or identify contraventions; (f)

whether the contravention could have been prevented by the credit provider;

(g) any action taken by the credit provider to remedy the contravention or compensate the debtor or to prevent further contraventions; (h) the time taken to make the application and the nature of the application; (i)

any other matter the Court considers relevant.

102 (5) Related contraventions The Court must, for the purposes of determining an application for an order under this Division or the amount of a civil penalty, treat a contravention of a key requirement that occurs merely because of another contravention of a key requirement as being a contravention of the same kind. If a provision referred to in section 100 contains several requirements, the Court must treat contraventions of more than one of those requirements as a single contravention of the one key requirement for the purposes of determining the amount of a civil penalty. 102 (6) Suppression of publication of application The Court may, if it thinks it appropriate in the circumstances, order that particulars of or any matters relating to an application for an order under this Division not be published.]

COMMENTARY ON SECTION 113 [113.05] Declaration The court must make a declaration whether a contravention of a key requirement has occurred. This provision is mandatory — if an authorised person makes the application, the court must declare whether or not the credit provider has contravened a key requirement (Cashnow Pty Ltd v Various Debtors (VCAT, 1 March 2002, unreported). Under the Credit Act, it was uncertain whether the state tribunals had the power to make declarations that the legislation had been contravened. The

standard of proof to be applied is on the balance of probabilities — the Court of Appeal of the Supreme Court of Queensland in Queensland v Ward [2004] 1 Qd R 429; (2003) ASC ¶155-059; [2003] QCA 366; BC200304915 rejected arguments that there is criminal onus in s 102 of the UCCC (s 113 of the Code) applications. [113.10] Penalty orders Section 113(2) vests in the court a discretionary power to make “penalty orders” if it is “of the opinion” that a key requirement has been contravened. Presumably, if the court holds such an opinion, it will make a declaration to that effect in accordance with s 113(1). However, if the court declares that a key requirement has been contravened, it does not necessarily follow that the court will make an order requiring the credit provider to pay an amount as a civil penalty. The word “may” in s 113(1) confers a discretion on the court (s 210(1)) (see [112.15]). The court will commonly impose a penalty order [page 432] where the breach results in a financial benefit to the credit provider. However, in Re Esanda Finance Corp Ltd (2004) ASC ¶155-070; [2004] QSC 257; BC200405273 at [37], the court held that the breaches of the key requirements of the UCCC were significant enough to warrant a penalty order, despite the fact that the breaches resulted in no monetary benefit to the credit provider or detriment to the consumer. In Berckelman v DaimlerChrysler Services Australia Pty Ltd [2004] NSWCTTT 715, the New South Wales Consumer, Trader and Tenancy Tribunal made an order that a civil penalty, equivalent to 70 per cent of the total interest charges under the contract from the date the contract was entered into to the date when orders were made by the tribunal, be imposed. The tribunal justified the penalty as being appropriate in the following manner: The breaches of “key requirements” in this application go to non-disclosure. They are viewed seriously by this Tribunal. The Respondent’s behaviour before and after the making of this application, the conduct of its agents in respect of their business practices, its apparent lack of training, compliance and rectification of breaches in respect of the Code, all convince the Tribunal that a civil penalty should be imposed.

[113.15] Prudential standing Section 113(3) provides that, in imposing a civil penalty, the court must (if so requested by the credit provider) have regard primarily to the “prudential standing” of the credit provider. The court must have regard to the prudential standing if the credit provider requests, but is precluded from doing so if the credit provider does not make that request. Although the apparent intention of s 113(3) is to protect credit providers against orders that might cause them to suffer financial instability, the Code does not define “prudential standing”. Nor is the term defined in other Australian legislation, although a helpful guide is found in s 5 of the Banking Act 1959 (Cth), which defines “prudential matters” to mean, in relation to a bank: … matters relating to: (a) the conduct by an ADI, an authorised [non-operating holding company (NOHC)], a relevant group of bodies corporate, or a particular member or members of such a group, of any part of its or their affairs in such a way as: (i)

to keep the ADI, NOHC, group or member or members of the group in a sound financial position; or

(ii) not to cause or promote instability in the Australian financial system; or (iii) not to cause or promote instability in the New Zealand financial system; or (b) the conduct by an ADI, an authorised NOHC, a relevant group of bodies corporate, or a particular member or members of such a group, of its or their affairs with integrity, prudence and professional skill.

In the absence of any definition of “prudential standing” in the UCCC (or the Code), Lee J of the District Court of South Australia in Re Polish Community Credit Union Ltd (2000) ASC ¶155-037; [2000] SADC 7 adopted the following definition (at 9): I take the expression to mean the applicant’s financial capacity to meet its current commitments to borrowers and, beyond that, to serve the future needs of its members.

The purpose of s 113(3) is to ensure that penalties under the Code are not responsible for the financial failure of a credit provider, which is a theoretically [page 433]

possible outcome; for example, if loans made by a credit provider contained breaches of multiple key requirements, each of which was the subject of a $500,000 penalty. See the following examples of cases where tribunals have considered the prudential standing of credit providers: Re Stafford Parish Credit Union Ltd (admin appt’d) (QSC, Demington J, 765/98, 18 March 1998, unreported); Re Polish Community Credit Union Ltd (2000) ASC ¶155-037; [2000] SADC 7; Macquarie Credit Union Ltd v Director-General, Dept of Fair Trading (1998) 2 ACCR 676; (1998) ASC ¶155-014 at 148,500; Woolworths/Safeway Employees’ Credit Co-op v Various Debtors [2000] VCAT 1289. In the Woolworths case, a number of credit contracts failed to include a statement of the total amount of interest charges payable as required by s 17(6) of the Code, owing to a computer error. The mutual co-operative credit provider submitted that even a small penalty would significantly affect its small cash reserves, and would affect its whole membership. The Victorian Civil and Administrative Tribunal ultimately decided that no penalty should be ordered. A number of questions arise in relation to the taking into account of prudential standing and these are yet to be answered. Commenting extrajudicially, Cate McKenzie, Deputy President of the Victorian Civil and Administrative Tribunal, submitted the following considerations: Can the Tribunal take this factor into account and impose a greater penalty because the credit provider’s breach of key requirements is so fundamental, and so widespread through its contract portfolio, that its conduct will result in a total loss of customer confidence? Is prudential standing affected by the size of the organisation? If so, does this mean that a larger organisation might incur a larger civil penalty than a smaller one, even though each has breached the same key requirement in a similar way? Could the Tribunal, despite the fact that an organisation had committed grave breaches of many key requirements, order a lesser penalty because it takes into account that the payment of the penalty might affect the organisation’s financial viability? Is reputation in the market place (as distinct from actual ability to meet commitments) relevant?

Source: “Credit Code Breaches — The Approach of the Victorian Civil and Administrative Tribunal” (2004) 6 Butterworths Consumer Credit Bulletin 5 at [3.6.1]. [113.20] Other matters to be considered Section 113(4) lists the matters that a court must take into account in imposing a civil penalty. Section 113(4)

substantially repeats the criteria which have been followed by courts in determining civil penalty applications under the Credit Act (see Westpac Banking Corporation Ltd v Various Respondents (No 4) (1992) ASC ¶56187). These matters relate to the conduct of the credit provider (particularly, whether there was any dishonesty on the part of the credit provider, whether the credit provider’s systems for ensuring compliance with the Code are adequate, and whether the credit provider has compensated the debtor for any loss) and are stated to include “any other matter the court considers relevant”. Consideration of these matters is mandatory, but not every one of the matters enumerated in the section will arise for consideration in every application. For example, no loss may have been suffered by the debtor as a result of the contravention. [page 434] For the purposes of s 113(4)(a), an assessment of the conduct of the credit provider has been held to include how quickly the credit provider acts to fix its error, as well as the seriousness with which they appear to take their Code obligations (see ANZ v Various Debtors (VCAT, M60 of 2001, 7 May 2002, unreported)). In the case of Queensland v Ward [2004] 1 Qd R 429; (2003) ASC ¶155-059; [2003] QCA 366; BC200304915, the court rejected the argument that because “unjust conduct” is not listed as one of the matters to be considered under s 113(4), it is irrelevant to making a determination under that section. In that case, the credit provider’s conduct in threatening bodily harm to debtors who did not pay, described as being “flamboyantly contemptuous of both the criminal and other statute law, and the private rights and personal safety of others”, was held to be relevant under both s 113(4)(a) and (i). Section 113(4)(c) requires the court to consider “the loss or other detriment (if any) suffered by the debtor as a result of the contravention”. This does not necessarily mean monetary loss. In Re Esanda Finance Corp Ltd (2004) ASC ¶155-070; [2004] QSC 257; BC200405273, the court took into account the loss of an opportunity to compare on an equal footing credit contracts offered in the market. This detriment was relevant even though defaulting debtors

were actually likely to be better off financially, since the creditor had agreed not to pursue them for the difference between the price realised on sale of repossessed vehicles and the original cost of the vehicles. Section 113(4)(f) requires the court to consider “whether the contravention could have been prevented by the credit provider”. It is difficult to imagine any contravention that could not have been prevented, and the purpose of this subsection is unclear. In Macquarie Credit Union Ltd v Director-General, Dept of Fair Trading (1998) 2 ACCR 676; (1998) ASC ¶155-014, the tribunal expressed similar puzzlement, but concluded that s 113(4)(f) is directed at situations where the credit provider has some appreciation, or ought to have been aware of the contraventions at the time they were occurring, and “could have” taken action to prevent them. Section 113(4)(g) allows the court to consider “any action taken by the credit provider to remedy the contravention or compensate the debtor or to prevent further contraventions”. In Re Esanda Finance Corp Ltd (2004) ASC ¶155-070; [2004] QSC 257; BC200405273, the court looked favourably on the fact that the creditor scrutinised non-UCCC finance applications, and informed their motor vehicle dealer network that they would no longer accept any finance proposals that involved a deliberate contravention of the UCCC. Further, the creditor altered the structure of commissions that may encourage contravention of the UCCC, sent a bulletin to all members of their network reminding them of the UCCC, and released an online training program to employees. Section 113(4)(h) requires the court to consider “the time taken to make the application”. If a credit provider becomes aware of a contravention of a key requirement, the first reaction of the credit provider may not be to make an application under s 112 of the Code. If the credit provider establishes that the contravention was not systemic but, instead, was isolated or random, the credit provider might, quite reasonably, decide not to make an application (see [111.40]). However, if the credit provider establishes that the contravention might be systemic or widespread, the credit provider would normally make an application. [page 435]

The procedure which should be adopted by the credit provider if it becomes aware of a contravention of a key requirement is: identify the extent of non-compliance; implement compliance procedures to ensure that the contravention is not repeated; assess the impact of the contravention on debtors and guarantors; and if appropriate, make an application under s 112 of the Code. The Commercial Tribunal of New South Wales in Flood v Police Department Employees’ Credit Union (1999) ASC ¶155-028 suggested that s 102(4)(h) of the UCCC (s 113(4)(h) of the Code) is not relevant where an application is brought by the debtor. Section 113(4)(i) permits the court to consider “any other matter the court considers relevant”. Matters not specifically referred to in s 113(4), which could be relevant, are the cause of the contravention, the nature and seriousness of the breach, and the extent of the efforts made by the credit provider (and, in particular, its senior management) to foster a compliance culture in connection with the lending principles implemented by the Code. In Macquarie Credit Union Ltd v Director-General, Dept of Fair Trading (1998) 2 ACCR 676; (1998) ASC ¶155-014, the Commercial Tribunal of New South Wales considered that the fact that the credit union was a mutual organisation was not a relevant matter for the purposes of s 102(4)(b) of the UCCC (s 113(4)(b) of the Code), but the magnitude of the costs incurred by the credit union in bringing the application was a relevant matter. In Re Esanda Finance Corp Ltd (2004) ASC ¶155-070; [2004] QSC 257; BC200405273, the Supreme Court of Queensland considered an application by Esanda seeking a declaration as to whether it had breached certain key requirements under the Code. Esanda provided credit for motor vehicle purchases directly and through motor dealers. Some of those dealers had a practice of offering consumers non-consumer loans if a business purpose declaration was signed, taking them outside the protections of the UCCC. Dealers received a higher commission for placing non-consumer loans. Initially, Esanda asked that, despite the apparent breaches of the UCCC,

under s 102(2) of the UCCC (s 113(2) of the Code), no penalty be imposed in respect of those breaches. The government consumer agency in Queensland intervened and was joined as a party to proceedings. The parties agreed that Esanda should make a declaration that it had contravened key requirements of the UCCC, and further agreed to a quantum of civil penalty to be imposed. In endorsing the suggested civil penalty in his judgment, White J considered the following factors in accordance with s 102(4)(a)–(i) of the UCCC (s 113(4)(a)–(i) of the Code): that the contravention was not deliberate, but could have been identified by a rigorous risk management program; that steps had been taken to review all non-compliant contracts at considerable expense to Esanda; that a relatively small number of contracts was involved; that there was no financial benefit to Esanda; that defaulting consumers were better off as Esanda said it would not pursue the defaulting debtors for the difference between the amount realised on the sale of the repossessed vehicles and their original cost; and [page 436] that Esanda had altered the commission structure so that no incentive remained for dealers to offer non-consumer contracts to consumer debtors. As civil penalties are discretionary, the court can consider other relevant factors, such as whether the breaches of the Code were isolated, how serious the breaches were, and what effect the penalties will have in acting as a punishment or deterrent (Australian and New Zealand Banking Group Ltd v Director of Consumer Affairs [2003] VCAT 23). Such criteria were derived from those used under the credit regime in force prior to the UCCC and the Code (see also ANZ v Various Debtors (VCAT, M60 of 2001, 7 May 2002,

unreported); Queensland v Ward [2004] 1 Qd R 429; (2003) ASC ¶155-059; [2003] QCA 366; BC200304915). The matters to be considered also include matters known only to the individual debtors. Examples of this include the debtor’s conduct prior to the breach, as well as any loss suffered as a result of the breach. It has been suggested that debtors may well be able to “cast additional light” on the conduct of the credit provider to be considered under s 113(4), such as steps taken by the credit provider to compensate debtors or remedy the breach, and when the credit provider first became aware or ought reasonably to have become aware of the breach (see Director of Consumer Affairs Victoria v Australian Finance Direct Ltd (2004) ASC ¶155-064; [2004] VCAT 645). In Esanda, the court also considered relevant the creditor’s initiative to promptly identify the breaches, inform the government consumer agency, and apply for orders pursuant to s 101(1) of the UCCC (s 112(1) of the Code). In response, proper recognition was given to such positive conduct in the determination of the penalty, and it was noted that this is important in encouraging candour on the part of credit providers. [113.25] Related contraventions The effect of s 113(5) is that where a contravention of a key requirement causes another contravention of that key requirement (or causes contraventions of other key requirements), the court must (for the purposes of determining any civil penalty) treat all of the contraventions as if they were only the single contravention of the first key requirement. This provision is of practical importance because the cap of $500,000 imposed by s 116(1) relates to “a contravention of a key requirement”. Section 113(5) prevents that cap from being multiplied in instances where more than one contravention “occurs merely because of another contravention”. It may not, in every case, be easy to determine whether one contravention has occurred “merely because of” another. [113.30] Suppression of publication Section 113(6) empowers the court to order, “if it thinks it appropriate in the circumstances”, that particulars of an application not be published. The section provides no guidance as to what may be appropriate circumstances for such an order.

[113.35] Cases Department of Consumer and Employment Protection v Chequecash Pty Ltd [2009] WASC 18; BC200900406; Australian Capital Providers Pty Ltd v Wakelin [2009] QSC 167; BC200905403.

[page 437]

Penalty if application made by debtor or guarantor 114 (1) [Maximum penalties] On application being made by a debtor or a guarantor for an order in relation to a credit contract other than a small amount credit contract, the maximum penalty that may be imposed by the court for a contravention of a key requirement is an amount not exceeding the amount of: (a) except as provided by paragraphs (b) and (c) — all interest charges payable under the contract from the date it was made; or (b) in the case of a contravention of a key requirement relating to a statement of account of a continuing credit contract — all interest charges payable under the contract for the period to which the statement of account relates; or (c) in the case of a contravention of a key requirement relating to prohibited monetary obligations — all interest charges accruing under the contract from the date the contravention occurred. [subs (1) am Act 130 of 2012 s 3 and Sch 4 item 18, eff 1 July 2013]

114 (1A) On application being made by a debtor or a guarantor for an order in relation to a small amount credit contract, the maximum penalty that may be imposed by the court for a contravention of a key requirement is an amount not exceeding the sum of the following amounts: (a) the amount of the permitted establishment fee payable in relation to the contract; (b) the total amount of the permitted monthly fees payable in relation to the contract based on the term of the contract when it was made.

[subs (1A) insrt Act 130 of 2012 s 3 and Sch 4 item 19, eff 1 July 2013]

114 (2) [Loss by debtor] The court may, however, impose a greater penalty if the debtor or guarantor satisfies the court that the debtor has suffered a loss. The amount of the penalty is to be not less than the amount of the loss. 114 (3) [Calculation of future interest] For the purposes of paragraph (1) (a), the amount of future interest charges payable under a credit contract is to be calculated on the assumptions in sections 180 and 182. ________________________________________ [Editorial note: UCCC s 103 provided as follows: Penalty if application made by debtor or guarantor 103 (1) [Maximum penalties] On application being made by a debtor or a guarantor for an order, the maximum civil penalty that may be imposed by the Court for a contravention of a key requirement is an amount not exceeding the amount of— (a) except as provided by paragraphs (b) and (c) — all interest charges payable under the contract from the date it was made; or (b) in the case of a contravention of a key requirement relating to a statement of account of a continuing credit contract — all interest charges payable under the contract for the period to which the statement of account relates; or (c) in the case of a contravention of a key requirement relating to prohibited monetary obligations — all interest charges accruing under the contract from the date the contravention occurred. 103 (2) [Loss by debtor] The Court may, however, impose a greater civil penalty if the debtor or guarantor satisfies the Court that the debtor has suffered a loss. The amount of the civil penalty is to be not less than the amount of the loss. 103 (3) [Calculation of future interest] For the purposes of subsection (1)(a), the amount of future interest charges payable under a credit contract is to be calculated on the assumptions in sections 158 and 160.]

COMMENTARY ON SECTION 114 [114.05] Outline The maximum civil penalty that may be imposed for a contravention of a key requirement varies depending on who makes the [page 438]

application for the civil penalty. If the application is made by the debtor or guarantor, the maximum civil penalty payable is set out in s 114. The maximum civil penalty payable if the application is made by the credit provider or ASIC is set out in s 116. The differences in the maximum civil penalty payable are intended to encourage credit providers to apply for an order if they become aware of contraventions of key requirements. Further, the debtor or guarantor may not be entitled to bring any application under s 112 where the credit provider or ASIC first makes application (see [112.20]). [114.10] Maximum civil penalty Subject to the extent of any loss suffered by the debtor or guarantor (see [114.20]), the maximum civil penalty if the application is made by the debtor or guarantor (other than for a SACC — see [114.30]) is all the interest charges payable under the contract from the date it was made (s 114(1)(a)). However, the maximum civil penalty is limited in the following two circumstances: if the key requirement contravention relates to a statement of account for a continuing credit contract, the maximum amount is all interest charges for the period to which the statement relates (s 114(1)(b)); and if the key requirement contravention relates to a prohibited monetary obligation, the maximum amount is all interest charges accrued after the contravention (s 114(1)(c)). In the case of a continuing credit contract, it will be impossible to determine the amount of interest charges payable under the contract, even on the assumptions set out in ss 180 and 182, because the contract does not have a fixed term, and the amount actually drawn down under the contract is unknown. This means, in theory, that the amount of the civil penalty for a key requirement contravention in relation to a continuing credit contract is limited only by reference to the loss suffered by the debtor (s 114(2)) and not by reference to interest charges. [114.15] Multiple contraventions If the credit provider has contravened more than one key requirement, s 114 would allow a court to impose a civil penalty equal to the interest charges payable under the contract multiplied by the number of key requirements breached. The amount of any civil penalty

awarded under s 114 may be set off against the amount due to the credit provider under the credit contract (s 115(1)). Therefore, if the credit provider contravenes more than one key requirement, the amount due by the debtor or guarantor may be reduced by an amount greater than the interest charges payable under the contract. [114.20] Loss Section 114(2) permits the court to impose a penalty greater than the amount of interest charges if the debtor or guarantor satisfies the court that the debtor has suffered a loss. If a debtor establishes that he or she has suffered a loss, the amount of the civil penalty cannot be less than the amount of the loss. This requirement is mandatory. A court does not have a discretion to award an amount less than the amount of the loss. Section 114(2) does not expressly limit the recoverable loss to losses arising from the contravention of the key requirement (whereas s 113(4)(c) does), but there may not be much significance in this because “loss” in s 114(2) would have to mean loss that is in some way related to the contravention. [page 439] Note the distinction between the reference to the loss suffered by the debtor in ss 114(2) and 118(1), and the loss “or other detriment” suffered by the debtor in s 113(4). It is not clear whether the use of the word “detriment” in s 113(4)(c) imports into s 114 or s 118 a conception of loss wider than the prima facie meaning of those sections. It seems that in the context of s 113(4), the court should consider whether the debtor would have acted differently if the key requirement had not been contravened. [114.25] Relationship with s 118 The relationship between ss 114 and 118 is complex and not entirely clear. One issue is whether the debtor or guarantor may ever recover more than the amount of loss arising from the contravention of the key requirement. Under s 114(2), if the debtor or guarantor satisfies the court that the debtor has “suffered a loss”, the court must impose a civil penalty which is not less than the amount of the loss. That civil penalty is to be a debt due by the credit

provider to the debtor or guarantor (if not set-off). It effectively is an order for compensation for loss. Under s 118, an order for compensation for loss arising from the contravention of a key requirement may be made, but it must not exceed the amount of that loss. If s 114(2) is construed as permitting a civil penalty to be awarded in respect of loss not arising from the contravention of the key requirement in respect of which the application is made, a mismatch between ss 114(2) and 118 would arise. This is because the debtor would be able to recover more if it made a s 112 application for a civil penalty (seeking a s 114(2) penalty for loss suffered) (such an application only being permissible if the credit provider or ASIC has not already applied: s 112(2)) than if it made a s 118 application for compensation (which would be limited to loss arising from the key requirement contravention). On the other hand, s 114(2) does not limit the amount which may be awarded by way of civil penalty only to the amount of the debtor’s loss. There is a real difference in meaning between the expression “not less than the amount of the loss” in s 114(2) and the expression “not to exceed the amount of the loss” in s 118(2). So, it can be seen that a civil penalty under s 114 can arguably exceed the debtor’s loss (but see comments on Queensland v Ward (2002) below). The Code does not give any guidance on the circumstances when a penalty greater than the loss suffered would be imposed. In this respect, however, the terms of s 113(4) have relevance insofar as they specify the matters that the court must have regard to in considering the imposition of a civil penalty. In particular, s 113(4)(c) requires the court to have regard to “the loss or other detriment (if any) suffered by the debtor as a result of the contravention”. This factor is likely to assume particular significance in the case of an application for a civil penalty by the debtor or guarantor, which civil penalty effectively serves as compensation to that debtor or guarantor (preventing as it does an order for compensation being made under s 118 in respect of that contravention (s 118(3))). This somewhat confusing situation prompted Ambrose J in Queensland v

Ward [2004] 1 Qd R 429; (2003) ASC ¶155-059; [2003] QCA 366; BC200304915 to state that: On the other hand the quantum of a civil penalty recovered by a debtor under s 104(1) of the UCCC [s 115(1) of the Code] is probably limited by s 102(4)(c) of the UCCC

[page 440] [s 113(4)(c) of the Code] which would probably be applied having regard to s 107 of the UCCC [s 118 of the Code] which deals with the debtor’s right to apply for compensation for loss “arising from the contravention of a key requirement” although the terms of s 107(3) of the UCCC [s 118(3) of the Code] suggest that when making an order for compensation for loss a court would have to take into account any order for a civil penalty obtained by a debtor. In my view the better construction of ss 103 and 107 of the UCCC [ss 114 and 118 of the Code] is that the debtor may not upon application under either section recover a civil penalty in a sum which exceeds the loss attributable to the breach of the key requirement he establishes.

This was strictly obiter dictum, because the application in Queensland v Ward was brought by the government consumer agency for the purposes of the UCCC, civil penalties being awarded pursuant to ss 101 and 105 of the UCCC (ss 112 and 116 of the Code). With the greatest respect, it may be said that Ambrose J’s analysis itself adds to the confusion as it may be said that the statement regarding s 118(3) is not an accurate summary of that provision: s 118(3) prevents, effectively, a double penalty — there can be no s 118 compensation if there has already been a s 114 civil penalty (or such a penalty has been considered and refused). Section 118(3) does not state that a compensation order must take into account any penalty order. Nevertheless, the analysis of Ambrose J may carry persuasive weight with other courts considering the issue. An appeal from the decision of Ambrose J on other issues was dismissed in Queensland v Ward [2004] 1 Qd R 429; (2003) ASC ¶155-059; [2003] QCA 366; BC200304915 (except for certain specific orders, which were varied with consent). A second related issue, which was noted but not decided by Ambrose J in Queensland v Ward, is whether the effect of s 118(1) and (2) in any way limits the amount that may be recovered by a debtor as a civil penalty under s 114(1)(a). That is, do those provisions, which limit compensation to the actual loss suffered as a result of a key requirement contravention, impliedly

restrict the ability of the debtor even to recover as a civil penalty all interest charges payable under the contract, if those interest charges exceed the actual loss sustained by reason of the contravention of the key requirement? [114.30] Small amount credit contracts (SACCs) The Enhancements Act amended s 114(1) to state that it does not apply to SACCs. Instead, the Enhancements Act introduces s 114(1A) to apply to SACCs. The Enhancements Act introduced a specific regime for the regulation of SACCs — see further commentary on ss 23A, 31A, 31B and Div 5A. Section 114(1A) prescribes the maximum penalty that may be imposed by a court for an order in relation to an SACC, following an application being made by a debtor or a guarantor. The Explanatory Memorandum to the Enhancements Act explains (at paras 5.54 and 5.55): 5.54

The changes proposed in section 23A mean that providers of small amount credit contracts will not be able to impose interest charges. As a result there is a consequent need to modify section 114, which sets out the orders a court can make where a credit provider has breached a key requirement in relation to a small amount credit contract.

[page 441] 5.55

The Enhancements Bill therefore makes consequential amendments to section 114 as follows: small amount credit contracts are excluded from subsection 114(1) (which enables orders to be made in relation to interest charges payable under a credit contract); and subsection 114(1A) is inserted, which provides that the maximum penalty that a court may impose is the total of the permitted establishment and monthly fees payable under the contract. [Schedule 4, items 18 and 19, subsections 114(1) and (1A)]

Payment of penalty to debtor or guarantor 115 (1) [Penalty constitutes debt; application of set-off] An amount of

penalty ordered by the court to be paid on an application for an order made by a debtor or a guarantor may be set off by the debtor or guarantor against any amount that is due or becomes due to the credit provider under the credit contract. If there is no such amount, the amount of the penalty is a debt due by the credit provider to the debtor or guarantor. 115 (2) [Appropriation of Consolidated Revenue Fund] The Consolidated Revenue Fund is appropriated for the purposes of: (a) a set-off; or (b) a debt due; in relation to a penalty ordered under subsection (1). The Financial Management and Accountability Act 1997 does not apply in relation to those amounts. 115 (3) [Court discretion in terms of payment order] An order made on application by a debtor or a guarantor may include such directions as the court considers appropriate relating to the payment of the amount owed by the debtor or the credit provider as a result of the order. ________________________________________ [Editorial note: UCCC s 104 provided as follows: Payment of penalty to debtor or guarantor 104 (1) [Penalty constitutes debt; application of set-off] An amount of civil penalty ordered by the Court to be paid on an application for an order made by a debtor or a guarantor may be set off by the debtor or guarantor against any amount that is due or becomes due to the credit provider under the credit contract. If there is no such amount, the amount of the civil penalty is a debt due by the credit provider to the debtor or guarantor. 104 (2) [Court discretion in terms of payment order] An order made on application by a debtor or a guarantor may include such directions as the Court considers appropriate relating to the payment of the amount owed by the debtor or the credit provider as a result of the order.]

COMMENTARY ON SECTION 115 [115.05] Set-off When the court orders, on an application made by a debtor or guarantor, that a civil penalty be paid, the amount of the penalty may be set off by the debtor or guarantor against any amount due to the credit provider under the contract. The reference to the credit contract in s 115

should be read as a reference to the credit contract containing the key requirement contravention. Alternatively, where the contract the subject of the application has been discharged, the amount of the civil penalty is a debt due from the credit provider to the debtor or guarantor. [page 442] [115.10] “Set-off by the guarantor” Section 115 also purports to allow a guarantor to set off the amount of a civil penalty against amounts owing under the credit contract. This choice of words is curious as it contemplates a third party exercising a right of set-off. Set-off generally requires mutuality between the parties to the set-off, so that, for example, the debtor and the credit provider may set off amounts owing to each other, but a third party strictly speaking can have no right to “set-off” amounts owing by the credit provider to the guarantor against amounts owing by the debtor to the credit provider. Section 115, therefore, appears to create a statutory right which is sui generis, as it does not reflect any rights which would otherwise be available at general law. Query how this right would be regarded for the purposes of the mandatory set-off that would apply in the insolvency of any of the parties (Bankruptcy Act 1966 (Cth) s 86; Corporations Law s 553C). [115.15] Guarantors The effect of s 115 is that any civil penalty payable by a credit provider will be set off against the amount due under the credit contract unless the contract has already been paid out. Therefore, if an application by a guarantor is successful, the debtor will benefit because the amount payable under the credit contract will be reduced by an amount equal to the amount of the civil penalty. However, since the word “may” is used in s 115(1) (see s 210) it seems that the guarantor could elect not to set off the amount of the civil penalty but, instead, wait until the credit contract is paid out so that the guarantor could recover the amount as a debt due by the credit provider to the guarantor. Alternatively, s 115 can be interpreted as saying that the discretion in s 115 rests with the court not the guarantor. [115.20] Directions The court may make such directions as it thinks appropriate relating to the payment of the amount owed by the debtor or the

credit provider (s 115(3)) as a result of the order. Section 115(3) does not refer to guarantors, probably because the obligations of the guarantor are ancillary to those of the debtor. [115.25] Appropriation The appropriation provision in s 115(2) was introduced by the NCCP Act regime changes. The explanatory memorandum indicates that this was inserted to ensure that s 115(1) would be “operational in the Commonwealth context” by complying with s 81 of the Constitution.

Penalty if application made by a credit provider or ASIC 116 On application being made by a credit provider or ASIC for an order, the maximum penalty that may be imposed by the court for a contravention of a key requirement relating to a contract affected by the application is an amount calculated so that the total penalty for all contraventions of the requirement in Australia (as disclosed by the credit provider) does not exceed $500,000. ________________________________________ [Editorial note: UCCC s 105 provided as follows: Penalty if application made by a credit provider or Government Consumer Agency 105 (1) [Maximum penalty] On application being made by a credit provider or the Government Consumer Agency for an order, the maximum civil penalty that may be imposed by the Court for a

[page 443] contravention of a key requirement relating to a contract affected by the application is an amount calculated so that the total civil penalty for all contraventions of the requirement in Australia (as disclosed by the credit provider) does not exceed $500 000. 105 (2) [Proportion of penalty in each jurisdiction] For the purpose of determining the penalty, the Court is in making an order to determine the appropriate amount of penalty for disclosed contraventions of the key requirement in all jurisdictions and to determine the

amount payable in each jurisdiction proportionately according to the number of contracts in that jurisdiction affected by the disclosed contraventions. 105 (3) [Validity of orders in different jurisdictions] An order relating to the amount payable in another jurisdiction has no effect in this jurisdiction and has such effect in that other jurisdiction as the law of that other jurisdiction provides.]

COMMENTARY ON SECTION 116 [116.05] Maximum civil penalty Section 116 places a limit on the maximum civil penalty that may be imposed on a credit provider when the application is made by the credit provider or ASIC. The apparent purpose of the section is to encourage credit providers to bring applications when contraventions of key requirements of the Code are discovered, so as to obtain the benefit of a “capped” civil penalty. The maximum penalty that may be imposed for a contravention of a key requirement relating to a contract affected by an application is a penalty calculated so that the total civil penalty for all contraventions in Australia (as disclosed by the credit provider) of the same key requirement does not exceed $500,000. In order to achieve this result under the UCCC, the court was required to consider the number of contraventions the subject of the application, to consider the number of contraventions disclosed or estimated throughout the whole of Australia, and to assess what proportion of the penalty ought to be imposed in its jurisdiction (see s 105(2) of the UCCC). This issue has been overcome now that the courts will be exercising federal jurisdiction. [116.10] All contraventions in Australia The limit of $500,000 is expressed to apply to all contraventions of the same key requirement in Australia. It therefore applies equally to credit providers who operate nationally, and to credit providers who operate in only one state or territory. In each case, however, it will be necessary for the credit provider to furnish evidence of the number of contraventions occurring throughout Australia (see ANZ v Various Debtors (VCAT, M60 of 2001, 7 May 2002, unreported)). [116.15] UCCC — proportionality approach As stated at [116.05], s 105(2) of the UCCC required the court, in determining the amount of the penalty, to determine the appropriate total penalty and then to determine the proportion of that penalty which should be paid in its jurisdiction. This

process had to be followed even if no applications were in fact made in other jurisdictions. There was no obligation for a credit provider to make applications in every jurisdiction in which a contravention was discovered. GE Capital Finance Australia v Various Debtors (2000) ASC ¶155-036 is an example of the application of s 105(2) of the UCCC. In that case, the Victorian Civil and Administrative Tribunal endorsed a national penalty of $250,000 agreed on by GE and the Victorian Director of the Office of Fair Trading and Business Affairs. The tribunal then determined, under s 105(2), the amount payable in each [page 444] jurisdiction proportionately to the number of contracts in that jurisdiction affected by the disclosed contraventions. Those jurisdictions were each state and territory in Australia. The case concerned a continuing credit product made available through retailers — in an estimated 11,900 contracts between May 1997 and 15 August 1999, the retailer failed to provide the customer with a copy of the offer document (setting out the information required by ss 14 and 15 of the UCCC) before the customer accepted the offer. A similar procedure was followed by the Victorian Civil and Administrative Tribunal in ANZ v Various Debtors (VCAT, M60 of 2001, 7 May 2002, unreported). [116.20] UCCC — proportionality across jurisdictions Section 105(3) of the UCCC provided that the court’s decision had no effect in any other jurisdiction. It was therefore possible for courts in different states to make penalty orders based on the same “proportions” (as disclosed by the credit provider) but (subject to the cap of $500,000) on very different total penalties. However, this was subject to the process of registering orders discussed in [116.30]. [116.25] Multiple contraventions The total civil penalty payable by a credit provider may exceed $500,000 if the credit provider has contravened more than one key requirement. The $500,000 cap applies to contraventions of each separate key requirement. This view was affirmed in ANZ v Various

Debtors (VCAT, M60 of 2001, 7 May 2002, unreported). On the other hand, in Queensland v Ward [2004] 1 Qd R 429; (2003) ASC ¶155-059; [2003] QCA 366; BC200304915, civil penalties were assessed on a per contract basis, not a “per breach” basis. Note that, if one contravention flows from another, the second contravention is treated as a contravention of “the same kind” (see s 113(5)). Those words are ambiguous but it is likely that they will be interpreted to mean that, in the circumstances specified in s 113(5), only one contravention will be deemed to have occurred. Also, if there are two separate contraventions of a key requirement (eg, two independent breaches of s 17(5) — incorrect disclosure of both the method of calculation of interest charges and the frequency of their debiting) they are still to be regarded as only one contravention (s 113(5)) even if one does not occur “merely because of another”. In the ANZ case, McKenzie DP heard arguments as to whether the maximum penalty under s 105 of the UCCC (s 116 of the Code) was to apply for all contraventions by a credit provider for each key requirement, or whether the maximum applied to all key breaches of all key requirements in the aggregate. Agreeing with the former, McKenzie DP said nothing in s 105 of the UCCC (s 116 of the Code) would suggest that the cap applies in aggregate to all breaches of all key requirements. [116.30] UCCC — Registration of orders Under the UCCC (s 108), a credit provider or government consumer agency could register an order made under ss 102 and 105 of the UCCC in one jurisdiction with the court of another jurisdiction. The order, once registered, became an order of the second jurisdiction in respect of contraventions which had occurred in that jurisdiction. These issues are no longer relevant with the national Code.

[page 445]

Payment of penalty

117 An amount of penalty ordered by the court to be paid on an application for an order made by a credit provider or ASIC must be paid by the credit provider to ASIC on behalf of the Commonwealth. ________________________________________ [Editorial note: UCCC s 106 provided as follows: Payment of penalty to fund 106 An amount of civil penalty ordered by the Court to be paid on an application for an order made by a credit provider or the Government Consumer Agency must be paid by the credit provider into a fund established and operated under another law of this jurisdiction for the purposes of this section or, if no such fund is established, to the Government Consumer Agency.]

COMMENTARY ON SECTION 117 [117.05] Payment of penalty to fund Section 117 provides that, when an application is made by a credit provider or ASIC, the amount of any civil penalty is to be paid to ASIC on behalf of the Commonwealth. Previously, under the UCCC, any such penalty was to be paid into a fund specifically operated for this purpose (or, in the absence of such a fund, to the relevant government consumer agency). So, for example, in GE Capital Finance Australia v Various Debtors (2000) ASC ¶155-036, the Victorian Civil and Administrative Tribunal ordered the payment of the Victorian proportion of the penalty imposed in that case to be paid to the Victorian Consumer Credit Fund established under the Credit (Administration) Act 1984 (Vic). Many such funds were established for purposes such as consumer education and financial counselling during the operation of the Credit Act.)

Compensation for debtor or guarantor 118 (1) [Compensation for loss] The court may, on application by a debtor or a guarantor, order that the credit provider pay to the debtor or guarantor an amount by way of compensation for loss arising from the contravention of a key requirement. 118 (2) [Maximum compensation] The court may only order an amount to

be paid by way of compensation if the debtor or guarantor satisfies the court that the debtor or guarantor has suffered a loss arising from the contravention. The amount of compensation is not to exceed the amount of the loss. 118 (3) [Prior civil penalty order] The court may not make an order under this section if the debtor or guarantor has previously obtained or been refused a penalty referred to in section 115 relating to the same contravention. 118 (4) [Subsequent civil penalty order] An amount payable under this section does not affect the amount of penalty for the purposes of section 116. ________________________________________ [Editorial note: UCCC s 107 provided as follows: Compensation for debtor or guarantor 107 (1) [Compensation for loss] The Court may, on application by a debtor or a guarantor, order that the credit provider pay to the debtor or guarantor an amount by way of compensation for loss arising from the contravention of a key requirement.

[page 446] 107 (2) [Maximum compensation] The Court may only order an amount to be paid by way of compensation if the debtor or guarantor satisfies the Court that the debtor or guarantor has suffered a loss arising from the contravention. The amount of compensation is not to exceed the amount of the loss. 107 (3) [Prior civil penalty order] The Court may not make an order under this section if the debtor or guarantor has previously obtained or been refused a civil penalty referred to in section 104 relating to the same contravention. 107 (4) [Subsequent civil penalty orders] An amount payable under this section does not affect the amount of penalty for the purposes of section 105.]

COMMENTARY ON SECTION 118 [118.05] Outline Section 118 empowers the court, on an application made by a debtor or guarantor, to order the credit provider to compensate a debtor or guarantor for any loss suffered as a result of a contravention of a key requirement. The compensation ordered must not exceed the amount of loss suffered by the debtor or guarantor.

[118.10] Preserve right to compensation A debtor or guarantor may not seek an order for a civil penalty if the alleged contravention is or has been the subject of an application by the credit provider or ASIC (s 112(2)). The effect of s 118 together with s 112(3) is to preserve the right of the debtor and the guarantor to seek compensation for loss if a key requirement has been contravened, even if the credit provider or ASIC has made application under the Code. The amount of the civil penalty awarded under s 116 will not be affected by any award or compensation under s 118 (s 118(4)). [118.15] Court not to make order The court may not make an order under s 118 when the debtor or guarantor has already obtained or been refused a civil penalty under ss 112 and 115, that is, where an application has previously been made by the debtor or guarantor and a civil penalty has been obtained or refused. Where possible, it is clearly to the advantage of the debtor or guarantor to seek orders under ss 112 and 115 rather than under s 118, since a civil penalty calculated in accordance with s 114 is not restricted to loss suffered by the debtor or guarantor as a result of the contravention of a key requirement. [118.20] Relationship with s 114 The relationship between ss 114 and 118 is complex and somewhat obscure (see [114.25]). In particular, in Queensland v Ward (2002) ASC ¶155-055; [2002] QSC 171; BC200203212, Ambrose J raised (without deciding) the issue of whether the effect of s 107(1) and (2) and s 103(2) of the UCCC (s 118(1), (2) and s 114(2) of the Code) limited the size of the civil penalty which a debtor may recover under s 103(1)(a) of the UCCC (s 114(1)(a) of the Code). [118.25] Case Australian Capital Providers Pty Ltd v Wakelin [2009] QSC 167; BC200905403. [118.30] Code omissions Sections 108 and 109 of the UCCC are omitted from the Code under the NCCP Act regime changes. They are briefly discussed below by way of background information. [118.35] Former s 108 of the UCCC Section 108 of the UCCC provided that a credit provider or government consumer agency could register with the

[page 447] court an order made by the court of another jurisdiction under provisions equivalent to ss 113 and 116 of the Code. Registration had the effect that the order was taken to be an order in the jurisdiction in which it was registered (s 108(2) of the UCCC). Registration was not mandatory. The credit provider or the government consumer agency could elect not to register an order. Credit providers could decide not to register the orders made by the tribunal, relying on s 101(2) of the UCCC. Section 101(2) of the UCCC (s 112(2) of the Code) provided that no further application for a civil penalty could be made in relation to a contravention under a contract which was, or had been, subject to an application made anywhere in Australia. This would effectively prevent any debtor making an application in relation to the contraventions the subject of the application. However, the risk was that a debtor might nevertheless file an application in relation to such a contravention. If this occurred, the credit provider would be forced to attend the relevant court or tribunal to argue that the application should be struck out under s 101(2) of the UCCC. The position was different in Western Australia as a result of which it was desirable to register as soon as possible in WA an order made in any other jurisdiction. [118.40] Former s 109 of the UCCC Section 109 of the UCCC provided that the court could refuse to hear an application on the ground that it was more appropriate that the application be heard in another specified jurisdiction. The court had to consider all relevant matters, including the number of affected contracts in each jurisdiction. The provision was designed to prevent “forum shopping” because parties could otherwise attempt to make applications in jurisdictions where the outcome was expected to be more favourable. [Editorial note: There is no NCC provision comparable to ss 108 and 109 of the UCCC.]

General provisions relating to applications by credit providers or ASIC

119 (1) [Multiple credit contracts] An application for an order by a credit provider or ASIC: (a) may apply to any one or more credit contracts; and (b) may apply to all or any class of credit contracts entered into by the credit provider during a specified period (for example, all credit contracts entered into during a specified period which are affected by a specified contravention). 119 (2) [Notice of application may be published] The court may require notice of any such application to be published by notice, in a form approved by the court, in a newspaper circulating throughout one or more States or Territories, as the court determines. 119 (3) [Notice to ASIC] Notice of an application by a credit provider must be given by the credit provider to ASIC. ________________________________________ [Editorial note: UCCC s 110 provided as follows: General provisions relating to applications by credit providers or Government Consumer Agencies 110 (1) [Multiple credit contracts] An application for an order by a credit provider or the Government Consumer Agency— (a) may apply to any one or more credit contracts; and

[page 448] (b) may apply to all or any class of credit contracts entered into by the credit provider during a specified period (for example, all credit contracts entered into during a specified period which are affected by a specified contravention). 110 (2) [Notice of application may be published] The Court may require notice of any such application to be published by notice, in a form approved by the Court, in a newspaper circulating throughout this jurisdiction or Australia, as the Court determines. 110 (3) [Notice of application to Government Consumer Agency] Notice of an application by a credit provider must be given by the credit provider to the Government Consumer Agency.]

COMMENTARY ON SECTION 119 [119.05] One or more credit contracts Section 119 enables a credit provider or ASIC to make a single application that relates to one or more contracts, or to a class of contracts (such as all contracts entered into during a specified period containing the same contravention of a key requirement). [119.10] Notice of application Section 119(2) empowers the court to order that notice of an application made by a credit provider or ASIC be published in a newspaper circulating in one or more of the states or territories. The apparent intention of this provision is to ensure that affected debtors and guarantors are provided with an opportunity to join in the proceedings to seek compensation under s 118 if they have suffered any loss. The section does not, however, make any provision for service of the application on affected debtors. It may be that the court would order publication of a notice in lieu of service, but this is a matter that will depend on the rules of each individual court. If a court decided that no debtors or guarantors suffered loss and, therefore, the contravention would not give rise to a successful claim for compensation by a debtor or guarantor under s 118, the court might decline to exercise its discretion to order the publication of a notice of the application. [119.15] Notice to ASIC Notice of each application made by a credit provider must be given by the credit provider to ASIC. On its face, this provision does not require that a copy of each application be served on ASIC, although service of the application would be the simplest means of giving notice. Section 119 does not make it mandatory for notice of an application made by ASIC to be given to any person (including the credit provider).

ASIC may represent interests of debtors 120 ASIC may apply to the court to become a party to an application under this Division and, if joined as a party, has standing to represent the public interest and the interests of debtors. ________________________________________

[Editorial note: UCCC s 111 provided as follows: Government Consumer Agency may represent interests of debtors 111 The Government Consumer Agency may apply to the Court to become a party to an application under this Division and, if joined as a party, has standing to represent the public interest and the interests of debtors.]

[page 449] COMMENTARY ON SECTION 120 [120.05] Outline Section 120 enables ASIC to apply to be joined as a party to an application and, if joined, to represent the public interest and the interests of debtors. The Code does not specify whether ASIC may represent both the interests of debtors and the public interest in the same application, or whether it is able to be joined in only one capacity. Nor does the Code specify the criteria to be considered by the court in considering an application by ASIC to be joined in an application. The case of Director of Consumer Affairs Victoria v Australian Finance Direct Ltd (2004) ASC ¶155-064; [2004] VCAT 645 involved an application made by a number of individual debtors for joinder to proceedings brought by the government consumer agency (under the UCCC). The debtors sought to be joined on the grounds that their interests were affected by the proceedings. Counsel for the debtors argued that any declaration that a key requirement of the Code had been breached would affect all debtors under the relevant contracts and so they should be able to participate in proceedings. McKenzie DP of the Victorian Civil and Administrative Tribunal made the point that, where the director of a government consumer agency is joined to represent the “public interest and the interests of debtors”, this means “the interest of all affected debtors, not only of some [debtors], or particular individuals” (at [31]). The tribunal will take the loss of debtors into account in a “global way” — it is not required to hear every individual debtor and determine their individual loss. McKenzie DP stated that, where there is doubt about whether a declaration

would bind non-party debtors, they should be joined to ensure that they are bound. This would prevent future attempts to litigate (eg, under s 118 or s 23). In the circumstances of this case, however, there was no need to join each individual debtor, as any declaration made by a court will be binding on all debtors under the contracts affected by the application (see [47] and [49]). The tribunal noted that it should not be assumed that the principles derived from Director of Consumer Affairs Victoria v Australian Finance Direct Ltd (2004) ASC ¶155-064; [2004] VCAT 645 will automatically apply to applications instigated by credit providers. For example, joinder of individual debtors might be appropriate on such an application if the director (now ASIC) did not apply to be joined, or if the class of affected contracts was so small that individual circumstances could hardly be ignored. Further, s 112(2) prohibits debtors making an application for a civil penalty where the relevant government consumer agency (now ASIC) has already done so. It would not be permitted for s 112(2) to be circumvented by indirectly achieving this end by joinder under s 120.

Directions pending court’s decision 121 (1) [Directions to protect interest of debtor] The court may, before disposing of an application by a debtor or guarantor for an order under this Division, make such directions as it considers appropriate to protect the interests of the debtor or guarantor concerned. [page 450] 121 (2) [Other enforcement proceedings] Subject to any such directions of the court, the application does not prevent: (a) any proceedings for the enforcement of the debtor’s obligations (or the obligations of a guarantor) from being taken; or (b) any rights over property the subject of a mortgage from being exercised.

121 (3) [Withdrawal of application] For the purposes of this section, a reference to the disposal of an application includes a reference to its withdrawal by the applicant. 121 (4) [Application for variation of direction] A credit provider affected by a direction of the court may apply to the court for variation of the direction. The court may, on such an application being made, vary or revoke the direction or refuse to vary or revoke the direction. ________________________________________ [Editorial note: UCCC s 112 — apart from numbering the section is unchanged.]

COMMENTARY ON SECTION 121 [121.05] Outline The court may, before disposing of an application by a debtor or guarantor, make interlocutory orders to protect the interests of debtors or guarantors who may be affected by the application. Such directions might, for example, impose restrictions on the extent to which a credit provider may take enforcement action under a credit contract affected by the application. In the absence of such directions, s 121(2) makes it clear that there is no restriction on a credit provider’s ability to enforce the debtor’s obligations under the affected contract (or the obligations of any relevant guarantor), or to assert its rights over any property taken as security. The section does not extend to applications made by credit providers or ASIC. It is an open question whether similar orders may be made in such applications (the answer to which may depend on the general power of each court to make directions).

Offences 122 Nothing in this Division affects the liability of a person for an offence against this Code or the regulations. ________________________________________ [Editorial note: UCCC s 113 — apart from numbering the section is unchanged.]

COMMENTARY ON SECTION 122 [122.05] Outline Section 122 makes it clear that the civil penalty provisions of the Code do not affect the liability of a person for an offence against the Code or Regulations. In other words, the fact that a credit provider may have suffered a civil penalty under Div 1 of Pt 6, does not affect their criminal liability for any other offences that may have occurred.

Time limit for application for orders under this Division 123 (1) [Limitation period] Proceedings under this Division for a declaration of contravention and the imposition of a penalty for a contravention may not be brought after 6 years from the day the contravention happened. [page 451] 123 (2) [Paramountcy of subs (1)] Subsection (1) applies despite any Act relating to the limitation of time for commencing actions. 123 (3) [Definition] In this section: contravention means contravention of a key requirement. ________________________________________ [Editorial note: UCCC s 113A provided as follows: Time limit for application for orders under this Division 113A (1) [Limitation period] Proceedings under this Division for a declaration of contravention and the imposition of a civil penalty for a contravention may not be brought after 6 years from the day the contravention happened. 113A (2) [Paramountcy of subs (1)] Subsection (1) applies despite any Act relating to the limitation of time for commencing actions. 113A (3) [Definition] In this section—

contravention means contravention of a key requirement.]

COMMENTARY ON SECTION 123 [123.05] Outline This section limits the time in which a person may bring an application relating to a contravention of a key requirement of the Code to a period of six years from the date of the breach (usually the date of the credit contract). This limitation period applies to applications for a declaration that a key requirement of the Code has been contravened as well as to civil penalties imposed in relation to such a contravention. Before the UCCC precursor to s 123 (being s 113A of the UCCC) was introduced, these applications were subject to a two-year limitation period as per the relevant state and territory limitation provisions. Section 123 brings the limitation period in line with that of most other civil actions. Given that many credit contracts extend over decades (eg, home loan agreements), it was thought that the two-year limitation period was insufficient for the various government consumer agencies which were responsible for enforcing the UCCC to adequately ensure compliance with the UCCC. The extended time period increases the likelihood that breaches of the Code will be uncovered while the credit provider is still liable for a civil penalty.

DIVISION 2 — OTHER PENALTIES Civil effect of contraventions 124 (1) [Compensation for contravention] If a credit provider contravenes a requirement of or made under this Code, the court may order the credit provider to make restitution or pay compensation to any person affected by the contravention and, in that event, may make any consequential order it considers appropriate in the circumstances. [subs (1) am Act 130 of 2012 s 3 and Sch 1 item 27, eff 1 Mar 2013]

124 (2) An application for the exercise of the court’s powers under this

section may be made by: (a) a person affected by the contravention; or (b) ASIC on behalf of a person affected by the contravention, if the person has consented in writing to ASIC making the application; or [page 452] (c) ASIC (on its own behalf). [subs (2) subst Act 130 of 2012 s 3 and Sch 1 item 28, eff 1 Mar 2013] [s 124 am Act 130 of 2012 s 3 and Sch 1 item 26, eff 1 Mar 2013]

________________________________________ [Editorial note: UCCC s 114 provided as follows: Civil effect of other contraventions 114 (1) [Compensation for contravention] If a credit provider contravenes a requirement of or made under this Code (other than one for which a civil effect is specifically provided by Division 1 or by any other provision of this Code), the Court may order the credit provider to make restitution or pay compensation to any person affected by the contravention and, in that event, may make any consequential order it considers appropriate in the circumstances. 114 (2) [Standing] An application for the exercise of the Court’s powers under this section may be made by the Government Consumer Agency or by any person affected by the contravention.]

COMMENTARY ON SECTION 124 [124.05] Before the Enhancements Act — “Civil effect” Orders could only be made under s 124 in respect of contraventions of a requirement of the Code “other than one for which a civil effect is specifically provided by Division 1 or any other provision of this Code”. It is not clear whether s 124 was excluded only in the case of sections which use the words “civil effect” (such as s 150(5) and s 154(3)), or whether s 124 was excluded in all cases where a section provides for a result that has civil (as distinct from criminal) consequences (eg, s 42(4), which renders non-complying mortgages unenforceable). It would appear that the words “civil effect” were not necessary in order to exclude s 124, given that:

subsection headings do not form part of the Code (s 206); the term “civil effect” is not defined; and the words “civil effect” have a plain ordinary meaning that is capable of extending to provisions such as s 42(4) which do not specifically refer to “civil effect”. [124.06] After the Enhancements Act The Enhancements Act amended s 124(1) of the Code to remove the words: … other than one for which a civil effect is specifically provided by Division 1 or by any other provision of this Code.

The Explanatory Memorandum to the Enhancements Act explains the reason for this change (at paras 2.84–2.87): 2.84

This amendment results in two changes: consumers will be able to seek orders both for a specific civil effect (where this is provided for in the Code), and for compensation or restitution resulting from the contravention; and ASIC will have comprehensive standing under the Code, in relation to contraventions where a specific civil effect is provided for in the Code, and all other contraventions.

2.85

The following entities can make an application to the court under this section: ASIC on its own behalf; ASIC on behalf of a person affected by the contravention, if that person has consented in writing to ASIC making the application; and a person affected by the contravention. [s 124(2)].

[page 453] 2.86

The amendment does not create new offences for past conduct that did not previously give rise to a penalty or a liability to a consumer. The amendment will mean that where the remedy available to a consumer for a past contravention was limited to the civil effect, they will now be able to obtain a more comprehensive remedy where they have suffered additional loss or damage.

2.87

There is no retrospectivity in regards to what constitutes a contravention, so entities would always have been operating with full knowledge about the legality of their conduct. The amendment to section 124 therefore does not introduce new or retrospective obligations on persons who engage in credit activities.

[124.10] Before the Enhancements Act — relationship with Pt 6, Div 1 Section 124 provided a right of action for compensation or restitution to any person affected by a contravention of a requirement of the Code “other than one for which a civil effect is specifically provided by Division 1 or any other provision of this Code”. Division 1 of Pt 6 of the Code provided remedies for compensation to a debtor or guarantor (whether by way of an order for compensation or by a right of set-off or a debt in the sum of a civil penalty awarded) for loss suffered by reason of the contravention of key requirements of the Code. Section 124 was separate from the right to seek a civil penalty under s 114 or an order for compensation under s 118, which rights were limited only to contraventions of requirements of the Code other than key requirements as defined in s 111 (see [111.20]). It was held that s 124(1) prevented a court from awarding compensation pursuant to Div 2 of Pt 6 in respect of a contravention of key requirements of the Code. In Queensland v Ward (2002) ASC ¶155-055; [2002] QSC 171; BC200203212, Ambrose J held that: In my view the better construction of this rather difficult part of the Consumer Credit Code is that s 114(1) of the UCCC [s 124(1) of the Code] prevents a court from making an order under Division 2 with respect to compensation for contravention of key requirements of the Code which may be made under Division 1, although it does not prevent a court from making an order with respect to contravention of non-key requirements of the Code. On the other hand it would be inconsistent with the obvious policy of Division 1 of Part 6 to make an order for compensation under Division 2 which exceeded the loss which actually resulted from contravention of the non-key requirements established.

On the facts of that case, the state had brought proceedings for a civil penalty under s 112 and also sought orders under s 124 on behalf of the debtors. Ambrose J held that there was not sufficient evidence to establish that the contraventions of the non-key requirements of the Code had caused any relevant loss to the debtors. [124.15] Restitution or compensation Section 124 empowers a court to order, when a credit provider has contravened any requirement of the Code, that the credit provider make restitution or pay compensation to any person who has suffered loss as a result of the contravention, and to make any consequential orders that it considers necessary (s 124(1)). Such orders may

be made on an application brought by any person affected by the contravention or by ASIC (s 124(2)). [page 454] In Queensland v Ward (2002) ASC ¶155-055; [2002] QSC 171; BC200203212, Ambrose J stated that, for the purposes of s 124 of the Code, “restitution” connotes the yielding up or restoring of something improperly or unlawfully taken or retained without legal justification, and suggested that it did not include compensation (even though, if the expression “make restitution” stood alone, it might in context include “pay compensation”). Ambrose J thought it would include orders for recovery of goods seized under a bill of sale given to the credit provider as security for a loan. The question for decision was whether an order (such as that sought by the state on behalf of the debtors) for repayment of the amount of money paid by a debtor to the credit provider which exceeded the amount of money lent to that debtor, or perhaps such part of that excess as may be judged appropriate, was restitutionary or compensatory. Ambrose J held that such an order was really compensatory, being in the nature of relief which the debtors themselves could have sought on application under ss 114(1)(a) and 118 to recover loss. In Dale v Nichols Constructions Pty Ltd [2003] QDC 453, Mrs Dale sought compensation under s 124 in respect of breaches of non-key requirements of the Code. McGill DCJ held that, although it may not be necessary to show financial loss as such in order to obtain an order for compensation under s 124, the section was not directed to an order that payment be made simply because the Code had been breached. It was necessary for the debtor to show that there was some actual disadvantage as a result of the breach, whether in the form of monetary loss or other harm. Since there was no proof of monetary loss, any distress and upset to Mrs Dale had arisen largely because of her inability to make payments as demanded by Nichols Constructions and, on the evidence, the loans would have been entered into even if the Code had been complied with, the court (following Queensland v Ward) refused to make an order under s 124.

In the case of Berckelman v Daimler Chrysler Services Australia Pty Ltd [2004] NSWCTTT 715, the New South Wales Consumer, Trader and Tenancy Tribunal held that the credit provider, Daimler, should reimburse the debtor for interest accrued from the date the debtor requested to pay out the contract by way of compensation for having failed to allow the applicant to pay out the contract in accordance with s 75 of the UCCC (s 82 of the Code). The tribunal was satisfied that the interest compensation claimed by the applicant was not too remote from the respondent’s failure to comply with s 76 of the UCCC (s 83 of the Code). This provides support for the view apparently taken by Ambrose J in Queensland v Ward that an order for repayment of interest charges was compensatory rather than restitutionary. However, the tribunal rejected the submission that compensation should be awarded for the loss of chance to sell the vehicle the subject of the credit contract and realise its value from when the request for a pay-out figure was made, stating that they were not convinced that such a loss of chance in respect of the proposed sale of the vehicle arose in the “usual course of things” or “may reasonably be supposed to be within the contemplation of the parties”. A request for compensation on this ground was unsuccessful. In Garnar v Capital Finance Australia Ltd [2003] VCAT 1171, Mr Garnar argued that the credit provider’s decision not to alter his obligations under the contract as a result of his hardship as per s 66 of the UCCC (s 72 of the Code) entitled him to compensation or restitution under s 114 of the UCCC (s 124 of the Code). The Victorian Civil and Administrative Tribunal dismissed the application on the grounds that the credit provider was not obliged to accede to Mr Garnar’s request. [page 455] [124.20] “Person affected by the contravention” The class of persons in whose favour such an order may be made is not restricted to debtors and guarantors but may include any person “affected”. Contrast this with ss 114 and 118, which limit potential applicants to debtors and guarantors. The Code does not state what nexus is necessary between the contravention of the key

requirement and the requirement to pay compensation or restitution. See also [124.01]. [124.25] Applicants If an application is made by ASIC, the court may order restitution or the payment of compensation to all persons affected by the contravention. However, before the Enhancements Act, it should be noted that this clearly only applied to compensation awarded on application by ASIC for losses sustained by reason of contravention of non-key requirements of the Code (Queensland v Ward (2002) ASC ¶155-055; [2002] QSC 171; BC200203212). If the consumer’s loss was really sustained by reason of contravention of key requirements, the consumer will need to apply under the relevant provision of Pt 6, Div 1. Also, if a person affected by the contraventions made an application, the court could order the credit provider to make restitution to or pay compensation not only to the applicant but also to all others affected by the contravention.

[page 457]

Part 7 — Related sale contracts DIVISION 1 — INTERPRETATION AND APPLICATION Meaning of sale contract 125 For the purposes of this Code, a sale contract is a contract for any one or more of the following: (a) a contract for the sale of goods; (b) a contract for the supply of services. ________________________________________ [Editorial note: UCCC s 115 — apart from numbering the section is unchanged.]

COMMENTARY ON SECTION 125 [125.05] Outline The Code (as did the UCCC) imports the “linked credit provider” provisions from the Australian Consumer Law (Sch 2 of the Competition and Consumer Act 2010 (Cth), formerly the Trade Practices Act 1974 (Cth)) and Pt 2 of the Credit Act 1984 (NSW), and adapts and enhances them for Code-regulated credit contracts. A credit provider may be liable for the misrepresentations of a supplier in relation to a tied credit contract and also for defects in goods or services supplied (or other breaches) under a “sale contract” if the credit provider is “linked” to the supplier of the goods or services. Consequently, Pt 7 of the Code (Related sale contracts) gives buyers additional remedies where a credit provider is “linked” to a supplier and, importantly, the sale contract is financed by the credit provider.

Under general law principles: in the absence of negligence, a person is only liable for breaches of contract or for misrepresentations made in relation to a contract if the person has a direct contractual link to the aggrieved person. This is the doctrine of “privity”; under the doctrine of privity, a person can only be made liable for their own acts or omissions as they affect another person with whom the original person has a contract; and the privity doctrine has been substantially eroded over recent years through the effects of laws which impose liability on persons even though they have no direct contract or link with the aggrieved person. In Australia, the Australian Consumer Law and Pt 2 of the Credit Act have had this effect through a number of provisions, and the Code adopts some of those principles for Code-regulated credit contracts. Consequently, a primary effect of the related sale contract provisions in Pt 7 of the Code is to override the general law privity principle so that a credit provider can be liable for defects in goods or services supplied under a sale contract if the credit provider is “linked” to the supplier. Part 7 seems to recognise that suppliers may lack the financial stability to meet claims made against them, and often financiers may be in an economic position to exert considerable control [page 458] over suppliers by virtue of the fact that they give them finance to induce consumers to buy (see Law Council of Australia, Committee on Fair Consumer Credit Laws, Report on Fair Consumer Credit Laws to the Honourable G O Reid, Attorney-General for the State of Victoria, parliamentary paper, Victorian Parliament, Melbourne, 1972 and Law Council of Australia, Committee on Fair Consumer Credit Laws, Supplementary Report on Fair Consumer Credit Laws to the AttorneyGeneral for Victoria by a Committee of the Law Council of Australia,

parliamentary paper, Victorian Parliament, Melbourne, 1978 (Molomby Report)). Consequently, Pt 7 of the Code reflects the recommendations of the Molomby Report that, where a credit provider supplies credit and has a commercial link with the supplier, liability should be imposed on the credit provider (as well as the supplier) to protect the debtor from the risk of the supplier being insolvent. Previously, it had been assumed, in relation to the relevant provisions in the UCCC that refer to related sale contracts (ie, ss 115–131 of the UCCC; ss 125–141 of the Code) that such provisions repeated the provisions of the Trade Practices Act 1974 (Cth) (now the Competition and Consumer Act 2010 (Cth) containing the Australian Consumer Law) to ensure that the relevant consumer protections were available in respect of unincorporated linked credit providers and suppliers, who are not caught by the Australian Consumer Law — this is now confirmed in the explanatory memorandum to the NCCP Act (at para 8.227). (Note the Crimes Act 1914 (Cth) s 4C prevents double jeopardy — this means that an offender who has been convicted of a criminal offence under one law (such as the Australian Consumer Law) for a particular act or omission, cannot also be convicted of a criminal offence under the Code for the same act or omission). The practical effect of Pt 7 is that credit providers must carefully assess the sales practices and financial standing of the suppliers with whom they are linked, as: they may be accountable to the debtor for the supplier’s conduct regarding the tied credit contract (s 128) or the related sale contract (s 129); and liability for loss or damage suffered by a debtor may be apportioned between a supplier and a linked credit provider (s 131). In addition, credit providers should in practice ensure that, if buyers have queries concerning the credit provider’s products, the supplier must direct them to contact the credit provider (rather than the supplier attempting to answer those queries). The Credit Act contained similar protection (see Pt 2) but the liability on

credit providers is increased in Pt 7 of the Code (see [125.20]). [125.10] Sale contract Section 125 defines a sale contract as being a contract for sale of goods, or a contract for the supply of services. Unlike the Credit Act definition (see s 20 of the Credit Act), the Code’s definition does not contain a monetary limit. “Goods” is defined in s 204 of the Code to include: ships, aircraft or other vehicles; or animals, including fish; or minerals, trees or crops, whether on, under or attached to land or not; but does not include anything declared to be excluded by the Regulations. At the time of publication, no such exclusions have been made by the Regulations. [page 459] “Services” is defined in s 204 of the Code to include: rights in relation to, and interests in, real property; or insurance; or professional services; or a right to services; excluding the provision of credit or a right to credit or services provided under a consumer lease. This definition is broad, and means that the Code related sale contract provisions apply to contracts for the sale of real property (compare the Code definitions of “goods” and “services” with those in s 5 of the Credit Act). In Agussol v Australian Finance Direct Ltd (2004) ¶ASC 155-066; [2004] VCAT 1560, the court held that the contract entered into between the applicant and the respondent, for the supply of certain

educational materials and seminars, is a contract within the meaning of s 115 of the UCCC (s 125 of the Code). See also commentary on definitions in s 204 at [204.55]. [125.15] Linked credit provider In general terms, s 127 states that a credit provider is “linked” to a supplier when: the parties have existing business arrangements; or the supplier refers their customers to the credit provider for credit; or the supplier’s customers can apply for credit or obtain credit application forms at the supplier’s premises. (See [127.05]–[127.30].) [125.20] Code protection Part 7 of the Code contains provisions imposing liability on linked credit providers equivalent to those contained in the Credit Act, namely: section 129 of the Code is similar to s 24 of the Credit Act — liability for any damage suffered by a debtor as a result of a misrepresentation, breach of contract or failure of consideration in relation to a sale contract; and sections 134–138 of the Code are similar to ss 23, 25 and 26 of the Credit Act — debtors rights in relation to credit contracts which are tied to sale contracts which are rescinded or discharged. However, the potential liability of linked credit providers is increased by the Code as follows: Part 7 of the Code applies to the sale of real property by virtue of the definition of “services” (see [125.10]); linked credit providers can be liable for any representation, warranty or statement made by a supplier in relation to a tied credit contract (s 128); and section 135 of the Code gives a debtor rights following the

rescission or discharge of a tied credit contract, unless credit was provided as a result of an approach by the debtor that was not induced by the supplier or credit provider. In contrast, the equivalent Credit Act provisions (ss 27 and 28) do not apply if the credit was provided as a result of an approach by the debtor that was not induced by the supplier only.

[page 460]

Sale contracts to which this Part applies 126 This Part applies to or in respect of a sale contract or proposed sale contract only if the sale of the goods or supply of services concerned is financed, or is proposed to be financed, wholly or partly by the provision of credit to which this Code applies. ________________________________________ [Editorial note: UCCC s 116 — apart from numbering the section is unchanged.]

COMMENTARY ON SECTION 126 [126.05] Outline Section 126 limits the Code’s linked credit provider provisions in Pt 7 to “sale contracts” or “proposed sale contracts” where the contract or proposed contract is financed, or proposed to be financed, wholly or partly by the provision of Code-regulated credit.

Linked credit providers and tied credit contracts 127 (1) [“linked credit provider”] For the purposes of this Code, a linked credit provider of a supplier means a credit provider: (a) with whom the supplier has a contract, arrangement or understanding relating to the supply to the supplier of goods in which the supplier deals, relating to the business carried on by the supplier of supplying goods or services or relating to the provision to persons to whom goods or services are supplied by the supplier of credit in respect of payment for those goods or services; or (b) to whom the supplier, by arrangement with the credit provider, regularly refers persons for the purpose of obtaining credit; or (c) whose forms of contract or forms of application or offers for credit are, by arrangement with the credit provider, made available to persons by the supplier; or

with whom the supplier has a contract, arrangement or (d) understanding under which contracts or applications or offers for credit from the credit provider may be signed by persons at the premises of the supplier. 127 (2) [“tied continuing credit contract”] For the purposes of this Code, a tied continuing credit contract contract is a continuing credit contract under which a credit provider provides credit in respect of the payment by a debtor for goods or services supplied by a supplier in relation to whom the credit provider is a linked credit provider. [subs (2) am Act 130 of 2012 s 3 and Sch 1 item 56, eff 1 Mar 2013]

127 (3) [“tied loan contract”] For the purposes of this Code, a tied loan contract is a credit contract (other than a continuing credit contract) entered into between a credit provider and a debtor where: (a) the credit provider knows or ought reasonably to know that the debtor enters into the credit contract wholly or partly for the purposes of payment for the goods or services supplied by a supplier; and (b) at the time the credit contract is entered into the credit provider is a linked credit provider of the supplier. ________________________________________ [Editorial note: UCCC s 117 — apart from numbering the section is unchanged.]

COMMENTARY ON SECTION 127 [127.05] Outline Section 127 defines the terms “linked credit provider”, “tied continuing credit contract” and “tied loan contract” used throughout Pt 7 of the Code. [page 461] [127.10] Linked credit provider A credit provider becomes a “linked credit

provider” when its association with the supplier involves any of the following: a contract between the parties concerning the supply of goods the supplier deals with or relating to the provision of credit to the customers of the supplier (eg, the credit provider contracts with the supplier to finance the supplier’s purchase of goods to be leased to the supplier’s customers, or the credit provider contracts with the supplier that it will provide credit to the supplier’s customers) (s 127(1)(a)); or the supplier refers its customers to the credit provider for credit (eg, a washing machine supplier suggests that a potential customer apply for credit to a particular credit provider to finance the purchase) (s 127(1)(b)); or the credit provider’s application forms or contracts are provided to customers by the supplier (eg, a dress shop has a stand next to the cash register containing application forms for a credit card from a credit provider) (s 127(1)(c)); or the credit provider’s application forms or contracts may be signed by customers at the supplier’s premises (eg, a motor vehicle dealer offers customers’ application forms for a particular credit provider to be signed at the dealership as a means of purchasing a vehicle) (s 127(1)(d)). A “supplier” is defined in s 204 of the Code as meaning a person who supplies goods or services. [127.15] Tied continuing credit contract A tied continuing credit contract is a continuing credit contract covering the payment by the customer for goods or services with a credit provider which is a linked credit provider of the supplier of the goods and services (s 127(2)). In the case of continuing credit, if a credit provider is a “linked credit provider” to the supplier, all transactions with that supplier which are financed by the credit provider will be tied contracts. However, not all credit card contracts are tied contracts. In many cases, the provider of the credit on a credit card has no direct contract or arrangement with the supplier of goods or services. It is only where the

credit provider which issues the credit card is also the banker to, or financier of, the supplier that there is a chance that the preconditions exist under which the credit provider could actually be “linked”. [127.20] Tied loan contract The definition of tied loan contract includes all credit contracts, other than continuing credit contracts. A tied loan contract is one where the credit provider knows or ought to know that the debtor entered into the contract wholly or partly to pay for the goods or services supplied by a linked supplier of the credit provider (s 127(3)). See commentary at [135.05] on meaning of “wholly or partly”. A loan contract is “tied” only where the credit provider knows or ought to have known that the credit provided was intended to pay for goods or services, even when that credit provider has already been established as “linked” to the supplier. For example, if a motor vehicle dealership made loan forms available to its customers for a particular credit provider and was therefore “linked” to that credit provider, a customer which approached that credit provider for a loan without

[page 462] specifying that the loan was intended to purchase goods and services from that motor vehicle dealership will not be entering into a tied contract. See s 199(4) of the Code (see commentary at [199.10]) regarding when a credit provider will be taken to “know” that credit is provided to pay for goods or services. The Code does not give any guidance as to the meaning of “ought to have known”. [127.25] Supplier guarantees The Code does not apply to any guarantee by the supplier under a tied loan contract or a tied continued credit contract (reg 65). This exclusion by reg 65 is made under s 8(3) of the Code. [127.30] “Arrangement” or “understanding” In Sullivan v Waltons Credits Ltd (1990) ASC 55-976, the Commercial Tribunal of New South Wales said an “arrangement” or “understanding” involved a meeting of minds, but it does not necessarily create legally enforceable obligations between the parties. In addition, in Ampol Ltd v Calaby Pty Ltd (1991) 30 FCR 426; 110 ALR 343; BC9103306, the Federal Court of Australia confirmed that arrangements and understandings need not give rise to rights or obligations at law or in equity.

DIVISION 2 — LIABILITY OF CREDIT PROVIDERS FOR SUPPLIERS’ MISREPRESENTATIONS Credit provider liable with respect to supplier’s misrepresentations etc about tied credit contract 128 (1) [Misrepresentations by supplier render credit provider liable] If there is a tied loan contract or a tied continuing credit contract in respect of a

sale contract, any representation, warranty or statement made (whether orally or in writing) by the supplier, or any person acting on behalf of the supplier, to the debtor in relation to the tied loan contract or tied continuing credit contract gives the debtor the same rights against the credit provider as the debtor would have had if it had been made by the credit provider. 128 (2) [Indemnification of credit provider] Without prejudice to any other rights or remedies to which a credit provider may be entitled, a credit provider is entitled to be indemnified by the person who made the representation, warranty or statement, and any person on whose behalf it was made, against any damage suffered by the credit provider through the operation of this section. ________________________________________ [Editorial note: UCCC s 118 — apart from numbering the section is unchanged.]

COMMENTARY ON SECTION 128 [128.05] Outline Part 7 of the Code makes a linked credit provider potentially liable in connection with related sale contracts in the two separate ways provided for in ss 128 and 129. Section 128 gives a debtor rights against the credit provider for representations made by a supplier about a tied credit contract. Section 129 gives a debtor a right to damages against linked credit providers and suppliers for any loss or damage suffered due to any misrepresentation, breach of contract or failure of consideration in connection with a related sale contract (see [129.05]). [page 463] [128.10] Representations about credit contracts If a supplier or a person acting on their behalf makes representations, warranties or statements (which includes any misrepresentation) to the debtor on any matter relating to the credit contract, the debtor has the same rights against the credit provider as they would have had if the credit provider itself had made them. This section makes it clear that it is not necessary for a relationship of agency to exist,

before a linked credit provider can become liable for the supplier’s representations. In addition, the supplier’s representations may be relevant to an application under s 76 of the Code for a court to reopen a transaction. Section 128 enables a consumer to take action against the linked credit provider for the supplier’s representations based on rights under common law or equity or under statute (eg, ss 124 and 154 of the Code). Section 118 of the Code (see commentary at [118.05]–[118.40]) did not have an equivalent in the Credit Act (eg, see Custom Credit Corp Ltd v Lynch [1993] 2 VR 469; (1993) ASC ¶56-201 and Australian Guarantee Corp Ltd v Hawkins (1991) ASC ¶56-041, where it was held that the credit provider was only liable if the linked supplier was their agent) or the Trade Practices Act (now the Competition and Consumer Act 2010 (Cth) containing the Australian Consumer Law). It is designed to protect consumers against the risk that a supplier may play down the implications of the linked credit provider’s credit package, in order to secure the sale. Credit providers must therefore ensure that their linked suppliers are aware of their rights and obligations under the Code as if they were the credit provider’s agents.

DIVISION 3 — LIABILITY OF CREDIT PROVIDERS IN RELATION TO GOODS Right to damages under sale contract against both supplier and linked credit provider 129 (1) General right to damages If: (a) a supplier supplies goods, or causes goods to be supplied, to a linked credit provider of the supplier and a debtor enters into a contract with the linked credit provider for the provision of credit in respect of the supply by way of sale of the goods to the debtor; or (b) a debtor enters into a contract with a linked credit provider of a supplier for the provision of credit in respect of the supply by the supplier of goods or services, or goods and services, to the debtor;

and the debtor suffers loss or damage as a result of misrepresentation, breach of contract, or failure of consideration in relation to the sale contract, the supplier and the linked credit provider are, subject to this Division, jointly and severally liable to the debtor for the amount of the loss or damage, and the debtor may recover that amount by action in accordance with this section in a court of competent jurisdiction. 129 (2) Credit provider’s defences A linked credit provider of a particular supplier is not liable to a debtor by virtue of subsection (1) in proceedings arising under that subsection if the credit provider establishes: (a) that the credit provided by the credit provider to the debtor was the result of an approach made to the credit provider by the debtor that was not induced by the supplier; or [page 464] (b) if the proceedings relate to a contract of sale with respect to which a tied loan contract applies, that: (i)

after due inquiry before becoming a linked credit provider of the supplier, the credit provider was satisfied that the reputation of the supplier in respect of the supplier’s financial standing and business conduct was good; and

(ii) after becoming a linked credit provider of the supplier, but before the tied loan contract was entered into, the linked credit provider had not had cause to suspect that the debtor might, if the contract was entered into, be entitled to recover an amount of loss or damage suffered as a result of misrepresentation, breach of contract or failure of consideration in relation to the contract as referred to in subsection (1); and (iii) after becoming a linked credit provider of the supplier, but before the tied loan contract was entered into, the credit provider had not had cause to suspect that the supplier might be unable to meet the supplier’s liabilities as and when they fell due; or

(c) if the proceedings relate to a contract of sale with respect to which a tied continuing credit contract entered into by the linked credit provider applies, that, having regard to: (i)

the nature and volume of business carried on by the linked credit provider; and

(ii) such other matters as appear to be relevant in the circumstances of the case; the linked credit provider, before becoming aware of the contract of sale, or of proposals for the making of the contract of sale (whichever the linked credit provider first became aware of), had not had cause to suspect that a person entering into such a contract with the supplier might be entitled to claim damages against, or recover a sum of money from, the supplier for misrepresentation, breach of contract or failure of consideration as referred to in subsection (1). [s 129 am Act 130 of 2012 s 3 and Sch 1 item 57, eff 1 Mar 2013]

________________________________________ [Editorial note: UCCC s 119 — apart from numbering the section is unchanged.]

COMMENTARY ON SECTION 129 [129.05] Outline Section 129 gives a debtor a general right to damages against both the supplier and the linked credit provider if the debtor suffers loss or damage as a result of a misrepresentation, breach of contract or failure of consideration in relation to a sale contract. Provisions with similar effect were contained in the Credit Act (s 24) and are contained in the Australian Consumer Law (s 278). The debtor to whom a linked credit provider supplies credit must be the same person to whom the supplier supplies the goods or services in question. In Gaszewski v Australian Finance Direct Ltd [2005] NSWCTTT 320, Mrs Gaszewski borrowed money to enable her to attend investment courses provided by the National Investment Institute from a linked credit provider, Australian Finance Direct. However, it was Mr Gaszewski who was the

enrolled student in the course (though he was able to take Mrs Gaszewski along as his partner). Since there was no congruity between the debtor and the person to whom the goods or services were supplied, Mrs Gaszewski could not rely on s 119 of the UCCC (s 129 of the Code) in relation to her debt to Australian Finance Direct. [129.10] Damages Where a linked credit provider provides credit to a debtor in relation to the supply of goods, services or goods and services which have been, [page 465] or will be, supplied by a supplier to which it is linked, and the debtor suffers loss or damage through misrepresentation, breach of contract, non-delivery of the goods etc in relation to the contract, both the supplier and linked credit provider are jointly and severally liable to the debtors for the amount of the loss (s 129(1)). In Agussol v Australian Finance Direct Ltd (2004) ASC ¶155-066; [2004] VCAT 1560, “loss or damage” was characterised as the loss attributable to entry into the sale contract and the loan contract. In Agussol, those amounts were payments already made under the loan contract which had been terminated. [129.15] Defences A number of circumstances provide defences to credit providers in relation to contracts which are linked. They are: the fact that the debtor approached the credit provider independently and was not induced by the supplier — this is a complete defence to a buyer’s claim; for a tied loan contract: —

before it became linked, the credit provider, after due inquiry, was satisfied as to the supplier’s good financial standing and business conduct; and

—

after becoming linked, but before the specific contract was entered into, the credit provider had not had reason to suspect

that the debtor might be entitled to recover for loss or damage suffered as a result of the supplier’s conduct or that the supplier might be insolvent; and for a tied continued credit contract, because of the nature and volume of the business carried on by the linked credit provider and any other relevant matters, the linked credit provider has no reason to suspect that a breach may occur. In Clegg v National Investment Institute Pty Ltd and Australian Finance Direct Ltd [2004] NSWCTTT 669, a linked credit provider, Australian Finance Direct, who provided finance for educational seminars provided by a supplier, National Investment Institute, sought to establish a defence on one of the bases in s 119(2) of the UCCC (s 129(2) of the Code). In rejecting the three defences raised under s 119(2)(b) of the UCCC, the tribunal noted: 1.

section 119(2)(b)(i) of the UCCC (s 129(2)(b)(i) of the Code) — that Australian Finance Direct had failed to satisfy itself that the financial standing and business conduct of the supplier were good, as they relied on due diligence conducted by a business entity whose business was purchased by Australian Finance Direct; and in any event the inquiry was made on a different company (being a fellow subsidiary of a parent company like the National Investment Institute), but not the entity with which Australian Finance Direct was “linked”;

2.

section 119(2)(b)(ii) of the UCCC (s 129(2)(b)(ii) of the Code) — that Australian Finance Direct should have had cause to suspect a recovery for loss or damage resulting from any misrepresentation in relation to contracts with the National Investment Institute. Chairperson Ransome noted that “alarm bells should have been ringing” as Australian Finance Direct acknowledged that, at the relevant time, it knew ASIC had commenced proceedings in the Federal Court against the National [page 466]

Investment Institute alleging that the National Investment Institute had made misleading statements that certain of its products and training were ASIC-approved when they were not. Submissions made by Australian Finance Direct that there was no cause for concern, because the proceedings involving ASIC did not relate specifically to the course Ms Clegg had enrolled in, were rejected. As such it failed to make out the defence under s 119(2)(b) of the UCCC (s 129(2)(b) of the Code); and 3.

section 119(2)(b)(ii) of the UCCC (s 129(2)(b)(ii) of the Code) — Australian Finance Direct could not rely on this defence if it did not have in place a process whereby it could satisfy itself that there were no concerns about the linked supplier’s financial viability. The tribunal rejected arguments that there was no cause for concern as the National Investment Institute was continuing to trade and pay any debts due to Australian Finance Direct, and there was no other information in the public domain that gave it cause to suspect the National Investment Institute might be unable meet its liabilities. This was because Australian Finance Direct could not point to any evidence that, after it became a linked credit provider, it required the National Investment Institute to provide it with any key financial information so it could be satisfied as to its solvency. The tribunal noted that: … a credit provider cannot plead ignorance when it has taken no steps to assure itself on objective measures that the credit provider will be able to meet its liabilities.

[129.20] “Induced” The Code does not define “induce”. Case law suggests “induce” involves persuasion, pressure or influence (see Yorke v Lucas (1983) 49 ALR 672; 80 FLR 143; (1983) ASC ¶55-282; (1983) ATPR 40401 and Heating Centre Pty Ltd v Trade Practices Commission (1986) 9 FCR 153; 65 ALR 429; (1986) ATPR 40-674). It is likely that finance will be “induced” if the supplier’s advertisements for goods or services state that finance is available from a particular credit provider. In Comcare v Mather and Mitchell (1995) 56 FCR 456 at 462–63; 37 ALD 463 at 469; 21 AAR 297; BC9507596, Kiefel J of the Federal Court of Queensland stated: To be said to have, expressly or impliedly, induced or encouraged an undertaking or presence at

some location could refer to, by way of example only, requirements, suggestions, recognition of practices, fostering of participation, or providing assistance and may include the exercise of discretion or choice on the part of the employee.

[129.25] Procedures The practical effect of s 129 is similar to that of s 128 — credit providers must ensure that suppliers are aware of the Code’s requirements. In addition, s 129 suggests that credit providers should carefully assess whether suppliers with which they may be linked exercise appropriate standards of good conduct in their dealings with buyers.

[page 467]

Limits on debtor’s right of action against linked credit provider 130 (1) Debtor may raise credit provider’s liability Subject to subsection (2), in relation to a contract referred to in paragraph 129(1)(a) or (b), in which a credit provider claims damages or an amount of money from a debtor, the debtor may set up the liability of the credit provider under section 129 in diminution or extinction of the debtor’s liability. 130 (2) Proceedings to be brought against both supplier and linked credit provider Subject to subsection (3), a debtor may not, in respect of a liability for which, by reason of section 129, a supplier and a linked credit provider are jointly and severally liable: (a) bring proceedings to recover an amount of loss or damage from the credit provider; or (b) where proceedings are brought against the debtor by the linked credit provider, make a counterclaim or exercise the right conferred by subsection (1) against the credit provider; unless the debtor brings the action against the supplier and the credit provider jointly or, in the case of a counterclaim or right conferred by subsection (1), claims in the proceedings against the supplier in respect of the liability by third-party proceedings or otherwise.

130 (3) When joint proceedings not required Subsection (2) and paragraphs (5)(a) and (6)(a) do not apply in relation to proceedings where: (a) the supplier is insolvent, cannot be located after reasonable inquiry, or has died or been dissolved; or (b) in the opinion of the court in which the proceedings are taken, it is not reasonably likely that a judgment obtained against the supplier would be satisfied and the court has, on the application of the debtor, declared that subsection (2) and paragraphs (5)(a) and (6)(a) do not apply in relation to the proceedings. 130 (4) Limit of credit provider’s liability The liability of a linked credit provider to a debtor for damages or a sum of money in respect of a contract referred to in subsection 129(1) is not to exceed the sum of: (a) the amount of credit under the tied loan contract or tied continuing credit contract; and (b) the amount of interest (if any) or damages in the nature of interest allowed or awarded against the linked credit provider by the court; and (c) the amount of costs (if any) awarded by the court against the linked credit provider or supplier or both. 130 (5) Enforcement of judgment against linked credit provider Where in proceedings arising under section 129, judgment is given against a supplier and a linked credit provider, the judgment: (a) must not be enforced against the linked credit provider unless a written demand made on the supplier for satisfaction of the judgment has remained unsatisfied for not less than 30 days; and (b) may be enforced against the linked credit provider only to the extent of the amount calculated in accordance with this section, or so much of the judgment debt as has not been satisfied by the supplier, whichever is the lesser. 130 (6) Enforcement of right against linked credit provider Where in proceedings in respect of the liability arising under section 129, a right

conferred by subsection (1) is established against a linked credit provider, the debtor: (a) may not receive the benefit of the right unless judgment has been given against the supplier and linked credit provider, a written demand has been made on the supplier for satisfaction of the judgment and the demand has remained unsatisfied for not less than 30 days; and [page 468] (b) may receive the benefit only to the extent of the amount calculated in accordance with this section or so much of the judgment debt as has not been satisfied by the supplier, whichever is the lesser. [s 130 am Act 130 of 2012 s 3 and Sch 1 item 58, eff 1 Mar 2013]

________________________________________ [Editorial note: UCCC s 120 provided as follows: Limits on debtor’s right of action against linked credit provider (cf Trade Practices Act 1974 (Cwlth) s 73) 120 (1) Debtor may raise credit provider’s liability Subject to subsection (2), in relation to a contract referred to in section 119(1)(a) or (b), in which a credit provider claims damages or an amount of money from a debtor, the debtor may set up the liability of the credit provider under section 119 in diminution or extinction of the debtor’s liability. 120 (2) Proceedings to be brought against both supplier and linked credit provider Subject to subsection (3), a debtor may not, in respect of a liability for which, by reason of section 119, a supplier and a linked credit provider are jointly and severally liable— (a) bring proceedings to recover an amount of loss or damage from the credit provider; or (b) where proceedings are brought against the debtor by the linked credit provider, make a counterclaim or exercise the right conferred by subsection (1) against the credit provider; unless the debtor brings the action against the supplier and the credit provider jointly or, in the case of a counterclaim or right conferred by subsection (1), claims in the proceedings against the supplier in respect of the liability by third-party proceedings or otherwise. 120 (3) When joint proceedings not required Subsections (2), (5)(a) and (6)(a) do not apply in relation to proceedings where— (a) the supplier is insolvent, cannot be located after reasonable inquiry, or has died or

been dissolved; or (b) in the opinion of the court in which the proceedings are taken, it is not reasonably likely that a judgment obtained against the supplier would be satisfied and the court has, on the application of the debtor, declared that subsections (2), (5)(a) and (6)(a) do not apply in relation to the proceedings. 120 (4) Limit of credit provider’s liability The liability of a linked credit provider to a debtor for damages or a sum of money in respect of a contract referred to in section 119(1) is not to exceed the sum of— (a) the amount of credit under the tied loan contract or tied continuing credit contract; and (b) the amount of interest (if any) or damages in the nature of interest allowed or awarded against the linked credit provider by the court; and (c) the amount of costs (if any) awarded by the court against the linked credit provider or supplier or both. 120 (5) Enforcement of judgment against linked credit provider Where in proceedings arising under section 119, judgment is given against a supplier and a linked credit provider, the judgment— (a) must not be enforced against the linked credit provider unless a written demand made on the supplier for satisfaction of the judgment has remained unsatisfied for not less than 30 days; and (b) may be enforced against the linked credit provider only to the extent of the amount calculated in accordance with this section, or so much of the judgment debt as has not been satisfied by the supplier, whichever is the lesser. 120 (6) Enforcement of right against linked credit provider Where in proceedings in respect of the liability arising under section 119, a right conferred by subsection (1) is established against a linked credit provider, the debtor— (a) may not receive the benefit of the right unless judgment has been given against the supplier and linked credit provider, a written demand has been made on the supplier for satisfaction of the judgment and the demand has remained unsatisfied for not less than 30 days; and (b) may receive the benefit only to the extent of the amount calculated in accordance with this section or so much of the judgment debt as has not been satisfied by the supplier, whichever is the lesser.]

[page 469] COMMENTARY ON SECTION 130 [130.05] Outline Section 130 prescribes limits on a debtor’s right of action against a linked credit provider and effectively gives a statutory right of setoff, subject to s 130(6). A right of set-off is the right to raise an independent

cross-claim as a defence to an action. That is, s 130 makes it clear that the liability of a credit provider under s 129 is limited to the extent to which a debtor cannot recover its loss or damage from the supplier. (Note that the headings to ss 129–133 refer to s 73 of the Trade Practices Act 1974, but s 206(3) of the Code states that a heading to a section does not form part of the Code). [130.10] Who must the debtor sue? Although the linked credit provider is jointly and severally liable with the supplier, the debtor cannot make a claim against the credit provider under s 129 unless the supplier is also a party to the proceedings (s 130(2)). This does not apply where the supplier is insolvent, cannot be located after reasonable inquiry, or has died or been dissolved, or where a court is of the view that a judgment against the supplier would not be satisfied (s 130(3)). For example, in Agussol v Australian Finance Direct Ltd (2004) ASC ¶155-066; [2004] VCAT 1560, proceedings which were required to be brought against both the linked credit provider and the supplier were brought successfully against the linked credit provider because the supplier was insolvent. [130.15] What can the debtor recover from the credit provider? The debtor can recover not more than the amount of credit under the credit contract plus interest and costs (s 130(4)). Query what is meant by the “amount of credit” in the context of a tied continuing credit contract — should this be construed as meaning the “credit limit” (which is likely to be of no relevance to the related sale contract to which the s 129 action relates) or to the credit provided for the related sale contract? [130.20] Enforcement of judgment against a linked credit provider If a debtor obtains judgment against both the supplier and the linked credit provider, it may not be enforced against the credit provider unless demand has been made on the supplier and that demand remains unsatisfied for 30 days (s 130(5)).

Liability of supplier to linked credit provider

131 Unless the linked credit provider and supplier otherwise agree, the supplier is liable to the linked credit provider for the amount of a loss suffered by the linked credit provider, being an amount not exceeding the maximum amount of the linked credit provider’s liability under subsection 130(4) and, unless the court otherwise determines, the amount of costs (if any) reasonably incurred by the linked credit provider in defending the proceedings by reason of which the liability was incurred. [s 131 am Act 130 of 2012 s 3 and Sch 1 item 59, eff 1 Mar 2013]

________________________________________ [Editorial note: UCCC s 121 provided as follows:

[page 470] Liability of supplier to linked credit provider (cf Trade Practices Act 1974 (Cwlth) s 73) 121 Unless the linked credit provider and supplier otherwise agree, the supplier is liable to the linked credit provider for the amount of a loss suffered by the linked credit provider, being an amount not exceeding the maximum amount of the linked credit provider’s liability under section 120(4) and, unless the court otherwise determines, the amount of costs (if any) reasonably incurred by the linked credit provider in defending the proceedings by reason of which the liability was incurred.]

COMMENTARY ON SECTION 131 [131.05] Outline Section 131 makes the supplier liable for the linked credit provider’s loss equal to the amount of the linked credit provider’s liability under s 130(4) and the amount of costs reasonably incurred in defending proceedings brought by a debtor. However, s 131 allows the linked credit provider and supplier to agree that the liability of the linked credit provider will be apportioned between the linked credit provider and supplier or borne solely by the linked credit supplier. It is usual practice for credit providers and suppliers to enter into agreements whereby suppliers indemnify the credit provider for any costs they may incur in defending linked credit provider proceedings.

Interest may be awarded 132 (1) [Debtor’s right to interest] Despite any other law, where, in proceedings arising under section 129, judgment is given against a supplier and a linked credit provider or against a linked credit provider for an amount of loss or damage, the court in which the proceedings are taken must, on the application of the debtor, unless good cause is shown to the contrary, award interest to the debtor against the supplier and credit provider or against the credit provider, as the case may be, on the whole or a part of the amount from the time when the debtor became entitled to recover the amount until the date on which the judgment is given, at a rate prescribed by the regulations. 132 (2) [Good cause not to award interest] In determining whether good cause is shown against awarding interest under this section on the whole or part of an amount of loss or damage, the court is to take into account any payment made into court by the supplier or credit provider. [s 132 am Act 130 of 2012 s 3 and Sch 1 item 60, eff 1 Mar 2013]

________________________________________ [Editorial note: UCCC s 122 provided as follows: Interest may be awarded (cf Trade Practices Act 1974 (Cwlth) s 73) 122 (1) [Debtor’s right to interest] Despite any other law, where, in proceedings arising under section 119, judgment is given against a supplier and a linked credit provider or against a linked credit provider for an amount of loss or damage, the court in which the proceedings are taken must, on the application of the debtor, unless good cause is shown to the contrary, award interest to the debtor against the supplier and credit provider or against the credit provider, as the case may be, on the whole or a part of the amount from the time when the debtor became entitled to recover the amount until the date on which the judgment is given, at a rate prescribed by the regulations. 122 (2) [Good cause not to award interest] In determining whether good cause is shown against awarding interest under this section on the whole or part of an amount of loss or damage, the court is to take into account any payment made into court by the supplier or credit provider.]

COMMENTARY ON SECTION 132 [132.05] Outline Section 132 requires a court, on the application of the

debtor (except where good cause is shown to the contrary), to award interest to the debtor against a supplier and/or linked credit provider against whom [page 471] judgment has been given, on the whole or a part of the amount from the time when the debtor became entitled to recover the amount until the date on which judgment is given, at a rate prescribed by the Regulations. Regulation 90 prescribes a rate of interest as being the annual percentage rate payable under the relevant credit contract as at the date of the judgment, or, if the contact is not still in force on that date, the date immediately before the contract was terminated (see Agussol v Australian Finance Direct Ltd (2004) ASC ¶155-066; [2004] VCAT 1560). In determining whether good cause is shown against awarding interest under s 132, the court will take into account any payment made into court by the supplier or credit provider.

Subrogation of credit provider 133 If a judgment given in proceedings arising under section 129 is enforced against a linked credit provider of a particular supplier, the credit provider is subrogated to the extent of the judgment so enforced to any rights that the debtor would have had but for the judgment against the supplier or any other person in respect of the loss or damage suffered by the debtor as a result of the misrepresentation, breach of contract or failure of consideration in relation to the contract from which the liability arose. [s 133 am Act 130 of 2012 s 3 and Sch 1 item 61, eff 1 Mar 2013]

________________________________________ [Editorial note: UCCC s 123 provided as follows: Subrogation of credit provider (cf Trade Practices Act 1974 (Cwlth) s 73) 123 If a judgment given in proceedings arising under section 119 is enforced against a linked

credit provider of a particular supplier, the credit provider is subrogated to the extent of the judgment so enforced to any rights that the debtor would have had but for the judgment against the supplier or any other person in respect of the loss or damage suffered by the debtor as a result of the misrepresentation, breach of contract or failure of consideration in relation to the contract from which the liability arose.]

COMMENTARY ON SECTION 133 [133.05] Outline Section 133 provides that, if a judgment given in proceedings under s 129 of the Code is enforced against a credit provider, the credit provider is subrogated to any rights that the debtor would have had but for the judgment against the supplier to whom the credit provider is linked, or any other person in respect of the loss or damage suffered by the debtor as a result of any action in relation to the contract from which the liability arose. That is, the credit provider is given the same rights that a debtor had against the supplier, so that the credit provider can step in and take recovery proceedings against the supplier.

DIVISION 4 — TERMINATION OF RELATED TRANSACTIONS Termination of sale contract which is conditional on obtaining credit 134 (1) [Termination by purchaser for lack of credit] If a purchaser of goods or services makes it known to a supplier that credit is required in order to pay for the goods or services and [page 472] the purchaser, after making reasonable endeavours to do so, fails to obtain credit on reasonable terms, the purchaser is entitled to terminate the sale contract.

134 (2) [Goods to be returned] A purchaser may terminate a sale contract under this section even though goods or services have already been supplied under the contract but, if practicable, goods supplied under the sale contract must be returned to the supplier. 134 (3) [Remedies of supplier; return of money to purchaser] If a sale contract is terminated under this section: (a) the supplier is entitled to: (i)

reasonable compensation for damage to, or deterioration of, goods supplied under the sale contract (other than fair wear and tear) up to the date of their return to the supplier or, if they are not returned, the cash price of the goods; and

(ii) the reasonable value of the services supplied under the sale contract up to the date of termination; and (b) the purchaser is entitled (subject to the supplier’s entitlement referred to above) to the return of money paid under the sale contract. 134 (4) [Exclusion of section] This section does not apply to a sale contract for the supply of rights in relation to, and interests in, real property unless the supplier was aware that the purchaser intended to obtain the credit from the supplier or from a linked credit provider of the supplier. ________________________________________ [Editorial note: UCCC s 124 provided as follows: Termination of sale contract which is conditional on obtaining credit 124 (1) [Termination by purchaser for lack of credit] If a purchaser of goods or services makes it known to a supplier that credit is required in order to pay for the goods or services and the purchaser, after making reasonable endeavours to do so, fails to obtain credit on reasonable terms, the purchaser is entitled to terminate the sale contract. 124 (2) [Goods to be returned] A purchaser may terminate a sale contract under this section even though goods or services have already been supplied under the contract but, if practicable, goods supplied under the sale contract must be returned to the supplier. 124 (3) [Remedies of supplier; return of money to purchaser] If a sale contract is terminated under this section— (a) the supplier is entitled to—

(i)

reasonable compensation for damage to, or deterioration of, goods supplied under the sale contract (other than fair wear and tear) up to the date of their return to the supplier or, if they are not returned, the cash price of the goods; and

(ii) the reasonable value of the services supplied under the sale contract up to the date of termination; and (b) the purchaser is entitled (subject to the supplier’s entitlement referred to above) to the return of money paid under the sale contract. 124 (4) [Exclusion of section] This section does not apply to a sale contract for the supply of rights in relation to, and interests in, real property unless the supplier was aware that the purchaser intended to obtain the credit from the supplier or from a linked credit provider of the supplier.]

COMMENTARY ON SECTION 134 [134.05] Outline Section 134 is unusual to the extent that it imposes no rights or obligations on the credit provider, as it simply relates to rights and obligations that the purchaser and supplier have against each other. Section 134 entitles a purchaser to terminate a sale contract for goods or services, if the purchaser “makes it known” to a supplier that credit is required to pay for goods or services and the purchaser is unable to obtain finance on reasonable terms after making reasonable attempts to do so. [Editorial note: now s 278 of the Australian Consumer Law.]

[page 473] [134.10] “Makes it known” It is unclear what is required for a debtor to “make it known” to a supplier that credit is required to pay for the goods and services purchased. Although s 134 is entitled “termination of sale contract which is conditional on obtaining credit”, that section heading is not part of the Code (s 206(3) of the Code). That is, does s 134 only apply where a related sale contract expressly states that it is conditional on the debtor obtaining finance, or is it enough for a debtor to orally inform the supplier that they will only be able to pay if they obtain finance? If s 134 applies only in the former case, then suppliers could easily avoid its effect by not making their sale contracts conditional on purchasers obtaining finance. The Code’s

related sale contracts provisions extend to contracts for sale of real property (see discussion of “services” at [125.10]). However: … [b]ecause the term “services” is defined as including rights in relation to, and interests in, real property, [s 134] is capable of entitling a purchaser to terminate a contract for the sale of land even where the purchaser has not included a specific “subject to finance” condition in the contract. It was not intended that the section should have such an effect. [Explanatory notes to the Consumer Credit (Queensland) Amendment Act 1998]

As a result of the Consumer Credit (Queensland) Amendment Act 1998 (s 134(4) of the Code), the power to terminate, in cases of real property transactions, is now limited to situations where the buyer informed the seller that the buyer was intending to obtain credit from the seller or from a credit provider linked to the seller. Therefore, a real property contract will only be avoidable on the basis of s 134 where a buyer was unsuccessful in obtaining credit from the seller or a credit provider linked to the seller. [134.15] Reasonable endeavours The Code gives no guidance as to the meaning of “reasonable endeavours” (compare s 21 of the Credit Act 1984 which gives a right to a buyer to terminate if the buyer “takes reasonable steps” to obtain credit and fails to do so). Presumably “reasonable endeavours” may vary depending on the amount of credit sought. [134.20] If goods have been supplied The right under s 134(1) for a purchaser to terminate a sale contract extends to the situation where goods or services have already been supplied under that contract. However, s 134(2) requires that goods supplied under a sale contract must be returned to the supplier, if practicable. The termination notice must be in writing (see commentary on s 137 at [137.05]). [134.25] Compensation Section 134(3) gives the supplier a right to reasonable compensation for any damage or deterioration to goods supplied under a sale contract on termination of the sale contract, up to the date of their return to the supplier. If they are not returned, the supplier is entitled to the cash price of the goods. If services have been supplied, the supplier is entitled to the [page 474]

reasonable value of the services supplied under the sale contract up to the date of termination. The purchaser is entitled to a refund of any money paid under a sale contract, subject to the supplier’s rights under s 134(3)(a) (s 134(3)(b)).

Termination of (or recredit under) tied credit contract if sale contract terminated 135 (1) [Effect of termination] If a sale contract is rescinded or discharged (whether under this Code or any other law) and there is a tied loan contract or a tied continuing credit contract made with the purchaser by a linked credit provider of the supplier under the sale contract, the debtor is entitled: (a) in the case of a tied loan contract — to terminate the credit contract; or (b) in the case of a tied continuing credit contract — to be credited with the amount of credit in relation to the sale contract and the interest charges attributable to that amount. 135 (2) [Related guarantee or mortgage] If a tied loan contract is terminated under this section, any related guarantee or mortgage is terminated to the extent to which it secures obligations under the contract or any related guarantee. 135 (3) [Recovery of payments] If a tied loan contract is terminated under this section, the credit provider is entitled to recover from the debtor any part of the amount of credit that has not been paid to the supplier and the debtor is entitled to recover from the credit provider any interest charges or other amounts paid by the debtor under the credit contract. 135 (4) [Effect of termination of guarantee or mortgage] If a mortgage or guarantee is terminated under this section, the credit provider is entitled to recover from the mortgagor or guarantor any part of the amount of credit that has not been paid to the supplier and that is secured by the mortgage or guarantee, and the mortgagor or guarantor is entitled to recover from the credit provider any other amounts paid by the mortgagor or guarantor.

135 (5) [Recovery of loss following termination] If a tied loan contract is terminated under this section, the credit provider is entitled to recover from the supplier (subject to any agreement between them) the amount of any loss suffered by the credit provider as a result of the operation of this section. 135 (6) [Notice of termination] A supplier who knows that a sale contract referred to in subsection (1) has been rescinded or discharged must forthwith give the credit provider under any tied loan contract or tied continuing credit contract notice of the termination. Criminal penalty: 50 penalty units. 135 (7) [Debtor initiated credit supply] This section does not apply if the credit is provided as a result of an approach by the debtor that was not induced by the supplier or credit provider. 135 (8) [Application of section] This section applies: (a) to the exercise by a purchaser of a right under this Code or any other law to rescind or discharge a sale contract; and (b) to a tied loan contract or a tied continuing credit contract, but only if the sale contract was the principal purpose for which the credit was provided. ________________________________________ [Editorial note: UCCC s 125 provided as follows: Termination of (or recredit under) tied credit contract if sale contract terminated 125 (1) [Effect of termination] If a sale contract is rescinded or discharged (whether under this Code or any other law) and there is a tied loan contract or a tied continuing credit contract made with the purchaser by a linked credit provider of the supplier under the sale contract, the debtor is entitled— (a) in the case of a tied loan contract — to terminate the credit contract; or

[page 475] (b) in the case of a tied continuing credit contract — to be credited with the amount of credit in relation to the sale contract and the interest charges attributable to that amount. 125 (2) [Related guarantee or mortgage] If a tied loan contract is terminated under this

section, any related guarantee or mortgage is terminated to the extent to which it secures obligations under the contract or any related guarantee. 125 (3) [Recovery of payments] If a tied loan contract is terminated under this section, the credit provider is entitled to recover from the debtor any part of the amount of credit that has not been paid to the supplier and the debtor is entitled to recover from the credit provider any interest charges or other amounts paid by the debtor under the credit contract. 125 (4) [Effect of termination of guarantee or mortgage] If a mortgage or guarantee is terminated under this section, the credit provider is entitled to recover from the mortgagor or guarantor any part of the amount of credit that has not been paid to the supplier and that is secured by the mortgage or guarantee, and the mortgagor or guarantor is entitled to recover from the credit provider any other amounts paid by the mortgagor or guarantor. 125 (5) [Recovery of loss following termination] If a tied loan contract is terminated under this section, the credit provider is entitled to recover from the supplier (subject to any agreement between them) the amount of any loss suffered by the credit provider as a result of the operation of this section. 125 (6) [Notice of termination] A supplier who knows that a sale contract referred to in subsection (1) has been rescinded or discharged must forthwith give the credit provider under any tied loan contract or tied continuing credit contract notice of the termination. Maximum penalty — 50 penalty units. 125 (7) [Debtor initiated credit supply] This section does not apply if the credit is provided as a result of an approach by the debtor that was not induced by the supplier or credit provider. 125 (8) [Application] This section applies— (a) to the exercise by a purchaser of a right under this Code or any other law to rescind or discharge a sale contract; and (b) to a tied loan contract or a tied continuing credit contract, but only if the sale contract was the principal purpose for which the credit was provided.]

COMMENTARY ON SECTION 135 [135.05] Outline Section 135 governs the rights and obligations of a debtor (and any mortgagor or guarantor), credit provider and supplier in respect of a tied credit contract if a related sale contract is rescinded or terminated provided that sale contact was the principal purpose for which the credit was provided (s 135(8)). Under s 135(1), if a sale contract is rescinded or terminated, and there is a tied credit contract, the debtor is entitled to: terminate the tied credit contract (in the case of a tied loan contract); or be credited with the amount of credit in relation to the sale contract plus interest on that amount (in the case of a tied continuing credit contract).

If a tied loan contract (which does not include a continuing credit contract — see commentary in [127.20]) is terminated, any related mortgage and guarantee is also terminated to the extent that it secures obligations under the contract or under a related guarantee (s 135(2)). The termination of the sale or credit contracts must be by way of written notice (see [137.05]). Contracts need not be terminated within any prescribed time period. Arguments that a right to terminate must be exercised within reasonable time, or as soon as possible after the relevant occasion arises, were rejected by the Victorian Civil and Administrative Tribunal in Agussol v Australian Finance Direct Ltd (2004) ASC ¶155-066; [2004] VC 1560. In that case, the tribunal noted that the right of termination given by s 125(1) of the UCCC (s 135(1) of the Code) is in the nature of an “entitlement” given to the debtor, rather than a power or a duty required to be exercised within a certain time frame. The tribunal rejected [page 476] arguments that cl 30(5) of Sch 2 of the UCCC (s 218 of the Code) (which provides that, where no time is prescribed for doing an act, that act must be done “as soon as possible”) applies to the right to terminate under s 125 of the UCCC (s 135 of the Code). Section 218 of the Code applies only to the duties or powers provided by the Code (where no specific time period is otherwise provided) but not to “entitlements” or protections offered by the Code, such as a debtor’s right to terminate under s 135. Reading the legislation in this way accords with the intention of parliament that the purpose of s 135 is for the protection of debtors. A tied loan contract may finance “wholly or partly” goods or services supplied by a supplier (see s 127(3)). If only part of the amount financed under a linked credit contract finances the related sale contract, that credit contract can nevertheless be terminated by the debtor. Credit providers may therefore choose not to allow credit contracts to partly finance related sale contracts. All moneys paid under the contract are recoverable, as termination of the

contract under s 135 has effect from its beginning (Agussol v Australian Finance Direct Ltd (2004) ASC ¶155-066; [2004] VC 1560). [135.10] Supplier’s obligations A supplier who knows that a sale contract has been terminated must give the credit provider under any tied credit contract notice of that termination, otherwise they will be guilty of an offence and subject to a maximum penalty of 50 penalty units (s 135(6)) (see para 17 of the “Overview of the National Credit Code” for commentary on penalty units). That notice must be in writing (see s 183(3) and commentary at [183.25]). [135.15] Rights of credit providers, debtors, mortgagors and guarantors If a tied loan contract is terminated under s 135, the credit provider is entitled to recover from the debtor any part of the amount of credit that has not been paid to the supplier. The debtor is entitled to recover from the credit provider any interest charges or other amounts paid by the debtor under the credit contract (s 135(3)). If a mortgage or guarantee is terminated under s 135, the credit provider is entitled to recover from the mortgagor or guarantor any part of the amount of credit that has not been paid to the supplier and that is secured by the mortgage or guarantee. The mortgagor or guarantor is entitled to recover from the credit provider any other amounts paid by the mortgagor or guarantor (s 135(4)). If a tied loan contract is terminated under s 135, the credit provider is entitled to recover from the supplier (subject to any agreement between them) the amount of any loss suffered by the credit provider (s 135(5)). However, unlike the Credit Act (ss 25(3)(d) and 26(1)(c)), there is no obligation on the buyer to deliver the goods to the credit provider; however, if practicable, the goods must be returned to the supplier (see s 134(2) and commentary at [134.20]). Importantly, this means that a credit provider cannot retain goods given to it by the debtor until the supplier has indemnified the credit provider for its losses (cf ss 25(4) and 26(2) of the Credit Act). Under general law or

the terms of the sale contract, the supplier will no doubt be entitled to recover any goods the subject of that contract from the debtor. [page 477] [135.20] Limitation Section 135 does not apply if credit is provided as a result of an approach by the debtor that was not induced by the supplier or the credit provider (s 135(7)). See [129.20] for discussion of “induced”. [135.25] Insurance contracts Section 135 allows a debtor to terminate a credit contract that is tied to a sale contract, where that sale contract is rescinded or discharged. This applies in situations where a credit provider is aware that the credit contract was entered into to finance the purchase by the debtor and the credit provider is linked to the seller. Prior to the Consumer Credit (Queensland) Amendment Act 1998, there had been possible problems where an insurance policy and credit contract were linked. Section 135 provides the debtor with the right to terminate a credit contract where an associated “sale contract” is rescinded. A “sale contract” includes a contract for the supply of services, hence an insurance contract would be considered a sale contract for the purposes of s 135. The section was capable of being applied so that: If the debtor arranges a home buildings insurance contract and the first year’s premium is financed under the housing loan contract, the debtor may be able to terminate the whole housing loan contract if the insurance contract is rescinded and, as is common, there is an established pattern of referrals by the financier to the insurer. This was never the intention. [Explanatory notes to the Consumer Credit (Queensland) Amendment Act 1998]

The intention was that the credit contract could only be terminated if the primary underlying contract (ie, the real property transaction) was rescinded. Section 125(8) of the UCCC (s 135(8) of the Code) was inserted by the Consumer Credit (Queensland) Amendment Act 1998 (Qld) to limit the termination right to situations where the rescinded “sale contract was the principal purpose for which the credit was provided”. [135.30] Dominant purpose Section 135 applies to:

the exercise by a purchaser of a right, under the Code or another law, to rescind or discharge the sale contract; and to a tied loan contract or tied continuing credit contract, but only if the sale contract was the principal purpose for which the credit was provided (see Agussol v Australian Finance Direct Ltd (2004) ASC ¶155-066; [2004] VCAT 1560; s 135(3)). It is not clear what rights to terminate exist where the sale contract was supplemental to the purpose for which the credit was provided. [135.35] Cases See Elderton v Australian Finance Direct Ltd [2007] NSWSC 1192; BC200709102; Bahadori v Permanent Mortgages Pty Ltd (2007) 69 NSWLR 49; [2007] NSWSC 79; BC200700725.

Termination of linked maintenance services contract if credit contract terminated 136 (1) [Effect of termination of tied contract on linked contract] If: (a) there is a tied loan contract or a tied continuing credit contract made with the debtor by a linked credit provider of the supplier under a sale contract to supply maintenance services; and [page 478] (b) the tied loan contract or tied continuing credit contract is terminated (whether under this Code or any other law) before the end of the term of the sale contract; the debtor is entitled to terminate the sale contract to supply maintenance services and recover from the supplier a proportionate rebate of consideration paid under the sale contract. 136 (2) [Notice of debtor’s rights] In any such case, the credit provider must inform the debtor in accordance with the regulations of the debtor’s rights under this section.

Criminal penalty: 50 penalty units. 136 (3) [Strict liability offence] Subsection (2) is an offence of strict liability. Note: For strict liability, see section 6.1 of the Criminal Code.

136 (4) [Rebate calculation] The regulations may prescribe the manner of calculating the proportionate rebate of consideration for the purposes of this section. 136 (5) [Debtor initiated credit supply] This section does not apply if the credit is provided as a result of an approach by the debtor that was not induced by the supplier or credit provider. ________________________________________ [Editorial note: UCCC s 126 provided as follows: Termination of linked maintenance services contract if credit contract terminated 126 (1) [Effect of termination of tied contract on linked contract] If— (a) there is a tied loan contract or a tied continuing credit contract made with the debtor by a linked credit provider of the supplier under a sale contract to supply maintenance services; and (b) the tied loan contract or tied continuing credit contract is terminated (whether under this Code or any other law) before the end of the term of the sale contract; the debtor is entitled to terminate the sale contract to supply maintenance services and recover from the supplier a proportionate rebate of consideration paid under the sale contract. 126 (2) [Notice of debtor’s rights] In any such case, the credit provider must inform the debtor in accordance with the regulations of the debtor’s rights under this section. Maximum penalty — 50 penalty units. 126 (3) [Rebate calculation] The regulations may prescribe the manner of calculating the proportionate rebate of consideration for the purposes of this section. 126 (4) [Debtor initiated credit supply] This section does not apply if the credit is provided as a result of an approach by the debtor that was not induced by the supplier or credit provider.]

COMMENTARY ON SECTION 136 [136.05] Outline If a tied credit contract to finance the supply of maintenance services is terminated before the end of the maintenance

contract, the debtor may terminate the maintenance contract and recover a proportionate rebate from the supplier for the balance of the maintenance contract. In that case, the credit provider must notify the debtor of the debtor’s rights in a written statement in the Code prescribed Form 15 and if the credit provider does not do so it is liable to a maximum penalty of 50 penalty units. Under the NCCP Act regime changes, failure to comply with s 136(2) was made an offence of strict liability by the insertion of s 136(3). (See paras 17 and 18 of the Overview of the National Credit Code for commentary on penalty units and strict liability offences.) The credit provider must give the Form 15 to the debtor within 21 days of the termination of the tied contract (s 136(2), reg 91). The regulation prescribes the manner of calculating the proportionate rebate (s 136(4), reg 92). The provisions of s 136 do not apply if credit is provided as a result of an independent approach by the debtor (ie, that was not induced by the supplier or the credit provider). See [129.20] for a discussion of “induced”. [page 479] [136.10] “Maintenance services” The Code does not define “maintenance services”. Presumably it would include repair and service contracts.

Termination of contract under this Part to be in writing 137 An entitlement to terminate a sale contract or credit contract that is conferred by a provision of this Part may be exercised only by notice in writing to the other party to the contract. ________________________________________ [Editorial note: UCCC s 127 — apart from numbering the section is unchanged.]

COMMENTARY ON SECTION 137 [137.05] Outline A debtor who wishes to take advantage of a right to terminate a sale contract or credit contract under Pt 7 of the Code must do so by notice in writing to the other party to the contract. (See references to “writing” in s 195 and the definition of “writing” in s 204, which is defined as including “any mode of representing or reproducing words in a visible form”). In Agussol v Australian Finance Direct Ltd (2004) ASC 155-066; [2004] VCAT 1560, the court held that, for a loan contract to be terminated, the debtor would have to notify the linked credit provider directly. Separate notices should be provided to both the supplier and the credit provider, as appropriate. It is not clear how this suggests that debtors cannot rely on the mandatory notice provisions as between suppliers and credit providers contained in s 135(6) (see [135.10]). It is not necessary for such a notice to use the word “terminated”, but it must be a clear indication to the other party that the contract has ended.

Powers of court with respect to termination of contract under this Part 138 The court may, on the application of any interested party, make orders:

(a) declaring whether a purported termination of a contract under this Part is valid; and (b) for the adjustment of rights following termination of a contract under this Part. ________________________________________ [Editorial note: UCCC s 128 — apart from numbering the section is unchanged.]

COMMENTARY ON SECTION 138 [138.05] Outline Section 138 provides that a court may, on the application of any interested party, make orders: declaring whether a purported termination of a contract under Pt 7 of the Code is valid; and for the adjustment of rights following termination of a contract under Pt 7. See [112.06] for the meaning of “court”.

[page 480]

Part 5 not to apply to termination of contract under this Part 139 Part 5 does not apply to the termination of a contract under this Part. ________________________________________ [Editorial note: UCCC s 129 — apart from numbering the section is unchanged.]

COMMENTARY ON SECTION 139 [139.05] Outline Section 139 states that the provisions of Pt 5 of the Code, dealing with ending and enforcing credit contracts, mortgages and guarantees, do not apply to the termination of a contract under Pt 7 of the Code.

DIVISION 5 — OTHER PROVISIONS Requirement as to source of credit for goods or services 140 (1) [Source of credit] A supplier must not require a purchaser of goods or services to apply for, or obtain, credit from a particular credit provider. Criminal penalty: 100 penalty units. 140 (2) [Strict liability offence] Subsection (1) is an offence of strict liability. Note: For strict liability, see section 6.1 of the Criminal Code.

________________________________________ [Editorial note: UCCC s 130 provided as follows: Requirement as to source of credit for goods or services

130 A supplier must not require a purchaser of goods or services to apply for, or obtain, credit from a particular credit provider. Maximum penalty — 100 penalty units.]

COMMENTARY ON SECTION 140 [140.05] Outline A supplier must not require a purchaser of goods or services to apply for, or obtain, credit from a particular credit provider. Section 140 is similar in its effect to s 47 of the Competition and Consumer Act 2010 (Cth) (formerly s 47 of the Trade Practices Act). It reflects the philosophy that debtors should be entitled to arrange finance with any credit provider, rather than with a specific credit provider required by the supplier. [140.10] Penalty A failure to comply with s 140 carries a criminal penalty of 100 penalty units. Under the NCCP Act regime changes, failure to comply with s 140 was made an offence of strict liability by the insertion of s 140(1). (See paras 17 and 18 of the “Overview of the National Credit Code” for commentary on penalty units and strict liability offences).

Prohibition on payment for goods or services by postdated bills of exchange or notes which exceed cash price of goods or services 141 (1) [Excess value postdated bill of exchange or promissory note] A supplier must not demand or accept payment from the purchaser for goods or services supplied under a sale contract [page 481] in the form of a postdated bill of exchange or promissory note given by the purchaser if the face value of the bill or note exceeds the cash price of the goods or services. Criminal penalty: 100 penalty units.

141 (2) [Application] Subsection (1) does not apply unless the postponement of the debt to the supplier constitutes a provision of credit to which this Code applies. 141 (3) [Strict liability offence] Subsection (1) is an offence of strict liability. Note: For strict liability, see section 6.1 of the Criminal Code.

________________________________________ [Editorial note: UCCC s 131 provided as follows: Prohibition on payment for goods or services by postdated bills of exchange or notes which exceed cash price of goods or services 131 (1) [Excess value postdated bill of exchange or promissory note] A supplier must not demand or accept payment from the purchaser for goods or services supplied under a sale contract in the form of a postdated bill of exchange or promissory note given by the purchaser if the face value of the bill or note exceeds the cash price of the goods or services. Maximum penalty — 100 penalty units. 131 (2) [Application] This section does not apply unless the postponement of the debt to the supplier constitutes a provision of credit to which this Code applies.]

COMMENTARY ON SECTION 141 [141.05] Outline A supplier must not demand or accept payment from the purchaser for goods or services in the form of a postdated bill of exchange or promissory note given by the purchaser if the face value of the bill or note exceeds the cash part of the goods or services. The effect of this provision is to ensure that the Code’s disclosure requirements (see ss 16 and 17) cannot be avoided for credit that would otherwise be subject to the Code’s regulation. This prohibition only applies if the postponement of the debt to the supplier constitutes a provision of credit to which the Code applies. [141.10] Penalty A failure to comply with s 141 carries a criminal penalty of 100 penalty units. Under the NCCP Act regime changes, failure to comply with s 141 was made an offence of strict liability by the insertion of s 141(3). (See paras 17 and 18 of the “Overview of the National Credit Code” for commentary on penalty units and strict liability offences).

[page 483]

Part 8 — Related insurance contracts Interpretation and application 142 (1) [Contract for insurance] For the purposes of this Code, a creditrelated insurance contract is a contract for insurance of any of the following kinds in connection with a credit contract: (a) insurance over mortgaged property; (b) consumer credit insurance; (c) insurance of a nature prescribed for the purposes of this section by the regulations. 142 (2) [Application to insurance] This Code does not apply to insurance over mortgaged property that: (a) is insurance for an extended period of warranty for goods; or (b) is insurance over property that is not mortgaged to secure obligations under the credit contract. 142 (3) [Insuring obligations] This Code does not apply to consumer credit insurance in connection with a credit contract unless the contract for consumer credit insurance insures the obligations of the debtor under the credit contract. ________________________________________ [Editorial note: UCCC s 132 — apart from numbering the section is unchanged.]

COMMENTARY ON SECTION 142 [142.05] Outline The definition of the term “credit-related insurance

contract” is set out in s 142. The term is used in s 17(15) (information relating to insurance financed by credit contract to be disclosed to the debtor in credit contract), s 34(10) (information regarding insurance to be included in statements of account), and ss 146–149 (inclusive) (see commentary to ss 146 and 149). It does not include lenders mortgage insurance. Section 142(2) and (3) modify the definition of credit-related insurance contracts in respect of mortgaged property insurance and consumer credit insurance. The Code states that those types of insurance contracts will only be credit-related insurance contracts if: in the case of mortgaged property insurance, the property is mortgaged to secure the credit contract; and in the case of consumer credit insurance, the insurance insures the obligations of the debtor under the credit contract. This prevents the Code from having an unintentionally broad application. Without s 142(2) and (3), the requirements of the Code in relation to insurance (eg, disclosures under ss 17(15) and 34(10) and termination under ss 148 and 149) could have applied to insurance contracts that were essentially unrelated to the credit contract. The fact that insurance may be financed under a credit contract does not necessarily suggest that there is any real connection between the credit contract and the insurance. For example, mortgaged property insurance may be [page 484] financed by an unsecured credit card. If the debtor cancels their credit card, there is no logical reason why the insurance over property mortgaged to secure the debtor’s home loan (which continues on foot) should also be cancelled. Section 142(2) also provides that the Code does not apply to insurance for an extended period of warranty over goods (such as that provided under some credit card arrangements). The concept of “insurance” itself is not defined by the Code. It is therefore

necessary to refer to the general law concept, being an undertaking for consideration to pay money (or give a corresponding benefit) on the happening of an uncertain event. [142.10] Application of Code The provisions in the Code regulating insurance apply only to credit-related insurance contracts. The Code does not apply to credit provided by an insurer for the purpose of paying instalments to the insurer, provided the insured does not have to make further payments under the contract if it is cancelled (s 6(8)). [142.15] “Insurance over mortgaged property” There is no definition in the Code of the expression “insurance over mortgaged property”, but s 142(2) makes it clear that the Code applies only to insurance of mortgaged property in relation to a credit contract if the property is mortgaged to secure obligations under the credit contract. “Mortgage” and “property” are defined in s 204. [142.20] “Consumer credit insurance” The term “consumer credit insurance” is defined in s 204 to mean insurance which insures the capability of the debtor to make repayments under the credit contract. There must be a specific link between the insurance and the credit contract. The definition does not include insurance that insures the capacity of a guarantor to make payments under any related guarantee. The definition would also not include general loss of income, loss of profits or business disruption insurance. Section 142(3) restricts the meaning of “consumer credit insurance”, in relation to a credit contract for the purposes of the Code, to consumer credit insurance that insures the obligations of the debtor under the credit contract. [142.25] Regulations As yet, no insurance has been prescribed by the Regulations to be included in the definition of “credit-related insurance contract”. [142.30] ASIC Resource — Report 256 In October 2011, ASIC published Report 256 Consumer credit insurance: A review of sales practices by authorised deposit-takinginstitutions.1 The report uses information obtained from 15 ADIs to examine the sales

practices of ADIs that sell consumer credit insurance. The report sets out 10 recommendations for the sale of consumer credit insurance. These recommendations relate to: formal sales scripts; [page 485] evidence of consent; disclosure of interest payments; separate quotes; disclosure of premium structure; disclosure of consumer credit insurance policies; timing of provisions of product disclosure statements; ongoing information; training programs; and monitoring systems. [142.35] Disclosure The Code contains requirements for the disclosure in credit contracts and statements of account of details concerning credit-related insurance which is to be financed under a credit contract, or has been financed under a credit contract. The disclosure requirements for the precontractual statement and the credit contract are discussed at [17.80]. Section 34(10) specifies the information required in a statement of account if payment is made to an insurer in respect of a credit-related insurance contract which is agreed to be financed under the credit contract during the statement period. Generally, the required disclosures are: the insurer’s name; the type of insurance;

the amount paid to the insurer; and details of commissions paid. However, this disclosure is not required to be repeated in the statement of account if it has previously been disclosed in accordance with the Code (eg, in a previous statement of account or in the precontractual statement). (See [34.05]ff.) General insurance provided as part of a credit-related insurance policy In some situations, general insurance may be provided as part of a creditrelated insurance policy. In these circumstances, it is sufficient to disclose the: identity of the general insurer; kind of insurance; and total amounts of both premium paid and commission. This reduced disclosure regime is optional, so credit providers may choose to fully disclose premiums and commissions paid to each insurer involved. For example, where both general and life insurance is financed by a consumer credit contract, the statement would comply if it referred only to the identity of the general insurer, the sum of the premiums payable and the sum of the commissions paid by the insurers. Further, it would need to refer to the kinds of insurance provided (ie, that general and life insurance has been provided to the debtor). 1 Available online at ASIC’s website: http://www.asic.gov.au/asic/pdflib.nsf/LookupByFileName/rep256-issued-19-October-2011.pdf/$file/rep256-issued-19-October-2011.pdf (accessed 13 March 2014)).

Requirement to take out insurance or to insure with particular insurer or on particular terms 143 (1) [No compulsory insurance unless approved by regulations] A credit provider or a supplier must not: (a) require a debtor or guarantor to take out insurance or to pay the cost

of insurance taken out or arranged by the credit provider or supplier; or [page 486] (b) represent to a debtor or guarantor that the debtor or guarantor is required to pay the cost of any such insurance; unless the insurance is compulsory insurance, mortgage indemnity insurance, insurance over mortgaged property or insurance of a nature and extent approved for the purposes of this section by the regulations. Criminal penalty: 100 penalty units. 143 (2) [Identity of insurer; terms of insurance] A credit provider or a supplier must not, in connection with a credit contract or a sale contract in relation to which there is a tied loan contract or a tied continuing credit contract: (a) require a debtor or guarantor to take out insurance with a particular insurer (unless the insurer is the only insurer providing insurance of the relevant kind or the requirement is exempted from the operation of this section by the regulations); or (b) make any unreasonable requirement as to the terms on which the debtor or guarantor is to take out insurance. Criminal penalty: 100 penalty units. 143 (3) [Strict liability offences] Subsections (1) and (2) are offences of strict liability. Note: For strict liability, see section 6.1 of the Criminal Code.

143 (4) Civil effect If the credit provider or supplier contravenes this section, the insured is entitled to recover the whole of the premium paid under the contract from the credit provider or supplier, as the case requires. ________________________________________

[Editorial note: UCCC s 133 provided as follows: Requirement to take out insurance or to insure with particular insurer or on particular terms 133 (1) [No compulsory insurance unless approved by regulations] A credit provider or a supplier must not— (a) require a debtor or guarantor to take out insurance or to pay the cost of insurance taken out or arranged by the credit provider or supplier; or (b) represent to a debtor or guarantor that the debtor or guarantor is required to pay the cost of any such insurance; unless the insurance is compulsory insurance, mortgage indemnity insurance, insurance over mortgaged property or insurance of a nature and extent approved for the purposes of this section by the regulations. Maximum penalty — 100 penalty units. 133 (2) [Identity of insurer; terms of insurance] A credit provider or a supplier must not, in connection with a credit contract or a sale contract in relation to which there is a tied loan contract or a tied continuing credit contract— (a) require a debtor or guarantor to take out insurance with a particular insurer (unless the insurer is the only insurer providing insurance of the relevant kind or the requirement is exempted from the operation of this section by the regulations); or (b) make any unreasonable requirement as to the terms on which the debtor or guarantor is to take out insurance. Maximum penalty — 100 penalty units. 133 (3) Civil effect If the credit provider or supplier contravenes this section, the insured is entitled to recover the whole of the premium paid under the contract from the credit provider or supplier, as the case requires.]

COMMENTARY ON SECTION 143 [143.05] Outline A credit provider or supplier may require a debtor to take out compulsory insurance, mortgage indemnity insurance, insurance over the mortgaged property, or any insurance prescribed by the Regulations, or make [page 487] representations to that effect. A credit provider must not require a debtor to take out or pay the cost of any other type of insurance (s 143(1)). Further, a credit provider cannot require that insurance be taken out with a particular

insurer (s 143(2)(a)) or make any other unreasonable requirement as to the terms on which the debtor or guarantor is to take out insurance (s 143(2)(b)). Section 143(2) is restricted to a credit contract or a sale contract in relation to which there is a tied loan contract or a tied continuing credit contract. A similar restriction does not apply to s 143(1). Therefore s 143(1) could apply to regulated insurance arranged by suppliers who have no connection with the credit provider. [143.10] “Compulsory insurance” The term “compulsory insurance” is defined in s 204 to mean compulsory third party personal injury insurance, or insurance of a nature declared by the Regulations. As yet, no insurance has been declared by the Regulations. [143.15] “Mortgage indemnity insurance” The term “mortgage indemnity insurance” is not defined in the Code. It is intended to mean insurance covering a credit provider’s loss arising from a default in repaying a mortgaged housing loan, or arising from a fall in value of the underlying security. It is now commonly known as “lenders’ mortgage insurance”. [143.20] “Insurance over mortgaged property” The term “insurance over mortgaged property” is not defined in the Code (see [142.15]). [143.25] Regulations No insurance has been included by the Regulations in the types of insurance specified in s 143(1). [143.30] Consumer credit insurance The effect of s 143(1) is that a credit provider cannot require that a debtor or guarantor is to take out consumer credit insurance (which is defined in s 204 to mean insurance which insures the capacity of the debtor to make repayments under the credit contract). [143.35] Exclusive dealing under Australian Consumer Law Compare the prohibition in s 143(2)(a) with the anti-competitive vertical transactions prohibited by s 47 of the Competition and Consumer Act 2010 (Cth) (formerly s 47 of the Trade Practices Act 1974 (Cth)). In Trade Practices Commission v British Building Society (1988) ATPR 40-880, a building society introduced a lending scheme which involved a requirement that the

debtor take out life insurance with a nominated insurance company. The building society admitted breaching s 47 of the Trade Practices Act. In Re Ku-ring-gai Co-operative Building Society (No 12) Ltd (1978) 22 ALR 621; 36 FLR 134; (1978) ATPR 40-094, a terminating building society sought declarations that its requirement that debtors insure property mortgaged to the building society with an insurance company nominated by the building society was not in breach of s 47. The court held that the building society’s actions contravened s 47(6) of the Trade Practices Act. [143.40] “Tied loan contract” and “tied continuing credit contract” The terms “tied continuing credit contract” and “tied loan contract” are defined in s 204 by reference to s 127(2) and (3) respectively (see [127.15] and [127.20]). [page 488] [143.45] “Unreasonable requirement” The Code does not define what is meant by an unreasonable requirement as to the terms on which the debtor or guarantor is to take out insurance (s 143(2)(b)). It is likely that an unreasonable requirement will be one which is not reasonably necessary for the protection of the legitimate interests of the credit provider or the supplier (compare with s 76(2)(e)). Perhaps some guidance can be drawn from the equivalent prohibition in the Credit Act, which was to “require insurance for a period, against risks or subject to terms, conditions or exceptions which the mortgagee would not reasonably require if he were to arrange the insurance at his own expense”. [143.50] Regulations No requirements of a debtor or a guarantor to take out insurance have been exempted from the prohibition in s 143(2) by the Regulations (as permitted by s 143(2)(a)). [143.55] A supplier Section 199 of the Code sets out when the conduct of an agent or employee of a credit provider may be imputed to the credit provider, but is silent with respect to suppliers.

In Brian Gardner Motors Pty Ltd v Bembridge (2000) 120 A Crim R 53; [2000] WASCA 400; BC200007807, the Supreme Court of Western Australia held that a supplier company may be liable under s 133 of the UCCC (s 143 of the Code) where the requisite elements of the offence were performed on behalf of the company by a person to whom the functions of the directors, in the discrete area of consumer finance, had been fully delegated. [143.60] Standing committee guideline The Standing Committee of Officials on Consumer Affairs (SCOCA) issued the guideline set out below in relation to the interpretation of s 133 of the UCCC (s 143 of the Code) on 20 June 2000. The guideline stated that s 133 of the UCCC (s 143 of the Code) would not be breached if a credit provider offered a debtor: a loan at one rate if insurance was not taken out; and a loan at a cheaper rate (or with lower fees or charges) if insurance was taken out by the debtor. Prior to the issue of the guideline, there was a concern that this practice may amount to “insurance forcing” and breach s 133 of the UCCC (s 143 of the Code). Text of SCOCA guideline REQUIREMENT TO TAKE OUT INSURANCE OR TO INSURE WITH PARTICULAR INSURER OR ON PARTICULAR TERMS The Objective of this Guideline is to: help promote a uniform and clearer interpretation of the meaning of the Consumer Credit Code If considered appropriate, Guidelines may be developed and issued when the following criteria are satisfied: the request for clarification of the Code must be made by a significant sector of stakeholders or relate to an issue that has potential to affect a significant sector of the marketplace;

[page 489] there is considerable uncertainty as to the application of the provision which may arise from legal debate or various interpretations evident from conduct in the market place; there exists, in relation to a provision, a reasonable risk for a credit provider, intermediary, debtor or guarantor arising from such uncertainty. Guidelines cannot expand upon the meaning of a provision to create an interpretation that would not be possible within the meaning of the provision. Refer “Objectives, Criteria and Process for Consumer Credit Code Guidelines” issued by the Standing Committee of Officials of Consumer Affairs on 30 June 1998 (see [143.65]). Credit Code Reference Section 133 Consumer Credit Code [s 143 of the Code] Guideline Explanatory Note The primary purpose of s 133 [of the UCCC; s 143 of the Code] is to prevent “insurance forcing” where credit is made available on condition that insurance is also taken out and/or taken out with a particular insurer. Some credit providers may be in a position to offer reductions in the cost of credit as an incentive for consumers to acquire credit and insurance products together (this combination of products is sometimes referred to as “bundling”). Prospective debtors still have the choice of taking out the credit without taking out the insurance but do not, in these circumstances, receive a reduction in the cost of credit. Credit providers have received conflicting advice about the application of s 133 [of the UCCC; s 143 of the Code] of the Code to such practices. Interpretation Government Consumer Agencies are of the view that: Where a credit provider or supplier offers or agrees to reduce the cost of

credit (either the annual percentage rate(s) or fees and charges payable in connection with the credit contract) only on the condition that a prospective debtor or guarantor takes out insurance and/or takes out that insurance with a particular insurer, the offering of that insurance on those conditions does not constitute a breach of s 133 [of the UCCC; s 143 of the Code], provided that where the prospective debtor or guarantor declines to take out the insurance or to take out that insurance with a particular insurer, the credit is still available, albeit without the proposed reduction in the cost of that credit. [143.70] Status of SCOCA guideline in relation to the Code It is unclear if the SCOCA guideline also reflects the approach that ASIC takes to this issue. [143.75] Penalty A failure to comply with s 143 carries a criminal penalty of 100 penalty units. Under the NCCP Act regime changes, failure to comply with s 143 was made an offence of strict liability by the insertion of s 143(3). (See paras 17 and 18 of the “Overview of the National Credit Code” for commentary on penalty units and strict liability offences.)

Financing of insurance premiums over mortgaged property 144 (1) [Credit for insurance premiums] A credit provider must not knowingly provide credit to the debtor to pay the premium or finance the premium on insurance taken out by the debtor over mortgaged property for a period of insurance exceeding 1 year, but may provide credit for or finance successive premiums for periods of 1 year or less. Criminal penalty: 100 penalty units. [page 490] 144 (2) [Advance debit of premiums] The credit provider must not knowingly debit the premium to the debtor’s account more than 30 days before the beginning of the period of insurance to which it relates.

Criminal penalty: 100 penalty units. 144 (3) Civil effect If a credit provider contravenes subsection (1), the insured is entitled to recover the whole of the premium paid under the contract from the credit provider. If a credit provider contravenes subsection (2), the insured is entitled to recover the amount of premium debited in contravention of the subsection. ________________________________________ [Editorial note: UCCC s 134 provided as follows: Financing of insurance premiums over mortgaged property 134 (1) [Credit for insurance premiums] A credit provider must not knowingly provide credit to the debtor to pay the premium or finance the premium on insurance taken out by the debtor over mortgaged property for a period of insurance exceeding 1 year, but may provide credit for or finance successive premiums for periods of 1 year or less. Maximum penalty — 100 penalty units. 134 (2) [Advance debit of premium] The credit provider must not knowingly debit the premium to the debtor’s account more than 30 days before the beginning of the period of insurance to which it relates. Maximum penalty — 100 penalty units. 134 (3) Civil effect If a credit provider contravenes subsection (1), the insured is entitled to recover the whole of the premium paid under the contract from the credit provider. If a credit provider contravenes subsection (2), the insured is entitled to recover the amount of premium debited in contravention of the subsection.]

COMMENTARY ON SECTION 144 [144.05] Contravention If a credit provider contravenes s 144, the credit provider will be liable for a penalty (s 144(1)), and the insured is entitled to recover the whole of the premium paid or debited to his account (s 144(3)). [144.10] Acknowledgment The credit provider could seek to obtain an acknowledgment from the debtor that the debtor does not intend to use any of the credit to take out an insurance policy or, if the credit is to be used for that purpose, that the insurance period will not be in excess of one year. [144.15] “Knowingly” A credit provider only breaches s 144 if it does so knowingly. Many other sections of the Code impose strict liability.

[144.20] “Debit the premium” Section 144(2) is not expressly confined to premiums for mortgaged property insurance. Read literally it could extend to premiums for any kind of insurance, but the drafting of the section and the contents of the explanatory memorandum seem to indicate that it is only intended to extend to premiums for insurance of mortgaged property. [144.25] Tyre and wheel rim insurance On 28 August 2013, ASIC announced the results of its industry-wide review of car financiers that were financing tyre and rim insurance premiums as part of car loans. It was reported that the industry had to pay back over $15 million to over 30,000 car owners. The industry-wide review was prompted after BMW Australia Finance Ltd notified ASIC that it was financing tyre and rim insurance premiums. Ultimately, BMW was required to refund $1.39 million to consumers. [page 491] ASIC alleged that in financing the tyre and rim insurance premiums, the car financiers had breached s 144(1) of the Code. Section 144(1) provides that a credit provider must not finance premiums for mortgaged property insurance for more than one year. It is important to note that even if a credit provider contravenes s 144(1), the insurance policy is not affected — that is, the insured continues to be covered by the policy and is entitled to claim under that policy. Tyre and rim insurance policies generally had a term of three years, and longer in some cases. From a legal perspective, the requirement to refund the insurance premiums only applies if a credit provider breaches s 144(1) and s 144(3) applies. In some cases, it was arguable that the civil penalty under s 144(3) did not apply even though there may have been a contravention of s 144(1). It seems that the consumers who financed the premiums for tyre and rim insurance as part of their car loan benefited through ASIC’s investigations. Each consumer received a full refund of the insurance premium from the

credit provider (even though that premium was passed on by the credit provider receiving it to the insurance company providing the insurance). Those consumers also received the benefit of the insurance policy from the insurer.2 It is arguable that certain credit providers were not required to pay back the insurance premium to the debtor under s 144 of the Code. That argument is based on the following: the definition of mortgaged property — whether it was arguable that the tyres and rims did not form part of the mortgaged property; the definition of extended warranty — whether it was arguable that tyre and rim insurance was an extended warranty product; the application of s 144(1) and, primarily, the meaning of words “knowingly”; the application of s 144(3) and whether the “premium was paid under the contract”; and the background on s 144 and the legislative intent. Argument 1 — “knowingly” There is no contravention of s 144(1) if a credit provider did not “knowingly” finance the insurance premiums. Contravention of that provision carries a criminal penalty, hence the criminal burden of proof should be applied — that is, “beyond reasonable doubt”. That particular section is not a strict liability offence, unlike many other provisions of the Code. In view of the above, and by applying the high knowledge threshold, a credit provider did not have the requisite knowledge — and hence did not contravene s 144(1). Argument 2 — “under the contract” If argument 1 is not accepted, and it is found that a credit provider contravened s 144(1), it is arguable that s 144(3) did not apply in those circumstances. This is based on the premise that the insurance premium was not “paid under the [credit] contract”. The insurance premium was paid under the insurance contract.

[page 492] The courts have considered the term “under the contract” in the context of the UCCC. In those cases (Avco Financial Services Ltd v Abschinski [1994] 2 VR 659; (1994) ASC ¶56-256 and Australian Finance Direct Ltd v Director of Consumer Affairs Victoria (2005) ASC ¶155-073; [2004] VSC 526; BC200408816 — see commentary at [3.45]), it was held that unless the credit contract was source of the obligation, the amount is not paid under the contract. In the case of tyre and rim insurance, it is arguable that the premium was paid under the credit contract if the credit contract positively required the debtor to take out tyre and rim insurance — similar to a comprehensive insurance policy that a credit contract requires. In the absence of such a positive obligation, the insurance premium was not paid under the credit contract. That is, it was included in the application of the amount of credit section of the credit contract purely to satisfy s 17(2) only, and did not make insurance payable under the contract. This argument would apply to those credit contracts that did not contain a contractual obligation to take out the insurance (bearing in mind that, in many cases, a car dealer completes the credit contract and the credit provider receives a copy after it is completed and signed by the debtor). The above analysis is consistent with the legislative intent of the original provisions in the state and territory Credit Acts (the predecessor regime to the UCCC and the Code). The lesson learnt from the ASIC enforcement action on tyre and rim insurance is that credit providers must regularly control, audit and assess any products “sold” together with a credit contract — including assessing each insurance product that will be financed by the credit amount. This assessment should include a basic analysis of whether the product is permitted by the Code and, if so, if any restrictions apply (eg, consumer credit insurance). The tyre and rim insurance example is a timely reminder to credit providers to conduct regular audits of their Code procedures (and, particularly, the activities of their representatives), including documents, procedures, computer systems and marketing.

2 See Australian Securities and Investments Commission, 13-231MR ASIC review prompts car financiers to refund more than $15 million, media release, 28 August 2013, https://www.asic.gov.au/asic/asic.nsf/byHeadline/13-231MR%20ASIC%20review%20prompts%20car%20financiers%20to%20refund%20more%20than%2015%20million%20dollars?opendocument (accessed online 28 January 2014).

Commission for consumer credit insurance 145 (1) [Application] This section applies to commission paid by an insurer in connection with consumer credit insurance taken out by the debtor, or for which an amount is paid by the debtor. 145 (2) [Maximum commission] The total of any such commission accepted by all or any of the following: (a) the credit provider; (b) the supplier under a sale contract in relation to which there is a tied loan contract or a tied continuing credit contract; (c) the agent of the credit provider or supplier; must not exceed, in amount or value, 20% of the premium (excluding government charges). 145 (3) [Commission not to exceed maximum] A credit provider or any such supplier or agent must not accept, and an insurer must not pay, a commission exceeding, in amount or value, the maximum allowed under this section. Criminal penalty: 100 penalty units. [page 493] 145 (4) [Strict liability offence] Subsection (3) is an offence of strict liability. Note: For strict liability, see section 6.1 of the Criminal Code.

145 (5) Civil effect If a credit provider or supplier contravenes this section,

the insured is entitled to recover the whole amount or value of the commission from the credit provider or the supplier, as the case requires. ________________________________________ [Editorial note: UCCC s 135 provided as follows: Commission for consumer credit insurance 135 (1) [Application] This section applies to commission paid by an insurer in connection with consumer credit insurance taken out by the debtor, or for which an amount is paid by the debtor. 135 (2) [Maximum commission] The total of any such commission accepted by all or any of the following— (a) the credit provider; (b) the supplier under a sale contract in relation to which there is a tied loan contract or a tied continuing credit contract; (c) the agent of the credit provider or supplier; must not exceed, in amount or value, 20% of the premium (excluding government charges). 135 (3) [Commission not to exceed maximum] A credit provider or any such supplier or agent must not accept, and an insurer must not pay, a commission exceeding, in amount or value, the maximum allowed under this section. Maximum penalty — 100 penalty units. 135 (4) Civil effect If a credit provider or supplier contravenes this section, the insured is entitled to recover the whole amount or value of the commission from the credit provider or the supplier, as the case requires.]

COMMENTARY ON SECTION 145 [145.05] Outline The combined commission paid by an insurer on any consumer credit insurance taken out or paid for by the debtor is not to exceed 20 per cent of the premium (excluding government charges) (s 145(2)). Otherwise, the insured will be entitled to recover the whole amount or value of the commission from the credit provider or the supplier (s 145(5)). Section 145 does not extend to consumer credit insurance taken out or paid for by a guarantor. [145.10] “Agent of credit provider or supplier” The aggregate commission paid by an insurer and accepted by the credit provider or any supplier, or any agent of the credit provider or supplier, may not exceed 20 per cent of the premium. However, s 145(1) of the Code will not be infringed if

commissions are paid to other persons (such as an agent of the insurer or an independent contractor of the credit provider or supplier) or if they are not paid by the insurer. [145.15] “20% of the premium” It is not clear whether the 20 per cent limit referred to in s 145(2) applies only to the amount paid by the insurer, or whether it also extends to the total of the amounts received by the credit provider, supplier and their agents. This distinction may be illustrated by an example. Assume an insurer paid 20 per cent commission to a supplier, of which five per cent was given to the credit provider and five per cent to an agent. The insurer has not paid more than the permitted 20 per cent commission, but the total commission received by the supplier, credit provider and agent is 30 per cent. Does this involve a breach of s 145? On balance, it would seem not because: section 145 applies only to commission paid by an insurer. In the example above, the insurer has paid no more than 20 per cent commission and s 145 is expressed to apply only to commissions paid by the insurer. Commissions paid by another party (eg, the supplier in the above example) are not caught; [page 494] section 145(1) expressly provides that s 145 applies only to commission “paid by an insurer”. This means that s 145(2) can only be referring to commissions “accepted” from the insurer, because it is not possible for recipients of commissions to accept from an insurer more than the insurer has actually paid. In the example above, the credit provider and agent cannot be said to be accepting commission from the insurer; if the objective of the Code is to protect consumers, and if the amount of commission paid from the sum paid by the consumer is limited to 20 per cent, why should it matter that other parties are remunerating each other by way of additional commissions, at no

cost to the consumer? Those additional commissions would have to be disclosed if they fell within s 17(14) of the Code; and under s 145(3) each of the supplier, credit provider and agent would be guilty of a criminal offence if the facts in the example above involved a contravention of s 145. The credit provider and agent may be totally unaware of the circumstances which would involve them in the commission of a criminal offence, and this cannot have been intended. It would mean that no one could safely accept a commission in relation to consumer credit insurance at all, in case the total of commissions payable exceeded 20 per cent. [145.20] “Commission” The term “commission” is unhelpfully defined in s 204 to include “any form of monetary consideration or any form of nonmonetary consideration to which a monetary value can be assigned”. One issue is whether, in the context of the reference to commission in s 145, a limitation should be implied into the definition of commission — namely, that commission includes: … any form of monetary consideration or non-monetary consideration to which a monetary value can be assigned that is paid in connection with the introduction of business.

There is no case law that deals expressly with this point. Under s 145 of the Code, the payment does not necessarily need to be referable to the introduction of business in order to be a commission. Section 145(1) states as follows: This section applies to commission paid by an insurer in connection with consumer credit insurance taken out by the debtor, or for which an amount is paid by the debtor.

This section of the Code does not replicate the limitation on commission which is found in s 17(14). Section 17(14) of the Code includes a limitation with respect to commission, to the effect that the section only applies where the commission is paid “for introduction of credit business”: 17(14) If a commission is to be paid by or to the credit provider for the introduction of credit business or business financed by the contract …

Therefore, until there is some judicial interpretation of the definition of the

term of “commission”, it is difficult to provide a comprehensive or definitive description of what constitutes a commission and to state categorically whether any particular monetary or non-monetary benefit will constitute a commission. [page 495] The most that may be gathered from the definition is that a commission can be monetary or non-monetary in nature. On that basis, a commission may include: monetary payments; a discount, rebate, credit, allowance or other monetary benefits; the provision of services; the provision of equipment or other goods; or the provision of incentives or other benefits. Each benefit will need to be considered in light of various characteristics of a “commission” to ascertain whether the benefit is a commission. The principal characteristics of the commission (which have been gleaned from the manner in which courts have interpreted the term in the past in a similar context) are set out below (eg, see Custom Credit Corp Ltd v Lupi [1992] 1 VR 99; (1991) ASC ¶56-024; Westpac Banking Corp [1992] 1 Qd R 674; (1991) ASC ¶56-068; Canham v Australian Guarantee Corp Ltd (1993) 31 NSWLR 246; (1993) ASC ¶56-227). A benefit is likely to be a commission if it: is a benefit which varies with turnover or amount of business; is payable or due to be provided on the basis of “success” (eg, a successful introduction of business); satisfies the “but for” test (eg, but for the credit contract, the third party would not receive the benefit); and is calculated by reference to the amount or value of the product or

service being provided by the credit provider; is to be paid or provided at a specific time (eg, if a flat fee will be paid only upon a successful introduction of business); is unusual (eg, a large monetary payment or an overseas trip for the provision of a relatively minor service, such as acting as the distribution point for the credit provider’s brochures); and is characterised by the recipient or the principal as a commission. If a benefit that is paid or provided by a credit provider to a third party or to a credit provider by a third party has one or more of the above characteristics, then it is more likely than not to be a commission. Obviously, the more characteristics of the commission a benefit possesses, the more likely it is to be a commission (see also [17.75]). A benefit is unlikely to be a commission if it: does not have any of the characteristics of a commission set out above; is a token fee or a flat fee of a relatively minor amount which is not linked to performance or level of business (eg, a yearly fee for displaying brochures or other promotional material); and is reimbursement of costs incurred or a genuine fee for services rendered or facilities provided. [145.25] Penalty A failure to comply with s 145(3) carries a criminal penalty of 100 penalty units. Under the NCCP Act regime changes, failure to comply with s 145(3) was made an offence of strict liability by the insertion of s 145(5). (See paras 17 and 18 of the “Overview of the National Credit Code” for commentary on penalty units and strict liability offences.)

[page 496]

Supply of copy of credit-related insurance contract

by insurer 146 (1) [Copy to debtor within 14 days] If the premium under a creditrelated insurance contract is financed under the credit contract, the insurer must ensure that a copy of the policy of insurance is given to the debtor within 14 days after acceptance of the insurance proposal by the insurer. Criminal penalty: 100 penalty units. 146 (2) [Prescribed written notice where debtor has beneficial interest in insurance contract] In the case of any such contract of insurance entered into by the credit provider in which the debtor has a beneficial interest, the credit provider must ensure that a written notice containing particulars of the insurance prescribed by the regulations is given to the debtor within 14 days after the beneficial interest is acquired by the debtor. Criminal penalty: 100 penalty units. 146 (3) [Application] Subsections (1) and (2) do not apply to compulsory insurance. 146 (4) [Strict liability offences] Subsections (1) and (2) are offences of strict liability. Note: For strict liability, see section 6.1 of the Criminal Code.

________________________________________ [Editorial note: UCCC s 136 provided as follows: Supply of copy of credit-related insurance contract by insurer 136 (1) [Copy to debtor within 14 days] If the premium under a credit-related insurance contract is financed under the credit contract, the insurer must ensure that a copy of the policy of insurance is given to the debtor within 14 days after acceptance of the insurance proposal by the insurer. 136 (2) [Prescribed written notice where debtor has beneficial interest in insurance contract] In the case of any such contract of insurance entered into by the credit provider in which the debtor has a beneficial interest, the credit provider must ensure that a written notice containing particulars of the insurance prescribed by the regulations is given to the debtor within 14 days after the beneficial interest is acquired by the debtor. 136 (3) [Application] This section does not apply to compulsory insurance.

Maximum penalty — 100 penalty units.]

COMMENTARY ON SECTION 146 [146.05] Outline Apart from compulsory insurance policies, if a premium paid under a credit-related insurance contract is financed, the insurer must provide a copy of the insurance policy to the debtor within 14 days of acceptance of the insurance proposal. If the insurance policy is entered into by the credit provider, the credit provider must provide the debtor with a written notice setting out the key features of the policy within 14 days of the debtor acquiring an interest in the policy. [146.10] Written notice The particulars that are to be included in the written notice required to be given to the debtor by s 146(2) are prescribed in reg 93. Regulation 93 prescribes that the key features of the insurance contract that are to be included in the written notice are the: name of the insurer; kind of insurance, the risks insured against and the exclusions; beneficiaries under the policy; expiry date of the policy; premium payable (to the extent ascertainable); [page 497] fees and charges payable (to the extent ascertainable); and person by whom, and the person with whom, a claim may be made in respect of the policy, and the manner of making a claim. The written notice may be given by providing a copy of the insurance policy to the debtor (reg 93(3)). [146.15] Obligations imposed on insurer/credit provider The insurer, not the credit provider, is required by s 146(1) to ensure that a copy of the

insurance policy is given to the debtor. The only way for an insurer to “ensure” that this is done may be for the insurer to do it itself. In contrast, s 146(2) imposes the obligation on the credit provider to provide a written notice to the debtor. If the credit provider is not aware of the particulars set out in reg 93(2), the credit provider must obtain these details from the insurer. [146.20] “Credit-related insurance contract” The term “credit-related insurance contract” is defined in s 142(1) (see [142.05]) to be an insurance contract for insurance over mortgaged property, consumer credit insurance (defined in s 204), or insurance of a nature prescribed by the Regulations (as yet no insurance has been prescribed by the Regulations). [146.25] “Compulsory insurance” The term “compulsory insurance” is defined in s 204 to mean compulsory third party personal injury insurance and insurance prescribed by the Regulations (as yet, no insurance has been prescribed by the Regulations). [146.30] Period See s 218 of the Code (ss 218(2), 218(3), 218(4) and 218(6)) to ascertain how to calculate the commencement and end of the 14-day period specified in s 146(1) and (2). [146.35] Penalty A failure to comply with s 146(2) carries a criminal penalty of 100 penalty units. Under the NCCP Act regime changes, failure to comply with s 146 was made an offence of strict liability by the insertion of s 146(4). (See paras 17 and 18 of the Overview of the National Credit Code for commentary on penalty units and strict liability offences.)

Rejection of debtor’s proposal for insurance 147 (1) [Notice of rejection by insurer] If a credit provider proposes to finance the amount payable by the debtor under or in connection with a credit-related insurance contract and the proposal for insurance is rejected by an insurer, the insurer must inform the debtor and the credit provider of its rejection. 147 (2) [Refund of premium] Unless the insurance is to be arranged with

another insurer, the credit provider must ensure that any amount paid by the debtor is refunded or credited in full. Criminal penalty: 100 penalty units. 147 (3) [Strict liability offence] Subsection (2) is an offence of strict liability. Note: For strict liability, see section 6.1 of the Criminal Code.

147 (4) [Recovery of premium] The credit provider may, in turn, recover the amount paid to the debtor from the insurer, if an amount has been paid to the insurer by the debtor under or in connection with the proposed insurance contract. [page 498] ________________________________________ [Editorial note: UCCC s 137 provided as follows: Rejection of debtor’s proposal for insurance 137 (1) [Notice of rejection by insurer] If a credit provider proposes to finance the amount payable by the debtor under or in connection with a credit-related insurance contract and the proposal for insurance is rejected by an insurer, the insurer must inform the debtor and the credit provider of its rejection. 137 (2) [Refund of premium] Unless the insurance is to be arranged with another insurer, the credit provider must ensure that any amount paid by the debtor is refunded or credited in full. Maximum penalty — 100 penalty units. 137 (3) [Recovery of premium] The credit provider may, in turn, recover the amount paid to the debtor from the insurer, if an amount has been paid to the insurer by the debtor under or in connection with the proposed insurance contract.]

COMMENTARY ON SECTION 147 [147.05] Outline If a credit provider wants to finance the amount payable by the debtor for a credit-related insurance contract, and the proposal is rejected by the insurer, the insurer must notify the debtor and the credit provider of the rejection. The credit provider must ensure any amount paid by the debtor is refunded or credited in full unless insurance is to be arranged with another insurer. In turn, a credit provider may recover the amount paid to the insurer.

Section 147 makes the credit provider, and not the debtor, responsible for obtaining a refund of premium from the insurer. [147.10] “Credit-related insurance contract” The term “credit-related insurance contract” is defined in s 142(1) (see [142.05]) to be an insurance contract for insurance over the mortgaged property, consumer credit insurance (which term is in turn defined in s 204) or insurance of the nature prescribed by the Regulations (as yet no insurance has been prescribed). [147.15] Penalty A failure to comply with s 147(2) carries a criminal penalty of 100 penalty units. Under the NCCP Act regime changes, failure to comply with s 147(2) was made an offence of strict liability by the insertion of s 147(3). (See paras 17 and 18 of the “Overview of the National Credit Code” for commentary on penalty units and strict liability offences.)

Termination of consumer credit insurance contract if credit contract terminated 148 (1) [Termination of insurance contract] On termination of a credit contract, any relevant credit-related insurance contract financed under the credit contract for consumer credit insurance in force is also terminated. 148 (2) [Refund of premium by credit provider] If a credit contract is terminated, the credit provider is required to pay the debtor or credit the debtor with a proportionate rebate of premium paid under any relevant creditrelated insurance contract for consumer credit insurance in force immediately before the credit contract is terminated. 148 (3) [Recovery of premium from insurer] The credit provider may, in turn, recover the amount paid to the debtor from the insurer. [page 499] 148 (4) [Calculation of rebate] The regulations may prescribe the manner of

calculating the proportionate rebate of premium for the purposes of this section, including the rebate payable where this section does not apply to the whole of a credit-related insurance contract. 148 (5) [No exclusion by contract] This section has effect despite any provision of the credit-related insurance contract. 148 (6) [Credit-related insurance contract] This section does not apply to a credit-related insurance contract, to the extent that it provides a benefit in the event of the death of the debtor, if a credit contract is terminated on the death of a debtor. However, it does apply to the credit-related insurance contract to the extent that it provides other benefits. ________________________________________ [Editorial note: UCCC s 138 — apart from numbering the section is unchanged.]

COMMENTARY ON SECTION 148 [148.05] Outline When a credit contract is terminated, any relevant consumer credit insurance contract is also terminated and the credit provider must rebate the prescribed portion of premium paid under any such consumer credit insurance contract. The amount so rebated may be recovered by the credit provider from the insurer. [148.10] Proportionate rebate of premium The manner of calculating the proportionate rebate of premium is set out in reg 94 (based on the number of unexpired months of the term for which insurance was agreed to be provided) (see further [148.25]). [148.15] Relevant consumer credit insurance Only relevant consumer credit insurance is terminated automatically. The term “consumer credit insurance” is defined in s 204 to mean insurance which insures the capacity of the debtor to make repayments under the credit contract. Since the definition would not include insurance which insures the capacity of a guarantor to make repayments, or loss of profits or business interruption insurance, those policies will not be terminated automatically if the credit contract is terminated. However, s 148 may have an unintended consequence

where a policy of consumer credit insurance relates to more than one credit contract, and one of those credit contracts is terminated. Section 148 would have the effect that the policy is automatically terminated, regardless of the intention of the parties. [148.20] Override insurance contract The requirements of s 148 override the terms of any insurance contract (s 148(5)). [148.25] Life insurance/death benefit Section 148(4) and (6) apply if a consumer credit-related insurance contract provides for a death benefit as well as other benefits, say for disability or unemployment, if the events to which the benefits relate occur during the term of the credit contract, and the debtor dies before the end of that term. The death benefit under the insurance contract is payable, and the effect of s 148(4) and (6) is that the premium paid for the death benefit is not refundable. However, there must be separate proportionate rebates of the premiums paid for the other benefits (in the example above, the disability and unemployment benefits). That is, where a single premium is paid for a [page 500] combination of death and other benefits, and the debtor dies before the end of the credit contract term, a partial rebate of the premium will be required in respect of the non-death benefits. Regulation 94 sets out the manner of calculating the proportionate rebate of premium for the purposes of s 148(4) (see [R94.05]).

Termination of insurance contract over mortgaged property if credit contract terminated 149 (1) [Termination of insurance contract and rebate of premium] If a credit contract is terminated before the end of the term of a credit-related insurance contract over mortgaged property financed under the credit contract

or before any such insurance contract is otherwise terminated, the debtor is entitled to terminate the insurance contract and recover from the insurer a proportionate rebate of premium paid under the insurance contract. 149 (2) [Notice of debtor’s rights] On the termination of the credit contract, the credit provider must inform the debtor in accordance with the regulations of the debtor’s rights under this section. Criminal penalty: 50 penalty units. 149 (3) [Strict liability offence] Subsection (2) is an offence of strict liability. Note: For strict liability, see section 6.1 of the Criminal Code.

149 (4) [Calculation of rebate] The regulations may prescribe the manner of calculating the proportionate rebate of premium for the purposes of this section. 149 (5) [Termination by written notice] An entitlement under this section to terminate an insurance contract may be exercised only by notice in writing to the insurer. 149 (6) [No exclusion by contract] This section has effect despite any provision of the credit-related insurance contract. ________________________________________ [Editorial note: UCCC s 139 provided as follows: Termination of insurance contract over mortgaged property if credit contract terminated 139 (1) [Termination of insurance contract and rebate of premium] If a credit contract is terminated before the end of the term of a credit-related insurance contract over mortgaged property financed under the credit contract or before any such insurance contract is otherwise terminated, the debtor is entitled to terminate the insurance contract and recover from the insurer a proportionate rebate of premium paid under the insurance contract. 139 (2) [Notice of debtor’s rights] On the termination of the credit contract, the credit provider must inform the debtor in accordance with the regulations of the debtor’s rights under this section. Maximum penalty — 50 penalty units. 139 (3) [Calculation of rebate] The regulations may prescribe the manner of calculating the proportionate rebate of premium for the purposes of this section. 139 (4) [Termination by written notice] An entitlement under this section to terminate an

insurance contract may be exercised only by notice in writing to the insurer. 139 (5) [No exclusion by contract] This section has effect despite any provision of the creditrelated insurance contract.]

COMMENTARY ON SECTION 149 [149.05] Outline If a credit contract terminates before the end of the period of cover under an insurance contract over the mortgaged property which is [page 501] financed under the credit contract (or before the insurance contract is otherwise terminated), the debtor can terminate the insurance contract and recover from the insurer a proportionate rebate of the premium paid. [149.10] Form 16 Regulation 95 prescribes that the information to be provided to the debtor by the credit provider on termination of the credit contract is a written statement in Form 16. Note the obligation to provide the Form 16 information statement to a debtor is imposed on the credit provider, not the insurer. [149.15] Proportionate rebate of premium The manner of calculating the proportionate rebate of premium is set out in reg 96. The rebate is the sum of: the amount of premium paid for any period of the insurance contract not yet commenced; and 90 per cent of the proportion of the amount of premium paid which is attributable to the unexpired portion of the current period of insurance (consisting of whole months). [149.20] Written notice The debtor may only terminate the insurance contract under s 149 by written notice to the insurer (s 149(5)). [149.25] Override insurance contract The requirements of s 149 override the terms of any insurance contract (s 149(6)).

[149.30] Penalties A failure to comply with s 149(2) carries a criminal penalty of 50 penalty units. Under the NCCP Act regime changes, failure to comply with s 149(2) was made an offence of strict liability by the insertion of s 149(3). (See paras 17 and 18 of the Overview of the National Credit Code for commentary on penalty units and strict liability offences.)

[page 503]

Part 9 — Advertising and related conduct Advertising 150 (1) General principle A person must not publish, or cause to be published, an advertisement that states or implies that credit is available unless the advertisement complies with: (a) this section; and (b) if, under Part 10, the comparison rate is included — Division 2 of that Part. Criminal penalty: 100 penalty units. 150 (2) Regulations The advertisement must not contain a statement of a kind prohibited by the regulations. It must contain any statement required by the regulations. 150 (3) Annual percentage rate The advertisement need not contain an annual percentage rate, but must do so if the advertisement states the amount of any repayment. If the advertisement contains an annual percentage rate and credit fees and charges are payable, the advertisement must: (a) state that fees and charges are payable; or (b) specify the amount of the fees and charges payable; or (c) specify the amount of some of the fees and charges payable and state that other fees and charges are payable. 150 (4) Civil effect A person who suffers loss as a result of a contravention by another person of this section may recover the amount of the loss against that other person or any other person involved in the contravention. ________________________________________

[Editorial note: UCCC s 140 provided as follows: Advertising 140 (1) General principle A person must not publish, or cause to be published, an advertisement that states or implies that credit is available unless the advertisement complies with this section and, until the expiry of Part 9A, with the provisions of Division 2 of that Part. Maximum penalty — 100 penalty units. 140 (2) Regulations The advertisement must not contain a statement of a kind prohibited by the regulations. It must contain any statement required by the regulations. 140 (3) Annual percentage rate The advertisement need not contain an annual percentage rate, but must do so if the advertisement states the amount of any repayment. If the advertisement contains an annual percentage rate and credit fees and charges are payable, the advertisement must— (a) state that fees and charges are payable; or (b) specify the amount of the fees and charges payable; or (c) specify the amount of some of the fees and charges payable and state that other fees and charges are payable. 140 (4) Comparison rate The advertisement may contain the comparison rate calculated as prescribed by the regulations and, if it does so, must be accompanied by the warnings set out in the regulations. This subsection does not apply while Part 9A has effect. 140 (5) Civil effect A person who suffers loss as a result of a contravention by another person of this section may recover the amount of the loss against that other person or any other person involved in the contravention.]

[page 504] COMMENTARY ON SECTION 150 [150.01] Outline A person must not publish, or cause to be published, an advertisement that states or implies that credit is available unless the advertisement complies with: section 150, which regulates what information must be contained if the amount of any repayment is stated, or an annual percentage rate is stated; and if the comparison rate is included under Pt 10, Div 2. A “comparison rate” is a figure designed to encompass the total cost of a credit product, including all of the interest, fees and charges which a debtor

will be required to pay in addition to the amount borrowed. The comparison rate is intended to assist consumers in ascertaining the real cost involved in borrowing money. (The UCCC contained Pt 9A dealing with comparison rates. The NCCP Act regime changed this to be Pt 10 — and made significant changes to the comparison rate requirements — see commentary on s 157). [150.02] Introduction The Code provides uniform controls over the promotional activities of any “person” who states or implies that credit is available. “Person” includes prospective credit providers, their intermediaries, finance brokers, and suppliers of goods and services in connection with a linked credit provider funding the purchase of goods and services. In addition to s 150, Pt 10 requires a comparison rate to be included in all credit advertisements which include an annual percentage rate. Part 9A of the UCCC also used to require that schedules of comparison rates be made available at premises of credit providers, finance brokers and linked suppliers, accompany credit application forms, and be accessible from any webpage advertising credit products (other than continuing credit contracts) (see ss 146A–146T of the UCCC). By virtue of the NCCP Act regime changes, Pt 10 of the Code does not require the provision of comparison rate schedules. [150.03] ASIC advertising and enforcement ASIC has been active in monitoring advertising compliance since the commencement of the NCCP Act regime. See “ASIC action — advertising and enforcement activities” in the introductory pages to this text. See further regulatory guide RG 234 Advertising financial products and services (including credit): Good practice guidance. [150.05] “Publish or cause to be published” The Code does not define “publish”. A full discussion of the meaning of “publish” is contained in E V Lanyon, Australian Consumer Credit Law, LexisNexis, Sydney, 1994, looseleaf, [4.15]. Briefly put, the prudent course is to assume that “publish” will be given its broadest meaning so that publishing would include all of the following:

circulation of advertisements by mail or hand delivery; display of advertisements in the form of notices, signs and labels at the premises of a supplier or a credit provider or elsewhere; broadcasting of advertisements on television or radio; [page 505] advertisements on pay television or computer subscriber networks (eg, the internet). Section 151(1) sets out circumstances in which a person is taken to have caused an advertisement to be published, but is not exhaustive (see [151.10]). [150.10] “Advertisement” The expression “advertisement” is not defined for the purposes of s 150 of the Code. It is therefore necessary to rely on definitions and interpretations that have developed in other contexts. Part 10 includes a definition of the term “credit advertisement” (s 159) for the purposes of Pt 10 only. This is: … an advertisement in any form or medium that states or implies that credit is available, but (for the avoidance of doubt) does not include:

(a) notices or other documents required or authorised to be given under this Code, or (b) a publication that only lists reference rates. The Standing Committee of Officials of Consumer Affairs (in conjunction with the New South Wales Department of Fair Trading) in 2000 released two information pamphlets entitled Balloon Payments — A Guide for Businesses and Interest-free Offers and Promotions — A Guide for Businesses. In these pamphlets, the term “advertisement” was said to: … essentially [cover] any matter which draws the attention of the public, or a portion of the public, to a product in a manner directly or indirectly calculated to promote that product.

These pamphlets were not legally binding but provide useful guidance on

the interpretation of the term “advertisement” in relation to the UCCC. See also [150.31]. In addition to the pamphlets, it is possible that courts and tribunals will give the term its broadest meaning. Under the Credit Acts (the predecessors to the UCCC), “advertisement” was defined to include “without affecting the generality of the expression, a notice, label, sign, circular and matter that is not writing but, by reason of the form or content in which it appears, conveys a message” (s 121(1) of the Credit Act). In addition, courts and tribunals may have regard to dictionary and statutory definitions, and case law interpretations, of the term “advertisement” to determine whether consumer credit marketing material is an “advertisement” for the purposes of the Code. The Australian Broadcasting Authority Television Program Standard 23 defines “advertisement” as a: … matter that draws the attention of the public, or a segment of the public, to a product, service, person, organisation or line of conduct in a manner calculated to promote or oppose, directly or indirectly, that product, service, person, organisation or line of conduct.

This definition has been widely applied by the media and advertising industries — for example, in their self-regulatory codes — and may offer some additional assistance in determining the meaning of “advertisement” for the purposes of the Code. [page 506] Australian courts have given a broad interpretation to the meaning of the word “advertisement”. The Federal Court of Australia has stated that the issue as to whether or not something is an “advertisement” is to be objectively determined by examining the “essential character” or purpose of the publication on its face and without reference to the actual intention of those concerned with its production or transmission (see Rothmans of Pall Mall (Aust) Ltd v Australian Broadcasting Tribunal (1985) 5 FCR 330 at 339; 58 ALR 675 at 682; 7 ALN N232; ACP Publishing Pty Ltd v Federal Cmr of Taxation (1993) 49 FCR 191 at 197; 125 ALR 538 at 543–4; 93 ATC

4773; BC9305014 per Hill J). The question is whether, objectively, the material appears to be designed or calculated to draw public attention to, or promote the sale and use of a product (Rothmans of Pall Mall (Aust) Ltd v Australian Broadcasting Tribunal, (above); Director of Public Prosecutions v United Telecasters Sydney Ltd (1990) 168 CLR 594 at 598; 91 ALR 1 at 4; 64 ALJR 181; BC9002939 per Brennan, Dawson and Gaudron JJ). A full discussion of the meaning of “advertisement” is contained in E Lanyon, Australian Consumer Credit Law, LexisNexis, Sydney, 1994, looseleaf, [4.010]. “Advertisement” is likely to extend to: electronic advertising, including “banner ads” or “Google ads” (ie, advertisements that appear on Google search webpage results); a standard form letter sent by a credit provider to prospective debtors promoting credit via a direct marketing campaign; informative material such as instruction and information leaflets or manuals, but only if their material can objectively be seen to be designed or calculated to draw public attention to a product or promote the sale of that product; any oral, written or pictorial representation appearing in newspapers, magazines, television and radio, billboards, direct mailing leaflets, pamphlets, notices, signs and labels that objectively can be said to draw public attention to a product or promote the sale of that product; or marketing words on a statement of account sent to debtors. [150.15] “Annual percentage rate” The original s 140 of the UCCC (the precursor to s 150 of the Code) applied to advertisements that referred “to the cost of credit”. This test was considered ambiguous and the Consumer Credit (Queensland) Amendment Act 1998 (Qld) replaced it with a new test — does the advertisement “state the amount of any repayment”? If the advertisement does state the amount of any repayment, certain disclosures are required, such as the “annual percentage rate” (APR) that applies. If an APR is stated and fees or charges apply, the advertisement must:

state that fees and charges apply; or specify the amount of fees and charges applicable; or specify the amount of some of the fees and charges that apply and state that other fees and charges apply also; and comply with Div 2 of Pt 10, that is, include the: —

name of the product (s 162(1));

—

amount of credit (s 162(1));

—

term of the credit (s 162(1)); and

—

relevant comparison rate in accordance with Pt 10 (s 160(1)). [page 507]

Section 160(2) provides that an advertisement may contain a comparison rate, in accordance with Pt 10, even if it does not contain an APR. Details regarding the provision of a comparison rate are contained in Pt 10 of the Code and Pt 7–8 of the Regulations (see [157.05]–[168.05]). Section 150(3) is supplemented by cl 1 of the Customer Owned Banking Code of Practice (COBCP) (January 2014), which deals with advertising and promises that promotional materials will not be misleading or deceptive. In addition, cl 1 of the COBCP expressly requires credit unions, mutual banks and mutual building societies to have regard to ASIC guidance on advertising. The current version of the Code of Banking Practice (2013) does not repeat its former cl 30.2 stating that advertisements which refer to an interest rate must also indicate whether there are other fees and charges, and that full details of the terms and conditions of the credit being advertised are available on application. Section 150 is unclear as to which annual percentage rate (APR) must be included in a credit advertisement for a product where the credit provider offers varying rates (eg, a product where the usual APR is 5.75 per cent but the rate can be reduced at the credit provider’s discretion if certain criteria are met). Logically, those advertisements should specify the “maximum APR” (and, if the credit provider wishes to specify the possible

lower APR(s), the advertisement should also specify the applicable criteria). Such disclosure is in keeping with the philosophy underlying the Code’s advertising regime, namely to ensure that debtors are adequately informed of the cost of credit in advertisements promoting consumer credit products on the basis of their cost. If an advertisement refers to a lower APR than the APR which is customarily available, this could breach the Code’s prohibition in s 154 against misleading representations (see [154.05]). [150.20] Regulations Section 150(2) provides that an advertisement must not contain a statement of a kind prohibited by the Regulations, and must contain any statement required by the Regulations. No regulations have so far been made for the purposes of s 150(2). [150.25] Which advertisements are covered by s 150? Section 150 (including the requirement to comply with Div 2 of Pt 10) covers advertisements that “state or imply that credit is available”. Again, if a very broad interpretation of this phrase is adopted, any advertisement that identifies a credit provider could be taken to be an advertisement that states or implies that credit is available, because credit providers exist largely, if not exclusively, for the purpose of providing credit. Section 150(1) must therefore be read down unless the intention of the section is to cover all advertising by credit providers. This is clearly not the intention of the section, so reading down is therefore necessary. It is not clear where the line should be drawn for the purposes of reading down s 150. One possibility would be to confine s 150 to advertisements which relate to a specific credit product or products offered by a credit provider on the basis that the advertisement cannot state or imply that credit is available for the purposes of the Code unless the credit concerned is identified with some particularity. Section 150 also purports to extend to all advertisements which state or imply that any credit is available, not just to advertisements which state or imply that credit to which the Code applies is available. The only sensible interpretation of s 150 is that it applies only to credit [page 508]

to which the Code applies. There is nothing (in the Code, the explanatory memorandum or parliamentary speeches) to indicate to the contrary. [150.26] ASIC regulatory guide RG 234 ASIC regulatory guide RG 234 Advertising financial products and services (including credit): Good practice guidance focuses on avoiding both false or misleading statements and on engaging in misleading or deceptive conduct. The guide applies to any communication that informs consumers about or promotes financial products, financial advice services, credit products or credit services, across all manner of media. In RG 234, ASIC emphasises the need for striking a balance between the benefits and risks of a product in such communications (ie, they should not overstate the potential benefits or create unrealistic expectations). The regulatory guide is quite comprehensive and addresses warnings, disclaimers, fine print, fees and costs, product comparisons, past performance and forecasts, technical language, endorsements, target audience, consistency with disclosure documents, photographs, diagrams, images, examples, and the nature and scope of financial advice and credit assistance. The guide also provides media-specific guidance. [150.30] Guidance from the Standing Committee of Officials of Consumer Affairs The Standing Committee of Officials of Consumer Affairs (SCOCA) (in conjunction with the New South Wales Department of Fair Trading) released two “information pamphlets”, which provided guidance on the advertising of: interest-free offers; and balloon payments. Both of these pamphlets set out guidance in relation to the advertising of products to ensure that those products were not misleading or deceptive under fair trading legislation and complied with the UCCC. The pamphlets were not legally binding, but gave a good indication of the approach which should be adopted by credit providers in relation to such products under the UCCC.

Balloon payments The pamphlet entitled Balloon Payments — A Guide for Businesses set out guidelines for advertisements for products (whether UCCC regulated or not) which included a balloon payment. This is a product which requires small monthly or weekly instalments and a substantial final payment. The pamphlet stated that: advertising which creates an impression of easy repayment levels must adequately draw the consumer’s attention to the substantial final payment; terms such as “balloon payment” or “residual” should only be used in advertisements where the consumer could fully understand the particular condition of the purchase (eg, such as when ownership of the vehicle depends on the purchaser making a final substantial payment); fine print should not be used — information should be presented in a manner that is clear, prominent and easy to read; and advertisements should state: —

the required regular payment (eg, weekly, monthly);

—

the amount of the balloon payment; [page 509]

—

in the case of print advertisements, the amount of the balloon payment immediately underneath the appropriate advertisement in type of no less than nine point;

—

the annual percentage rate or rates;

—

the total period over which the instalments would be payable; and

—

the amount of any fees or charges which would apply (or state that fees and charges apply, or state the amount of some of the fees and charges that apply and that other fees and charges are

also payable). Interest-free products The pamphlet entitled Interest-free Offers and Promotions — A Guide for Businesses set out the guidelines for advertisements for interest-free products. The pamphlet related to all interestfree products, whether regulated by the Code or not. This pamphlet was issued in response to concerns that consumers were being misled about the annual percentage rate and from when it was charged. To avoid these concerns the pamphlet recommended that: all advertising and other disclosures be clear, conspicuous and legible; and all advertisements clearly state: —

the nature of the “interest-free” offer;

—

any conditions relating to the “interest-free period”;

—

the annual percentage rate or rates which would apply after the “interest-free period” had expired;

—

when the annual percentage rate or rates would be applied from; and

—

the amount of any fees or charges which would apply (or state that fees and charges apply, or state the amount of some of the fees and charges that apply, and that other fees and charges were also payable).

[150.31] Status of SCOCA pamphlet guidance in relation to the Code It is unclear if the SCOCA pamphlets also reflect the approach that ASIC takes to these advertising issues. However, it is likely that ASIC will have regard to them in forming its views. [150.35] Guidelines from Management Committee On 27 November 1996, the Uniform Consumer Credit Code Management Committee (UCCCMC) issued an industry guideline clarifying aspects of the UCCC’s advertising provisions. Some parts of this clarification were necessary because of the ambiguity surrounding the interpretation of s 140 of the UCCC before it was

amended by the Consumer Credit (Queensland) Amendment Act 1998 (Qld). That guideline is reproduced in full below. The last paragraph of the guideline notes that it is to be regarded as interim advice only. In the light of the Consumer Credit (Queensland) Amendment Act, the status of the guideline issued by the UCCCMC concerning the UCCC’s advertising provisions (as amended) became uncertain. The guideline was issued under the authority of the chair of the Standing Committee of Officials of Consumer Affairs (SCOCA), as there was no framework for the making of formal industry guidelines by SCOCA or the UCCCMC. The guideline had no formal legal status, as the UCCC contained no provision for the making or status of guidelines or rulings (see [143.65]). [page 510] It is unclear if the UCCCMC guideline also reflects the approach that ASIC will take to this issue. However, it is likely that ASIC will have regard to the guideline in forming its view. Text of UCCCMC guideline Consumer Credit Code Clarification of Advertising Provisions A number of approaches have been received from industry groups seeking clarification of sections 140 and 143 of the [UCCC (ss 150 and 153 of the Code)] which came into effect on November 1 [1996]. In particular there are concerns that the provisions may hinder the inclusion in advertisements of information which actually specifies the quantum of fees and charges payable under certain credit contracts. There have also been some concerns expressed about how credit providers may advertise reference rates. With respect to the advertising of fees and charges, I advise that it is not intended to prevent the inclusion of additional information as to the cost of credit such as the amount of a fee or charge payable. With respect to the advertising of annual percentage rates it is considered that

sections 140(3) and 143 [of the UCCC; ss 150(3) and 153 of the Code] permit the following: disclosure of a reference rate and, where a margin may apply, including a statement as to the range of percentage rates within which the margin may apply; or disclosure of a reference rate together with a statement to the effect that the annual percentage rate which may apply to a particular customer is available on request from a nominated address or telephone number. Where a reference rate is disclosed as described above, the name of the reference rate should be disclosed together with the amount of the rate or how the amount of the rate may be ascertained. It is also intended that section 140 [of the UCCC; s 150 of the Code] should not prevent the inclusion in an advertisement of a statement that the annual percentage rate is available on request from a nominated address or telephone number. A default rate is not, in the context of these provisions, considered to be another annual percentage rate requiring separate disclosure. It should be noted that the above information is intended as interim advice and that further consideration is currently being given to the issue of a more comprehensive formal guideline in consultation with stakeholders. Dennis Hall Chair Standing Committee of Officials of Consumer Affairs (SCOCA) [150.40] Common law All advertising (including the advertising of consumer credit) is, and remains, subject to the common law and to other legislation of general application, such as the Australian Consumer Law, the ASIC Act (which applies specifically to financial products including consumer credit) and the Fair Trading Acts (or equivalent legislation) of the various states and territories.

[page 511] [150.45] Penalty There is a penalty of up to 100 penalty units for breaching s 150. (See para 17 of the “Overview of the National Consumer Credit Code” for commentary on penalty units.)

Persons liable for advertisements 151 (1) [Deemed responsibility for publication of advertisement] A person is, in the absence of proof to the contrary, taken to have caused an advertisement to be published if: (a) the person provides credit, owns or has an interest in any goods, or supplies or has an interest in the supply of any goods or services, which the advertisement promotes; and (b) the advertisement specifies the name, business name, address, telephone number, facsimile number or post office box number of the person or the person’s agent. 151 (2) [Defence] It is a defence to a charge under section 150 of causing an advertisement that does not comply with that section to be published if the person charged proves that he or she could not, by the exercise of reasonable care, have prevented the noncompliance to which the offence relates. ________________________________________ [Editorial note: UCCC s 141 provided as follows: Persons liable for advertisements 141 (1) [Deemed responsibility for publication of advertisement] A person is, in the absence of proof to the contrary, taken to have caused an advertisement to be published if— (a) the person provides credit, owns or has an interest in any goods, or supplies or has an interest in the supply of any goods or services, which the advertisement promotes; and (b) the advertisement specifies the name, business name, address, telephone number, facsimile number or post office box number of the person or the person’s agent. 141 (2) [Defence] It is a defence to a charge under section 140 of causing an advertisement

that does not comply with that section to be published if the person charged proves that he or she could not, by the exercise of reasonable care, have prevented the noncompliance to which the offence relates.]

COMMENTARY ON SECTION 151 [151.05] Outline Section 151 deals with “causing” publication of an advertisement, but not publication itself. Section 151 creates a rebuttable presumption that certain persons who apparently stand to gain from a noncomplying advertisement caused the advertisement to be published. Section 151 does not set out the only circumstances in which a person is taken to have caused an advertisement to be published. A “charge” under s 150 may be defended by a person proving that they could not, by the exercise of reasonable care, have prevented the non-compliance (s 151(2)). In neither case does s 151 extend to actual publication, so that the defence in s 151(2) will not be available to a person charged with publication of a non-complying advertisement. See E Lanyon, Australian Consumer Credit Law, LexisNexis, Sydney, 1994, looseleaf, [4.060] for a full discussion. [151.10] Section 151(1) not exhaustive Section 151(1) does not set out the only circumstances in which a person will be said, for the purposes of the Code, to have caused publication of an advertisement. It adds to, rather than limits, the circumstances in which a person causes publication for the purposes of the Code. [page 512] [151.15] “Proof to the contrary” An infringement of s 150 has both civil and criminal consequences. Presumably the burden of proof required by s 151(1) is proof on the balance of probabilities, rather than beyond reasonable doubt. [151.20] “Interest in” These words have a wide reach. Section 204 defines an interest in relation to property to mean any legal or equitable estate in, or any right, power or privilege over or in relation to the property. Section 151

does not state what interest is necessary for the purposes of s 151(1). However, “interest” is broadly defined in s 204. [151.25] “Charge” Section 151(2) provides a defence to a “charge under s 150”. A breach of s 150 has both criminal consequences (s 150(1)) and potential civil consequences (s 150(4)). Does the word “charge” in s 151(2) cover both criminal and civil proceedings? “Charge” is more commonly used in relation to criminal offences than in connection with civil claims for compensation. If “charge” in s 151(2) is restricted to criminal proceedings, the combined effect of ss 150 and 151 could be that a person may be presumed to have caused an advertisement to be published (s 151(1)), and would therefore presumably be “involved” in any contravention and liable for loss (s 150(4)), but would not have the defence in s 151(2) available to them. [151.30] Onus of proof Section 151(1) establishes a rebuttable presumption. The onus of rebutting the presumption lies on the person charged.

Defence 152 A printer, publisher or proprietor of a newspaper, a licensee of a commercial broadcasting or television station, an exhibitor of a film, or a person acting with the authority of any of them, does not commit an offence under section 150 unless he or she suspected, or had reason to suspect, that publishing the advertisement would constitute an offence. ________________________________________ [Editorial note: UCCC s 142 provided as follows: Defence 142 A printer, publisher or proprietor of a newspaper, a licensee of a commercial broadcasting or television station, an exhibitor of a film, or a person acting with the authority of any of them, is not guilty of an offence under section 140 unless he or she suspected, or had reason to suspect, that publishing the advertisement would constitute an offence.]

COMMENTARY ON SECTION 152 [152.05] Outline Section 152 provides a defence to certain publishers (as

distinct from those who caused the advertisement to be published) who may be involved in the publication of an advertisement, if they did not suspect, or have reason to suspect, that publication would constitute an offence. The scheme of the Code seems to indicate that s 151 deals with causing publication, while s 152 deals with publication itself. However, s 152 is not expressly so limited, and it may be that the persons referred to in s 152 could be involved in publishing or causing publication, (or both) depending on the circumstances, and depending on how the courts interpret ss 150–153. [page 513] [152.10] “Not guilty of an offence” The use of these words suggests (as with the use of the word “charge” in s 151(2)) — see [151.25]) that the defence in s 152 is available only in the case of a criminal prosecution under s 150(1), and not in the case of a civil action under s 150(4). [152.15] “Suspected, or had reason to suspect” The word “suspect” has been considered by the courts in Queensland Bacon Pty Ltd v Rees (1966) 115 CLR 266; 40 ALJR 13; [1966] ALR 855; BC6600470; Re Chisum Services Pty Ltd (1982) 7 ACLR 641; 1 ACLC 292; and Commissioner for Corporate Affairs (Vic) v Guardian Investments Pty Ltd [1984] VR 1019; (1984) 9 ACLR 162; 2 ACLC 165. A suspicion is less than a belief, but more than mere speculation. The suspicion in question would have to relate to factual matters (eg, that an annual percentage rate (APR) was inaccurately stated, or that fees and charges were applicable, but not referred to in the advertisement). The extent of the defence in s 152 may be more limited than an initial reading would seem to indicate. It does not excuse a publisher from being aware of the law; rather it protects publishers who are unaware of the factual accuracy of the contents of an advertisement. For example, a publisher who unwittingly published, on instructions from a credit provider, an incorrect APR, could expect to be entitled to the protection of s 152. For a discussion of the words “had reason to”, see [13.35].

[152.20] “Defence” Section 152 provides that a publisher is “not guilty of an offence” if they meet the requirements of the section. This is the language of criminal responsibility, but presumably the intention is to protect “innocent” publishers from both criminal liability under s 150(1) and civil liability under s 150(4), rather than just from the criminal element of s 150. On either interpretation, s 152 only provides a defence to liability under s 150, and not to liability under s 154, which contains its own defence (s 154(2)).

Interest rates which may be disclosed 153 (1) [Interest rate disclosure] A person must not disclose an interest rate: (a) in an advertisement that states or implies that credit is available; or (b) to a debtor before the debtor enters into a credit contract; unless the interest rate is expressed as a nominal percentage rate per annum or is the comparison rate calculated as prescribed by the regulations and accompanied by the warnings set out in the regulations. Criminal penalty: 100 penalty units. 153 (2) [Strict liability offence] Subsection (1) is an offence of strict liability. Note: For strict liability, see section 6.1 of the Criminal Code.

________________________________________ [Editorial note: UCCC s 143 provided as follows: Interest rates which may be disclosed 143 A person must not disclose an interest rate— (a) in an advertisement that states or implies that credit is available; or

[page 514]

(b) to a debtor before the debtor enters into a credit contract; unless the interest rate is expressed as a nominal percentage rate per annum or is the comparison rate calculated as prescribed by the regulations and accompanied by the warnings set out in the regulations. Maximum penalty — 100 penalty units.]

COMMENTARY ON SECTION 153 [153.05] Outline The effect of s 153(1) is that if a person discloses an interest rate to a potential debtor or in an advertisement that states or implies that credit is available, the interest rate must be expressed as a “nominal percentage rate per annum”, or as a comparison rate calculated as prescribed by the Regulations and accompanied by the warnings set out in the Regulations. “Interest rate” is not defined in the Code. It may be that a statement of the amount of periodic interest payments (eg, “$10 interest per month”) would not be permissible under s 153 as that disclosure reflects an amount of “interest” and is not in the form of a nominal percentage rate per annum. [153.10] “Person” Section 153 is not limited to credit providers. It applies to anyone who is disclosing an interest rate. It extends to agents of the credit provider and other third parties. [153.15] “Debtor” Debtor is defined in s 204 to include a prospective debtor. How is a prospective debtor to be distinguished from anyone else in the population, or is everyone a potential debtor? Section 153 can be read to mean that interest rates (other than the annual percentage rate or the comparison rate) may only be disclosed to debtors who have entered into credit contracts. But are they not then still “potential debtors” in relation to future credit contracts? And in any event, what is left to disclose to a debtor who has already entered into a credit contract? [153.20] “Nominal percentage rate per annum” According to s 153, a credit provider is not permitted to advertise or state to a potential debtor the interest rate for a product unless the rate is expressed as an annual rate. This section reflects the wording in s 143 of the UCCC, which initially referred to “the annual percentage rate or rates”, but was amended by the Consumer

Credit (Queensland) Amendment Act 1998 (Qld) to refer to the interest rate “expressed as a nominal percentage rate per annum”. The explanatory notes to the amendment Act state: [The former] expression has caused some difficulty especially in the context of an advertisement because the “annual percentage rate” is only defined in section 25 [of the UCCC; s 27 of the Code] in the context of the annual percentage rate under a credit contract. In the context of an advertisement there is of course no particular credit contract in mind. Accordingly [s 143 (of the UCCC; s 153 of the Code) is amended to substitute] the expression “expressed as a nominal percentage rate per annum”.

The requirement that only the nominal percentage rate per annum may be disclosed means that a daily percentage rate may not be disclosed. This would make it difficult to disclose to potential debtors the method by which interest is calculated as required by ss 16(1)(a) and 17(5). It is also unclear how s 153 operates where a credit provider’s nominal percentage rate per annum is determined by using a reference or indicator rate [page 515] plus a margin. Is it permissible to disclose the method by which the nominal percentage rate per annum is determined (ie, reference rate plus margin), or is it necessary, in order to comply with s 153, to disclose only the nominal percentage rate per annum? If the latter view is correct, it would mean that precontractual disclosures complying with ss 16 and 17(4)(c) would involve breaches of s 153. However, see comments in the guideline reproduced at [150.35] on disclosure of reference rates. [153.25] Advertisements The effect of s 153(1)(a) is that, if a person discloses an interest rate in an advertisement that states or implies that credit is available, that person must express the interest rate as a “nominal percentage rate per annum”. [153.30] Penalty A failure to comply with s 153 carries a criminal penalty of 100 penalty units. Under the NCCP Act regime changes, failure to comply with s 153 was made an offence of strict liability by the insertion of s 153(2).

(See paras 17 and 18 of the “Overview of the National Credit Code” for commentary on penalty units and strict liability offences.)

False or misleading representations 154 (1) [Material to entry; inducement to enter] A person must not make a false or misleading representation in relation to a matter that is material to entry into a credit contract or a related transaction or in attempting to induce another person to enter into a credit contract or related transaction. Criminal penalty: 50 penalty units. 154 (2) [Defence] It is a defence to prosecution for an offence against this section if a person charged proves that he or she reasonably believed that the representation was not false or misleading. 154 (3) Civil effect A person who suffers loss as a result of a contravention by another person of this section may recover the amount of the loss from that other person or any other person involved in the contravention. ________________________________________ [Editorial note: UCCC s 144 provided as follows: False or misleading representations 144 (1) [Material to entry; inducement to enter] A person must not make a false or misleading representation in relation to a matter that is material to entry into a credit contract or a related transaction or in attempting to induce another person to enter into a credit contract or related transaction. Maximum penalty — 50 penalty units. 144 (2) [Defence] It is a defence to prosecution for an offence against this section if a person charged proves that he or she reasonably believed that the representation was not false or misleading. 144 (3) Civil effect A person who suffers loss as a result of a contravention by another person of this section may recover the amount of the loss from that other person or any other person involved in the contravention.]

COMMENTARY ON SECTION 154 [154.05] Outline Section 154 substantially duplicates ss 18, 29 and 236 of

the Australian Consumer Law (formerly ss 52, 53 and 82 of the Trade Practices Act) [page 516] and equivalent provisions in the ASIC Act (ss 12DA, 12DB and 12GF respectively) and the various state and territory Fair Trading Acts (or equivalent legislation). If a false or misleading representation is made: a person responsible for the advertisement may be subject to criminal penalties (the current maximum penalty is 50 penalty units (s 154(1)); a person who relies on the representation to his or her detriment may recover that loss from those responsible; and the contract may be reopened under s 76, since a misleading or deceptive advertisement is a factor the court will consider when deciding whether the contract was “unjust”. [154.10] “Person” Section 154 applies to any person, not just the credit provider. Debtors and guarantors, as well as any third party, may incur liability under s 154. A debtor who makes a false or misleading representation to a guarantor to induce the guarantor to guarantee the debtor’s credit contract may be liable to the guarantor for any loss suffered by the guarantor as a result. Similarly, a debtor may be liable to the credit provider for false or misleading representations made to the credit provider. It must be asked, however, whether such rights against a debtor are likely to be of much value in practice, given that they are most likely to be exercised at a time when the debtor is unable to pay their debts. Credit providers may, of course, also be liable to debtors and guarantors under this section. [154.15] “Material” The Code does not define “material”. Presumably, in this context, it includes anything on which a person actually relies in connection with entry into a credit contract or related transaction.

[154.20] “Related transaction” The Code does not define “related transaction”, but it would include any mortgage, guarantee, related insurance contract or related sale contract given in connection with the credit contract. [154.25] “Defence for prosecution for an offence” As with s 151(2) (see [151.25]) and s 152 (see [152.10]), it is not clear whether the defence is only in relation to criminal proceedings (in this case under s 154(1)) or whether it extends to civil proceedings (under s 154(3)). The words “prosecution” and “offence” tend to suggest only criminal liability. [154.30] Civil effect The High Court considered the effect of s 82 of the Trade Practices Act 1974 (Cth) (now the Competition and Consumer Act 2010 (Cth) containing the Australian Consumer Law), on which s 154(3) is based, in I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd (2002) 210 CLR 109; 192 ALR 1; [2002] HCA 41; BC200205780. I & L Securities (the credit provider) granted a loan of $950,000 and took a mortgage over property of the debtor. The credit provider relied on a property valuation of $1.576 million, given by HTW Valuers (the valuer). The credit provider failed to check the creditworthiness of the debtor, who defaulted on the first repayment. The credit provider was only able to recover $592,367 from the sale of the property, and claimed the remaining loss on the loan, $661,481 (including interest and expenses), from the valuer. The valuer admitted liability both in negligence and under s 52 of the Trade Practices Act. [page 517] Damages in negligence were reduced on account of the contributory negligence of the credit provider in failing to prudently assess the creditworthiness of the debtor. The High Court appeal concerned whether compensation payable under s 82 of the Trade Practices Act could be reduced where the conduct in contravention of the Act was one of multiple causes contributing to the loss, and whether s 87 qualified the compensation available under s 82. A 6–1 majority in the High Court interpreted s 82 as entitling a person who

had suffered loss caused by conduct in contravention of the Act to recover the whole of that loss. The conduct in contravention of the Act did not have to be the sole cause, nor even a dominant cause, of the loss. Where a chain of causation can be established between the conduct in contravention of the Act and the loss, a plaintiff is entitled to be compensated for the whole of the loss. Interestingly, Callinan J felt that, in this case, the legislation produced an outcome that was unreasonable and unfair to the valuer, and called on the parliament to urgently amend the legislation to provide for apportionment of liability under s 82. In dissent, Kirby J attempted to give effect to the language and object of s 82, and to the remedial nature of the legislation in general. Kirby J found that the section allowed the plaintiff to recover the loss or damage that can be fairly attributed to the conduct in contravention of the Act, and not loss or damage suffered by their own conduct, or the conduct of another. Kirby J focused on the construction of the word “by” within s 82, and said that to allow further recovery would be beyond the language and purpose of the section. He found that the trial judge, having heard evidence from the lender and the valuer, had correctly exercised the judicial judgment required in attributing liability under s 82. The majority judgments interpreted s 87 as allowing a court to make a range of orders, which in combination would compensate a plaintiff in full or in part. The words “in part” do not refer to the plaintiff’s right to compensation, but rather permit the court to make orders which supplement other awards made under the Act, or other compensation the plaintiff may have received. The majority found that s 87 must be given an interpretation which is consistent with s 82, and that it does not qualify a plaintiff’s right to be fully compensated for losses caused by conduct in contravention of the Act. [154.35] Similar provisions Section 154 mirrors almost identical provisions in the Australian Consumer Law, and equivalent provision in the ASIC Act (ss 12DA, 12DB and 12GF, respectively), and the various state and territory Fair Trading Acts (or equivalent legislation). Clause 3 of the Code of Banking Practice (2013) also requires a bank to ensure that it promotes better

informed decisions in relation to a “banking service” by providing effective disclosure of information. The Customer Owned Banking Code of Practice (January 2014) (cl 1.1) contains a provision to ensure that advertising and promotional material is not misleading or deceptive.

[page 518]

Harassment 155 A credit provider or supplier must not harass a person in attempting to get that person to apply for credit or to enter into a credit contract or a related transaction. Criminal penalty: 100 penalty units. ________________________________________ [Editorial note: UCCC s 145 provided as follows: Harassment 145 A credit provider or supplier must not harass a person in attempting to get that person to apply for credit or to enter into a credit contract or a related transaction. Maximum penalty — 100 penalty units.]

COMMENTARY ON SECTION 155 [155.05] Outline The conduct of credit providers and suppliers (including their agents, on general law principles as well as under s 199 of the Code) in the course of obtaining customers is regulated by s 155. Together, ss 155 and 156 attempt to protect individuals from credit providers using high pressure sales tactics by prohibiting harassment and regulating the canvassing of credit at customers’ homes. The prohibition on harassment also extends generally to suppliers of goods or services through s 50 of the Australian Consumer Law (formerly s 60 of the Trade Practices Act 1974 (Cth)), and specifically to suppliers of financial products through s 12DJ of the ASIC Act.

The provisions in the Code relating to advertising and marketing should not be viewed in isolation. For example, s 50 of the Australian Consumer Law, on which s 155 is based, and its counterparts in the state Fair Trading Acts also regulate coercive tactics employed by canvassers. State legislation such as the Hawkers Act 2003 (ACT), which requires hawkers to be licensed, may be relevant to suppliers of goods or services. It may also be relevant for suppliers to consider the various state Door-to-door Trading and Fair Trading Acts in each state and territory. The Fair Trading Acts in Victoria and New South Wales were amended in the early 2000s by the Fair Trading (Further Amendment) Act 2003 (Vic), Fair Trading (Consumer Contracts) Act 2004 (Vic) and the Fair Trading Amendment Act 2003 (NSW), respectively. The Fair Trading Act 1987 (NSW) regulates “direct commerce contracts”, these being contracts for goods exceeding $100 in value conducted via door-to-door and uninvited telephone sales. The Act imposes requirements for cooling off, limitations on the hours that dealers are able to contact people at home, and provides rights to consumers who wish to cancel a contract. However, further prohibitions on hawking of financial products contained in s 992A of the Corporations Act do not apply in respect of credit products as they are excluded from the definition of “financial product” (see s 765(h) of the Corporations Act; regs 7.1.06 and 7.1.06A of the Corporations Regulations 2001 (Cth)). [155.10] “Harass” The Code does not define “harass”, so courts will be free to interpret s 155 so as to punish behaviour which they regard as unacceptable or inappropriate in the course of attempting to gain business. Dictionary definitions include “worry” and “trouble”, as well as language which suggests that the conduct needs to be continued or repeated. [page 519] Persistent approaches after a request to stop has been made would almost certainly be “harassment”. Using abusive language can amount to

harassment. It is also possible that a single act which is sufficiently annoying or troublesome could be prohibited by the Code. An example might be a telephone call late at night. Edwards, Brogan and Tierney (S Edwards, D Brogan and A Tierney, Accessing the Consumer Credit Code, TF Law and Tax, South Melbourne, 1996) suggested that, although “harassment” is not defined, the provision is clearly intended to outlaw inappropriate and improper coercion by credit providers and suppliers. [155.15] Debt collection guidelines Owing to the limited amount of judicial consideration on what constitutes harassment, the ACCC initially released a set of guidelines Debt Collection and the Trade Practices Act — June 1999 (the 1999 guideline). The original Guidelines were replaced in July 2014, the ACCC and ASIC have jointly issued a new “Debt Collection Guideline: for collectors and creditors” (July 2014), which updates RG 96 to reflect recent regulatory changes. As part of a project to revise the 1999 guideline, the ACCC and ASIC released precursor regulator guide RG 96 Debt collection guideline: for collectors and creditors (the guideline) in October 2005. The guideline reflects the view of the ACCC and ASIC on how the relevant provisions of the ASIC Act and the former Trade Practices Act 1974 (Cth), now the Competition and Consumer Act 2010 (Cth) containing the Australian Consumer Law apply to debt collection conduct. The guideline is not law, but it provides an indication of the type of behaviour the ACCC and ASIC believe will allow debt collectors to avoid breaching the ASIC Act and the Australian Consumer Law and, by extension, the Code. The new guideline supports a flexible, fair and realistic approach to collection, based on the supposition that most debtors are honest and want to meet their commitments if given a reasonable opportunity to do so. The guideline also reminds credit providers that they are obliged to protect the privacy of debtors, under privacy laws. In particular, the guideline focuses on obligations surrounding the collection and disclosure of debtors’ personal information. Consequently, when making contact establishing the debtor’s identity is critical. The guideline provides that:

communications with debtors must only ever be for a reasonable purpose and should only occur to the extent necessary; “contact” includes, but is not limited to, communication by phone, writing and in person; “continuous contact” refers to a chain of contact, wherein a series of communications all form part of a single “thread” of communication, if that contact occurs within a reasonable proximity of time; reasonable contact times apply and these differ between contact methods; it is assumed that contact will usually be by telephone; debtors and third parties are entitled to be free from excessive communication (and unnecessary or unduly frequent contact may constitute undue harassment); third party contact is not recommended to obtain location information more often than once every six months, and in most cases, the debtor’s home will be the appropriate place to contact the debtor. [page 520] Collection activity should be suspended if the person contacted claims that they are not the alleged debtor, or that the debt was never incurred or that the debt has already been settled. That person’s identity and liability must then be confirmed. Without such investigation, there may be a considerable risk of breaching the law. When making representations about the consequences of non-payment, creditors must take care to accurately explain the consequences of nonpayment of a debt without misrepresenting those consequences. Such misrepresentation may give rise to an action in misleading and deceptive conduct or unconscionable dealing.

Creditors must put in place internal processes for resolving complaints and disputes. Staff must receive adequate training and it is recommended that compliance programs be implemented. Membership of an external dispute resolution (EDR) scheme is a legal requirement for most creditors and is an invaluable method to resolve complaints. The table below summarises salient points of the 1999 and 2014 Guidelines. Contact

1999 Guideline Principle

2014 Guideline Principle

Communicating with the debtor at their workplace

The guideline states that generally the debtor’s home will be the appropriate place to contact the debtor.

The guideline states that generally debtors should not be contacted at a location:

The guideline states that generally the debtor’s home will be the appropriate place to contact the debtor. where the debtor has said they do not want to be contacted;

Collectors should carefully consider whether contacting the debtor at work on a switch number or reception (contrasted with the debtor’s direct work phone number) is appropriate and whether there are more suitable options available.

where the debtor would be likely to view as unusual or substantially inconvenient; or where it is likely that others, such as work colleagues or friends will become aware of the debt, collector’s identity or collection activity.

Visiting the debtor’s workplace should only be undertaken as a last resort, unless the debtor is the proprietor or a director of a business to which the debt relates or has specifically However, these locations may be requested or agreed to the visit. acceptable if the debtor fails to Visiting the workplace will provide an alternative, effective always involve a risk of location for communication. breaching the collector’s privacy obligations to the debtor. Contact should be made during the debtor’s normal working hours, if known. Otherwise 9am to 5pm on weekdays.

[page 521] Personal visits

Where necessary, a collector is Personal visits are generally to entitled to communicate with the be considered an option of last

debtor by visiting in person. However, a collector should respect the debtor’s own, and their household’s, privacy and security. Generally a collector should not use personal visits as the initial step in communicating with the debtor. Personal visits should not be used if other less intrusive means of communication are available and effective.

resort. Face-to-face contact should only be made if reasonable attempts to contact a debtor by other less intrusive means have failed. Where necessary, face-to-face contact should be made at the debtor’s home, where possible, within reasonable hours of contact (9am to 9pm).

Frequency of communications Collectors are entitled to make reasonable efforts to contact debtors; however, debtors should not be subject to unnecessary communications. A collector should not make unsolicited communications with the debtor more frequently than is reasonable and necessary according to the circumstances. Whether frequency of communication is considered to be reasonable will be assessed in light of the purpose of the communications.

Debtors and third parties are entitled to be free from excessive communication (and unnecessary or unduly frequent contact may constitute undue harassment).

Allowing arrangements and other processes to work

The guideline also provides that debtors should avoid unduly frequent contact with a debtor. Generally a collector should not contact a debtor more than three times a week or ten times a month. A collector should generally not contact a debtor if an informal arrangement has been made for payment of the debt, and is being complied with, or if other legal processes or arrangements exist which make it inappropriate for the debtor to be contacted.

The guideline emphasises the importance of adopting a flexible and realistic approach to repayment arrangements, including: reasonable allowances for ongoing living expenses; considering the debtor’s income (ie fixed low income and/or prospects of income increases); recognising that the debtor may have other debts owing to other creditors, and

[page 522] The guideline reinforces this and

ensuring that repayment

states that informal arrangements arrangements are meaningful should be put in writing with a and sustainable. copy provided to the debtor. If Contact requirements alter once: the informal arrangement is being a repayment arrangement is complied with, then the debtor put in place; should not be contacted unless: bankruptcy is declared; or the debtor asks you to; or a Bankruptcy Act agreement you wish to propose a genuine is made. alternative arrangement to benefit the debtor. Communicating with a debtor’s representative

A debtor is entitled to have another party represent them and/or advocate on their behalf when communicating with the collector. In turn, representatives must act reasonably, and the collector should be entitled to contact the debtor directly in appropriate circumstances. The guideline provides that a collector should not refuse to deal with an authorised representative or contact a debtor directly after you know the debtor is represented.

The guideline also provides that a debtor is entitled to have an authorised representative to advocate on their behalf. Different contact requirements apply to represented debtors (see pp 21–22 of the guideline for further details). Generally, creditors should not contact represented debtors. All communications should be directed through the representative.

Communicating with third parties

Collectors are entitled to contact third parties in order to facilitate communication with the debtor. However, third parties are not liable for the debt, and are under no obligation to provide information to the collector. They are entitled to similar (if not greater) protection from undue harassment. A collector should only make unsolicited communications to third parties as are reasonable and

Conduct towards the debtor, their representatives, family members and other third parties is also covered by the guideline. A debtor must not be pressured by misleading, harassing, threatening or putting pressure on a debtor’s spouse or partner, a member of the debtor’s family or other third parties such as authorised representatives.

[page 523] necessary according to the circumstances. A collector should not assume that any member of the debtor’s family or household is aware of, or privy to,

All communications must be consistent with the collector’s privacy obligations to the debtor and third party.

information about the debt situation, or that the debtor wants such persons to be informed. A debtor’s family and third parties should be treated with The guideline contains courtesy and respect. In most information on contacting family circumstances it is likely that the members and third parties. third party is unaware of the Unsolicited contact with a third debt and may find the contact party such as a spouse of the distressing. debtor should only take place to ask where the debtor lives and/or A collector may breach consumer protection laws if, in leave a message for the debtor. communicating with the third Generally, third parties should party they: only be given the collector’s name and contact details. suggest or imply that the third party should pay the debt or is liable for the debt when there is no legal obligation to pay the debt; Communication with children should be avoided except in limited circumstances. The guideline also provides that the collector should not: suggest or imply that the third party is liable for the debt when the person has no legal obligation to pay;

suggest or imply that the third party should persuade the debtor to pay the debt;

put pressure on the debtor indirectly by involving a partner or other person the debtor is emotionally attached to; or embarrass the debtor.

suggest or imply that the third party should try and persuade the debtor to pay the debt or that the third party should themselves pay the debt; put pressure on the debtor indirectly by involving the third party; or embarrass or distress the debtor.

[page 524]

Misleading or deceptive conduct

A collector must not engage in any other conduct that is misleading or deceptive, or is likely to mislead or deceive.

A collector must not engage in any other conduct that is misleading or deceptive, or is likely to mislead or deceive.

Coercion

A collector should not exercise unacceptable or illegitimate pressure on a debtor or third party in order to persuade the recipient of the conduct to undertake a particular course of action.

A collector should not engage in coercion, actual or threatened force or pressure that restricts a debtor’s choice or freedom to act. “Force” is not limited to physical force.

Language, violence and physical force

A collector should not use abusive, threatening, offensive, obscene or discriminatory language to a debtor or a third party. A collector must not use, or threaten to use, violence or physical force to any person. A collector must not use, or threaten to use, violence or physical force to property. Such conduct is criminal under state and territory criminal law.

N/A

Undue harassment

N/A

Undue harassment means unnecessary or excessive contact or communication with a person, to the point where that person feels intimidated, tired or demoralised. Undue harassment may occur when repeated approaches are made or repeated pressure is applied to a debtor, going beyond what is acceptable or reasonable. There is no requirement that the conduct must involve the threat of an illegal act to contravene the law.

[page 525] Unconscionable conduct

The guideline refers to the prohibition on unconscionable conduct under the Trade Practices Act (now the Australian Consumer Law) and Australian

Conduct may be unconscionable if it is particularly harsh or oppressive. It is conduct that is substantially more than hard commercial bargaining. The

Securities and Investments Commission Act. The draft guideline states that collectors risk breaching this prohibition especially if they “exert undue influence or pressure on, or unfair tactics against, a debtor who is specially disadvantaged or vulnerable”.

relationship between a creditor or collector and a debtor is one that could assume characteristics of unconscionable conduct, as the creditor or collector is in a position of strength and can exert pressure of unfair tactics over a debtor.

[155.20] “Related transaction” The Code does not define “related transaction”. See [154.20].

Canvassing of credit at home 156 (1) [Prior arrangement required] A credit provider must not visit (personally or in the person of an employee or agent) a place of residence for the purpose of inducing a person who resides there to apply for or obtain credit, except by prior arrangement by the credit provider with a person who resides there. Criminal penalty: 100 penalty units. 156 (2) [Door-to-door sales] A person who visits another’s residence for the purpose of offering goods or services for sale and who offers to provide or arrange for the provision of credit to finance the sale will not be taken to have called for the purpose of inducing a person to apply for or obtain credit. ________________________________________ [Editorial note: UCCC s 146 provided as follows: Canvassing of credit at home 146 (1) [Prior arrangement required] A credit provider must not visit (personally or in the person of an employee or agent) a place of residence for the purpose of inducing a person who resides there to apply for or obtain credit, except by prior arrangement by the credit provider with a person who resides there. Maximum penalty — 100 penalty units. 146 (2) [Door-to-door sales] A person who visits another’s residence for the purpose of offering goods or services for sale and who offers to provide or arrange for the provision of

credit to finance the sale will not be taken to have called for the purpose of inducing a person to apply for or obtain credit.]

COMMENTARY ON SECTION 156 [156.05] “Credit provider must not visit” The prohibition in s 156 extends to credit providers and their employees and agents. It would not extend to a third party, acting independently, who is not an agent of the credit provider for this purpose. [page 526] [156.10] “Place of residence” For s 156 to apply, the place of canvassing must be the place of residence of the person canvassed (ie, the potential debtor). Compare the wording “place of residence” in s 156(1) with the equivalent wording in s 99(1), “premises used for residential purposes”, and s 156(2), “another’s residence”. Presumably they all mean the same thing. If a credit provider solicits business at the premises of a third party (such as at the home of someone other than the person canvassed), s 156 will not apply. Section 156 refers to canvassing “for the purpose of inducing” the potential debtor to apply for or obtain credit. The section clearly covers attempts at canvassing which are unsuccessful in addition to those which are successful. The wording also imports a subjective element into the section by requiring proof that the credit provider had the intention of inducing entry into a credit contract. It has been stated in some English cases that the relevant intention which must be proved is “the principal or dominant intention”, and that it is for the person challenging the disposition (ie, the person “prosecuting”) to establish intention. [156.15] “Person who resides there” Section 156 requires that the credit provider must have made a prior arrangement with a person who resides in the place of residence, in order to be able to visit the residence to induce the residents to apply for or obtain credit. The section makes it clear, therefore, that the prior arrangement must be made with a person who resides in the place of residence, and not merely a person who is visiting the residence and

does not reside there. Section 156 deals with situations where a credit provider visits the residence of a debtor (or potential debtor). The credit provider can only do so by arrangement with a person who normally resides there. The equivalent section in the UCCC was s 146. Prior to the Consumer Credit (Queensland) Amendment Act 1998 (Qld), s 146 of the UCCC required the arrangement to be made with the person or persons to whom the inducement to apply for credit was to be made. This was amended by the Consumer Credit (Queensland) Amendment Act, the explanatory notes to which explain: That provision currently prohibits a credit provider from visiting a place of residence for the purpose of inducing a person who resides there to apply for or obtain credit except by prior arrangement with that particular person. It is now considered that this is unduly restrictive and that the main policy objective of the provision, namely restricting door-to-door canvassing for credit, will be met so long as the person with whom the arrangement to visit is made is a person who normally resides at the premises but not necessarily the person whom the credit provider wishes to solicit.

The section now allows the credit provider to make an arrangement with any resident of a particular household to visit that household. The person with whom the credit provider has made this arrangement need not be present when the credit provider actually visits. This gives a credit provider greater flexibility in visiting potential debtors. Section 156 seems to suggest that a credit provider who, without prior arrangement, visits a place of residence for the purpose of inducing a person who does not live there to apply for credit does not breach the Code Sections 155 and 156 contain some grey areas. It is clear that the only activity (short of harassment) which is illegal is a visit to the home without prior arrangement. However, a general advertising campaign stating that a credit provider is happy to visit debtors at their homes would not breach s 155 or s 156. [page 527] Under s 156(2), the prohibition against home visits does not apply to credit hawking by, or on behalf of, suppliers of goods or services. Therefore, a

supplier is able, without prior arrangement, to visit a home to offer goods or services for sale and, at the same time, make an offer to provide or arrange for the provision of credit to finance that sale. This exception applies even if the supplier is linked to a credit provider. This means that a supplier, by agreement with a credit provider, can give out the credit provider’s application forms, or refer purchasers to that credit provider for credit while selling goods and services door-to-door. In relation to home visits, credit providers and suppliers of goods and services should also not lose sight of the door-to-door sales legislation in the various states. [156.20] “Prior arrangement” Section 156 simply requires that there be a prior arrangement. The impetus for the making of the arrangement may come from the credit provider — the credit provider may make unsolicited approaches to potential customers (provided those approaches do not amount to harassment: s 155) with a view to making an arrangement for a home visit. The credit provider should make clear, at the time the visit is arranged, the purpose of the visit. [156.25] Penalty for breach A credit provider who contravenes ss 155 or 156, and a supplier who contravenes the prohibition on harassment in s 155 may be liable to a maximum penalty of 100 penalty units (ss 155 and 156) (see para 17 of the “Overview of the National Credit Code” for commentary on penaltyunits). Previous versions of ss 145 and 146 of the UCCC (the equivalent sections to ss 155 and 156 of the Code) included a civil penalty to the effect that any resulting contract was unenforceable against the debtor if either of those equivalent sections was breached. The automatic nature of the civil penalty was dropped. Instead, the criminal penalty was doubled to 100 penalty units for each section.

[page 529]

Part 10 — Comparison rates DIVISION 1 — PRELIMINARY Object of Part 157 (1) [True cost of credit] The object of this Part is to assist consumers to identify the true cost of credit offered by credit providers. 157 (2) [Comparison rates mandatory] In order to achieve that object, this Part makes it mandatory for credit providers to include the comparison rate in advertisements for consumer credit (other than under continuing credit contracts) if an interest rate is advertised. 157 (3) [Total cost of credit] The comparison rate will reflect the total cost of credit arising from interest charges and other prescribed credit fees and charges. ________________________________________ [Editorial note: UCCC s 146A provided as follows: Object of Part 146A (1) [True cost of credit] The object of this Part is to assist consumers to identify the true cost of credit offered by credit providers. 146A (2) [Comparison rates mandatory] In order to achieve that object, this Part— (a) makes it mandatory for credit providers to include the comparison rate in advertisements for consumer credit (other than under continuing credit contracts) if an interest rate is advertised; and (b) requires credit providers, linked suppliers and finance brokers to supply consumers with schedules of comparison rates for any such consumer credit. The comparison rate will reflect the total cost of credit arising from interest charges and other prescribed credit fees and charges.]

COMMENTARY ON SECTION 157 [157.05] Overview of the comparison rate regime In April 2002, legislation requiring the mandatory use of comparison rates was passed in the form of Pt 9A of the UCCC (see the Consumer Credit (Queensland) Amendment Act 2002 (Amendment Act 2002); Consumer Credit Amendment Regulation (No 1) 2003 (Amendment Regulation 2003); and Consumer Credit Amendment Regulation (No 2) 2004 (Amendment Regulation 2004)). The Amendment Act 2002 and Amendment Regulation 2003 commenced on 1 July 2003, and applied to all consumer credit products, with the exception of continuing credit contracts. The use of comparison rates in certain advertisements continues to be mandated under Pt 10 of the Code, which amended and replaced Pt 9A of the UCCC. Part 9A consisted of ss 146A–146T of the UCCC. Those sections required the use of comparison rates in “credit advertisements”, and obliged credit industry participants to make “comparison-rate schedules” available. Part 9A of the UCCC was initially to remain in effect for three years (s 146D of the UCCC) in order “to assist consumers to identify the true cost of credit offered by credit providers”. These provisions were extended for one year beyond the initial three-year period [page 530] and eventually expired on 1 July 2007. (The sunset extension was introduced by the Consumer Credit and Trade Measurement Amendment Act 2006 (Qld) in order to enable a review of the comparison rate regime to be completed). The NCCP Act regime changes altered Pt 9A of the UCCC to become Pt 10 of the Code and made significant changes to the comparison rate requirements — the major change being that comparison rate schedules are not required under the Code. Thus, Pt 10 of the Code sets out the requirements for comparison rates to be shown in credit advertisements.

[157.10] “Comparison rate” A “comparison rate” is a tool intended to help consumers identify the true cost of credit. The explanatory memorandum to the NCCP Act states in relation to the Code (at para 8.270): A comparison rate reflects the total cost of credit arising from interest charges and other fees and charges. The object of the measures [in Pt 10] is to help consumers identify the true cost of credit, which allows for much easier comparison between loan products.

Part 10 makes it mandatory to include the comparison rate in advertisements for consumer credit where an interest rate is also advertised, and prescribes formal and substantive requirements for the publication of the comparison rate. The comparison rate to be included in a credit advertisement is the rate or rates for the combination of loan amounts and terms which most closely represent the typical amount of credit and loan term initially provided under the credit product which is being advertised. Credit providers must select the typical combination of amount of credit and loan term from reg 97. The highest amount of credit listed is $150,000 for a term of 25 years. [157.15] Comparison rate example: Example of the use of comparison rates (from Queensland Department of Tourism, Racing and Fair Trading Ministerial Statement, 6 March 2002) A consumer is looking for a home loan of $100,000 over 25 years. The following information is obtained from three different credit providers: Lender X offers a flat variable rate of 6.31 per cent per annum, with a $675 application fee and an ongoing account-keeping fee of $10 per month. Lender Y offers an introductory “honeymoon” rate of 4.99 per cent for 12 months that reverts to a variable rate currently 6.7 per cent per annum with no application fee and ongoing account-keeping fees of $12 per month. Lender Z offers an introductory rate of 4.25 per cent for six months that reverts to a variable rate currently 6.57 per cent per annum and involves a $500 application fee and ongoing account-keeping fees of $8 per month. How does the consumer compare the cost of these loans to decide which is the cheapest? None of the figures from the different credit providers are the

same. Some lenders offer features that are not offered by others and some impose fees that are not charged by others. The comparison rate for all three products shows the same percentage — 6.55 per cent. In other words, the cost of the three products is the same. However, [page 531] the myriad fees, charges, introductory expenses and differing interest rates cloud this fact, making it difficult to compare the true cost of each of the products on offer. Under Pt 9A of the UCCC, the credit providers in these examples were required to make available schedules of the comparison rates applicable to the credit product on offer. This included up to 21 different loan amounts and terms ranging from $200 over two weeks to $300,000 over 30 years. In this example, the credit providers would have been required to make available a schedule which included the comparison rate for a home loan over 25 years. [157.20] History Since the enactment of the UCCC, consumer groups had argued for the mandatory use of comparison rates in all advertising of interest rates by credit providers, and that the scope of comparison rates should extend to all forms of credit, including continuing credit contracts. However, there were strong objections to the introduction of comparison rates under the UCCC. A central concern was the lack of an appropriate formula for calculating a comparison rate, particularly in regard to continuing credit contracts, which do not have a fixed term or amount borrowed. Additionally, the accuracy and effectiveness of the use of comparison rates rested on several assumptions. Consumers had to make certain assumptions in relation to: the amount borrowed; the term of the loan; identifying which fees will actually be imposed (as distinct from

the fees which may be imposed, but only in certain circumstances, such as a fee for document production, or for a dishonoured payment); and the effect of drawing down further credit under a continuing credit contract. [157.25] Calculation of comparison rate The Amendment Regulation 2003 (see [157.05]) amended reg 12 of the UCCC Regulation (precontractual disclosure of comparison rate), and inserted into reg 33F of the UCCC Regulation a formula to calculate the comparison rate for the purpose of Pt 9A of the UCCC. Each calculation was then identical. In calculating the comparison rate under regs 12 and 33F of the UCCC Regulation, credit providers could rely on the assumptions and tolerances in ss 158–160, inclusive, of the UCCC. The equivalent provisions under the NCCP Act regime are found in regs 71 and 100. These contain identical calculations to those which applied under the UCCC. In calculating the comparison rate under regs 71 and 100, credit providers can rely on the assumptions and tolerances in ss 180–182, inclusive of the Code. [157.30] Regime under the UCCC and the Code Under the UCCC, there were two aspects to the comparison rate regime. First, comparison rates were required to be shown in credit advertisements; second, credit providers and certain other participants had to make available comparison rate schedules. These listed the comparison interest rates for one or more consumer credit products based on a series of combinations of loan amounts and terms (specified in reg 33D of the UCCC Regulation). The UCCC requirement to provide comparison rate schedules created various difficulties of interpretation which are briefly discussed at [157.40] below.

[page 532] Under the Code, as amended by the NCCP Act regime changes, the comparison rate regime is now limited to the first limb (credit advertising) and the provision of comparison rate schedules is no longer required. The Code regime is set out in ss 157–168 and regs 97–100. In relation to the noncontinuation of the comparison rate schedule regime, the explanatory memorandum to the NCCP Act indicates (at para 8.271) that: The comparison rate requirements [in Pt 10 of the Code] are based on Part 9A of the UCCC. A review of the comparison rate disclosure requirements … has resulted in Division 3 of Part 9A of the UCCC (dealing with comparison rate schedules) not being enacted as Commonwealth law.

[157.35] UCCC comparison rate schedules The UCCC required credit providers, finance brokers (as defined in s 146C of the UCCC) and linked suppliers to display and make available for collection by members of the public “comparison rate schedules” (s 146K(1), (2) and (3) of the UCCC). The relevant comparison rate schedules had to be available at premises at which: the credit provider, finance broker or supplier displayed, or made available for collection by members of the public, documents advertising their consumer credit products; or members of the public could lodge applications for credit in person. In relation to credit providers, the “relevant comparison rate schedule” was the schedule for each of the consumer credit products of the credit provider. For finance brokers, the “relevant comparison rate schedule” was the schedule for the consumer credit products in which the broker dealt. For a linked supplier, the “relevant comparison rate schedule” was the schedule for the consumer credit products of each linked credit provider. (See ss 146L and 146K(5) of the UCCC, as limited by reg 33H of the UCCC Regulation). Regulation 33G(1) and (2) of the UCCC Regulation exempted a credit provider from s 146K(1) and (5) of the UCCC in relation to certain of its premises if their use was limited to one or more of the following:

the display or provision of credit advertisements that did not, or information that did not, contain an annual percentage rate; and the distribution, or collection, or both, of credit applications. Section 146K(4) of the UCCC provided that a credit provider, finance broker or supplier, who made material advertising consumer credit products available on the internet, had to ensure that electronic access to the relevant comparison rate schedule was also available. Additionally, under s 146K(5) of the UCCC, a credit provider, finance broker or supplier needed to ensure that the relevant comparison rate schedule accompanied any application for credit which they sent or gave to a prospective debtor. [157.40] UCCC comparison rate schedule issues The following issues arose in relation to the use of comparison rate schedules: A relevant comparison rate schedule had to accompany any application form given out by the credit provider, finance broker or linked supplier. A different schedule was needed for each available interest rate. If the [page 533] prospective debtor did not specify the interest rate they were interested in when they requested the application form, it was difficult for the credit provider, broker or supplier to know which schedule to give them. The UCCC Regulation prescribed the amounts and terms for which comparison rates were to be included in the schedules. For example, $250 for a term of two weeks; $10,000 for a term of three years; $100,000 for a term of 25 years; $300,000 for a term of 30 years. There were concerns that this could produce misleading calculations particularly where the amount of credit specified was not available for the term specified (eg, $100,000 was available but

not over a term of 25 years). It was, however, possible for a warning to be included in accordance with reg 33C(3) of the UCCC Regulation. Every comparison rate schedule had to include its date of issue (s 146P(1)(c) of the UCCC). This gave rise to uncertainty as to whether pre-printed comparison rate schedules could be used or whether they had to be printed out each day (with that day’s date). Credit providers sometimes offer loans to individual consumers where the interest rate is determined once certain risk factors are taken into account for the customer (eg, their membership of a professional body, age, length of employment, residence, number of dependents, etc). In these circumstances, it was practically impossible for the credit provider to prepare and provide the relevant comparison rate schedule in advance to comply with the UCCC because of the potential wide variation of interest rates. Regulation 33D(3) and (4) of the UCCC Regulation therefore provided that comparison rate schedules for consumer credit products which were priced for risk must provide five comparison rates. These were to be calculated on the basis of the average annual percentage rate charged by the credit provider, rounded to the nearest whole number, and for two whole number rates above and below the average rate. For online advertisements under the UCCC, it was advisable to include a link to the comparison rate schedules on any website menu which contained links to material advertising consumer credit products or information about interest rates as well as on each webpage which contained relevant advertisements, and to display the relevant comparison rate on any webpage which constituted a credit advertisement and displayed an annual percentage rate. A credit provider had to ensure that the comparison rate schedules for all consumer credit products which may be applied for with an application form accompanied the application form. In the online context, a consumer had to be required to access the relevant

comparison rate schedule before they could download or complete any application form. The consumer had to be asked to acknowledge they had been provided with access to the relevant comparison rate schedules before proceeding with the application. [page 534] [157.45] Meaning of “consumer credit product” under the UCCC There were difficulties of interpretation in relation to exactly what constituted an individual consumer credit product. These included the issues summarised below: Uncertainty arose in relation to “bundled” credit products. Credit providers had to consider whether a “bundled” credit product was a separate and distinct “consumer credit product” from its “base product” as this would determine how many comparison rate schedules they needed to create to comply with the UCCC comparison rate schedule regime and the pricing structure that would be fed into the calculations underlying the schedules. For example, a credit provider may have permitted a debtor to request an interest-only period for a period of, for example, 12–48 months on their home loan. The interest-only period could have potentially fallen within a fixed rate or a variable rate period. This resulted in a large number of interest rate combinations being potentially available. The loan with an interest-only period was not treated as a separate loan product. The question as to whether a separate comparison rate schedule was required for the loan that may have an interest-only period depended on the meaning of “consumer credit product”. The difficulty with this was that the definition of “consumer credit product” (being “any form of facility for the provision of credit” (s 146C of the UCCC)) could be interpreted in different ways. A narrow view would be that, if the features of one possible loan

differed from the features of another possible loan, they would be separate products. A broader view would be that facilities should be treated as different “consumer credit products” only if there was a variation in any of the factors which gave the two facilities their distinguishable form. This is thought to have been the better view such that a bundled loan product was a separate consumer credit product if it represented a separate and distinct credit facility made available by the credit provider to debtors generally (as opposed to a “special” arrangement for an individual customer). The bundled product would be a separate credit facility if it was offered under a different name or description than that given to the “base product”, or if it had a separate and distinct combination of features such as interest rate, fees and charges and other terms and conditions so as to make it separate and distinct from the “base product”. In other words, two products were likely to be treated as different consumer credit products if there was a difference in the key factors which gave the two facilities their distinguishable form. A recommended guide was to treat the products as separate products if their features differed in the factors which had to be disclosed on a UCCC comparison rate schedule, including: —

the name of the credit product — if the credit products were described or advertised under different names or descriptions; [page 535]

—

the name of the credit provider — if the two products were provided under the names of different credit providers;

—

interest rates — if the applicable interest rates were different (either in relation to the numerical value or their method of calculation);

—

amounts of credit disclosed in the schedule — if generally

available amounts differed significantly; and —

comparison rates — if the comparison rates varied.

On the other hand, if the “base product” and the available variations were essentially the same type of credit facility (eg, they were all fixed rate home loans), it was thought that they could be treated as a single product and it should therefore only be necessary to provide a single comparison rate schedule for the “base product”. There were also issues in relation to “weekend special” financing arrangements offered by car dealers — such as discounted interest rates on particular makes and models of vehicles. A dealer would have a separate rate with a credit provider under which the dealer may pay the credit provider the difference between the discounted interest rate and the usual or standard interest rate. Under s 146K of the UCCC, dealers were required to display and make available for collection the comparison rate schedules for the consumer credit products of the credit providers who were linked credit providers of the dealer. The “weekend specials” were considered a separate consumer credit product from the consumer credit products that were usually available because they had a different annual percentage rate to the usual credit products, and because they were only available on particular makes and models of vehicles. Accordingly, dealers had to display and make available for collection a comparison rate schedule for the “weekend specials”. See also [159.10]–[159.25].

Part not to apply to continuing credit contracts 158 (1) [Part not applicable to continuing credit contracts] This Part does not apply to advertising or other matters about the provision of credit under continuing credit contracts. 158 (2) [Reference to credit does not include continuing credit contracts] Accordingly, a reference in this Part to the provision of credit (or to a credit contract or related matters) does not include a reference to the provision of credit under a continuing credit contract (or to a continuing credit contract or matters related to such a contract). ________________________________________ [Editorial note: UCCC s 146B — apart from numbering the section is unchanged.]

COMMENTARY ON SECTION 158 [158.05] Outline This section states that Pt 10 does not apply to a continuing credit contract (as defined in s 204). If there is any doubt as to whether a credit contract falls within the definition of “continuing credit contract”, the prudent course is to treat it as if Pt 10 applies.

[page 536]

Definitions 159 In this Part: consumer credit product means any form of facility for the provision of credit (other than under a continuing credit contract) provided to debtors by a credit provider. credit advertisement means an advertisement in any form or medium

that states or implies that credit is available, but (for the avoidance of doubt) does not include: (a) notices or other documents required or authorised to be given under this Code; or (b) a publication that only lists reference rates. name, of a consumer credit product, means the usual name or description by which the credit provider describes or advertises the product. ________________________________________ [Editorial note: UCCC s 146C provided as follows: Definitions 146C In this Part— comparison rate schedule see section 146J. consumer credit product means any form of facility for the provision of credit (other than under a continuing credit contract) provided to debtors by a credit provider. credit advertisement means an advertisement in any form or medium that states or implies that credit is available, but (for the avoidance of doubt) does not include— (a) notices or other documents required or authorised to be given under this Code; or (b) a publication that only lists reference rates. finance broker means a person who carries on the business of negotiating, or acting as intermediary to obtain, credit for persons other than the employer or principal of the person so negotiating or acting. name, of a consumer credit product, means the usual name or description by which the credit provider describes or advertises the product.]

COMMENTARY ON SECTION 159 [159.05] Outline Section 159 defines a number of terms used in Pt 10. [159.10] “Consumer credit product” Note that continuing credit contracts are excluded from the definition of “consumer credit product”. Accordingly, the comparison rate regime does not apply to those contracts (see also s 158). For commentary relating to the definition of “consumer credit product”, see [157.45] and [159.15]–[159.25] below.

[159.15] “Consumer credit product” — case law There are as yet no judicial authorities which directly aid the interpretation of the definition of “consumer credit product”. However, judicial comments and dictionary definitions suggest that the expression “any form of facility” should be given a wide interpretation. In Brownbill v Esanda Finance Corp (1991) 31 FCR 153; 102 ALR 332; (1991) ASC ¶56-098; BC9103350, the court considered legislation that defined “credit” as “any form of financial accommodation” (subject to certain specified exceptions and inclusions). Their Honours did not find it necessary to discuss the meaning of the words “any form of financial accommodation” in any detail, and only noted that they were “very general words” for which it would be undesirable to attempt to express a definitive or exhaustive view as to the kinds of transactions which they might encompass (at FCR 158; ALR 337). [page 537] In Booker v State Rail Authority of NSW (No 2) (1993) 31 NSWLR 402; 19 MVR 469, in which the court briefly considered the expression “any form of transportation or conveyance”, their Honours referred to the expression “any form” as “wide language” (at NSWLR 407). [159.20] “Consumer credit product” — ordinary meaning The phrase “any form of facility for the provision of credit (other than under a continuing credit contract) provided to debtors by a credit provider” should be broadly interpreted so as to encompass any separately distinguishable arrangement for credit which a credit provider makes available to members of the public. In particular, credit products may have a common core (eg, they are all fixed rate loans) but have various distinct characteristics which mean they are in different “forms”. Examples of relevant characteristics in this context would, at a minimum, be those which formerly had to be identified in a UCCC comparison rate schedule under s 146M of the UCCC, such as the: name of the credit product (ie, its usual name or description);

name of the credit provider; interest rates taken into account for each disclosed amount and term; amount and terms for which the product is available; and applicable comparison rate(s). [159.25] “Consumer credit product” — relevance under the Code As the definition of “consumer credit product” in the Code is the same definition that was in s 146C of the UCCC, the interpretation issues outlined in [157.45] and the analysis at [159.15]–[159.25], in relation to what constitutes a “consumer credit product”, are still relevant in relation to the Code. However, the ability to identify the distinction between individual credit products is significantly less important under the Code because there is no obligation to produce a comparison rate schedule for each product. The comparison rate provisions relating to advertising do not turn on the question of separate products. [159.30] “Credit advertisement” For commentary relating to the definition of “credit advertisement”, see [150.10]. [159.35] “Name” of a product The “name” of a consumer credit product is the usual name or description by which the credit provider describes or advertises the product. [159.40] “Finance broker” Note that the UCCC Pt 9A contained a definition of “finance broker”. This was deleted by the NCCP Act regime changes, presumably because there is no longer a requirement for finance brokers to make comparison rate schedules available to prospective customers.

[page 538]

DIVISION 2 — COMPARISON RATE IN CREDIT

ADVERTISING Comparison rate mandatory in advertisements containing annual percentage rate 160 (1) [Comparison rate required] A credit advertisement must contain the relevant comparison rate in accordance with this Part if it contains an annual percentage rate. 160 (2) [Comparison rate may be included even if not required] A credit advertisement may contain the relevant comparison rate in accordance with this Part even if it does not contain an annual percentage rate. Note: Section 150(1) makes it an offence (penalty — 100 penalty units) if a person publishes a credit advertisement that does not comply with this Division.

________________________________________ [Editorial note: UCCC s 146E provided as follows: Comparison rate mandatory in advertisements containing annual percentage rate 146E (1) [Comparison rate required] A credit advertisement must contain the relevant comparison rate in accordance with this Part if it contains an annual percentage rate. 146E (2) [Comparison rate may be included even if not required] A credit advertisement may contain the relevant comparison rate in accordance with this Part even if it does not contain an annual percentage rate. Note: Section 140(1) makes it an offence (maximum penalty 100 penalty units) if a person publishes a credit advertisement that does not comply with this Division.]

COMMENTARY ON SECTION 160 [160.05] Outline Section 160 states that a credit advertisement: which contains an annual percentage rate (APR) must also contain the “relevant comparison rate”; and which does not contain an APR may also contain the “relevant comparison rate”. Section 159 defines “credit advertisement”. See the discussion at [150.10]

above for what constitutes an “advertisement”. [160.10] Computer display or printout Credit providers frequently use computer loan calculators, to assist in marketing loans, which allow potential debtors to see a number of details regarding possible loans such as repayments over the life of a loan. The better view is that the information on the computer display, or in the form of a printout, is not an “advertisement”. This means it is not a credit advertisement containing an APR as contemplated under s 160 and, therefore, is not required to contain comparison rates. The four questions relevant to ascertaining whether s 160 will apply to the computer information are: 1.

Is it an “advertisement”?

2.

Is it a “credit” advertisement?

3.

Is it a credit advertisement which “contains an APR”?

4.

Is it an advertisement “published” or “caused to be published” by the credit provider? [page 539]

“Advertisement” is not defined in the Code and must be given its ordinary meaning. The courts have interpreted “advertisement” broadly (see [150.10]). The question is whether the computer information (regardless of the credit provider’s intentions) appears (wholly or partly) to be designed or calculated to draw public attention to, or to promote the sale of, the credit provider’s products and services. The better view is that the computer information is not an advertisement if: it does not, on its face, objectively appear to be calculated or designed to draw public attention to the credit provider’s products or services. If it is akin to a generic spreadsheet calculation, or a quote, prepared by a staff member in order to provide a customer

with details about how a specific loan arrangement would operate, it is unlikely to be an advertisement; it contains information of a factual nature without (although this is not necessarily decisive) what is often referred to as puff, or exhortations to acquire a loan product. A key characteristic of an advertisement has generally been that it must, as noted by Gibbs J in Rotary Offset Press Pty Ltd v Deputy Cmr of Taxation (1972) 46 ALJR 609; 72 ATC 4212; 3 ATR 319, make generally or publicly known, or to give public notice of, the relevant subject matter. Computer information would not ordinarily satisfy this requirement as: it consists of details about a possible specific loan generated specifically for one consumer; and the way the computer information is delivered (ie, screens or printouts specific to a consumer displayed or provided one to one to that potential debtor) is not easily characterised as drawing public attention to the credit provider’s products and services. If the computer information is a credit advertisement that must contain a comparison rate, then that rate must be in the computer information — it cannot be a separate schedule. This is because of the words a “credit advertisement must contain” in s 160.

The relevant comparison rate 161 (1) [Calculation of relevant comparison rate] The relevant comparison rate for the purposes of section 160 is the comparison rate calculated for whichever of the designated amounts and terms most closely represents the typical amount of credit and term initially provided by the credit provider for the consumer credit product being advertised. 161 (2) [Regulation to designate amounts and terms] The designated amounts and terms are the amounts and terms prescribed by a regulation for the purposes of this section.

161 (3) [Advertisement may contain more than one comparison rate] The credit advertisement may contain more than one relevant comparison rate. ________________________________________ [Editorial note: UCCC s 146F provided as follows: The relevant comparison rate 146F (1) [Calculation of relevant comparison rate] The relevant comparison rate for the purposes of section 146E is the comparison rate calculated for whichever of the designated amounts

[page 540] and terms most closely represents the typical amount of credit and term initially provided by the credit provider for the consumer credit product being advertised. 146F (2) [Regulation to designate amounts and terms] The designated amounts and terms are the amounts and terms prescribed by a regulation for the purposes of this section. 146F (3) [Advertisement may contain more than one comparison rate] The credit advertisement may contain more than one relevant comparison rate.]

COMMENTARY ON SECTION 161 [161.05] Outline Section 161 states that the “relevant comparison rate” provided in accordance with s 160 must be calculated for whichever of the designated amounts and terms most closely represents the typical amount of credit and term initially provided by the credit provider for the consumer credit product being advertised. The designated amounts and terms are prescribed by reg 97 as: $250 for a term of two weeks; $1000 for a term of six months; $2500 for a term of two years; $10,000 for a term of three years; $30,000 for a term of five years; and $150,000 for a term of 25 years.

Information about comparison rate 162 (1) [Details of credit product must be stated] The credit advertisement must clearly state the name of the consumer credit product, the amount of credit and the term to which each comparison rate applies. 162 (2) [Whether comparison rate calculated for secured or unsecured loan to be specified] If the comparison rate is calculated for an amount of credit prescribed by a regulation for the purposes of this subsection, the credit advertisement must clearly state: (a) that the comparison rate is for a secured loan if it has been calculated on the basis that a mortgage or guarantee is taken by the credit provider; or (b) that the comparison rate is for an unsecured loan if it has not been so calculated. The word “secured” or “unsecured” in connection with the amount of credit for which the comparison rate is calculated is a sufficient description for the purposes of this subsection. ________________________________________ [Editorial note: UCCC s 146G provided as follows: Information about comparison rate

146G (1) [Details of credit product must be stated] The credit advertisement must clearly state the name of the consumer credit product, the amount of credit and the term to which each comparison rate applies. 146G (2) [Whether comparison rate calculated for secured or unsecured loan to be specified] If the comparison rate is calculated for an amount of credit prescribed by a regulation for the purposes of this subsection, the credit advertisement must clearly state— (a) that the comparison rate is for a secured loan if it has been calculated on the basis that a mortgage or guarantee is taken by the credit provider; or (b) that the comparison rate is for an unsecured loan if it has not been so calculated. The word “secured” or “unsecured” in connection with the amount of credit for which the comparison rate is calculated is a sufficient description for the purposes of this subsection. 146G (3) [Availability of comparison schedule to be specified] The credit advertisement

must clearly state that a comparison rate schedule will be available at the premises of the credit provider, finance broker or supplier to which the advertisement relates.]

[page 541] COMMENTARY ON SECTION 162 [162.05] Outline Section 162 provides that the advertisement must clearly state the name of the consumer credit product, the amount of credit, and the term to which each comparison rate applies (s 162(1)). If the comparison rate is calculated for an amount of credit which is $10,000 or $30,000 (reg 98), s 162(2) requires that the credit advertisement must clearly state: that the comparison rate is for a secured loan if it has been taken on the basis that a mortgage or guarantee is taken by the credit provider; or that the comparison rate is for an unsecured loan if it has not been calculated on the basis that a mortgage or guarantee is taken. Section 146G(3) of the UCCC (which was the precursor to s 162 of the Code) required that the credit advertisement must also include a statement that a comparison rate schedule would be available at the premises of the credit provider, finance broker or supplier to which the advertisement related. As discussed at [157.30], comparison rate schedules are not required under the Code comparison rate regime.

Warning about comparison rate 163 (1) [Warning to accompany comparison rate] A comparison rate in a credit advertisement must be accompanied by a warning about the accuracy of the comparison rate that is prescribed by a regulation. 163 (2) [Warning may specify basis of calculation] The warning may be given in conjunction with the basis on which the comparison rate is

calculated, that is, that the comparison rate is accurate only for the specified amount of credit and specified term. ________________________________________ [Editorial note: UCCC s 146H provided as follows: Warning about comparison rate 146H (1) [Warning to accompany comparison rate] A comparison rate in a credit advertisement must be accompanied by a warning about the accuracy of the comparison rate that is prescribed by a regulation. 146H (2) [Separate warnings for separate documents] If a comparison rate schedule comprises 2 or more documents, a separate warning must be given on each document. 146H (3) [Warning may specify basis of calculation] The warning may be given in conjunction with the basis on which the comparison rate is calculated, that is, that the comparison rate is accurate only for the specified amount of credit and specified term.]

COMMENTARY ON SECTION 163 [163.05] Outline Section 163 requires that, where a comparison rate is printed in a credit advertisement, it must be accompanied by a written warning about the accuracy of the comparison rate. The warning can either be the prescribed short statement or long statement using the following words (reg 99(3) and (4)): WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan. [Long statement]

[page 542] WARNING: This comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. [Short statement]

The warning must be given in the same form as the comparison rate is given unless the credit advertisement is on television, the internet or other electronic display medium (reg 99). See further s 164(3) for the form for television, the internet or other electronic display medium.

[163.10] Additional warnings The advertisement may also contain a warning that the credit provider does not provide credit for an amount, or a term, or both, specified in a credit advertisement (reg 99(2)). [163.15] UCCC position Note that under the UCCC, the short warning could be used in credit advertising; however, the long warning had to appear in comparison rate schedules. If the comparison rate schedule comprised two or more documents, a separate warning had to be given on each document (s 146H(2) of the UCCC and reg 33C of the UCCC Regulation). [163.20] Duplicated provisions See [R71.15] for commentary on an overlap between the comparison rate requirements under regs 71 and 100.

Other requirements for comparison rate 164 (1) [Comparison rate must be identified] A comparison rate in any credit advertisement must be identified as a comparison rate. 164 (2) [Comparison rate must be prominent] A comparison rate in any credit advertisement must not be less prominent than: (a) any annual percentage rate stated in the advertisement; and (b) the amount of any repayment stated in the advertisement. 164 (3) [Advertisements on electronic medium] The following applies to credit advertisements on television, the internet or other electronic display medium: (a) if the annual percentage rate is in spoken form and not displayed on the screen in text, the comparison rate must also be in spoken form; (b) if the annual percentage rate is displayed on the screen in text, the comparison rate must also be displayed on the screen in text and may be in spoken form; (c) if the comparison rate is in spoken form, the warning and other information may be either in spoken form or displayed on the screen in text;

(d) if the comparison rate is displayed on the screen in text, the warning and other information must also be displayed on the screen in text. ________________________________________ [Editorial note: UCCC s 146I provided as follows: Other requirements for comparison rate 146I (1) [Comparison rate must be identified] A comparison rate in any credit advertisement must be identified as a comparison rate. 146I (2) [Comparison rate must be prominent] A comparison rate in any credit advertisement must not be less prominent than— (a) any annual percentage rate stated in the advertisement; and (b) the amount of any repayment stated in the advertisement.

[page 543] 146I (3) [Advertisements on electronic medium] The following applies to credit advertisements on television, the Internet or other electronic display medium— (a) if the annual percentage rate is in spoken form and not displayed on the screen in text, the comparison rate must also be in spoken form; (b) if the annual percentage rate is displayed on the screen in text, the comparison rate must also be displayed on the screen in text and may be in spoken form; (c) if the comparison rate is in spoken form, the warning and other information may be either in spoken form or displayed on the screen in text; (d) if the comparison rate is displayed on the screen in text, the warning and other information must also be displayed on the screen in text.] [Editorial note: There is no NCC provision comparable to UCCC ss 146J, 146K, 146L, 146M, 146N, 146O, 146P and 146Q.]

COMMENTARY ON SECTION 164 [164.05] Outline Section 164 provides the formal requirements for publication of the comparison rate. It requires that a comparison rate in a credit advertisement must: be identified as a comparison rate (s 164(1)); and

not be less prominent than any annual percentage rate (APR) or the amount of any repayment stated in the advertisement (s 164(2)). [164.10] Television, internet and electronic display mediums Where the credit advertisement is on television, the internet or other electronic display medium: if the APR is in spoken form and not displayed on the screen in text, the comparison rate must also be in spoken form; if the APR is displayed on the screen in text, the comparison rate must also be displayed on screen in text and may be in spoken form; if the comparison rate is in spoken form, the warning and other information may be either in spoken form or displayed on the screen in text; and if the comparison rate is displayed on the screen in text, the warning and other information must also be displayed on the screen in text (s 164(3)). Prior to the Amendment Regulation 2004 (see [157.05]), there was an inconsistency between the provisions of s 146I(3) of the UCCC and reg 33C of the UCCC Regulation. That regulation previously required a warning to be in written form but s 146I(3) provided that, in the context of “television, the internet and other electronic display medium”, the warning could be given orally if the comparison rate was given orally. Regulation 33C of the UCCC Regulation was amended to provide that a comparison rate warning in a credit advertisement had to be given in the same form as the comparison rate was given unless the credit advertisement was on television, the internet or other electronic display medium. This amended requirement has carried through to the Code in s 164(3). [164.15] Radio advertisements The previous inconsistency between s 146I(3) of the UCCC and reg 33C of the UCCC Regulation also affected radio advertising. The previous requirement did not sensibly apply to radio advertisements since the warning cannot be given in a written form, as was required by s 146I of the UCCC.

[page 544] The Amendment Regulation 2004 (see [157.05]) clarified that a comparison rate warning in a credit advertisement had to be given in the same form as the comparison rate; therefore, if the comparison rate was given orally, the warning must be given orally. The same logic applies under the Code (s 164(3)).

DIVISION 3 — COMPARISON RATE IN OTHER DOCUMENTS Comparison rates in documents other than credit advertising 165 If a document, other than a credit advertisement, contains a comparison rate, Division 2 applies (with necessary changes) in relation to the comparison rate as if it were in a credit advertisement. ________________________________________ [Editorial note: There was no comparable UCCC provision.]

COMMENTARY ON SECTION 165 [165.05] Outline Section 165 applies Div 2 of the Code (ss 160–164) to any document that displays comparison rates, even if it is not a credit advertisement as defined in s 159, as if it was a credit advertisement.

DIVISION 4 — MISCELLANEOUS Calculation of comparison rates

166 (1) [Regulation may prescribe calculation method] A regulation may make provision about the way in which comparison rates are to be calculated for the purposes of this Part. 166 (2) [Fees or charges not required to be included in calculation in certain situations] For the purposes of calculating the relevant comparison rate, credit fees or charges are not ascertainable and need not be included in the calculation if their imposition or amount is dependent on events that may or may not happen (unless a regulation under this section otherwise provides). ________________________________________ [Editorial note: UCCC s 146R provided as follows: Calculation of comparison rates 146R (1) [Regulation may prescribe calculation method] A regulation may make provision about the way in which comparison rates are to be calculated for the purposes of this Part. 146R (2) [Fees and charges not required to be included in calculation in certain situations] For the purposes of calculating the relevant comparison rate, credit fees or charges are not ascertainable and need not be included in the calculation if their imposition or amount is dependent on events that may or may not happen (unless a regulation under this section otherwise provides).]

COMMENTARY ON SECTION 166 [166.05] Outline Pursuant to s 166 of the Code, reg 100 sets out the formula which must be applied to calculate the comparison rates for a “consumer credit product”. [page 545] The comparison rate formula takes into account the following variables (among others): Rj”, being “the repayment to be made at time j”. “j” is defined as: “the time, measured as a multiple (not necessarily integral) of the interval between contractual repayments that will

have elapsed since the first amount of credit is provided under the credit contract, except that if the contract does not provide for a constant interval between repayments an interval of any kind is to be selected by the credit provider as the unit of time”. “Cj”, being “the fee or charge (if any) payable by the debtor at time j in addition to the repayments Rj, being a credit fee or charge (other than a government fee, charge or duty) that is ascertainable when the comparison rate is disclosed (whether or not the credit fee or charge is payable if the credit is not provided)”. Regulation 100(4) provides that a “comparison rate must be correct to at least the nearest one hundredth of 1% per annum”. [166.10] Fees and charges Under reg 100, a comparison rate must include credit fees and charges which are ascertainable at the time the comparison rate is disclosed. This is limited by s 166, which provides that credit fees and charge are not ascertainable, and need not be included in the calculation of the comparison rate, if their imposition or amount is dependent on events that may or may not occur. Examples of the likely credit fees and charges to be included in the calculation of the comparison rate are the: application fee; monthly administration fee; and discharge of security fee if it is a fixed fee. (The legal costs associated with discharging a security generally do not have to be included in the calculation of the comparison rate, because the amount of legal costs is not ascertainable at the time the comparison rate is disclosed.) Under the UCCC, when a comparison rate schedule needed to be provided it was an open question as to whether a lenders mortgage insurance premium should be included in the comparison rate calculation. This was because the amount of the lenders mortgage insurance premium payable by a debtor is only calculable once an application for credit has been submitted. This meant that the amount of the lenders mortgage insurance premium was not

ascertainable at the time the comparison rate schedule was disclosed, and therefore did not need to be included in the calculation of the comparison rate. However, if it was possible to calculate the amount of the lenders mortgage insurance premium payable by the debtor using information available at the time the comparison rate schedule was given (ie, the annual percentage rate, the model loan amount and the model loan term), the amount of lenders mortgage insurance was ascertainable and therefore had to be included in the calculation of the comparison rate. The Standing Committee of Officials of Consumer Affairs (SCOCA) in its Statement of Enforcement Policy on Valuation Fees endorsed the following [page 546] approach as regards the inclusion of valuation fees in the comparison rate calculation under the UCCC: Where there is no uncertainty over whether a consumer will be charged a valuation fee, but the exact amount of the fee is not known at the time a comparison rate is disclosed, a reasonable estimate of the likely valuation fee is to be included for the purposes of calculating the comparison rate.

This raised concerns given the fact that the amount varies from consumer to consumer. It is unclear if the SCOCA policy also reflects the approach that ASIC will take to the valuation fee issue. However, it is likely that ASIC will have regard to it in forming its views.

Compliance grace period following changes in interest or fees 167 A credit advertisement does not cease to comply with this Part merely because of a change in the annual percentage rate or in any credit fees or charges during the period of 7 days after the change takes effect.

________________________________________ [Editorial note: UCCC s 146S provided as follows: Compliance grace period following changes in interest or fees 146S A credit advertisement or comparison rate schedule does not cease to comply with this Part merely because of a change in the annual percentage rate or in any credit fees or charges during the period of 7 days after the change takes effect.]

COMMENTARY ON SECTION 167 [167.05] Outline Credit providers effectively have seven days after an annual percentage rate change in which to amend their advertisements.

Regulations — exemptions and other matters 168 A regulation may make provision about the following: (a) exempting any class of persons or matters from the operation of any provision of this Part; (b) requirements with which a credit advertisement containing a comparison rate must comply. ________________________________________ [Editorial note: UCCC s 146T provided as follows: Regulations — exemptions and other matters 146T A regulation may make provision about the following— (a) exempting any class of persons or matters from the operation of any provision of this Part; (b) requirements with which a credit advertisement containing a comparison rate, or a comparison rate schedule, must comply.]

COMMENTARY ON SECTION 168 [168.05] Outline No regulations have yet been made under this section.

[page 547]

Part 11 — Consumer leases DIVISION 1 — INTERPRETATION AND APPLICATION Meaning of consumer lease 169 For the purposes of this Code, a consumer lease is a contract for the hire of goods by a natural person or strata corporation under which that person or corporation does not have a right or obligation to purchase the goods. ________________________________________ [Editorial note: UCCC s 147 — apart from numbering the section is unchanged.]

COMMENTARY ON SECTION 169 [169.05] Outline Part 11 of the Code regulates consumer leases under which the lessee has no right or obligation to purchase the leased goods. These consumer leases were not regulated under the Credit Act. The Credit Act only regulated consumer leases if they conferred on the hirer an obligation or right to purchase the leased goods. The Credit Act treated those contracts as credit sale contracts. The Code treats a contract for the hire of goods under which the hirer has a right or obligation to purchase the goods as a sale of goods by instalments if the charge that is, or may be, made for hiring the goods, together with any other amount payable under the hiring contract (including an amount to purchase the goods or to exercise an option to do so), exceeds the cash price

of the goods. Such a contract for the hire of goods is deemed to be a credit contract for the purposes of the Code (s 9(1) and (2) — see [9.05]–[9.30]). [169.06] Enhancements Act reforms The Enhancements Act amended the NCCP regime in relation to (among other things) consumer leases, and the changes relating to consumer leases commenced on 1 March 2013. The Explanatory Memorandum to the Enhancements Act indicates that the intention of the reform is to “provide greater regulatory consistency between consumer leases and credit contracts (to address regulatory arbitrage arising from the current lower level of obligations applying to consumer leases” (see p 3 of the Explanatory Memorandum). The amendments relating to consumer leases are contained in Sch 5 of the Enhancements Act. [169.07] Code provisions for consumer leases The Code provisions regulating consumer leases are set out in Pt 11 and s 204. The Explanatory Memorandum to the Enhancements Act outlines that amendments by the Act will affect businesses that engage in credit services relating to consumer leases by: providing that consumers entering consumer leases will have rights similar to those available to consumers in relation to credit contracts; and [page 548] requiring changes to internal procedures of businesses engaged in captured services. The Enhancements Act changes the attempt to achieve consistency between leases and credit contracts by: requiring unilateral alterations by the lessor to be agreed by the lessee; requiring lessors to issue at least annual statements;

requiring lessors to issue pre-termination notices; requiring formal provisions relating to the variation of an existing lease; providing for changes on grounds of hardship and for reopening of unjust transactions; introducing changes to enforcement procedures associated with leases and a right to seek postponement of enforcement; and introducing a right for a lessee to take action against a “linked lessor” for any misrepresentation by the supplier about leased goods. The key amendments (outlined at p 75 of the Explanatory Memorandum) relate to: the form of consumer lease documents; obligations on the lessor to provide statements of account — both at least annually and if requested by a lessee, at the end of the lease; changes to obligations under consumer leases; lessors must inform the lessee if there is a direct debit default; changes on the grounds of hardship and on the grounds the consumer lease was unjust; the rights of the lessor in regards to repossessing goods under a consumer lease; terminating a consumer lease — lessors must issue a pretermination notice; enforcement procedures and expenses including a right to seek postponement of enforcement; the liability of lessors for misrepresentations by suppliers of leased goods (this includes a right for a lessee to take action against a “linked lessor” for any misrepresentation by the supplier about leased goods, and introducing criminal penalties for both lessor and supplier for harassment; and

offences for false or misleading representations and harassment in relation to consumer leases. [169.10] Consumer lease A consumer lease is a contract for the hire of goods by a natural person or strata corporation under which that person or corporation does not have a right or obligation to purchase goods. [169.15] “Goods” Section 204 contains an inclusive definition of the word “goods”. Therefore, the term will include those items which fall within the ordinary meaning of the term, and those items specifically referred to in the definition. The Regulations may declare certain items not to be “goods” for the purposes of the Code. As yet, no declaration is made by the Regulations. “Goods” within the meaning of the Code would usually be “personal property” as defined in the PPSA. Accordingly, a consumer lease under the Code will usually be registrable as a security interest under the PPSA (unless it does not in substance secure an obligation and has too short a term to qualify as a “PPS lease”). [page 549] [169.20] “Natural person” See [5.10]. “Person” is defined in s 211 to include an individual or a body corporate. A natural person is an individual. [169.25] “Right or obligation to purchase” For Pt 11 of the Code to apply, there must be no right or obligation under the contract of hire for the hirer to purchase the goods. A right or obligation arising other than under the contract of hire would apparently still allow the contract to be a consumer lease rather than a sale by instalments under s 9 of the Code. If there is no right or obligation to purchase the goods, it should not matter whether or not that fact is recorded in the contract, but if it is recorded in the contract it is likely to give evidentiary assistance should the matter ever be called into question. [169.30]

Summary

table

The

Explanatory

Memorandum

to

the

Enhancements Act sets out (at para 6.12) the following summary table for the Code’s post and pre-Enhancements Act consumer lease regimes: New law [Code — after the Enhancements Act] A consumer lease: must be in written form;

Current law [Code — before the Enhancements Act] A consumer lease must be in writing and signed by the lessee under s 173.

must be signed by both the lessor and lessee; may be made up of multiple documents; and may be made in a form other than in writing. A unilateral alteration of a lease No equivalent for consumer leases. document by the lessor will be void, The requirement only applies to unless the lessee agrees to the change. credit contracts under s 19 of the Code. The new law will prohibit lessors No equivalent for consumer leases. from overcharging fees payable under The requirement only applies to a consumer lease. credit contracts under ss 31 and 32 of the Code. Lessors are required to provide: an ongoing statement of account if requested by the lessee; and an end of lease statement. Consumer leases can be changed on the grounds of hardship or on the basis the transaction is unjust.

No equivalent for consumer leases. The obligation to provide an ongoing statement of account only applies to credit contracts under s 33 of the Code. Part 4 Div 3 previously applied to consumer leases by virtue of the former deeming provision in s 177(1) (a) (except s 78).

Imposes an obligation on the lessor to No equivalent for consumer leases. provide a statement of the amount The obligation only applies to credit

payable on termination.

contracts under s 83 of the Code.

Imposes an obligation on the lessor to No equivalent for consumer leases. inform the lessee when a direct debit The obligation only applies to credit default occurs. contracts under s 87 of the Code. Lessee have [sic] a right to terminate A lessee may terminate the lease after a lease in two different goods have been provided by circumstances: returning the goods under s 179 of the Code. before the goods have been provided; and [page 550] There is no equivalent obligation after the goods have been under the old law to provide a provided. statement of account. The lessor is also required to provide a statement of account to the lessee upon termination. The following enforcement matters are extended to consumer leases: enforcement proceedings; postponement of enforcement proceedings; procedures for goods hired under a consumer lease; and recovery of enforcement expenses from the lessee.

Those enforcement matters only apply to credit contracts: enforcement proceedings under ss 88, 89 and 93; postponement of enforcement proceedings under ss 94–97; enforcement procedures for goods mortgaged under ss 98–101; recovery of enforcement expenses under s 107. Sections 98–101 currently apply to

consumer leases by virtue of the deeming provision s 177. Lessors are liable for a suppliers’ misrepresentation. The new law also imposes a criminal penalty on a lessor or supplier for harassment.

No equivalent for consumer leases. Credit contracts are regulated in relation to linked credit providers and false or misleading representations under ss 125–133.

Consumer leases to which this Part applies 170 (1) [Application] This Part applies to a consumer lease if, when the lease is entered into: (a) the goods are hired wholly or predominantly for personal, domestic or household purposes; and (b) a charge is or may be made for hiring the goods and the charge together with any other amount payable under the consumer lease exceeds the cash price of the goods; and (c) the lessor hires the goods in the course of a business of hiring goods carried on in this jurisdiction or as part of or incidentally to any other business of the lessor carried on in this jurisdiction. 170 (2) [Continued jurisdiction] If this Part applies to a consumer lease: (a) this Part applies to all transactions or acts under the lease whether or not they take place in this jurisdiction; and (b) this Part continues to apply even though the lessee ceases to carry on a business in this jurisdiction. 170 (3) [“amount payable”] For the purposes of this section, the amount payable under a consumer lease includes any agreed or residual value of the goods at the end of the lease or on termination of the lease by the lessor or lessee, but does not include: (a) any amount payable for services that are incidental to the hire of the goods under the lease; or (b) any amount that ceases to be payable on the termination of the contract following the exercise of a right of cancellation by the lessee at the earliest opportunity. [page 551]

170 (4) [Predominant purpose for hire] For the purposes of this section, the predominant purpose for which goods are hired is: (a) the purpose for which more than one half of the goods are intended to be used; or (b) if the same goods are intended to be used for different purposes, the purpose for which the goods are intended to be most used. ________________________________________ [Editorial note: UCCC s 148 provided as follows: Consumer leases to which this Part applies 148 (1) [Application] This Part applies to a consumer lease if, when the lease is entered into— (a) the lessee is ordinarily resident in this jurisdiction or a strata corporation formed in this jurisdiction; and (b) the goods are hired wholly or predominantly for personal, domestic or household purposes; and (c) a charge is or may be made for hiring the goods and the charge together with any other amount payable under the consumer lease exceeds the cash price of the goods; and (d) the lessor hires the goods in the course of a business of hiring goods or as part of or incidentally to any other business of the lessor. 148 (2) [Multiple lessees] If not all the lessees under a consumer lease ordinarily reside, or are strata corporations formed, in this jurisdiction, this Code applies only if goods are first hired under the lease in this jurisdiction. 148 (3) [Continued jurisdiction] If this Part applies to a consumer lease— (a) this Part applies to all transactions or acts under the lease whether or not they take place in this jurisdiction; and (b) this Part continues to apply even though the lessee ceases to be ordinarily resident in this jurisdiction. 148 (4) [“amount payable”] For the purposes of this section, the amount payable under a consumer lease includes any agreed or residual value of the goods at the end of the lease or on termination of the lease by the lessor or lessee, but does not include— (a) any amount payable for services that are incidental to the hire of the goods under the lease; or (b) any amount that ceases to be payable on the termination of the contract following the exercise of a right of cancellation by the lessee at the earliest opportunity. 148 (5) [Predominant purpose for hire] For the purposes of this section, the predominant purpose for which goods are hired is— (a) the purpose for which more than one half of the goods are intended to be used; or

(b) if the same goods are intended to be used for different purposes, the purpose for which the goods are intended to be most used.]

COMMENTARY ON SECTION 170 [170.05] Outline Part 11 of the Code applies to a consumer lease if all the conditions set out in s 170 are satisfied. [170.10] Personal, domestic or household purposes The goods must be hired wholly or predominantly for personal, domestic or household purposes. Section 170(4) provides that the predominant purpose for which goods are hired is: the purpose for which more than one half of the goods are intended to be used; or if the same goods are intended to be used for different purposes, the purpose for which the goods are intended to be most used. [page 552] Note that the “predominant purpose” test in the case of consumer leases is slightly different from the corresponding test for credit contracts. For leases, the purpose is related exclusively to the use of the leased goods; whereas for credit contracts, the purpose for which the credit is intended to be used may also be relevant. See discussion at [5.25]. [170.15] Amount payable The charge for hiring the goods, together with any amount payable under the consumer lease, must exceed the cash price of the goods. The amount payable under a consumer lease includes any agreed or residual value of the goods at the end of the lease, or on termination of the lease by the lessor or lessee, but does not include any amount: payable for services that are incidental to the hire of the goods under the lease; or that ceases to be payable on the termination of the contract

following the exercise of a right of cancellation by the lessee at the earliest opportunity (s 170(1)(b) and (3)). [170.20] Business of hiring goods The lessor must hire the goods in the course of a business of hiring goods carried on in this jurisdiction, or as part of, or incidental to, any other business of the lessor carried on in this jurisdiction (s 170(1)(c)). [170.25] Residence Under the UCCC, the lessee was required to be ordinarily resident in, or a strata corporation formed in, the relevant state or territory (s 148(1)(a) of the UCCC). This requirement does not appear in the Code. [170.30] Jurisdiction If a lease is regulated by the Code, the Code applies to all transactions or acts under the lease, whether or not they take place in this jurisdiction, and the Code continues to apply even though the lessee ceases to carry on a business in this jurisdiction (s 170(2)). [170.35] Conditions precedent The conditions precedent to the application of Pt 11 of the Code to a consumer lease (see [170.10]–[170.30]) repeat, to some extent, the conditions precedent to the application of the Code to the provision of credit generally (see s 5).

Consumer leases to which this Part does not apply 171 (1) Short term or indefinite leases This Part does not apply to a consumer lease for a fixed period of 4 months or less or for an indefinite period. 171 (2) Employment-related leases This Part does not apply to a consumer lease under which goods are hired by an employee in connection with the employee’s remuneration or other employment benefits. 171 (3) Regulations may exclude leases The regulations may exclude from the application of this Part consumer leases of a class specified in the regulations. [page 553] 171 (4) ASIC may exclude leases ASIC may exclude, from the application of this Part, a consumer lease specified by ASIC. 171 (5) [Exemption not legislative instrument] An exemption under subsection (4) is not a legislative instrument. 171 (6) [ASIC may exclude by legislative instrument] ASIC may, by legislative instrument, exclude from the application of this Part, consumer leases of a class specified in the instrument. ________________________________________ [Editorial note: UCCC s 149 provided as follows: Consumer leases to which this Part does not apply 149 (1) Short term or indefinite leases This Part does not apply to a consumer lease for a fixed period of 4 months or less or for an indefinite period. 149 (2) Employment-related leases This Part does not apply to a consumer lease under which goods are hired by an employee in connection with the employee’s remuneration or other employment benefits.

149 (3) Regulations The regulations may exclude from the application of all or any provisions of this Part consumer leases of a class specified in the regulations.]

COMMENTARY ON SECTION 171 [171.05] Outline Part 11 of the Code does not apply to a consumer lease: for a fixed period of four months or less, or for an indefinite period (s 171(1)) — therefore, short-term leases, or leases which have no specified termination date, are not regulated; under which goods are hired by an employee in connection with the employee’s remuneration or other employment benefits (s 171(2)) — therefore, a lease paid for by an employer for the benefit of an employee will not be regulated; of a class specified in the Regulations (s 171(3)) — no class has as yet been specified in the Regulations; specified by ASIC (s 171(4)); or of a class specified by ASIC by legislative instrument (s 171(6)). For example, the Code would not apply to novated leases for cars even though the employee has ultimate responsibility for ensuring repayments should their employment be terminated. (See E V Lanyon, “Regulating Consumer Credit — An Australian Perspective”, March 2004.)

Presumptions relating to application of this Part 172 (1) [Presumption of application of Part] In any proceedings (whether brought under this Code or not) in which a party claims that a lease is a consumer lease to which this Part applies, it is presumed to be such unless the contrary is established. 172 (2) [Lessee’s declaration of purpose] It is presumed for the purposes of this Code that goods hired under a lease are not hired wholly or predominantly for personal, domestic or household purposes if the lessee declares, before entering the lease, that the goods are hired wholly or predominantly for business purposes, unless the contrary is established.

172 (3) [Lessor’s knowledge of purpose] However, the declaration is ineffective if, when the declaration was made, the lessor or a person (the prescribed person) of a kind prescribed by the regulations: (a) knew, or had reason to believe; or [page 554] (b) would have known, or had reason to believe, if the lessor or prescribed person had made reasonable inquiries about the purpose for which the goods were hired; that the goods were in fact hired wholly or predominantly for personal, domestic or household purposes. 172 (4) [Where declaration ineffective] If the declaration is ineffective under subsection (3), paragraph 170(1)(a) is taken to be satisfied in relation to the lease. 172 (5) [Form of declaration] A declaration under this section is to be substantially in the form (if any) required by the regulations and is ineffective for the purposes of this section if it is not. 172 (6) [Contravention] A person commits an offence if: (a) the person engages in conduct; and (b) the conduct induces a debtor to make a declaration under this section that is false or misleading in a material particular; and (c) the declaration is false or misleading in a material particular. Criminal penalty: 100 penalty units, or 2 years imprisonment, or both. 172 (7) [Strict liability offence] Strict liability applies to paragraph (6)(c). ________________________________________ Note: For strict liability, see section 6.1 of the Criminal Code. [Editorial note: UCCC s 150 provided as follows:

Presumptions relating to application of this Part 150 (1) [Presumption of application of Part] In any proceedings (whether brought under this Code or not) in which a party claims that a lease is a consumer lease to which this Part applies, it will be presumed to be such unless the contrary is established. 150 (2) [Lessee’s declaration of purpose] Goods hired under a lease are presumed conclusively for the purposes of this Part not to be hired wholly or predominantly for personal, domestic or household purposes if the lessee declares, before hiring the goods, that the goods are hired wholly or predominantly for business purposes. Note: See section 176 for the circumstances in which a credit provider is taken to have knowledge of our reason to believe something for the purposes of this Code. 150 (3) [Lessor’s knowledge of purpose] However, such a declaration is ineffective for the purposes of this section if the lessor (or any other person who obtained the declaration from the lessee) knew, or had reason to believe, at the time the declaration was made that the goods were in fact hired wholly or predominantly for personal, domestic or household purposes. Note: See section 176 for the circumstances in which a credit provider is taken to have knowledge of or reason to believe something for the purposes of this Code. 150 (4) [Form of declaration] A declaration under this section is to be substantially in the form (if any) required by the regulations and is ineffective for the purposes of this section if it is not.]

COMMENTARY ON SECTION 172 [172.05] Outline The effect of s 172(1) of the Code is to put the onus of proof entirely upon a person who wishes to claim, in the course of any proceedings, that a consumer lease is not subject to the Code. If the lessee has signed a “business purpose declaration”, this may enable the onus to be completely discharged unless the contrary is established. It is a rebuttable presumption — a party may establish that, despite a declaration having been made under s 172(2), the lease was in fact for a Code purpose (see [13.05] and [13.10]). [172.10] Business purpose declaration A declaration under s 172(2) must be in the form set out in reg 104. Note that the declaration must be obtained from the lessee before the lessee enters into the consumer lease (see [13.25]). [page 555] The “business purposes” declaration is only effective (s 172(3)) if:

untrue declarations — neither the lessor nor anyone else who gets the declaration from the lessee knows or has reason to believe when it is made that it not true (s 172(3)); timing — the declaration is obtained before the lessee enters into the lease (s 172(2)) — this means that: —

if a lease is formed by an offer made by the lessee which the lessor accepts, then the declaration must be given before the lessee signs the offer; and

—

if the lease is formed by the lessee accepting an offer made by the lessor, then the declaration must be obtained before the lessee accepts the offer;

form — the business purpose declaration must be substantially in the form required by the Regulations (s 150(4), reg 104(1)); warning — the declaration must contain the prescribed warning (reg 104(2)); execution — the declaration must contain (immediately below the prescribed warning (s 172(4), reg 104(3)); —

the signature of each person making the declaration; and

—

either the date on which the declaration is signed or the date on which it is received by the credit provider.

[172.15] “Knew or had reason to believe” — UCCC position The circumstances in which a lessor may not rely on a business purpose declaration in relation to a consumer lease, specified in s 150(3) of the UCCC, are not the same as the circumstances in which a credit provider may not rely on a business purpose declaration in relation to a credit contract specified in s 11(3) of the UCCC (see [13.35]). This is because s 11 of the UCCC was amended by the Consumer Credit (Queensland) Amendment Act 1998 (Qld) and a corresponding amendment was not made to s 150(3) of the UCCC. Under s 150(3) of the UCCC, a lessor may not rely on a business purpose declaration if the lessor or “any other person” who obtained the declaration from the lessee knew or had reason to believe that the declaration

was false at the time it was made. The concept of “any other person” means that s 150(3) of the UCCC could operate unfairly where a false declaration is obtained by a person not directly associated with the lessor. The equivalent provision in s 11(3) of the UCCC (following the Consumer Credit (Queensland) Amendment Act) for credit contracts substitutes a concept of “relevant person” for “any other person”. See further [13.30] and [13.35]. Code position Under s 172(3), a lessor may not rely on a business purpose declaration if the lessor or a person of a kind prescribed by the Regulations (see reg 103 for prescribed persons) knew or had reason to believe that the declaration was false at the time it was made or would have known, or had reason to believe, if it had made reasonable enquiries (see [13.10], [13.30] and [13.45]). [172.20] “Substantially in the form” The requirement that the declaration be substantially in the form required by the Regulations is the same as the requirement in relation to a business declaration for a credit contract in s 13(5) of the Code (see [13.40]). [page 556] [172.25] Penalty There was no penalty for contravention of this provision in the UCCC. However, the Code now provides that if a person engages in conduct which induces a debtor or lessee to make a false or misleading declaration, and the declaration is false or misleading, that person commits an offence. The offence carries a criminal penalty of up to 100 penalty units (s 172(6)). Section 172(6)(c) is a strict liability offence (s 172(7)). (See paras 17 and 18 of the “Overview of the National Credit Code” for commentary on penalty units and strict liability offences.)

DIVISION 2 — FORM OF AND INFORMATION TO BE INCLUDED IN CONSUMER LEASES

Form of consumer lease 173 (1) A consumer lease must be in the form of a written lease document: (a) signed by the lessor and the lessee; and (b) containing the information required by this Division. [subs (1) subst Act 130 of 2012 s 3 and Sch 5 item 14, eff 1 Mar 2013]

173 (1A) Subject to subsection (2), a consumer lease may consist of one or more separate documents. [subs (1A) insrt Act 130 of 2012 s 3 and Sch 5 item 14, eff 1 Mar 2013]

173 (2) [Prescribed form] The regulations may make provision for or with respect to the form of consumer leases and the way they are expressed. 173 (2A) In the case of a lease document consisting of more than one document, it is sufficient compliance with this section if one of the documents is duly signed and the other documents are referred to in the signed document. [subs (2A) insrt Act 130 of 2012 s 3 and Sch 5 item 15, eff 1 Mar 2013]

173 (3) [Contravention] A lessor must not enter into a consumer lease that contravenes a requirement of this section or regulations made under this section. Criminal penalty: 100 penalty units. 173 (4) [Strict liability offence] Subsection (3) is an offence of strict liability. Note: For strict liability, see section 6.1 of the Criminal Code.

________________________________________ [Editorial note: UCCC s 151 provided as follows: Form of consumer lease 151 (1) [Form and content of lease] A consumer lease must be in the form of a written lease document signed by the lessee and containing the information required by this Division.

151 (2) [Prescribed form] The regulations may make provision for or with respect to the form of consumer leases and the way they are expressed. 151 (3) [Contravention] A lessor must not enter into a consumer lease that contravenes a requirement of this section or regulations made under this section. Maximum penalty (subsection (3)) — 100 penalty units.]

COMMENTARY ON SECTION 173 [173.05] Outline Section 173(1) provides that a consumer lease must be in writing and contain the information required by the Code. The information required by the Code to be included in a consumer lease is set out in s 174. A lessor who enters into a lease that contravenes a requirement of s 173 is liable to [page 557] a penalty of up to 100 penalty units. Under the NCCP Act regime changes, a failure to comply with s 173(3) was made an offence of strict liability by the insertion of s 173(4). (See paras 17 and 18 of the “Overview of the National Credit Code” for commentary on penalty units and strict liability offences.) [173.10] Form of consumer lease Section 173(2) provides that the Regulations may make provision for the form of consumer leases, and the way they are expressed. No regulations as yet have been made for the purposes of s 173(2). [173.15] Multiple documents The Enhancements Act allows a consumer lease to be made up of multiple documents. In this case, the lease will be signed in accordance with s 173(1) if one of the documents is signed, and the other documents are referred to in that document.

Other forms of consumer lease 173A (1) The regulations may authorise other ways of making a consumer lease that do not involve a written document.

173A (2) In that case, the provisions of this Division apply with such modifications as are prescribed by the regulations. [s 173A insrt Act 130 of 2012 s 3 and Sch 5 item 16, eff 1 Mar 2013]

________________________________________ [Editorial note: There was no comparable UCCC provision.]

COMMENTARY ON SECTION 173A [173A.05] Outline The Regulations may authorise other ways of forming a consumer lease other than a written document. None are currently prescribed. Note that consumer leases may be formed electronically in writing — see commentary on s 187 (s 15 is the equivalent provision applying to credit contracts). The Explanatory Memorandum to the Enhancements Act explains (at para 6.17): 6.17

The amendments will allow for regulations to be made which authorize consumer leases to be formed other than by a party signing a contract, such as by specified conduct [Schedule 5, item 16, section 173A]. Under the Code, credit contracts can also be formed by conduct and this same power is being extended to consumer leases. This will allow flexibility in relation to the way in which consumer lease contracts can be formed to reflect changes in practice (for example, by potentially allowing contracts to be formed by the consumer accepting goods).

Disclosures in consumer leases 174 (1) [Information required] A consumer lease must contain the following matters, if ascertainable: (a) a description or identification of the goods hired under the lease; [page 558] (b) the amount or value of any consideration to be paid or provided by the lessee before the delivery of those goods; (c) the amount of any stamp duty or other government charge (other

than on receipts or withdrawals) payable by the lessee in respect of the lease; (d) the amount of any other charges not included in the rental payable under the lease, and a description of those charges; (e) the amount of each rental payment to be made by the lessee under the lease, the date on which the first rental payment is due and either the dates on which subsequent rental payments are due or the interval between rental payments; (f)

the number of rental payments to be made by the lessee, and the total amount of rental payable under the lease;

(g) a statement of the conditions on which the lessee may terminate the lease; (h) a statement of the liabilities (if any) of the lessee on termination of the lease. 174 (2) [Deemed compliance] A consumer lease is taken to comply with this section despite any omission or other error if the court is satisfied that the omission or error is not of such a nature as to mislead the lessee to his or her disadvantage. 174 (3) [Contravention] A lessor must not enter into a consumer lease that contravenes a requirement of this section. Criminal penalty: 100 penalty units. 174 (4) [Strict liability offence] Subsection (3) is an offence of strict liability. Note: For strict liability, see section 6.1 of the Criminal Code.

________________________________________ [Editorial note: UCCC s 152 provided as follows: Disclosures in consumer leases 152 (1) [Information required] A consumer lease must contain the following matters, if ascertainable— (a) a description or identification of the goods hired under the lease;

(b) the amount or value of any consideration to be paid or provided by the lessee before the delivery of those goods; (c) the amount of any stamp duty or other government charge (other than on receipts or withdrawals) payable by the lessee in respect of the lease; (d) the amount of any other charges not included in the rental payable under the lease, and a description of those charges; (e) the amount of each rental payment to be made by the lessee under the lease, the date on which the first rental payment is due and either the dates on which subsequent rental payments are due or the interval between rental payments; (f)

the number of rental payments to be made by the lessee, and the total amount of rental payable under the lease;

(g) a statement of the conditions on which the lessee may terminate the lease; (h) a statement of the liabilities (if any) of the lessee on termination of the lease. 152 (2) [Deemed compliance] A consumer lease is taken to comply with this section despite any omission or other error if the Court is satisfied that the omission or error is not of such a nature as to mislead the lessee to his or her disadvantage. 152 (3) [Contravention] A lessor must not enter into a consumer lease that contravenes a requirement of this section. Maximum penalty (subsection (3)) — 100 penalty units.]

COMMENTARY ON SECTION 174 [174.05] Outline Section 174(1) of the Code sets out the information to be included in a consumer lease. Disclosures required in relation to consumer leases [page 559] are less extensive than those required in relation to credit contracts. Moreover, disclosures in relation to consumer leases are, in all cases, only required to the extent that the information is ascertainable and, essentially, are only required to the extent that, without them, the lessee would be misled to the lessee’s disadvantage. [174.10] Disclosures By virtue of s 180(1), disclosures in consumer leases will be taken to be correctly made if they are within permitted tolerances (see [174.20]) and if they are made as at a date stated in the lease.

[174.15] Assumptions Section 180(5) states that disclosures relating to consideration, charges and payments in a consumer lease may be made on the assumption that there will be no change in the matters disclosed and that no new charge will be imposed. Section 182 of the Code states that the Regulations may vary or provide for additional assumptions. Regulation 108 contains additional assumptions authorised by s 182 of the Code. That is, disclosures relating to repayments, fees and charges may be made, if any repayment is due on a particular day, on the assumption that the repayment is paid on that day, although it may not be a business day and the contract provides that the payment is to be made on the next preceding or succeeding day. [174.20] Tolerances The information disclosed in consumer leases will be taken to be correct if it is within the tolerances allowed by the Regulations, and the disclosure is correct as at a date stated in the consumer lease (s 180(1)). Tolerances regarding any amounts payable under a consumer lease are set out in regs 106 and 107. Fractions of a cent may be rounded-off to the nearest whole cent (regs 106(1)(b) and 107(1)(b)). [174.25] “If ascertainable” The information set out in s 174(1) must be included in the consumer lease only if the information is “ascertainable”. Information is taken to be ascertainable if it is ascertainable as at the disclosure date on the basis of the assumptions set out in s 180 and the assumptions set out in the Regulations. Section 180(5) contains assumptions as to disclosures in consumer leases (see [174.15]) and reg 108 contains additional assumptions. [174.30] No disadvantage If a court is satisfied that any omission or other error will not mislead a lessee to their disadvantage, the consumer lease will be taken to have complied with s 174 (s 174(2)). [174.35] Penalty A failure to comply with s 174 carries a criminal penalty of up to 100 penalty units. Under the NCCP Act regime changes, failure to comply with s 174 was made an offence of strict liability by the insertion of s 174(4). (See paras 17 and 18 of the “Overview of the National Credit Code” for commentary on penalty units and strict liability offences.)

Alteration of consumer lease document 174A (1) An alteration of (including an addition to) a new consumer lease document by the lessor after it is signed by the lessee is ineffective unless the lessee has agreed in writing to the alteration. [page 560] 174A (2) This section does not apply to an alteration having the effect of reducing the lessee’s liabilities under the consumer lease. [s 174A insrt Act 130 of 2012 s 3 and Sch 5 item 17, eff 1 Mar 2013]

________________________________________ [Editorial note: There was no comparable UCCC provision.]

COMMENTARY ON SECTION 174A [174A.05] Outline This section mirrors s 19 for credit contracts (see [19.05]–[19.30]). The Explanatory Memorandum to the Enhancements Act explains (at para 6.18): 6.18

Finally, there are restrictions on consumer lease documents being altered that operate in a similar manner to the way credit contracts are regulated under the Code. A lessor will be prohibited from making unilateral changes to a lease document (other than alterations that reduce the liabilities of the lessee) unless the lessee agrees to the change in writing.

Copy of lease etc for lessee 175 (1) [Lessor to provide] A lessor must, within 14 days after entering into a consumer lease, give to the lessee a copy of the consumer lease, together with a statement in the form prescribed by the regulations explaining the rights and obligations of a lessee. Criminal penalty: 50 penalty units.

175 (2) [Exclusion of section] Subsection (1) does not apply if the lessor has previously given the lessee a copy of the consumer lease to keep. 175 (3) [Strict liability offence] Subsection (1) is an offence of strict liability. Note: For strict liability, see section 6.1 of the Criminal Code.

175 (4) [Application of s 194] Section 194 applies to this section as if references in that section to the credit provider were references to the lessor or a lease broker and as if references in that section to the debtor were references to the lessee. ________________________________________ [Editorial note: UCCC s 153 provided as follows: Copy of lease etc for lessee 153 (1) [Lessor to provide] A lessor must, within 14 days after entering into a consumer lease, give to the lessee a copy of the consumer lease, together with a statement in the form prescribed by the regulations explaining the rights and obligations of a lessee. Maximum penalty — 50 penalty units. 153 (2) [Exclusion of section] Subsection (1) does not apply if the lessor has previously given the lessee a copy of the consumer lease to keep. 153 (3) [Application of section 171] Section 171 applies to this section as if references in that section to the credit provider were references to the lessor or a lease broker and as if references in that section to the debtor were references to the lessee.]

[page 561] COMMENTARY ON SECTION 175 [175.05] Outline A lessor must: within 14 days of entering into a consumer lease, give the lessee a copy of the consumer lease and a statement in the prescribed form explaining the rights and obligations of the lessee (s 175(1)); or at some earlier point in time, give the lessee a copy of the consumer lease to keep (s 175(2)).

[175.10] Information statement The information statement provided to the lessee, which may be a separate document or be part of the consumer lease document, is to be a written statement in the form of Form 17 (reg 105). Section 175(2) can be read as meaning that, if the lessee has already been given a copy of the lease, they are not required to be given the Form 17. This is clearly not the intent, and lessors should ensure that they always give lessees the Form 17, irrespective of whether or not they give a copy of the lease under s 175(1) or (2). [175.15] Notice period Section 218 of the Code deals with how to calculate the commencement and end of the 14-day period. Section 175(2) refers to the copy being given to a lessor “previously”. It is uncertain whether this means previous to the execution of the lease or previous to the expiration of 14 days. It appears that the first interpretation is the better one, otherwise s 175(1) and (2) would operate co-existently but provide different obligations. [175.20] “Give the lessee a copy” By virtue of s 194 (which applies to consumer leases because of ss 175(4) and 177(1)(c)), where there are multiple lessees, each must receive a copy. Note the differences in wording between s 20 (which deals with the giving of copies of credit contracts) and s 175. Section 20(2) requires a credit provider to give the debtor a copy of the credit contract “in the form in which it was made”. These words do not appear in s 175, and one wonders whether the difference is intentional. Nor is s 175 clear as to whether the copy it requires must show the signatures of all parties, or whether it is enough for the lessee simply to be given a copy of the terms and conditions applying to the lease. [175.25] Joint lessees The general rule is that each party to the lease must be given a copy. However, s 175(4) states that s 194 applies to the s 175 obligations. Hence, the nominations and consents available to joint mortgagors, debtors and guarantors are available to joint lessors. There is some doubt as to whether the consent and nomination provisions apply to the original lease document. The note under s 194(1), giving examples of notices or other documents to which s 194 applies, does not include those required to be given under s 175. This is arguably a drafting oversight, but nevertheless it is not clear whether s 194 applies to both lessees

and potential lessees (see further s 15AD of the Acts Interpretation Act 1901 (Cth), which states that if examples are given, they are not to be read as being an exhaustive list or as limiting the provision to which they relate. See para 22 of the “Overview of the National Credit Code” for commentary on interpretation.) This is because s 175(4) states that s 194 applies “as if references in that section to the debtor were [page 562] references to the lessee”. Section 204 defines “debtor” to include potential debtor. However, there is no equivalent definition stating that a lessee includes a potential lessee (no doubt this is another drafting oversight). For example, before execution of the lease, it would not be technically accurate to describe a potential lessee as a joint lessee (a situation to which s 175(2) would apply). It is therefore arguable that, prior to execution, the nomination and consent provisions in s 194 would not apply. Hence, it would be prudent to provide separate copies of the lease and the Form 17 to each joint lessee. [175.30] Penalty A failure to comply with s 175(1) carries a criminal penalty of up to 50 penalty units. Under the NCCP Act regime changes, failure to comply with s 175(1) was made an offence of strict liability by the insertion of s 175(3). (See paras 17 and 18 of the “Overview of the National Credit Code” for commentary on penalty units and strict liability offences.)

DIVISION 4 — FEES AND CHARGES [Div 4 insrt Act 130 of 2012 s 3 and Sch 5 item 18, eff 1 Mar 2013]

Prohibited consumer lease fees or charges 175A The regulations may specify: (a) consumer lease fees or charges; or

(b) classes of consumer lease fees or charges; that are prohibited for the purposes of this Code. ________________________________________ [Editorial note: There was no comparable UCCC provision.]

COMMENTARY ON SECTION 175A [175A.05] Outline The Explanatory Memorandum to the Enhancements Act explains (at para 6.19): 6.19

A new Division 4 is introduced which reflects the provisions of the Code in respect of fees and charges that currently apply to credit contracts. The Code will allow for consumer lease fees and charges to be prohibited by regulation.

Fees or charges in relation to third parties 175B (1) When this section applies This section applies if a fee or charge is payable by a lessee to the lessor for an amount (the third party amount) payable or paid by the lessor to another person, body or agency. 175B (2) Third party amount ascertainable at time of lessee payment If, when the fee or charge is paid by the lessee to the lessor, the third party amount is ascertainable, then the amount of the fee or charge must not exceed the third party amount. [page 563] 175B (3) Third party amount not ascertainable at time of lessee payment If: (a) when the fee or charge is paid by the lessee to the lessor, the third party amount is not ascertainable; and (b) after the fee or charge is paid, the lessor ascertains the third party amount; and

(c) the third party amount is less than the amount of the fee or charge paid; then the lessor must refund or credit the difference to the lessee. 175B (4) Determining third party amount The third party amount is to be determined by: (a) taking into account any discount, rebate or other allowance that is received or receivable by the lessor or a related body corporate (within the meaning of the Corporations Act 2001); and (b) disregarding any rebate on tax payable by the lessor or a related body corporate (within the meaning of that Act). ________________________________________ [Editorial note: There was no comparable UCCC provision.]

COMMENTARY ON SECTION 175B [175B.05] Outline See commentary on s 175A.

DIVISION 5 — LESSOR’S OBLIGATION TO ACCOUNT [Div 5 insrt Act 130 of 2012 s 3 and Sch 5 item 18, eff 1 Mar 2013]

Subdivision A — Ongoing statements of account

Statements of account 175C (1) A lessor must give to the lessee, or arrange for the lessee to be given, periodic statements of account in accordance with this Subdivision. Criminal penalty: 100 penalty units. 175C (2) The maximum period for a statement of account is 12 months.

175C (3) A statement of account need not be given if: (a) the lessee was in default under the consumer lease during the statement period and the lessor has commenced enforcement proceedings; or (b) the lessee has died or is insolvent and the lessee’s personal representative or trustee in bankruptcy has not requested a statement of account. 175C (4) Subsection (1) is an offence of strict liability. Note: For strict liability, see section 6.1 of the Criminal Code.

________________________________________ [Editorial note: There was no comparable UCCC provision.]

COMMENTARY ON SECTION 175C [175C.05] Outline The Explanatory Memorandum to the Enhancements Act explains (at para 6.20): 6.20

A new Division 5 is introduced into the Code to impose obligations on the lessor to provide statements which provide information in relation to the history of the lessee’s account. Credit providers are obliged under the Code

[page 564] to provide statements of account, and the Enhancements Bill extends similar requirements to lessors. The underlying policy considerations for requiring a statement of account for credit contracts equally extends to lessees under a consumer lease arrangement, primarily in that it provides an opportunity for the consumer to review their account and identify any discrepancies.

[175C.10] Penalty rationale The Explanatory Memorandum to the Enhancements Act explains (at para 6.22): 6.22

Failure to provide a statement of account annually, or upon the request of the lessee, will be an offence of strict liability [Schedule 5, item 18, section 175C]. Strict liability is necessary to ensure the effectiveness of the enforcement regime for these offences. The offence also attracts a criminal penalty of 100 penalty units. The rationale for this

penalty is historic as the penalty provision for the offence under section 33 which applies to credit contracts was carried over from state legislation. As this new provision is intended to mirror the current provisions that apply to credit contracts, to maintain consistency, the same penalty is also applied to lessors.

Information to be contained in statements of account 175D A statement of account must contain the information prescribed by the regulations. ________________________________________ [Editorial note: There was no comparable UCCC provision.]

COMMENTARY ON SECTION 175D [175D.05] Outline The Explanatory Memorandum to the Enhancements Act explains (at para 6.21): 6.21

The Enhancements Bill will introduce obligations on the lessor to provide statements of account both every 12 months and in response to a request by the lessee [section 175C and 175E]. The information that must be included in the statements of account will be prescribed in the regulations [section 175D]. It is anticipated that regulations will be made requiring the lessee to provide information such as a record of ongoing payments over a specified period of time, and the remaining term of the lease.

Statement of amount owing and other matters 175E (1) A lessor must, at the request of a lessee and within the time specified by this section, provide a statement of all or any of the following: (a) any amounts credited to the lessee’s account during a period specified in the request; (b) any amounts currently overdue and the date they became due; (c) any amount currently payable and the date it becomes due; (d) any other information prescribed by the regulations.

Criminal penalty: 100 penalty units. [page 565] 175E (2) The statement must be given: (a) within 14 days, if all information requested relates to a period 1 year or less before the request is given; or (b) within 30 days, if any information requested relates to a period more than 1 year before the request is given. 175E (3) A statement under this section may be given orally but if the request for the statement is made in writing the statement must be given in writing. 175E (4) In the case of joint lessees, the statement under this section need only be given to a lessee who requests the statement and not, despite section 194, to each joint lessee. 175E (5) A lessor is not required to provide a further written statement under this section if it has, within the 3 months before the request is given, given such a statement to the person requesting it. 175E (6) Subsection (1) is an offence of strict liability. Note: For strict liability, see section 6.1 of the Criminal Code.

________________________________________ [Editorial note: There was no comparable UCCC provision.]

COMMENTARY ON SECTION 175E [175E.05] Outline See commentary on s 175D above.

Court may order statement of account to be provided

175F If a statement of account is not provided within the time required by this Subdivision, the court may, on the application of the lessee, order the lessor to provide the statement or itself determine the amounts in relation to which the statement was sought. ________________________________________ [Editorial note: There was no comparable UCCC provision.]

COMMENTARY ON SECTION 175F [175F.05] Outline If the lessor does not provide a statement of account within the prescribed period, then a court has powers with regard to the statement.

Disputed accounts 175G (1) If: (a) a liability is entered against a lessee under a consumer lease; and (b) the lessee, by written notice to the lessor, disputes the liability; then the lessor must give the lessee a written notice explaining in reasonable detail how the liability arises. 175G (2) A written notice need not be given if the lessor agrees with the lessee as to the disputed amount and gives the lessee a written notice advising of the agreed liability. 175G (3) In the case of a consumer lease for which a statement of account is given, the notice of dispute must be given to the lessor within 30 days after the day the lessee receives the statement of account in which the amount, or part of that amount, is first shown. [page 566]

175G (4) In the case of a consumer lease in respect of which a statement of account need not be and is not given for the period to which the disputed liability relates, the notice of dispute must be given to the lessor not later than 3 months after the day the lease ends. 175G (5) The lessor must not begin enforcement proceedings on the basis of a default arising from the disputed liability until the period of 30 days, starting on the day the lessor gives the written explanation or advice as to agreement, has expired. Criminal penalty: 50 penalty units. 175G (6) A lessee or lessor may apply to the court to have the court determine a disputed liability and, if satisfied that a liability is genuinely disputed, the court may determine the matters in dispute and make such consequential orders as it thinks just. 175G (7) If an application is made to the court under this section within 30 days after the day the written explanation is given, the lessor must not, without leave of the court, begin enforcement proceedings on the basis of a default arising from the disputed liability. Criminal penalty: 50 penalty units. 175G (8) Subsections (5) and (7) are offences of strict liability. Note: For strict liability, see section 6.1 of the Criminal Code.

175G (9) This section does not affect a dispute not dealt with, or not arising, under this section. ________________________________________ [Editorial note: There was no comparable UCCC provision.]

COMMENTARY ON SECTION 175G [175G.05] Outline The Explanatory Memorandum to the Enhancements Act explains (at para 6.24): 6.24

The Code enables a lessee to seek written explanations from the lessor, as the trigger

for the mechanisms to resolve disputes. A lessor is required to give a lessee a written explanation where a lessee disputes a particular liability, within 30 days of receiving the statement of account. A lessor must not commence enforcement action until at least 30 days after the written explanation is provided. Where the court has been asked to determine liability within 30 days of the lessor’s explanation, the lessor must not commence enforcement proceedings without leave of the court. Failure to observe this requirement is a strict liability offence with a maximum penalty of 50 penalty units. Strict liability is necessary to ensure the effectiveness of the enforcement regime for this offence.

Subdivision B — End of lease statements

End of lease statement 175H (1) A lessor must arrange for the lessee to be given, not later than 90 days before the end of the fixed term of a consumer lease, a statement containing the information prescribed by the regulations. Criminal penalty: 100 penalty units. 175H (2) Subsection (1) does not apply in the circumstances (if any) prescribed by the regulations. [page 567] 175H (3) Subsection (1) is an offence of strict liability. Note: For strict liability, see section 6.1 of the Criminal Code.

________________________________________ [Editorial note: There was no comparable UCCC provision.]

COMMENTARY ON SECTION 175H [175H.05] Outline It is an offence of strict liability if a lessor fails to provide a statement to the lessor at least 90 days before the end of the consumer lease

term. This requirement will maximise the ability for a lessee to begin negotiation for the leased goods before the termination of the lease.

DIVISION 6 — CERTAIN TRANSACTIONS NOT TO BE TREATED AS NEW CONSUMER LEASES [Div 6 insrt Act 130 of 2012 s 3 and Sch 5 item 18, eff 1 Mar 2013]

Changes etc under consumer leases 175J If: (a) there is: (i)

a change to an existing consumer lease that results in further goods being provided; or

(ii) a deferral or waiver of an amount under an existing consumer lease; or (iii) a postponement relating to an existing consumer lease; and (b) the change, deferral, waiver or postponement is made in accordance with this Code or the existing consumer lease; then the change, deferral, waiver or postponement is not to be treated as creating a new consumer lease or a credit contract for the purposes of this Code. ________________________________________ [Editorial note: There was no comparable UCCC provision.]

COMMENTARY ON SECTION 175J [175J.05] Outline Section 175(J) prescribes the types of changes that will not create a new consumer lease. This means the Code requirements for making new consumer leases will not apply to those changes. See further commentary at s 40 that relates to changes under credit contracts.

Further goods and deferrals or waivers under consumer leases 176 [s 176 rep Act 130 of 2012 s 3 and Sch 5 item 19, eff 1 Mar 2013] COMMENTARY ON REPEALED SECTION 176 [176.05] Outline Section 176 was repealed by the Enhancements Act. [176.10] Before the Enhancements Act — changes to consumer leases Prior to the Enhancements Act, in certain circumstances, providing [page 568] further goods under a consumer lease, or waiving or deferring a payment, did not create a new consumer lease or credit contract (eg, if the consumer lease permitted a provision, waiver or deferral). Therefore, in the specified circumstances it was not necessary to comply with the obligations imposed on the lessor when the lessor entered into a new consumer lease. Section 176 mirrored s 40, which applies to credit contracts. Further, prior to the Enhancements Act, the Code did not make express provision for unilateral or agreed changes to consumer leases, nor did it restrict the parties’ contractual rights to change contracts. Unilateral changes to consumer leases were therefore previously governed by the terms of the consumer lease and agreed changes were at the discretion of the parties to the lease. The Code did, however, provide for changes to consumer leases on grounds of hardship.

DIVISION 7 — CHANGES TO OBLIGATIONS UNDER CONSUMER LEASES [Div 7 insrt Act 130 of 2012 s 3 and Sch 5 item 18, eff 1 Mar 2013]

Subdivision A — Changes by agreement of parties

Changes by agreement 177A (1) If the parties under an existing consumer lease agree to change its terms, the lessor must, not later than 30 days after the date of the agreement, give to the lessee a written notice setting out: (a) particulars of the change in the terms of the consumer lease; and (b) any information required by the regulations. Criminal penalty: 100 penalty units. 177A (2) Subsection (1) does not apply to a change which defers or otherwise reduces the obligations of the lessee for a period not exceeding 90 days. 177A (3) This section does not apply to a change made under Subdivision B. 177A (4) The lessor may, under subsection (1), give a lessee particulars only of a matter as changed instead of particulars of the change, but only if the lessor: (a) makes it clear to the lessee that the matter has changed; or (b) issues to the lessee a new set of terms and conditions relating to the consumer lease. 177A (5) Subsection (1) is an offence of strict liability. Note: For strict liability, see section 6.1 of the Criminal Code.

________________________________________ [Editorial note: There was no comparable UCCC provision.]

COMMENTARY ON SECTION 177A [177A.05] Outline Section 177A sets out the notice requirements when a lease is changed by agreement. The Explanatory Memorandum to the Enhancements Act explains (at paras 6.30, 6.31 and 6.32):

6.30

… It will be a strict liability offence not to comply with the appropriate procedure and noncompliance attracts a maximum penalty of 100 penalty units.

[page 569] 6.31

The notice requirements in s 177A do not sapply where the change defers or reduces the obligations of the lessee for a period of not more than 90 days.

6.32

This is a strict liability offence. Strict liability is necessary to ensure the effectiveness of the enforcement regime for these offences. The offence also attracts a criminal penalty of 100 penalty units. The rationale for this penalty is historic as the penalty provision for the offence under section 71 which applies to credit contracts was carried over from state legislation. As this new provision is intended to mirror the current provisions that apply to credit contracts, to maintain consistency, the same penalty is also applied to lessors.

[177A.10] The notice provisions do not apply if a change is made on the grounds of hardship or because consumer lease is unjust (s 177A(3)).

Subdivision B — Changes on grounds of hardship and unjust transactions

Changes on grounds of hardship 177B (1) Hardship notice If a lessee considers that he or she is or will be unable to meet his or her obligations under a consumer lease, the lessee may give the lessor notice (a hardship notice), orally or in writing, of the lessee’s inability to meet the obligations. Note: If the lessee has given the lessor a hardship notice, there may be extra requirements (beyond those in section 179D) that the lessor must comply with before beginning enforcement proceedings — see section 179F.

177B (2) Further information Within 21 days after the day of receiving the lessee’s hardship notice, the lessor may give the lessee notice, orally or in writing, requiring the lessee to give the lessor specified information within 21 days of the date of the notice stated in the notice. The information specified must be relevant to deciding: (a) whether the lessee is or will be unable to meet the lessee’s

obligations under the lease; or (b) how to change the lease if the lessee is or will be unable to meet those obligations. 177B (3) The lessee must comply with the requirement. Note: The lessor need not agree to change the consumer lease, especially if the lessor: (a) does not believe there is a reasonable cause (such as illness or unemployment) for the lessee’s inability to meet his or her obligations; or (b) reasonably believes the lessee would not be able to meet his or her obligations under the lease even if it were changed.

177B (4) Notice of decision on changing consumer lease The lessor must, before the end of the period identified under subsection (5), give the lessee a notice: (a) that is in the form (if any) prescribed by the regulations and records the fact that the lessor and the lessee have agreed to change the consumer lease; or (b) that is in the form (if any) prescribed by the regulations and states: (i)

the lessor and the lessee have not agreed to change the consumer lease; and

(ii) the reasons why they have not agreed; and (iii) the name and contact details of the approved external dispute resolution scheme of which the lessor is a member; and (iv) the lessee’s rights under that scheme. Civil penalty: 2,000 penalty units. 177B (5) The lessor must give the notice before the end of the period identified using the table. [page 570] Period for giving notice

1 2

3

If: The lessor does not require information under subsection (2) The lessor requires information under subsection (2) but does not receive any information in compliance with the requirement The lessor requires information under subsection (2) and receives information in compliance with the requirement

The period is: 21 days after the day of receiving the hardship notice 28 days after the stated date of the notice under subsection (2)

21 days after the day of receiving the information

177B (6) Regulations may prescribe shorter periods for consumer leases The regulations may provide for subsections (2), (3), (4) and (5) to have effect in relation to consumer leases prescribed by the regulations as if a particular reference in subsection (2) or (5) to a number of days were a reference to a lesser number of days prescribed by the regulations. ________________________________________ [Editorial note: There was no comparable UCCC provision.]

COMMENTARY ON SECTION 177B [177B.05] Outline The Explanatory Memorandum to the Enhancements Act explains (at paras 6.35 and 6.36): 6.35

The Code mirrors the hardship variation and unjust transactions provisions that currently apply to credit contracts under Part 4 Division 3 of the Code, and extends the regulation to leases. The Enhancements Bill has repealed the former paragraph 177(1) (a) which extended these provisions to consumer leases in a shorthand way. The Code now sets out in detail the way in which these provisions apply to consumer leases.

6.36

The operation of the hardship provisions has been changed, consistent with the changes made to the equivalent provisions in respect of credit contracts to make it simpler for lessees to seek a variation of the terms of their contract.

[177B.10] Hardship provisions for credit contracts and consumer leases See commentary on s 72, and in particular [72.55] for a summary table.

Notice of change 177C (1) A lessor that enters into an agreement with a lessee to change the consumer lease as a result of a hardship notice by the lessee must, not later than 30 days after the date of the agreement, give to the lessee a written notice setting out: (a) particulars of the change in the terms of the lease; and (b) any information required by the regulations. Criminal penalty: 50 penalty units. 177C (2) The lessor may, under subsection (1), give the lessee particulars only of a matter as changed instead of particulars of the change, but only if the lessor: (a) makes it clear to the lessee that the matter has changed; or (b) gives to the lessee a new set of terms and conditions relating to the lease. [page 571] 177C (3) Subsection (1) is an offence of strict liability. Note: For strict liability, see section 6.1 of the Criminal Code.

________________________________________ [Editorial note: There was no comparable UCCC provision.]

COMMENTARY ON SECTION 177C [177C.05] Outline Section 177C prescribes the notice requirements for a consumer lease hardship change.

Changes by court

177D (1) If a lessor does not change a consumer lease as a result of a hardship notice by a lessee, the lessee may apply to the court to change the terms of the lease. 177D (2) The court may, after allowing the applicant and the lessor a reasonable opportunity to be heard: (a) by order change the lease (but not so as to reduce the amount ultimately payable by the lessee to the lessor under the lease), and make such other orders as it thinks fit; or (b) refuse to change the lease. 177D (3) The court may, if it thinks it appropriate in the circumstances, stay any enforcement proceedings under the lease, and make such other orders as it thinks fit, until the application has been determined. ________________________________________ [Editorial note: There was no comparable UCCC provision.]

COMMENTARY ON SECTION 177D [177D.05] Outline Section 177D prescribes the rights of a lessee to apply to a court if a lessor refuses a hardship application, and prescribes a court’s powers.

Lessor may apply for variation of change 177E (1) A lessor under a consumer lease that has been changed by an order under subsection 177D(2) may apply to the court for an order varying or revoking the order. 177E (2) A lessor subject to a stay of enforcement proceedings or other order under subsection 177D(3) may apply to the court for an order varying or revoking the stay or order. 177E (3) On an application under this section, the court may vary or revoke

the order or stay to which the application relates as it thinks fit, or may refuse the application. ________________________________________ [Editorial note: There was no comparable UCCC provision.]

COMMENTARY ON SECTION 177E [177E.05] Outline A lessor is entitled to apply to a court to vary any original court order contemplated in s 177D.

[page 572]

Court may reopen unjust transactions 177F (1) Power to reopen unjust transactions The court may, if satisfied on the application of a lessee that, in the circumstances relating to the relevant consumer lease at the time it was entered into or changed (whether or not by agreement), the lease or change was unjust, reopen the transaction that gave rise to the lease or change. 177F (2) Matters to be considered by court In determining whether a term of a particular consumer lease is unjust in the circumstances relating to it at the time it was entered into or changed, the court is to have regard to the public interest and to all the circumstances of the case and may have regard to the following: (a) the consequences of compliance, or noncompliance, with all or any of the provisions of the lease; (b) the relative bargaining power of the parties; (c) whether or not, at the time the lease was entered into or changed, its provisions were the subject of negotiation; (d) whether or not it was reasonably practicable for the applicant to negotiate for the alteration of, or to reject, any of the provisions of

the lease or the change; (e) whether or not any of the provisions of the lease impose conditions that are unreasonably difficult to comply with, or not reasonably necessary for the protection of the legitimate interests of a party to the lease; (f)

whether or not the lessee, or a person who represented the lessee, was reasonably able to protect the interests of the lessee because of his or her age or physical or mental condition;

(g) the form of the lease and the intelligibility of the language in which it is expressed; (h) whether or not, and if so when, independent legal or other expert advice was obtained by the lessee; (i)

the extent to which the provisions of the lease or change and their legal and practical effect were accurately explained to the lessee and whether or not the lessee understood those provisions and their effect;

(j)

whether the lessor or any other person exerted or used unfair pressure, undue influence or unfair tactics on the lessee and, if so, the nature and extent of that unfair pressure, undue influence or unfair tactics;

(k) whether the lessor took measures to ensure that the lessee understood the nature and implications of the transaction and, if so, the adequacy of those measures; (l)

whether at the time the lease was entered into or changed, the lessor knew, or could have ascertained by reasonable inquiry at the time, that the lessee could not pay in accordance with its terms or not without substantial hardship;

(m) whether the terms of the transaction or the conduct of the lessor is justified in the light of the risks undertaken by the lessor; (n) the terms of other comparable transactions involving other lessors and, if the injustice is alleged to result from excessive costs, the costs payable in comparable cases;

(o) any other relevant factor. 177F (3) Representing lessee For the purposes of paragraph (2)(f), a person is taken to have represented a lessee if the person represented the lessee, or assisted the lessee to a significant degree, in the negotiations process prior to, or at, the time the consumer lease was entered into or changed. 177F (4) Unforeseen circumstances In determining whether a consumer lease is unjust, the court is not to have regard to any injustice arising from circumstances that were not reasonably foreseeable when the lease was entered into or changed. 177F (5) Conduct In determining whether to grant relief in respect of a consumer lease that it finds to be unjust, the court may have regard to the conduct of the parties to the proceedings in relation to the lease since it was entered into or changed. [page 573] 177F (6) Application This section does not apply to a change to a consumer lease under this Subdivision. ________________________________________ [Editorial note: There was no comparable UCCC provision.]

COMMENTARY ON SECTION 177F [177F.05] Outline Sections 177F–177K prescribe a court’s power to reopen unjust transactions. [177F.10] Unjust “Unjust” is defined in s 204. The Explanatory Memorandum to the Enhancements Act explains the principles to apply to “unjust” and “unconscionable, harsh and oppressive” (at para 6.41): they should be given a construction consistent with the beneficial policy intentions of the legislation;

the meanings of each concept may overlap but each word may also have an independent operation (so that a contract may be unjust because a term is oppressive or burdensome but not unconscionable); the phrase is inclusive so that a consumer lease can still be unjust even if it is not unconscionable, harsh or oppressive; and the reference to “unconscionable” encompasses both common law and statutory unconscionability. [177F.15] Criteria Section 177F sets out criteria for a court to consider if a lease or a change in the lease was unjust. This involves a two-stage inquiry. First, the court must determine if the consumer lease is unjust, and second, what relief is appropriate. Different considerations may apply in each stage.

Orders on reopening of transactions 177G The court may, if it reopens a transaction under this Subdivision, do any one or more of the following, despite any settlement of accounts or any agreement purporting to close previous dealings and create a new obligation: (a) reopen an account already taken between the parties to the transaction; (b) relieve the lessee from payment of any amount in excess of such amount as the court, having regard to the risk involved and all other circumstances, considers to be reasonably payable; (c) set aside either wholly or in part or revise or alter an agreement made in connection with the transaction; (d) give judgement for or make an order in favour of a party to the transaction of such amount as, having regard to the relief (if any) which the court thinks fit to grant, is justly due to that party under the consumer lease; (e) give judgement or make an order against a person for delivery of goods to which the lease relates and which are in the possession of that person;

(f)

make ancillary or consequential orders.

[Editorial note: There was no comparable UCCC provision.]

COMMENTARY ON SECTION 177G [177G.05] Outline A court is given a range of powers if a lease transaction is reopened as unjust.

[page 574]

Applications by ASIC 177H (1) This section applies if ASIC considers that it is in the public interest to make an application under this Subdivision. 177H (2) ASIC may make an application under this Subdivision and has standing to represent the public interest. 177H (3) The application: (a) may apply to any one or more consumer leases; and (b) may apply to all or any class of consumer leases entered into by a lessor during a specified period (for example, all leases entered into during a specified period that are affected by a specified matter for which relief is sought). ________________________________________ [Editorial note: There was no comparable UCCC provision.]

COMMENTARY ON SECTION 177H [177H.05] Outline Section 177H gives powers to ASIC.

Time limit 177J An application may not be brought under this Subdivision more than 2 years after the relevant consumer lease is terminated, discharged or otherwise comes to an end. ________________________________________ [Editorial note: There was no comparable UCCC provision.]

COMMENTARY ON SECTION 177J [177J.05] Outline Section 177J prescribes time limits for making an application under ss 177A–177H.

Joinder of parties 177K (1) If it appears to the court that a person other than a lessor (a third party) has shared in the profits of, or has a beneficial interest prospectively or otherwise in, a consumer lease that the court holds to be unjust, the court may make an order about the third party that the court considers appropriate. 177K (2) However, before making an order about the third party, the court must: (a) join the third party as a party to the proceedings; and (b) give the third party an opportunity to appear and be heard in the proceedings. ________________________________________ [Editorial note: There was no comparable UCCC provision.]

COMMENTARY ON SECTION 177K [177K.05] Outline Section 177K gives rights to third parties.

[page 575]

DIVISION 8 — REPOSSESSION, TERMINATION AND ENFORCEMENT OF CONSUMER LEASES [Div 3 heading subst Act 130 of 2012 s 3 and Sch 5 item 20, eff 1 Mar 2013]

Subdivision A — Repossession of goods under consumer lease [Subdiv A heading insrt Act 130 of 2012 s 3 and Sch 5 item 20, eff 1 Mar 2013]

Application of certain Code provisions to consumer leases 177 [s 177 rep Act 130 of 2012 s 3 and Sch 5 item 21, eff 1 Mar 2013] COMMENTARY ON REPEALED SECTION 177 [177.05] Outline Section 177 was repealed by the Enhancements Act. [177.10] Before the Enhancements Act Prior to its repeal, s 177 stated that certain provisions of the Code that apply to credit contracts also applied to consumer leases. Those were provisions relating to: changes to contracts on the grounds of hardship and unjust transactions (except for s 78, dealing with unconscionable interest and other charges — see [78.05]–[78.40]); information as to leased goods, entry to residential property to take possession of goods, and orders by the court for entry and repossession (see [98.05]–[98.20]); and miscellaneous matters (eg, tolerances and assumptions) (see [180.05]–[202.10]). [177.15] Current position The Enhancements Act amended the Code to set the equivalent provisions out in full in Pt 11.

Notice of repossession 178 (1) [30 days written notice] A lessor must not exercise any right under a consumer lease to take possession of goods subject to the lease unless the lessor has given the lessee 30 days’ written notice of the lessor’s intention to do so. Criminal penalty: 50 penalty units. 178 (2) [Exemptions] However, the lessor is not required to give the notice in accordance with this section if: (a) the right arises under a lease granted for a fixed term at the end of that term; or (b) the lessor believes on reasonable grounds that the lessee has disposed of goods hired under the lease, or intends to dispose of such goods, contrary to the terms of the lease; or (c) the lessor has made reasonable attempts to locate the lessee but without success; or (d) the lessee is insolvent; or (e) the court authorises the lessor to do so. 178 (3) [Strict liability offence] Subsection (1) is an offence of strict liability. Note: For strict liability, see section 6.1 of the Criminal Code.

________________________________________ [Editorial note: UCCC s 156 provided as follows:

[page 576] Notice of repossession 156 (1) [30 days written notice] A lessor must not exercise any right under a consumer lease to take possession of goods subject to the lease unless the lessor has given the lessee 30 days’ written notice of the lessor’s intention to do so.

156 (2) [Exemptions] However, the lessor is not required to give the notice in accordance with this section if— (a) the right arises under a lease granted for a fixed term at the end of that term; or (b) the lessor believes on reasonable grounds that the lessee has disposed of goods hired under the lease, or intends to dispose of such goods, contrary to the terms of the lease; or (c) the lessor has made reasonable attempts to locate the lessee but without success; or (d) the lessee is insolvent; or (e) the Court authorises the lessor to do so. Maximum penalty — 50 penalty units.]

COMMENTARY ON SECTION 178 [178.05] Outline A lessor must not exercise any right under a consumer lease to take possession of goods subject to a lease unless the lessor has given the lessee 30 days written notice of the lessor’s intention to do so. A lessor may not be able to avail itself of certain rights under ss 98–101 (which apply to consumer leases by virtue of s 177(1)(b)) unless it has given the notice required by s 178. [178.10] Notice See s 218 to calculate the commencement and end of the 30day period. No form of notice is prescribed. [178.15] Notice not required Notice will not be required in accordance with s 178 if the: right to take possession of the goods arises under a lease granted for a fixed term and is exercised at the end of that term; or lessor believes on reasonable grounds that, contrary to the lease terms, the lessee has disposed of, or intends to dispose of, goods hired under the lease; or lessor has made reasonable attempts to locate the lessee but without success; or lessee is insolvent; or court authorises the lessor not to give the notice. The circumstances in which notice is not required, specified in s 178(2)(b)

and (c), are similar to the circumstances in which a credit provider is not required to serve a default notice on a debtor (see s 88(5)(b) and (d), and [88.15]). [178.20] “Court” See [112.06] for the meaning of “court”. In Dent v Ford Credit Australia (2001) ASC ¶155-048; [2001] VCAT 208, the Victorian Civil and Administrative Tribunal did not hear the matter in relation to an alleged failure to give a default notice under s 156 of the UCCC (s 178 of the Code) because it found that it did not have jurisdiction to do so. The tribunal found that a failure to comply with s 156 of the UCCC (s 178 of the Code) is a summary offence which must be heard and determined in the Magistrates Court, not a tribunal. [178.25] Penalty A failure to comply with s 178(1) carries a criminal penalty of up to 50 penalty units. Under the NCCP Act regime changes, failure to comply [page 577] with s 178(1) was made an offence of strict liability by the insertion of s 178(3). (See paras 17 and 18 of the “Overview of the National Credit Code” for commentary on penalty units and strict liability offences.) [178.30] Personal property securities law Regulation 4.1 of the PPSR (which deems compliance with certain notice requirements under the Code for mortgaged goods to be compliance with the equivalent PPSA requirements) does not apply to repossessions of goods under a consumer lease. (Under s 177 of the Code, the repossession provisions in ss 102 and 104 of the Code apply to goods mortgages and do not apply to consumer leases.) Consumer lease that is a “PPS lease” under the PPSA If a consumer lease satisfies the definition of a “PPS lease” (PPSA s 13), the enforcement provisions in Pt 4 of the PPSA will not apply (PPSA s 109(1)(c)).

Consumer lease that is a PPSA security interest If the consumer lease is a security interest that secures payment or the performance of an obligation, it may be necessary to comply with both the notice requirements in s 178 of the Code and the notice requirements in s 130 of the PPSA.

Subdivision B — Termination of consumer lease by lessee [Subdiv B insrt Act 130 of 2012 s 3 and Sch 5 item 22, eff 1 Mar 2013]

Termination before goods have been provided 178A (1) If: (a) a consumer lease has been entered into; and (b) the goods hired under the lease have not been provided; then the lessee may, by written notice to the lessor, terminate the lease. 178A (2) Nothing in subsection (1) prevents the lessor from retaining or requiring payment of fees or charges incurred before the termination and which would have been payable under the consumer lease. ________________________________________ [Editorial note: There was no comparable UCCC provision.]

COMMENTARY ON SECTION 178A [178A.05] Outline The Explanatory Memorandum to the Enhancements Act explains (at para 6.50): 6.50

Section 178A will introduce a right for the lessee to terminate a lease by written notice if the leased goods have not yet been provided. The lessor is still entitled to demand payment of fees or charges which were incurred before the lease was terminated (but not, for example, amounts in relation to rental payments). The amount charged by lessors for these fees will be subject to regulation by the unfair contract terms provisions in the Competition and Consumer Act 2010. This complements the lessor’s existing right to terminate a lease under section 179.

[page 578]

Termination after goods have been provided 179 (1) [Termination by return of goods] A lessee may, at any time before the end of a consumer lease, end the lease by returning the goods hired under the lease to the lessor during ordinary business hours or at such other time as may be agreed with the lessor or fixed by the court on the application of the lessee. 179 (2) [Amount payable by lessee on termination] The amount payable by a lessee on the termination of a consumer lease under this section before the end of its fixed term is: (a) the amount payable under the lease on such a termination; or (b) the amount determined in accordance with the principles (if any) set out in the regulations for the purposes of this section; whichever is the lesser. [s 179 am Act 130 of 2012 s 3 and Sch 5 item 23, eff 1 Mar 2013]

________________________________________ [Editorial note: UCCC s 157 — apart from numbering the section is unchanged.]

COMMENTARY ON SECTION 179 [179.05] Penalties The Code requires a consumer lease to set out the lessee’s liabilities on termination of the lease, but does not change the general law requirements with regard to termination payments. In particular, principles relating to penalties will still apply to consumer leases regulated by the Code. [179.10] Termination Section 179 allows a lessee to end a consumer lease at any time before the end of that lease by returning the hired goods to the lessor during ordinary business hours (or at any other time agreed with the lessor or fixed by the court on the application of the lessee (s 179(1)). The amount payable by a lessee on such a termination is determined by the

lease. A lower amount may be prescribed by the Regulations (see s 179(2)) but to date this has not occurred.

Statement of amount payable on termination 179A (1) A lessor must, at the written request of a lessee, provide a written statement of the amount required to terminate a consumer lease as at such date as the lessee specifies. If so requested, the lessor must also provide details of the items which make up that amount. 179A (2) The statement must also contain: (a) a statement to the effect that the amount payable to terminate the lease may change according to the date on which it is paid; and (b) a statement to the effect that the lessee has no right to own the goods if the lease is terminated; and (c) a statement to the effect that the lessee must return the goods to the lessor by a specified date; and (d) any other matters prescribed by the regulations. 179A (3) A lessor must give a statement, complying with this section, within 7 days after the day the request is given to the lessor. Criminal penalty: 50 penalty units. 179A (4) In the case of joint lessees, the statement need only be given to the lessee who requests the statement and not, despite section 194, to each joint lessee. [page 579] 179A (5) Subsection (3) is an offence of strict liability. Note: For strict liability, see section 6.1 of the Criminal Code. [s 179A insrt Act 130 of 2012 s 3 and Sch 5 item 24, eff 1 Mar 2013]

________________________________________ [Editorial note: There was no comparable UCCC provision.]

COMMENTARY ON SECTION 179A [179A.05] Outline The Explanatory Memorandum to the Enhancements Act explains (at para 6.52): 6.52

Section 179A imposes an obligation on the lessor to provide a statement summarising the amounts payable by the lessee on termination. The lessee may make a request for such a statement at any time. Failure to provide a statement of the amounts payable upon termination of the lease is an offence of strict liability that attracts a criminal penalty of 50 penalty units [Schedule 5, item 24, section 179A]. The rationale for the penalty being strict liability is that lessees should be promptly informed about the amount necessary to be paid to end a lease, rather than incurring additional liabilities where there is a delay.

Court may determine amount payable on termination if lessor does not 179B (1) If the lessor does not provide a statement of the amount payable to terminate a consumer lease in accordance with this Subdivision after a request is duly made by a lessee, the court may, on the application of the lessee, determine: (a) the amount payable on the date of determination; and (b) the amount by which it increases daily; and (c) the period for which the determination is applicable. 179B (2) The consumer lease is discharged if: (a) the goods hired under the lease are returned to the lessor within the applicable period; and (b) an amount calculated in accordance with the determination is tendered to the lessor within the applicable period. [s 179B insrt Act 130 of 2012 s 3 and Sch 5 item 24, eff 1 Mar 2013]

________________________________________ [Editorial note: There was no comparable UCCC provision.]

COMMENTARY ON SECTION 179B [179B.05] Outline If a lessor does not provide a payout figure, a lessee may apply to a court to determine the amount payable.

One-off notice to be given the first time a direct debit default occurs 179C (1) This section applies if: (a) a lessee authorises payment of an amount for a consumer lease by direct debit; and [page 580] (b) default occurs; and (c) it is the first occasion the default occurs. 179C (2) The lessor must give the lessee a notice, complying with this section, within 14 days of the default occurring. Criminal penalty: 50 penalty units. 179C (3) The notice must contain the information prescribed by the regulations. 179C (4) Subsection (2) is an offence of strict liability. Note: For strict liability, see section 6.1 of the Criminal Code.

179C (5) This section does not affect any other requirement under this Code to give a notice.

[s 179C insrt Act 130 of 2012 s 3 and Sch 5 item 24, eff 1 Mar 2013]

________________________________________ [Editorial note: There was no comparable UCCC provision.]

COMMENTARY ON SECTION 179C [179C.05] Outline Section 179C imposes additional obligations on a lessor to notify lessees about direct debit defaults. See also commentary on reg 69D.

Subdivision C — Enforcement of consumer leases [Subdiv C insrt Act 130 of 2012 s 3 and Sch 5 item 24, eff 1 Mar 2013]

Requirements to be met before lessor can enforce consumer lease against defaulting lessee 179D (1) Enforcement of consumer lease A lessor must not begin enforcement proceedings against a lessee in relation to a consumer lease unless: (a) the lessee is in default under the lease; and (b) the lessor has given the lessee a default notice, complying with this section, allowing the lessee a period of at least 30 days from the date of the notice to remedy the default; and (c) the default has not been remedied within that period. Criminal penalty: 50 penalty units. Note: If a lessee has given a lessor a hardship notice or a postponement request there may be extra requirements that the lessor must comply with before beginning enforcement proceedings — see sections 179F and 179H.

179D (2) Default notice requirements A default notice must contain a prominent heading at its top stating that it is a default notice and specify: (a) the default; and (b) the action necessary to remedy the default; and

(c) a period for remedying the default; and (d) the date after which enforcement proceedings in relation to the default, and, if relevant, repossession of goods hired under the lease may begin if the default has not been remedied; and (e) the information prescribed by the regulations about the lessee’s right to: (i)

give a hardship notice under section 177B; or

(ii) give a postponement request under section 179H; or (iii) make an application to the court under sections 177D and 179K; and (f)

the information prescribed by the regulations about: [page 581] (i)

the approved external dispute resolution scheme of which the lessor is a member; and

(ii) the lessee’s rights under that scheme; and (g) that a subsequent default of the same kind that occurs during the period specified for remedying the original default may be the subject of enforcement proceedings without further notice if it is not remedied within the period; and (h) that, under the Privacy Act 1988, a credit reporting body (within the meaning of that Act) may collect and hold default information (within the meaning of that Act) in relation to the default; and (i)

any other information prescribed by the regulations.

[subs (2) am Act 197 of 2012 s 3 and Sch 5 item 132, eff 13 Mar 2014]

179D (3) When default notice not required A lessor is not required to give a default notice or to wait until the period specified in the default notice has elapsed, before beginning enforcement proceedings, if: (a) the lessor reasonably believes that it was induced by fraud on the

part of the lessee to enter into the consumer lease; or (b) the lessor has made reasonable attempts to locate the lessee but without success; or (c) the court authorises the lessor to begin the enforcement proceedings; or (d) the lessor reasonably believes that the lessee has disposed of goods hired under the lease, or intends to dispose of such goods, contrary to the terms of the lease; or (e) the lessee becomes insolvent after entering into the consumer lease. 179D (4) Non-remedial default If the lessor reasonably believes that a default is not capable of being remedied: (a) the default notice need only specify the default; and (b) the lessor may begin the enforcement proceedings after the period of 30 days from the date of the notice. 179D (5) Strict liability Subsection (1) is an offence of strict liability. Note: For strict liability, see section 6.1 of the Criminal Code.

________________________________________ [Editorial note: There was no comparable UCCC provision.]

COMMENTARY ON SECTION 179D [179D.05] Outline The Explanatory Memorandum to the Enhancements Act explains (at paras 6.56 and 6.57): 6.56

The Code sets out notice procedures a lessor must follow before they can begin enforcement proceedings against a defaulting lessee. Before commencing enforcement proceedings, the lessor must give a default notice, which provides the lessee a period of 30 days from the date of the notice to remedy the default. Failure to do so amounts to a strict liability offence with a maximum penalty of 50 penalty units. Strict liability is necessary to ensure the effectiveness of the enforcement regime for this offence to protect the lessee’s interests. The default notice must contain a number of matters under s 179D(2) including information prescribed by the regulations; this information is expected to ensure the person in default has relevant information relating to the default itself, the date after which enforcement action may begin, and the lessee’s

rights. 6.57

The provisions also outline certain circumstances where a default notice is not required, such as where the lessor has made reasonable attempts to locate the lessee without success or the court has authorised the start of enforcement proceedings.

[page 582] [179D.10] Privacy amendments The Privacy Amendment (Enhancing Privacy Protection) Act 2012 (Cth) amended s 179D(2)(h). The original wording was: (h) that, under the Privacy Act 1988, the debt may be included in a credit reporting agency’s credit information file about the lessee if: (i)

the debt remains overdue for 60 days or more; and

(ii) the lessor has taken steps to recover all or part of the debt; … The amendment is part of the Privacy Act reforms that introduced a comprehensive credit reporting regime, which commenced on 12 March 2014. (See “Privacy reforms” in the introductory pages to this text.)

Defaults may be remedied 179E (1) If a default notice under section 179D states that the lessor intends to take action because the lessee is in default under the consumer lease, the lessee may remedy the default within the period specified in the notice, and the lease is then reinstated and any acceleration clause cannot operate. 179E (2) A lessee does not remedy the default if, at the end of the period, the lessee is in default under the consumer lease because of the breach specified in the notice or because of a subsequent breach of the same type. ________________________________________

[Editorial note: There was no comparable UCCC provision.]

COMMENTARY ON SECTION 179E [179E.05] Outline A lessee has the right to remedy any default within the period specified in the default notice, in order to avoid enforcement action.

Effect of hardship notices on enforcement 179F (1) This section applies if: (a) a lessor is required to give a default notice under section 179D before beginning enforcement proceedings; and (b) before or after the lessor gives the default notice, the lessee gives the lessor a hardship notice (the current hardship notice) under section 177B; and (c) either: (i)

in the 4 months before the current hardship notice is given, the lessee had not given the lessor another hardship notice; or

(ii) in that 4-month period, the lessee had given the lessor one or more other hardship notices, but the lessor reasonably believes that the basis on which the current hardship notice was given is materially different from the bases on which the other hardship notices were given. 179F (2) The lessor must not begin enforcement proceedings against the lessee unless: (a) the lessor has given the lessee a notice under paragraph 177B(4)(b), in response to the current hardship notice, stating that the lessor and the lessee have not agreed to change the consumer lease; and (b) the period of 14 days, starting on the day the lessor gave the notice under paragraph 177B(4)(b), has expired. Criminal penalty: 50 penalty units. [page 583] Note: The lessor must allow the lessee at least 30 days from the date of the default notice to remedy the default — see section 179D. The 14-day period in subsection (2) may end before, at the same time as, or after the end of the period for remedying the default specified in the default notice.

179F (3) However, the lessor may take possession of goods hired under a consumer lease if the lessor reasonably believes that: (a) the lessee has removed or disposed of the goods, or intends to remove or dispose of them; or (b) urgent action is necessary to protect the goods. 179F (4) Subsection (2) is an offence of strict liability. Note: For strict liability, see section 6.1 of the Criminal Code.

COMMENTARY ON SECTION 179F [179F.05] Outline Section 179F limits a lessor’s rights to begin enforcement proceedings against a lessee where the lessee gives a hardship notice under s 179D.

Requirements to be met before lessor can enforce an acceleration clause 179G (1) An acceleration clause of a consumer lease is to operate only if: (a) the lessee is in default under the lease; and (b) the lessor has given to the lessee a default notice under section 179D; and (c) the default notice contains an additional statement of: (i)

the manner in which the liabilities of the lessee under the consumer lease would be affected by the operation of the acceleration clause; and

(ii) the amount required to terminate the lease (as accelerated); and (d) the default has not been remedied within the period specified in the default notice (unless the lessor reasonably believes that the default is not capable of being remedied).

179G (2) However, a lessor is not required to give a default notice under section 179D or to wait until the period specified in the default notice has elapsed before bringing an acceleration clause into operation, if: (a) the lessor reasonably believes that it was induced by fraud on the part of the lessee to enter into the consumer lease; or (b) the lessor has made reasonable attempts to locate the lessee but without success; or (c) the court authorises the lessor not to do so; or (d) the lessor reasonably believes that the lessee has removed or disposed of goods hired under a consumer lease, or intends to remove or dispose of goods hired under the lease, or that urgent action is necessary to protect the goods. ________________________________________ [Editorial note: There was no comparable UCCC provision.]

COMMENTARY ON SECTION 179G [179G.05] Outline The Explanatory Memorandum to the Enhancements Act explains (at para 6.62): 6.62

Where a lessor has included an acceleration clause in their contract (enabling the lessor to require the lessee to pay the outstanding balance as a lump sum), the Code restricts the operation of such clauses so that the

[page 584] lessor cannot demand an acceleration in payments until a default notice is provided. The Code specifies circumstances where this restriction does not apply (for example, where the lessor is unable to locate the lessee).

Subdivision D — Postponement of enforcement proceedings [Subdiv D insrt Act 130 of 2012 s 3 and Sch 5 item 24, eff 1 Mar 2013]

Postponement of exercise of rights 179H (1) Postponement request A lessee who has been given a default notice under section 179D may, at any time before the end of the period specified in the notice, request (a postponement request), orally or in writing, that the lessor negotiate a postponement of: (a) the enforcement proceedings; or (b) any action taken under such proceedings; or (c) the operation of any applicable acceleration clause. 179H (2) Lessor’s notice about postponement If the lessee gives the postponement request, the lessor must, within 21 days after the day of receiving the request, give the person a written notice: (a) that states whether or not the lessor agrees to negotiate a postponement; and (b) if the lessor does not agree to negotiate — that states: (i)

the name of the approved external dispute resolution scheme of which the lessor is a member; and

(ii) the person’s rights under that scheme; and (iii) the reasons for not agreeing to negotiate. Criminal penalty: 30 penalty units. 179H (3) Enforcement proceedings If the lessee gives the postponement request, the lessor must not begin enforcement proceedings unless: (a) the lessor has given the lessee a notice under subsection (2) in response to the postponement request; and (b) the period of 14 days, starting on the day the lessor gives the notice under subsection (2), has expired. Criminal penalty: 50 penalty units. Note: The lessor must allow the lessee at least 30 days from the date of the default notice to remedy the default — see section 179D. The 14-day period in subsection (3) may end before, at the same time as, or after the end of the period for remedying the default specified in the default notice.

179H (4) However, the lessor may take possession of goods hired under the consumer lease if the lessor reasonably believes that: (a) the lessee has removed or disposed of the goods, or intends to remove or dispose of them; or (b) urgent action is necessary to protect the goods. 179H (5) Strict liability Subsections (2) and (3) are offences of strict liability. Note: For strict liability, see section 6.1 of the Criminal Code.

________________________________________ [Editorial note: There was no comparable UCCC provision.]

[page 585] COMMENTARY ON SECTION 179H [179H.05] Outline Section 179H sets out the rights of a lessee to postpone enforcement proceedings where the lessee has been provided with a default notice. Failure of the lessor to comply is an offence of strict liability carrying a penalty of 100 penalty units.

Effect of negotiated postponement 179J (1) A default notice under section 179D is taken, for the purposes of this Code, not to have been given if a postponement is negotiated with the lessor under section 179H and the lessee complies with the conditions of postponement. 179J (2) A lessor must give written notice of the conditions of a postponement referred to in subsection (1) not later than 30 days after agreement is reached on the postponement. The notice must set out the

consequences under subsection (5) if the conditions of the postponement are not complied with. Criminal penalty: 100 penalty units. 179J (3) Subsection (2) is an offence of strict liability. Note: For strict liability, see section 6.1 of the Criminal Code.

179J (4) A lessor that is required to give notice under section 177A (which deals with changes to leases by agreement) in relation to a postponement is not required to comply with subsection (2). 179J (5) If any of the conditions of a postponement are not complied with, a lessor is not required to give a further default notice under this Code to the lessee with whom the postponement was negotiated before proceeding with enforcement proceedings. ________________________________________ [Editorial note: There was no comparable UCCC provision.]

COMMENTARY ON SECTION 179J [179J.05] Outline Section 179J sets out the consequences when a postponement is negotiated. Failure of a lessor to comply is an offence of strict liability and attracts a penalty of 100 penalty units.

Postponement by court 179K (1) If the lessee is unable to negotiate a postponement, the lessee may apply to the court for a postponement. 179K (2) After allowing the applicant and the lessor a reasonable opportunity to be heard, the court may: (a) order the postponement to which the application relates; or (b) refuse to order the postponement; or

(c) make such other orders as it thinks fit. 179K (3) The court may, if it thinks it appropriate in the circumstances, stay any enforcement proceedings under the consumer lease until the application has been determined. ________________________________________ [page 586] [Editorial note: There was no comparable UCCC provision.]

COMMENTARY ON SECTION 179K [179K.05] Outline A lessor may apply to a court for a postponement if they are unable to negotiate a postponement with the lessor.

Lessor may apply for variation of postponement order 179L (1) A lessor that is subject to an order under this Subdivision may apply to the court for variation of the order. 179L (2) On such an application, the court may: (a) vary the order to which the application relates as it thinks fit; or (b) refuse to vary the order; or (c) revoke the order. ________________________________________ [Editorial note: There was no comparable UCCC provision.]

COMMENTARY ON SECTION 179L

[179L.05] Outline The Explanatory Memorandum to the Enhancements Act explains (at para 6.66): 6.66

The provisions regarding enforcement procedures for goods hired under a consumer lease are intended to provide the same protections as those which apply in relation to mortgaged goods under a credit contract. These provisions previously applied to consumer leases by virtue of paragraph 177(1)(b) of the Code. This Enhancements Bill repeals that provision and instead the Code now sets out in detail the obligations that apply in relation to consumer leases.

Subdivision E — Enforcement procedures for goods hired under a consumer lease [Subdiv E insrt Act 130 of 2012 s 3 and Sch 5 item 24, eff 1 Mar 2013]

Information as to location of goods hired under a consumer lease 179M (1) A lessor may, by written notice to a lessee, require the lessee to inform the lessor, within 7 days after the day the notice is given to the lessee, where the goods hired under the consumer lease are and, if the goods are not in the lessee’s possession, to give the lessor all information in the lessee’s possession that might assist the lessor to trace the goods. 179M (2) A lessee who contravenes a notice under this section commits an offence. Criminal penalty: 50 penalty units. 179M (3) Subsection (2) is an offence of strict liability. Note: For strict liability, see section 6.1 of the Criminal Code.

________________________________________ [page 587] [Editorial note: There was no comparable UCCC provision.]

COMMENTARY ON SECTION 179M [179M.05] Outline A lessor may require the lessee to inform the lessor of the location of goods hired under the consumer lease. A lessee who contravenes this section commits a strict liability offence that carries a penalty of 50 penalty units.

Entry to residential property to take possession of goods 179N (1) A lessor, or an agent of a lessor, must not enter any part of premises used for residential purposes for the purpose of taking possession of goods hired under a consumer lease unless: (a) the court has authorised the entry; or (b) the occupier of the premises has, after being informed in writing of the provisions of this section, consented in writing to the entry. 179N (2) The regulations may provide for procedures for the obtaining and giving of consent for the purposes of this section and may set out the circumstances in which consent is or is not taken to have been given. 179N (3) If premises are entered in contravention of this section by a lessor or an agent of a lessor, the lessor commits an offence. Criminal penalty: 50 penalty units. 179N (4) Subsection (3) is an offence of strict liability. Note: For strict liability, see section 6.1 of the Criminal Code.

________________________________________ [Editorial note: There was no comparable UCCC provision.]

COMMENTARY ON SECTION 179N [179N.05] Outline Section 179N restricts lessors from entering residential

premises to seize leased goods, unless the occupant has given written consent for them to enter or the court has authorised their entry.

Court may order entry 179P The court may, on the application of a lessor that is entitled to take possession of goods hired under a consumer lease, authorise the lessor to enter residential premises for the purpose of taking possession of the goods. ________________________________________ [Editorial note: There was no comparable UCCC provision.]

COMMENTARY ON SECTION 179P [179P.05] Outline A court may order entry to residential premises to allow a lessor to take possession of the leased goods.

[page 588]

Order for possession 179Q (1) The court may, on the application of a lessor that is entitled to take possession of goods hired under a consumer lease, order a person who has possession of the goods to deliver them to the lessor: (a) at a specified time or place; or (b) within a specified period. 179Q (2) The court may, on the application of a lessor or other person required to deliver goods to a lessor, by order vary the place at which or time or period within which goods must be delivered to the lessor. 179Q (3) A person who contravenes an order under this section commits an

offence. Criminal penalty: 30 penalty units. 179Q (4) Subsection (3) is an offence of strict liability. Note: For strict liability, see section 6.1 of the Criminal Code.

________________________________________ [Editorial note: There was no comparable UCCC provision.]

COMMENTARY ON SECTION 179Q [179Q.05] Outline A court may order a person to deliver the leased goods to a lessor.

Subdivision F — Enforcement expenses [Subdiv F insrt Act 130 of 2012 s 3 and Sch 5 item 24, eff 1 Mar 2013]

Recovery of enforcement expenses 179R (1) A lessor must not recover or seek to recover enforcement expenses from a lessee in excess of those reasonably incurred by the lessor. Enforcement expenses of a lessor extend to those reasonably incurred by the use of the staff and facilities of the lessor. 179R (2) Any provision of the consumer lease that appears to confer a greater right is void. If enforcement expenses are in fact recovered in excess of this limitation, they may be recovered back. 179R (3) If there is a dispute between the lessor and the lessee about the amount of enforcement expenses that may be recovered by the lessor, the court may, on application by any of the parties to the dispute, determine the amount of that liability. ________________________________________

[Editorial note: There was no comparable UCCC provision.]

COMMENTARY ON SECTION 179R [179R.05] Outline A lessor may not recover an amount greater than reasonable enforcement expenses from a lessor. A court may determine any dispute about the amount of enforcement expenses. [page 589]

DIVISION 9 — LINKED LESSORS AND TIED CONSUMER LEASES [Div 9 insrt Act 130 of 2012 s 3 and Sch 5 item 24, eff 1 Mar 2013]

Subdivision A — Interpretation and application

Linked lessors and tied consumer leases 179S (1) For the purposes of this Code, a linked lessor of a supplier means a lessor: (a) with whom the supplier has a contract, arrangement or understanding relating to: (i)

the supply to the supplier of goods in which the supplier deals; or

(ii) the business carried on by the supplier of supplying goods; or (iii) the provision to persons of a consumer lease for the hire of goods supplied by the supplier to the lessor; or (b) to whom the supplier, by arrangement with the lessor, regularly refers persons for the purpose of being provided with a consumer lease; or

(c)

whose forms of contract or forms of application or offers for a consumer lease are, by arrangement with the lessor, made available to persons by the supplier; or

(d) with whom the supplier has a contract, arrangement or understanding under which applications for a consumer lease or offers to be provided with a consumer lease from the lessor may be signed by persons at the premises of the supplier. 179S (2) A tied consumer lease is a consumer lease entered into between a lessor and a lessee where: (a) the lessee enters into the lease to hire goods supplied by the supplier to the lessor; and (b) at the time the lease is entered into the lessor is a linked lessor of the supplier. ________________________________________ [Editorial note: There was no comparable UCCC provision.]

COMMENTARY ON SECTION 179S [179S.05] Outline The Explanatory Memorandum to the Enhancements Act explains (at para 6.69): 6.69

A new Division 9 is introduced into the Code which addresses the relationships between linked lessors and suppliers of goods. These provisions address the situation where a consumer’s primary or exclusive contact in relation to a lease will be with a supplier of goods, but the goods are ultimately supplied to the consumer by a third party, the lessor (with the supplier arranging for title to pass to the lessor).

Subdivision B — Liability of lessors for suppliers’ misrepresentations

Lessor liable for supplier’s misrepresentations about hired goods

179T (1) If there is a tied consumer lease, any representation, warranty or statement made (whether orally or in writing) by the supplier, or any person acting on behalf of the supplier, to the lessee in relation to: (a) goods hired under the lease; or (b) the lease; or (c) services, supplied or arranged by the lessor, that are incidental to the hire of goods under the lease; gives the lessee the same rights against the lessor as the lessee would have had if it had been made by the lessor. [page 590] 179T (2) Without prejudice to any other rights or remedies to which a lessor may be entitled, a lessor is entitled to be indemnified by the person who made the representation, warranty or statement, and any person on whose behalf it was made, against any damage suffered by the lessor through the operation of this section. ________________________________________ [Editorial note: There was no comparable UCCC provision.]

COMMENTARY ON SECTION 179T [179T.05] Outline The Explanatory Memorandum to the Enhancements Act explains (at paras 6.70, 6.71 and 6.72): 6.70

Section 179T will provide the consumer with a remedy for specified conduct where the lessor is linked to the supplier. This approach, which already applies in relation to linked credit contracts, recognises that the lessor may be in a commercial relationship with the supplier where they largely regulate or supervise their conduct, but where common law principles of agency may not necessarily provide the consumer with a remedy against the lessor for the conduct of the supplier.

6.71

The Enhancements Bill introduces definitions for the terms “a linked lessor” and “a tied consumer lease”. A linked lessor means a lessor: with whom the supplier has a contract, arrangement or understanding relating to the goods;

to whom the supplier regularly refers persons for the purpose of providing a consumer lease; whose contracts and application forms are made available to potential lessees by the supplier (by arrangement with the lessor); or with whom the supplier has a contract, arrangement or understanding under which contracts or applications for a consumer lease may be signed by persons at the supplier’s premises. 6.72

A tied consumer lease is defined as a consumer lease which is entered into where the goods hired under the consumer lease are supplied by a supplier to the lessor, and the lessor is a linked lessor of that supplier.

DIVISION 10 — CONDUCT RELATING TO CONSUMER LEASES [Div 10 insrt Act 130 of 2012 s 3 and Sch 5 item 24, eff 1 Mar 2013]

False or misleading representations 179U (1) A person must not make a false or misleading representation: (a) in relation to a matter that is material to entry into a consumer lease or a related transaction; or (b) in attempting to induce another person to enter into a consumer lease or a related transaction. Criminal penalty: 50 penalty units. 179U (2) It is a defence to prosecution for an offence against this section if a person charged proves that he or she reasonably believed that the representation was not false or misleading. 179U (3) A person who suffers loss as a result of a contravention of this section by another person may recover the amount of the loss from: (a) that other person; or (b) any other person involved in the contravention. [page 591]

________________________________________ [Editorial note: There was no comparable UCCC provision.]

COMMENTARY ON SECTION 179U [179U.05] Outline The Explanatory Memorandum to the Enhancements Act explains (at paras 6.73 and 6.74): 6.73

Under section 179T, a linked lessor will be held liable for a supplier’s misrepresentations about the leased goods, the lease itself or services, supplied or arranged by the lessor, that are incidental to the hire of goods under the lease. A lessor is liable for any representations, warranties or statements made by the supplier of the goods to the lessee in relation to the tied consumer lease.

Example 6.2 The lessor is a linked lessor with a supplier of computers and software. Consumers sign leases at the premises of the supplier and have no direct contact with the lessor. The supplier misrepresents both the quality of the software and the terms of the service warranty provided with the lease. The consumer would have a remedy against the lessor as a linked lessor. 6.74

The lessor is entitled to be indemnified by the person who made the representation, warranty or statement and any person on whose behalf it was made. Because of their ongoing commercial relationships it is usually anticipated that there would be [a] contract between the lessor and the supplier which would specifically address the liability of the supplier to indemnify the lessor in these circumstances.

Harassment 179V A lessor or supplier must not harass a person in attempting to get that person to: (a) apply for a consumer lease; or (b) enter into a consumer lease or a related transaction. Criminal penalty: 100 penalty units. ________________________________________ [Editorial note: There was no comparable UCCC provision.]

COMMENTARY ON SECTION 179V

[179V.05] Outline It is an offence to harass a person to enter into a consumer lease arrangement. [179V.10] Penalties The Explanatory Memorandum to the Enhancements Act explains (at para 6.79): 6.79

The criminal penalties under sections 179U and 179V are consistent with the penalties under sections 154 and 155, which in turn reflect those that previously applied under State and Territory legislation.

[page 592]

DIVISION 11 — OTHER CODE PROVISIONS APPLICABLE TO CONSUMER LEASES [Div 11 insrt Act 130 of 2012 s 3 and Sch 5 item 24, eff 1 Mar 2013]

Application of certain Code provisions to consumer leases 179W (1) Part 12 (relating to miscellaneous matters) and subsection 204(2) (definition of associated) apply in relation to a consumer lease in the same way as they apply in relation to a credit contract. 179W (2) For the purposes of the application of those provisions: (a) references to a credit provider are to be read as references to a lessor; and (b) references to a debtor are to be read as references to a lessee; and (c) references to a credit contract or contract are to be read as references to a consumer lease; and (d) references to a linked credit provider are to be read as references to a linked lessor.

________________________________________ [Editorial note: There was no comparable UCCC provision.]

COMMENTARY ON SECTION 179W [179W.05] Outline Part 12 and s 204(2) apply to consumer leases. [179W.10] The Explanatory Memorandum to the Enhancements Act explains (at para 6.81): 6.81

The table below outlines the provisions which have been extended to apply to consumer leases.

Table 6.1 Credit Contracts

Consumer Leases

Topic

Section 14

Subsection 173(1)

Form and expression of contract document

Section 15

Section 173A

Contract documents in a form other than writing

Section 18

Subsection 173A(1A)

One or more separate documents

Section 19

Section 174A

Unilateral changes to a contract document

Section 31

Section 175A

Regulation of fees and charges

Section 32

Section 175A

Prohibits the overcharging of fees and charges

Section 33

Section 175C

Obligation to provide an ongoing statement of account

Section 34

Section 175D

Information to be contained in statements of account

Section 36

Section 175E

Statement of account on request

Section 37

Section 175F

Court ordered statement of account

Section 38

Section 175G

Disputed accounts

[page 593] Section 40

Section 175J

Certain transactions not treated as consumer leases

Section 71

Section 177A

Changes by agreement

Section 72

Section 177B

Section 73

Section 177C

Section 74

Section 177D

Section 75

Section 177E

Section 76

Section 177F

Section 77

Section 177G

Changes on the grounds of hardship and unjust transactions Under the old law, these matters applied to consumer leases by virtue of the former deeming provision in 177(1)(a): Changes on grounds of hardship

Section 79

Section 177H

Notice of change

Section 80

Section 177J

Changes by court

Section 81

Section 177K

Applying for variation of change Court may reopen unjust transactions Orders on reopening of transactions Applications by ASIC Time limit Joinder of parties

Section 83

Section 179A

Obligation to provide statement of amount payable on termination

Section 84

Section 179B

Court may also determine the amount payable on termination

Section 87

Section 179C

Obligation to notify about a direct debit default

Section 88

Section 179D

Section 89

Section 179E

Enforcement proceedings: Requirements before enforcement

No equivalent

Section 179F

Section 93

Section 179G

Defaults may be remedied Extra requirements before lessor can enforce Enforcing acceleration clauses

Section 94

Section 179H

Section 95

Section 179J

Postponement of enforcement proceedings: Postponement of exercise of rights Effect of negotiated postponement

[page 594] Section 96

Section 179K

Postponement by court

Section 97

Section 179L

Applying for variation of postponement order

Section 98

Section 179M

Section 99

Section 179N

Section 100

Section 179P

Section 101

Section 179Q

Enforcement proceedings for goods mortgaged Under the old law, these matters applied to consumer leases by paragraph 177(1)(b) of the former deeming provision: Information about the location of mortgaged goods Entry into residential property to take possession of goods Court may order entry Order for possession

Section 107

Section 179R

Recovery of enforcement expenses

Section 127

Section 179S

Definitions for linked lessor and tied consumer lease

Section 128

Section 179T

Liability for linked contracts

Section 154

Section 179U

False or misleading representations

Section 155

Section 179V

Harassment

[page 595]

Legislation as at 28 February 2013, applicable to agreements made prior to 1 March 2013.

Part 11 — Consumer leases DIVISION 1 — INTERPRETATION AND APPLICATION Meaning of consumer lease 169 For the purposes of this Code, a consumer lease is a contract for the hire of goods by a natural person or strata corporation under which that person or corporation does not have a right or obligation to purchase the goods.

Consumer leases to which this Part applies 170 (1) This Part applies to a consumer lease if, when the lease is entered into: (a) the goods are hired wholly or predominantly for personal, domestic or household purposes; and (b) a charge is or may be made for hiring the goods and the charge together with any other amount payable under the consumer lease exceeds the cash price of the goods; and (c) the lessor hires the goods in the course of a business of hiring goods carried on in this jurisdiction or as part of or incidentally to any other business of the lessor carried on in this jurisdiction. 170 (2) If this Part applies to a consumer lease: (a) this Part applies to all transactions or acts under the lease whether or not they take place in this jurisdiction; and (b) this Part continues to apply even though the lessee ceases to carry on a business in this jurisdiction. 170 (3) For the purposes of this section, the amount payable under a consumer lease includes any agreed or residual value of the goods at the end of the lease or on termination of the lease by the lessor or lessee, but does not include: (a) any amount payable for services that are incidental to the hire of the goods under the lease; or (b) any amount that ceases to be payable on the termination of the contract following the exercise of a right of cancellation by the lessee at the earliest opportunity. 170 (4) For the purposes of this section, the predominant purpose for which

goods are hired is: (a) the purpose for which more than one half of the goods are intended to be used; or (b) if the same goods are intended to be used for different purposes, the purpose for which the goods are intended to be most used.

Consumer leases to which this Part does not apply 171 (1) Short term or indefinite leases This Part does not apply to a consumer lease for a fixed period of 4 months or less or for an indefinite period. 171 (2) Employment-related leases This Part does not apply to a consumer lease under which goods are hired by an employee in connection with the employee’s remuneration or other employment benefits. 171 (3) Regulations may exclude leases This Part does not apply to a consumer lease under which goods are hired by an employee in connection with the employee’s remuneration or other employment benefits. [page 596] 171 (4) ASIC may exclude leases ASIC may exclude, from the application of this Part, a consumer lease specified by ASIC. 171 (5) An exemption under subsection (4) is not a legislative instrument. 171 (6) ASIC may, by legislative instrument, exclude from the application of this Part, consumer leases of a class specified in the instrument.

Presumptions relating to application of this Part 172 (1) In any proceedings (whether brought under this Code or not) in which a party claims that a lease is a consumer lease to which this Part applies, it is presumed to be such unless the contrary is established. 172 (2) It is presumed for the purposes of this Code that goods hired under a

lease are not hired wholly or predominantly for personal, domestic or household purposes if the lessee declares, before entering the lease, that the goods are hired wholly or predominantly for business purposes, unless the contrary is established. 172 (3) However, the declaration is ineffective if, when the declaration was made, the lessor or a person (the prescribed person) of a kind prescribed by the regulations: (a) knew, or had reason to believe; or (b) would have known, or had reason to believe, if the lessor or prescribed person had made reasonable inquiries about the purpose for which the goods were hired; that the goods were in fact hired wholly or predominantly for personal, domestic or household purposes. 172 (4) If the declaration is ineffective under subsection (3), paragraph 170(1)(a) is taken to be satisfied in relation to the lease. 172 (5) A declaration under this section is to be substantially in the form (if any) required by the regulations and is ineffective for the purposes of this section if it is not. 172 (6) A person commits an offence if: (a) the person engages in conduct; and (b) the conduct induces a debtor to make a declaration under this section that is false or misleading in a material particular; and (c) the declaration is false or misleading in a material particular. Criminal penalty: 100 penalty units, or 2 years imprisonment, or both. 172 (7) Strict liability applies to paragraph (6)(c). Note: For strict liability, see section 6.1 of the Criminal Code.

DIVISION 2 — FORM OF AND INFORMATION

TO BE INCLUDED IN CONSUMER LEASES Form of consumer lease 173 (1) A consumer lease must be in the form of a written lease document signed by the lessee and containing the information required by this Division. 173 (2) The regulations may make provision for or with respect to the form of consumer leases and the way they are expressed. [page 597] 173 (3) A lessor must not enter into a consumer lease that contravenes a requirement of this section or regulations made under this section. Criminal penalty: 100 penalty units. 173 (4) Subsection (3) is an offence of strict liability. Note: For strict liability, see section 6.1 of the Criminal Code.

Disclosures in consumer leases 174 (1) A consumer lease must contain the following matters, if ascertainable: (a) a description or identification of the goods hired under the lease; (b) the amount or value of any consideration to be paid or provided by the lessee before the delivery of those goods; (c) the amount of any stamp duty or other government charge (other than on receipts or withdrawals) payable by the lessee in respect of the lease; (d) the amount of any other charges not included in the rental payable under the lease, and a description of those charges;

the amount of each rental payment to be made by the lessee under (e) the lease, the date on which the first rental payment is due and either the dates on which subsequent rental payments are due or the interval between rental payments; (f)

the number of rental payments to be made by the lessee, and the total amount of rental payable under the lease;

(g) a statement of the conditions on which the lessee may terminate the lease; (h) a statement of the liabilities (if any) of the lessee on termination of the lease. 174 (2) A consumer lease is taken to comply with this section despite any omission or other error if the court is satisfied that the omission or error is not of such a nature as to mislead the lessee to his or her disadvantage. 174 (3) A lessor must not enter into a consumer lease that contravenes a requirement of this section. Criminal penalty: 100 penalty units. 174 (4) Subsection (3) is an offence of strict liability. Note: For strict liability, see section 6.1 of the Criminal Code.

Copy of lease etc. for lessee 175 (1) A lessor must, within 14 days after entering into a consumer lease, give to the lessee a copy of the consumer lease, together with a statement in the form prescribed by the regulations explaining the rights and obligations of a lessee. Criminal penalty: 50 penalty units. 175 (2) Subsection (1) does not apply if the lessor has previously given the lessee a copy of the consumer lease to keep. 175 (3) Subsection (1) is an offence of strict liability.

Note: For strict liability, see section 6.1 of the Criminal Code.

175 (4) Section 194 applies to this section as if references in that section to the credit provider were references to the lessor or a lease broker and as if references in that section to the debtor were references to the lessee.

Further goods and deferrals or waivers under consumer leases 176 The provision of further goods under a consumer lease or a change in a consumer lease as a result of a deferral or waiver of payment of an amount payable under a consumer lease is not to [page 598] be treated as creating a new consumer lease for the purposes of this Part or as creating a credit contract, if the provision of the further goods or the deferral or waiver is permitted by this Code or the consumer lease.

DIVISION 3 — OTHER PROVISIONS APPLICABLE TO CONSUMER LEASES Application of certain Code provisions to consumer leases 177 (1) The following provisions of this Code apply in relation to a consumer lease in the same way as they apply in relation to credit contracts: (a) Division 3 of Part 4 (relating to changes to contracts on the grounds of hardship and unjust transactions), other than section 78; (b) sections 98 to 101 (relating to information as to mortgaged goods, entry to residential property to take possession of goods and orders by the court for entry and possession);

(c) Part 12 (relating to miscellaneous matters). 177 (2) For the purposes of the application of those provisions: (a) references to a credit provider are to be read as references to a lessor; and (b) references to a debtor are to be read as references to a lessee; and (c) references to a credit contract or contract are to be read as references to a consumer lease; and (d) references to mortgaged goods are to be read as references to goods hired under a consumer lease. 177 (3) For the purposes of the application of Division 3 of Part 4, the words “(without a change being made to the annual percentage rate or rates)” are taken to be omitted from section 72 wherever occurring.

Notice of repossession 178 (1) A lessor must not exercise any right under a consumer lease to take possession of goods subject to the lease unless the lessor has given the lessee 30 days’ written notice of the lessor’s intention to do so. Criminal penalty: 50 penalty units. 178 (2) However, the lessor is not required to give the notice in accordance with this section if: (a) the right arises under a lease granted for a fixed term at the end of that term; or (b) the lessor believes on reasonable grounds that the lessee has disposed of goods hired under the lease, or intends to dispose of such goods, contrary to the terms of the lease; or (c) the lessor has made reasonable attempts to locate the lessee but without success; or (d) the lessee is insolvent; or (e) the court authorises the lessor to do so.

178 (3) Subsection (1) is an offence of strict liability. Note: For strict liability, see section 6.1 of the Criminal Code.

Termination of lease 179 (1) A lessee may, at any time before the end of a consumer lease, end the lease by returning the goods hired under the lease to the lessor during ordinary business hours or at such other time as may be agreed with the lessor or fixed by the court on the application of the lessee.

179 (2) The amount payable by a lessee on the termination of a consumer lease under this section before the end of its fixed term is: (a) the amount payable under the lease on such a termination; or (b) the amount determined in accordance with the principles (if any) set out in the regulations for the purposes of this section; whichever is the lesser.

[page 599]

Part 12 — Miscellaneous DIVISION 1 — TOLERANCES AND ASSUMPTIONS Tolerances and assumptions relating to information 180 (1) Disclosures generally Information disclosed in a precontractual statement, contract document, mortgage document or guarantee, statement, notice or consumer lease, or otherwise disclosed for the purposes of this Code, is taken to be correctly disclosed if: (a) it is within tolerances allowed by the regulations; and (b) the disclosure is made as at a date stated in it. 180 (2) Disclosure of interest charges Disclosures for the purposes of this Code relating to interest charges may be made on the following assumptions (and such other assumptions under this section as are applicable): (a) that, in the case of an annual percentage rate or default rate, there will be no variation in the rate as disclosed over the whole term of the contract or any shorter term for which it applies; (b) if a change to a variable rate is provided for by the contract, that the variable rate applicable over the term for which it applies is the same as the equivalent variable rate as at the date disclosure is made; (c) that the debtor will make the repayments required by the contract at the times required by the contract. 180 (3) Disclosure of repayments Disclosures for the purposes of this Code relating to repayments may be made on the assumption that the debtor will

pay the repayments required by the contract at the times required by the contract and on such other assumptions under this section as are applicable. 180 (4) Disclosures of credit fees and charges Disclosures relating to credit fees and charges for the purposes of this Code may be made on the following assumptions (and on such other assumptions under this section as are applicable): (a) that there will be no change in the credit fees and charges as so disclosed and no new fees or charges imposed; (b) that the debtor will pay the fees and charges required by the contract at the times required by the contract. 180 (5) Disclosures in consumer leases Disclosures for the purposes of this Code relating to consideration, charges and payments in a consumer lease may be made on the assumptions that there will be no change in the matters disclosed and no new charges imposed. 180 (6) When information is ascertainable Information required to be disclosed for the purposes of this Code, which is not otherwise ascertainable, is taken to be ascertainable if it is ascertainable, as at the date the disclosure is made, on the basis of assumptions set out in this section or in the regulations. 180 (7) Disclosure of names Information disclosed for the purposes of this Code as to a name is taken to be correctly disclosed if the information is sufficient to identify the person concerned. ________________________________________ [Editorial note: UCCC s 158 — apart from numbering the section is unchanged.]

COMMENTARY ON SECTION 180 [180.05] Outline Information disclosed by a credit provider will be taken to be correctly disclosed if it is within the tolerances and assumptions set out in s 180. [page 600]

Section 180(1) of the Code provides that information disclosed by a credit provider in a precontractual statement, the credit contract, mortgage document or guarantee, statement, notice or consumer lease or other Code disclosure document is taken to be correctly disclosed if it is within the tolerances allowed by the Regulations and the disclosure is made as at a date stated in it. Section 180 sets out a number of tolerances relating to the disclosure of interest charges, repayments, credit fees and charges, consumer leases and relating to the disclosure of names and when information is ascertainable. The following paragraphs summarise the effect of the Code’s tolerances and assumptions. [180.10] Additional tolerances Additional tolerances relating to contracts and other documents are set out in s 181 (see [181.10]). [180.15] Additional assumptions Additional assumptions may be made by Regulations under s 182 (see [182.10]). [180.20] Information disclosures The assumptions and tolerances set out in s 180, and in other sections of the Code and the Regulations, apply to all information disclosed for the purposes of the Code. Information to be provided by a credit provider includes the information to be: included in a precontractual statement (s 16(1)); included in a credit contract (s 17); included in an account statement (s 34); included in a statement of amount owing (s 36(1)); included in a statement of payout figure (s 83); and provided by a credit provider, if requested by a debtor or guarantor, referred to in s 36(1). Also, the Code imposes requirements in respect to the information to be contained in a mortgage (Div 1 of Pt 3) and a guarantee (Div 2 of Pt 3), and the disclosures required when applicable interest rates change (s 64), when

repayments change (s 65) and when credit fees and charges change (s 66). Further, a default notice must comply with s 88(3) and a consumer lease must contain the information specified in s 174(1). [180.25] Tolerances The tolerances are set out in reg 106: Percentage rates may be rounded-off to not less than four decimal places (but must be correct to the fourth decimal place) (reg 106(1) (a)). Amounts payable may be rounded-off to the nearest whole cent (reg 106(1)(b)). Amounts payable which are calculated using an interest rate that is within permissible tolerances in reg 106(1) are also within permissible tolerances (reg 106(2)). Overstated interest charges or repayments, or credit fees or charges that are government fees or charges, are also within permissible tolerances (reg 106(4)). The effect of reg 106(4) is that if the credit provider cannot determine, or has difficulty determining, an interest charge or a repayment, or a credit fee or charge that is a government fee or charge, then the credit provider will not contravene the Code if the credit [page 601] provider decides to overstate the amount. However, such an overstatement will not affect the actual amounts payable under the contract and will not be permissible unless it is within the permissible tolerances specified in reg 107 (reg 106(5)). [180.30] Overstated amounts Overstated interest charges, repayments, credit fees or charges that are government fees or charges are also within permissible tolerances (reg 106(4)). The effect of reg 106(4) is that, if the credit provider cannot determine, or has difficulty determining, an interest

charge, a repayment, or a credit fee or charge, the credit provider will not contravene the Code if the credit provider decides to overstate the amount. [180.35] Total amount of interest charges Section 180(2) sets out a number of assumptions that may be made in disclosing interest rates. Section 17(6) of the Code requires disclosure of the total amount of interest charges payable if, on the assumptions set out in ss 180 and 182, the credit contract would be paid out within seven years. A credit provider must: first, determine whether it is necessary to disclose the total interest charges payable; and second, if it is necessary to disclose the total interest charges payable, calculate that amount. The assumptions in ss 180 and 182 relevant to the first point (determination) are that the debtor will make repayments when due (s 180(2) (c) and (3)) and that the applicable interest rate on the disclosure date will not change (s 180(2)(a) and (b)). Also, the assumptions in s 182 and reg 108, which deal with payments or interest charges which fall due on a day other than a business day, are relevant to the determination. The assumptions relevant to the second point (calculation) are that the applicable interest rate (s 180(2)(a) and (b)) and the credit fees and charges (s 180(4)) will not change. Also, the tolerances in ss 181 and 182 and in regs 107, 108 and 109 regarding the applicable interest rate and the amount of repayments may be used to calculate the total amount of interest charges. [180.40] Total repayments Section 180(3) sets out assumptions relevant to the disclosure of repayments. Section 17(7)(a)(iii) requires disclosure in a credit contract of the total amount of repayments payable under a credit contract if, on the assumptions set out in ss 180 and 182, the credit contract would be paid out within seven years. A credit provider must: first, determine whether it is necessary to disclose the total amount of repayments; and second, if it is necessary to disclose the total amount of repayments, calculate that amount.

The assumptions in s 180(2), (3) and (4) and the tolerances in reg 108 should be applied in calculating that amount. Section 180(2) contains assumptions relating to the disclosure of interest charges. Section 180(3) states that repayment disclosures may be made on the assumption that the debtor will pay the repayments required by the contract at the times required by the contract. Section 180(4) contains assumptions relating to the disclosure of credit fees and charges (see [180.45] below). See also the commentary in [181.10] on the assumptions prescribed by the Regulations below. [page 602] [180.45] Total credit fees and charges Assumptions for disclosing credit fees and charges are prescribed in s 180(4). Section 17(8)(c) requires the disclosure of the total amount of credit fees and charges payable under a credit contract, if ascertainable. Section s 180(6) applies to determine whether an amount is “ascertainable” (see [180.50]). The assumptions in s 180(2), (3) and (4) and the tolerances in ss 180 and 182 and reg 108 will be applied in calculating the total amount of credit fees and charges payable under the credit contract. Section 180(4) states that disclosures relating to credit fees and charges for the purposes of the Code may be made on the assumption that there will be no change in the credit fees and charges as disclosed and that no new fees or charges will be imposed, and that the debtor will pay the fees and charges required by the contract at the times required by the contract. [180.50] “If ascertainable” Information is taken to be ascertainable for the purposes of the Code if it was ascertainable as at the date of the disclosure on the basis of the assumptions in s 180 and the Regulations (s 180(6)). “Ascertainable” means capable of being fixed, settled or decided and able to be ascertained (Oxford English Dictionary, Clarendon Press, Oxford, 1933). “Ascertained” means “to find out by making inquiries” (Oxford English Dictionary). Therefore, a credit provider is obliged to make reasonable inquiries to determine whether an amount is “ascertainable” (see [17.20]).

[180.55] Names A name will be correctly disclosed if the information is sufficient to identify the person concerned (s 180(7)). This will eliminate the penalties that have resulted under the state and territory Credit Acts (the precursor regime to the UCCC and the Code) for minor technical errors in the disclosure of names, where the identity of the person concerned was clear, but the name was technically wrong (see Household Financial Services Ltd v Various Respondents (1996) 2 ACCR 250; (1996) ASC ¶56-352 at 56-898– 900; Australian Guarantee Corp Ltd v Various Debtors (1996) ASC ¶56-440 at 56-769; and National Australia Bank Ltd v Various Respondents (1995) ASC ¶56-324 at 56-558–560). [180.60] Disclosures in consumer leases Disclosures for the purposes of the Code in relation to consideration, charges and payments in a consumer lease may be made on the assumption that there will be no change in the matters disclosed and no new charges imposed (s 180(5)).

Tolerances relating to contracts and other documents 181 An amount of interest, a fee or charge or any other amount charged, payable or calculated under or in connection with a credit contract, mortgage, guarantee or consumer lease is, for the purposes of this Code, taken to comply with this Code if the amount is within tolerances allowed by the regulations. ________________________________________ [Editorial note: UCCC s 159 — apart from numbering the section is unchanged.]

[page 603] COMMENTARY ON SECTION 181 [181.05] Outline The amount of interest, fees or charges or any other amount

charged, payable or calculated under a credit contract, mortgage, guarantee or consumer lease is taken to comply with the Code if the amount is within the tolerances specified in the Regulations. [181.10] Tolerances Regulation 107 prescribes that: a calculation of an amount of interest is taken to be correct if the interest rate used for the calculation has been rounded off to not less than four decimal places (but must be correct to the fourth decimal place) (reg 107(1)(a)); an amount charged, payable or calculated may be rounded off to the nearest whole cent (reg 107(1)(b)); and any amount or duty in the nature of receipts or financial institutions duty which a credit provider is authorised to charge by a law of the Commonwealth that is not within a permissible tolerance under reg 107(1)(a) or (b), will be within a permissible tolerance. [181.15] Disclosures The tolerances in reg 107 (which, in the case of reg 107(1)(a) and (b), are the same as in reg 106(1)(a) and (b)) relating to the amount of interest, fees and charges payable by a debtor or lessee will apply whenever the Code requires the disclosure of that information. The information is to be included: in a precontractual statement (s 16); in a credit contract (s 17(6), (7), (8), (14)); in statements of account (s 34(3), (4), (6), (7), (8), (9)); when variations to interest rates (s 64), repayments (s 65) and credit fees and charges (s 66) are notified; if requested by a debtor, when the credit provider is asked to itemise a payout figure (s 83); and in relation to fees and charges under a consumer lease (s 174(1)). However, tolerances in relation to disclosures of information will not necessarily apply to amounts actually changed (reg 106(5)).

Regulations 182 The regulations may vary an assumption set out in this Division and may provide for additional assumptions. ________________________________________ [Editorial note: UCCC s 160 — apart from numbering the section is unchanged.]

COMMENTARY ON SECTION 182 [182.05] Outline The Regulations may vary an assumption, or provide for additional assumptions. [page 604] [182.10] Additional assumptions Additional assumptions are set out in regs 108 and 109 (see commentary on regs 108 and 109.) Those additional assumptions and their effect are described below. [182.15] Payments due on non-business day Regulation 108(1) provides that, if any repayment is due, or any interest charge or fee or charge is to be debited on a particular day, disclosure may be made on the assumption that the payment is made, or the interest charge or fee or charge is debited, on that day although the day is not a business day, and the contract provides that the repayment is to be made, or the interest charge or fee or charge is to be debited on the next preceding or succeeding business day. In the absence of reg 108(1), credit providers would need to ensure that the programming of their computer systems for calculating those amounts was based on a calendar distinguishing between business and non-business days and whether amounts were to be paid on the succeeding or preceding business day if their payment day was a non-business day, for the life of the loan (unless they over disclosed those amounts — see reg 106(4)). This would produce extremely difficult systems programming issues.

[182.20] “Business day” The term “business day” is defined in s 204 to mean a day that is not a Saturday or Sunday, or a public holiday, special holiday or bank holiday in the place where any relevant act is or may be carried out. [182.25] Date on which credit provided Regulation 108(2) provides that disclosures may be made on the basis that credit will be provided: when nominated in the precontractual statement; or if no date is nominated in the precontractual statement, any disclosure date set out in the financial statement referred to in reg 72(10); or if no date is set out in the financial statement, the date on which the statement is provided to the debtor. Regulation 108(3) makes it clear that a credit provider is not required to use the assumptions in reg 108(2) in relation to continuing credit contracts or contracts with progressive drawdowns on dates yet to be ascertained. The effect of this is to confirm that the Code regards repayment amounts and the amounts of interest charges for these kinds of contracts as being unascertainable for disclosure purposes. Instead of disclosing amounts in these circumstances, credit providers are required to disclose methods of calculation (eg, under s 17(7)(a)(i) and (b)). [182.30] Offset arrangements Loan offset arrangements should be ignored when disclosures required by the Code are made (reg 109(1)), except that statements of account must disclose both the net interest charge debited during the statement period (reg 109(2)(a)) and the difference between that amount and the amount which would have been debited if the offset arrangement had not been in place (reg 109(2)(b)). See [32.50]. However, the additional disclosure obligations in reg 109(2) apply only if the arrangement affects the amount of interest charges payable under a credit contract. The term could include an arrangement whereby interest charges payable by a

[page 605] debtor under a credit contract are affected by arrangements between the credit provider and a third party (eg, an employer of the debtor). Without reg 109 it would be very difficult, if not impossible, to make meaningful precontractual disclosures in relation to credit contracts which were linked to interest offset arrangements. The effect of reg 109 is to authorise over-disclosure which, arguably, is no more than is already permitted by reg 106(4), but it is just as well to have the matter put beyond doubt by reg 109. [182.35] “Loan account offset arrangements” “Loan account offset arrangement” is not defined for the purposes of the Code, but it would include the kinds of arrangements, commonly offered by credit providers, under which interest which would otherwise be earned on a debtor’s deposit account with the credit provider is not paid by the credit provider, but is instead offset against the interest payable under the debtor’s credit contract. These arrangements, if properly structured, can produce tax benefits for the debtor thereby reducing the debtor’s cost of credit. Care must be taken to ensure compliance with ATO Taxation Ruling TR 93/6 Income tax and fringe benefits tax: loan account offset arrangements particularly when making the disclosures required by reg 109(2).

DIVISION 2 — DOCUMENTARY PROVISIONS Form of notices 183 (1) [Prescribed form and content of notices] The regulations may prescribe the form of any notices required or authorised to be given under this Code and may require such notices to contain specified information. 183 (2) [Notice by mortgagee] A notice required to be given by a mortgagee under this Code may include information required to be given in the same

situation under an Act, and the notice may be included in any notice given under that Act. 183 (3) [Notice in writing] A notice required or authorised to be given under this Code is to be in writing unless this Code or the regulations otherwise provide. ________________________________________ [Editorial note: UCCC s 161 — apart from numbering the section is unchanged.]

COMMENTARY ON SECTION 183 [183.05] Outline The Regulations may prescribe the form of any notices required or authorised under the Code and may require that notices contain specified information. A notice required to be given by a mortgagee may include information required by another Act and may be included in any notice given under any other Act. Notices must be in writing unless the Code or the Regulations provide otherwise. [183.10] No regulations As yet the Regulations do not prescribe the form and content of any notices for the purposes of this section, although the form and content of declarations and forms prescribed by other sections of the Code are dictated by the Regulations (eg, regs 68, 104 and 111). The Regulations do not provide that anything other than written notice is acceptable in any circumstances. [page 606] [183.15] “Act” The term “Act” is not defined in the Code. Section 38(1) of the Acts Interpretation Act 1901 (Cth), however, provides that “An Act” passed by the Parliament of the Commonwealth may be referred to by the word “Act” alone. Accordingly “Act” means an Act of the Commonwealth. [183.20] Combined notices The effect of s 183(2) is that a default notice served on a mortgagor under s 88(2) may be combined with the notice or

notices required to be served by the real property legislation in each state or territory. See also the comments about combined notices at [88.20]. [183.25] “Notice” Section 183(3) is expressed to deal with “notices” required or authorised to be given under the Code. It appears that s 183(3) will apply only where the Code uses the word “notice”, as distinct, for example, from “request” (eg, ss 36 and 83) or “apply” (eg, s 72) or “inform” (eg, s 26(3)(b)) because where those other words are used it seems clear from their context that verbal communications are contemplated, except where express provision is made to the contrary. [183.30] Implications The Code contains, under the heading “Documentary Provisions” (Pt 12, Div 2), requirements dealing with the “form of notices” and “legibility and language”. The Code requires that: a notice required or authorised to be given under the Code is to be in writing unless the Code or the Regulations provide otherwise (s 183(3)); and a credit contract, mortgage, guarantee or a notice given by a credit provider under the Code must be: —

easily legible;

—

to the extent that it is printed or typed, in at least 10-point type; and

—

clearly expressed (s 184, reg 110).

The requirements of s 184 apply to credit contracts, guarantees, consumer leases, notices and mortgages. Section 76(2)(g) and (k) applies equally to credit contracts, guarantees and mortgages.

Legibility and language 184 (1) [Legibility and clarity] A credit contract, mortgage or guarantee or

a notice given by a credit provider under this Code, other than a document transmitted by electronic communication: (a) must be easily legible; and (b) to the extent that it is printed or typed must conform with the provisions of the regulations as to print or type; and (c) must be clearly expressed. 184 (2) [Electronic transmission] A credit contract, mortgage or guarantee or a notice given by a credit provider under this Code, if transmitted by electronic communication: (a) must be easily legible; and (b) must conform with the provisions of the regulations, if any, as to content, legibility and accompanying information; and (c) must be clearly expressed. [page 607] 184 (3) [Prohibited provisions] If the court is satisfied, on application by ASIC, that a provision of a credit contract, mortgage or guarantee or a notice given by a credit provider under this Code does not comply with the requirements of this section, it may prohibit the credit provider from using a provision in the same or similar terms in future credit contracts, mortgages or guarantees or notices. 184 (4) [Contravention] A credit provider that contravenes a prohibition imposed under subsection (3) commits an offence. Criminal penalty (subsection (4)): 100 penalty units. ________________________________________ [Editorial note: UCCC s 162 provided as follows: Legibility and language 162 (1) [Legibility and clarity] A credit contract, mortgage or guarantee or a notice given by

a credit provider under this Code, other than a document transmitted by electronic communication— (a) must be easily legible; and (b) to the extent that it is printed or typed must conform with the provisions of the regulations as to print or type; and (c) must be clearly expressed. 162 (1A) [Electronic transmission] A credit contract, mortgage or guarantee or a notice given by a credit provider under this Code, if transmitted by electronic communication— (a) must be easily legible; and (b) must conform with the provisions of the regulations, if any, as to content, legibility and accompanying information; and (c) must be clearly expressed. 162 (2) [Prohibited provisions] If the Court is satisfied, on application by the Government Consumer Agency, that a provision of a credit contract, mortgage or guarantee or a notice given by a credit provider under this Code does not comply with the requirements of this section, it may prohibit the credit provider from using a provision in the same or similar terms in future credit contracts, mortgages or guarantees or notices. 162 (3) [Contravention] A credit provider that contravenes a prohibition imposed under subsection (2) is guilty of an offence. Maximum penalty (subsection (3)) — 100 penalty units.]

COMMENTARY ON SECTION 184 [184.05] Outline A credit contract, guarantee or mortgage, or a notice given by a credit provider under the Code must be easily legible, conform with the Regulations as to print and type, and must be clearly expressed. ASIC may apply to the court for a declaration that a provision of a credit contract, guarantee, mortgage or notice does not comply with s 184(3). The court may order that the credit provider not use the provision in future credit contracts, guarantees, mortgages or notices. These provisions apply equally to consumer leases because of s 177(1)(c). [184.10] e-Commerce Act — legibility and language Section 162 of the UCCC (the precursor to s 184 of the Code) formerly provided that credit contracts, guarantees and notices (ie, not including mortgages) were subject to legibility and language requirements. The section was subsequently amended as follows: section 162(1) and (2) of the UCCC were amended so that

mortgages were also subject to the same legibility and language requirements (now followed in s 184(1) and (2) of the Code); section 162(1) was amended so that the language and legibility requirements were limited to paper-based transactions (now followed in s 184(1) of the Code); and [page 608] a new subsection was inserted (the equivalent of s 184(2) of the Code), which provided that credit contracts, mortgages and other documentation provided electronically must be easily legible, comply with any regulations made in relation to content, legibility and accompanying information, and be clearly expressed. [184.15] Print type Regulation 110 prescribes that the print type of all written contracts, mortgages, guarantees and notices must be not less than 10 point. [184.16] Legibility Section 184(1)(a) requires that a credit contract, guarantee, mortgage or notice must be “easily legible”. This is not defined in the Code. A credit provider must consider aspects of the document such as the paper size, typeface and page layout. Each of these has an impact on the legibility of the document. [184.25] Unjust contracts Section 76 of the Code confers on the court power to reopen unjust contracts, mortgages, guarantees and (because of s 177(1) (c)) consumer leases. One factor to be taken into account when a court determines whether a term of a particular contract, mortgage, guarantee or consumer lease is unjust is the form of the contract, mortgage, guarantee or consumer lease and the intelligibility of its language (s 76(2)(g) and (k) — see [76.15]). [184.30] “Clearly expressed” The Code gives no guidance as to the meaning of the phrase “clearly expressed”. The requirement that documents be clearly

expressed is repeated in the codes of practice adopted by sections of the financial industry. Clause 4.1 of the Customer Owned Banking Code of Practice (January 2014) states that terms and conditions must be “clear, unambiguous, and not misleading”. Note that cl 12.2 of the Code of Banking Practice (2013) says terms and conditions “will be distinguishable from marketing or promotional material” and “will be in English and any other language we consider appropriate”. It is easier to determine when a document is not clearly expressed than it is to determine when it is clearly expressed. There is some guidance in existing court decisions on drafting which courts consider acceptable (see Stephen J in National Bank of Australasia Ltd v Mason (1975) 133 CLR 191 at 203; 7 ALR 653 at 663; 50 ALJR 362; BC7500068; Hepples v Cmr of Taxation (1992) 173 CLR 492 at 510–13; (1991) 102 ALR 497 at 509–15; [1991] HCA 39; BC9102627 per Deane J (although in dissent); Re Moodie; Ex parte Emery (1981) 34 ALR 481 at 486–8; 55 ALJR 387; 3 ALN No 33; BC8100071; Department of Social Security v Rurak (1990) 26 FCR 1; 99 ALR 17; 21 ALD 163; 12 AAR 478; Morlend Finance Corp (Vic) Pty Ltd v Westendorp [1993] 2 VR 284 at 309; (1993) ASC ¶56-200; Minister for Industry and Commerce v Zyfert and Muller (1983) 77 FLR 471; and P Butt, “Plain Language in Conveyancing?” The Conveyancer, November 1992, p 741.)

[page 609]

Copies of contracts and other documents 185 (1) [Copies of documents on request] A credit provider must in accordance with this section, at the written request of a debtor, mortgagor or guarantor, provide to the debtor, mortgagor or guarantor a copy of: (a) the credit contract, mortgage or guarantee; or (b) any credit-related insurance contract in the credit provider’s possession; or (c) a notice previously given to the debtor, mortgagor or guarantor under this Code.

Criminal penalty: 30 penalty units. 185 (2) [Time to provide copies] The copy must be provided: (a) within 14 days, if the original came into existence one year or less before the request is given; or (b) within 30 days, if the original came into existence more than one year before the request is given. Note: Section 196 provides for the date on which notice is taken to be given.

185 (3) [Copies after discharge or termination] A credit provider must provide a copy of a notice which requires a debtor, mortgagor or guarantor to take action if requested in accordance with subsection (1) even though the contract has been discharged or terminated but only if the request is made within 2 years of the discharge or termination. Criminal penalty: 30 penalty units. 185 (4) [Strict liability offences] Subsections (1) and (3) are offences of strict liability. Note: For strict liability, see section 6.1 of the Criminal Code.

________________________________________ [Editorial note: UCCC s 163 provided as follows: Copies of contracts and other documents 163 (1) [Copies of documents on request] A credit provider must in accordance with this section, at the written request of a debtor, mortgagor or guarantor, provide to the debtor, mortgagor or guarantor a copy of— (a) the credit contract, mortgage or guarantee; or (b) any credit-related insurance contract in the credit provider’s possession; or (c) a notice previously given to the debtor, mortgagor or guarantor under this Code. 163 (2) [Time to provide copies] The copy must be provided— (a) within 14 days, if the original came into existence 1 year or less before the request is given; or (b) within 30 days, if the original came into existence more than 1 year before the request is given. Note: Section 173 provides for the date on which notice is taken to be given.

163 (4) [Copies after discharge or termination] A credit provider must provide a copy of a notice which requires a debtor, mortgagor or guarantor to take action if requested in accordance with subsection (1) even though the contract has been discharged or terminated but only if the request is made within 2 years of the discharge or termination. Maximum penalty — 30 penalty units.]

COMMENTARY ON SECTION 185 [185.05] Outline If the debtor, mortgagor or guarantor asks, in writing, for an additional copy of a document or notice, the credit provider must give them, as appropriate, a copy of any: credit contract, mortgage or guarantee (s 185(1)(a)); [page 610] credit-related insurance contract the credit provider has in its possession (s 185(1)(b)); and previous notice given to the debtor, mortgagor or guarantor under the Code (s 185 (1)(c)). The copy must be given within: 14 days, if the original came into existence a year or less before the request (s 185(2)(a)); or 30 days, if the original came into existence more than a year before the request (s 185(2)(b)). [185.10] UCCC — e-Commerce Act The former s 163(3) of the UCCC, which provided that copies of contracts and other documents could be given by facsimile, was repealed by the e-Commerce Act for redundancy. [185.15] Life of contract Section 185 only applies during the life of a credit contract, mortgage or guarantee. However, the effect of s 185(3) is that a debtor, mortgagor or guarantor may request, for a period of two years after the contract is discharged or terminated, a copy of any notice which required the debtor, mortgagor or guarantor to take action.

[185.20] Date of notice See s 196 (see [196.15]) to determine the date on which a request by a debtor, mortgagor or guarantor is given. [185.25] Period See s 218 to ascertain how to calculate the commencement and end of the periods specified in s 185. [185.30] Who can request copies It is not clear whether s 185 only allows the debtor to request a copy of the credit contract, the mortgagor to request a copy of the mortgage or the guarantor to request a copy of the guarantee, or instead allows a debtor, mortgagor or a guarantor to ask for all documents referred to in s 185. A broad interpretation would allow any debtor, mortgagor or guarantor to seek a copy of any one or more of the documents referred to in s 185. [185.35] Penalties A failure to comply with s 185(1) and (3) each carry a criminal penalty of up to 30 penalty units. Under the NCCP Act changes, s 185(1) and (3) are offences of strict liability by the insertion of s 185(4). (See paras 17 and 18 of the “Overview of the National Credit Code” for commentary on penalty units and strict liability offences).

Records of nominations of persons to occupy reverse mortgaged properties 185A (1) A credit provider under a credit contract for a reverse mortgage that provides for the debtor to nominate to the credit provider a person who is to be allowed to occupy the reverse mortgaged property, and to revoke such a nomination, must keep in accordance with the regulations a record of any such nominations and revocations. [page 611] 185A (2) A person commits an offence if: (a) the person is subject to a requirement under subsection (1); and

(b) the person engages in conduct; and (c) the person’s conduct contravenes the requirement. Criminal penalty: 50 penalty units. [s 185A insrt Act 130 of 2012 s 3 and Sch 2 item 26, eff 1 Mar 2013]

________________________________________ [Editorial note: There was no comparable UCCC provision.]

COMMENTARY ON SECTION 185A [185A.05] Outline The Enhancements Act introduced a specific regime for reverse mortgages. See commentary on s 13A and [13A.30] for a list of all Code provisions relating to reverse mortgages. Section 185A relates to the right of a reverse mortgage debtor to nominate a person (such as a spouse) to occupy the mortgaged property with the same rights as the debtor, and to revoke that nomination. A credit provider must keep records of any nomination (or revocation) by a debtor. A contravention of s 185A is a criminal offence.

Signing of documents 186 (1) [Agent permitted] It is sufficient compliance with a requirement under this Code that a document be signed by a person if the person’s signature is written on the document by another person by or under the authority of the person required to sign. 186 (2) [Subject to s 199] This section has effect subject to section 199 (Conduct of agents and related matters). ________________________________________ [Editorial note: UCCC s 164 provided as follows: Signing of documents 164 (1) [Agent permitted] It is sufficient compliance with a requirement under this Code that

a document be signed by a person if the person’s signature is written on the document by another person by or under the authority of the person required to sign. 164 (2) [Subject to s 176] This section has effect subject to section 176 (Conduct of agents and related matters).]

COMMENTARY ON SECTION 186 [186.05] Outline Section 186 provides that the debtor may authorise another person to accept an offer made by the credit provider. The debtor would have the right to do this under general law, for example, by appointing an attorney or agent, so s 186 is probably unnecessary. However, the Code limits the debtor’s right to appoint an authorised person by providing that the debtor may not appoint the credit provider, or a person associated with the credit provider, for the purpose of signing a credit contract (see s 199(2)) or signifying acceptance of an offer by the credit provider (see s 14(3)). The reference to “authorised person” in s 14(2) would include a subsidiary cardholder. Subject to this, any person authorised by the debtor, mortgagor or guarantor may sign a credit contract, mortgage or guarantee on behalf of the debtor, mortgagor or guarantor. [page 612] [186.10] Application to written documents All credit contracts and guarantees must be in writing (s 14 (in relation to credit contracts) and s 55 (in relation to guarantees)). Therefore, s 186 will apply to all credit contracts and guarantees. Section 186 will also apply to all notices which are required to be in writing (s 183(3)) and to all mortgages which are required to be in writing (s 42(1)). However, a goods mortgage need not be in writing if the credit provider lawfully had possession of the mortgaged goods before the mortgage was entered into, otherwise than because the credit provider supplied the goods (s 42(3)). [186.15] Person may not authorise credit provider A debtor, mortgagor or guarantor cannot authorise a credit provider, or a person associated with a credit provider, to enter into a credit contract, mortgage or guarantee on the

person’s behalf (s 199(2)). The phrase “person associated with a credit provider” is defined in s 204(2) (see [199.30]). [186.20] Name of agent Section 186 could be interpreted to mean that, if someone other than the person who is to be bound by a document (eg, an agent or attorney) executes a document on behalf of the person to be bound, the person executing the document must not write their name under the signature, but must instead write the name of the person to be bound. However, that interpretation would be contrary to general law regarding execution by an agent or attorney. Therefore, if a document is to be executed by someone on behalf of the person to be bound, they should write their name and capacity under that signature (eg, “Abby Brown as attorney for John Smith”).

Electronic transactions and documents 187 (1) [Contracts, mortgages, guarantees] Without limiting the provisions of this Code, it is declared that any contract, mortgage or guarantee referred to in this Code may be made in accordance with the Electronic Transactions Act 1999. 187 (2) [Requirement or permission] Without limiting the provisions of this Code, it is declared that any requirement or permission by or under this Code, however expressed: (a) to give information in writing; or (b) to provide a signature; or (c) to produce a document; or (d) to record information in writing; or (e) to retain a document; may be met in accordance with the Electronic Transactions Act 1999. Example Giving information would include the requirement under subsection 36(1) to provide a statement of amount owing.

Note 1: Subsection 9(5) of the Electronic Transactions Act 1999 has a definition relating to the giving of information. That definition provides, generally, that giving information includes, but is not limited to, the following: (a) making an application; (b) making or lodging a claim; (c) giving, sending or serving a notification; (d) lodging a return;

[page 613] (e) making a request; (f)

making a declaration;

(g) lodging or issuing a certificate; (h) making, varying or cancelling an election; (i)

lodging an objection;

(j)

giving a statement of reasons.

Note 2: See regulations made under the Electronic Transactions Act 1999 for exemptions relating to electronic transactions.

________________________________________ [Editorial note: UCCC s 164A provided as follows: Electronic transactions and documents 164A (1) Without limiting the provisions of this Code, it is declared that any contract, mortgage or guarantee referred to in this Code may be made in accordance with the laws of this jurisdiction in relation to electronic transactions. 164A (2) Without limiting the provisions of this Code, it is declared that any requirement or permission by or under this Code, however expressed— (a) to give information in writing; or (b) to provide a signature; or (c) to produce a document; or (d) to record information in writing; or (e) to retain a document; may be met in accordance with the laws of this jurisdiction in relation to electronic transactions. Example— Giving information would include the requirement under section 34(1) to provide a statement of amount owing.

Note—” The laws of this jurisdiction relating to electronic transactions include a definition relating to the giving of information. That definition provides, generally, that giving information includes, but is not limited to— (a) making an application; (b) making or lodging a claim; (c) giving, sending or serving a notification; (d) lodging a return; (e) making a request; (f)

making a declaration;

(g) lodging or issuing a certificate; (h) making, varying or cancelling an election; (i)

lodging an objection;

(j)

giving a statement of reasons

164A (3) The regulations may provide that— (a) a specified transaction, or a specified class of transactions; or (b) a specified document, or a specified class of documents; or (c) specified information, or a specified class of information; referred to by or under this Code must not be made, given or provided by electronic communication.] [Editorial note: There is no NCC provision comparable to UCCC s 165.]

COMMENTARY ON SECTION 187 [187.05] Section 187 Section 187 of the Code is substantially similar to s 164A of the UCCC except that, instead of facilitating the application of the electronic transactions legislation in each state and territory and the Commonwealth (with the UCCC Regulation prescribing relevant exemptions) (as was the case under the UCCC), s 187 of the Code facilitates the application of the Electronic Transactions Act 1999 (Cth) only and the regulations made under the Electronic Transactions Act prescribe the relevant exemptions. It is intended [page 614] that the classes of transactions, documents or information prohibited under

the UCCC Regulation also be prohibited under the Electronic Transactions Regulations 2000 (Cth). [187.10] Section 187(1) Section 187(1) confirms that credit contracts, mortgages and guarantees may be formed in accordance with the Electronic Transactions Act 1999 (Cth). The Electronic Transactions Act provides that, for the purposes of a law of the Commonwealth, a transaction is not invalid because it took place wholly or partly by means of one or more electronic communications. This general rule, however, does not apply to the validity of a transaction to the extent that a more specific provision in the Electronic Transactions Act deals with the validity of the transaction. Further, the Electronic Transactions Act provides that regulations may provide that this general rule does not apply to a specified transaction or to a specified law of the Commonwealth. The Electronic Transactions Regulations 2000 (Cth) prescribe that the following sections of the Code are specifically exempt from the general rule above, and therefore the following transactions, documents or information may not be made, given or provided by electronic communication: a guarantee to which the Code applies under s 8; a copy of a guarantee given under s 57(1)(a); a copy of a credit contract given under s 57(1)(b); a copy of a contract document given under s 59(2)(a); a notice setting out particulars of the change in the terms of the credit contract under s 61(1)(a); a default notice under s 88(1); a default notice under s 88(2); information concerning the provisions of s 99(1)(b); a request for entry to premises under reg 87(a); a consent to enter premises under reg 87(c); a notice under s 102(1);

a demand made on the supplier under s 130(5)(a); a demand made on the supplier under s 130(6)(a); a notice of intention to repossess under s 178(1); a transaction on which duty is only charged under the laws of this jurisdiction if the transaction is effected or evidenced by an instrument or document in hard copy form; and an instrument on which duty is only charged under the laws of this jurisdiction if the instrument is in hard copy form. [187.15] Section 187(2) Section 187(2) provides that any requirement or permission under the Code to: give information in writing; provide a signature; produce a document; record information in writing; or retain a document; may be met in accordance with the Electronic Transactions Act 1999 (Cth). The Electronic Transactions Act contains the relevant provisions which prescribe how [page 615] these requirements are met if the information, document or signature is given by electronic communication. For example, if, under a law of the Commonwealth, a person is required to give information in writing, under the Electronic Transactions Act that requirement is taken to have been met if the person gives the information by means of an electronic communication, where: at the time the information was given, it was reasonable to expect

that the information would be readily accessible, so as to be useable for subsequent reference; and the person to whom the information is required to be given consents to the information being given by means of an electronic communication. Further, under the Electronic Transactions Act, if, under a law of the Commonwealth, the signature of a person is required, that requirement is taken to have been met in relation to an electronic communication if: a method is used to identify the person and to indicate the person’s approval of the information communicated; having regard to all the relevant circumstances at the time the method was used, the method was as reliable as was appropriate for the purposes for which the information was communicated; and the person to whom the signature is required to be given consents to that requirement being met by way of the use of the method used. [187.20] Electronic Transactions Act The Electronic Transactions Act 1999 (Cth) establishes the basic rule that a transaction is not invalid merely because it took place by means of an electronic communication. It is important to understand that the Electronic Transactions Act does not validate transactions or contracts which would not be valid if made in the traditional ways. Electronic signatures The Electronic Transactions Act 1999 (Cth) permits “electronic signatures”, but does not specify any particular method. Section 10(1) of the Electronic Transactions Act states that, where a signature is required, it may be provided by a method which is used to identify the person and to indicate the person’s approval of the information communicated. The only “technical” requirement is that the method must be as reliable as appropriate for the purpose of the communicated information having regard to all the relevant circumstances at the time the method was used. The person

from whom the signature is required must give consent to the use of the method. Great care must be taken when drafting consents for electronic signatures. The manner in which relevant disclosure documents are delivered to consumers must be considered. Customer identification and verification requirements must be established, and the medium of communication with the consumer nominated. Credit providers also must consider whether, given that the market is still transitioning from paper to electronic records and documents, it will offer customers the option of switching between paper and electronic communications. The English High Court, in J Pereira Fernandes SA v Mehta [2006] 2 All ER 891; [2006] 1 WLR 1543; [2006] 1 All ER (Comm) 885; [2006] EWHC 813 (Ch), considered an exchange of emails which purported to establish a guarantee. The Statute of Frauds provides that a guarantee is unenforceable unless in writing and signed by the guarantor or unless there is a memorandum or note of the guarantee signed by the guarantor. [page 616] The court held that, on the evidence, the email in question was a sufficient memorandum of the guarantee. There remained the issue of whether it had been signed by the guarantor. It was argued that the email headers, which contained the name of the guarantor, were sufficient to constitute a signature. This proposition was rejected by the court. The headers are inserted automatically and were not intended to be a signature. Certainly the automatic insertion of email headers does not satisfy the requirement of s 10(1) of the Electronic Transactions Act to “indicate the person’s approval of the information communicated”. Nor, it is submitted, is the automatic insertion of “signature lines” a signature for the purposes of the Electronic Transactions Act. Again, the automatic insertion does not indicate the approval of the information. On the other hand, it is doubtful that sophisticated encryption methods are

necessary. The only question is whether the “method” is reliable and appropriate having regard to all relevant circumstances. In most cases, it will probably be sufficient for the person to type their name along with some indication that they are adopting the contents of the message. Document requirements Where a law requires the production or retention of a document, the Electronic Transactions Act 1999 (Cth) provides that the person may produce or retain the document in an electronic form provided certain conditions are met. The most important of these conditions is, of course, that the electronic document must contain the same information as the original or, if the original was itself electronic, that the produced or retained document has not been altered. The Electronic Transactions Act refers to this as the “integrity of information” of the document. The Act does not provide technical requirements to ensure integrity of information. Instead, s 11(3) of the Electronic Transactions Act states that: … the integrity of information contained in a document is maintained if, and only if, the information has remained complete and unaltered, apart from: (a) the addition of any endorsement, or (b) any immaterial change, which arises in the normal course of communication, storage or display.

The emphasis is on the information content rather than the form of the document. The problem is therefore mainly one of evidence. Credit providers who wish to take advantage of electronic communications must ensure that their information systems provide sufficient evidence to show that the documents in question have maintained “integrity of information”. Contract formation An online contract is formed in the same way as a traditional paper contract. That is, where all necessary elements are present, by acceptance of an offer and communication of that acceptance to the offeror. The Electronic Transactions Act does not specify when or where a contract is made. In particular, there is some doubt as to whether the postal acceptance rule applies to the formation of contracts made by email. Under the postal

acceptance rule, a contract is formed at the time and the place where the acceptance is posted. [page 617] The better view is that the normal rules apply to contract formation, that is, the contract is formed when and where the acceptance actually reaches the offeror. The Electronic Transactions Act clarifies the question of time and place of dispatch and receipt of messages. Specifically, the Electronic Transactions Act rules are: 1.

time of dispatch — the dispatch of an electronic communication occurs when it enters the first information system outside the control of the originator of the electronic communication. Therefore, for example, an acceptance of an offer occurs under the ETA at the time the acceptance enters a communication system outside of the control of the person accepting the offer;

2.

time of receipt — if the recipient of an electronic communication has designated an information system to receive electronic communications, the time of receipt is when the electronic communication enters that information system, unless otherwise agreed between the originator and the recipient — however, if no information system has been designated, then the time of receipt is the time that the electronic communication comes to the attention of the addressee;

3.

place of dispatch — the place of dispatch is the place where the originator of the electronic communication has its place of business; and

4.

place of receipt — the place where the addressee has its place of business or ordinarily resides (some additional rules apply according to whether either the originator or the addressee has more than one place of business).

Each of the Electronic Transactions Act rules can normally be excluded by agreement to the contrary between the parties. Part 3 (Regulations 8–12) of the Electronic Transactions Regulations Part 3 (regs 8–11)) of the Electronic Transactions Regulations 2000 (Cth) introduced on 1 July 2010 has specific application to the NCCP Act. These regulations have effectively replaced the previous s 172 of the UCCC. Regulation 10 of the Electronic Transactions Regulations provides for the process to obtain consent to receiving a notice or other document by electronic communication and includes obligations to ensure that informed consent has been obtained. Regulation 11 provides a method of determining the date of a notice or other document sent by fax. Although the Electronic Transactions Act 1999 (Cth) includes fax transactions as an “electronic communication”, reg 11 specifically provides for fax transactions. For further information in relation to these regulations, see [195.25].

DIVISION 3 — GENERAL PROVISIONS Assignment by credit provider 188 (1) [Effect on credit provider] If the rights of a credit provider under a credit contract, mortgage or guarantee are assigned or pass by law to another person, this Code from then on applies to that other person and does not impose any further obligation on the credit provider. [page 618] 188 (2) [Effect on debtor] The debtor, mortgagor or guarantor has and may exercise the same rights in respect of the credit contract, mortgage or guarantee against the assignee as the debtor, mortgagor or guarantor has against the credit provider. 188 (3) [Exceptions] Subsection (1) does not apply while the credit provider

continues to receive payments from the debtor, or would continue to do so if the debtor complied with the credit contract. ________________________________________ [Editorial note: UCCC s 166 — apart from numbering the section is unchanged.]

COMMENTARY ON SECTION 188 [188.05] Outline If a credit provider’s rights are assigned or passed by law to another person, after the assignment or passage by law, the Code applies to that other person and does not impose any further obligations on the credit provider. However, if the credit provider continues to receive payments from the debtor, or would continue to do so if the debtor complied with the credit contract, the credit provider is not excused from the obligations imposed by the Code. The debtor, mortgagor or guarantor may exercise the same rights against the assignee as he or she could exercise against the credit provider. [188.10] “From then on” The Code will apply to the incoming person only after the assignment or passing of the credit contract, mortgage or guarantee. The original credit provider will not be excused from any previous contraventions of the Code, but will not be responsible for any contraventions of the Code by the assignee unless the original credit provider continues to receive payments from the debtor (or would continue to do so if the debtor complied with the credit contract). The original credit provider remains liable, and the incoming credit provider is apparently also liable, for breaches relating to preassignment conduct (see [188.25]). [188.15] “Person” “Person” is defined to include an individual or a body corporate. [188.20] Application of Code For the Code to apply, s 5(1)(d) requires that the credit provider provide the credit in the course of a business of providing credit, or as part of, or incidental to, any other business of the credit provider. In contrast, it is not necessary that the incoming person provides the credit in the course of, or as part of, or incidental to, any other business (as required of the original credit provider by s 5(1)(d) of the Code).

[188.25] Incoming person to conduct due diligence A debtor can take action against both the incoming person and the original credit provider in respect of preassignment breaches (s 188(2)). Therefore, the incoming person might suffer loss as a result of preassignment conduct of the initial credit provider. It follows that any assignee of a credit contract, mortgage or guarantee should conduct appropriate due diligence and seek appropriate indemnities from the initial credit provider before accepting any assignment. [page 619] [188.30] “Assigned” The Code does not distinguish between legal and equitable assignments, and s 188 appears to apply in the case of either type of assignment. Section 188(2) makes it clear that, after an assignment, the debtor, mortgagor or guarantor retains all their rights against the original credit provider, and also gains the same rights against the assignee. The position with regard to the obligations of the debtor, mortgagor or guarantor, however, will be different depending on whether the assignment was legal or equitable. If the assignment is legal, then the obligations of the debtor, mortgagor or guarantor are owed to the assignee. If, on the other hand, the assignment is equitable, there is nothing in the Code to alter the general law position that the obligor cannot obtain a full discharge from the assignee, so the debtor, mortgagor or guarantor continues to have obligations to the original credit provider.

Assignment by debtor, mortgagor or guarantor 189 (1) [Effect on debtor] If the rights of a debtor, mortgagor or guarantor under a credit contract, mortgage or guarantee are assigned or pass by law to another person, this Code from then on applies to that other person and does not confer any further rights on the debtor, mortgagor or guarantor. 189 (2) [Corporate assignee] Subsection (1) does not apply if the rights are assigned or pass by law to a corporation which is neither a trustee for the

debtor, mortgagor or guarantor nor an executor of the debtor’s, mortgagor’s or guarantor’s estate. 189 (3) [Conditions on assignment] Subsection (1) does not affect a requirement which is made of a debtor or mortgagor under section 52. ________________________________________ [Editorial note: UCCC s 167 provided as follows: Assignment by debtor, mortgagor or guarantor 167 (1) [Effect on debtor] If the rights of a debtor, mortgagor or guarantor under a credit contract, mortgage or guarantee are assigned or pass by law to another person, this Code from then on applies to that other person and does not confer any further rights on the debtor, mortgagor or guarantor. 167 (2) [Corporate assignee] Subsection (1) does not apply if the rights are assigned or pass by law to a corporation which is neither a trustee for the debtor, mortgagor or guarantor nor an executor of the debtor’s, mortgagor’s or guarantor’s estate. 167 (3) [Conditions on assignment] Subsection (1) does not affect a requirement which is made of a debtor or mortgagor under section 48.]

COMMENTARY ON SECTION 189 [189.05] Outline If the rights of a debtor, mortgagor or guarantor are assigned or passed by law to another person, after the assignment or passing by law the Code applies to that other person and does not confer any further rights on the debtor, mortgagor or guarantor. However, the assignment or passing by law will not have that effect if the assignee is a corporation which is a trustee for the debtor, mortgagor or guarantor or an executor of the debtor’s, mortgagor’s or guarantor’s estate (s 189(2)). [189.10] Sale of mortgaged property Property encumbered by a mortgage may be sold only with the credit provider’s consent, or with the authority of the [page 620] court (s 51(1)). A credit provider may not unreasonably withhold that consent

(s 51(2)). Some of the conditions which a credit provider may require before any property is sold are set out in s 52. Section 189 does not affect a requirement made of a debtor or mortgagor under s 52. The effect of ss 52 and 189 is that, after an assignment or disposal of mortgaged property, although a credit provider may require that a mortgagor continue to remain personally responsible to the credit provider for the repayment of the credit contract (s 52(3)), the Code will not confer any further rights on the mortgagor (s 189). It is clear, however, from s 52(1) that a credit provider may impose requirements on a debtor or mortgagor other than those set out in s 52. In view of s 189(3), it is not certain how s 189 affects a requirement made of a debtor or mortgagor in connection with a consent under s 51, but not made under s 52. [189.15] Extent of s 189 The extent of s 189 is not clear. An assignee will not be entitled to receive a new precontractual statement, or further copies of any credit contract, mortgage or guarantee (as would be required by ss 16, 20, 43 and 57 of the Code). However, it is not clear whether other rights are also transferred to the assignee. For example, it is not clear that the right to apply for a contract to be reopened under s 76 of the Code, or the right to seek a civil penalty under s 112 of the Code, is transferred to the assignee.

Appropriation of payments 190 (1) [Debtor may specify application of payment] A debtor who is liable to a credit provider under 2 or more credit contracts may require the credit provider by written notice to apply a payment to a particular one of those contracts or to divide the payment between them in a specified manner. 190 (2) [Contravention] A credit provider that contravenes a requirement under this section commits an offence. Criminal penalty: 30 penalty units. 190 (3) [Strict liability offence] Subsection (2) is an offence of strict liability. Note: For strict liability, see section 6.1 of the Criminal Code.

190 (4) [Prior agreement on application of payments] A debtor may not make a requirement under this section if the debtor and the credit provider have previously agreed as to the application of the payment concerned in relation to the credit contracts under which the debtor is liable to the credit provider. ________________________________________ [Editorial note: UCCC s 168 provided as follows: Appropriation of payments 168 (1) [Debtor may specify application of payment] A debtor who is liable to a credit provider under 2 or more credit contracts may require the credit provider by written notice to apply a payment to a particular one of those contracts or to divide the payment between them in a specified manner. 168 (2) [Contravention] A credit provider that contravenes a requirement under this section is guilty of an offence. Maximum penalty — 30 penalty units. 168 (3) [Prior agreement on application of payments] A debtor may not make a requirement under this section if the debtor and the credit provider have previously agreed as to the application of the payment concerned in relation to the credit contracts under which the debtor is liable to the credit provider.]

[page 621] COMMENTARY ON SECTION 190 [190.05] Outline A debtor who is liable to a credit provider under two or more credit contracts may require the credit provider, by written notice, to apply a payment to a particular one of those contracts, or to divide the payment between them in a specified manner (s 190(1)), unless the debtor and the credit provider have previously agreed as to the application of the payment concerned (s 190(4)). However, the parties are able to contract out of this position. That is, the debtor and credit may agree beforehand as to the application of the payment concerned (s 190(4)). [190.10] Payments As to payments generally, see commentary on s 26 at [26.05]–[26.30].

[190.15] Prior agreement The credit provider and the debtor, mortgagor or guarantor may agree in the initial credit contract, mortgage or guarantee that payments are to be applied in a certain way. Section 190(4) does not require that the previous agreement be made immediately before the payment. Standard form credit contracts, mortgages and guarantees often allow the credit provider to appropriate payments towards paying any part of the moneys owing as the credit provider sees fit. If the credit provider seeks to preserve that right to apply payments as it sees fit, the credit provider should include an appropriation clause in its credit contract, mortgage or guarantee. Otherwise, the credit provider must comply with any direction received from the debtor under s 190(1). [190.20] Penalty A failure to comply with s 190(2) carries a criminal penalty of up to 30 penalty units. Under the NCCP Act regime changes, failure to comply with s 190(2) was made an offence of strict liability by the insertion of s 190(3). (See paras 17 and 18 of the Overview of the National Credit Code for commentary on penalty units and strict liability offences).

Contracting out 191 (1) [No contracting out] A provision of a contract or other instrument by which a person seeks to avoid or modify the effect of this Code is void. 191 (2) [No indemnification of credit provider] A provision of a contract or other instrument by which a person seeks to have the debtor, mortgagor or guarantor indemnify the credit provider for any loss or liability arising under this Code is void. 191 (3) [Contravention] A credit provider that is a party to any such contract or other instrument commits an offence. Criminal penalty: 100 penalty units. 191 (4) [Strict liability offence] Subsection (3) is an offence of strict liability. Note: For strict liability, see section 6.1 of the Criminal Code.

[page 622] 191 (5) [Guarantor’s liability] Subsection (2) does not affect the operation of subsection 60(2). ________________________________________ [Editorial note: UCCC s 169 provided as follows: Contracting out 169 (1) [No contracting out] A provision of a contract or other instrument by which a person seeks to avoid or modify the effect of this Code is void. 169 (2) [No indemnification of credit provider] A provision of a contract or other instrument by which a person seeks to have the debtor or guarantor indemnify the credit provider for any loss or liability arising under this Code is void. 169 (3) [Contravention] A credit provider that is a party to any such contract or other instrument is guilty of an offence. Maximum penalty — 100 penalty units. 169 (4) [Guarantor’s liability] Subsection (2) does not affect the operation of section 55(2).]

COMMENTARY ON SECTION 191 [191.05] Outline A provision of a contract or instrument that seeks to avoid or modify the effect of the Code is void. Similarly, a provision of a contract or instrument by which the debtor or guarantor indemnifies the credit provider for any loss or liability under the Code is void. [191.10] Examples For example, a debtor or guarantor may not indemnify a credit provider for any fines which may be imposed for non-compliance with the Code, for any civil penalties which may be imposed on the credit provider under s 113 of the Code, or for any compensation for loss arising from a contravention of the Code (under s 118 (in respect of a key requirement) or under s 124 (in respect of other contraventions)). [191.15] Indemnity by guarantor The effect of s 60(1) is that a guarantor cannot be liable for an amount which exceeds the debtor’s liabilities under the credit contract and reasonable enforcement expenses. In some circumstances, at general law a debtor may be released from his or her

liabilities. Section 60(2) provides that, in the circumstances specified in that section, the credit provider may still enforce the guarantee. Section 191(5) states that nothing in s 191(2) (which prohibits a debtor or guarantor indemnifying a credit provider for losses or liabilities under the Code) affects s 60(2). [191.20] Penalty A failure to comply with s 191(3) carries a criminal penalty of up to 100 penalty units. Under the NCCP Act regime changes, failure to comply with s 191(3) was made an offence of strict liability by the insertion of s 191(4). (See paras 17 and 18 of the “Overview of the National Credit Code” for commentary on penalty units and strict liability offences).

Indemnities 192 (1) [Where void] An indemnity for any liability under this Code is not void, and cannot be declared void, on the grounds of public policy, despite any rule of law to the contrary. [page 623] 192 (2) [Application to liabilities] The liabilities to which this section applies include the following: (a) a liability for any criminal or civil penalty incurred by any person under this Code; (b) a payment in settlement of a liability or alleged liability under this Code; (c) a liability under another indemnity for any liability under this Code. 192 (3) [Subject to s 191(2)] This section is subject to subsection 191(2). 192 (4) [Derogation] This section does not derogate from any other rights and remedies that exist apart from this section. ________________________________________

[Editorial note: UCCC s 169A provided as follows: Indemnities 169A (1) [Where void] An indemnity for any liability under this Code is not void, and cannot be declared void, on the grounds of public policy, despite any rule of law to the contrary. 169A (2) [Application to liabilities] The liabilities to which this section applies include the following— (a) a liability for any criminal or civil penalty incurred by any person under this Code; (b) a payment in settlement of a liability or alleged liability under this Code; (c) a liability under another indemnity for any liability under this Code. 169A (3) [Subject to s 169(2)] This section is subject to section 169(2). 169A (4) [Derogation] This section does not derogate from any other rights and remedies that exist apart from this section. 169A (5) [Indemnity] This section extends to any indemnity obtained before the commencement of this section.]

COMMENTARY ON SECTION 192 [192.05] Outline Section 192 gives a broad right to any party to receive an indemnity in respect of potential civil or criminal penalties under the Code. The section sets aside the common law rule that renders an indemnity against a criminal liability unenforceable. “An indemnity for any liability under this Code is not void, and cannot be declared void on the grounds of public policy, despite any rule of law to the contrary” (s 192(1)). Section 192 replicates s 169A of the UCCC, which was introduced by the Consumer Credit (Queensland) Amendment Act 1998 (Qld). Section 169A was introduced to deal with some particular difficulties said to arise from the application of the UCCC to certain types of mortgage securitisation programs. The difficulties were seen to arise from the possible application of a rule of law which, on the grounds of public policy, rendered void any attempt by a person to obtain or enforce an indemnity given by another person in respect of liability for an act or omission by the first person which constitutes an offence at law. [192.10] Securitisation programs Securitisation programs involve a number of parties, each with different responsibilities. However, the Code generally imposes all Code compliance responsibilities on the credit provider. Section 192 permits a “credit provider” (eg, the trustee in a securitisation program) to

be indemnified for any of the consequences set out in s 192(2), including the Code’s civil and criminal penalty regimes, by a party responsible for the conduct that gave rise to those consequences. That party may logically be the person whom the debtors, under the credit contracts forming part of the securitisation program, think is their credit provider and who administers their credit contracts. [page 624] The implementation of the UCCC initially created a number of issues for securitisation programs. The problems arose, not because of the UCCC per se, but because of the interaction of the UCCC with general principles of trust law and other regulatory requirements (such as Reserve Bank of Australia Prudential Statement C2). It was, therefore, the complex interaction of various legal and regulatory principles that created problems for securitisation schemes in respect of the UCCC’s penalty regime prior to the enactment of the UCCC precursor to s 192 of the Code. At the heart of a securitisation program lies a trust. The trustee is generally the credit provider for the purposes of the Code, and the responsibilities and penalties of the Code therefore fall on to the trustee. From the point of view of the trustee, this is not entirely fair because it is normally parties other than the trustee that engage in the conduct which may give rise to breaches of the Code. Trustees traditionally have a somewhat passive role, leaving the day-to-day operation and management of the securitisation trust activities to other parties. The usual approach adopted by trustees to protect themselves against acts of other parties is to seek indemnities. In respect of breaches of the Code, the penalties are either civil or criminal. An indemnity may be sought against civil liability, but, as a matter of public policy, an indemnity against criminal liability will not be enforceable (see Halsbury’s Laws of England, Butterworths, London, 1978, vol 20(2), [359]). With regard to civil liability, trustees may seek indemnities from other

parties, but may have difficulty in enforcing an indemnity from the assets of the trust on the ground that the trustee’s right to indemnity out of the trust fund (to the extent that it applied to civil penalties imposed under Pt 6 of the Code) is void as against public policy. For example, A W Scott et al, Scott on Trusts, 4th ed, Aspen Publishers, New York, 1998, summarises the common law position as follows (at para 245): If the trustee is negligent in making an improper tax return and incurs a liability for penalties … he [or she] is not entitled to indemnity over the trust estate.

The application of this principle is that, in the absence of an express provision of law or regulation to the contrary, a trustee would not be able to seek indemnity out of the trust estate for civil penalties. Section 192 overcomes the problems described above. [192.15] Application Although s 192 is primarily intended to deal with securitisation practices (see quote from the explanatory notes to the Consumer Credit (Queensland) Amendment Act 1998 (Qld)), it is likely to have much broader application. [192.20] Person giving indemnity Any person (other than a debtor, mortgagor or a guarantor) may give an indemnity in respect of the consequences listed in s 192(2).

[page 625]

Effect of noncompliance 193 (1) [Avoidance of contract not automatic] A credit contract, mortgage or guarantee or any other contract is not illegal, void or unenforceable because of a contravention of this Code unless this Code contains an express provision to that effect. 193 (2) [General law rights unaffected] Except as provided by this section, this Code does not derogate from rights and remedies that exist apart from this Code.

________________________________________ [Editorial note: UCCC s 170 — apart from numbering the section is unchanged.]

COMMENTARY ON SECTION 193 [193.05] Outline A contravention of the Code will only result in a credit contract, mortgage or guarantee being illegal, void or unenforceable if the Code contains an express provision to that effect (s 193(1)). The Code does not derogate from rights and remedies that exist apart from the Code (s 193(2)). [193.10] General law Generally, the effect of an agreement or arrangement which contravenes a statute varies as between statutes. It does not necessarily follow that, where parties to a contract fail to comply with a statutory requirement, the resulting contract, if one is created, is necessarily illegal, void or unenforceable. Whether a contract is illegal, void or unenforceable depends on the intention of the legislature as expressed in the statute, and principles governing the interpretation of statutes must be applied (Yango Pastoral Co Pty Ltd v First Chicago Aust Ltd (1978) 139 CLR 410 at 414; 21 ALR 585 at 588; 53 ALJR 1; BC7800069). The purpose of s 193 is to ensure that the intention of the legislature in relation to the Code is clear: that intention, as evidenced by s 193, is that, unless the Code contains an express provision to the effect that a credit contract, mortgage or guarantee is illegal, void or unenforceable, it will not have that effect.

Giving notice or other document 194 (1) Application This section applies as follows: (a) this section applies (subject to this subsection) to notices or other documents that are required to be given for the purposes of this Code; (b) this subsection and subsections (3) and (7) apply, but the remainder of this section does not apply, to precontractual statements and notices given under section 16;

(c) subsections (4), (5) and (6) do not apply to default notices; (d) this section applies despite the provisions of any other section of this Code (except subsections 36(4) and 83(4)) to the contrary. Note: Examples of notices or other documents to which this section applies are those required to be given under sections 20, 33, 36, 43, 56, 57 and 83.

194 (2) Unsuccessful attempts by credit provider A credit provider is relieved from the obligation to give a notice or other document to a person if: (a) the credit provider has previously made a reasonable (but unsuccessful) attempt to give a notice or other document in accordance with this Code by leaving it at, or by sending it by post or electronic communication to the appropriate address of the person under section 195; and (b) the credit provider has reasonable grounds for believing that the person can no longer be contacted at that address. [page 626] 194 (3) Joint debtors etc — general obligation In the case of joint debtors, mortgagors or guarantors, a notice or other document must be given to each debtor, mortgagor or guarantor, except as provided by this section. 194 (4) Joint debtors etc — nomination of one of them A notice or other document may be given to any 2 or more joint debtors, mortgagors or guarantors by being given to one of the joint debtors, mortgagors or guarantors nominated by them to receive the notice or other document on their behalf. The notice or other document need not be addressed to all of them. 194 (5) Joint debtors etc — same address A single copy of a notice or other document may be given to any 2 or more joint debtors, mortgagors or guarantors at the same address if each of them has consented to a single copy being given and the notice or other document is addressed jointly to them. The procedure prescribed by this subsection is an alternative to the procedure prescribed by subsection (4).

194 (6) Nominated persons generally A notice or other document may be given to a person by being given to any other person nominated by the person to receive the notice or other document on his or her behalf. However— (a) a debtor, mortgagor or guarantor cannot nominate the credit provider or a person associated with the credit provider; and (b) a mortgagor cannot nominate the debtor if the mortgage is given by a guarantor; and (c) a guarantor cannot nominate the debtor. 194 (7) Lawyers A notice or other document may be given to a person by being given to a lawyer acting for the person in the matter concerned. 194 (8) Withdrawal of nomination or consent A nomination or consent under this section ceases to have effect if it is withdrawn by the person who made or gave it. 194 (9) Form of nomination or consent A nomination or consent under this section (or the withdrawal of any such nomination or consent) must be in the form required by the regulations. ________________________________________ [Editorial note: UCCC s 171 provided as follows: Giving notice or other document 171 (1) Application This section applies as follows— (a) This section applies (subject to this subsection) to notices or other documents that are required to be given for the purposes of this Code. (b) This subsection and subsections (3) and (7) apply, but the remainder of this section does not apply, to pre-contractual statements and notices given under section 14. (c) Subsections (4), (5) and (6) do not apply to default notices. (d) This section applies despite the provisions of any other section of this Code (except sections 34(3A) and 76(4)) to the contrary. Note: Examples of notices or other documents to which this section applies are those required to be given under sections 18, 31, 34, 39, 51, 52 and 76. 171 (2) Unsuccessful attempts by credit provider A credit provider is relieved from the obligation to give a notice or other document to a person if— (a) the credit provider has previously made a reasonable (but unsuccessful) attempt to

give a notice or other document in accordance with this Code by leaving it at, or by sending it by post, telex, facsimile or electronic communication to the appropriate address of the person under section 172; and (b) the credit provider has reasonable grounds for believing that the person can no longer be contacted at that address. 171 (3) Joint debtors etc — general obligation In the case of joint debtors, mortgagors or guarantors, a notice or other document must be given to each debtor, mortgagor or guarantor, except as provided by this section. 171 (4) Joint debtors etc — nomination of one of them A notice or other document may be given to any 2 or more joint debtors, mortgagors or guarantors by being given to one of the joint debtors, mortgagors or guarantors nominated by them to receive the notice or other document on their behalf. The notice or other document need not be addressed to all of them.

[page 627] 171 (5) Joint debtors etc — same address A single copy of a notice or other document may be given to any 2 or more joint debtors, mortgagors or guarantors at the same address if each of them has consented to a single copy being given and the notice or other document is addressed jointly to them. The procedure prescribed by this subsection is an alternative to the procedure prescribed by subsection (4). 171 (6) Nominated persons generally A notice or other document may be given to a person by being given to any other person nominated by the person to receive the notice or other document on his or her behalf. However— (a) a debtor, mortgagor or guarantor cannot nominate the credit provider or a person associated with the credit provider; and (b) a mortgagor cannot nominate the debtor if the mortgage is given by a guarantor; and (c) a guarantor cannot nominate the debtor. 171 (7) Legal practitioners A notice or other document may be given to a person by being given to a legal practitioner acting for the person in the matter concerned. 171 (8) Withdrawal of nomination or consent A nomination or consent under this section ceases to have effect if it is withdrawn by the person who made or gave it. 171 (9) Form of nomination or consent A nomination or consent under this section (or the withdrawal of any such nomination or consent) must be in the form required by the regulations.]

COMMENTARY ON SECTION 194 [194.05] Outline The Code contains a number of requirements for a credit provider to supply information or give notices during the contract period. Those requirements include the obligations to give:

statements of account; a statement of amount owing and other matters, on request; notice of unilateral and agreed changes to credit contracts; notice of changes on hardship grounds; payout statements; default notices; and notices in connection with the possession and sale of mortgaged goods. Compliance with certain Code requirements to provide enforcement notices and statements of account relating to mortgaged goods is deemed to constitute compliance with equivalent obligations to provide enforcement notices and statements of account to a grantor under the PPSA. Section 194 deals with the giving of notices and other documents. In certain circumstances, a credit provider will be excused from their obligation to give a notice or other document to a person that they have been unable to contact. Although the general requirement is that a document or notice must be given to each joint debtor, mortgagor or guarantor, s 194 provides for certain exceptions to this rule (s 194(4) and (5)). Section 194 states that examples of notices or other documents to which s 194 applies are those required to be given under s 20 (credit contracts), s 33 (statements of account), s 36 (statement of amount owing), s 43 (copy of mortgage), s 55 (form of guarantee), s 57 (copies of documents for guarantor), and s 83 (statement of payout figure). Part 9A of the UCCC contained requirements to give comparison rate schedules from 1 July 2003 onwards. There was a suggestion that a comparison rate schedule may be a notice for the purposes of the UCCC. The Standing Committee of Officials on Consumer Affairs (SCOCA) issued a Statement of Enforcement Policy, which stated: [page 628]

Questions have arisen regarding whether comparison rate schedules are notices provided under the [UCCC], in which case the schedules would need to comply with the Code requirements applying to notices. As a comparison rate schedule is not aimed at a particular debtor but made available to the public at large, there is no reason to view it as a notice provided under the [UCCC].

SCOCA therefore endorsed the following enforcement approach by government consumer agencies in relation to this issue: Comparison rate schedules are not notices provided under the [UCCC].

Note that Pt 10 of the Code replaces Pt 9A of the UCCC and no longer requires the giving of comparison rate schedules. [194.10] Application Section 194(1) specifies how s 194 is to apply. Notices nominations will not apply to precontractual statements or default notices. However, a s 36 statement of amount owing and a s 83 payout figure need only be given to the person that requested the statement, and not to all joint debtors, mortgagors or guarantors as applicable. [194.15] UCCC — e-Commerce Act Section 171(2) of the UCCC formerly referred to documents being given to persons by leaving them at, or sending them to, an appropriate address by “post, telex, facsimile or similar facility”. The e-Commerce Act replaced the words “similar facility” with “electronic communication” to clarify that electronic means of sending documents, such as email, were permissible. This change has carried through to s 194(2) of the Code. [194.20] Unsuccessful attempts by a credit provider to give notices or other documents A credit provider is relieved, under s 194(2), from their obligation to give a particular notice: … to a person if: (a) the credit provider has previously made a reasonable (but unsuccessful) attempt to give a notice in accordance with [the] Code by leaving it at, or sending it by post or electronic communication to the appropriate address of the person under section 195; and (b) the credit provider has reasonable grounds for believing that the person cannot be contacted at that address.

Previously, a credit provider had to obtain a court order before it was relieved from the obligation to give a notice. The explanatory notes to the

Consumer Credit (Queensland) Amendment Act 1998 (Qld) note that this proved to be commercially and practically unrealistic. [194.25] Joint debtors, mortgagors or guarantors The general rule, as encapsulated by s 194(3), is that a separate notice must be given to each joint debtor, mortgagor or guarantor, subject to the exceptions in s 194(4) and (5). Section 194(4) provides that joint debtors, mortgagors or guarantors may nominate one of them to receive notices and other documents on behalf of all [page 629] of them, and the notice need not be addressed to all of them. This nomination procedure is available whether or not the joint debtors, mortgagors or guarantors reside at the same address. Alternatively, under s 194(5), in the case of joint debtors, mortgagors or guarantors residing at the same address, they may jointly consent to receiving a single copy of a document, at their joint address, which is addressed to all of them. The rules for notices nominations and consents are discussed below. [194.30] Notices nominations Section 194(4) provides that joint debtors, mortgagors or guarantors (whether residing at the same or different addresses) may nominate one of themselves to receive notices on behalf of the group this is similar, but not identical, to the notices nomination provision contained in the former s 171 of the UCCC). Where such a nomination is made, although a notice or other document may be addressed to all parties, it need not be. The explanatory notes to the Consumer Credit (Queensland) Amendment Act 1998 (Qld) (which enacted s 171 of the UCCC) gave these examples: Assume that there are four joint debtors and three of them all nominate the same fourth person to receive notices on their behalf. In such a case all four are effectively served by giving the notice on the nominated person. It is not intended that the person nominated should be required to sign the nomination form.

Assume on the other hand that only two of the four persons nominate the same person to receive notices on their behalf and the remaining person makes no nomination. In this instance, the two nominating persons and the nominated person are all effectively served by giving the notice to the nominated person. However, in this case, the fourth person (who has not participated in this process of nominating) must be served separately.

The explanatory notes to the Consumer Credit (Queensland) Amendment Act also stated: Section 171(4) of the UCCC [s 194(4) of the Code] aims to ensure that joint borrowers and guarantors have reasonable flexibility in choosing how many identical copies of notices and statements of account they require. It is arguable that under the terms of the previous Code section 171(3) [prior to the 1998 Amendment Act] a nomination had to encompass all joint debtors, mortgagors or guarantors and even then was effective only if all of them resided at the same address.

The form of the nomination must be in accordance with reg 111. This is basically identical to the former UCCC reg 40 prescribing the form of the notices nomination to be given under s 171 of the UCCC. A credit provider’s nomination form should include the words in quotation in reg 111(1)(a) and cover the matters in reg 111(1)(b) and (c) (see commentary below). A notice’s nomination could appear in an application form, a credit contract or a separate form. Although the Code prescribes the contents of the notice’s nomination, it does not prescribe that those contents should appear in any particular form. Regulation 111 requires that a nomination must contain: the words “I/we nominate … [full name of person nominated] to receive notices and other documents under the National Credit Code on behalf of me/all of us”; [page 630] a prominent statement that each joint debtor/mortgagor/guarantor is entitled to receive a copy of any notice or other document under the Code, and that by signing the form they are giving up the right to be provided with information direct from the credit provider; a prominent statement that any person who has signed the form can

advise the credit provider at any time in writing that they wish to cancel their nomination. In summary, joint debtors, mortgagors or guarantors — irrespective of whether they live at the same address or not — may nominate one of them to receive notices on their behalf. Such notices may be addressed to either all of them, or the person so nominated (or presumably the nominated person and any other of the joint debtors, mortgagors or guarantors who do not make such a nomination). [194.35] Consent — joint debtors etc — same address Section 194(5) sets out a “consent” procedure — joint debtors, mortgagors or guarantors may consent to a single copy of a notice that is addressed to both (or all) of them being given in lieu of a notice to each party. This is primarily to deal with situations in which “joint debtors, mortgagors or guarantors reside at the same address”. The section is restricted to notices that are “given to any two or more joint debtors, mortgagors or guarantors at the same address”. Section 194(5) provides a further option in addition to the procedures available under s 194(4). Representations have been made that where two or more joint debtors, mortgagors or guarantors reside at the same address, it should not be necessary for one or more of them to have to nominate another to receive notices. In these circumstances, they should be able to jointly consent to receiving a single copy at that address which is to be addressed jointly to them. However, as the final sentence of s 194(5) indicates, this is an alternative to the s 194(4) procedures and accordingly where the joint debtors, mortgagors or guarantors reside at the same address, it is for them to choose which of the procedures provided under subss (4) and (5) they prefer. A consent under s 194(5) must be in the form required by reg 111(2). Identical words to the words in quotation marks in reg 111(2)(a) should appear in a credit provider’s notice’s consent form. Similar, but not identical, words can be used to cover the matters in reg s 111(2)(b) and (c). A notice’s consent could appear in an application form, a credit contract or a separate form. Although the Code prescribes the contents of the notice’s consent, it does not prescribe that those contents should appear in any particular form. Regulation 111(2) requires that a consent must contain:

the words “We consent to notices and other documents under the National Credit Code being sent jointly to us at … [address for service]”; a prominent statement that each joint debtor/mortgagor/guarantor is entitled to receive a copy of any notice or other document under the Code, and that by signing the form they are giving up the right to be provided with information separately from the credit provider; and a prominent statement that any person who has signed the form can advise the credit provider at any time, in writing, that they wish to cancel their consent. [page 631] [194.40] Restrictions on nominations and consents A nomination or consent by joint debtors, mortgagors or guarantors does not apply to default notices (s 194(1)(c)). Therefore, it is necessary to serve a default notice on each debtor, mortgagor or guarantor. Section 194(6) allows a person to nominate any other person to receive notices on their behalf, and also restricts the nominations that a person can make. Debtors, mortgagors or guarantors may not nominate the credit provider or a person associated with the credit provider to receive notices. A guarantor may not nominate the debtor to receive notices on behalf of the guarantor (this is the case whether or not the guarantor is also a mortgagor). Section 194 has a limited application to precontractual statements and notices under s 16. Although precontractual statements may be given to a person by giving it to their lawyer (see [194.40]), the other provisions of s 194 (such as the nomination and consent provisions) do not apply to precontractual statements. A person who made or gave a nomination or consent may withdraw it, and it then ceases to have effect (s 194(8)). Regulations may also specify a form

for a withdrawal of consent (s 194(9)), but no such regulations have been made to date. [194.45] Lawyers Section 194(7) permits the sending of a notice or other document to a person’s lawyer. This is limited to situations where the lawyer is acting for the recipient in respect of the relevant matter. That is, there is no general power to give all notices to a person’s lawyer. Lawyers may receive precontractual statements or notices given under s 16 on behalf of a client. [194.50] Form of nominations and consents A nomination or consent or their withdrawal must be in the form required by reg 111 (s 194(9)). See [194.25] and [194.30] and commentary on reg 111 for more detailed comments on the form of notices, nominations and consents. [194.55] Summary of use of notices nomination and consents In summary, notice’s nominations and consents can be used as follows: Although s 194 is not entirely clear on the point, it is safest to proceed on the basis that a debtor can only validly nominate another debtor, or consent to documents or notices being jointly addressed to themself and another debtor, under the same credit contract. A guarantor can only validly nominate another guarantor, or consent to documents or notices being jointly addressed to themself and another guarantor (if they are also a guarantor under the same guarantee). A mortgagor can only validly nominate a mortgagor, or consent to documents or notices being jointly addressed to themself and another mortgagor (if they are also a mortgagor under the same mortgage). A debtor, mortgagor or guarantor may validly nominate another debtor, mortgagor or guarantor (as appropriate) even when there are other debtors, mortgagors or guarantors: —

living there who do not make the nomination; or

—

who live at different addresses. [page 632]

Any two or more joint debtors, mortgagors or guarantors who live at the same address may consent to receiving a single copy of a notice or other document addressed jointly to them even when there are other debtors, mortgagors or guarantors: —

living there who do not give that consent; or

—

who live at different addresses.

A prudent credit provider will not rely on a nomination or consent when increasing liabilities under a guarantee or mortgage. It is unwise to rely on a notice nomination or consent in the case of a guarantor or a mortgagor, because of various notices the Code requires to be given to them. A nomination or consent does not apply to s 88 default notices (s 194(5)), but applies to many other communications under the Code (eg, account statements). It is permissible to send a notice or other document to a person’s lawyer. This is limited to a situation where the lawyer is acting for the recipient in respect of the relevant matter. That is, there is no general power to give all notices to a person’s lawyer (s 194(7)). Note that this permission applies also to precontractual statements and notices given under s 16 (s 194(1)(b)). The nomination and consent procedures described above do not apply to a precontractual statement and notices given under s 16 of the Code (but a lawyer acting for the person who is to receive such documents may still receive them). A debtor, mortgagor or guarantor cannot nominate the credit

provider or a person associated with the credit provider (a related body corporate) to receive notices (s 194(6)(a)). A guarantor (whether or not they are also a mortgagor) cannot nominate the debtor to receive notices (s 194(6)(b) and (c)). The explanatory notes to the Consumer Credit (Queensland) Amendment Act 1998 (Qld) (which enacted s 171 of the UCCC) stated that a notices nomination under s 171(4) of the UCCC (s 194(4) of the Code) can be effective even if all of the joint debtors, mortgagors or guarantors do not live at the same address. However, this was not expressly stated in s 171(4) of the UCCC (s 194(4) of the Code). On the other hand, this can be implied into s 171(4) of the UCCC (s 194(4) of the Code) by contrasting the wording in s 171(5) of the UCCC (s 194(5) of the Code) (consents) which includes the words “at the same address”. These words are not included in s 171(4) of the UCCC (s 194(4) of the Code). [194.60] Mortgagors and guarantors In practice there are very few notices for guarantors or mortgagors to which the nomination or consent provisions can relate. For instance, it is possible to rely on a nomination or consent between guarantors to serve a notice of increase of the debtor’s liabilities under s 61(1)(a); however, the safer approach is to ensure that a copy of the notice of increase is given to each guarantor to limit the possibility of the change later being found to be unjust because the nominating or consenting guarantor claims never to have [page 633] seen the notice (s 76(2)(d) or (k)). A prudent credit provider will not rely on a nomination or consent when increasing liabilities under a guarantee or a mortgage. In general, the nature of notices that the Code requires a credit provider to give to mortgagors and guarantors do not relate to regular administrative matters (such as copies of statements) — instead, the notice obligations are copies of credit contracts, mortgages and guarantees, notifications of changes

to contracts which affect liability (the receipt of any of which by the affected mortgagor or guarantor may become an issue in deciding whether the contract or change is unjust), and default notices (to which s 194 nominations or consents do not apply). It is, therefore, generally preferable if credit providers do not rely on notice’s nominations or consents for mortgagors and guarantors at all. [194.65] Capacity issues Section 194(3), (4) and (5) refer to the “debtors, mortgagors or guarantors”. This raises the question of how the “or” is to be read. (It is implicit that “debtor” refers to “debtor under a (ie, the same) credit contract” (s 5(1).). For example, s 194(3) either refers to three separate groups, and is effectively three separate provisions, or refers to one group only. That is, the “or” may be read distributively (ie, distributing the word “joint” — the section means “each debtor notice must be given to each joint debtor; each mortgagor notice must be given to each joint mortgagor” and so on), or as a simple alternative. The section must be read distributively. If “or” is not read distributively, and there is more than one of any type of party, all notices must be given to everyone (ie, if there are joint debtors under a credit contract, then there are “joint debtors, mortgagors or guarantors”, and, therefore, each debtor notice must be given to each guarantor). That result is absurd, therefore the premise on which it is based must be incorrect. Similarly, the “or” in s 194(5) must be read distributively (as three separate provisions). If it is not, then “joint debtors, mortgagors or guarantors” again refers to a single group, with the effect that all debtors, mortgagors and guarantors must live at the same address before a consent can be given. Again, this result would be absurd. Further, s 194(4) is drafted in terms of “the joint debtors, mortgagors or guarantors”. Use of the word “the” suggests that the section is referring to a group which has been previously identified (otherwise the section would just use “joint debtors” etc). The implication is that the joint debtors etc are the same joint debtors etc who are referred to in s 194(3). This adds to the force of the argument that s 194(4) should be read as three separate provisions,

referring to debtors nominating debtors, mortgagors nominating mortgagors, and guarantors nominating guarantors. When s 194(4) uses the words “nominated by them” it raised the question “who is them?” It appears that the only group who can be meant by “them” is “the debtors, mortgagors or guarantors” referred to previously. On the basis of this and the conclusion above (that s 194(3), (4) and (5) each effectively contain three provisions), it is clear that “them” refers to the debtors (or to the mortgagors, or to the guarantors, as the case may be).

[page 634]

Manner of giving notice or other document 195 (1) [Address for service: debtors etc] If this Code requires or permits a notice or other document to be given to a person who is a debtor, mortgagor or guarantor, the appropriate address of the person is: (a) an address nominated in writing by that person to the person giving the notice or other document; or (b) if there is no such nomination, the address of the place of residence of that person last known to the person giving the notice or other document. Note: A nominated address may be an electronic address.

195 (2) [Address for service: other persons] An appropriate address of any other person is: (a) an address nominated in writing by that person to the person giving the notice or other document; or (b) the address of the place of residence or business of that person last known to the person giving the notice or other document. Note: A nominated address may be an electronic address.

195 (3) [Cancellation or change of nominated address] If a person nominates an address under paragraph (1)(a) or (2)(a), the person may, by notice in writing to the person giving the notice or other document referred to in subsection (1), change the nominated address or cancel the nomination. 195 (4) [Effect of cancellation] A nomination under this section ceases to have effect if it is cancelled by the person who made it. ________________________________________ [Editorial note: UCCC s 172 provided as follows:

Manner of giving notice or other document 172 (1) [Manner of service] If this Code requires or permits a notice or other document to be given to a person (whether the expression “deliver”, “serve”, “notify”, “send” or “give” or another expression is used), the notice or other document may be given— (a) to a natural person— (i)

by delivering it to the person personally; or

(ii) by leaving it at, or by sending it by post, telex or facsimile or, with the written consent of the person in accordance with subsection (1A), by electronic communication to, an appropriate address of the person; or (b) to a body corporate— (i)

by leaving it at the registered office of the body corporate with an officer of the body corporate; or

(ii) by sending it by post, telex or facsimile or, with the written consent of the body corporate in accordance with subsection (1A), by electronic communication to its registered office. 172 (1A) A debtor, mortgagor or guarantor may consent to the giving of documents by electronic communication by, and only by, a specific positive election in writing, after being informed that if consent is given— (a) paper documents may no longer be given; and (b) electronic communications should be regularly checked for notices; and (c) consent to the giving of documents by electronic communication may be withdrawn at any time. 172 (2) [Address for service: debtors etc] The appropriate address of a debtor, mortgagor or guarantor for the purposes of subsection (1) is— (a) an address nominated in writing by that person to the person giving the notice or other document; or (b) if there is no such nomination, the address of the place of residence of that person last known to the person giving the notice or other document. Note: A nominated address may be an electronic address.

[page 635] 172 (3) [Address for service: other persons] An appropriate address of any other person for the purposes of subsection (1) is— (a) an address nominated in writing by that person to the person giving the notice or other document; or (b) the address of the place of residence or business of that person last known to the person giving the notice or other document. Note: A nominated address may be an electronic address.

172 (3A) If a person nominates an address under subsection (2)(a) or (3)(a), the person may, by notice in writing to the person giving the notice or other document referred to in subsection (1), change the nominated address or cancel the nomination. 172 (3B) If this Code requires or permits a notice or other document to be given to a debtor, mortgagor or guarantor by a credit provider (whether the expression “deliver”, “serve”, “notify”, “send” or “give” or another expression is used), the notice or other document may, with the written consent in accordance with subsection (3C) of the debtor, mortgagor or guarantor, as the case may be, to service of documents by this process, be given by— (a) making it available for a reasonable period of time on the credit provider’s information system for retrieval by electronic communication by the debtor, mortgagor or guarantor; and (b) promptly notifying the debtor, mortgagor or guarantor by electronic communication that the information is available for retrieval on that information system and the nature of the information; and (c) providing the debtor, mortgagor or guarantor with the ability to readily retrieve the information by electronic communication. 172 (3C) A person may consent to the giving of documents by the process in subsection (3B) by, and only by, a specific positive election in writing, after being informed that if consent is given— (a) there is no longer a requirement that paper documents be given; and (b) electronic communications should be regularly checked for notices; and (c) consent to the giving of documents by that process may be withdrawn at any time. 172 (3D) In addition to the requirements of the laws of this jurisdiction in relation to electronic transactions, if a notice or other document is given by sending it to a nominated electronic address or by the process in subsection (3B)— (a) the notice or other document must be in a format that enables the notice or other document to be printed and saved to an electronic file; and (b) at the time the notice or other document was sent or was made available on the credit provider’s information system, it was reasonable to expect that the intended recipient would be readily able to print the notice or other document and to save it to an electronic file. 172 (3E) A nomination or consent under this section ceases to have effect if it is cancelled or withdrawn by the person who made or gave it. 172 (3F) The regulations may provide for or with respect to— (a) the electronic retention of documents under this Code that have been given by electronic communication or by the process in subsection (3B); and (b) electronic access to those documents by the relevant debtor, mortgagor or guarantor. 172 (4) [Other authorised form of service] Nothing in subsection (1)— (a) affects the operation of another law that authorises the service of a notice or other document otherwise than as provided in subsection (1); or (b) affects the power of a court or tribunal to authorise service of a notice or other document otherwise than as provided in subsection (1).

172 (5) [Notice by post] If this Code requires or permits a notice or other document to be given by post (whether the expression “deliver”, “serve”, “notify”, “send” or “give” or another expression is used), service may be effected by properly addressing, prepaying and posting the notice or other document as a letter.]

COMMENTARY ON SECTION 195 [195.05] Outline Section 195 was substantially amended by the NCCP Act regime changes. It sets out the address to which a notice or other document required or permitted by the Code should be sent to a person. The section applies [page 636] to credit contracts, mortgages, guarantees or consumer leases required to be given to another person under the Code. A distinction is made between a person who is a debtor, mortgagor or guarantor (s 195(1)) and other persons (s 195(2)). [195.10] Debtors, mortgagors or guarantors Section 195(1) provides that a notice or other document should be sent to an address nominated in writing by a debtor, mortgagor or guarantor (s 195(1)(a)) or if there is no such nomination, to their last known “place of residence” (s 195(1)(b)). A nominated address can include an electronic address or may be an address other than a place of residence and may include, for example, a post office box. [195.15] Other persons Section 195(2) provides that a notice or other document should be sent to an address nominated in writing by any other person (s 195(2)(a)) or if there is no such nomination, to their last known “place of residence or business” (s 195(2)(b)). A nominated address can include an electronic address or may be an address other than a place of residence and may include, for example, a post office box. The case of Bayford v St George Bank Ltd [2003] SASC 210; BC200303580 considered the validity of the service of a notice of demand and a notice to the mortgagor under the UCCC. Both notices were sent to an

address that the applicant had an interest in, but did not reside at. The applicant argued that she was not aware that she was in default under the mortgage. Neither of the notices was returned to the bank. Besanko J determined that the bank had made proper inquiries and could be satisfied that the mortgagor could be located at that address. These notices were also sent to a post office box nominated in the credit contract as the address and expressly stated in the mortgage as the address for service. Despite being returned by Australia Post, for the reasons above, service on the post office box was still said to have constituted proper service. [195.16] Notices to bodies corporate A written notice (or other document) may be given to a body corporate by: leaving it at the registered office with an officer of the body corporate; or sending it by post, telex, fax or, with the written consent of the body corporate in accordance with s 195(2)(b), by electronic communication to its registered office (s 195(2)(b)). [195.20] Notice of change Section 195(3) enables a person who has provided a nomination of an appropriate address for the sending of a notice or other document to change or cancel that nomination by providing notice in writing. Section 195(4) confirms that a nomination made under the section ceases to have effect if it is cancelled by the relevant person. [195.25] Electronic Transactions Regulations As noted at [187.20], Pt 3 of the Electronic Transactions Regulations 2000 (Cth) has specific application to the provision of communications by electronic communication under the NCCP Act. Section 195 must therefore be read subject to these regulations. The relevant regulations are explained below. [page 637] Regulation 10(1) of the Electronic Transactions Regulations provides that a debtor, mortgagor or guarantor can consent to the giving of documents by

electronic communication only after being told that, if written consent is given: paper documents may no longer be given; electronic communications should be regularly checked for documents; and consent to the giving of documents by electronic communication may be withdrawn at any time. Similarly, reg 10(3) of the Electronic Transactions Regulations provides that any person, other than a debtor, mortgagor or guarantor, may consent to the giving of documents by electronic communication only after being told that, if written consent is given: paper documents may no longer be given; electronic communications should be regularly checked for documents; and consent to the giving of documents by electronic communication may be withdrawn at any time. Regulation 10(2) of the Electronic Transactions Regulations allows credit providers to serve notices or other documents to a debtor, mortgagor or guarantor by making them available on the credit provider’s information system (such as internet banking site) for retrieval by electronic communication, provided the relevant debtor, mortgagor or guarantor has given written consent and provided that: the notice or document must be available on the credit provider’s information system for a reasonable period for retrieval by electronic communication; the credit provider must promptly notify the debtor, mortgagor or guarantor that the information is available for retrieval and the nature of the information; and the credit provider must provide the debtor, mortgagor or guarantor with the ability to readily retrieve the information by electronic communication.

The last requirement is perhaps overly broad, as neither the Electronic Transactions Act 1999 (Cth) nor the explanatory notes accompanying the Electronic Transactions Act specify the scope of this duty. For instance, it would be reasonable to interpret this provision as requiring the credit provider to provide such things as instructions and log-in information so that consumers can readily access the information online. However, does this duty mean that a credit provider would have to provide extensive technical support for problems that do not relate to their own systems and software so that consumer can “readily retrieve” the information? Indeed, on a broad interpretation (which the authors would not support), the credit provider would seem to be required to equip the consumer with such things as a computer and an email account. This language also makes it unclear whether, for example, an email notification provided for the purpose of satisfying reg 10(2) (b) of the Electronic Transactions Regulations must link to the credit provider’s electronic address. It is arguable that a link is not required and that this regulation could be satisfied, for example, by an [page 638] SMS message telling a debtor that their credit statement is available online. There are security and privacy risks associated with any interpretation which requires a link directly to the information to be retrieved. Regulation 10(4) of the Electronic Transactions Regulations provides further protection for consumers. More particularly, this regulation provides that: any notices or other documents sent to a nominated electronic address, or made available by a process specified in reg 10(1)–(3) of the Electronic Transactions Regulations, must be in a format that “allows it to be saved to an electronic file and printed”; and at the time that a notice or other document is sent or made available on the credit provider’s information system, it must have been

“reasonable to expect that the intended recipient would be able to save it to an electronic file and print it”. Regulation 10(4) of the Electronic Transactions Regulations is silent as to the grounds on which a “reasonable” presumption can be made for its purposes. It is arguable that consent given by a debtor, mortgagor or guarantor or other person in accordance with reg 10(1)–(3) of the Electronic Transactions Regulations may be relied on. Such consent could be taken as grounds to reasonably expect that the debtor, mortgagor or guarantor or other person has: ready access to key systems such as a computer, a printer, online access; and sufficient computer knowledge; which would allow, in most cases, the intended recipient to “be readily able to save the notice or other document to an electronic file and print it”. However, in order to satisfy reg 10(4) of the Electronic Transactions Regulations, a credit provider seeking to provide documents by sending them to an electronic address or making them available on its information system may need to ensure, for example, that: the documents are provided in a file format that is widely readable by software that is free of charge, rather than a proprietary file format that is less widely readable or that may be read only by software that is costly; and the size of any document is not so large as to make it hard to access or save (eg, due to individual users’ bandwidth or storage limitations). [195.30] Permissive Regulation 10(1)(4) of the Electronic Transactions Regulations 2000 (Cth) is permissive, conferring on parties a means of giving notices which are approved by the Code. It does not prohibit parties from contractually agreeing other means of giving notice (eg, by agreeing that notice may be served at a post office box address). This regulation provides that a debtor, mortgagor or guarantor or other person “may consent to the giving of a notice” by way of an electronic communication. Therefore, this

regulation should be interpreted as permitting, but not requiring, a notice to be given in the manner specified. Section 191 would suggest that, although the parties may agree on alternative methods of giving notice, they may not exclude the methods described in these regulations. [page 639] [195.35] Other legislation Section 195 does not affect the operation of any other law which authorises or requires another method of service of a notice (s 195(4)(a)). For example, if real property legislation of a jurisdiction requires service of a notice on a natural person or body corporate at an address other than the address specified in s 195, it will be necessary to serve the notice at the other address required by the real property legislation. In addition, the credit provider should serve the notice at the address specified in s 195 to ensure compliance with the notice requirements of the Code. (For example, ss 93 and 94 of the Land Titles Act 1925 (ACT); ss 57 and 58 of the Real Property Act 1900 (NSW); s 73 of the Land Title Act 1994 (Qld) and s 84 of the Property Law Act 1974 (Qld); ss 132 and 133 of the Real Property Act 1886 (SA); s 77 of the Land Titles Act 1980 (Tas); ss 74, 76 and 77 of the Transfer of Land Act 1958 (Vic); and ss 106 and 108 of the Transfer of Land Act 1893 (WA) (the Real Property Act 1886 (SA) applies to the Northern Territory) require service of notices on the address specified on the Titles Office register).

Date of notice or other document 196 (1) [Deemed date of service] For the purposes of this Code a notice or other document is taken to be given: (a) in the case of a notice or other document given personally — on the date it bears or the date it is received by the addressee, whichever is the later; or (b) in the case of a notice or other document sent by post — on the date it bears or the date when it would have been delivered in the

ordinary course of post, whichever is the later; or (c) in the case of a notice or other document given by electronic communication — at the time that subsection 14(3) of the Electronic Transactions Act 1999 provides is the time of receipt of the electronic communication. 196 (2) [Date of document] For the purposes of this Code, the date of a notice or other document is the date it is taken to be given in accordance with this section. ________________________________________ [Editorial note: UCCC s 173 provided as follows: 173 (1) [Deemed date of service] For the purposes of this Code a notice or other document is taken to be given— (a) in the case of a notice or other document given personally — on the date it bears or the date it is received by the addressee, whichever is the later; or (b) in the case of a notice or other document sent by post — on the date it bears or the date when it would have been delivered in the ordinary course of post, whichever is the later; or (c) in the case of a notice or other document sent by facsimile transmission — on the date it bears or the date on which the machine from which the transmission was sent produces a report indicating that the notice or other document was sent to the facsimile or other number of the addressee, whichever is the later; or (d) in the case of a notice or other document given in accordance with section 172(3B) — at the time when the electronic communication referred to in section 172(3B)(b) enters the information system of the addressee; or (e) in the case of a notice or other document given by electronic communication — at the time when the electronic communication enters the information system of the addressee. 173 (2) [Date of document] For the purposes of this Code, the date of a notice or other document is the date it is taken to be given in accordance with this section.

[page 640] 173 (3) This section has effect despite anything to the contrary in the laws of this jurisdiction in relation to electronic transactions.] [Editorial note: There is no NCC provision comparable to UCCC s 173A.]

COMMENTARY ON SECTION 196 [196.05] Outline Section 196 sets out when a notice or other document will be taken to have been given. The section will apply to all originals and copies of notices, credit contracts, mortgages, guarantees and consumer leases required to be given to another person under the Code. The section appears to modify the “postal rule” for the written acceptance of an offer to enter into a contract. Acceptance will be taken to have occurred according to s 196, not when it is posted. [196.10] Electronic communications Section 196(1)(c) provides that a notice or other document given by electronic communication is taken to have been given at the time prescribed by s 14(3) of the Electronic Transactions Act 1999 (Cth). Section 14(3) of the Electronic Transactions Act provides that, where the addressee of an electronic communication has designated an information system for the purpose of receiving electronic communications, the electronic communication is taken to have been given when it enters the designated information system. For example, a notice being sent via email to a debtor’s email address (which has been designated for the purpose of receiving electronic communications) will be taken to have been given when it enters the email inbox. If the addressee of an electronic communication has not designated an information system for the purpose of receiving electronic communications, then unless otherwise agreed, the electronic communication is taken to have been given when the electronic communication comes to the attention of the addressee. [196.15] Date on which notice given A notice is taken to be given on the later of: the date of the notice (s 196(1)(a), (b) and (c)); or the date: —

it is received by the addressee, if it is delivered personally;

—

it would have been delivered in the ordinary course of post, if it is posted; or

the date when an electronic communication enters the information system of the addressee. [196.20] Date of notice The date of the notice is the date it is taken to be given, which will not necessarily be the same as the date shown on it. [196.25] Period See s 218 of the Code to ascertain how to calculate the commencement and end of any period prescribed by the Code. Section 218 prescribes matters relating to distance, time and age. It states, among other things: a period of time is to be calculated by excluding the day on which the prescribed act or event occurs and, if the period is expressed to be a [page 641] specified number of clear days or a specified number of days, by excluding the day on which the purpose is to be fulfilled, and, in any other case, by including the day on which the purpose is to be fulfilled; if the last day of a period provided or allowed by the Code for doing anything is not a business day in the place in which the thing is to be or may be done, the thing may be done on the next business day in the place; if the last day of a period provided or allowed by the Code for the filing or registration of a document is a day on which the office is closed where the filing or registration is to be or may be done, the document may be filed or registered at the office on the next day that the office is open; if no time is provided or allowed for doing anything, the thing is to

be done as soon as possible, and as often as the prescribed occasion happens. In summary, a period of time from one thing (eg, the sending of a default notice) to another (eg, beginning legal action) is calculated by not counting the day that the first thing happens and: if the Code requires “at least” a certain period, or a specified number of “clear days”, not counting the day on which the second event happens; otherwise, by counting the day on which the second event occurs (s 218). [196.30] Case Permanent Custodians Ltd v Upston (2007) ASC ¶155-083; NSW ConvR 56-178; [2007] NSWSC 223; BC200701913.

Extensions of time 197 The court may extend a period if authorised by this Code to do so even though the period has elapsed. ________________________________________ [Editorial note: UCCC s 174 — apart from numbering the section is unchanged.]

COMMENTARY ON SECTION 197 [197.05] Outline The court may only extend a period if authorised to do so by the Code. However, the extension may be sought outside the specified period — a court may extend the period after it has elapsed. See [112.06] for the meaning of “court”. [197.10] See [112.06] for the meaning of “court”.

Orders of court

198 An order of the court in force under this Code, including such an order as varied from time to time, has effect according to its tenor. ________________________________________ [Editorial note: UCCC s 175 — apart from numbering the section is unchanged.]

[page 642] COMMENTARY ON SECTION 198 [198.05] Outline An order of the court in force under the Code has effect according to its tenor.

Conduct of agents and related matters 199 (1) [Imputed conduct of agent or employee] The conduct of an officer, agent or employee of a credit provider acting within his or her actual or ostensible authority will be imputed to the credit provider and taken to be conduct of the credit provider. 199 (2) [Credit provider may not act as agent] A person cannot authorise a credit provider, or a person associated with a credit provider, to enter into a credit contract, mortgage or guarantee on the person’s behalf. This subsection does not prevent a credit provider from authorising a person associated with the credit provider to enter into a credit contract on behalf of the credit provider. 199 (3) [Offence] A credit provider or person associated with a credit provider that purports to act as agent of a debtor, mortgagor or a guarantor in entering into a credit contract or a mortgage or guarantee commits an offence. Criminal penalty: 50 penalty units. 199 (4) [Imputed knowledge of credit provider] A credit provider is not, for the purposes of this Code, taken to know or have reason to believe

something because an officer, agent or employee of the credit provider does so, unless the knowledge or reason to believe that thing is acquired by the officer, agent or employee acting in that capacity and in connection with the transaction concerned. ________________________________________ [Editorial note: UCCC s 176 provided as follows: Conduct of agents and related matters 176 (1) [Imputed conduct of agent or employee] The conduct of an officer, agent or employee of a credit provider acting within his or her actual or ostensible authority will be imputed to the credit provider and taken to be conduct of the credit provider. 176 (2) [Credit provider may not act as agent] A person cannot authorise a credit provider, or a person associated with a credit provider, to enter into a credit contract, mortgage or guarantee on the person’s behalf. This subsection does not prevent a credit provider from authorising a person associated with the credit provider to enter into a credit contract on behalf of the credit provider. 176 (3) [Offence] A credit provider or person associated with a credit provider that purports to act as agent of a debtor, mortgagor or a guarantor in entering into a credit contract or a mortgage or guarantee is guilty of an offence. Maximum penalty — 50 penalty units. 176 (5) [Imputed knowledge of credit provider] A credit provider is not, for the purposes of this Code taken to know or have reason to believe something because an officer, agent or employee of the credit provider does so, unless the knowledge or reason to believe that thing is acquired by the officer, agent or employee acting in that capacity and in connection with the transaction concerned.]

COMMENTARY ON SECTION 199 [199.05] Outline Section 199(1) restates the general law that the conduct of an officer, agent or employee of a credit provider acting within their actual or ostensible authority will be imputed to the credit provider and taken to be the conduct of the credit provider. [page 643] [199.10] Knowledge of credit provider At general law, a credit provider is taken to know what its agents, officers and employees know. Section 199(4)

narrows this general principle. Under the Code, a credit provider is not taken to know (or have reason to believe) something because an officer, agent or employee of the credit provider knows or has reason to believe it, unless the knowledge or beliefs acquired by the officer, agent, or employee acting in that capacity and they were the actual person dealing with the transaction. [199.15] Knowledge of person other than credit provider The protection conferred by s 199(4) does not apply if the knowledge of someone other than the credit provider is relevant. For example, under ss 13(3) or 172(3) a business purpose declaration is ineffective if the credit provider, or the person who obtained the declaration, knew or had reason to believe that the credit was in fact to be applied wholly or predominantly for personal, domestic or household purposes. Therefore, if a financial adviser receives a business purpose declaration and, because he or she is a friend of the debtor, he or she knows it is untrue, the declaration is ineffective. The declaration would not be saved by s 199(4), although the adviser’s knowledge was not acquired in his or her capacity as a financial adviser, because s 199(4) only limits a credit provider’s knowledge. [199.20] Limitation on appointment A person cannot authorise a credit provider, or a person associated with a credit provider, to enter into a credit contract, mortgage or guarantee on a person’s behalf. For example, a debtor may not authorise a loans officer of a credit provider to sign a contract on the debtor’s behalf. Section 199 generally prevents a person authorising a credit provider to enter into a contract on behalf of that person. The explanatory notes to the Consumer Credit (Queensland) Amendment Act 1998 (Qld) (which enacted s 176 of the UCCC) stated: The objective of the provision is to prevent prospective debtors, mortgagors or guarantors from authorising a credit provider to act for them.

However, it is common commercial practice for persons with whom credit providers have agencies and like arrangements to be authorised to by a credit provider to enter into contracts with the debtor on the credit provider’s behalf.

Section 199 expressly states that the general prohibition above “does not prevent a credit provider from authorising a person associated with the credit provider to enter into a credit contract on behalf of the credit provider”. [199.25] Offence A credit provider or an associated person who purports to enter into a credit contract, mortgage or guarantee on behalf of another person is guilty of an offence and liable to a maximum penalty of 50 units (s 199(3)). [199.30] “Person associated with credit provider” Section 204(2) defines a person “associated” with a credit provider. A person is associated with a credit provider if the person: and the credit provider are related bodies corporate under the Corporations Act; or [page 644] is a supplier in respect of whom the credit provider is a linked credit provider; or is an officer, agent or employee of the credit provider, or of any such related body corporate or supplier, is acting in that capacity. [199.35] Control of agents A credit provider must carefully control the activities of its agents, officers and employees because: the acts of its agents, officers and employees bind the credit provider. For example: —

if an agent enters into a credit contract on behalf of the credit provider, the credit provider is bound by the contract; and

—

if an agent makes a representation on behalf of a credit provider, the credit provider is taken to have made the representation; and

the credit provider itself can be liable if an agent, officer or employee does something wrong. [199.40] Practical assumptions by credit provider A credit provider should assume: that each act of any of its agents, officers and employees will be taken to be an act of the credit provider; and if the agent, officer or employee breaches a provision of the Code, the credit provider will be considered to be in breach of that provision as well. [199.45] Examples The following are examples of where the acts of agents, officers and employees can affect the credit provider: Section 76 — when a court decides whether a credit contract, mortgage or guarantee is unjust, it may take into account: —

the extent to which the provisions of the contract, mortgage or guarantee were explained and understood. If an agent liaised with a person signing the document, what the agent did or did not do is relevant to determining whether a document is unjust (s 76(2)(i));

—

any unfair pressure, influence or tactics. Unfair pressure, influence or tactics by an agent are relevant to determining whether a contract is unjust (s 76(2)Q); and

—

whether the credit provider knew, or could have ascertained by reasonable enquiry of the debtor, that the debtor could not pay, or could not pay without substantial hardship (s 76(2)(l)). If an agent deals with a debtor, the agent’s knowledge is relevant as the credit provider will be taken to have knowledge of its agent (however, see the limitation at [199.15]).

Section 113(4)(e) — in determining the penalty for a contravention of a key requirement, the court must have regard to the systems or procedures of the credit provider in place to prevent or identify

contraventions. This will include the systems a credit provider puts in place to control the activities of its agents, officers and employees. Section 155 — a credit provider is prohibited from harassing a person to get them to apply for credit (or to enter into a credit contract or a related transaction). If an agent acting within the scope of its authority harasses a [page 645] person in contravention of the section, the agent’s act will be taken to be the act of the credit provider. The credit provider will contravene the section and be liable to a penalty. [199.50] Liability of agents, officers and employees Agents, officers and employees can be personally liable for contraventions of the Code. Anyone who aids, abets, counsels or procures the commission of an offence under the Code (or is in any way directly or indirectly involved in the offence) is taken to have committed the offence (s 200). Accordingly, if an agent, officer or employee of the credit provider is involved in the commission of an offence by the credit provider (or any other person), the agent, officer or employee could, themselves, be liable. If a corporation contravenes the Code, each officer of the corporation who knowingly authorised or permitted the contravention is also taken to contravene the Code (s 201 — see [201.05]). “Officer” is defined in s 201 widely to include a director of the corporation or a person who is otherwise concerned in its management (see [201.10]). [Editorial note: There is no NCC provision comparable to UCCC ss 177, 178, 179, 180, 181 and 182.]

DIVISION 4 — PROVISIONS RELATING TO OFFENCES Offences by officers, agents or employees

200 An officer, agent or employee of a credit provider or other person may be prosecuted for an offence against this Code or the regulations (if liable for the offence) whether or not proceedings have been taken against the credit provider or other person. ________________________________________ [Editorial note: UCCC s 182A — apart from numbering the section is unchanged.]

COMMENTARY ON SECTION 200 [200.05] Outline Section 200 establishes that proceedings may be taken against an officer, agent or employee of a credit provider for an offence against the Code or the Regulations, whether or not proceedings have already been instigated against the credit provider itself or another person.

Offences by corporations 201 (1) [Deemed contravention by officer] If a corporation contravenes a provision of this Code or the regulations, each officer of the corporation is taken to have contravened the provision if the officer knowingly authorised or permitted the contravention. 201 (2) [Separate proceedings against officer] An officer of a corporation may be proceeded against and convicted under a provision pursuant to this section whether or not the corporation has been proceeded against or convicted under the provision. 201 (3) [Liability of corporation unaffected] Nothing in this section affects the liability imposed on a corporation for an offence committed by the corporation against this Code or the regulations. [page 646] 201 (4) [Definition] In this section:

officer means a director of the corporation or a person who is otherwise concerned in its management. ________________________________________ [Editorial note: UCCC s 183 — apart from numbering the section is unchanged.]

COMMENTARY ON SECTION 201 [201.05] Outline If a corporation contravenes the Code or the Regulations, each officer of the corporation is taken to have contravened the provision if the officer knowingly authorised or permitted the contravention (s 201(1)). Proceedings may be brought against an officer even if proceedings are not brought against the corporation or if the corporation is not convicted (s 201(2)). [201.10] “Officer” The term “officer” is defined in s 201(4) to mean a director or person who is otherwise concerned in its management. Note that the person must have knowingly authorised or permitted the contravention. [201.15] “Knowingly authorised or permitted” The Code gives no guidance as to the meaning of the phrase “knowingly authorised or permitted”.

Limitations 202 Despite anything in any Act, proceedings for an offence against this Code or the regulations may be brought within the period of 3 years that next succeeds the commission of the offence or, with the consent of the AttorneyGeneral, at any later time. ________________________________________ [Editorial note: UCCC s 184 — apart from numbering the section is unchanged.]

COMMENTARY ON SECTION 202

[202.05] Outline Proceedings for an offence against the Code may only be brought within the period of three years that next succeeds the commission of the offence or, with the consent of the Attorney-General, at any later time. [202.10] Limitation The limitation will not affect sections of the Code which provide that provisions of credit contracts, mortgages or guarantees are void and any amount overpaid is recoverable. For example, s 202 will not apply to s 23, which prohibits the imposition of certain monetary liabilities, as any provision which imposes such a prohibited monetary liability is void (s 23(2)).

Application of section 4K of the Crimes Act 1914 203 Section 4K of the Crimes Act 1914 does not apply in relation to an offence against this Code or the regulations. ________________________________________ [Editorial note: There was no comparable UCCC provision.]

[page 647] COMMENTARY ON SECTION 203 [203.05] Outline Section 203 states that s 4K of the Crimes Act 1914 (Cth) does not apply in relation to offences in the Code or the Regulations. As stated in the explanatory memorandum, s 4K of the Crimes Act 1914 (Cth) was excluded “to maintain the interpretative effect of the UCCC”. Section 4K(1) of the Crimes Act 1914 (Cth) provides that where something is required to be done within a period of time or before a particular time, the obligation to do that thing continues despite the period of time having passed (unless the contrary intention appears). Section 4K(2) provides that where the failure to do the thing is an offence, the person is guilty of an offence in respect of each successive day on which they do not do that thing. Section 4K(3) and (4) relate to the bringing of proceedings in relation to multiple offences.

DIVISION 5 — EXEMPTIONS FROM THIS CODE Exemptions by ASIC

203A (1) Exemptions ASIC may exempt a person, contract, mortgage, guarantee or consumer lease from all or specified provisions of this Code. 203A (2) [Exemption not legislative instrument] An exemption under subsection (1) is not a legislative instrument. 203A (3) [ASIC may exempt by legislative instrument] ASIC may, by legislative instrument, exempt a class of persons, contracts, mortgages, guarantees or consumer leases from all or specified provisions of this Code. 203A (4) Conditions on exemptions An exemption may apply unconditionally or subject to specified conditions. A person to whom a condition specified in an exemption applies must comply with the condition. The court may order the person to comply with the condition in a specified way. Only ASIC may apply to the court for the order. 203A (5) Publication of exemptions under subsection (1) An exemption under subsection (1) must be in writing and ASIC must publish notice of it on its website. ________________________________________ [Editorial note: There was no comparable UCCC provision.]

COMMENTARY ON SECTION 203A [203A.05] Outline Section 203A provides ASIC with the power to exempt a person, contract, mortgage, guarantee or consumer lease from some or all of the provisions of the Code. An ASIC exemption made under s 203A(1) shall not be considered a legislative instrument (s 203A(2)). However, ASIC does have the power to provide exemptions by legislative instrument (s 203A(3)). [page 648] [203A.10] Conditions Section 203A(4) stipulates that ASIC can make an exemption with or without conditions and that a person must comply with any relevant conditions. ASIC can apply to the court to have a person comply with any attached condition in a specified way.

[203A.15] Form of exemption Section 203A(5) requires ASIC to provide an exemption in writing and for it to be published on the ASIC website.

Exemptions by the regulations 203B The regulations may: (a) exempt a person, contract, mortgage, guarantee or consumer lease from all or specified provisions of this Code; or (b) exempt a class of persons, contracts, mortgages, guarantees or consumer leases from all or specified provisions of this Code. ________________________________________ [Editorial note: There was no comparable UCCC provision.] [Editorial note: There is no NCC provision comparable to UCCC ss 185, 186 and 187.]

COMMENTARY ON SECTION 203B [203B.05] Outline Section 203B permits the Regulations to exempt a person, contract, mortgage, guarantee or consumer lease from some or all of the provisions of the Code. [203B.10] Exemptions Regulation 111A exempts certain persons from having the obligation to disclose information about rights under or access to an approved external dispute resolution scheme under specified provisions in the Code. The specified persons are: a person who is an unlicensed carried-over instrument lender; a person who is exempt under s 109 or s 110 of the NCCP Act from the requirement to hold a licence; and a person who is exempt under item 41 or 42 of Sch 2 to the Transitional Act from the requirement to be registered.

[page 649]

Part 13 — Principal definitions Principal definitions 204 (1) [Definitions] In this Code: acceleration clause means: (a) in relation to a credit contract or mortgage — a term of a credit contract or mortgage providing that: (i)

on the occurrence or non-occurrence of a particular event, the credit provider becomes entitled to immediate payment of all, or a part, of an amount under the contract that would not otherwise have been immediately payable; or

(ii) whether or not on the occurrence or non-occurrence of a particular event, the credit provider has a discretion to require repayment of the amount of credit otherwise than by repayments fixed, or determined on a basis stated, in the contract; but does not include any such term in a credit contract or mortgage that is an on demand facility; or (b) in relation to a consumer lease — a term of a consumer lease providing that: (i)

on the occurrence or non-occurrence of a particular event, the lessor becomes entitled to immediate payment of all, or a part, of an amount under the lease that would not otherwise have been immediately payable; or

(ii) whether or not on the occurrence or non-occurrence of a particular event, the lessor has a discretion to require

payment of an amount payable under a lease otherwise than by repayments fixed, or determined on a basis stated, in the lease. [def subst Act 130 of 2012 s 3 and Sch 5 item 25, eff 1 Mar 2013]

adjusted credit amount, in relation to a small amount credit contract, means the first amount of credit that is, or is to be, provided under the contract. Note: Some amounts are to be disregarded in working out the first amount of credit (see subsection (3)). [def insrt Act 130 of 2012 s 3 and Sch 4 item 20, eff 1 July 2013]

ADI has the same meaning as in the Banking Act 1959. amend includes: (a) omit or omit and substitute; or (b) alter or vary; or (c) amend by implication. amount of credit: see subsection 3(2). annual cost rate of a credit contract means the annual cost rate of the contract calculated in accordance with section 32B. [def insrt Act 130 of 2012 s 3 and Sch 4 item 21, eff 1 July 2013]

annual percentage rate: see section 27. approved external dispute resolution scheme has the same meaning as in section 11 of the National Credit Act. [def am Act 130 of 2012 s 3 and Sch 1 item 62, eff 1 Mar 2013]

ASIC means the Australian Securities and Investments Commission. associated: see subsection (2). [page 650] Australia means the Commonwealth of Australia but, when used in a geographical sense, does not include an external Territory.

bridging finance contract: a credit contract is a bridging finance contract if: (a) when the contract is made, the debtor: (i)

reasonably expects to receive a lump sum before the term of the contract ends; and

(ii) intends to discharge the debtor’s obligations under the contract so far as possible with that sum; and (aa) the term of the contract is 2 years or less; and (b) the conditions (if any) prescribed by the regulations are met. [def insrt Act 130 of 2012 s 3 and Sch 2 item 5, eff 18 Sep 2012]

Bulk Electronic Clearing System means the system established by the Australian Payments Clearing Association to manage the conduct of the exchange and settlement of bulk electronic low value transactions and includes any replacement system. [def insrt Act 130 of 2012 s 3 and Sch 5 item 26, eff 1 Mar 2013]

business day means a day that is not: (a) a Saturday or Sunday; or (b) a public holiday, special holiday or bank holiday in the place in which any relevant act is to be or may be done. carried on in this jurisdiction has a meaning affected by section 12 of the National Credit Act. cash price of goods or services to which a credit contract relates means: (a) the lowest price that a cash purchaser might reasonably be expected to pay for them from the supplier; or (b) if the goods or services are not available for cash from the supplier or are only available for cash at the same, or a reasonably similar, price to the price that would be payable for them if they were sold with credit provided — the market value of the goods or services. commission includes any form of monetary consideration or any form of

non-monetary consideration to which a monetary value can be assigned. Commonwealth means the Commonwealth of Australia but, when used in a geographical sense, does not include an external Territory. compulsory insurance means: (a) compulsory third-party personal injury insurance; or (b) insurance of a nature declared by the regulations to be compulsory insurance for the purposes of this Code. consumer credit insurance means insurance that insures the capacity of the debtor to make repayments under the credit contract, including insurance against sickness of, injury to, or disability or death of, the debtor or against unemployment of the debtor, and also including life insurance (including insurance under a group policy) to cover any outstanding amount on the debtor’s death. consumer lease: see section 169. consumer lease fees or charges means fees or charges payable in connection with a consumer lease, but does not include: (a) enforcement expenses; or (b) government charges, or duties, on receipts or withdrawals. [def insrt Act 130 of 2012 s 3 and Sch 5 item 27, eff 1 Mar 2013]

[page 651] continuing credit contract means a credit contract under which: (a) multiple advances of credit are contemplated; and (b) the amount of available credit ordinarily increases as the amount of credit is reduced. contract includes a series or combination of contracts, or contracts and arrangements. contract document means the document or documents setting out the

terms of a contract. credit: see subsection 3(1). credit card has the same meaning as in subsection 133BA(2) of the National Credit Act. [def insrt Act 84 of 2011 s 3 and Sch 1 item 25, eff 1 July 2012]

credit card contract has the same meaning as in subsection 133BA(1) of the National Credit Act. [def insrt Act 84 of 2011 s 3 and Sch 1 item 26, eff 1 July 2012]

credit contract: see section 4. credit cost amount: see subsection 32B(3). [def insrt Act 130 of 2012 s 3 and Sch 4 item 22, eff 1 July 2013]

credit fees and charges means fees and charges payable in connection with a credit contract or mortgage, but does not include: (a) interest charges (including default charges); or (b) any fees or charges that are payable to or by a credit provider in connection with a credit contract in connection with which both credit and debit facilities are available if the fees or charges would be payable even if credit facilities were not available (not being annual fees or charges in connection with credit card contracts); or (c) government charges, or duties, on receipts or withdrawals; or (d) enforcement expenses. [def am Act 84 of 2011 s 3 and Sch 1 item 27, eff 1 July 2012]

credit limit has the same meaning as in section 5 of the National Credit Act. [def insrt Act 84 of 2011 s 3 and Sch 1 item 28, eff 1 July 2012]

credit provider means a person that provides credit, and includes a prospective credit provider. credit-related insurance contract: see section 142. credit service has the same meaning as in section 7 of the National Credit

Act. daily percentage rate: see section 27. date of a notice: see section 196. debtor means a person (other than a guarantor) who is liable to pay for (or to repay) credit, and includes a prospective debtor. default notice: (a) in relation to credit contracts, mortgages and guarantees — see section 88; and (b) in relation to consumer leases — see section 179D. [def subst Act 130 of 2012 s 3 and Sch 5 item 28, eff 1 Mar 2013]

default rate: see section 27. definition means a provision of this Code (however expressed) that: (a) gives a meaning to a word or expression; or (b) limits or extends the meaning of a word or expression. direct debit, in relation to the payment of an amount, means the debiting of an amount against an account with a financial institution that is processed through the Bulk Electronic Clearing System, as specified and authorised in writing by: [page 652] (a) in relation to the payment by a debtor of an amount for a credit contract — the debtor; and (b) in relation to the payment by a lessee of an amount for a consumer lease — the lessee. [def insrt Act 130 of 2012 s 3 and Sch 5 item 29, eff 1 Mar 2013]

dispose of property includes: (a) sell the property; or (b) part with possession of the property to the prejudice of the

owner or a mortgagee of the property; or (c) destroy the property. electronic communication has the same meaning as in the Electronic Transactions Act 1999. enforcement expenses, in relation to a mortgage, includes expenses incurred by the mortgagee in preserving or maintaining property subject to the mortgage (including insurance, rates and taxes payable for the property) but only if the expenses are incurred after a breach occurs and are authorised by the mortgage. enforcement proceedings means: (a) for a credit contract, consumer lease or guarantee — proceedings in a court to recover a payment due under the contract, lease or guarantee; or (b) for a consumer lease or mortgage — taking possession of property under the lease or mortgage; or (c) for a mortgage — taking any other action to enforce the mortgage. [def subst Act 130 of 2012 s 3 and Sch 5 item 30, eff 1 Mar 2013]

engage in conduct means: (a) do an act; or (b) omit to perform an act. [def insrt Act 130 of 2012 s 3 and Sch 2 item 6, eff 18 Sep 2012]

fail includes refuse. goods includes: (a) ships, aircraft or other vehicles; or (b) animals, including fish; or (c) minerals, trees or crops, whether on, under or attached to land or not; but does not include anything declared by the regulations not to be goods for the purposes of this Code.

goods mortgage means a mortgage over goods. guarantee includes an indemnity (other than one arising under a contract of insurance). guarantee document means the document or documents setting out the terms of a guarantee. guarantor includes a prospective guarantor. hardship notice: (a) in relation to credit contracts — see subsection 72(1); and (b) in relation to consumer leases — see subsection 177B(1). [def insrt Act 130 of 2012 s 3 and Sch 5 item 31, eff 1 Mar 2013]

insolvent means: (a) in the case of a natural person — a person who is an insolvent under administration; or (b) in the case of a corporation — a corporation that is an externally-administered corporation within the meaning of the Corporations Act 2001. [def am Act 46 of 2011 s 3 and Sch 2 item 784, eff 27 Dec 2011]

instrument includes a statutory instrument. [page 653] interest, in relation to land or other property, means: (a) a legal or equitable estate in the land or other property; or (b) a right, power or privilege over, or in relation to, the land or other property. key requirement: see Part 6. land includes any interest in land. lessee means the lessee under a consumer lease to which Part 11 applies, and includes a prospective lessee.

[def insrt Act 130 of 2012 s 3 and Sch 5 item 32, eff 1 Mar 2013]

lessor means the lessor under a consumer lease to which Part 11 applies, and includes a prospective lessor. [def insrt Act 130 of 2012 s 3 and Sch 5 item 33, eff 1 Mar 2013]

linked credit provider: see subsection 127(1). linked lessor: see subsection 179S(1). [def insrt Act 130 of 2012 s 3 and Sch 5 item 34, eff 1 Mar 2013]

lowest price, in relation to the cash price of goods or services to which a credit contract relates, means the lowest price including any goods and services tax but unaffected by any discount between the credit provider and the supplier. market value, of goods or services to which a credit contract relates, means fair market value including any goods and services tax. medium amount credit contract: a credit contract is a medium amount credit contract if: (a) the contract is not a continuing credit contract; and (b) the credit provider under the contract is not an ADI; and (c) the credit limit of the contract is: (i)

at least $2,001 (or such other amount as is prescribed by the regulations); but

(ii) not more than $5,000 (or such other amount as is prescribed by the regulations); and (d) the term of the contract is at least 16 days but not longer than 2 years (or such other number of years as is prescribed by the regulations); and (e) the contract meets any other requirements prescribed by the regulations. [def insrt Act 130 of 2012 s 3 and Sch 4 item 22A, eff 1 July 2013]

merchant service agreement means an agreement between a credit provider and a supplier of goods and services under which the credit provider agrees to pay to the supplier amounts for goods or services

supplied by the supplier and paid by means of credit cards, whether or not the credit cards are issued by the credit provider. modification includes addition, omission or substitution. mortgage includes: (a) any interest in, or power over, property securing obligations of a debtor or guarantor; or (b) a credit provider’s title to land or goods subject to a sale by instalments; or (c) a mortgage taken to have been entered into under subsection 9(3); but does not include a consumer lease to which Part 11 applies. mortgage document means the document or documents setting out the terms of a mortgage by reference to which the mortgage is created. mortgagor includes a prospective mortgagor. National Credit Act means the National Consumer Credit Protection Act 2009 and includes regulations made under section 329 of that Act, but does not include this Code. [page 654] number means: (a) a number expressed in figures or words; or (b) a letter; or (c) a combination of a number so expressed and a letter. omit, in relation to a provision of this Code or an Act, includes repeal. on demand facility means a credit contract or mortgage under which: (a) the total amount outstanding under the contract or mortgage is repayable at any time on demand by the credit provider; and (b) there is no agreement, arrangement or understanding between

the credit provider and the debtor or mortgagor that repayment will only be demanded on the occurrence or non-occurrence of a particular event. [def insrt Act 130 of 2012 s 3 and Sch 5 item 35, eff 1 Mar 2013]

penalty includes forfeiture or punishment. permitted establishment fee: see paragraph 31A(1)(a). [def insrt Act 130 of 2012 s 3 and Sch 4 item 23, eff 1 July 2013]

permitted monthly fee: see subsection 31A(2). [def insrt Act 130 of 2012 s 3 and Sch 4 item 24, eff 1 July 2013]

postponement request: (a) in relation to credit contracts, mortgages or guarantees — see subsection 94(1); and (b) in relation to consumer leases — see subsection 179H(1). [def insrt Act 130 of 2012 s 3 and Sch 5 item 36, eff 1 Mar 2013]

power includes authority practising lawyer means a person who is admitted to the legal profession by a federal court or a Supreme Court of a State or Territory and holds a practising certificate (however described) entitling the person to practise that profession. [def insrt Act 130 of 2012 s 3 and Sch 2 item 7, eff 18 Sep 2012]

printed includes typewritten, lithographed or reproduced by any mechanical means. proceedings means a legal or other action or proceedings. prohibited credit amount: see subsection 39A(1). [def insrt Act 130 of 2012 s 3 and Sch 4 item 25, eff 1 July 2013]

property means any legal or equitable estate or interest (whether present or future, vested or contingent, or tangible or intangible) in real or personal property of any description (including money), and includes things in action. provision, in relation to this Code or an Act, means words or other matter

that form or forms part of this Code or the Act, and includes: (a) a Chapter, Part, Division, Subdivision, section, subsection, paragraph, subparagraph, subsubparagraph or Schedule of or to this Code or the Act; or (b) a section, clause, subclause, item, column, table or form of or in a Schedule to this Code or the Act; or (c) the long title and any preamble to the Act. purchaser means: (a) in relation to goods — a person who purchases, or proposes to purchase, the goods; or (b) in relation to services — a person who contracts, or proposes to contract, to obtain services. reference rate means a benchmark, index or other reference rate. referring State has the same meaning as in section 19 of the National Credit Act. [page 655] regulation means a regulation made or in force for the purposes of this Code. repeal includes: (a) revoke or rescind; or (b) repeal by implication; or (c) abrogate or limit the effect of this Code or instrument concerned; or (d) exclude from, or include in, the application of this Code or instrument concerned any person, subject matter or circumstance. residential property means:

(a) land on which a dwelling is or will be affixed predominantly for residential purposes; or (b) a lease of land on which a dwelling is or will be affixed predominantly for residential purposes, being a lease that: (i)

is a Crown lease (within the meaning of the Income Tax Assessment Act 1997); and

(ii) gives the lessee reasonable security of tenure; or (c) a licence in relation to land on which a dwelling is or will be affixed predominantly for residential purposes, being a licence that: (i)

is granted by the Commonwealth, a State or a Territory; and

(ii) gives the licensee reasonable security of tenure; or (d) a share that: (i)

is in a company that is the legal owner of the land on which a dwelling is or will be affixed predominantly for residential purposes; and

(ii) gives the person who legally owns the share a right to occupy the dwelling; or (e) a right to occupy a dwelling in an aged care facility or retirement village; (f)

an equity of redemption in relation to land on which a dwelling is or will be affixed predominantly for residential purposes.

retained credit fees and charges means credit fees and charges retained by the credit provider, other than credit fees and charges passed on to (or retained in reimbursement of an amount paid to): (a) a third party that is not a related body corporate (for the purposes of the Corporations Act 2001) of the credit provider; or (b) a financial institution that is such a related body corporate in

respect of the provision of banking services that are provided to the credit provider by the financial institution on the same terms as those services are ordinarily provided to customers who are not related to or associated with the financial institution. reverse mortgage: see section 13A. [def insrt Act 130 of 2012 s 3 and Sch 2 item 3, eff 18 Sep 2012]

reverse mortgaged property, in relation to a credit contract for a reverse mortgage, means a dwelling or land that has been mortgaged to secure a debtor’s obligations under the contract. [def insrt Act 130 of 2012 s 3 and Sch 2 item 8, eff 18 Sep 2012]

sale contract: see section 125. services includes: (a) rights in relation to, and interests in, real property; or (b) insurance; or (c) professional services; or (d) a right to services; but does not include the provision of credit or a right to credit or services provided under a consumer lease. [page 656] sign includes the affixing of a seal or the making of a mark. Note: See section 186.

small amount credit contract has the same meaning as in section 5 of the National Credit Act. [def insrt Act 130 of 2012 s 3 and Sch 4 item 26, eff 1 July 2013]

statutory instrument means an instrument (including a regulation) made or in force under or for the purposes of this Code, and includes an instrument made or in force under any such instrument.

strata corporation means: (a) a body corporate incorporated in relation to land subdivided wholly or mainly for residential purposes under a law of the Commonwealth, a State or a Territory providing for strata, cluster, precinct or other subdivision of land; or (b) a body corporate whose issued shares confer a right to occupy land for residential purposes. supplier means a supplier of goods or services. supply includes agree to supply. termination of a contract includes the discharge or rescission of the contract. this Code means this Schedule and includes regulations made for the purposes of this Schedule. this jurisdiction has the same meaning as in section 21 of the National Credit Act. tied consumer lease: see subsection 179S(2). [def insrt Act 130 of 2012 s 3 and Sch 5 item 37, eff 1 Mar 2013]

tied continuing credit contract: see subsection 127(2). tied loan contract: see subsection 127(3). unjust includes unconscionable, harsh or oppressive. [def insrt Act 130 of 2012 s 3 and Sch 5 item 38, eff 1 Mar 2013]

unpaid balance: see section 27. unpaid daily balance: see section 27. word includes any symbol, figure or drawing. writing includes any mode of representing or reproducing words in a visible form. Note: See section 187.

204 (2) [“associated”] For the purposes of this Code, a person is associated with a credit provider if:

(a) the person and the credit provider are related bodies corporate for the purposes of the Corporations Act 2001; or (b) the person is a supplier in respect of whom the credit provider is a linked credit provider; or (c) the person is an officer, agent or employee of the credit provider, or of any such related body corporate or supplier, acting in that capacity. 204 (3) In working out the first amount of credit that is, or is to be, provided under a small amount credit contract for the purposes of the definition of adjusted credit amount in subsection (1), the following amounts are to be disregarded: (a) if some or all of the amount of a fee or charge (the fee amount) payable in relation to the contract forms, or is to form, part of the first amount of credit that is, or is to be, provided under the contract — the fee amount; [page 657] (b) if subsection 39A(1) is contravened in relation to the contract — the prohibited credit amount; (c) any other amount prescribed by the regulations. [subs (3) insrt Act 130 of 2012 s 3 and Sch 4 item 27, eff 1 July 2013]

________________________________________ [Editorial note: UCCC Sch 1 provided as follows: SCHEDULE 1 PRINCIPAL DEFINITIONS 1 (1) In this Code, unless the contrary intention appears acceleration clause see section 84. amount of credit see section 4(2). annual percentage rate see section 25. cash price, of goods or services to which a credit contract relates, means—

(a) the lowest price that a cash purchaser might reasonably be expected to pay for them from the supplier; or (b) if the goods or services are not available for cash from the supplier or are only available for cash at the same, or a reasonably similar, price to the price that would be payable for them if they were sold with credit provided — the market value of the goods or services. commission includes any form of monetary consideration or any form of non-monetary consideration to which a monetary value can be assigned. compulsory insurance means— (a) compulsory third-party personal injury insurance; or (b) insurance of a nature declared by the regulations to be compulsory insurance for the purposes of this Code. consumer credit insurance means insurance that insures the capacity of the debtor to make repayments under the credit contract, including insurance against sickness of, injury to, or disability or death of, the debtor or against unemployment of the debtor, and also including life insurance (including insurance under a group policy) to cover any outstanding amount on the debtor’s death. consumer lease see section 147. continuing credit contract means a credit contract under which— (a) multiple advances of credit are contemplated; and (b) the amount of available credit ordinarily increases as the amount of credit is reduced. contract includes a series or combination of contracts, or contracts and arrangements. contract document means the document or documents setting out the terms of a contract. Corporations Act means the Corporations Act 2001 (Cwlth). Court, in relation to a provision of this Code, means the court or tribunal which has by law jurisdiction under that provision. credit see section 4(1). credit contract see section 5. credit fees and charges means fees and charges payable in connection with a credit contract or mortgage, but does not include— (a) interest charges (including default charges); or (b) any fees or charges that are payable to or by a credit provider in connection with a credit contract in connection with which both credit and debit facilities are available if the fees or charges would be payable even if credit facilities were not available (not being annual fees or charges in connection with continuing credit contracts under which credit is ordinarily obtained only by the use of a card); or (c) government charges, or duties, on receipts or withdrawals; or (d) enforcement expenses. credit provider means a person that provides credit, and includes a prospective credit

provider. credit-related insurance contract see section 132.

[page 658] daily percentage rate see section 25. date of a notice see section 173. debtor means a person (other than a guarantor) who is liable to pay for (or to repay) credit, and includes a prospective debtor. default notice see Part 5. default rate see section 25. dispose of property includes— (a) sell the property; or (b) part with possession of the property to the prejudice of the owner or a mortgagee of the property; or (c) destroy the property. enforcement expenses, in relation to a mortgage, includes expenses incurred by the mortgagee in preserving or maintaining property subject to the mortgage (including insurance, rates and taxes payable for the property) but only if the expenses are incurred after a breach occurs and are authorised by the mortgage. enforcement proceedings, in relation to a credit contract or a guarantee or mortgage, means— (a) proceedings in a court to recover a payment due under the contract or a guarantee; or (b) taking possession of property under a mortgage or taking any other action to enforce a mortgage. goods includes— (a) ships, aircraft or other vehicles; or (b) animals, including fish; or (c) minerals, trees or crops, whether on, under or attached to land or not; but does not include anything declared by the regulations not to be goods for the purposes of this Code. goods mortgage means a mortgage over goods. Government Consumer Agency means the person who, or body which, has by law the functions of the Government Consumer Agency under this Code. guarantee includes an indemnity (other than one arising under a contract of insurance). guarantee document means the document or documents setting out the terms of a guarantee.

guarantor includes a prospective guarantor. insolvent means— (a) in the case of a natural person — a person who is an insolvent under administration within the meaning of the Corporations Act; or (b) in the case of a corporation — a corporation that is an externally-administered body corporate within the meaning of the Corporations Act. jurisdiction means a State or Territory. key requirement see Part 6. land includes any interest in land. linked credit provider see section 117(1). lowest price, in relation to the cash price of goods or services to which a credit contract relates, means the lowest price including any goods and services tax but unaffected by any discount between the credit provider and the supplier. market value, of goods or services to which a credit contract relates, means fair market value including any goods and services tax. merchant service agreement means an agreement between a credit provider and a supplier of goods and services under which the credit provider agrees to pay to the supplier amounts for goods or services supplied by the supplier and paid by means of credit cards, whether or not the credit cards are issued by the credit provider. mortgage includes— (a) any interest in, or power over, property securing obligations of a debtor or guarantor; or (b) a credit provider’s title to land or goods subject to a sale by instalments; or (c) a mortgage taken to have been entered into under section 10(3); but does not include a consumer lease to which Part 10 applies.

[page 659] mortgage document means the document or documents setting out the terms of a mortgage by reference to which the mortgage is created. mortgagor includes a prospective mortgagor. penalty unit see section 179. purchaser means— (a) in relation to goods — a person who purchases, or proposes to purchase, the goods; or (b) in relation to services — a person who contracts, or proposes to contract, to obtain services. reference rate means a benchmark, index or other reference rate.

regulation means a regulation made or in force for the purposes of this Code. retained credit fees and charges means credit fees and charges retained by the credit provider, other than credit fees and charges passed on to (or retained in reimbursement of an amount paid to)— (a) a third party that is not a related body corporate (for the purposes of the Corporations Act) of the credit provider; or (b) a financial institution that is such a related body corporate in respect of the provsion of banking services that are provided to the credit provider by the financial institution on the same terms as those services are ordinarily provided to customers who are not related to or associated with the financial institution. sale contract see section 115. services includes— (a) rights in relation to, and interests in, real property; or (b) insurance; or (c) professional services; or (d) a right to services; but does not include the provision of credit or a right to credit or services provided under a consumer lease. strata corporation means— (a) a body corporate incorporated in relation to land subdivided wholly or mainly for residential purposes under a law of this or some other jurisdiction providing for strata, cluster, precinct or other subdivision of land; or (b) a body corporate whose issued shares confer a right to occupy land for residential purposes. supplier means a supplier of goods or services. supply includes agree to supply. termination of a contract includes the discharge or rescission of the contract. tied continuing credit contract see section 117(2). tied loan contract see section 117(3). unpaid balance see section 25. unpaid daily balance see section 25. 1 (2) For the purposes of this Code, a person is associated with a credit provider if— (a) the person and the credit provider are related bodies corporate for the purposes of the Corporations Act; or (b) the person is a supplier in respect of whom the credit provider is a linked credit provider; or (c) the person is an officer, agent or employee of the credit provider, or of any such related body corporate or supplier, acting in that capacity.]

COMMENTARY ON SECTION 204 [204.01] Acceleration clause This term was previously defined in the now repealed s 92(1). The Enhancements Act moved this definition to s 204(1). The wording of that definition was not altered, except in one respect: s 92(1) defined an acceleration clause as a term of a credit contract or mortgage, whereas the new s 204(1) provides that an acceleration clause must be “in relation to a credit [page 660] contract or a mortgage”, as well as being a term of a credit contract or mortgage. A minor change, but one that is arguably more expansive than its predecessor. Acceleration clauses, which relate to the early repayment of credit, can be either “automatic” or “non-automatic”. Section 204(1)(a)(i) refers to “automatic” acceleration clauses, which are triggered by a predetermined event (ie, clauses that purport to operate without the need for any action on the part of the credit provider). Section 204(1)(a)(ii) refers to “nonautomatic” acceleration clauses, which enliven the credit provider’s discretion to require repayment (ie, clauses that only operate at the discretion of the credit provider). The Code restricts the operation of acceleration clauses. These restrictions are set out in s 93, but do not apply, however, to an “on demand facility” (an “on demand facility” is excluded from the definition of “acceleration clause” in s 204(1)(a)). “On demand facility” is defined separately in s 204(1) as a credit contract or mortgage where the total amount outstanding is repayable at any time on demand by the credit provider. Further, there must be no agreement, arrangement or understanding between the credit provider and debtor or mortgagor that repayment will be contingent on some particular event. The concept of “agreement, arrangement or understanding” is very broad and thus care must be taken when drafting “on demand facility” credit contracts.

[204.02] Adjusted credit amount This definition was inserted by the Enhancements Act as part of the SACC regime. See commentary on s 23A. See also s 204(3), inserted into the Code by the Enhancements Act. The Explanatory Memorandum to the Enhancements Act explains (at para 5.56): 5.56 The term adjusted credit amount is relevant to calculating the permitted establishment and monthly fees (as discussed in paragraph 5.27). A definition of this term is to be included in section 204 of the Code as the amount of credit that is to be provided under the contract, excluding the following amounts: the permitted establishment and monthly fees; any amount of credit provided under the contract retained or paid to the credit provider or to any person prescribed by the regulations, in breach of the prohibition in section 39A; and any other amount that may be prescribed by the regulations. [Schedule 4, item 20, subsection 204(1)]

[204.03] Annual cost rate This definition was inserted by the Enhancements Act. It relates to the maximum annual percentage rate cap introduced by Div 4A (as part of the Enhancements Act modifications to the Code). (See further commentary on ss 32A, 32AA and 32B.) See also definition of “credit cost amount”. [204.04] Approved external dispute resolution scheme The definition of “approved external dispute resolution scheme” refers to s 11 of the NCCP Act. Section 11 of the NCCP Act defines an approved EDR scheme to be one or more EDR schemes that are “approved by ASIC” in accordance with the Regulations and cover relevant disputes in relation to the credit activities engaged in by the relevant person or its representatives. [page 661] At the time of writing this text, there are two ASIC-approved EDR schemes: the Financial Ombudsman Service (FOS) and Credit Ombudsman Service Limited (COSL) (see para 5.7 of the “Overview of the National

Consumer Credit Protection Act (NCCP Act) regime” in the introductory pages of this text). [204.05] Bridging finance contract The Explanatory Memorandum to the Enhancements Act explains (at para 3.19): 3.19 The Enhancements Bill also introduces a definition of a bridging finance contract, as a contract where, first, at the time the contract is made the debtor reasonably expects to receive a lump sum before the end of the contract and to use that sum as far as possible to meet their obligations under the contract, and, secondly, if the regulation prescribe any conditions, those conditions are meet [sic]. [Schedule 2, item 5, subsection 204(1)]

See also commentary at [13A.85]. [204.06] Carried on in this jurisdiction The definition of “carried on in this jurisdiction” refers to s 12 of the NCCP Act. Section 12 of the NCCP Act refers to Div 3 of Pt 1.2 of the Corporations Act and further defines business that is “carried on in this jurisdiction” to be conduct that is intended or likely to induce people in the jurisdiction to use the goods or services that the person provides and that is undertaken in the course of carrying on a business. It is irrelevant whether or not the conduct has effect in other jurisdictions as well. [204.07] Commonwealth The definition of “Commonwealth” generally means the Commonwealth of Australia, but where used in a geographical sense does not include an external territory (eg, Christmas Island). [204.08] Consumer credit insurance Consumer credit insurance is now regulated by the Insurance Contracts Act 1984 (Cth). (See Insurance Laws Amendment Act (No 2) 1994 (Cth)). [204.10] Continuing credit contract The definition of “continuing credit contract” has two limbs: “(a) multiple advances of credit are contemplated; and (b) the amount of available credit ordinarily increases as the amount of credit is reduced”. Both limbs must be satisfied for a credit contract to be a continuing credit contract. Overdrafts and credit card facilities are continuing credit contracts. Other types of credit contracts, such as home and personal loans, are not continuing credit contracts if one or more advances are

contemplated but the amounts repaid cannot be redrawn (ie, they are not “revolving”). Where a credit contract has a fixed term and requires principal and interest instalments to be paid, but permits the debtor to redraw amounts which have been repaid in excess of the minimum amounts payable (ie, the overall limit of the facility is “amortising” (reducing), but the debtor is permitted to redraw amounts up to the limit from time to time) the contract will not be a continuing credit contract. This is because “ordinarily” (ie, where the debtor makes the repayments required by the contract), the amount of available credit will not increase, so limb (b) of the definition will [page 662] not be satisfied. Further, where the debtor simply makes the repayments required by the contract (ie, the minimum amounts required to be paid), the amount of credit will be reduced, but there will be no “available credit”. It is only where the debtor elects to make additional payments (ie, above the minimum amounts required by the contract) that the amount of available credit will increase as the amount of credit is reduced, but this situation cannot be said to be “ordinary”, rather it is “extraordinary”. [204.15] Contract In Flood v Police Department Employees’ Credit Union (1999) ASC ¶155-028 at [85], the Commercial Tribunal of New South Wales recognised that not all contracts and transactions between a credit provider and a debtor will be regarded as constituting a “series” or “combination” for the purposes of the definition of “contract”. [204.20] Court The UCCC (Sch 1) included a definition of “Court”. This is not included in the Code (see [112.06]). [204.25] Credit contract The term “credit contract” is defined in s 4. See commentary at [23.30]–[23.50] for an analysis of the meaning of “credit contract” in Macquarie Credit Union Ltd v Director-General, Dept of Fair Trading (1998) ASC ¶155-014; Flood v Police Department Employees’ Credit Union (1999) ASC ¶155-028 and Police Department Employees’ Credit Union v Flood (1999) ASC ¶155-034; [1999] NSWSC 885.

[204.26] Credit cost amount This definition was inserted by the Enhancements Act. It relates to the maximum annual percentage rate cap introduced by Div 4A (as part of the Enhancements Act modifications to the Code). See also [204.03]. The Enhancements Act also introduced the following definitions in connection with the SACC regime (also introduced by the Enhancements Act): “adjusted credit amount”, “permitted establishment”, “fee permitted”, “monthly fee” and “prohibited credit amount”. [204.30] Credit fees and charges See generally [17.45]. Note that “interest charges” is not defined in the Code. It is not clear whether interest charges would include amounts which although not described as interest charges are nevertheless charges in the nature of interest; that is, amounts charged to remunerate the credit provider for providing the credit. [204.31] Electronic communication Section 204 provides that “electronic communication” has the same meaning as in the Electronic Transactions Act 1999 (Cth). In the Electronic Transactions Act, “electronic communication” means data, text, or voice processed by an automated voice recognition system, and carried by guided (ie, over wires or fibre optics) or unguided (radiocommunications) electromagnetic energy. Under Pt 3 of the Electronic Transactions Regulations 2000 (Cth), a debtor, mortgagor or guarantor may consent to documents being provided through electronic communication, as long as that is in a form that permits saving and [page 663] printing. However, Sch 1 to these Regulations provides that certain specific classes of documents (such as documents given to guarantors and default notices) may not be given by electronic communications even if the debtor, mortgagor or guarantor has consented. This change has carried through to s 194(2) of the Code.

[204.35] Enforcement expenses The maximum amount that may be secured by a mortgage made under the Code is the amount of the liabilities of the debtor under a credit contract which the mortgage secures, or the guarantor’s liability under the guarantee which the mortgage secures, and (in either case) the reasonable enforcement expenses of enforcing the mortgage or guarantee (see s 49). The definition of “enforcement expenses” enables a mortgagee to recover expenses incurred by it in preserving or maintaining the mortgaged property. However, they may be recovered only if the expenses are incurred after a breach occurs and those expenses are authorised by the mortgage. Consequently, mortgages which are regulated by the Code must be drafted so that a mortgagor will be in breach of their mortgage if they fail to pay expenses to preserve or maintain mortgaged property, and must also give the mortgagee the right to pay them (and recover them as enforcement expenses) if the mortgagor fails to do so. [204.40] Enforcement proceedings “Enforcement proceedings” are not the same thing as enforcement action. Enforcement action includes, for example, making demands for payment, issuing default notices and accelerating amounts owing under the credit contract, none of which would be “enforcement proceedings”. [204.45] Medium amount credit contract (MACC) This definition was inserted by the Enhancements Act. The definition is relevant to the prohibition of the maximum annual cost rate of 48 per cent as prescribed by ss 32A and 32AA. The term is used in s 32D to prescribe the calculation of the annual cost rate for MACCs (see s 32B(2)). [204.50] Mortgage The Code applies only to mortgages given by individuals or strata corporations to the extent that they secure credit contracts or related guarantees which are regulated by the Code (s 7). Therefore, the Code will not apply to all mortgages granted by individuals. It will apply only to mortgages granted by individuals who secure amounts due under: credit contracts with individuals or strata corporations where the credit is predominantly for personal, domestic or household purposes or for the purpose of purchasing, renovating or improving

residential property for investment purposes (or to refinance such residential investment credit); or guarantees given by individuals or strata corporations in support of such credit contracts. For example, the Code would not regulate a mortgage provided by a director of a company to secure (via a guarantee) a loan to the company, nor would it apply to a mortgage given by a company to secure (via a guarantee) a loan given to a director. The Code definition of “mortgage” is wide and would include, for example, a credit provider’s right to set off amounts owing by the debtor to the credit [page 664] provider under a credit contract against the credit provider’s obligation to pay money to the debtor on any account and would also include retention of title (ie, Romalpa clauses). Note that reg 64 prescribes that the Code does not apply to the mortgages described in that regulation. The exclusions in reg 64 and the fact that consumer leases are expressly excluded from the definition of “mortgage” for the purposes of the Code, tends to confirm that “mortgage” is intended to have a wide meaning, as otherwise these exclusions would not be required. [204.51] Permitted establishment fee This definition was inserted by the Enhancements Act and relates to SACCs (see s 23A). [204.52] Permitted monthly fee This definition was inserted by the Enhancements Act as part of the new SACCs regime (see [204.46]). [204.53] Prohibited credit amount This definition was inserted by the Enhancements Act as part of the new SACCs regime. [204.54] Retained credit fees and charges This definition was inserted into

the UCCC by the Consumer Credit (Queensland) Amendment Act 1998 (Qld) and has been carried into the Code (see [111.20] and [111.25]). The explanatory notes to the Consumer Credit (Queensland) Amendment Act 1998 (Qld) stated: … the primary meaning of the term is credit fees and charges which are retained by the credit provider as distinct from those that are passed on (or are retained in reimbursement of an amount paid) to a third party which is not a related body corporate, for Corporations Law purposes, of the credit provider. [Clause (b)] is intended to ensure that where a credit provider pays a fee or charge to a related corporation which is a financial institution providing banking type services, the fee will not be considered a retained credit fee or charge if the financial institution provides its services to the credit provider on the same terms as those services are provided to customers who are unrelated to the institution.

[204.55] Services The definition of “services” includes rights in relation to, and interests in, “real property” (para (a)). The Code does not define “real property” but does define “land” elsewhere in s 204. It is not clear whether the Code intentionally distinguishes between “land” and “real property”. [204.56] Small amount credit contract (SACC) This definition was inserted by the Enhancements Act as part of the new SACC regime. See [23A.25] for a list of all Code provisions specifically relating to SACCs. “Small amount credit contract” is defined as having “the same meaning as in “the National Credit Act”, which is defined to be the NCCP Act. Section 5(1) of the NCCP Act states: “small amount credit contract”: a credit contract is a small amount credit contract if: (a) the contract is not a continuing credit contract; and (b) the credit provider under the contract is not an ADI; and (c) the credit limit of the contract is $2,000 (or such other amount as is prescribed by the regulations) or less; and (d) the term of the contract is at least 16 days but not longer than 1 year (or such other number of years as is prescribed by the regulations); and

[page 665] (e) the debtor’s obligations under the contract are not, and will not be, secured; and (f)

the contract meets any other requirements prescribed by the regulations.

See further commentary on s 23A. [204.60] Strata corporation A practical concern for credit providers is how they can identify whether a debtor is a strata corporation and, consequently, that the Code may apply to that loan. The distinguishing features of strata corporations are summarised below: Distinguishing features of strata corporations Features New South Wales A strata corporation created in New South Wales must be called “The Owners — Strata Plan No [the registered number of the strata plan]” A strata corporation created in New South Wales is not a corporation within the meaning of the Corporations Act, and consequently does not have an Australian Company Number (ACN)

Legislation

Provision

Strata Schemes Management Act 1996 (NSW)

s 11(1)

Strata Schemes Management Act 1996 (NSW)

s 11(2)

Queensland A strata corporation created in Queensland Building Units and must be called “The Group Titles Act Proprietors — [name of 1980 (Qld) building] Building Units Plan No [the plan

s 27(1)

number]” or “The Proprietors — [name of parcel] Group Titles Plan No [the plan number]” (The name of the building or parcel is the name on the relevant plan) The Corporations Act does not apply to strata Building Units and corporations created in Group Titles Act Queensland and 1980 (Qld) consequently they do not have an ACN

s 27(2)

South Australia The name of a strata corporation created in Strata Titles Act 1988 s 18(1) and (2) South Australia must be (SA) “Strata Corporation No [the number of the deposited strata plan] Incorporated/Inc” [page 666] A strata corporation Corporations (South created in South Australia) Act 1990 Australia is not subject (SA) to the Corporations Act, and consequently does not have an ACN Victoria

s 93

The name of a strata corporation created in Victoria must be “Owners corporation 1 — Plan No [the relevant plan number]”, or if more than one body corporate is created in a plan, “Owners corporation — [eg, 1, 2, 3] Plan No [the relevant plan number]” The Corporations Act does not apply to a strata corporation, and consequently a strata corporation created in Victoria does not have an ACN

Subdivision (Registrar’s Requirements) Regulations 2011 (Vic)

reg 28

Subdivision Act 1988 s 29 (Vic)

Western Australia The name of a strata corporation created in Strata Titles Act 1985 s 32(1) and (2b) Western Australia must (WA) have a name consisting of: — “The Owners of [the name of the scheme]”; and — the number of the strata/survey-strata plan allocated to it by the Registrar of Titles (For strata plans

registered before the commencement of s 36 of the Strata Titles Amendment Act 1995 (WA), the name of the building is the name appearing on the strata plan) A strata corporation created in Western Australia is not subject to the Corporations Act, and consequently does not have an ACN

Strata Titles Act 1985 s 32(4) (WA)

[page 667]

Australian Capital Territory A strata corporation created in the Australian Unit Titles Capital Territory must (Management) Act be called “The Owners 2011 (ACT) — Units Plan No [the number allotted to the units plan by the registrar]” Australian Capital Territory strata corporations in practice

s8

do not have ACNs and are not registered under the Corporations Act [204.65] “Associated” with a credit provider Section 204(2) includes a definition of a person who is “associated” with a credit provider. This definition applies to the references to an associate of a credit provider in ss 14(3), 194(6) and 199(2).

[page 669]

Part 14 — Miscellaneous provisions relating to interpretation DIVISION 1 — PRELIMINARY

Displacement of Part by contrary intention 205 The application of this Part may be displaced, wholly or partly, by a contrary intention appearing in this Code. ________________________________________ [Editorial note: UCCC Sch 2 Pt 1 s 1 provided as follows: Displacement of Schedule by contrary intention 1 The application of this Schedule may be displaced, wholly or partly, by a contrary intention appearing in this Code.]

COMMENTARY ON SECTION 205 [205.05] Outline Section 205 confirms the standing of provisions contained in ss 206–218 relating to the interpretation of provisions of the Code. These sections are to be displaced either wholly or in part by any contrary intention appearing in the Code. Sections 206–218 may assist interpreting other sections of the Code only to the extent they do not lead to a contrary intention to the relevant section. [Editorial note: There is no NCC provision comparable to UCCC Sch 2 Pt 2 ss 2 and 3.]

DIVISION 2 — GENERAL

Material that is, and is not, part of this Code 206 [s 206 rep Act 130 of 2012 s 3 and Sch 1 item 51, eff 1 Mar 2013] COMMENTARY ON REPEALED SECTION 206 [206.05] Outline Section 206 was repealed by the Enhancements Act. Prior to the Enhancements Act repeal, s 206 stipulated what material should be considered as forming part of the Code. Section 206 was repealed so that the interpretation of headings, punctuation and notes of the Code will be in accordance with the Acts Interpretation Act 1901 (Cth) and the Code is therefore consistent with Commonwealth legislation generally. (Previously, s 206 specified the way in which headings, notes and punctuation could be used for Code interpretation and this was inherited from the UCCC.) [page 670] [206.10] Material forming part of the Code Prior to its Enhancements Act repeal, s 206 stated that the heading to a Part, Division or Subdivision (s 206(1)) and punctuation (s 206(2)) form a part of the Code. [206.15] Material not forming part of the Code Prior to its Enhancements Act repeal, s 206 stated that the heading to a section or subsection (s 206(3)) and notes (s 206(4)) do not form a part of the Code.

References to particular Acts and to enactments 207 In this Code: (a) an Act of the Commonwealth may be cited by its short title; and (b) an Act of a State or Territory may be cited: (i)

by its short title; or

in another way sufficient in an Act of the State or Territory for (ii) the citation of such an Act; together with a reference to the State or Territory. ________________________________________ [Editorial note: UCCC Sch 2 Pt 2 s 5 provided as follows: References to particular Acts and to enactments 5 In this Code— (a) an Act of this jurisdiction may be cited— (i)

by its short title; or

(ii) by reference to the year in which it was passed and its number; and (b) a Commonwealth Act may be cited— (i)

by its short title; or

(ii) in another way sufficient in a Commonwealth Act for the citation of such an Act; together with a reference to the Commonwealth; and (c) an Act of another jurisdiction may be cited— (i)

by its short title; or

(ii) in another way sufficient in an Act of the jurisdiction for the citation of such an Act; together with a reference to the jurisdiction.]

COMMENTARY ON SECTION 207 [207.05] Outline Section 207 outlines how legislation will be referenced within the Code. [207.10] Commonwealth legislation Acts of the Commonwealth may be cited with by their short titles in the Code (s 207(a)). [207.15] State or territory legislation Acts of states and territories may be cited either by their short title or in any other way appropriate in the applicable jurisdiction (s 207(b)). [Editorial note: There is no NCC provision comparable to UCCC Sch 2 Pt 2 ss, 6, 7, 8, 9 and 10.]

Compliance with forms 208 (1) [Substantial compliance] If a form is prescribed or approved by or for the purpose of this Code, strict compliance with the form is not necessary and substantial compliance is sufficient. [page 671] 208 (2) [Specified requirements] If a form prescribed or approved by or for the purpose of this Code requires: (a) the form to be completed in a specified way; or (b) specified information or documents to be included in, attached to or given with the form; or (c) the form, or information or documents included in, attached to or given with the form, to be verified in a specified way; the form is not properly completed unless the requirement is complied with. ________________________________________ [Editorial note: UCCC Sch 2 Pt 2 s 11 — apart from numbering the section is unchanged.]

COMMENTARY ON SECTION 208 [208.05] Outline Section 208 provides guidance on compliance with forms prescribed by the Code. [208.10] Substantial compliance Substantial compliance with any forms prescribed by the Code is sufficient and there is no general requirement for strict compliance unless specific requirements are explicitly stated (s 208(1) and (2)). [208.15] Completion of prescribed forms Section 208(2) states that forms with specific requirements will not be properly completed unless they are complied with, including where:

the form is to be completed in a specified way; specified information or documents are to be included in, attached or given in the form; or the form, or attached documents and information, are to be verified in a certain manner. [Editorial note: There is no NCC provision comparable to UCCC Sch 2 Pt 3 s 12.]

DIVISION 3 — TERMS AND REFERENCES Provisions relating to defined terms and gender and number 209 (1) [Corresponding meanings] If this Code defines a word or expression, other parts of speech and grammatical forms of the word or expression have corresponding meanings. 209 (2) [Contrary context or subject matter] Definitions in or applicable to this Code apply except so far as the context or subject matter otherwise indicates or requires. 209 (3) [Gender] In this Code, words indicating a gender include each other gender. 209 (4) [Number] In this Code: (a) words in the singular include the plural; and (b) words in the plural include the singular. ________________________________________ [Editorial note: UCCC Sch 2 Pt 3 s 13 — apart from numbering the section is unchanged.]

COMMENTARY ON SECTION 209 [209.05] Outline Section 209 relates to interpretation of provisions in the

Code relating to defined terms, gender and numbers. [page 672] [209.10] Definitions Undefined words or expressions which are another form of a defined word or expression in the Code are to have a corresponding meaning (s 209(1)). Definitions contained in the Code are to apply unless the relevant context or subject matter expresses a clearly different meaning (s 209(2)). [209.15] Gender and numbers Any reference to a particular gender in the Code should be considered as including “each other gender” (s 209(3)). References in the Code to the plural are to include the singular, and singular references are to include the plural (s 209(4)).

Meaning of may and must etc 210 (1) [“may”] In this Code, the word may, or a similar word or expression, used in relation to a power indicates that the power may be exercised or not exercised, at discretion. 210 (2) [“must”] In this Code, the word must, or a similar word or expression, used in relation to a power indicates that the power is required to be exercised. 210 (3) [Contrary rules of construction] This section has effect despite any rule of construction to the contrary. ________________________________________ [Editorial note: UCCC Sch 2 Pt 3 s 14 provided as follows: Meaning of may and must etc 14 (1) In this Code, the word “may”, or a similar word or expression, used in relation to a power indicates that the power may be exercised or not exercised, at discretion. 14 (2) In this Code, the word “must”, or a similar word or expression, used in relation to a

power indicates that the power is required to be exercised. 14 (3) This clause has effect despite any rule of construction to the contrary.]

COMMENTARY ON SECTION 210 [210.05] Outline Section 210 provides guidance on how powers conferred by the Code are to be exercised. Its provisions are to have effect despite any rule of construction to the contrary (s 210(3)). [210.10] Use of “may” The use of the word “may”, or a similar word or expression, in relation to a power within the Code indicates that there is discretion regarding whether that power is exercised or not (s 210(1)). [210.15] Use of “must” The use of the word “must”, or a similar word or expression, in relation to a power within the Code indicates that power is required to be exercised (s 210(2)). [Editorial note: There is no NCC provision comparable to UCCC Sch 2 Pt 3 s 15.]

Effect of express references to bodies corporate and individuals 211 In this Code, a reference to a person generally (whether the expression “person”, “party”, “someone”, “anyone”, “no-one”, “one”, “another” or “whoever” or another expression is used): [page 673] (a) does not exclude a reference to a body corporate or an individual merely because elsewhere in this Code there is particular reference to a body corporate (however expressed); and (b) does not exclude a reference to an individual or a body corporate merely because elsewhere in this Code there is particular reference to an individual (however expressed).

________________________________________ [Editorial note: UCCC Sch 2 Pt 3 s 16 — apart from numbering the section is unchanged.]

COMMENTARY ON SECTION 211 [211.05] Outline Section 211 relates to the interpretation of provisions in the Code that make reference to persons in any way such as “person”, “party” etc. These provisions should be interpreted as generally including individuals and body corporates. [Editorial note: There is no NCC provision comparable to UCCC Sch 2 Pt 3 ss 17, 18 and 19.]

Reference to certain provisions of Code 212 If a provision of this Code refers: (a) to a Part or section by a number and without reference to this Code — the reference is a reference to the Part or section, designated by the number, of this Code; or (b) to a Division, Subdivision, subsection, paragraph, subparagraph or subsubparagraph by a number and without reference to this Code — the reference is a reference to: (i)

the Division, designated by the number, of the Part in which the reference occurs; and

(ii) the Subdivision, designated by the number, of the Division in which the reference occurs; and (iii) the subsection, designated by the number, of the section in which the reference occurs; and (iv) the paragraph, designated by the number, of the section, subsection, or other provision in which the reference occurs; and (v) the subparagraph, designated by the number, of the paragraph in which the reference occurs; and (vi) the subsubparagraph, designated by the number, of the

subparagraph in which the reference occurs; as the case requires. ________________________________________ [Editorial note: UCCC Sch 2 Pt 3 s 20 provided as follows: Reference to certain provisions of Code 20 If a provision of this Code refers— (a) to a Part, section or Schedule by a number and without reference to this Code — the reference is a reference to the Part, section or Schedule, designated by the number, of or to this Code; or (b) to a Schedule without reference to it by a number and without reference to this Code — the reference, if there is only 1 Schedule to this Code, is a reference to the Schedule; or (c) to a Division, Subdivision, subsection, paragraph, subparagraph, sub-subparagraph, clause, subclause, item, column, table or form by a number and without reference to this Code — the reference is a reference to— (i)

the Division, designated by the number, of the Part in which the reference occurs; and

[page 674] (ii) the Subdivision, designated by the number, of the Division in which the reference occurs; and (iii) the subsection, designated by the number, of the section in which the reference occurs; and (iv) the paragraph, designated by the number, of the section, subsection, Schedule or other provision in which the reference occurs; and (v) the paragraph, designated by the number, of the clause, subclause, item, column, table or form of or in the Schedule in which the reference occurs; and (vi) the subparagraph, designated by the number, of the paragraph in which the reference occurs; and (vii) the sub-subparagraph, designated by the number, of the subparagraph in which the reference occurs; and (viii)the section, clause, subclause, item, column, table or form, designated by the number, of or in the Schedule in which the reference occurs; as the case requires.]

COMMENTARY ON SECTION 212

[212.05] Outline Section 212 relates to interpretation of provisions in the Code making reference to provisions not expressly stated to be a part of the Code or other legislation. References to Parts, Divisions, Subdivisions, sections, subsections, paragraphs, subparagraphs or subsubparagraphs by number and without reference to the Code should be considered as being to that designated part of the Code.

Reference to provisions of this Code or an Act is inclusive 213 In this Code, a reference to a portion of this Code or an Act includes: (a) a reference to the Chapter, Part, Division, Subdivision, section, subsection or other provision of this Code or the Act referred to that forms the beginning of the portion; and (b) a reference to the Chapter, Part, Division, Subdivision, section, subsection or other provision of this Code or the Act referred to that forms the end of the portion. Example A reference to “sections 5 to 9” includes both section 5 and section 9. It is not necessary to refer to “sections 5 to 9 (both inclusive)” to ensure that the reference is given an inclusive interpretation.

________________________________________ [Editorial note: UCCC Sch 2 Pt 3 s 21 — apart from numbering the section is unchanged.]

COMMENTARY ON SECTION 213 [213.05] Outline Section 213 relates to the interpretation of provisions in the Code that make reference to portions of the Code or other legislation. References to multiple Chapters, Parts, Divisions, Subdivisions, sections, subsections or other provisions of the Code or other legislation should be inclusive of the first and last provisions. For example, a reference to “sections 5 to 9” includes both ss 5 and 9 as well as the sections in between. [Editorial note: There is no NCC provision comparable to UCCC Sch 2 Pt 4 s 22.]

[page 675]

DIVISION 4 — FUNCTIONS AND POWERS Power to make instrument or decision includes power to amend or repeal 214 If this Code authorises or requires the making of an instrument or decision: (a) the power includes power to amend or repeal the instrument or decision; and (b) the power to amend or repeal the instrument or decision is exercisable in the same way, and subject to the same conditions, as the power to make the instrument or decision. ________________________________________ [Editorial note: UCCC Sch 2 Pt 4 s 23 — apart from numbering the section is unchanged.]

COMMENTARY ON SECTION 214 [214.05] Outline The power to make an instrument or decision includes the power to amend or repeal the instrument or decision (s 214(a)). The power to amend or repeal an instrument or decision is exercisable or subject to the same conditions as the original power to make such instrument or decision (s 214(b)).

Matters for which statutory instruments may make provision 215 (1) [Provision by statutory instrument: how made] If this Code authorises or requires the making of a statutory instrument in relation to a

matter, a statutory instrument made under this Code may make provision for the matter by applying, adopting or incorporating (with or without modification) the provisions of: (a) an Act or statutory instrument; or (b) another document (whether of the same or a different kind); as in force at a particular time or as in force from time to time. 215 (2) [Document as in force from time to time] If a statutory instrument applies, adopts or incorporates the provisions of a document, the statutory instrument applies, adopts or incorporates the provisions as in force from time to time, unless the statutory instrument otherwise expressly provides. 215 (3) [Application: general or limited] A statutory instrument may: (a) apply generally to all persons, matters or things or be limited in its application to: (i)

particular persons, matters or things; or

(ii) particular classes of persons, matters or things; or (b) otherwise apply generally or be limited in its application by reference to specified exceptions or factors. 215 (4) [Application: differential] A statutory instrument may: (a) apply differently according to different specified factors; or (b) otherwise make different provision in relation to: (i)

different persons, matters or things; or

(ii) different classes of persons, matters or things. 215 (5) [Determinations from time to time by specified person or body] A statutory instrument may authorise a matter or thing to be from time to time determined, applied or regulated by a specified person or body. 215 (6) [Regulation by statutory instrument includes prohibition] If this Code authorises or requires a matter to be regulated by statutory instrument,

the power may be exercised by prohibiting by statutory instrument the matter or any aspect of the matter. [page 676] 215 (7) [Code also providing for another aspect] If this Code authorises or requires provision to be made with respect to a matter by statutory instrument, a statutory instrument made under this Code may make provision with respect to a particular aspect of the matter despite the fact that provision is made by this Code in relation to another aspect of the matter or in relation to another matter. 215 (8) [Review or right of appeal] A statutory instrument may provide for the review of, or a right of appeal against, a decision made under the statutory instrument, or this Code, and may, for that purpose, confer jurisdiction on any court, tribunal, person or body. 215 (9) [Statutory declaration] A statutory instrument may require a form prescribed by or under the statutory instrument, or information or documents included in, attached to or given with the form, to be verified by statutory declaration. ________________________________________ [Editorial note: UCCC Sch 2 Pt 4 s 24 provided as follows: Matters for which statutory instruments may make provision 24 (1) If this Code authorises or requires the making of a statutory instrument in relation to a matter, a statutory instrument made under this Code may make provision for the matter by applying, adopting or incorporating (with or without modification) the provisions of— (a) an Act or statutory instrument; or (b) another document (whether of the same or a different kind); as in force at a particular time or as in force from time to time. 24 (2) If a statutory instrument applies, adopts or incorporates the provisions of a document, the statutory instrument applies, adopts or incorporates the provisions as in force from time to time, unless the statutory instrument otherwise expressly provides. 24 (3) A statutory instrument may— (a) apply generally throughout this jurisdiction or be limited in its application to a

particular part of this jurisdiction; or (b) apply generally to all persons, matters or things or be limited in its application to— (i)

particular persons, matters or things; or

(ii) particular classes of persons, matters or things; or (c) otherwise apply generally or be limited in its application by reference to specified exceptions or factors. 24 (4) A statutory instrument may— (a) apply differently according to different specified factors; or (b) otherwise make different provision in relation to— (i)

different persons, matters or things; or

(ii) different classes of persons, matters or things. 24 (5) A statutory instrument may authorise a matter or thing to be from time to time determined, applied or regulated by a specified person or body. 24 (6) If this Code authorises or requires a matter to be regulated by statutory instrument, the power may be exercised by prohibiting by statutory instrument the matter or any aspect of the matter. 24 (7) If this Code authorises or requires provision to be made with respect to a matter by statutory instrument, a statutory instrument made under this Code may make provision with respect to a particular aspect of the matter despite the fact that provision is made by this Code in relation to another aspect of the matter or in relation to another matter. 24 (8) A statutory instrument may provide for the review of, or a right of appeal against, a decision made under the statutory instrument, or this Code, and may, for that purpose, confer jurisdiction on any court, tribunal, person or body. 24 (9) A statutory instrument may require a form prescribed by or under the statutory instrument, or information or documents included in, attached to or given with the form, to be verified by statutory declaration.]

COMMENTARY ON SECTION 215 [215.05] Outline Section 215 outlines the manner and form of statutory instruments authorised or required under the Code.

[page 677]

Presumption of validity and power to make 216 (1) [Presumption of validity] All conditions and preliminary steps

required for the making of a statutory instrument are presumed to have been satisfied and performed in the absence of evidence to the contrary. 216 (2) [Presumption of power to make] A statutory instrument is taken to be made under all powers under which it may be made, even though it purports to be made under this Code or a particular provision of this Code. ________________________________________ [Editorial note: UCCC s Sch 2 Pt 4 s 25 — apart from numbering the section is unchanged.]

COMMENTARY ON SECTION 216 [216.05] Outline Section 216 provides for the presumption of the validity and power to make statutory instruments. It is presumed that all conditions and preliminary steps required for the making of a statutory instrument have been satisfied and performed unless there is evidence to the contrary (s 216(1)). A statutory instrument shall be considered to have been made under all relevant powers even if it purports to be made under the Code or a particular provision of the Code (s 216(2)). [Editorial note: There is no NCC provision comparable to UCCC Sch 2 Pt 4 ss 26, 27 and 28.]

Exercise of powers between enactment and commencement 217 (1) [Empowering provision not yet commenced] If a provision of this Code (the empowering provision) that does not commence on its enactment would, had it commenced, confer a power: (a) to make an appointment; or (b) to make a statutory instrument of a legislative or administrative character; or (c) to do another thing; then: (d) the power may be exercised; and

(e) anything may be done for the purpose of enabling the exercise of the power or of bringing the appointment, instrument or other thing into effect; before the empowering provision commences. 217 (2) [Empowering provision not yet commenced: amendment of Code] If a provision of an Act (the empowering provision) that does not commence on its enactment would, had it commenced, amend a provision of this Code so that it would confer a power: (a) to make an appointment; or (b) to make a statutory instrument of a legislative or administrative character; or (c) to do another thing; then: (d) the power may be exercised; and (e) anything may be done for the purpose of enabling the exercise of the power or of bringing the appointment, instrument or other thing into effect; before the empowering provision commences. 217 (3) [Instrument-making powers] If: (a) this Code has commenced and confers a power to make a statutory instrument (the basic instrument-making power); and [page 678] (b) a provision of an Act that does not commence on its enactment would, had it commenced, amend this Code so as to confer additional power to make a statutory instrument (the additional instrument-making power); then:

(c) the basic instrument-making power and the additional instrumentmaking power may be exercised by making a single instrument; and (d) any provision of the instrument that required an exercise of the additional instrument-making power is to be treated as made under subsection (2). 217 (4) [Effective date: instrument or provision necessary to enable exercise of power etc] If an instrument, or a provision of an instrument, is made under subsection (1) or (2) that is necessary for the purpose of: (a) enabling the exercise of a power mentioned in the subsection; or (b) bringing an appointment, instrument or other thing made or done under such a power into effect; the instrument or provision takes effect: (c) on the making of the instrument; or (d) on such later day (if any) on which, or at such later time (if any) at which, the instrument or provision is expressed to take effect. 217 (5) [Effective date: instrument or provision not necessary to enable exercise of power etc] If: (a) an appointment is made under subsection (1) or (2); or (b) an instrument, or a provision of an instrument, made under subsection (1) or (2) is not necessary for a purpose mentioned in subsection (4); the appointment, instrument or provision takes effect: (c) on the commencement of the relevant empowering provision; or (d) on such later day (if any) on which, or at such later time (if any) at which, the appointment, instrument or provision is expressed to take effect. 217 (6) [Rights and liabilities prior to commencement] Anything done under subsection (1) or (2) does not confer a right, or impose a liability, on a person before the relevant empowering provision commences.

217 (7) [References to powers as amended] After the enactment of a provision mentioned in subsection (2) but before the provision’s commencement, this section applies as if the references in subsections (2) and (5) to the commencement of the empowering provision were references to the commencement of the provision mentioned in subsection (2) as amended by the empowering provision. 217 (8) [References to enactment of instrument] In the application of this section to a statutory instrument, a reference to the enactment of the instrument is a reference to the making of the instrument. ________________________________________ [Editorial note: UCCC Sch 2 Pt 4 s 29 provided as follows: Exercise of powers between enactment and commencement 29 (1) If a provision of this Code (the “empowering provision”) that does not commence on its enactment would, had it commenced, confer a power— (a) to make an appointment; or (b) to make a statutory instrument of a legislative or administrative character; or (c) to do another thing; then— (d) the power may be exercised; and (e) anything may be done for the purpose of enabling the exercise of the power or of bringing the appointment, instrument or other thing into effect; before the empowering provision commences.

[page 679] 29 (2) If a provision of a Queensland Act (the “empowering provision”) that does not commence on its enactment would, had it commenced, amend a provision of this Code so that it would confer a power— (a) to make an appointment; or (b) to make a statutory instrument of a legislative or administrative character; or (c) to do another thing; then— (d) the power may be exercised; and

(e) anything may be done for the purpose of enabling the exercise of the power or of bringing the appointment, instrument or other thing into effect; before the empowering provision commences. 29 (3) If— (a) this Code has commenced and confers a power to make a statutory instrument (the “basic instrument-making power”); and (b) a provision of a Queensland Act that does not commence on its enactment would, had it commenced, amend this Code so as to confer additional power to make a statutory instrument (the “additional instrument-making power”); then— (c) the basic instrument-making power and the additional instrument-making power may be exercised by making a single instrument; and (d) any provision of the instrument that required an exercise of the additional instrument-making power is to be treated as made under subclause (2). 29 (4) If an instrument, or a provision of an instrument, is made under subclause (1) or (2) that is necessary for the purpose of— (a) enabling the exercise of a power mentioned in the subclause; or (b) bringing an appointment, instrument or other thing made or done under such a power into effect; the instrument or provision takes effect— (c) on the making of the instrument; or (d) on such later day (if any) on which, or at such later time (if any) at which, the instrument or provision is expressed to take effect. 29 (5) If— (a) an appointment is made under subclause (1) or (2); or (b) an instrument, or a provision of an instrument, made under subclause (1) or (2) is not necessary for a purpose mentioned in subclause (4); the appointment, instrument or provision takes effect— (c) on the commencement of the relevant empowering provision; or (d) on such later day (if any) on which, or at such later time (if any) at which, the appointment, instrument or provision is expressed to take effect. 29 (6) Anything done under subclause (1) or (2) does not confer a right, or impose a liability, on a person before the relevant empowering provision commences. 29 (7) After the enactment of a provision mentioned in subclause (2) but before the provision’s commencement, this clause applies as if the references in subclause (2) and (5) to the commencement of the empowering provision were references to the commencement of the provision mentioned in subclause (2) as amended by the empowering provision. 29 (8) In the application of this clause to a statutory instrument, a reference to the enactment of the instrument is a reference to the making of the instrument.]

COMMENTARY ON SECTION 217 [217.05] Outline Section 217 outlines conditions relating to the exercise of powers in the Code between enactment and commencement.

[page 680]

DIVISION 5 — DISTANCE, TIME AND AGE Matters relating to distance, time and age 218 (1) [Distance] In the measurement of distance for the purposes of this Code, the distance is to be measured along the shortest road ordinarily used for travelling. 218 (2) [Calculating time] If a period beginning on a given day, act or event is provided or allowed for a purpose by this Code, the period is to be calculated by excluding the day, or the day of the act or event, and: (a) if the period is expressed to be a specified number of clear days or at least a specified number of days — by excluding the day on which the purpose is to be fulfilled; and (b) in any other case — by including the day on which the purpose is to be fulfilled. 218 (3) [Non-business day] If the last day of a period provided or allowed by this Code for doing anything is not a business day in the place in which the thing is to be or may be done, the thing may be done on the next business day in the place. 218 (4) [Office closed] If the last day of a period provided or allowed by this Code for the filing or registration of a document is a day on which the office is closed where the filing or registration is to be or may be done, the document may be filed or registered at the office on the next day that the office is open.

218 (5) [No time specified] If no time is provided or allowed for doing anything, the thing is to be done as soon as possible, and as often as the prescribed occasion happens. 218 (6) [Legal time] If, in this Code, there is a reference to time, the reference is, in relation to the doing of anything in a State or Territory, a reference to the legal time in the State or Territory. 218 (7) [Age] For the purposes of this Code, a person attains an age in years at the beginning of the person’s birthday for the age. ________________________________________ [Editorial note: UCCC Sch 2 Pt 5 s 30 provided as follows: Matters relating to distance, time and age 30 (1) In the measurement of distance for the purposes of this Code, the distance is to be measured along the shortest road ordinarily used for travelling. 30 (2) If a period beginning on a given day, act or event is provided or allowed for a purpose by this Code, the period is to be calculated by excluding the day, or the day of the act or event, and— (a) if the period is expressed to be a specified number of clear days or at least a specified number of days — by excluding the day on which the purpose is to be fulfilled; and (b) in any other case — by including the day on which the purpose is to be fulfilled. 30 (3) If the last day of a period provided or allowed by this Code for doing anything is not a business day in the place in which the thing is to be or may be done, the thing may be done on the next business day in the place. 30 (4) If the last day of a period provided or allowed by this Code for the filing or registration of a document is a day on which the office is closed where the filing or registration is to be or may be done, the document may be filed or registered at the office on the next day that the office is open. 30 (5) If no time is provided or allowed for doing anything, the thing is to be done as soon as possible, and as often as the prescribed occasion happens. 30 (6) If, in this Code, there is a reference to time, the reference is, in relation to the doing of anything in a jurisdiction, a reference to the legal time in the jurisdiction. 30 (7) For the purposes of this Code, a person attains an age in years at the beginning of the person’s birthday for the age.]

[page 681]

COMMENTARY ON SECTION 218 [218.05] Right of termination In Agussol v Australian Finance Direct Ltd (2004) ASC ¶155-066; [2004] VC 1560, the Victorian Civil and Administrative Tribunal was not prepared to say that cl 30(5) of Sch 2 of the UCCC (which s 218(5) of the Code replicates) imposed an obligation on debtors wishing to terminate contracts under s 125 of the UCCC (which s 135 of the Code replicates) to do so “as soon as possible”. The tribunal noted that the right of termination given by that section is in the nature of an “entitlement” given to the debtor, rather than a power or a duty required to be exercised within a certain timeframe. Section 218 applies only to the duties or powers provided by the Code (where no specific time period is otherwise provided) but not to “entitlements” or protections offered by the Code, such as a debtor’s right to terminate under s 135 (see [135.05]). [Editorial note: There is no NCC provision comparable to UCCC Sch 2 Pt 6 ss 31, 32, 33, 34, 35, Sch 2 Pt 7 s 36, and Sch 2 Pt 8 s 37.]

[page 683]

National Consumer Credit Protection Regulations 2010 CONTENTS Table of Provisions Table of Amendments National Consumer Credit Protection Regulations 2010 Chapter 1 — Preliminary Chapter 2 — Licensing of persons who engage in credit activities Chapter 3 — Responsible lending conduct Chapter 4 — Administration — Registers relating to credit activities Chapter 5 — Compliance and enforcement Chapter 6 — Miscellaneous Chapter 7 — Matters in relation to the National Credit Code Schedules

[page 685]

National Consumer Credit Protection Regulations 2010

Table of Provisions Regulation

1 2 3 4 4D 5 6

Title

Chapter 1 — Preliminary Name of Regulations Commencement Definitions Meaning of associate Small amount credit contracts — credit limit increase to cover fees Prescribed orders Forms Chapter 2 — Licensing of persons who engage in credit activities

7 7A 8

Part 2-1 — Australian credit licences How to get an Australian credit licence — requirements for a foreign entity to appoint local agent When licence may be granted — continuous credit activity How to get an Australian credit licence — streamlined process for particular classes of applicants

9 9AA 9AB 9A 10 11 12 13 14 15

The conditions on the licence The conditions on the licence — special purpose funding entity Conditions for licensee — referrals Conditions for unlicensed carried over instrument lender — credit register Obligations of licensees — alternative dispute resolution systems Obligations of licensees — foreign entity must continue to have local agent Obligations of licensees — requirements for compensation arrangements Obligations of licensees — offence in relation to failure to cite licence number in documents Obligations of licensees — who compliance certificate must be signed by When a licence can be suspended, cancelled or varied — grounds to suspend or cancel licence [page 686]

16

17 18 19

Part 2-2 — Authorisation of credit representatives Sub-authorisation by body corporate Part 2-3 — Financial records, trust accounts and audit reports Information and matters to be contained in a trust account audit report Eligibility of auditors to prepare trust account audit report Auditors who prepare audit reports Part 2-4 — Exemptions and modifications DIVISION 1 — EXEMPTIONS

20 21 22 23 23A 23B 23C 23D

Subdivision 1.1 — Persons exempt from being licensed Persons exempt from requiring a licence — general Persons exempt from requiring a licence — debt collectors Persons exempt from requiring a licence — third parties Persons exempt from requiring a licence — suppliers of goods or services Persons exempt from requiring a licence — suppliers of goods or services with branded or co-branded credit card Persons exempt from requiring a licence — fund raising special purpose entity Persons exempt from requiring a licence — securitisation entity Persons exempt from requiring a licence — employment agencies

Subdivision 1.2 — Activities exempt from being credit activities under the Act 24 Activities exempt from being credit activities Subdivision 1.3 — Persons exempt from matters other than being licensed 24A ADI or registrable corporation exempt from responsible lending contract obligations — loan application received before 1 January 2011

25 25A 25B 25C 25D

DIVISION 2 — MODIFICATIONS Activities exempt from requiring a licence Modifications — credit representatives Modification — meaning of linked credit provider or linked lessor for regulation 23 Modification — meaning of linked credit provider for regulation 23A Modification — meaning of services for regulations 23 and

25E 25F 25G 25H 25I 25J 25K

23A Modifications — unlicensed carried over instrument lender Modifications — ADI in relation to carried over instrument Modifications — special purpose funding entity Modifications — temporary staff Modifications — locums Modification — exempted persons Modification — credit card contracts [page 687]

25L 25M

Modification — assignees of credit providers, lessors, mortgagees and beneficiaries of a guarantee Modification — credit card provided before 1 July 2012 Chapter 3 — Responsible lending conduct

26

26A 26B 27 27A 27B 28

Part 3-1 — Preliminary Definitions Part 3-2 — Requirements about credit guides Credit guide of licensee — to include further information Credit guide of credit provider or lessor — information about mortgage managers and product designers Credit guide of licensees — when information about fees, charges and commission is not required Credit guide of credit representatives — to include further information Credit guide of credit representatives — when information about fees, charges and commission not required Credit guide of credit representatives — contact details for

28A 28B

an approved external dispute resolution scheme Circumstances where credit guide not required [Repealed] Credit guide — circumstances where not required to update information

28C 28D

Part 3-3 — Requirements about quotes Circumstances where no quote required Quote for providing credit assistance — licensee to give information about fees and charges

Part 3-4 — Requirements about proposal disclosure documents 28E Proposal disclosure document — information about fees and charges 28F Proposal disclosure document — when information about fees and charges not required 28G Proposal disclosure document — information about commissions 28H Proposal disclosure documents — when information about commissions not required

28HA 28J 28JA 28L 28LA 28LB

Part 3-5 — Other obligations Reverse mortgages — credit assistance providers and credit providers to make reasonable inquiries Obligations of credit providers before entering credit contracts or increasing credit limits Inquiries about credit limit Manner of giving disclosure documents Standard home loans Key Facts Sheets [page 688]

28LC 28XXA 28XXB 28XXC 28XXD 28XXE 28XXF 28LD 28LE

Reverse mortgages — presumption of unsuitability of credit contract if certain loan to value ratios exist Small amount credit contracts — requirements for warning on licensee’s premises Small amount credit contracts — requirements for warning on licensee’s website Credit assistance in relation to small amount credit contracts — requirements for warning during telephone contact Small amount credit contracts — requirements for warning during telephone contact Authorisation for deduction Unsuitable credit contracts — prescribed circumstances Reverse mortgages — projections of home equity Reverse mortgage information statement _________________________________________________

[Regs 28LFA–28LN are misdirected amendments located in Endnote 4 of the Regulations] 28LFA Key Facts Sheets 28LFB Application forms in electronic form 28LF Circumstances in which application form may include outof-date Key Facts Sheet 28LG Circumstances in which up-to-date information can be provided otherwise than in Key Facts Sheet 28LH Meaning of credit limit increase invitation 28LI Giving consent to receive credit limit increase invitations 28LJ Licensee to notify consumer of use of credit card in excess of credit limit 28LK Fees charges and higher rates of interest 28LL Records of elections and withdrawals to be kept 28LM Agreement to apply payment against particular amount

28LN

28M 28N 28P 28Q 28R

owed Modification — Divisions 5 and 6 of Part 3-2B Part 3-6 — Modifications and exemptions Modifications Exemption — requirement to provide disclosure documents Circumstances where credit guide not required Exemption — credit assistance provider with shared responsibility for credit contract Exemption — intermediary’s requirement to provide proposal disclosure document

Part 3-7 — Licensees that are credit providers under credit contracts — additional rules relating to small amount credit contracts 28S Licensee must not enter into small amount credit contract if repayments do not meet prescribed requirements Chapter 4 — Administration — Registers relating to credit activities 29 Credit registers — licensees, credit representatives and registered persons [page 689] 30 30A

31 32 33

Credit registers — persons against whom banning order or disqualification order is made Credit register — unlicensed carried over instrument lender Chapter 5 — Compliance and enforcement Investigations — distribution of report Examination of person — form of notice requiring assistance and appearance for examination Inspection of books and audit information-gathering powers

34 35

— evidence of authority Hearings — form of summons to appear before ASIC Miscellaneous provisions — allowances and expenses Chapter 6 — Miscellaneous

36

Part 6-1 — Court proceedings Where proceedings may be brought

37 38 39 40 41 42 43 44 45 46 47 48 49

Part 6-2 — Infringement notices Purpose of Part 6-2 Definitions for Part 6-2 When an infringement notice can be given Contents of infringement notice Amount of penalty if infringement notice given Extension of time to pay penalty Payment of penalty by instalments Time for payment of penalty Effect of payment of penalty Withdrawal of infringement notice by nominated person Withdrawal of infringement notice by ASIC Notice of withdrawal of infringement notice Refund of penalty

49A 49B

Part 6-3 — Transitional arrangements Transitional — Schedule 1 to National Consumer Credit Protection Amendment Regulation 2012 (No 1) Transitional — Schedule 2 to National Consumer Credit Protection Amendment Regulation 2012 (No 1) Chapter 7 — Matters in relation to the National Credit Code

50 50A 51 52

Part 7-1 — Exemptions, declarations and other matters Continued application of Part 12 of the Code and interpretation provisions Exemption for short term credit Exempt credit — maximum account charges Additional exempt credit [page 690]

53 54 55 56 57 58 59 60 61 62 63 64 65

GIO Finance Limited’s No Interest Loan Scheme — exemption from Code Rental Purchase Plan — exemption from certain provisions of Code Partnership loans — exemption from certain provisions of Code Student loans — exemption from certain provisions of Code Loans for conservation of heritage items — exemption from Code ADIs — exemption from Code Estate administrators — exemption from certain provisions of Code Credit under Aged Care Act 1997 — exemption from certain provisions of Code Firefighter’s Benefit Fund of WA Incorporated — exemption from certain provisions of Code Charge card contracts — exemption of certain contracts from Code Credit providers providing credit to directors — exemption from certain provisions of Code Mortgages — exemptions from Code Guarantees — exemption from Code

65A 65B 65C 66 67 68 69 69A 69B 69C 69D

70 71 72 73 74 74A 75 76

Indigenous Business Australia — exemption from certain provisions of Code Exemption — providing credit in relation to a residential investment property Residential investment property loans — exemption from Code Deemed mortgages for goods lease with option to purchase Prescribed person in relation to a declaration Declaration of purposes for which credit provided Direct debit default notices — exemption for credit providers Exemption — requirement to give notice of agreement to change credit contract Exemption — requirement to give notice of agreement to change consumer lease Exemption — requirement to disclose information about dispute resolution scheme Exemption — requirement to give notice of direct debit default Part 7-2 — Credit contracts Statement about debtor’s statutory rights and obligations Comparison rate Pre-contractual statement Additional disclosures about insurance financed by contract Additional disclosures about credit contracts to be signed by debtor Reverse mortgages — disclosure about credit contract not including tenancy protection provision Deduction of amount for interest charges Calculation of unpaid daily balances

77 78 79

Early debit or payment of interest charges Interest charges in relation to residential investment property When statement of account not required [page 691]

79A 79AE 79AB

79AC 79B

Part 7-2A — Prohibited credit fees and charges Termination fees for certain credit contracts Small amount credit contracts (fees and charges) Credit provider or prescribed person must not require or accept payment of fee or charge in relation to small amount credit contract etc Prohibition relating to annual cost rate of credit contracts — later increases of annual percentage rate etc Minimum Repayment Warning

Part 7-2B — Additional rules in relation to small amount credit contracts 79C Default in payment by direct debit under small amount credit contract

80 81 82

Part 7-3 — Related mortgages and guarantees Mortgage arising from certain home ownership schemes — exemption from subsection 50(1) of the Code Form of guarantees Explanation about guarantor’s rights and obligations

Part 7-4 — Changes to obligations under credit contracts, mortgages and guarantees 83 Information about increases in the amount of credit Part 7-5 — Ending and enforcing credit contracts, mortgages and

84 84A 85 86 87 88 89

guarantees Information after surrender of goods Market value of reverse mortgaged property Information to be contained in direct debit default notice Information to be contained in default notice Consent to enter premises Statement about mortgagor’s rights and obligations Information about proceeds of sale of mortgaged goods

90 91 92

Part 7-6 — Related sale contracts Rate of interest on damages Informing debtor of rights Rebate of consideration

93 94 95 96

Part 7-7 — Related insurance contracts Particulars of insurance entered into by credit provider Proportionate rebate of consumer credit insurance premium Notice of right to cancel mortgaged property insurance Proportionate rebate of premium for insurance over mortgaged property [page 692]

97 98 99 100

Part 7-8 — Comparison rates Relevant comparison rate where annual percentage rate stated Information about whether comparison rate relates to secured loan Warnings about comparison rate Calculation of comparison rates

101

102 103 104 105 105A 105B 105C 105D 105E 105G 105H 105J 105K 105L

106 107 108

Matters that may be included in comparison rate schedules [Repealed] Part 7-9 — Consumer leases Consumer lease excluded from application of Part 11 of the Code Prescribed person in relation to declarations Declaration about purpose of lease Explanation about rights and obligations of consumer lessees Information to be contained in statement of account Information to be contained in statement of account about amount owing and other matters Information to be contained in end of lease statement Circumstances in which lessor is not required to provide end of lease statement Information to be contained in written notice about change by agreement to consumer lease Information to be contained in statement of amount payable on termination of consumer lease Exemption for lessors from giving one-off notice about direct debit default [Repealed] Information to be contained in one-off notice about direct debit default Information to be contained in default notice Consent to enter residential property to take possession of goods Part 7-10 — Miscellaneous Tolerances relating to disclosures Tolerances relating to amounts payable etc Additional assumptions relating to disclosures

109

Contracts linked to loan account offset arrangements

110 110A

Requirements for print or type Reverse mortgages — manner of keeping nominations or revocations Notices Exemption from Code — persons who are not members of approved external dispute resolution scheme [Repealed]

111 111A

Part 7-11 — Saving and transitional provisions — reliance on State and Territory Consumer Credit Codes 112 References in documents to Consumer Credit Code of a State or Territory [page 693] SCHEDULE 1 — FORMS Form 1 — Notice requiring reasonable assistance in connection with an investigation and appearance at an examination Form 2 — Summons to witness Form 3 — Infringement notice Form 4 — Prescribed terms and conditions of mortgage Form 5 — Information statement Form 6 — Disclosure about credit contracts Form 7 — Disclosure about credit contracts Form 7A — Disclosure about credit contracts (reverse mortgages) Form 8 — Disclosure about guarantee Form 9 — Information statement Form 10 — Information after surrender of mortgaged goods Form 11 — Direct debit default notice

Form 11A — Direct debit default notice Form 12 — Information about debtor’s rights after default Form 12A — Information about debtor’s rights after default Form 13 — Consent to enter premises Form 14 — Notice after taking possession of mortgaged goods Form 15 — Notice of right to terminate maintenance services contract Form 16 — Notice of right to cancel mortgaged property insurance Form 17 — Information statement Form 18 — Direct debit default notice Form 18A — Information about lessee’s rights after default Form 19 — Consent to enter premises SCHEDULE 2 — MODIFICATIONS — CARRIED OVER INSTRUMENTS SCHEDULE 3 — MODIFICATIONS — SPECIAL PURPOSE FUNDING ENTITY SCHEDULE 4 — MODIFICATIONS — RESPONSIBLE LENDING CONDUCT SCHEDULE 5 — KEY FACTS SHEETS SCHEDULE 5A — REVERSE MORTGAGE INFORMATION STATEMENT SCHEDULE 6 — KEY FACTS SHEETS FOR CREDIT CARD CONTRACTS SCHEDULE 7 — WARNING ABOUT SMALL AMOUNT CREDIT CONTRACTS — WARNING ON PREMISES SCHEDULE 8 — FORM OF HYPERLINK

SCHEDULE 9 — WARNING ABOUT SMALL AMOUNT CREDIT CONTRACTS — WARNING ON WEBSITES SCHEDULE 10 — EMPLOYER AUTHORISATION — PRESCRIBED FORM OF STATEMENT

[page 695]

National Consumer Credit Protection Regulations 2010

Table of Amendments The National Consumer Credit Protection Regulations SLI 44 of 2010 were registered on 12 March 2010 (F2010L00631) and commenced on 1 July 2010. The Regulations have been amended by: Amending Legislation

Date of FRLI Date of Registration Commencement 26 March 2010 1 July 2010 (F2010L00742)

National Consumer Credit Protection Amendment Regulations 2010 (No 1) SLI 59 of 2010 National Consumer Credit 21 May 2010 24 May 2010 Protection Amendment (F2010L01369) Regulations 2010 (No 2) SLI 105 of 2010 National Consumer Credit 18 June 2010 19 June 2010 Protection Amendment (F2010L01578) Regulations 2010 (No 3) SLI 137 of 2010 National Consumer Credit 30 June 2010 1 July 2010 Protection Legislation (F2010L01810)

Amendment Regulations 2010 (No 1) SLI 185 of 2010 National Consumer Credit Protection Legislation Amendment Regulations 2010 (No 2) SLI 235 of 2010 National Consumer Credit Protection Legislation Amendment Regulations 2010 (No 3) SLI 303 of 2010 National Consumer Credit Protection Amendment Regulations 2010 (No 4) SLI 333 of 2010 National Consumer Credit Protection Amendment Regulations 2011 (No 1) SLI 39 of 2011 National Consumer Credit Protection Amendment Regulations 2011 (No 2) SLI 40 of 2011 National Consumer Credit Protection Amendment Regulations 2011 (No 3) SLI 67 of 2011

21 July 2010 Sch 1, item 1: 1 (F2010L02121) October 2010; Sch 1, items 2– 17: 22 July 2010 25 November 2010 26 November 2010 (F2010L03104)

10 December 2010 1 January 2011 (F2010L03196)

24 March 2011 25 March 2011 (F2011L00474)

23 March 2011 1 July 2011 (F2011L00465)

13 May 2011 1 July 2011 (F2011L00764)

[page 696] National Consumer Credit Protection Amendment Regulations 2011 (No 4) SLI 143 of 2011

2 August 2011 Sch 1: 3 August (F2011L01585) 2011; Sch 2: 1 October 2011

National Consumer Credit Protection Amendment Regulations 2011 (No 5) SLI 165 of 2011 National Consumer Credit Protection Amendment Regulations 2011 (No 6) SLI 201 of 2011 National Consumer Credit Protection Amendment Regulation 2012 (No 1) SLI 117 of 2012 National Consumer Credit Protection Amendment Regulation 2012 (No 2) SLI 201 of 2012 National Consumer Credit Protection Amendment Regulation 2012 (No 3) SLI 313 of 2012 National Consumer Credit Protection Amendment Regulation 2012 (No 4) SLI 314 of 2012 National Consumer Credit Protection Amendment Regulation 2013 (No 1) SLI 43 of 2013 Federal Circuit Court of Australia Legislation (Consequential Amendments) Regulation 2013 (No 1) SLI 51 of 2013 National Consumer Credit Protection Amendment

5 September 2011 1 January 2012 (F2011L01805)

7 November 2011 Sch 1: 1 July (F2011L02260) 2012

18 June 2012 Sch 1: 19 June (F2012L01233) 2012; Sch 2: 1 July 2012 20 August 2012 21 August 2012 (F2012L01706)

11 December 2012 Sch 1: 12 December 2012; Sch 2: 1 March 2013 12 December 2012 Sch 1: 1 March 2013; Sch 2: 1 July 2013 3 April 2013

Sch 1: 4 April 2013

11 April 2013 12 April 2013 (F2013L00649)

21 May 2013 Sch 1: 22 May (F2013L00814) 2013; Sch 2: 1 June 2013

Regulation 2013 (No 2) SLI 85 of 2013 National Consumer Credit Protection Amendment (Small Amount Credit Contracts) Regulation 2014 (No 1) SLI 89 of 2014

12 June 2014 Sch 1: 13 June (F2014L00701) 2014

[page 697]

National Consumer Credit Protection Regulations 2010 Chapter 1 — Preliminary Name of Regulations 1 These Regulations are the National Consumer Credit Protection Regulations 2010. COMMENTARY ON REGULATION 1 [R1.05] Name of the regulations The name of the regulations is the National Consumer Credit Protection Regulations 2010.

Commencement 2 These Regulations commence on 1 July 2010. COMMENTARY ON REGULATION 2 [R2.05] Commencement The Code and the regulations commenced on 1 July 2010.

Definitions 3 (1) In these Regulations: Act means the National Consumer Credit Protection Act 2009. annual percentage rate has the same meaning as in section 27 of the

Code. [def insrt SLI 143 of 2011 reg 3 and Sch 2[1], eff 1 Oct 2011]

associate has the meaning given by regulation 4. Australian ADI has the meaning given by section 9 of the Corporations Act. authorised contact means contact with a consumer by a person in relation to the supply of goods or services by the person to the consumer, if the contact is made: (a) no later than 3 months after the consumer provided his or her contact details: (i)

to the person; and

(ii) for the purpose of being contacted about the supply of the goods or services; or (b) by posting to, or leaving at, a residential address written promotional material about goods or services; or (c) in relation to the possible return of goods supplied to the consumer or the possible provision of replacement goods to the consumer. [def insrt SLI 105 of 2010 reg 3 and Sch 1[1], eff 24 May 2010]

[page 698] carried over instrument has the meaning given by subsection 4(1) of the Transitional Act. [def insrt SLI 105 of 2010 reg 3 and Sch 1[1], eff 24 May 2010]

Code means the National Credit Code. Corporations Act means the Corporations Act 2001. credit card means: (a) a card of a kind commonly known as a credit card; or

(b) a card of a kind that persons carrying on business commonly issue to their customers, or prospective customers, for use in obtaining goods or services from those persons on credit; or (c) anything else that may be used as a card mentioned in paragraph (a) or (b). [def subst SLI 143 of 2011 reg 3 and Sch 2[2], eff 1 Oct 2011]

credit card contract means a continuing credit contract (as defined in section 204 of the Code) under which credit is ordinarily obtained only by the use of a credit card. [def insrt SLI 143 of 2011 reg 3 and Sch 2[2], eff 1 Oct 2011]

default rate has the same meaning as in section 27 of the Code. [def insrt SLI 143 of 2011 reg 3 and Sch 2[2], eff 1 Oct 2011]

exempt public authority means a body corporate that is incorporated within Australia or an external Territory and is: (a) a public authority; or (b) an instrumentality or agency of the Crown in right of the Commonwealth, in right of a State or in right of a Territory. exempt special purpose funding entity means a special purpose funding entity that is engaging in a credit activity and is exempt, under regulation 23B or 23C, from the requirement to hold a licence. [def insrt SLI 137 of 2010 reg 3 and Sch 1[1], eff 19 June 2010; am SLI 303 of 2010 reg 3 and Sch 1[1], eff 26 Nov 2010]

financial counselling association has the same meaning as in ASIC Class Order [CO 03/1063]. financial counselling service means a counselling and advocacy service provided predominantly for the purpose of assisting individuals who are in financial difficulty to resolve their problems. foreign company means either of the following: (a) a body corporate that is incorporated in an external Territory, or outside Australia and the external Territories, and is not: (i)

a corporation sole; or

(ii) an exempt public authority; (b) an unincorporated body that: (i)

is formed in an external Territory or outside Australia and the external Territories; and

(ii) under the law of its place of formation, may sue or be sued, or may hold property in the name of its secretary or of an officer of the body duly appointed for that purpose; and (iii) does not have its head office or principal place of business in Australia. fundraising special purpose entity has the meaning given by section 5 of the Act as modified by item 3.2 of Schedule 3. [def insrt SLI 137 of 2010 reg 3 and Sch 1[2], eff 19 June 2010]

[page 699] inappropriate person means: (a) a person in relation to whom: (i)

a prescribed State or Territory order is in force; or

(ii) a banning or disqualification order under Division 8 of Part 7.6 of the Corporations Act 2001 is in force; or (b) a person who is banned from engaging in a credit activity under: (i)

a law of a State or Territory; or

(ii) Part 2-4 of the Act; or (c) a person who has been convicted of a serious fraud during the last 10 years; or (d) a person who is disqualified from managing a corporation under Part 2D.6 of the Corporations Act 2001; or

(e) a person: (i)

who is registered to engage in credit activities under Schedule 2 of the Transitional Act; and

(ii) whose registration is suspended under a provision of item 23 of Schedule 2 to the Transitional Act, other than under paragraph 23(1)(a) or (b); or (f)

a person: (i)

who has been registered to engage in credit activities under Schedule 2 of the Transitional Act; and

(ii) whose registration has been cancelled under a provision of item 23 of Schedule 2 to the Transitional Act, other than paragraph 23(1)(a) or (b); or (g) a person: (i)

who is the holder of an Australian credit licence; and

(ii) whose licence is suspended on a ground mentioned in subsection 54(1) of the Act, other than a ground mentioned in paragraph 54(1)(a) or (b); or (h) a person: (i)

who has been the holder of an Australian credit licence; and

(ii) whose licence has been cancelled on a ground mentioned in subsection 54(1) of the Act, other than a ground mentioned in paragraph 54(1)(a) or (b). (i)

a person: (i)

who is the holder of an Australian financial services licence; and

(ii) whose licence is suspended on a ground mentioned in section 915B of the Corporations Act 2001, other than a ground mentioned in any of the following paragraphs: (A) paragraph 915B(1)(a) or (e);

(B) paragraph 915B(2)(a) or (d); (C) paragraph 915B(3)(a) or (d); (D) paragraph 915B(4)(a) or (d); or (j)

a person: (i)

who has been the holder of an Australian financial services licence; and

(ii) whose licence has been cancelled on a ground mentioned in section 915B of the Corporations Act 2001, other than a ground mentioned in any of the following paragraphs: (A) paragraph 915B(1)(a) or (e); (B) paragraph 915B(2)(a) or (d); (C) paragraph 915B(3)(a) or (d); (D) paragraph 915B(4)(a) or (d). [def insrt SLI 137 of 2010 reg 3 and Sch 1[2], eff 19 June 2010]

lawyer, for the purpose of regulation 24 has the meaning given by the modified definition of lawyer set out in subregulation 24(10). [def insrt SLI 105 of 2010 reg 3 and Sch 1[3], eff 24 May 2010]

[page 700] linked credit provider, for the purpose of regulation 23A, has the meaning given by the modified definition of linked credit provider set out in regulation 25C. [def insrt SLI 105 of 2010 reg 3 and Sch 1[3], eff 24 May 2010]

linked credit provider or lessor, for the purpose of regulation 23, has the meaning given by the modified definition of linked credit provider set out in regulation 25B. [def insrt SLI 105 of 2010 reg 3 and Sch 1[3], eff 24 May 2010]

managed contract — see regulation 26. [def insrt SLI 143 of 2011 reg 3 and Sch 2[3], eff 1 Oct 2011]

mortgage manager — see regulation 26. [def insrt SLI 143 of 2011 reg 3 and Sch 2[3], eff 1 Oct 2011]

non-standard business premises means business premises that are not physically separate from premises regularly used by consumers for purposes other than being contacted in relation to the supply of goods or services. [def insrt SLI 137 of 2010 reg 3 and Sch 1[3], eff 19 June 2010]

officer of a body corporate has the meaning given by the definition of officer of a corporation (as it relates to a body corporate) in section 9 of the Corporations Act. product designer — see regulation 26. [def insrt SLI 143 of 2011 reg 3 and Sch 2[4], eff 1 Oct 2011]

public officer, of a body corporate, means a person appointed under section 252 of the Income Tax Assessment Act 1936 as it relates to a body corporate. registered debt agreement administrator means a person registered by the Insolvency and Trustee Service Australia as a debt agreement administrator under Part IX of the Bankruptcy Act 1966. registered person has the same meaning as in the Transitional Act. securitisation entity has the meaning given by section 5 of the Act as modified by item 3.4 of Schedule 3. [def insrt SLI 137 of 2010 reg 3 and Sch 1[4], eff 19 June 2010]

services, for the purposes of regulations 23 and 23A, has the meaning given by the modified definition of services set out in regulation 25D. [def insrt SLI 105 of 2010 reg 3 and Sch 1[4], eff 24 May 2010]

servicing agreement has the meaning given by section 5 of the Act as modified by item 3.4 of Schedule 3. [def insrt SLI 137 of 2010 reg 3 and Sch 1[5], eff 19 June 2010]

substantial holding has the meaning given by the definition of that term (as it relates to a body corporate) in section 9 of the Corporations Act. trail commission — see regulation 26.

[def insrt SLI 143 of 2011 reg 3 and Sch 2[5], eff 1 Oct 2011]

unlicensed carried over instrument lender has the meaning given by modified subsection 5(1) of the Act as set out in item 2.4 of Schedule 2. [def insrt SLI 105 of 2010 reg 3 and Sch 1[5], eff 24 May 2010]

unsolicited contact includes contact with a consumer by a person or an associate of the person in relation to the supply of goods or services by the person to the consumer: (a) in the following circumstances: (i)

the contact is the first contact made by the person;

(ii) the contact is made in person from a non-standard business premises; or [page 701] (b) in the following circumstances: (i)

the contact is made by the person or an associate of the person;

(ii) the contact is not the first contact made by the person or an associate of the person; (iii) the first contact was made in person from a non-standard business premises; or (c) in the following circumstances: (i)

the consumer provided the consumer’s contact details to the person for the sole purpose of being contacted by the person in relation to the supply of goods or services by the person to the consumer;

(ii) the contact is not the first contact made by the person; (iii) the contact is made on or after the day 3 months after the consumer provided the contact details;

(iv) the contact is not authorised contact; or (d) in the following circumstances: (i)

the consumer did not provide the consumer’s contact details to the person for the sole purpose of being contacted by the person in relation to the supply of goods or services by the person to the consumer;

(ii) the contact is not described in paragraph (a) or (b); (iii) the contact is not authorised contact. [def subst SLI 235 of 2010 reg 3 and Sch 1[1], eff 1 Oct 2010]

volume bonus arrangement — see regulation 26. [def insrt SLI 143 of 2011 reg 3 and Sch 2[6], eff 1 Oct 2011]

3 (2) In these Regulations, a person is associated with a lessor if: (a) the person and the lessor are related bodies corporate for the purposes of the Corporations Act; or (b) the person is an officer, agent or employee of the lessor, or of any such related body corporate, acting in that capacity; or (c) the person is a supplier in respect of whom the lessor is a linked lessor. [subreg (2) am SLI 105 of 2010 reg 3 and Sch 1[6], eff 24 May 2010]

3 (3) In these Regulations, a provision of the Act modified in accordance with Division 2 of Part 2-4 and Schedule 2 is referred to as modified. [subreg (3) insrt SLI 105 of 2010 reg 3 and Sch 1[7], eff 24 May 2010]

COMMENTARY ON REGULATION 3 [R3.05] Definitions Regulation 3 lists the definitions of terms used in the regulations. The National Consumer Credit Protection Amendment Regulations 2011 (No 4) (Amendment Regulations 2011 (No 4)) amended reg 3 to state that “annual percentage rate” has the same meaning as it does in s 27 of the Code. It included new definitions of the following: “credit card”, “credit card

contract” and “default rate”. The following new definitions were also inserted by reference to reg 26: “managed contract”, “mortgage manager”, “product designer”, “trail commission”, “volume bonus arrangement” and “registered foreign company”. The Explanatory Statement to Select Legislative Instrument 2011 No 143 explains that the Amendment Regulations 2011 (No 4) introduce the following changes: providing further guidance about what must be included in the credit guides of credit assistance providers, mortgage managers, product designers and credit representatives; [page 702] exempting certain information about fees, charges and commissions from being disclosed in the credit assistance provider and credit representative’s credit guide; outlining how information about fees, charges and commissions must be set out in the credit assistance provider’s quote and proposal disclosure document; outlining how information about commissions must be set out in the credit assistance provider’s proposal disclosure document; modifying in limited circumstances the disclosure obligations in relation to trail commissions and some commissions in a credit assistance provider’s proposal disclosure document; and making other minor and technical changes.

Meaning of associate 4 (1) This regulation has effect for the purposes of interpreting a reference (the associate reference), in relation to a person (the primary person), to an associate.

4 (2) A person is not an associate of the primary person except as provided in this regulation. 4 (3) Nothing in this regulation limits the generality of anything else in it. 4 (4) If the primary person is a body corporate, the associate reference includes a reference to: (a) a director or secretary of the body; and (b) a related body corporate; and (c) a director or secretary of a related body corporate. 4 (5) An associate reference includes a reference to: (a) a person in partnership with whom the primary person engages in a credit activity; and (b) subject to subregulation (8), a person who is a partner of the primary person otherwise than because of the engaging in a credit activity in partnership with the primary person; and (c) a trustee of a trust in relation to which the primary person benefits, or is capable of benefiting; and (d) a director of a body corporate of which the primary person is also a director and that engages in a credit activity; and (e) subject to subregulation (8), a director of a body corporate of which the primary person is also a director and that does not engage in a credit activity; and (f)

a person in concert with whom the primary person is acting, or proposes to act, in respect of the matter to which the associate reference relates; and

(g) a person with whom the primary person is, or proposes to become, associated, whether formally or informally, in any other way, in respect of the matter to which the associate reference relates. 4 (6) If the primary person has entered, or proposes to enter, into a transaction, or has done, or proposes to do, any act or thing, in order to

become associated with another person as mentioned in an applicable provision of this regulation, the associate reference includes a reference to that other person. 4 (7) A person is not an associate of another person by virtue of subregulation (5), or by virtue of subregulation (6) as it applies in relation to subregulation (5), merely because one or both of the following occurs: (a) one gives advice to the other, or acts on the other’s behalf, in the proper performance of the functions attaching to a professional capacity or a business relationship; [page 703] (b) one, as a client, gives specific instructions to the other, whose ordinary business includes engaging in credit activities, to enter into a credit contract on the client’s behalf in the ordinary course of that business. 4 (8) For the purposes of proceedings in relation to a matter mentioned in these Regulations in which it is alleged that a person (person 1) was an associate of another person by virtue of paragraph (5)(b) or (e), person 1 is not taken to have been an associate of the other person in relation to a matter by virtue of that paragraph unless it is proved that person 1 knew, or ought to have known, at that time, the material particulars of that matter. 4 (9) A reference to an associate, in relation to an entity (other than a body corporate) that: (a) engages in a credit activity; and (b) is constituted by 2 or more persons; includes a reference to an associate of any of those persons. COMMENTARY ON REGULATION 4 [R4.05] Meaning of “associate” As stated in the Explanatory Statement, reg

4 defines the circumstances under which a person will be considered an “associate” of another person. The definition extends to formal relationships (for example, between a director and a company) and informal relationships (for example, where the parties have not entered into an agreement but act together to pursue a common objective). The term “associate” is defined comprehensively and is used to minimise avoidance of the relevant obligations, such as those relating to registration and the provision of exemptions under the NCCP Act.

Small amount credit contracts — credit limit increase to cover fees 4D The credit limit set out in paragraph (c) of the definition of small amount credit contract in subsection 5(1) of the Act is increased by the amount of each of the following as included in the amount of credit to be provided under the contract: (a) the permitted establishment fee for the contract; (b) the first permitted monthly fee payable under the contract. Note 1: Section 31A of the Code deals with the fees and charges that can be imposed under a small amount credit contract. Note 2: While this regulation could raise a credit limit to a maximum of $2,480, no more than $2,000 would be available to the consumer under the contract. [s 4D insrt SLI 89 of 2014 s 4 and Sch 1 item 1, eff 13 June 2014]

COMMENTARY ON REGULATION 4D [R4D.05] An exposure draft (6/01/2014) National Consumer Credit Protection Amendment (Small Amount Credit Contracts) Regulation 2014 proposes new regs 4D, 50A and 79AE, and proposed the repeal and replacement of reg 51. Its intent is to deal with perceived avoidance behaviour in the SACC industry: see further [23A.45]. According to the explanatory materials, reg 4D clarifies the distinction between a small amount credit contract (SACC) and a medium amount credit contract (MACC). Fees and charges allowed under the cap can be included in

addition to the SACC amount limit. A SACC allows up to $2,000 cash in hand to be provided to the consumer. The distinction is relevant to the operation of the cap on the [page 704] maximum amount a credit provider can charge under these contracts, and to the application of product-specific responsible lending obligations to SACCs. The cap for a SACC allows credit providers to charge maximum fees of: an upfront fee of 20 per cent of the adjusted credit amount (the amount the consumer receives in the hand); and a monthly fee of 4 per cent of that amount. The cap for a MACC allows credit providers to charge maximum interest and fees of: an establishment fee of $400; and interest at a maximum rate of 48 per cent. It was originally intended that the definition of a SACC would allow credit providers to apply the SACC cap to all contracts where the consumer receives a maximum amount of $2,000 in their hand. However, there are currently different legal opinions as to which cap applies to contracts where the consumer receives $2,000 or less, but is charged fees so that the total amount of credit exceeds $2,000. The item clarifies that credit providers can apply the small amount lending cap to contracts where the consumer receives a maximum amount of $2,000 in their hand. Fees and charges allowed under the cap can be in addition to this amount. [R4D.10] Subsequently, the National Consumer Credit Protection Regulations 2010 (Cth) (NCCP Regulations) was amended by the National Consumer Credit Protection Amendment (Small Amount Credit Contracts) Regulations 2014 (Cth) (2014 SACC Amendment Regulations) on 12 June

2014. From the relevant explanatory statement (SLI No. 89 of 2014), these amendments attempted to address and remove certain avoidance practices in the industry. In summary there are four main amendments made to the NCCP Regulations by the 2014 Amendment Regulations which have been briefly summarised below. The 2014 SACC Amendment Regulations insert reg 4D which clarifies what credit contracts will be a SACC and a MACC. A credit contract will be a SACC if it provides for an amount up to $2,000 “cash in hand” to the debtor despite what the credit amount is. In other words, the total amount of credit under a SACC may be more than $2,000 if a debtor is also charged fees and charges as long as the debtor receives $2,000 or less cash in hand. Under reg 4D, a credit limit may be a maximum of $2,480 and still be a SACC. This credit limit would consist of $2,000 that the debtor will receive (“cash in hand”), a 20% establishment fee ($400) and a 4% monthly fee paid upfront ($80). This is relevant to the maximum fees a credit provider may charge as: —

under a SACC, credit providers are permitted to charge maximum fees of up to 20% of an adjusted credit amount as an “upfront fee” and 4% of an adjusted credit amount as a monthly fee; and

—

MACCs may have an interest rate up to 48%.

A newly inserted reg 50A seeks to prevent the practice of credit providers utilising the exemption available for low-cost short term credit contracts available under s 6(1) of the NCCP to charge fees in excess of fees permitted under the NCCP. For example, a “membership fee” where such a fee is a prerequisite to a debtor accessing a credit contract. [page 705]

New reg 51 seeks to close a loophole whereby credit providers that provided a continuing credit contract arranged for a debtor to enter into a new continuing credit contract each time they required a further advance. Some credit providers relied on this practice to enable the credit provider to charge a further fee of $200 each time the person entered into a new continuing credit contract. New reg 79AE seeks to remove the practice of credit providers establishing a brokerage arm to arrange SACCs with the credit provider. Some credit providers sought to charge brokerage fees through such a brokerage arm as these fees were not included in the calculation of the amount payable under the maximum permitted fees for SACCs. The 2014 Amendment Regulations seek to prevent such a practice by prohibiting “prescribed persons” from requiring or accepting payment of a fee or charge in relation to a SACC. “Prescribed persons” now include a person that introduced a debtor to a lender or a person that was introduced to a debtor by a lender.

Prescribed orders 5 For the definition of prescribed State or Territory order in subsection 5(1) of the Act, orders made under an Act specified in the following table are prescribed. Item Act New South Wales 1.1 Crimes (Criminal Organisations Control) Act 2009 Queensland 3.1 Criminal Organisation Act 2009 South Australia 5.1 Serious and Organised Crime (Control) Act 2008 [reg 5 subst SLI 235 of 2010 reg 3 and Sch 1[2], eff 22 July 2010]

COMMENTARY ON REGULATION 5

[R5.05] Prescribed orders As stated in the Explanatory Statement, reg 5 prescribes orders made under the following Acts for the purposes of the term “prescribed State or Territory order” in s 5(1) of the NCCP Act: the Crimes (Criminal Organisation Control) Act 2009 (NSW); the Criminal Organisation Act 2009 (Qld); and the Serious and Organised Crime (Control) Act 2009 (SA). An order in respect of a person under these Acts because of their involvement in organised crime will be relevant to ASIC’s decision whether or not to grant, cancel or suspend a licence, or ban an individual from engaging in credit activities.

Forms 6 (1) A reference in these Regulations to a form of a particular number is a reference to the form of that number in Schedule 1. [page 706] 6 (2) The number of a form need not appear on a document that is required to comply with the form. 6 (3) A reference to a provision of the Code, or of these Regulations, to which a form relates need not appear on a document that is required to comply with the form. 6 (4) The expression ‘credit provider’, ‘debtor’, ‘lessor’ or ‘lessee’ in a form may be replaced by the name of: (a) the credit provider, debtor, lessor or lessee; or (b) another expression that is explained in the form. 6 (5) A document that is required to comply with a form need not contain any matter that is not relevant to the credit contract, mortgage, guarantee or

consumer lease concerned. The consequential renumbering of items is permissible. Note Section 208 of the Code makes provision with respect to forms. The section provides, among other things, that strict compliance with a form is not necessary and substantial compliance is sufficient.

COMMENTARY ON REGULATION 6 [R6.05] Use of forms This regulation specifies details relating to the use of the forms provided in the Regulations in Sch 1: the regulations form number and the NCCP Act or Code section and regulation reference numbers to which the form relates need not appear on the form; the expressions “credit provider”, “debtor”, “lessor” or “lessee” in a form can be replaced by the actual person’s name or a defined expression (for example, “you” or “us”); and credit providers can delete from a form any irrelevant material and make consequential renumbering (for example, in the case of an unsecured credit contract, the provisions dealing with mortgages could be deleted from Form 2 “Information Statement — Things You Should Know About Your Proposed Credit Contract”). In addition, s 208 of the Code provides that: strict compliance with a form is not necessary and substantial compliance is sufficient; but if the Code requires the form to be completed in a specified way, or specified information or documents to be included in, attached to or given with the form, or anything in connection with a form to be verified in a specified way, then the form is not properly completed unless that requirement is complied with.

[page 707]

Chapter 2 — Licensing of persons who engage in credit activities Part 2-1 — Australian credit licences How to get an Australian credit licence — requirements for a foreign entity to appoint local agent 7 (1) For paragraph 37(1)(e) of the Act, a foreign entity that: (a) is not a registered foreign company; and (b) applies for an Australian credit licence; must meet the requirements in subregulations (2) and (3). [subreg (1) am SLI 143 of 2011 reg 3 and Sch 2[7], eff 1 Oct 2011]

7 (2) The foreign entity must: (a) have appointed, as an agent, a person who is: (i)

an individual or a company; and

(ii) a resident in this jurisdiction; and (iii) authorised to accept, on the foreign entity’s behalf, service of process and notices; and (b) lodge, with the application, a memorandum of appointment or a power of attorney that is duly executed by or on behalf of the foreign entity and states the name and address of the agent. 7 (3) If the memorandum of appointment, or power of attorney, lodged under

paragraph (2)(b) was executed on behalf of the foreign entity, the foreign entity must also lodge a copy declared in writing to be a true copy of the document authorising the execution. 7 (4) In this regulation: registered foreign company has the meaning given by section 9 of the Corporations Act 2001. [subreg (4) insrt SLI 143 of 2011 reg 3 and Sch 2[8], eff 1 Oct 2011]

COMMENTARY ON REGULATION 7 [R7.05] Regulation 7 is made pursuant to s 37(1) of the NCCP Act which sets out the elements a non-ADI person must satisfy before they can be granted an Australian Credit Licence. Section 37(1)(e) of the NCCP Act allows additional requirements to be prescribed by the regulations. Regulation 7 requires a foreign entity which engages in credit activity in Australia (other than a registered foreign company as defined in reg 3) to appoint [page 708] an Australian resident, natural person or company as its process agent and to lodge the original appointment document with its ACL application (see also reg 11 for continuing obligations regarding the process agent). A registered foreign company conducting business in Australia must already meet equivalent requirements to reg 7 under Pt 5B.2 Div 2 of the Corporations Act. Therefore, this regulation extends the requirement to have a process agent to natural persons, trusts and partnerships that are not subject to the Corporations Act obligation. As a result of this regulation, ASIC and consumers can serve notices on a foreign entity in Australia, rather than having to do so overseas. Regulation 7 was amended by the National Consumer Credit Protection Amendment Regulations 2011 (No 4) to limit its application to a foreign

entity that is not a registered foreign company. This closes an unintended gap and ensures foreign companies that are not regulated under the Corporations Act 2001 (Cth) have an Australian presence in order to obtain an Australian Credit Licence. Further, it states that “registered foreign company” has the same meaning as it does in s 9 of the Corporations Act; this ensures that foreign companies subject to the Corporations Act licensing requirements will not also be required to have a local presence in order to undertake credit activities.

When licence may be granted — continuous credit activity 7A For paragraph 37(1)(e) of the Act, a requirement in relation to a person who: (a) is a credit provider, lessor, mortgagee or beneficiary of a guarantee in relation to a carried over instrument immediately before 1 July 2010; and (b) intends to engage in a credit activity in relation to the carried over instrument on or after 1 July 2010; and (c) intends to engage in a credit activity otherwise than in relation to the carried over instrument on or after 1 July 2010; is that the person must apply under section 36 of the Act for a licence to engage in the credit activities mentioned in paragraphs (b) and (c). [reg 7A subst SLI 137 of 2010 reg 3 and Sch 1[7], eff 19 June 2010]

COMMENTARY ON REGULATION 7A [R7A.05] Regulation 7A states that a credit provider, lessor, mortgagee or beneficiary of a guarantee in relation to a carried over instrument immediately before 1 July 2010, who intends to engage in a credit activity in relation to that carried over instrument or otherwise after 1 July 2010, must apply for an Australian Credit Licence in relation to both types of credit activity. (See Transitional Act s 4(1) for the meaning of “carried over instrument”.) This means that the carried over instrument person cannot

choose to have the modified regime apply to their carried over instruments and the licensing regime apply to their new contracts. They must apply for a licence which covers all of their instruments uniformly. Note that reg 7A applies for the purposes of s 37(1)(e) of the NCCP Act and that s 37 applies only in relation to the licensing of non-ADIs. The position in relation to an ADI carried over instrument lender or lessor (or mortgagee or guarantee beneficiary) which also seeks to conduct general credit activity after 1 July 2010 is covered in reg 25F. [page 709]

How to get an Australian credit licence — streamlined process for particular classes of applicants 8 (1) For section 39 of the Act, if an applicant is: (a) in the class of applicants mentioned in subregulation (2); and (b) is applying for a licence to engage in credit activities of the kind in which the person is authorised to engage under a law of a State or Territory; paragraph 37(1)(b) of the Act applies in relation to the applicant only to the extent that ASIC must consider whether it has reason to believe that the applicant is likely to contravene the obligations that will apply under paragraphs 47(1)(i) and (j) of the Act if the licence is granted. 8 (2) The class of applicants is persons: (a) who have applied for an Australian credit licence; and (b) who are authorised to engage in credit activities under a law of a State or Territory; and (c) who, under the law of the State or Territory, or under a condition imposed on the person by a licensing authority under the law of the

State or Territory: (i)

are required to comply with the following requirements: (A) the person must comply with the law; (B) the person must have sufficient or adequate resources to ensure the person can comply with the law; (C) the person must be responsible for ensuring that all representatives of the person comply with the law; (D) the person must arrange or provide credit that is appropriate for consumers; (E) the person must act honestly and fairly in the person’s dealings with borrowers and lenders; (F) the person must ensure that the person and all representatives of the person are competent to engage in the credit activities the person is authorised to engage in; (G) if the person is acting as an agent on behalf of a consumer, the person must act in the best interests of the person’s principal; and

(ii) are not required to be supervised by another person; and (d) who may be banned from engaging in credit activities under the law of the State or Territory; and (e) who have provided to ASIC a written statement in the approved form that the person will comply with the person’s obligations under the Act. 8 (3) For section 39 of the Act, paragraph 37(1)(c) of the Act does not apply in relation to the class of applicants mentioned in subregulation (4) to the extent that the applicant is applying for a licence to engage in credit activities of the kind the person was authorised to engage in under a law of a State or Territory. 8 (4) The class of applicants is persons who: (a) are in the class of applicants mentioned in subregulation (2); and

(b) are authorised to engage in credit activities under a law of a State or Territory that: (i)

requires the person to demonstrate that the person is a fit and proper person (however described); or

(ii) deems the person to be ineligible to engage in credit activities if the person is not a fit and proper person (however described). 8 (5) For section 39 of the Act, if an applicant is in the class of applicants mentioned in subregulation (7) or (8): (a) section 37 of the Act does not apply in relation to the applicant; and (b) if: (i)

the applicant applies under section 36 of the Act for a licence; and [page 710]

(ii) the application includes a statement, in accordance with the requirements of the approved form, to the effect that the applicant will, if granted the licence, comply with the applicant’s obligations as a licensee; ASIC must grant the applicant a licence. 8 (6) If ASIC grants the applicant a licence under subregulation (5), the licence must authorise the licensee to engage in credit activities that equate, as closely as possible, to the credit activities in relation to which the application was made. 8 (7) The class of applicants is persons who: (a) are authorised as a general insurer by APRA under section 12 of the Insurance Act 1973; and (b) are included on the Register of General Insurers and Authorised NOHCs; and

(c) offer lenders mortgage insurance products; and (d) engage in credit activities only: (i)

as an assignee in relation to providing the mortgage insurance products; or

(ii) as the credit provider under the doctrine of subrogation in relation to providing the mortgage insurance products. 8 (8) The class of applicants is persons who: (a) are registered by APRA under section 21 of the Life Insurance Act 1995; and (b) engage in credit activities in relation to the provision of credit only because of the operation of the terms and conditions of: (i)

a life policy (within the same meaning as in that Act) that was entered into before 1 July 2010 by the person; or

(ii) a document issued or given by the person in relation to a life policy (within the same meaning as in that Act) that was entered into before 1 July 2010 by the person. COMMENTARY ON REGULATION 8 [R8.05] Regulation 8 is made under s 39 of the NCCP Act which allows the Australian Credit Licence application process to be streamlined for a class or classes of applicants. There are two classes of applicants whose application process is streamlined under this regulation: persons already authorised to engage in credit activities under a law of a state or territory which imposes obligations that are similar to those in the NCCP Act; and certain general insurers authorised by the Australian Prudential Regulation Authority (APRA). Regulation 8(1) applies to state or territory authorised persons where the state or territory legislation imposes obligations (listed in reg 8(2)(c)) which are largely similar to the general conduct obligations and “unsuitability”

aspects of the responsible lending obligations imposed on the holder of an Australian Credit Licence under s 47 and Pt 3 of the NCCP Act. In assessing a licence application by such a person, ASIC need only consider the applicant’s obligations under s 47(1)(i) and (j) of the NCCP Act (membership of an external dispute resolution scheme and having adequate compensation arrangements) when determining (under s 37(1)(b) of the NCCP Act) whether the person is likely to contravene its obligations under s 47 of the NCCP Act. Regulation 8(3) allows ASIC not to have regard to s 37(1)(c) of the NCCP Act (the “fit and proper person” requirement) if the state or territory legislation applying to a person described above also incorporates a “fit and proper” test. [page 711] Regulation 8(5) makes s 37 of the NCCP Act (matters ASIC must have regard to when determining an application for a licence) not applicable in relation to: general insurer applicants whose only credit activity is as an assignee or a person subrogated to the credit provider, in each case, in relation to lender’s mortgage insurance products offered by the general issuer (reg 8(7)); and applicants who are registered life insurance providers whose only credit activity arises through the terms and conditions or related documents of a life insurance policy issued before 1 July 2010, if the applicant includes a statement in their licence application that they will comply with the obligations imposed on a licensee.

The conditions on the licence 9 (1) For section 45 of the Act, an Australian credit licence is subject to the conditions set out in this regulation.

9 (2) If: (a) there is a change in a matter particulars of which are entered in the credit register for licensees; and (b) the change is not a direct consequence of an act by ASIC; the licensee must lodge particulars of the change with ASIC, in the approved form, within 10 business days after the change occurs. 9 (3) If: (a) there is a change in a matter particulars of which are entered in the credit register for credit representatives; and (b) the change is not required to be reported in accordance with section 71 of the Act; and (c) the change is not a direct consequence of an act by ASIC; the licensee must ensure that particulars of the change are lodged with ASIC in the approved form within 15 business days after the change occurs. 9 (4) The licensee must ensure that each credit representative of the licensee that may give an authorisation to an individual is aware of the requirements in section 71 of the Act. 9 (5) The licensee must ensure that, before the licensee authorises an individual to engage in a credit activity on its behalf as mentioned in section 64 of the Act, reasonable inquiries are made to establish: (a) the individual’s identity; and (b) whether the individual has already been allocated a number by ASIC as a credit representative. 9 (6) The licensee must ensure that, before a body corporate that is a credit representative of the licensee authorises an individual to engage in a credit activity on behalf of the licensee as mentioned in section 65 of the Act, reasonable inquiries are made to establish: (a) the individual’s identity; and (b) whether the individual has already been allocated a number by

ASIC as a credit representative. 9 (7) The licensee must ensure that, if: (a) ASIC has allocated a number to a credit representative; and (b) the licensee, or a body corporate that has authorised an individual to engage in a credit activity on behalf of the licensee as mentioned in section 65 of the Act, lodges a document with ASIC that refers to the credit representative; the document refers to the number. [page 712] 9 (8) The licensee must provide evidence of an authorisation of any of its credit representatives: (a) on request by any person; and (b) free of charge; and (c) as soon as practicable after receiving the request and, in any event, within 10 business days after the day on which it received the request. 9 (9) The licensee must take reasonable steps to ensure that each of its credit representatives supplies evidence of its authorisation by the licensee: (a) on request by any person; and (b) free of charge; and (c) as soon as practicable after receiving the request and, in any event, within 10 business days after the day on which the credit representative received the request. 9 (10) If the licensee becomes aware of any change in control of the licensee, the licensee must lodge with ASIC particulars of the change, in the approved form, not later than 10 business days after the change.

9 (11) For subregulation (10): (a) a change in control, in relation to a licensee, includes a transaction, or a series of transactions in a period of 12 months, that results in a person having control of the licensee, either alone or together with associates of the person; and (b) control, in relation to a licensee, means: (i)

if the licensee is a body corporate: (A) the capacity to cast, or control the casting of, more than one half of the maximum number of votes that might be cast at a general meeting of the licensee; or (B) directly or indirectly holding more than one half of the issued share capital of the licensee (not including any part of the issued share capital that carries no right to participate beyond a specified amount in a distribution of either profits or capital); or

(ii) the capacity to control the composition of the licensee’s board or governing body; or (iii) the capacity to determine the outcome of decisions about the licensee’s financial and operating policies. 9 (12) For subparagraph (11)(b)(iii), the following matters must be taken into account in determining whether a person has the capacity to determine the outcome of decisions about the licensee’s financial and operating policies: (a) the practical influence the person can exert (rather than the rights it can enforce); (b) any practice or pattern of behaviour affecting the licensee’s financial or operating policies (whether or not it involves a breach of an agreement or a breach of trust). 9 (13) On the request of any person, the licensee must make available, within 10 business days, evidence of its Australian credit licence for inspection by that person. 9 (14) If:

(a) the licensee is not a body regulated by APRA; and (b) an event occurs that may make a material adverse change to the financial position of the licensee by comparison with its financial position: (i)

at the time of the application for the Australian credit licence; or

(ii) as described in documents lodged with ASIC after the application for the Australian credit licence; the licensee must lodge with ASIC in the approved form a notice setting out particulars of the event as soon as practicable, and in any case not later than 3 business days, after the licensee becomes aware of the event. [page 713] COMMENTARY ON REGULATION 9 [R9.05] Regulation 9 is made under s 45(7) of the NCCP Act and sets out further conditions applicable to all Australian Credit Licences. The conditions relate to: notifying changes in particulars on the registers for licensees and their credit representatives; ensuring that credit representatives who may sub-authorise others are aware of their obligations under s 71 of the NCCP Act; an obligation to make inquiries to establish the identity of any individual who is proposed to be authorised and whether the individual already has an ASIC number as a credit representative and to include that number in documents lodged with ASIC, where relevant; an obligation to provide evidence of authorisation of credit representatives within 10 business days of a request; ensuring that credit representatives themselves provide evidence of

their authorisation within 10 business days; providing evidence of the licensee’s Australian Credit Licence within 10 business days of a request; and for non-APRA-regulated bodies, notifying any event that may materially adversely change the licensee’s financial position from that last disclosed to ASIC within three business days after becoming aware of the event. This regulation aims to ensure that licensees provide ASIC with information that is current and relevant in relation to a range of technical or practical matters. This information is said to enhance “ASIC’s capacity to effectively carry out its regulatory functions in respect of supervising those licensees” and to assist “ASIC to ensure that when persons, both consumers and industry bodies, seek information from the credit registers that this data is current” (as noted in the Explanatory Statement). The requirement to provide evidence of the licensee’s Australian Credit Licence or the authorisation of a credit representative is intended to allow consumers to be satisfied that the person they are dealing with is properly authorised to engage in credit activities under the NCCP Act. In most cases, this evidence may be provided by giving access to the relevant information on the credit registers maintained by ASIC, accessible through its website. Note that these conditions apply to the holder of the Australian Credit Licence. However, many of them relate to matters affecting credit representatives, therefore licensees’ arrangements with their credit representatives must enable the licensee to ensure as far as possible that credit representatives comply with their obligations under reg 9. Regulation 9(10) appears to contain an error in that it requires a licensee to lodge particulars of any change in control of which the licensee becomes aware. However, it requires the particulars to be lodged within 10 business days after the actual change in control rather than within 10 business days after the licensee becomes aware of the change in control. This contrasts with reg 9(14) where a licensee must give notice of a material adverse change

event within three business days “after the licensee becomes aware of the event”. [page 714] Section 45(7) of the NCCP Act provides that ASIC cannot vary or revoke these conditions, ensuring that these conditions continue to apply uniformly to all persons while they hold an Australian Credit Licence.

The conditions on the licence — special purpose funding entity 9AA (1) For subsection 45(7) of the Act, the licence is subject to the conditions set out in this regulation if the licensee is a party to a servicing agreement with a special purpose funding entity. 9AA (2) The licensee must lodge with ASIC a notice, in an approved form, stating that the licensee is a party to a servicing agreement with a special purpose funding entity. [subreg (2) am SLI 303 of 2010 reg 3 and Sch 1[2], eff 26 Nov 2010]

9AA (3) For subregulation (2): (a) if the servicing agreement was entered into before 1 July 2010, the licensee must notify ASIC no later than 30 business days after 1 July 2010; and (b) if the servicing agreement was entered into on or after 1 July 2010, the licensee must lodge with ASIC a notice, in an approved form and stating that the service agreement was entered into, no later than 20 business days after the servicing agreement was entered into. [subreg (3) am SLI 303 of 2010 reg 3 and Sch 1[3], eff 26 Nov 2010]

9AA (4) If the licensee ceases to be a party to a servicing agreement with a special purpose funding entity, the licensee:

(a) must lodge with ASIC a notice, in an approved form, stating that the licensee has ceased to be a party to the servicing agreement with the entity; and (b) must lodge the notice no later than 15 business days after the licensee ceases to be a party. [subreg (4) am SLI 303 of 2010 reg 3 and Sch 1[4] and [5], eff 26 Nov 2010]

9AA (5) The licensee: (a) must lodge with ASIC a notice, in an approved form, setting out any action by a natural person in a position to control or influence the special purpose funding entity that has or may have the effect of directing the licensee to act inconsistently with: (i)

the licensee’s licence conditions; or

(ii) the credit legislation; and (b) must lodge the notice no later than 15 business days after the action occurs. [subreg (5) am SLI 303 of 2010 reg 3 and Sch 1[6] and [7], eff 26 Nov 2010] [reg 9AA insrt as reg 9A SLI 137 of 2010 reg 3 and Sch 1[8], eff 19 June 2010; renum SLI 185 of 2010; reg 3 and Sch 1[1], eff 1 July 2010]

COMMENTARY ON REGULATION 9AA [R9AA.05] Regulation 9AA sets out additional licence conditions for a licensee which is or becomes party to a servicing agreement with a special purpose funding entity. For the definitions of “servicing agreement” and “special purpose funding entity” see Sch 3, item 3.4 of the regulations. The licensee must notify ASIC if it is, or ceases to be, a party to such an agreement (and, presumably, the name of the relevant entity) and of any action by a natural person who can influence the special purpose funding entity that may effectively direct the licensee to act inconsistently with its licence conditions (including the obligation to comply with the credit legislation).

[page 715]

Conditions for licensee — referrals 9AB (1) For subsection 45(7) of the Act, a licensee who engages in a credit activity, on or after 1 October 2010, as a consequence of being a licensee described in subregulation 25(5) is subject to the conditions set out in this regulation. Note The licensee, or a representative of the licensee, provides the credit activity to a person by contacting the person after a referral by the referrer described in subregulation 25(5).

9AB (2) Register of referrers The licensee must keep, or have access to, a register of the referrers described in subregulation 25(5): (a) with which the licensee has an agreement of the kind described in paragraph 25(5)(a); or (b) who have been made a written offer of the kind described in subsubparagraph 25(5)(b)(ii)(B). 9AB (3) The register must include: (a) the referrer’s name and contact details; and (b) the date and means by which the referrer was advised in writing of the way in which the referrer may engage in credit activities under the agreement; and (c) the day on which the referrer first engaged in the conduct described in subparagraph 25(5)(c)(ii) under the agreement. Note The conduct is giving to the licensee, registered person or representative the consumer’s name.

9AB (4) The licensee must make the register available to ASIC on request. 9AB (5) Contact after referral The licensee may only contact the consumer described in subregulation 25(5) if he or she does so within 10 business days after receiving the referral from the referrer described in that subregulation. 9AB (6) If the licensee contacts the consumer in person, the licensee must

begin the discussion with the consumer (after the licensee has identified itself) by statements to the following effect: (a) ‘I am contacting you because we have been provided with your contact details by [name of referrer]. Can you confirm that you agreed with [name of referrer] to have us contact you?’; (b) if a payment of commission or a financial benefit may be given to the referrer — ‘before we continue, I would like to let you know that if you take up any of our products or services, [name of referrer] may receive the following financial benefits [brief description]’; (c) ‘are you happy to continue this discussion?’. 9AB (7) If the licensee contacts the consumer by letter or email, the licensee must include statements to the following effect at the start of the letter or email: (a) the licensee is contacting the consumer as a result of being provided with their contact details by the referrer (identifying the referrer by name); (b) the referrer may receive a financial benefit or payment. [reg 9AB insrt SLI 235 of 2010 reg 3 and Sch 1[3], eff 22 July 2010]

COMMENTARY ON REGULATION 9AB [R9AB.05] Regulation 9AB applies to a licensee which has a written agreement with a referrer whose business is not credit-related, for the referrer to refer consumers’ names to the licensee in accordance with reg 25(5). The licensee must keep a register of its referrers (or have access to such a register) which includes the referrer’s contact details, how and when the referrer received written guidance on how it was to engage in referral activities and the date of the first referral by that referrer. The licensee must also make the register available to ASIC. [page 716]

Credit providers often have such referral arrangements (known as “upstream referrals”) with hairdressers, for example, and other small businesses. The licensee can only contact any referred consumer within 10 business days after receiving the referral. The regulation also prescribes certain statements and disclosures that the licensee must make when contacting the consumer.

Conditions for unlicensed carried over instrument lender — credit register 9A (1) For modified section 45 of the Act, an unlicensed carried over instrument lender is subject to the conditions set out in this regulation. 9A (2) If: (a) there is a change in a matter, particulars of which are entered in the credit register for unlicensed carried over instrument lenders; and (b) the change is not a direct consequence of an act by ASIC; the lender must lodge particulars of the change with ASIC, in the approved form, no later than 10 business days after the change occurs. 9A (3) If the lender becomes aware of any change in control of the lender, the lender must lodge with ASIC particulars of the change, in the approved form, not later than 10 business days after the change. 9A (4) For subregulation (3): (a) a change in control, in relation to a lender, includes a transaction, or a series of transactions in a period of 12 months, that results in a person having control of the lender, either alone or together with associates of the person; and (b) control, in relation to a lender, means: (i)

if the lender is a body corporate: (A) the capacity to cast, or control the casting of, more than

one half of the maximum number of votes that might be cast at a general meeting of the lender; or (B) directly or indirectly holding more than one half of the issued share capital of the lender (not including any part of the issued share capital that carries no right to participate beyond a specified amount in a distribution of either profits or capital); or (ii) the capacity to control the composition of the lender’s board or governing body; or (iii) the capacity to determine the outcome of decisions about the lender’s financial and operating policies. 9A (5) For subparagraph (4)(b)(iii), the following matters must be taken into account in determining whether a person has the capacity to determine the outcome of decisions about the lender’s financial and operating policies: (a) the practical influence the person can exert (rather than the rights it can enforce); (b) any practice or pattern of behaviour affecting the lender’s financial or operating policies (whether or not it involves a breach of an agreement or a breach of trust). [subreg (5) am SLI 235 of 2010 reg 3 and Sch 1[4], eff 22 July 2010]

9A (6) If: (a) the lender is not a body regulated by APRA; and [page 717] (b) an event occurs that may make a material adverse change to the financial position of the lender by comparison with its financial position: (i)

at the time it became an unlicensed carried over instrument lender; or

(ii) as described in documents lodged with ASIC after it became an unlicensed carried over instrument lender; the lender must lodge with ASIC in the approved form a notice setting out particulars of the event as soon as practicable, and in any case not later than 3 business days, after the lender becomes aware of the event. [subreg (6) am SLI 235 of 2010 reg 3 and Sch 1[5], eff 22 July 2010] [reg 9A insrt SLI 105 of 2010 reg 3 and Sch 1[9], eff 24 May 2010]

COMMENTARY ON REGULATION 9A [R9A.05] Regulation 9A imposes conditions (but not licence conditions) on an unlicensed carried over instrument lender (as defined in Sch 2, item 2.4 of the Regulations) which engages in credit activity in relation to its carried over instruments (defined in the National Consumer Credit Protection (Transitional and Consequential Provisions) Act 2009 s 4(1)). These include notifying ASIC of any change in its particulars (within 10 business days), of any change in control of the lender (within 10 business days) and, if the lender is not APRA-regulated, notifying ASIC of any event that may materially and adversely change the lender’s financial position from that last disclosed to ASIC (within three business days after becoming aware of the event).

Obligations of licensees — alternative dispute resolution systems 10 (1) For subparagraph 47(1)(h)(i) of the Act, ASIC must take the following matters into account when considering whether to make or approve standards or requirements relating to internal dispute resolution: (a) Australian Standard AS ISO 10002: (i)

known as Complaints Handling; and

(ii) published by Standards Australia; and (iii) as in force when this regulation commences;

(b) any other matter ASIC considers relevant. 10 (2) ASIC may: (a) vary or revoke a standard or requirement that it has made in relation to an internal dispute resolution procedure; and (b) vary or revoke the operation of a standard or requirement that it has approved in its application to an internal dispute resolution procedure. 10 (3) For paragraph 47(1)(i) of the Act, ASIC must take the following matters into account when considering whether to approve an external dispute resolution scheme: (a) the accessibility of the dispute resolution scheme; (b) the independence of the dispute resolution scheme; (c) the fairness of the dispute resolution scheme; (d) the accountability of the dispute resolution scheme; (e) the efficiency of the dispute resolution scheme; (f)

the effectiveness of the dispute resolution scheme;

(g) any other matter ASIC considers relevant. 10 (4) ASIC may: (a) specify a period for which an approval of an external dispute resolution scheme is in force; and [page 718] (b) make an approval of an external dispute resolution scheme subject to conditions specified in the approval, including conditions relating to the conduct of an independent review of the operation of the scheme; and (c) vary or revoke:

(i)

an approval of an external dispute resolution scheme; or

(ii) the specification of a period for which an approval is in force; or (iii) a condition to which an approval of an external dispute resolution scheme is subject. 10 (5) For paragraph 110(a) of the Act, a licensee who engages in credit activities in the capacity of any of the following: (a) a trustee appointed under the will or on the intestacy of a person; (b) a trustee appointed under an express trust if: (i)

the settlor is an individual; and

(ii) the interest in the trust is not a credit contract; (c) an attorney appointed under an enduring power of attorney; is exempt from the requirements in paragraph 47(1)(i) of the Act in relation to the credit activities if complaints about the credit provided by the licensee may be made to the Ombudsman of a State or Territory. COMMENTARY ON REGULATION 10 [R10.05] Regulation 10 sets out the matters that ASIC must take into account when approving standards or requirements to be met by an internal dispute resolution procedure under s 47(1)(h)(i) of the NCCP Act and when approving an external dispute resolution scheme for the purposes of s 47(1)(i) of the NCCP Act. According to ASIC Regulatory Guide 165, these matters include: the size of a person’s business; the range of credit activities they engage in; the nature of their customer base; and the likely number and complexity of complaints. Regulation 10 also contains an exemption for certain trustees and attorneys from the requirement under s 47(1)(i) of the NCCP Act to be a member of an

external dispute resolution scheme if complaints about the relevant trustee or attorney may be made to a state or territory ombudsman.

Obligations of licensees — foreign entity must continue to have local agent 11 (1) For paragraph 47(1)(m) of the Act, a foreign entity that: (a) is not a foreign company; and (b) is a licensee; must meet the requirements in subregulation (2). 11 (2) The foreign entity must: (a) at all times, have an agent who is: (i)

an individual or a company; and

(ii) resident in this jurisdiction; and (iii) authorised to accept, on the foreign entity’s behalf, service of process and notices; and (b) notify ASIC of any change to: (i)

the agent; or

(ii) the name or address of the agent; not later than 1 month after the change; and [page 719] (c) make arrangements that ensure that ASIC may treat a document as being served on the foreign entity by leaving it at, or by sending it by post to: (i)

an address of the agent that has been notified to ASIC; or

(ii) if a notice or notices of a change or alteration to that address

has or have been given to ASIC — the address shown in the most recent notice. COMMENTARY ON REGULATION 11 [R11.05] Regulation 11 sets out continuing obligations for a foreign entity (other than a foreign company (see reg 3)) to maintain a process agent resident in Australia and notify ASIC of any changes in the agent or their details. See also reg 7.

Obligations of licensees — requirements for compensation arrangements 12 (1) For paragraph 48(2)(a) of the Act, and unless the licensee is an exempt licensee, the arrangements mentioned in subsection 48(1) of the Act are subject to the requirement that the licensee hold professional indemnity insurance cover that is adequate, having regard to: (a) the licensee’s membership of an approved external dispute resolution scheme (or schemes) mentioned in paragraph 47(1)(i) of the Act, taking account of the maximum liability that has, realistically, some potential to arise in connection with: (i)

any particular claim against the licensee; and

(ii) all claims in respect of which the licensee could be found to have liability; and (b) relevant considerations in relation to the engaging in a credit activity by the licensee, including: (i)

the volume of business involved in the credit activity; and

(ii) the number and kind of clients; and (iii) the kind, or kinds, of credit activities involved; and (iv) the number of representatives of the licensee. 12 (2) For paragraph 48(3)(c) of the Act, a matter to which ASIC must have regard, before approving particular arrangements under paragraph 48(2)(b) of

the Act, is whether those arrangements would provide coverage that is adequate, having regard to matters of the kind mentioned in subregulation (1). 12 (3) In this regulation: exempt licensee means any of the following: (a) a company or institution of any of the following kinds: (i)

a general insurance company authorised by APRA under section 12 of the Insurance Act 1973, and included on the Register of General Insurers and Authorised NOHCs;

(ii) a life insurance company registered with APRA under section 21 of the Life Insurance Act 1995; (iii) an authorised deposit-taking institution; (b) a licensee: (i)

that is related (within the meaning of section 50 of the Corporations Act) to a company or institution mentioned in paragraph (a); and

(ii) in respect of which the company or institution has provided a guarantee that: (A) ensures payment of the obligations of the licensee to an extent that is adequate within the meaning of subregulation (1); and (B) is approved in writing by ASIC; (c) a licensee whose license: [page 720] (i)

is subject to a condition under subsection 45(6) of the Act that the licensee is only authorised to engage in credit activities mentioned in item 1, 3, 4 or 5 in the table in subsection 6(1) of the Act; and

(ii) is not subject to a condition that the licensee hold professional indemnity insurance; (d) a licensee who: (i)

has a licence to provide a credit service within the meaning given by section 7 of the Act; and

(ii) will only provide the credit service in relation to: (A) credit contracts for which the licensee is the credit provider; or (B) consumer leases for which the licensee is the lessor. Note For paragraph (b), a decision to refuse to approve a guarantee is a reviewable decision under section 327 of the Act.

COMMENTARY ON REGULATION 12 [R12.05] Regulation 12 states that the compensation arrangements required under ss 47(1)(j) and 48 of the NCCP Act will be satisfied if the licensee holds an adequate professional indemnity insurance policy. The insurance must be adequate to cover the risk of claims by consumers, having regard to the likely amount of claims, and given the type of business the licensee is engaged in. Note that the requirement does not apply to an “exempt licensee” as defined in reg 12(3).

Obligations of licensees — offence in relation to failure to cite licence number in documents 13 (1) For subsection 52(2) of the Act, the following kinds of documents are prescribed: (a) a document that is required to be created or produced in accordance with Chapter 3 of the Act; (b) a printed advertisement that relates to the provision of credit to which the Code would apply; (c) a document that is required to be created, produced, given or published by a provision of the Code;

(d) a document lodged with ASIC that relates to the provision of credit to which the Code would apply. Note Under subsection 52(3) of the Act, a person commits an offence if: (a) the person is subject to a requirement to include and identify its Australian credit licence number in a document prescribed by the regulations; and (b) the person engages in conduct; and (c) the conduct contravenes the requirement.

13 (2) For the purposes of paragraph (1)(b), if a printed advertisement identifies more than 1 licensee, or uses a word or description that covers more than 1 licensee, subsection 52(2) of the Act is modified to provide that only 1 of the licensees must comply with paragraphs 52(2)(a) and (b) of the Act. Note Paragraph 110(c) of the Act provides that the regulations may provide that Chapter 2 of the Act applies as if specified provisions were omitted, modified or varied as specified in the regulations.

COMMENTARY ON REGULATION 13 [R13.05] Regulation 13 lists the documents on which a licensee must include its licence number under s 52(2) of the NCCP Act. These include all documents produced in accordance with Ch 3 of the NCCP Act (for example, [page 721] credit guides, quotes and unsuitability assessments), any document that a licensee must create, produce, give or publish under the Code (which will include credit contracts, statements of account, mortgages and guarantees), any document relating to Code-regulated credit which is lodged with ASIC and printed credit advertisements. Regulation 13(2) allows printed advertisements to include the licence number of only one licensee, notwithstanding that the advertisement identifies more than one licensee or uses a business or trading name that refers to several licensees.

Obligations of licensees — who compliance certificate must be signed by 14 For paragraph 53(3)(b) of the Act, the following persons are prescribed: (a) if the body corporate is not an ADI: (i)

the Chief Executive Officer of the body corporate; or

(ii) if the body corporate does not have a Chief Executive Officer — the person who: (A) is responsible for managing the affairs of the body corporate; and (B) has authority to make decisions in relation to the allocation of resources so that the body corporate complies with the Act; (b) if the body corporate is an ADI: (i)

the Chief Executive Officer of the body corporate; or

(ii) a person who satisfies the criteria to be fit and proper to hold a responsible person position under Prudential Standard APS 520. Note Prudential Standard APS 520 is in Schedule 1 to the Banking (prudential standard) determination No. 1 of 2006 — Prudential Standard APS 520 Fit and Proper. [reg 14 am SLI 105 of 2010 reg 3 and Sch 1[10], eff 24 May 2010]

COMMENTARY ON REGULATION 14 [R14.05] Regulation 14 sets out who may sign the annual compliance certificate on behalf of a body corporate licensee (see s 53 of the NCCP Act). The requirement varies depending on whether or not the licensee is an ADI. [R14.10] The Explanatory Statement to State Legislative Instrument 2010 No 44 explains: Section 53 of the NCCP Act requires licence holders to lodge an annual compliance certificate with ASIC. Paragraph 53(3)(b) provides that where the licensee is a body corporate, the certificate must be signed by a person of a kind prescribed by the Regulations.

This regulation provides that the compliance certificate must be signed by: the Chief Executive Officer (CEO) of the body corporate; or if the body corporate does not have a CEO, the person responsible for managing the affairs of the body corporate who has authority in relation to the allocation of resources within the licensee for complying with the NCCP Act.

[page 722]

When a licence can be suspended, cancelled or varied — grounds to suspend or cancel licence 15 For paragraph 55(2)(e) of the Act, the following are matters that ASIC must have regard to: (a) a licensee failing to lodge an annual compliance certificate under section 53 of the Act; (b) a licensee lodging an annual compliance certificate that contains information that: (i)

is false or misleading; or

(ii) can not reasonably be believed to be true by the person signing the certificate under subsection 53(3) of the Act. COMMENTARY ON REGULATION 15 [R15.05] Regulation 15 sets out factors that ASIC must take into account (as provided in s 55(2)(c)) in deciding whether to suspend or cancel a licence on the basis that the licensee is likely to contravene a general conduct obligation under s 47 of the NCCP Act or that the licensee is not a fit and proper person to engage in credit activities. The factors relate to failure to lodge an annual compliance certificate (under s 53 of the NCCP Act) or lodging one that is false or misleading or that the person signing it could not have reasonably believed to be true. The purpose of the regulation is said to be to ensure that “proper attention [is] given to the contents of the compliance certificate by the person who is

signing it”, so that its contents can reasonably be relied on by ASIC (see the Explanatory Statement).

Part 2-2 — Authorisation of credit representatives Sub-authorisation by body corporate 16 For paragraph 110(c) of the Act, paragraph 65(6)(c) of the Act is modified to include after ‘scheme’ the words ‘and is not an employee or director of the body corporate’. Note Paragraph 110(c) of the Act provides that the regulations may provide that Chapter 2 of the Act applies as if specified provisions were omitted, modified or varied as specified in the regulations.

COMMENTARY ON REGULATION 16 [R16.05] Regulation 16 modifies s 65(6)(c) of the NCCP Act. Its effect is to permit a body corporate credit representative of a licensee to sub-authorise a natural person who is an employee or director of the body corporate even though that employee or director is not a member of an approved external dispute resolution (EDR) scheme. [R16.10] Regulation 16 also modifies s 65(6)(c) of the NCCP Act so that credit representatives who are employees or directors of the body corporate can be sub-authorised without having to hold a membership of an EDR scheme in their own right. In the absence of reg 16, the sub-authorised credit representative would need to be a member of an approved EDR scheme. [page 723]

Part 2-3 — Financial records, trust accounts and audit reports Information and matters to be contained in a trust

account audit report 17 For paragraph 100(3)(b) of the Act, the trust account audit report must include a statement about the following matters: (a) whether, in the opinion of the auditor, the licensee’s trust accounts have been kept regularly and properly maintained; (b) whether the auditor received all necessary records, information and explanations from the licensee; (c) whether, in the opinion of the auditor, the licensee’s trust accounts provide a true and fair view of the transactions recorded and the balance at the end of the relevant period; (d) any other matter in relation to the trust accounts which should, in the opinion of the auditor, be communicated to ASIC. COMMENTARY ON REGULATION 17 [R17.05] Regulation 17 prescribes certain statements that the auditor must make in any trust account audit report to be lodged with ASIC under s 100 of the NCCP Act. A trust account audit report is only needed where the licensee maintains a trust account in relation to the provision of credit services and is therefore holding money on behalf of another person. The auditor must include the following information in the report: whether, in the opinion of the auditor, the trust accounts have been properly maintained; whether the auditor received all necessary records, information and explanations from the licensee; whether, in the opinion of the auditor, the licensee’s trust accounts provide an accurate statement of the transactions in relation to funds passing through the account, and the balance of the account; and any other matter in relation to the trust accounts which should, in

the opinion of the auditor, be communicated to ASIC. The Explanatory Statement for reg 17 indicates that if the auditor discovers, for example, that one or more of the accounts are not kept in such a manner as to enable them to be properly audited, or discovers any matter which appears to involve dishonesty or breach of law by the licensee, or discovers the fact of missing trust moneys, or failure to comply with the provisions of the NCCP Act, the auditor must fully set out those facts in the report.

Eligibility of auditors to prepare trust account audit report 18 (1) For subsection 100(4) of the Act, a person is ineligible to prepare a trust account audit report for a credit service licensee if: (a) the person does not meet the requirements of regulation 19; or [page 724] (b) the person is not an authorised audit company (within the meaning given by section 9 of the Corporations Act); or (c) the person owes an amount to, or is owed an amount by: (i)

the credit service licensee; or

(ii) if the credit service licensee is a body corporate — a related body corporate of the credit service licensee; or (d) a body corporate in which the person has a substantial holding owes an amount to, or is owed an amount by: (i)

the credit service licensee; or

(ii) if the credit service licensee is a body corporate — a related body corporate of the credit service licensee; or (e) if the credit service licensee is a body corporate — the person is:

(i)

an officer of the body corporate; or

(ii) a partner or employee of an officer of the body corporate. 18 (2) For paragraph (1)(c), a debt owed by an individual to a body corporate is to be disregarded if: (a) the body corporate is: (i)

an Australian ADI; or

(ii) a body corporate registered under the Life Insurance Act 1995; and (b) the debt arose because of a loan that the body corporate made to the individual in the ordinary course of the body corporate’s ordinary business; and (c) the individual used the amount of the loan to pay the whole or part of the purchase price of premises that the individual uses as his or her principal place of residence. 18 (3) For subparagraphs (1)(e)(i) and (ii), a person is taken to be an officer of a body corporate if: (a) the person is an officer of a related body corporate; or (b) unless ASIC directs that this paragraph does not apply in relation to the person — the person has, at any time within the immediately preceding period of 12 months, been an officer or promoter of the body corporate or of a related body corporate. 18 (4) For this regulation, a person is not taken to be an officer of a body corporate by reason only: (a) of being or having been the liquidator of the body corporate or of a related body corporate; or (b) of having been appointed as an auditor of the body corporate or of a related body corporate; or (c) of being a public officer of the body corporate for any purpose relating to taxation; or

(d) of being or having been authorised to accept service of process or any notices on behalf of the body corporate or a related body corporate. COMMENTARY ON REGULATION 18 [R18.05] Regulation 18 prescribes persons who may not be an auditor for trust account audit report purposes. The auditor must either meet the requirements of reg 19 or must be an authorised audit company (within the meaning of s 9 of the Corporations Act). In addition, neither the auditor nor any body corporate in which they have a substantial holding must owe an amount to, or be owed an amount by, the licensee or any of its related bodies corporate [page 725] (subject to certain exemptions in para (2)). Also, if the licensee to be audited is a body corporate, the auditor must not be an officer of the licensee or a partner or employee of an officer of the licensee. See [R19.05] for discussion of the relationship between regs 18 and 19.

Auditors who prepare audit reports 19 (1) For paragraph 106(c) of the Act, this regulation: (a) sets out who is eligible to be an auditor for the purpose of preparing the audit reports mentioned in paragraph 102(1)(b) of the Act; and (b) sets out when a person may be appointed as an auditor. Note Paragraph 106(c) of the Act provides that the regulations may make provision in relation to the auditors that prepare the audit reports mentioned in paragraphs 106(a) and (b) of the Act. [subreg (1) am SLI 137 of 2010 reg 3 and Sch 1[9], eff 19 June 2010]

19 (2) Eligibility to be an auditor A person is eligible to be appointed as an auditor for the purpose mentioned in paragraph (1)(a) only if: (a) the person is a registered company auditor or an authorised audit

company (within the meaning given by section 9 of the Corporations Act); and (b) the person: (i)

is not an employee, director or partner: (A) of the licensee; or (B) of any other person carrying on a business of engaging in credit activities; and

(ii) is not carrying on a business of engaging in credit activities. [subreg (2) am SLI 303 of 2010 reg 3 and Sch 1[8], eff 26 Nov 2010]

19 (3) Appointment as an auditor A licensee must: (a) within 3 months of being required to open a trust account, appoint a person who meets the requirements of subregulation (2) to be the licensee’s auditor; and (b) lodge with ASIC a notice, in the approved form, of the appointment within 14 days after appointing the person. [subreg (3) am SLI 303 of 2010 reg 3 and Sch 1[9], eff 26 Nov 2010]

19 (4) If a person is appointed as a licensee’s auditor, the appointment is continuous until the first of the following events occurs: (a) the licensee is no longer required to keep a trust account; (b) the auditor dies or otherwise ceases to engage in the business of being an auditor; (c) the auditor is unable to perform his or her duties as the licensee’s auditor; (d) ASIC approves the auditor’s resignation; (e) ASIC approves a request by the licensee to replace the person as an auditor. 19 (5) If a person ceases to be a licensee’s auditor under paragraph (4)(b), (c), (d) or (e), the licensee must:

(a) within 28 days of the cessation of the appointment, appoint another person who meets the requirements of subregulation (2) to be the licensee’s auditor; and (b) lodge with ASIC a notice, in the approved form, of the appointment within 14 days after appointing the person. [subreg (5) am SLI 303 of 2010 reg 3 and Sch 1[10], eff 26 Nov 2010]

[page 726] COMMENTARY ON REGULATION 19 [R19.05] Regulation 19 sets out eligibility requirements to be an auditor for trust account audit report purposes. It also states when such an auditor must be appointed, when their appointment ceases and requires the licensee to notify ASIC of the appointment of an auditor. Regulation 19(2) states that a person is eligible only if they are a registered company auditor (within the meaning of s 9 of the Corporations Act) and if they meet certain other criteria such as not being an employee, director or partner of the licensee; not carrying on a credit activity business; and not being an employee, director or partner of a person carrying on a credit activity business. As the Explanatory Statement indicates, these criteria concern situations which cast doubt on the auditor’s independence. Is not clear how the limitation in reg 19(2)(a) co-exists with the similar eligibility criteria in reg 18, nor why para (2) of reg 19 was not included in reg 18. The existence of the two regulations creates confusion. It is suggested that the safest interpretation is to comply with reg 19(2) and with reg 18(1) (c)–(e). However, the result of this would be that reg 18(1)(b) becomes redundant and an authorised audit company cannot be a trust account audit report auditor or an authorised company.

Part 2-4 — Exemptions and modifications [Pt 2–4 heading am SLI 105 of 2010 reg 3 and Sch 1[11], eff 24 May 2010]

DIVISION 1 — EXEMPTIONS [Div 1 heading insrt SLI 105 of 2010 reg 3 and Sch 1[11], eff 24 May 2010]

Subdivision 1.1 — Persons exempt from being licensed [Subdiv 1.1 heading insrt SLI 105 of 2010 reg 3 and Sch 1[11], eff 24 May 2010; am SLI 303 of 2010 reg 3 and Sch Sch 1[11], eff 26 Nov 2010]

Persons exempt from requiring a licence — general 20 (1) For paragraph 110(a) of the Act, this regulation exempts certain persons engaging in a credit activity from: (a) section 29 of the Act; and (b) definitions in the Act, as they apply to references in the provisions mentioned in paragraph (a); and (c) instruments made for the purposes of any of the provisions mentioned in paragraphs (a) and (b). Note Section 29 of the Act provides that a person must not engage in a credit activity if the person does not hold a licence authorising the person to engage in the credit activity.

20 (2) The person is exempted only to the extent that the person is engaging in the specified credit activity. Note If the person also engages in a credit activity that is not the subject of an exemption under the Act, the person is not exempted in relation to that credit activity.

20 (3) A person is exempted if: (a) the person engages in a credit activity while: [page 727] (i)

performing functions, or exercising powers, as a trustee within the meaning of the Bankruptcy Act 1966; or

(ii) performing functions, or exercising powers, incidental to the

person’s appointment as a trustee; or (b) the person engages in a credit activity while: (i)

performing functions, or exercising powers, as a controller within the meaning of the Corporations Act 2001, provisional liquidator, or liquidator (whether appointed by a court or otherwise); or

(ii) performing functions, or exercising powers, incidental to the person’s appointment as a controller, provisional liquidator or liquidator; or (c) the person engages in a credit activity while performing functions, or exercising powers, as a person appointed by a court to engage in a credit activity; or (d) the person engages in a credit activity while performing functions, or exercising powers, as the Public Trustee acting under a law of a State or Territory; or (e) the person engages in a credit activity while: (i)

performing functions, or exercising powers, as an administrator within the meaning of the Corporations Act 2001; or

(ii) performing functions, or exercising powers, incidental to the person’s appointment as an administrator; or (f)

the person engages in a credit activity while: (i)

performing functions, or exercising powers, as a controlling trustee within the meaning of section 187 of the Bankruptcy Act 1966; or

(ii) performing functions, or exercising powers, incidental to the person’s appointment as a controlling trustee; or (fa) the person engages in a credit activity while: (i)

performing functions, or exercising powers, as a trustee of a personal insolvency agreement under Part X of the Bankruptcy Act 1966; or

(ii) performing functions, or exercising powers, incidental to the person’s appointment as a trustee of a personal insolvency agreement; or (g) the person engages in a credit activity while: (i)

performing functions, or exercising powers, as a trustee or person administering a compromise or arrangement between a body corporate and another person or person; or

(ii) performing functions, or exercising powers, incidental to the person’s appointment as a trustee or person of that kind; or (h) the person engages in a credit activity while performing functions, or exercising powers, as a personal representative of a deceased person other than a deceased licensee; or (i)

subject to subregulation (4), the person engages in a credit activity while performing functions, or exercising powers, as a personal representative of a deceased licensee; or

(j)

the person engages in a credit activity while performing functions, or exercising powers, as a registered debt agreement administrator preparing and administering a debt agreement under Part IX of the Bankruptcy Act 1966; or

(k) the person engages in a credit activity while: (i)

performing functions, or exercising powers, as a registered trustee under Part X of the Bankruptcy Act 1966 in the ordinary course of activities as a registered trustee that is reasonably regarded as a necessary part of those activities; or

(ii) performing functions, or exercising powers, incidental to the person’s appointment as a registered trustee; or (l)

the person engages in a credit activity while: (i)

performing functions, or exercising powers, as a registered liquidator within the meaning of the Corporations Act 2001 in the ordinary course of activities as a registered liquidator that is reasonably regarded as a necessary part of those activities; or

[page 728] (ii) performing functions, or exercising powers, incidental to the person’s appointment as a registered liquidator. [subreg (3) subst SLI 303 of 2010 reg 3 and Sch 1[12], eff 26 Nov 2010]

20 (4) Paragraph (3)(i) only applies until the first of the following events occurs: (a) the end of 6 months after the death of the licensee; (b) the removal or discharge of the personal representative; (c) the final distribution of the licensee’s estate. 20 (5) A person is exempted if: (a) the person (the financial counselling agency) engages in the credit activity as part of a financial counselling service; and (b) no remuneration (whether by way of commission or otherwise) is payable to, or on behalf of, the financial counselling agency by any person in relation to any action by, or on behalf of, the client arising from: (i)

engaging in the credit activity; or

(ii) any other aspect of the provision of the financial counselling service; and (c) no remuneration (whether by way of commission or otherwise) is payable to, or on behalf of, a representative of the financial counselling agency by any person in relation to any action by, or on behalf of, the client arising from: (i)

engaging in the credit activity; or

(ii) any other aspect of the provision of the financial counselling service; and (d) no remuneration (whether by way of commission or otherwise) is payable to, or on behalf of, an associate of the financial counselling agency by any person in relation to any action by, or on behalf of,

the client arising from: (i)

engaging in the credit activity; or

(ii) any other aspect of the provision of the financial counselling service; and (e) no fees or charges (however described) are payable by or on behalf of the client in relation to the credit activity or any other aspect of the financial counselling service; and (f)

the financial counselling agency: (i)

does not engage in a credit activity that is not covered by paragraphs (a) to (e); and

(ii) takes all reasonable steps to ensure that none of its representatives engages in a credit activity that is not covered by paragraphs (a) to (e); and (g) the financial counselling agency takes all reasonable steps to ensure that each person who engages in credit activities on its behalf: (i)

is a member of, or is eligible to be a member of, a financial counselling association; and

(ii) has undertaken appropriate training to ensure that the person has adequate skills and knowledge to engage satisfactorily in the credit activity and any other aspect of the provision of the financial counselling service. 20 (6) A person is exempted if: (a) the person: (i)

is a related body corporate of a licensee; and

(ii) is engaging in credit activities only on behalf of the licensee; and (iii) is engaging in credit activities only because its employees and directors are engaging in credit activities on behalf of the licensee; and (b) the credit activities in which the person engages are not those

mentioned in: (i)

paragraph (a) or (b) of item 1 of the table in subsection 6(1) of the Act; or

(ii) paragraph (a) or (b) of item 3 of the table in subsection 6(1) of the Act. 20 (7) A person is exempted if the person is a public body or authority, or a local government body or authority, constituted under an Act of the Commonwealth or a State or Territory. [page 729] 20 (8) Subject to subregulation (9), if a person is authorised to engage in particular credit activities by: (a) an Act of the Commonwealth or a State or Territory (other than the Act, the Transitional Act or an Act mentioned in subregulation (10)); or (b) a licence or registration issued or granted under an Act of the Commonwealth or a State or Territory (other than the Act, the Transitional Act or an Act mentioned in subregulation (10)); the person is exempted to the extent that the person is engaging in the credit activities in which the person is authorised to engage under that Act, licence or registration. 20 (9) [subreg (9) rep SLI 235 of 2010 reg 3 and Sch 1[6], eff 22 July 2010] 20 (10) For paragraphs (8)(a) and (b), the Acts are: (a) the Finance Brokers Control Act 1975 (WA); and (b) the Credit (Administration) Act 1984 (WA); and (c) the Consumer Credit (Administration) Act 1996 (ACT). 20 (11) A person is exempted if:

(a) the person is an organisation that provides services and makes benefits available to members of: (i)

the organisation; or

(ii) a program or facility operated or conducted by or within the organisation; and (b) an incidental benefit of membership of the organisation, program or facility is that members are eligible: (i)

to apply for a particular credit contract or consumer lease offered by a licensee or a registered person; or

(ii) to obtain services or benefits under a particular credit contract or consumer lease offered by a licensee or a registered person; and (c) [repealed] (d) the organisation provides credit services (within the meaning given by section 7 of the Act) in relation to the particular credit contract or consumer lease to members or persons likely to become members under a contract or agreement with the licensee or registered person; and (e) it would not ordinarily be the case that: (i)

the credit to be provided under the credit contract is provided predominantly for the payment for services, goods or benefits provided by the organisation or an associate of the organisation; or

(ii) the goods to be hired under the consumer lease are supplied by the organisation or an associate of the organisation. [subreg (11) am SLI 105 of 2010 reg 3 and Sch 1[12], [13], eff 24 May 2010; SLI 185 of 2010 reg 3 and Sch 1[2], eff 1 July 2010]

20 (12) A person is exempted if: (a) either: (i)

the person: (A) is a charitable body (within the same meaning as in ASIC

Class Order [CO 02/184]); and (B) is engaging in credit activities by providing a credit service in relation to credit contracts or consumer leases provided by a licensed or registered credit provider or lessor or an exempt special purpose funding entity that is a credit provider or lessor; or (ii) the person: (A) is not a charitable body (within the same meaning as in ASIC Class Order [CO 02/184]); and (B) is engaging in credit activities by providing a credit service in relation to credit contracts or consumer leases provided by an ADI; and [page 730] (b) the credit contracts or consumer leases are offered as part of a program designed for low income consumers who are entitled: (i)

to hold a Health Care Card or Pension Concession Card; or

(ii) to receive Family Tax Benefit Part A; and (c) the only remuneration (whether by way of commission or otherwise) payable to, or on behalf of, the person by any other person in relation to any action by, or on behalf of, the client arising from providing the credit service is payments made by a third party that has no existing relationship with the client. [subreg (12) am SLI 137 of 2010 reg 3 and Sch 1[11], eff 19 June 2010]

20 (13) A person is exempted if: (a) the person engages in credit activities mentioned in: (i)

paragraph (c) of item 1 of the table in subsection 6(1) of the Act; or

(ii) paragraph (c) of item 3 of the table in subsection 6(1) of the

Act; or (iii) paragraph (b) of item 4 of the table in subsection 6(1) of the Act; or (iv) paragraph (b) of item 5 of the table in subsection 6(1) of the Act; and (b) the person engages in the credit activities while performing the statutory obligations of a credit provider, lessor, mortgagee or beneficiary of a guarantee under: (i)

the Privacy Act 1988; or

(ii) the Anti-Money Laundering and Counter-Terrorism Financing Act 2006. COMMENTARY ON REGULATION 20 [R20.05] Outline Division 1 of Pt 2-4 of the Regulations (regs 20–24) outlines a number of exemptions from the prohibition in s 29 of the NCCP Act, definitions in the NCCP Act as they apply to s 29 and instruments made for the purposes of s 29 or the relevant definitions. The exemptions apply “only to the extent that the person is engaging in the specified credit activity” (reg 20(2)), meaning that a person can only rely on the exemption to the extent it defines a person or activity that is exempted, and not to other credit activities engaged in that are not subject to an exemption. As stated in the Explanatory Statement to the Regulations, by way of an example, the exemption for registered debt agreement administrators only applies to the extent they are preparing or administering debt agreements, allowing these persons to negotiate with credit providers on behalf of consumers in these specific circumstances without needing to be licensed. [R20.10] Trustees etc Regulation 20(3) provides exemptions from the application of s 29 of the NCCP Act for trustees, liquidators, administrators and the like, being: a trustee within the meaning of the Bankruptcy Act 1966 (reg 20(3) (a)(i)); a person performing functions or exercising powers incidental to

their appointment as a trustee (reg 20(3)(a)(ii)); a controller within the meaning of the Corporations Act 2001 provisional liquidator or liquidator (reg 20(3)(b)(i)); a person performing functions or exercising powers incidental to their appointment as a controller, provisional liquidator or liquidator (reg 20(3)(b)(ii)); persons appointed by a court to engage in a credit activity (reg 20(3)(c)); the Public Trustee acting under a law of a state or territory (reg 20(3)(d)); an administrator within the meaning of the Corporations Act 2001 (reg 20(3)(e)(i)); [page 731] a person performing functions or exercising powers incidental to their appointment as an administrator (reg 20(3)(e)(ii)); a controlling trustee within the meaning of s 187 of the Bankruptcy Act 1966 (reg 20(3)(f)(i)); a person performing functions or exercising powers incidental to their appointment as a controlling trustee (reg 20(3)(f)(ii)); a trustee of a personal insolvency agreement under Part X of the Bankruptcy Act 1966 (reg 20(3)(fa)(i)); a person performing functions or exercising powers incidental to their appointment as a trustee of a personal insolvency agreement (reg 20(3)(fa)(ii)); a trustee or person administering a compromise or arrangement between a body corporate and another person or persons (reg 20(3) (g)(i)); a person performing functions or exercising powers incidental to

their appointment as a trustee or person of that kind (reg 20(3)(g) (ii)); a personal representative of a deceased person other than a deceased licensee (reg 20(3)(h)); the personal representative of a deceased licensee, until the first of the end of six months after the death of the licensee, the removal or discharge of the personal representative or the final distribution of the licensee’s estate (reg 20(3)(h) and (4)); a registered debt agreement administrator preparing and administering a debt agreement under Pt IX of the Bankruptcy Act (reg 20(3)(j)); a registered trustee under Pt X of the Bankruptcy Act 1966 in the ordinary course of activities as a registered trustee that is reasonably regarded as a necessary part of those activities (reg 20(3)(k)(i)); a person performing functions or exercising powers incidental to the person’s appointment as a registered trustee (reg 20(3)(k)(ii)); a registered liquidator within the meaning of the Corporations Act 2001 in the ordinary course of activities as a registered liquidator that is reasonably regarded as a necessary part of those activities (reg 20(3)(l)(i)); and a person performing functions or exercising powers incidental to the person’s appointment as a registered liquidator (reg 20(3)(l) (ii)). As stated in the Explanatory Statement, these exemptions largely cover activities where a third party is acting to assist or act on behalf of a licensee, borrower or consumer, and licensing is unnecessary. However, these persons will still need to comply with the other provisions of the NCCP Act as they are “standing in the shoes” of the licensee. [R20.15] Specific exemptions Regulation 20(5)–(13) lists exemptions from

the application of s 29 of the NCCP Act for specific entities that would otherwise be in breach of s 29 of the NCCP Act. [R20.20] Financial counselling agencies Regulation 20(5) exempts financial counselling agencies, if no fees or charges are payable by the client and the financial adviser is appropriately trained and is a member of a financial counselling association (defined in reg 3 to mean the peak bodies for financial [page 732] counsellors in Australia). This exemption is consistent with the exemption in ASIC Class Order 03/1096, which exempts similar financial counsellors (usually employed by the government to provide advice to consumers in financial difficulty) from having to obtain an Australian Financial Services Licence. [R20.25] Related bodies corporate Regulation 20(6) exempts related bodies corporate of the licensee where they are engaging in credit activities only because their employees and directors are engaging in credit activities on behalf of the licensee. This exemption complements s 29(3) of the NCCP Act, which provides a defence for the employees and directors of a related body corporate to the general prohibition in s 29 of the NCCP Act, while reg 20(6) exempts the body corporate itself. [R20.30] Public and local government bodies Public bodies or authorities and local government bodies or authorities constituted under a state, territory or Commonwealth Act are exempted by reg 20(7). These persons will be exempt as they are generally subject to other forms of oversight or accountability. [R20.35] Authorised persons Regulation 20(8) and (10) exempt persons authorised to engage in credit activities under an Act, licence or registration of a state, territory or the Commonwealth, other than the Finance Brokers Control Act 1975 (WA), the Credit (Administration) Act 1984 (WA) and the

Consumer Credit (Administration) Act 1996 (ACT). The Explanatory Statement states in relation to this exemption that: It will usually be the case that such authorisations are limited or that the entity only engages in credit activities in a way incidental to other activities, given that the Credit Act and the Transitional Act are intended to be the primary sources of regulation for those engaging in credit activities. The references to licences issued under Western Australia or Australian Capital Territory legislation is to ensure the exemption does not apply in the event that those licences are still in operation when the national licensing regime commences.

Regulation 20(9) formerly provided that this exemption will not apply to debt collectors following the expiration of the 12-month period for the specific exemption for this class of persons in reg 21 (note the 12-month period was later removed — see [21.10] below). [R20.40] Organisations providing services or benefits Organisations that provide services and benefits to members of the organisation or a program operated by the organisation are exempted by reg 20(11) where: an incidental benefit of membership of the organisation or program is that members are eligible to apply for, or obtain services under, a particular credit contract or consumer lease (reg 20 (11)(b)); the organisation provides credit services in relation to the particular credit contract or consumer lease to members or persons likely to become members under a contract or agreement with the licensee or registered person (reg 20(11)(d)); and [page 733] it would not normally be the case that the credit is provided predominantly for the payment of goods, services or benefits provided by the organisation or an associate of the organisation, or that the goods to be hired under the consumer lease are supplied by the organisation or an associate of the organization (reg 20(1)(e)). [R20.45] Charitable bodies As stated in the Explanatory Statement, reg 20(12) provides an exemption for charitable bodies that provide credit

services to low income consumers and for other organisations that provide credit services to low income consumers in conjunction with a licensed ADI. The charitable bodies will be exempt if: the credit services are provided in respect of credit contracts or consumer leases that are offered as part of a program designed for low income consumers who are entitled to hold a Health Care Card or Pension Concession Card or to receive Family Tax Benefit Part A; and the charity or other organisation does not receive any payment for the service from the individual client or anyone related to the client. The credit provider or lessor will still need to be a licensee in order to offer credit. [R20.50] Other persons Regulation 20(13) exempts persons that perform the statutory obligations of a credit provider, lessor, mortgagee or beneficiary of a guarantee under the Privacy Act 1988 or the Anti-Money Laundering and Counter-Terrorism Financing Act 2006, on behalf of the credit provider, consumer lessor, mortgagee or beneficiary of a guarantee.

Persons exempt from requiring a licence — debt collectors 21 (1) For paragraph 110(a) of the Act, this regulation exempts certain persons engaging in a credit activity from: (a) section 29 of the Act; and (b) definitions in the Act, as they apply to references in the provisions mentioned in paragraph (a); and (c) instruments made for the purposes of any of the provisions mentioned in paragraphs (a) and (b). Note Section 29 of the Act provides that a person must not engage in a credit activity if the person does not hold a licence authorising the person to engage in the credit activity.

21 (2) The person is exempted only to the extent that the person is engaging

in the specified credit activity. Note If the person also engages in a credit activity that is not the subject of an exemption under the Act, the person is not exempted in relation to that credit activity.

21 (3) A person is exempted if: (a) the person engages in a credit activity mentioned in: (i)

paragraph (c) of item 1 of the table in subsection 6(1) of the Act, on behalf of the credit provider who is a licensee, registered person or exempt special purpose funding entity; or

(ii) paragraph (c) of item 3 of the table in subsection 6(1) of the Act, on behalf of the lessor who is a licensee, registered person or exempt special purpose funding entity; or [page 734] (iii) paragraph (b) of item 4 of the table in subsection 6(1) of the Act, on behalf of the mortgagee who is a licensee, registered person or exempt special purpose funding entity; or (iv) paragraph (b) of item 5 of the table in subsection 6(1) of the Act, on behalf of the other person who is a licensee, registered person or exempt special purpose funding entity; and (b) the person only performs the obligations, or exercises the rights, mentioned in those paragraphs in relation to: (i)

demanding and receiving payments from: (A) borrowers or guarantors under credit contracts; or (B) lessees under consumer leases; and

(ii) enforcing rights in relation to taking possession of: (A) property secured by a mortgage; or (B) goods hired under a consumer lease; and (c) either:

(i)

the person: (A) holds a licence or authorisation to engage in an activity mentioned in paragraph (a) under one or more of the Acts mentioned in subregulation (5); or (B) is authorised to act on behalf of a person who holds a licence or authorisation of a kind mentioned in subsubparagraph (A); or

(ii) the person: (A) is not required to hold a licence or authorisation, or be authorised to act on behalf of a person who holds a licence or authorisation, to engage in an activity mentioned in paragraph (a) in a State or Territory; and (B) is not prohibited from engaging in an activity mentioned in paragraph (a) by an order of a court or a law of the State or Territory; and (d) the person is authorised in writing by a registered person or a licensee to engage in an activity mentioned in paragraph (a). [subreg (3) am SLI 137 of 2010 reg 3 and Sch 1[12], eff 19 June 2010; SLI 303 of 2010 reg 3 and Sch 1[13], eff 26 Nov 2010]

21 (4) [subreg (4) rep SLI 235 of 2010 reg 3 and Sch 1[7], eff 22 July 2010] 21 (5) For subparagraph (3)(c)(i), the Acts are the following: (a) the Commercial Agents and Private Inquiry Agents Act 2004 (NSW); (b) the Private Agents Act 1966 (Vic); (c) the Property Agents and Motor Dealers Act 2000 (Qld); (d) the Debt Collectors Licensing Act 1964 (WA); (e) the Security and Investigation Agents Act 1995 (SA); (f)

the Security and Investigations Agents Act 2002 (Tas);

(g) the Commercial and Private Agents Licensing Act (NT).

COMMENTARY ON REGULATION 21 [R21.05] Outline Regulation 21 exempts debt collectors from the need to hold a licence under s 29 of the NCCP Act. At the time of writing, debt collectors are subject to licensing requirements in every state and territory. This exemption avoids a dual licensing regime. [R21.10] Sunset clause Regulation 21 was originally limited to apply for a 12-month period from the date of commencement of Ch 2 of the Regulations. As stated in the Explanatory Statement, this 12-month period was intended to require [page 735] Commonwealth and state governments to consider which level of government should be responsible for licensing debt collectors after the expiry. This sunset clause was removed by amending regulations and at the time of writing no decision has been released as to whether debt collectors will be subject to a Commonwealth or state-based licensing regime.

Persons exempt from requiring a licence — third parties 22 (1) For paragraph 110(a) of the Act, this regulation exempts certain persons engaging in a credit activity from: (a) section 29 of the Act; and (b) definitions in the Act, as they apply to references in the provisions mentioned in paragraph (a); and (c) instruments made for the purposes of any of the provisions mentioned in paragraphs (a) and (b). Note Section 29 of the Act provides that a person must not engage in a credit activity if the person does not hold a licence authorising the person to engage in the credit activity. Subsection 29(3) provides, among other things, that it is a defence if the person is a credit

representative of a person who holds a licence.

22 (2) The person is exempted only to the extent that the person is engaging in the specified credit activity. Note If the person also engages in a credit activity that is not the subject of an exemption under the Act, the person is not exempted in relation to that credit activity.

22 (3) A person is exempted if: (a) the person engages in a credit activity by selling, storing or transporting property of a debtor, lessor, mortgagor or guarantor on behalf of: (i)

a credit provider who is a licensee, registered person or exempt special purpose funding entity; or

(ii) a mortgagee who is a licensee, registered person or exempt special purpose funding entity; or (iii) a person who is the beneficiary of a guarantee who is a licensee, registered person or exempt special purpose funding entity; or (iv) a lessor who is a licensee, registered person or exempt special purpose funding entity; or (b) the person engages in a credit activity by giving or sending to a debtor, lessee, mortgagor or guarantor, on behalf of: (i)

a credit provider who is a licensee, registered person or exempt special purpose funding entity; or

(ii) a mortgagee who is a licensee, registered person or exempt special purpose funding entity; or (iii) a person who is the beneficiary of a guarantee who is a licensee, registered person or exempt special purpose funding entity; or (iv) a lessor who is a licensee, registered person or exempt special purpose funding entity; a notice or document that the person mentioned in subregulation (i),

(ii), (iii) or (iv) is obliged by law to give or send to the debtor, lessee, mortgagor or guarantor. [subreg (3) am SLI 137 of 2010 reg 3 and Sch 1[13], eff 19 June 2010]

[page 736] COMMENTARY ON REGULATION 22 [R22.05] Exemption for third parties As stated in the Explanatory Statement, reg 22 exempts persons from the need to hold a licence under s 29 of the NCCP Act where they will only engage in credit activities in a limited or minimal way on behalf of a credit provider, mortgagee, beneficiary of a guarantee or lessor that holds an Australian Credit Licence. The exemption applies where the person engages in credit activities by: selling, storing or transporting property of a debtor, lessor, mortgagor or guarantor; or giving or sending notices or documents to a debtor, lessee, mortgagor or guarantor that the licensee is required by law to give or send to the debtor, lessee, mortgagor or guarantor, regardless of whether the notice is prepared by the holder of the licence or the third party.

Persons exempt from requiring a licence — suppliers of goods or services 23 (1) For paragraph 110(a) of the Act, this regulation exempts certain persons from: (a) section 29 of the Act; and (b) definitions in the Act as they apply to references in the provision mentioned in paragraph (a); and (c) instruments made for the purpose of any of the provisions mentioned in paragraphs (a) and (b).

Note Section 29 of the Act provides that a person must not engage in a credit activity if the person does not hold a licence authorising the person to engage in the credit activity. [subreg (1) am SLI 105 of 2010 reg 3 and Sch 1[14], eff 24 May 2010]

23 (2) The person is exempted only to the extent that the person is engaging in the specified credit activity. Note If the person also engages in a credit activity that is not the subject of an exemption under the Act, the person is not exempted in relation to that credit activity.

23 (3) A person is exempted if: (a) the person is: (i)

a supplier of goods or services (the supplier); or

(ii) a related body corporate of the supplier; or (iii) engaging in a credit activity primarily on the premises of the supplier with the agreement of the supplier; and (b) the person is: (i)

on behalf of a relevant credit provider for a credit contract or proposed credit contract, performing the obligations or exercising the rights of the relevant credit provider in relation to the contract or proposed contract; or

(ii) on behalf of a relevant lessor for a consumer lease or proposed consumer lease, performing the obligations or exercising the rights of the lessor under the lease or proposed lease; or (iii) on behalf of a relevant mortgagee for a mortgage or proposed mortgage, performing the obligations or exercising the rights of the mortgagee under the mortgage or proposed mortgage; or (iv) on behalf of a relevant beneficiary of a guarantee or proposed guarantee, performing the obligations or exercising the rights of the beneficiary in relation to the guarantee or proposed guarantee; or [page 737]

(v) providing credit services in relation to a credit contract or consumer lease offered or provided by a relevant credit provider or relevant lessor; and (c) if: (i)

the person is acting on behalf of the credit provider for a credit contract or proposed credit contract that is a loan contract or engaging in credit services in relation to a loan contract; and

(ii) the credit provided under the loan contract or the credit that would be provided if the loan contract were entered into will wholly or predominantly be used to pay for goods or services supplied by the supplier; and (d) if: (i)

the person is acting on behalf of the credit provider of a credit contract or proposed credit contract that is a continuing credit contract or engaging in credit services in relation to a continuing contract; and

(ii) the credit initially provided under the continuing credit contract or the credit that would be initially provided under the continuing credit contract if it were entered into will wholly or predominantly be used to pay for goods or services supplied by the supplier; and (e) if: (i)

the person is acting on behalf of a lessor for a consumer lease or proposed consumer lease or engaging in credit services in relation to a consumer lease; and

(ii) payments made under the lease or payments that would be made under the lease if the lease were entered into will wholly or predominantly be used to pay the lessor for the hire of goods supplied by the supplier. [subreg (3) am SLI 105 of 2010 reg 3 and Sch 1[15]–[18], eff 24 May 2010]

23 (4) The person is not exempted if the person supplies goods or services to the consumer as a result of unsolicited contact with the consumer.

[subreg (4) subst SLI 105 of 2010 reg 3 and Sch 1[19], eff 24 May 2010]

23 (5) In this regulation: relevant credit provider for a credit contract or proposed credit contract, means the credit provider for the contract or proposed contract if the credit provider is a: (a) licensee, registered person or exempt special purpose funding entity; and (b) linked credit provider or lessor of the supplier mentioned in subparagraph (3)(a)(i). relevant lessor for a consumer lease or proposed consumer lease, means the lessor under the lease or proposed lease if the lessor is a: (a) licensee, registered person or exempt special purpose funding entity; and (b) linked credit provider or lessor of the supplier mentioned in subparagraph (3)(a)(i). relevant mortgagee for a mortgage or proposed mortgage, means the mortgagee under the mortgage or proposed mortgage if the mortgagee is a: (a) licensee, registered person or exempt special purpose funding entity; and (b) linked credit provider or lessor of the supplier mentioned in subparagraph (3)(a)(i). relevant beneficiary of a guarantee or proposed guarantee, means the beneficiary of the guarantee or proposed guarantee if the beneficiary is a: (a) licensee, registered person or exempt special purpose funding entity; and (b) linked credit provider or lessor of the supplier mentioned in subparagraph (3)(a)(i). [subreg (5) subst SLI 105 of 2010 reg 3 and Sch 1[19], eff 24 May 2010; am SLI 137 of 2010 reg 3 and Sch 1[15], eff 19 June 2010]

23 (6) [subreg (6) rep SLI 105 of 2010 reg 3 and Sch 1[19], eff 24 May 2010] 23 (7) [subreg (7) rep SLI 105 of 2010 reg 3 and Sch 1[19], eff 24 May 2010] [reg 23 am SLI 137 of 2010 reg 3 and Sch 1[14], eff 19 June 2010]

[page 738] COMMENTARY ON REGULATION 23 [R23.05] Point of sale exemption The exemption in reg 23 exempts those covered by it from the requirement under s 29 of the NCCP Act to hold an Australian Credit Licence. The regulation exempts certain persons: providing “credit services” (that is, the person provides “credit assistance” or “acts as an intermediary”) in connection with credit contracts or consumer leases provided by a “linked credit provider or lessor” of the supplier of the goods or services; or performing obligations or exercising rights on behalf of a “linked credit provider or lessor” of the supplier. [R23.10] Exemption In the case of “credit services”, reg 23 exempts: a supplier of goods or services; a related body corporate of the supplier; or a person engaging in credit activities primarily on the premises of the supplier with the agreement of the supplier, from the need to hold an Australian Credit Licence in the following circumstances: the person provides “credit services” in relation to a credit contract or consumer lease provided by a “linked credit provider or lessor” of the supplier; the “credit services” are provided in relation to a loan, continuing credit or consumer lease which will be used to pay for goods or

services supplied by the supplier (in the case of continuing credit, it is the “credit initially provided” under the continuing credit contract which needs to be used to pay for the goods or services from the supplier); and the supply is not a result of unsolicited contact with the consumer (“unsolicited contact” is defined in reg 3). There are similar requirements for the other aspect of the exemption which deals with a person performing obligations or exercising rights on behalf of a “linked credit provider or lessor” of the supplier (see reg 25B). [R23.15] Exemption from responsible lending obligations A person who does not hold an Australian Credit Licence and can rely on the exemption will also be exempt from the responsible lending obligations under the NCCP Act imposed on Australian Credit Licence holders (the responsible lending provisions refer to “licensees”). The person would not need to provide credit guides, quotes for credit assistance or credit proposal disclosure documents or undertake reasonable inquiries and verification or unsuitability assessments. If, however, the person holds an Australian Credit Licence (perhaps due to other business activities), the exemption will not exempt the person from the responsible lending requirements in the NCCP Act. [R23.20] Definition of “services” Regulation 25D modifies the definition of “services” as applied to regs 23 and 23A to expressly exclude transfers of interests in land (see commentary below on reg 25D). [page 739]

Persons exempt from requiring a licence — suppliers of goods or services with branded or cobranded credit card 23A (1) For paragraph 110(a) of the Act, this regulation exempts certain

persons engaging in a credit activity from: (a) section 29 of the Act; and (b) definitions in the Act as they apply to references in the provision mentioned in paragraph (a); and (c) instruments made for the purpose of any of the provisions mentioned in paragraphs (a) and (b). Note Section 29 of the Act provides that a person must not engage in a credit activity if the person does not hold a licence authorising the person to engage in the credit activity.

23A (2) The person is exempted only to the extent that the person is engaging in the specified credit activity in relation to a continuing credit contract under which a credit card is provided. Note If the person also engages in a credit activity that is not the subject of an exemption under the Act or the Transitional Act, the person is not exempted in relation to that credit activity.

23A (3) The person is exempted if: (a) the person is: (i)

a supplier of goods or services; or

(ii) a related body corporate of a supplier of goods or services; or (iii) engaging in a credit activity on behalf of the supplier of goods or services; and (b) the person meets the requirements of subregulation (4) or (5). [subreg (3) am SLI 137 of 2010 reg 3 and Sch 1[17], eff 19 June 2010]

23A (4) For paragraph (3)(b), the requirements are that the person is performing the obligations or exercising the rights of a credit provider in relation to a credit contract or proposed credit contract: (a) on behalf of the credit provider who is a linked credit provider of the supplier and is a licensee, registered person or exempt special purpose funding entity; and (b) in relation to a continuing credit contract under which a credit card is:

(i)

provided or would be provided if the contract were entered into; and

(ii) branded or co-branded with the name of the supplier or a related body corporate of the supplier or any other words, phrases, initials or logo associated with the supplier or related body corporate. [subreg (4) am SLI 137 of 2010 reg 3 and Sch 1[18], eff 19 June 2010]

23A (5) For paragraph (3)(b), the requirements are that the person is providing credit services in relation to a continuing credit card contract under which a credit card is provided or would be provided if the contract were entered into and the: (a) credit provider for the continuing credit contract is a linked credit provider of the supplier and is a licensee, registered person or exempt special purpose funding entity; and (b) credit card is branded or co-branded with the name of the supplier or a related body corporate of the supplier or any other words, phrases, initials or logo associated with the supplier or related body corporate. [subreg (5) am SLI 137 of 2010 reg 3 and Sch 1[18], eff 19 June 2010]

23A (6) The person is exempted if the person engages in credit activities on the premises of the supplier. [subreg (6) subst SLI 137 of 2010 reg 3 and Sch 1[19], eff 19 June 2010] [reg 23A insrt SLI 105 of 2010 reg 3 and Sch 1[20], eff 24 May 2010; am SLI 137 of 2010 reg 3 and Sch 1[16], eff 19 June 2010]

[page 740] COMMENTARY ON REGULATION 23A [R23A.05] Co-branded credit cards Regulation 23A exempts credit activity by a supplier of goods or services in relation to a co-branded credit card from the requirement under s 29 of the NCCP Act to hold an Australian Credit

Licence. The regulation applies to suppliers of goods or services in accordance with an arrangement with a credit provider or lessor, related bodies corporate of the supplier and persons acting on behalf of the supplier where: they are either acting on behalf of a credit provider (reg 23A(4)) or providing credit services (reg 23A(5)); they are only engaging in these credit activities in respect of a continuing credit contract under which a credit card that is either branded or co-branded by the supplier of goods or services is supplied; the person offering the credit product is a licensee and is a linked credit provider (defined for the purposes of this regulation in reg 25C) of the supplier; and the consumer is not approached as a result of unsolicited contact. [R23A.10] Interaction with reg 23 The exemption in reg 23A is intended to operate where a person is being provided with a branded or co-branded credit card and there may be a delay between the consumer entering into the contract and their first use of the card. In these circumstances, the supplier will not be able to rely on the exemption provided in reg 23 as the initial use of the card may not necessarily be for the supply of goods or services from the supplier.

Persons exempt from requiring a licence — fund raising special purpose entity 23B (1) For paragraph 110(a) of the Act, this regulation applies in relation to a fund raising special purpose entity if: (a) it engages in a credit activity; and (b) it is party to a servicing agreement; and (c) it is a member of an approved external dispute resolution scheme; and

if it is a body corporate — no director or secretary of the body (d) corporate is an inappropriate person; and (e) if it is a trust — no trustee of the trust is an inappropriate person. 23B (2) The fund raising special purpose entity is exempted from: (a) section 29 of the Act; and (b) definitions in the Act, as they apply to references in the provision mentioned in paragraph (a); and (c) instruments made for the purpose of any of the provisions mentioned in paragraphs (a) and (b). Note Section 29 of the Act provides that a person must not engage in a credit activity if the person does not hold a licence authorising the person to engage in the credit activity.

23B (3) The fund raising special purpose entity is exempted only to the extent that it is engaging in the specified credit activity. [page 741] Note 1 If the fund raising special purpose entity also engages in a credit activity that is not the subject of an exemption under the Act or the Transitional Act, it is not exempted in relation to that credit activity Note 2 Under subsection 109(3) of the Act, ASIC may declare that instruments made under Chapter 2 of the Act apply in relation to a credit activity (other than an exempt credit activity in relation to a specified credit contract, mortgage, guarantee or consumer lease), or a class of persons or credit activities as if specified provisions were omitted, modified or varied as specified in the declaration. [reg 23B insrt SLI 137 of 2010 reg 3 and Sch 1[20], eff 19 June 2010]

COMMENTARY ON REGULATION 23B [R23B.05] Definitions Regulations 23B and 23C are the securitisation exemptions to the NCCP Act licensing requirements. They provide exemptions for the two categories of special purpose funding entities (defined in para 3.4 of Sch 3 to the regulations), being “fund raising special purpose entities” (defined in para 3.4 of Sch 3 to the regulations) and “securitisation

entities” (defined in para 3.3 of Sch 3 to the regulations). There are a number of technical aspects to the definitions that aim to reflect commercial practice. [R23B.10] Outline As stated in the Explanatory Statement, in general terms, the purpose of the exemptions is to exempt funding vehicles which are established to raise or receive funds from investors and are acting as either credit providers or lessors (including by way of a legal assignment of rights from a credit provider or lessor). A fund raising special purpose entity or a securitisation entity is exempt where it satisfies the following requirements: it is a party to a servicing agreement (defined in para 3.4 of Sch 3 to the regulations) with a licensee or registered person who acts on behalf of the entity in relation to the credit contracts or consumer leases it is a party to; none of the “relevant persons” is an inappropriate person (defined in reg 3(1)). If an entity is a corporation, each of its directors or secretaries are relevant persons, while if the entity is a trust, each trustee is a relevant person; and it is a member of an approved external dispute resolution (EDR) scheme. [R23B.15] Timing of EDR scheme membership Securitisation entities were allowed until 1 October 2010 to become members of an EDR scheme, which the Explanatory Statement to the amendment regulations explains was to enable them to negotiate changes to the rules of the schemes to reflect specific differences in their structure and operation. The Explanatory Statement also confirms that consumers can lodge complaints with an EDR scheme in respect of conduct taking place between 1 July 2010 and 30 September 2010.

Persons exempt from requiring a licence — securitisation entity 23C (1) For paragraph 110(a) of the Act, this regulation applies in relation to

a securitisation entity if: (a) it engages in a credit activity; and (b) it is party to a servicing agreement; and (c) on and after 1 October 2010, it is a member of an approved external dispute resolution scheme; and [page 742] (d) if it is a body corporate — no director or secretary of the body corporate is an inappropriate person; and (e) if it is a trust — no trustee of the trust is an inappropriate person. 23C (2) The securitisation entity is exempted from: (a) section 29 of the Act; and (b) definitions in the Act, as they apply to references in the provision mentioned in paragraph (a); and (c) instruments made for the purpose of any of the provisions mentioned in paragraphs (a) and (b). Note Section 29 of the Act provides that a person must not engage in a credit activity if the person does not hold a licence authorising the person to engage in the credit activity.

23C (3) The securitisation entity is exempted only to the extent that it is engaging in the specified credit activity. Note 1 If the securitisation entity also engages in a credit activity that is not the subject of an exemption under the Act or the Transitional Act, it is not exempted in relation to that credit activity. Note 2 Under subsection 109(3) of the Act, ASIC may declare that instruments made under Chapter 2 of the Act apply in relation to a credit activity (other than an exempt credit activity in relation to a specified credit contract, mortgage, guarantee or consumer lease), or a class of persons or credit activities as if specified provisions were omitted, modified or varied as specified in the declaration. [subreg (3) am SLI 303 of 2010 reg 3 and Sch 1[14], eff 26 Nov 2010] [reg 23C insrt SLI 137 of 2010 reg 3 and Sch 1[20], eff 19 June 2010]

COMMENTARY ON REGULATION 23C

[R23C.05] Securitisation entities Regulation 23C applies to securitisation entities and mirrors the application of reg 23B (see [R23B.05] above).

Persons exempt from requiring a licence — employment agencies 23D (1) For paragraph 110(a) of the Act, this regulation exempts certain persons engaging in a credit activity from: (a) section 29 of the Act; and (b) definitions in the Act, as they apply to references in the provisions mentioned in paragraph (a); and (c) instruments made for the purposes of any of the provisions mentioned in paragraphs (a) and (b). Note Section 29 of the Act provides that a person must not engage in a credit activity if the person does not hold a licence authorising the person to engage in the credit activity.

23D (2) The person is exempted only to the extent that the person is engaging in the specified credit activity. Note If the person also engages in a credit activity that is not the subject of an exemption under the Act, the person is not exempted in relation to that credit activity.

23D (3) The person is exempted if the person engages in a credit activity while performing functions, or exercising powers, in the following circumstances: (a) the person provides a person to a licensee, registered person or a representative of a licensee or registered person; and (b) that person engages in a credit activity on behalf of the licensee or registered person only as a person described in regulation 25H or 25I. [page 743] Note Regulation 25H relates to temporary staff. Regulation 25I relates to locums.

23D (4) For paragraph 110(c) of the Act, the provisions of the Act to which Part 2-6 of Chapter 2 of the Act applies apply in relation to the person as if subsection 29(4) of the Act were omitted. [reg 23D insrt SLI 235 of 2010 reg 3 and Sch 1[8], eff 22 July 2010]

COMMENTARY ON REGULATION 23D [R23D.05] Employment agencies Regulation 23D provides an exemption from licensing (for the purposes of s 29 of the NCCP Act) to employment agencies in circumstances where they provide a person to an Australian Credit Licence holder, registered person or representative of an Australian Credit Licence or registered person, and that person engages in credit activities only as a temporary member of staff (as described in reg 25H) or as a locum (as described in reg 25I). The rationale for this exemption is that the Australian Credit Licence holder or registered person is more likely to have day-to-day control and management of the temporary employee’s conduct while engaging in a credit activity than the employment agency.

Subdivision 1.2 — Activities exempt from being credit activities under the Act [Subdiv 1.2 heading insrt SLI 105 of 2010 reg 3 and Sch 1[21], eff 21 May 2010]

Activities exempt from being credit activities 24 (1) For paragraphs 110(b) and (c) of the Act, this regulation: (a) exempts certain credit activities, or classes of credit activities, from all of the provisions to which Part 2-6 of the Act applies; and (b) modifies specified provisions for the purposes of the exemption mentioned in paragraph (a). Note Section 108 of the Act identifies the provisions to which Part 2-6 of the Act applies. [subreg (1) am SLI 105 of 2010 reg 3 and Sch 1[22], eff 24 May 2010; SLI 303 of 2010 reg 3 and Sch 1[15], eff 26 Nov 2010]

24 (2) Subject to subregulation (3), the following credit activities are

exempted: (a) the providing of credit assistance by a lawyer in his or her professional capacity in relation to matters of law, legal interpretation or the application of the law to any facts; (b) the providing of any credit assistance not mentioned in paragraph (a) by a lawyer in the ordinary course of activities as a lawyer that is reasonably regarded as a necessary part of those activities. 24 (3) For subregulation (2), the credit activity is exempted only if the lawyer providing the credit assistance does not hold out or advertise to consumers that he or she is able to provide credit services. 24 (4) A credit activity, other than the provision of credit assistance mentioned in subregulation (2), is exempted if it is engaged in by a lawyer in the following circumstances: (a) the lawyer is acting: (i)

on the instructions of a client, an associate of the client or a relative of the client; and

(ii) in his or her professional capacity; and (iii) in the ordinary course of his or her activities as a lawyer; (b) the credit activity can reasonably be regarded as a necessary part of those activities; [page 744] (c) the lawyer has not received, and will not receive, from the client or from another person on behalf of the client a benefit in connection with those activities other than: (i)

the payment of professional charges in relation to those activities; and

(ii) reimbursement for expenses incurred or payment on account of expenses to be incurred on behalf of the client, an associate

of the client or a relative of the client; (d) the lawyer does not hold out or advertise to consumers that he or she is able to provide credit services. 24 (5) A credit activity is exempted if: (a) it is engaged in by a tax agent in the following circumstances: (i)

the tax agent is registered under Part 2 of the Tax Agent Services Act 2009;

(ii) the tax agent engages in the credit activity in the ordinary course of activities as a tax agent; and (b) it is a credit activity mentioned in item 2 of the table in subsection 6(1) of the Act; and (c) it does not involve providing a certificate or assessment (however described) relating to whether a consumer will be able to meet financial obligations under a credit contract or consumer lease. [subreg (5) am SLI 105 of 2010 reg 3 and Sch 1[23], eff 24 May 2010]

24 (6) A credit activity is exempted if: (a) the credit activity consists only of a person (person 1) passing on, publishing, distributing or otherwise disseminating a document that was provided or approved by another person (person 2); and (b) person 2: (i)

is not acting on behalf of person 1; and

(ii) is a licensee or registered person; and (c) person 1 is not otherwise required to hold an Australian credit licence to engage in credit activities; and (d) either: (i)

for a consumer in relation to the credit activity mentioned in paragraph (a): (A) person 1 advises the consumer that person 2 is a licensee or registered person; and

(B) if person 2 is a licensee — person 1 gives the consumer the licence number of person 2; and (C) if person 2 is an exempt special purpose funding entity — person 1 gives the consumer the licence number of the licensee who is party to the servicing agreement with the entity; or (ii) a reasonable person would not consider that person 1 is the licensee or registered person in relation to credit activities being engaged in by person 2; and (e) person 2 approved the content of the document. [subreg (6) am SLI 137 of 2010 reg 3 and Sch 1[23], [24], eff 19 June 2010]

24 (7) A credit activity is exempted if: (a) the credit activity consists only of a person (person 1) allowing another person (person 2) to use person 1’s business name, logo or trade mark in relation to: (i)

the passing on, publishing, distributing or other dissemination of a document; or

(ii) a credit contract, consumer lease, mortgage or guarantee provided or offered by person 2; or (iii) a credit activity engaged in by person 2; and (b) person 2: (i)

is not acting on behalf of person 1; and

(ii) is a licensee or registered person; and [page 745] (c) person 1 is not otherwise required to hold an Australian credit licence to engage in credit activities; and (d) either:

(i)

for a consumer in relation to a credit activity mentioned in paragraph (a): (A) the person performing the credit activity advises the consumer that person 2 is a licensee or registered person; and (B) if person 2 is a licensee — the person performing the credit activity gives the consumer the licence number of person 2; and (C) if person 2 is an exempt special purpose funding entity — person 1 gives the consumer the licence number of the licensee who is party to the servicing agreement with the entity; or

(ii) a reasonable person would not consider that person 1 is the licensee or registered person in relation to credit activities being engaged in by person 2. [subreg (7) am SLI 137 of 2010 reg 3 and Sch 1[27], [28], eff 19 June 2010]

24 (8) A credit activity is exempted if: (a) the credit activity consists only of a person (the provider) giving to another person (the inquirer), in response to a request made by the inquirer to the provider, information about: (i)

the cost, or an estimate of the likely cost, of a credit contract or a consumer lease offered by a licensee or a registered person; or

(ii) terms and conditions of a credit contract or a consumer lease offered by a licensee or a registered person; and (b) the provider could have complied with the request by giving the inquirer equivalent information about one or more other credit contracts or consumer leases offered by a licensee or a registered person; and (c) the provider did not give the inquirer that equivalent information. 24 (9) A credit activity is exempted if it is engaged in by a clerk or cashier in

the ordinary course of activities as a clerk or cashier. 24 (10) For paragraph 110(c) of the Act, the definition of lawyer in subsection 5(1) of the Act is modified for the purposes of this regulation to provide that lawyer means a duly qualified legal practitioner and, in relation to a person, means such a practitioner acting for the person. [subreg (10) insrt SLI 105 of 2010 reg 3 and Sch 1[24], eff 24 May 2010]

COMMENTARY ON REGULATION 24 [R24.05] Exempt activities Regulation 24 exempts specified activities from the operation of the NCCP. The following activities are exempted: credit assistance provided by legal practitioners acting in relation to matters of law, legal interpretation or the application of the law to any facts (reg 24(2)) or acting on their client’s instructions (reg 24(4)); credit services provided by registered tax agents in the ordinary course of their work (reg 24(5)); credit activity consisting of passing on, distributing, publishing or otherwise disseminating factual information that is provided by a licensed person (reg 24(6)) or passing on some types of factual information (reg 24(8)); and activity done in the course of work of a kind ordinarily done by clerks or cashiers (reg 24(9)). [page 746] [R24.10] Lawyers Lawyers are able to provide credit assistance in their professional capacity as a lawyer. The Explanatory Statement to the regulations states that this includes “activities such as the provision of legal advice on credit contracts, consumer leases or mortgages and assisting a consumer in applying for a credit contract by completing a document on the client’s instructions”. Lawyers are able to engage in credit activity on the

instructions of a client where the credit activity is a necessary part of acting on those instructions. However, the lawyer must not hold out that he or she is able to provide credit services (reg 24(3)). [R24.15] Tax agents Registered tax agents may engage in credit activities in the ordinary course of their business. This conduct is exempted by reg 24(5) if the tax agent only provides credit services, and does so in the ordinary course of activities as a tax agent. The tax agent cannot provide a certificate or assessment as to whether a consumer will be able to meet financial obligations under a credit contract or consumer lease. The explanatory statement provides that: Accordingly, tax agents are not be exempted where they are in some way expressing an opinion as to the capacity of the consumer to meet financial obligations under a credit contract or consumer lease. However, they are exempt where, for example, they provide a statement of financial position to assist a client in applying for finance, but express no view as to whether the consumer can meet the repayments.

[R24.20] Passing on prepared documents Conduct of passing on, publishing, distributing or otherwise disseminating a document on behalf of a licensee or registered person is exempted by reg 24(6) and (7), where it amounts to acting as an intermediary or, in some cases, providing credit assistance. As stated in the explanatory statement, the activity is exempt if: an unlicensed or unregistered person (person 1) engages in credit activities by passing on, publishing, distributing or otherwise disseminating a document that was provided or approved by another person (person 2), who is a registered person or licensee and not acting on behalf of person 1; and a consumer would reasonably understand that the credit activities are being engaged in by person 2, either because: —

they are advised by person 1 that person 2 is the registered person or licensee, and where person 2 is licensed they are provided with their licence number; or

—

a reasonable person would not consider that person 1 is the registered person or licensee in relation to credit activities being engaged in by person 2.

The exemption in reg 24(7) applies in similar circumstances, but where the credit activity consists of a person 1 allowing person 2 to use person 1’s business name, logo or trade mark in relation to the document provided by person 2. The explanatory statement also suggests that person 1 will be able to rely on the [page 747] exemption notwithstanding that they select or modify the content of the document or otherwise exercise control over the content of the document. The explanatory statement contains the following examples: Example: Regulation 24(6) Milo runs a retail business, with many customers passing through his store. He has an arrangement with the holder of an Australian credit licence, Rosie’s Credit Cards Pty Ltd, under which brochures inviting consumers to apply for a particular credit card are made available to those consumers. The brochures are prepared by Rosie’s Credit Cards, and Milo does not answer any questions from the consumers about the credit contract but instead refers all inquiries to a phone number in the brochure. Milo’s conduct is restricted to passing on, publishing, distributing or otherwise disseminating a document that was provided by Rosie, a licensee, who is acting on its own behalf and not on behalf of Milo. He does not select, modify or exercise control over the content of the document. Milo’s conduct would be exempt as long as consumers are advised of Rosie’s Credit Cards’ licence number or a reasonable person would assume that Rosie’s Credit Cards was the lender in respect of the credit card. Example: Regulation 24(7) Milo also supplies goods through a website. The website includes an advertisement for Rosie’s Credit Cards, and a link that takes consumers to an application form on the website for Rosie’s Credit Cards. Milo has specified the form and content of the advertisement to Rosie’s Credit Cards. The advertisement includes a statement that any inquiries should be addressed to Rosie’s Credit Cards and provides email and phone number contact details. This conduct would not be exempted under reg 24(6) as Milo has exercised control over the content of the document. However, it would be exempted under reg 24(7) where either consumers are advised of the Rosie’s Credit Cards’ licence number or a reasonable person would assume that Rosie’s Credit Cards was the lender in respect of the credit card.

[R24.25] Passing on factual information As stated in the explanatory

statement, reg 24(8) exempts communications providing information about the cost or terms of a credit contract where: the factual information is limited to information about either the cost or likely cost of a credit contract or lease, or the terms and conditions of a credit contract or lease; the credit contract or lease is provided by a licensee or registered person; the information is only provided in response to a request by a consumer; and the provider could have complied with the request by giving the other person information about one or more other credit contracts or leases, but elected not to do so. [R24.30] Clerks and cashiers As stated in the explanatory statement, reg 24(9) exempts activities done in the course of work of a kind ordinarily done by clerks or cashiers. This allows a person to assist a consumer by providing [page 748] administrative help, for example assisting the consumer to fill in an application form for a credit product, or photocopying or faxing documents provided by the consumer or application forms.

Subdivision 1.3 — Persons exempt from matters other than being licensed [Subdiv 1.3 insrt SLI 303 of 2010 reg 3 and Sch 1[16], eff 26 Nov 2010]

ADI or registrable corporation exempt from responsible lending contract obligations — loan application received before 1 January 2011

24A (1) For paragraph 164(a) of the Act, this regulation exempts certain persons engaging in a credit activity from Parts 3-2 and 3-4 of the Act. 24A (2) The person is exempted only to the extent that the person is engaging in the specified credit activity. Note If the person also engages in a credit activity that is not the subject of an exemption under the Act, the person is not exempted in relation to that credit activity.

24A (3) Applications for credit or consumer lease made before 1 January 2011 A person is exempted if the person: (a) is an ADI or a registrable corporation under the Financial Sector (Collection of Data) Act 2001; and (b) engages in the credit activity in relation to an application for credit or a consumer lease which the person received from a consumer during the period starting on 1 October 2010 and ending on 31 December 2010. 24A (4) The exemption ceases on 1 April 2011. COMMENTARY ON REGULATION 24A [R24A.05] This regulation exempts persons engaging in credit activities that fall under Pt 3-2 (Licensees that are credit providers under credit contracts) and Pt 3-4 (Licensees that are lessors under consumer leases) of the Act: reg 24A(1). As stated in the Explanatory Statement, reg 24A(3)(a) provides a temporary exemption from responsible lending conduct obligations for loan applications which were received by authorised deposit-taking institutions or registrable financial corporations under the Financial Sector (Collection of Data) Act 2001 before 1 January 2011. In order to qualify for this exemption, an authorised deposit-taking institution or registered financial corporation must have engaged in the credit activity in relation to an application for credit or a consumer lease by a customer during the period from 1 October 2010–31 December 2010 (reg 24A(3)(b)). The temporary exemption expired on 1 April 2011.

DIVISION 2 — MODIFICATIONS [Div 2 heading insrt SLI 105 of 2010 reg 3 and Sch 1[25], eff 24 May 2010]

Activities exempt from requiring a licence 25 (1) For paragraph 110(b) of the Act, this regulation exempts certain credit activities from: (a) section 29 of the Act; and [page 749] (b) definitions in the Act, as they apply to references in the provisions mentioned in paragraph (a); and (c) instruments made for the purposes of any of the provisions mentioned in paragraphs (a) and (b). Note Section 29 of the Act provides that a person must not engage in a credit activity if the person does not hold a licence authorising the person to engage in the credit activity.

25 (2) A credit activity is exempted if: (a) the activity consists only of: (i)

a person (person 1) informing another person (person 2) that a licensee or registered person, or a representative of the licensee or registered person, is able to provide a particular credit activity or a class of credit activities; and

(ii) person 1 giving person 2 information about how person 2 may contact the licensee, registered person or representative; and (b) at the time the activity is engaged in, person 1 discloses to person 2: (i)

any benefits, including commission, that person 1, or an associate of person 1, may receive in respect of the activity;

and (ii) any benefits, including commission, that person 1, or an associate of person 1, may receive that are attributable to the activity; and (c) the disclosure mentioned in paragraph (b) is provided in the same form as the information mentioned in paragraph (a). 25 (2A) A credit activity is exempted if: (a) the activity consists only of: (i)

a person (person 1) informing another person (person 2) that a licensee or registered person, or a representative of the licensee or registered person, is able to provide a particular credit activity or a class of credit activities; and

(ii) person 1 giving person 2 information about how person 2 may contact the licensee, registered person or representative; and (iii) person 1 making arrangements enabling person 2 to contact the licensee, registered person or representative by means of a link that can be accessed from a website provided by or for person 1 or an associate of person 1; and (b) at the time the activity is engaged in, person 1 discloses to person 2: (i)

any benefits, including commission, that person 1, or an associate of person 1, may receive in respect of the activity; and

(ii) any benefits, including commission, that person 1, or an associate of person 1, may receive that are attributable to the activity; and (c) the disclosure mentioned in paragraph (b) is provided in the same form as the information mentioned in subparagraph (a)(ii). [subreg (2A) insrt SLI 185 of 2010 reg 3 and Sch 1[4], eff 1 July 2010]

25 (3) A credit activity is exempted if it is a credit activity engaged in in respect of the provision of credit mentioned in:

(a) subsection 6(9) or (11) of the Code; or (b) regulation 52, 54, 55, 56, 57, 60, 61 or 63. 25 (4) A credit activity is exempted if: (a) a person (the referrer) engages in a credit activity before 1 October 2010; and (b) the activity consists only of: (i)

the referrer informing another person (the consumer) that a licensee or registered person, or a representative of a licensee or registered person, is able to provide a particular credit activity or a class of credit activities; and

(ii) the referrer giving to the licensee, registered person or representative the consumer’s name and contact details; and [page 750] (iii) the referrer giving to the licensee, registered person or representative a short description of the purpose for which the consumer may want a provision of credit or a consumer lease (if the referrer knows the purpose); and (c) the referrer is not banned from engaging in the credit activity under: (i)

a law of a State or Territory; or

(ii) Part 2-4 of the Act; and (d) at the time the activity is engaged in, the referrer discloses to the consumer: (i)

any benefits, including commission, that the referrer, or an associate of the referrer, may receive in respect of the activity; and

(ii) any benefits, including commission, that the referrer, or an associate of the referrer, may receive that are attributable to

the activity; and (e) the referrer has not required the consumer to pay a fee to any person in relation to the referrer giving to the licensee, registered person or representative the consumer’s name; and (f)

the consumer has consented to the referrer giving to the licensee, registered person or representative the consumer’s name; and

(g) the referrer engages in the activity as a matter incidental to the carrying on of a business that is not principally making contact with persons for the purpose of giving their names or other details to another person. [subreg (4) insrt SLI 235 of 2010 reg 3 and Sch 1[9], eff 22 July 2010]

25 (5) A credit activity is exempted if: (a) a person (the referrer) engages in a credit activity on or after 1 October 2010 under an agreement with the licensee or registered person or a representative of the licensee or registered person; and (b) the agreement: (i)

specifies the conduct in which the referrer can engage as conduct to which the exemption applies; and

(ii) is: (A) in writing only; or (B) based on an offer made in writing by the licensee, registered person or representative that has been accepted by the referrer; and (c) the activity consists only of: (i)

the referrer informing another person (the consumer) that the licensee or registered person, or a representative of the licensee or registered person, is able to provide a particular credit activity or a class of credit activities; and

(ii) the referrer giving to the licensee, registered person or representative the consumer’s name and contact details within 5 business days after informing the consumer; and

(iii) the referrer giving to the licensee, registered person or representative a short description of the purpose for which the consumer may want a provision of credit or a consumer lease (if the referrer knows the purpose); and (d) the referrer is not banned from engaging in the credit activity under: (i)

a law of a State or Territory; or

(ii) Part 2-4 of the Act; and (e) at the time the activity is engaged in, the referrer discloses to the consumer: (i)

any benefits, including commission, that the referrer, or an associate of the referrer, may receive in respect of the activity; and

(ii) any benefits, including commission, that the referrer, or an associate of the referrer, may receive that are attributable to the activity; and (f)

the referrer has not required the consumer to pay a fee to any person in relation to the referrer giving to the licensee, registered person or representative the consumer’s name; and [page 751]

(g) the consumer has consented to the referrer giving to the licensee, registered person or representative the consumer’s name; and (h) the referrer engages in the activity as a matter incidental to the carrying on of a business that is not principally making contact with persons for the purpose of giving their names or other details to another person; and (i)

the referrer does not conduct a business as part of which the referrer contacts persons face-to-face from non-standard business premises.

[subreg (5) insrt SLI 235 of 2010 reg 3 and Sch 1[9], eff 22 July 2010; am SLI 303 of 2010 reg 3 and

Sch 1[17], eff 26 Nov 2010]

COMMENTARY ON REGULATION 25 [R25.05] Referrers engaging in credit activity The NCCP Act regulates “credit activities”. “Credit activities” include providing a credit service (s 6 and s 7 of NCCP Act respectively), which means either providing credit assistance or acting as an intermediary. A referrer might provide “credit assistance” by, among other things, suggesting that a consumer apply for a particular credit contract with a particular credit provider (s 8 of the NCCP Act). Often, the referral activity will not be as specific as suggesting a particular contract, in which case the referrer may not be engaging in a credit activity by providing credit assistance. A referrer might in the course of, as part of, or incidentally to, a business carried on in this jurisdiction by the referrer or another person, act as an intermediary (whether directly or indirectly) between a credit provider and a consumer wholly or partly for the purposes of securing a provision of credit for the consumer under a credit contract for the consumer with the credit provider (s 9 of the NCCP Act). Acting as an intermediary, rather than providing credit assistance, is the most common credit activity possibly raised by referral activities. For a referrer to be acting as an intermediary, they must make the referral as part of, or incidentally to, a business. Also, the referral must be classed as being “wholly or partly for the purposes of securing a provision of credit”. It is arguable that many referrals that simply put a consumer in contact with an ACL holder or their representative do not rise to the level of being even partly for the purpose of securing a provision of credit and therefore are not credit activities. [R25.10] Dealing with referrers Licensees will be in breach of s 31 of the NCCP Act if they deal with a referrer who is engaging in credit activities but who does not have an Australian Credit Licence or a lawful excuse not to have an Australian Credit Licence (for example, an exemption applies or they are appointed as an authorised credit representative of an Australian Credit Licence holder). Licensees will also be in breach of s 31 of the NCCP Act if their representative deals with a referrer who is engaging in credit activities

but does not have an Australian Credit Licence or a lawful excuse (Pt 2-3, Div 4, NCCP Act). [R25.15] Exemptions available to referrers A referrer who is engaging in credit activities by making a referral will not breach the NCCP Act if they are covered by an applicable exemption under the regulations: referral to a linked credit provider at the point of sale by a supplier of goods or services (reg 23); [page 752] disseminating a document (reg 24(6)); disseminating a document or credit agreement etc using the referrer’s business name, logo or trade mark (reg 24(7)); providing information about the cost or terms and conditions of a credit contract (reg 24(8)); mere referral (reg 25(2)); mere referral (internet) (reg 25(2A)); referrer provides consumer’s details to ACL holder pre-1 October 2010 (reg 25(4)); and referrer provides consumer’s details to ACL holder on or after 1 October 2010 (reg 25(5)). Regulation 25 provides several exemptions in respect of certain credit activities from the requirement to hold an Australian Credit Licence. Some of the exemptions have been added subsequently and they do not fit neatly together. Some conduct may come under more than one exemption. [R25.20] Mere referrers Regulation 25(2) or (2A) applies if the activity consists only of: a person (the referrer) informing a consumer that a licensee or registered person, or a representative of the licensee or registered

person, is able to provide a particular credit activity or a class of credit activities; and the referrer gives the consumer information about how the consumer may contact the licensee or registered person, or a representative of the licensee or registered person, including through a website provided by or for the referrer; and at the time the activity occurs, the referrer discloses any benefits, including any commission that the referrer or an associate of the referrer may receive in respect of, or that are attributable to the activity; and the disclosure is in the same form as the information that has been provided. Regulation 25(2A) covers referrals where the information about how to contact a licensee or registered person is through a link on a website provided by or for the referrer; reg 25(2) covers all other referrals. [R25.25] Specific activities Regulation 25(3) applies if the activity consists only of credit activities in respect of the provision of credit in accordance with: s 6(9) (pawnbrokers) or s 6(11) (employee loans) of the Code, or reg 52 (see [52.05] below), reg 54 (Rental Purchase Plan Scheme), reg 55 (partnership loans), reg 56 (student loans), reg 57 (loan for conservation heritage items), reg 60 (credit under the Aged Care Act 1997), reg 61 (Firefighter’s Benefit Fund) or reg 63 (credit providers providing credit to directors). The credit activities listed at reg 25(3) refer to activities that are otherwise largely exempt from having to comply with the Code. [R25.30] Referrers’ exemption Regulation 25(5) applies if: the activity consists only of a person (the referrer) and a licensee or registered person having an agreement which specifies the conduct in which the referrer can engage (which fits within this exemption); and

[page 753] the agreement is either in writing or based on a written offer from a licensee, registered person, or their representative; and the activity consists only of: —

informing the consumer that a licensee, registered person or a representative of the licensee or registered person is able to provide a particular credit activity or a class of credit activities; and

—

the referrer giving a licensee, registered person or a representative of the licensee or registered person the consumer’s name within five business days after informing the consumer; and

—

the referrer giving a licensee, registered person or a representative of the licensee or registered person a short description of the purposes for which the consumer may want a provision of credit or a consumer lease (if the referrer knows the purpose); and

the referrer is not banned from engaging in the credit activity under a law of a state or territory or Pt 2-4 of the NCCP Act; and at the time the activity occurs, the referrer discloses any benefits, including a commission that the referrer or an associate of the referrer may receive in respect of, or that are attributable to, the activity; and the referrer has not required the consumer to pay a fee to any person in relation to the referrer giving a licensee, registered person or a representative of the licensee or registered person the consumer’s name and contact details; and the referrer engages in an activity as a matter incidental to the carrying on of a business that is not principally making contact with persons for the purpose of giving their names or other details to another person; and

the referrer does not conduct a business as part of which the referrer contacts persons face to face from non-standard business premises. Regulation 25(5) applies to conduct occurring on or after 1 October 2010. For conduct prior to 1 October 2010, reg 25(4) applies. Regulation 25(4) mirrors reg 25(5) but does not include the first two bullet points above, that is, for referrals to be exempted under reg 25(4) there is no need to have a relevant written referrer agreement. It should be noted that although reg 25(5) only explicitly permits a referrer to provide a registered person or a licensee with a consumer’s name, it appears necessary to the working of this provision that a referrer be permitted to provide a consumer’s contact details as well. This interpretation is supported by reg 9AB, which complements reg 25(5), and explicitly contemplates that a referrer will have provided a licensee with a consumer’s contact information, including a consumer’s email address or postal address. Regulation 25(5) should be read with reg 9AB, which requires a licensee to keep a register of referrers who provide referrals under reg 25(5) and to initiate contact with a consumer through a referral under reg 25(5) in certain prescribed ways.

Modifications — credit representatives 25A For paragraph 110(c) of the Act, section 67 of the Act applies as if it were modified by adding the following subsections after subsection 67(2): [page 754] ‘(3) However, if: (a) a person (person 1) purports to authorise a registered person (within the meaning of the Transitional Act) to engage in a credit activity as a credit representative under subsection 64(1) or 65(1); and (b) at the time of making the purported authorisation, person 1 reasonably believes that the registered person will engage in the credit activity only as a credit representative; the authorisation has effect when it is given and is taken not to contravene subsection (1).

(4) If the registered person does not request the cancellation of the registered person’s registration within 15 business days after the day on which the authorisation is given, the authorisation mentioned in subsection (3) ceases to have effect at the end of the 15 business days.’. [reg 25A insrt SLI 59 of 2010 reg 3 and Sch 1[1], eff 1 July 2010]

COMMENTARY ON REGULATION 25A [R25A.05] Regulation 25A is a transitional provision, introduced to avoid inconveniences arising if a person authorises another person to engage in a credit activity as a credit representative but the person so authorised is also a registered person. Regulation 25A permits the authorisation of a person who has registered for an Australian Credit Licence to engage in a credit activity as a credit representative where the authoriser reasonably believes the registered person will only engage in credit activity as a credit representative and the registered person promptly cancels its registration. An authorisation made under reg 25A will cease to have effect if the registered person does not request the cancellation of their registration within 15 business days of being authorised as a credit representative.

Modification — meaning of linked credit provider or linked lessor for regulation 23 25B For paragraph 110(c) of the Act and regulation 23, the definition of linked credit provider of a supplier in subsection 127 of the Code applies as if it were modified to provide that a linked credit provider or a linked lessor of a supplier means a credit provider or lessor: (a) with whom the supplier has a contract, arrangement or understanding relating to: (i)

the supply to the supplier of goods in which the supplier deals; or

(ii) the business of supplying goods or services carried on by the supplier; or (iii) the provision of a credit contract or consumer lease: (A) to persons to whom goods or services are supplied by the

supplier; and (B) for payment for the goods or services; or (b) to whom the supplier, by arrangement with the credit provider or lessor, regularly refers persons for the purpose of obtaining credit or being provided with a consumer lease; or (c) whose: (i)

forms of contract; or

(ii) forms of application; or (iii) offers for credit; or (iv) offers to be provided with a consumer lease; are, by arrangement with the credit provider or lessor, made available to persons by the supplier; or (d) with whom the supplier has a contract, arrangement or understanding under which: (i)

contracts; or

(ii) applications; or [page 755] (iii) offers for credit; or (iv) offers to be provided with a consumer lease; from the credit provider or lessor may be signed by persons at the premises of the supplier. [reg 25B insrt SLI 105 of 2010 reg 3 and Sch 1[26], eff 24 May 2010]

COMMENTARY ON REGULATION 25B [R25B.05] Regulation 25B amends the definition of “linked credit provider” and “linked lessor” for reg 23.

[R25B.10] Linked credit provider Regulation 25B defines a “linked credit provider or lessor” of a supplier as a credit provider or lessor: with whom the supplier has a contract, arrangement or understanding relating to: —

the supply to the supplier of the goods in which the supplier deals;

—

the business of supplying goods or services carried on by the supplier; or

—

the provision of credit contracts or consumer leases to customers of the supplier to pay for the acquisition of goods or services from the supplier;

to whom the supplier, by arrangement with the credit provider or lessor, regularly refers persons for the purpose of obtaining credit or consumer leases; whose credit or lease documentation (forms of contract, forms of application, offers for credit or offers to be provided with a consumer lease) is, by arrangements with the credit provider or lessor, made available to persons by the supplier; or with whom the supplier has a contract, arrangement or understanding under which credit or lease documentation (contracts, applications, offers for credit or offers to be provided with a consumer lease) from the credit provider or lessor may be signed by persons at the premises of the supplier.

Modification — meaning of linked credit provider for regulation 23A 25C For paragraph 110(c) of the Act and regulation 23A, the definition of linked credit provider of a supplier in subsection 127(1) of the Code applies as if it were modified to provide that a linked credit provider of a supplier means a credit provider: (a) with whom the supplier has a contract, arrangement or

understanding relating to: (i)

the supply to the supplier of goods in which the supplier deals; or

(ii) the business of supplying goods or services carried on by the supplier; or (iii) the provision of credit: (A) to persons to whom goods or services are supplied by the supplier; and (B) for payment for the goods or services; or (b) to whom the supplier, by arrangement with the credit provider, regularly refers persons for the purpose of obtaining credit; or (c) whose: (i)

forms of contract; or

(ii) forms of application; or (iii) offers for credit; [page 756] are, by arrangement with the credit provider, made available to persons by the supplier; or (d) with whom the supplier has a contract, arrangement or understanding under which: (i)

contracts; or

(ii) applications; or (iii) offers for credit; from the credit provider may be signed by persons at the premises of the supplier. [reg 25C insrt SLI 105 of 2010 reg 3 and Sch 1[26], eff 24 May 2010]

COMMENTARY ON REGULATION 25C [R25C.05] Regulation 25C amends the definition of “linked credit provider” for reg 23A.

Modification — meaning of services for regulations 23 and 23A 25D For paragraph 110(c) of the Act, the definition of services in subsection 204(1) of the Code is modified for the purposes of regulations 23 and 23A to provide that services: (a) includes: (i)

insurance; or

(ii) professional services; or (iii) a right to services; and (b) does not include: (i)

rights in relation to, and interest in, real property; or

(ii) services relating to a credit contract or consumer lease that is regulated under the National Credit Code, or would be regulated under the National Credit Code if entered into, other than credit services. [reg 25D insrt SLI 105 of 2010 reg 3 and Sch 1[26], eff 24 May 2010]

COMMENTARY ON REGULATION 25D [R25D.05] Regulation 25D amends the definition of “services” for regs 23 and 23A.

Modifications — unlicensed carried over instrument lender 25E For paragraph 110(c) of the Act, the provisions of the Act to which Part

2-6 of the Act applies, apply in relation to an unlicensed carried over instrument lender as if the provisions were modified as set out in Schedule 2. Note Unlicensed carried over instrument lender is defined in modified section 5 of the Act as mentioned in item 2.4 of Schedule 2. [reg 25E insrt SLI 105 of 2010 reg 3 and Sch 1[26], eff 24 May 2010]

COMMENTARY ON REGULATION 25E [R25E.05] Regulation 25E amends the application of the NCCP Act for unlicensed carried over instrument lenders in accordance with the amendments in Sch 2 of the Regulations. Refer to commentary on reg 9A at [R9A.05] for conditions applying to unlicensed carried over instrument lenders. [page 757]

Modifications — ADI in relation to carried over instrument 25F For paragraph 110(c) of the Act, section 38 of the Act applies to an ADI in relation to a carried over instrument as if it were modified by substituting the following section: When a license may be granted — ADI in relation to carried over instrument 38 (1) ASIC must grant a licence to an ADI in relation to a carried over instrument if (and must not grant a licence unless) the requirements mentioned in subsection (2), (3) or (4) are met. 38 (2) For subsection (1), the requirements are, if the ADI: (a) is a credit provider, lessor, mortgagee or beneficiary of a guarantee in relation to a carried over instrument (engages in the first credit activity) immediately before 1 July 2010; and (b) intends to engage in a credit activity (the second credit activity) other than the first credit activity on or after 1 July 2010; and (c) applies under section 36 for a licence to engage in the first credit activity and the second credit activity; and (d) includes a statement in the application (in accordance with the requirements of the approved form) to the effect that the ADI will, if granted the licence, comply with its

obligations as a licensee. 38 (3) For subsection (1), the requirements are, if the ADI: (a) is a credit provider, lessor, mortgagee or beneficiary of a guarantee in relation to a carried over instrument immediately before 1 July 2010; and (b) does not intend to engage in a credit activity other than in relation to a carried over instrument on or after 1 July 2010; and (c) applies under section 36 for a licence to engage in a credit activity in relation to a carried over instrument; and (d) includes a statement in the application (in accordance with the requirements of the approved form) to the effect that the ADI will, if granted the licence, comply with its obligations as a licensee. 38 (4) For subsection (1), the requirements are, if the ADI: (a) was not a credit provider, lessor, mortgagee or beneficiary of a guarantee in relation to a carried over instrument immediately before 1 July 2010; and (b) applies under section 36 for a licence; and (c) includes a statement in the application (in accordance with the requirements of the approved form) to the effect that the ADI will, if granted the licence, comply with its obligations as a licensee. 38 (5) The license must only authorise the ADI to engage in credit activities that equate (as closely as possible) to the credit activities in relation to which the application was made. [reg 25F insrt SLI 105 of 2010 reg 3 and Sch 1[26], eff 24 May 2010]

COMMENTARY ON REGULATION 25F [R25F.05] Regulation 25F amends the application of s 38 of the NCCP Act for ADIs in relation to a carried over instrument. The amendment has the effect of requiring ASIC to grant an Australian Credit Licence to an ADI in relation to a carried over instrument only if the ADI undertakes to comply with their obligations under the Australian Credit Licence and the ADI meets one of the following criteria: the ADI is a credit provider, lessor, mortgagee or beneficiary of a guarantee in relation to a carried over instrument immediately before 1 July 2010 and applies for an Australian Credit Licence to also engage in [page 758]

another credit activity after 1 July 2010 (the ADI cannot have a combination of the modified regime and the licensing regime applying to their carried over instruments); or the ADI is a credit provider, lessor, mortgagee or beneficiary of a guarantee in relation to a carried over instrument immediately before 1 July 2010 and applies for an Australian Credit Licence to continue that credit activity after 1 July 2010 (the ADI chooses to be licensed rather than participate under the modified regime); or the ADI has no carried over instruments. Refer to commentary on reg 7A at [R7A.05] for regulations concerning the licensing of credit activities in relation to a carried over instrument.

Modifications — special purpose funding entity 25G (1) For paragraphs 110(c) and 164(d) of the Act, the provisions to which Parts 2–6 and 3–7 of the Act apply apply in relation to: (a) a special purpose funding entity; or (b) a licensee or registered person who is a party to a servicing agreement with a special purpose funding entity; as if the provisions were modified as set out in Schedule 3. 25G (2) For paragraph (1)(a), each modification in Schedule 3 applies in relation to the special purpose funding entity from the time, or to the extent, that the obligation would apply to the licensee or registered person mentioned in paragraph (1)(b), in accordance with: (a) item 19 of Schedule 1 to the Transitional Act; or (b) item 36 of Schedule 2 to that Act; if the licensee or registered person were the credit provider or the lessor. [reg 25G subst SLI 235 of 2010 reg 3 and Sch 1[10], eff 22 July 2010]

COMMENTARY ON REGULATION 25G

[R25G.05] Regulation 25G amends the application of Ch 2 (Licensing of persons who engage in credit activities) and Ch 3 (Responsible lending conduct) of the NCCP Act in relation to a special purpose funding entity or a licensee or registered person who is a party to a servicing agreement with a special purpose funding entity, in accordance with the amendments in Sch 3 of the regulations.

Modifications — temporary staff 25H (1) For paragraphs 110(c) and 164(d) of the Act, this regulation applies in relation to a person if: (a) the person’s services are used by a licensee or registered person for a period of not more than 24 months (including any extension or rollover of a contract of engagement); and (b) the person performs substantially the same duties as an employee of the licensee or registered person; and (c) the person is subject to the same, or substantially the same, control and direction as an employee when the person is engaging in credit activities; and (d) the person was not engaged because the person possesses particular skills or experience that would prevent the licensee or registered person from exercising the control and supervision over the person, when the person is engaging in credit activities, that the licensee or registered person can exercise over its employees; and (e) the person is not remunerated predominantly by way of commission; and [page 759] (f)

the licensee or registered person does not hold out or represent to consumers that the person is acting other than as an employee.

25H (2) The provisions of the Act to which Part 2-6 and Part 3-7 of the Act

apply apply as if paragraph 65(6)(c) and sections 71 and 158 of the Act were omitted. [reg 25H insrt SLI 235 of 2010 reg 3 and Sch 1[10], eff 22 July 2010]

COMMENTARY ON REGULATION 25H [R25H.05] Regulation 25H provides an exception to ss 65(6)(c), 71 and 158 of the NCCP Act where Ch 2 (Licensing of persons who engage in credit activities) and Ch 3 (Responsible lending conduct) of the NCCP Act apply in relation to temporary staff. Temporary staff is defined under reg 25H to be a person: whose services are used by a licensee or registered person for a period of not more than 24 months (including any extension or rollover of a contract of engagement); and who performs substantially the same duties as an employee of the licensee or registered person; and who is subject to the same, or substantially the same, control and direction as an employee when the person is engaging in credit activities; and who is not engaged because the person possesses particular skills or experience that would prevent the licensee or registered person from exercising the control and supervision over the person, when the person is engaging in credit activities, that the licensee or registered person can exercise over its employees; and who is not remunerated predominantly by way of commission; and who is not held out or represented to consumers by the licensee or registered person as acting other than as an employee.

Modifications — locums 25I (1) For paragraph 110(c) of the Act, this regulation applies to a person who: (a) is engaged to replace an employee of a licensee or registered person

who is absent from work in that capacity and reasonably expected to return to work; and (b) performs substantially the same duties as the employee; and (c) is subject to the same, or substantially the same, control and direction as the employee when the person is engaging in credit activities. 25I (2) The provisions of the Act to which Part 2-6 of Chapter 2 of the Act applies apply as if each provision that refers to an employee of a licensee or registered person were modified by referring to: (a) an employee; and (b) a person described in subregulation (1). [reg 25I insrt SLI 235 of 2010 reg 3 and Sch 1[10], eff 22 July 2010]

COMMENTARY ON REGULATION 25I [R25I.05] Regulation 25I applies Ch 2 of the Act to locums as if they were an employee of an Australian Credit Licence holder or registered person. Locum is defined by reg 25I to be a person: who is engaged to replace an employee of an Australian Credit Licence holder or registered person who is absent from work in that capacity and reasonably expected to return to work; and [page 760] who performs substantially the same duties as the employee; and who is subject to the same, or substantially the same, control and direction as the employee when the person is engaging in credit activities.

Modification — exempted persons

25J (1) For paragraph 110(c) of the Act, this regulation applies to: (a) a person who is exempted from provisions of the Act under subregulation 20(11), 25(4) or (5); and (b) a person who acts on behalf of the person. 25J (2) Section 33 of the Act applies as if it were modified to include provision for section 128 of the Code to apply to any representation, warranty or statement made (whether orally or in writing) by the person in relation to a credit contract or consumer lease: (a) offered by a licensee or registered person; and (b) to which the person’s exemption relates. [reg 25J insrt SLI 235 of 2010 reg 3 and Sch 1[10], eff 22 July 2010]

COMMENTARY ON REGULATION 25J [R25J.05] Regulation 25J applies to a person exempt from provisions of the Act pursuant to regs 20(11), 25(4) or 25(5) as well as anyone acting on behalf of that person. Regulation 25J operates to amend s 33 of the NCCP Act (prohibition on giving misleading information) to include s 128 of the Code (credit provider liable with respect to supplier’s misrepresentations about tied credit contract), making a person who is exempted from the Act by those regulations liable for misrepresentations in respect of any representation, warranty or statement made (whether orally or in writing) they make when acting under the exemption.

Modification — credit card contracts 25K (1) For paragraph 164(d) of the Act, this regulation applies to a licensee that enters into a credit contract with a consumer in the form of issuing a credit card. 25K (2) The provisions of the Act to which Part 3-7 of the Act applies apply as if paragraph 128(a) were modified to read: ‘(a) provide a consumer with a credit card for the purpose of entering a credit contract that is formed or entered by:

(i)

the use by a consumer of the credit card to obtain credit from the licensee; or

(ii) the activation by a consumer of the credit card by arrangement with the licensee;’. [reg 25K insrt SLI 303 of 2010 reg 3 and Sch 1[18], eff 26 Nov 2010]

COMMENTARY ON REGULATION 25K [R25K.05] Credit cards This provision allows lenders who issue credit cards to meet their obligations under s 128 of the NCCP Act. [page 761]

Modification — assignees of credit providers, lessors, mortgagees and beneficiaries of a guarantee 25L For paragraph 164(d) of the Act, the provisions of the Act to which Part 3-7 of the Act applies apply as if section 10 were modified by adding the following subsection after subsection 10(2): ‘(3) A person mentioned in paragraph (1)(b) is not a credit provider, lessor, mortgagee or beneficiary of a guarantee under a credit contract, consumer lease, mortgage or guarantee while the original credit provider, lessor, mortgagee or beneficiary of the guarantee under the credit contract, consumer lease, mortgage or guarantee continues to receive payments from the debtor, or would continue to do so if the debtor complied with the credit contract, consumer lease, mortgage or guarantee.’. [reg 25L insrt SLI 303 of 2010 reg 3 and Sch 1[18], eff 26 Nov 2010]

COMMENTARY ON REGULATION 25L [R25L.05] Notice of a new credit provider This provision specifies that, until a debtor has notice of a new credit provider, the person considered to be the credit provider by the customer will be considered to be the provider under the Code to ensure consistency with s 188 of the Code.

Modification — credit card provided before 1 July 2012

25M For paragraph 164(d) of the Act, the provisions of the Act to which Part 3-7 of the Act applies apply as if section 133BD were modified by adding the following subsection after subsection 133BD(2): ‘(3) Subsections (1) and (2) do not apply if the application is made using an application form provided by the licensee to the consumer before 1 July 2012.’ [reg 25M insrt SLI 117 of 2012 reg 3 and Sch 2[1], eff 1 July 2012; am SLI 201 of 2012 s 3 and Sch 1[1], eff 21 Aug 2012]

COMMENTARY ON REGULATION 25M [R25M.05] Regulation 25M delayed the commencement of the requirements in s 133BD of the NCCP Act (credit card key fact sheets). Credit card providers did not need to provide a credit card key fact sheet to a prospective debtor if they gave them the credit card prior to 1 July 2012. Regulation 25M was to allow a transition period for credit providers to prepare to comply with that key fact sheet requirement. Note that for the purposes of regs 25K and 25M, “provide” means when the credit card document is dispatched by the credit provider, not when it is received by the debtor.

[page 763]

Chapter 3 — Responsible lending conduct [Ch 3 subst SLI 333 of 2011 reg 3 and Sch 1[1], eff 1 Jan 2011]

Part 3-1 — Preliminary Definitions 26 In this Chapter: disclosure document means any of the following: (a) a credit guide mentioned in section 113, 126, 127, 136, 149, 150, 158 or 160 of the Act; (b) a credit proposal disclosure document mentioned in section 121 of the Act; (c) a lease proposal disclosure document mentioned in section 144 of the Act; (d) a quote mentioned in section 114 or 137 of the Act. (e) a precontractual statement or an information statement mentioned in section 16 of the National Credit Code. interest rate means the interest rate or rates applicable to: (a) a type of home loan; or (b) a home loan chosen by a consumer. Note For the characteristics of a home loan that is a standard form of credit contract, see regulation 28LA. [def insrt SLI 165 of 2011 reg 3 and Sch 1[1], eff 1 Jan 2012]

lender means a person or entity who: (a) may determine the pricing of a standard home loan; and

(b) produces the Key Facts Sheet for that home loan. [def insrt SLI 165 of 2011 reg 3 and Sch 1[1], eff 1 Jan 2012]

licensee — see section 4.1 of Schedule 4. managed contract means a credit contract or consumer lease entered into as a result of credit assistance provided by a mortgage manager under the terms of an agreement the mortgage manager has with a credit provider, lessor or third party to manage the contract or lease. [def insrt SLI 143 of 2011 reg 3 and Sch 2[9], eff 1 Oct 2011]

mortgage manager means a licensee who has a written agreement with: (a) a credit provider or lessor; or (b) a third party who is authorised to act for a credit provider or lessor (under a written agreement with the credit provider or lessor); and under the terms of which: (c) the licensee is required to manage the relationship with the consumer on a day-to-day basis for the credit provider or lessor in accordance with the credit provider’s, lessor’s or third party’s policies and procedures; and (d) the credit contracts, consumer leases and associated documentation used by the licensee are branded or co-branded with the name of the licensee. [def insrt SLI 143 of 2011 reg 3 and Sch 2[9], eff 1 Oct 2011]

[page 764] product designer means a licensee who engages in a credit activity only through a written agreement with a credit provider or lessor under the terms of which: (a) the licensee manages a pool of funds from which credit contracts or consumer leases are provided; and (b) the licensee receives commission that is worked out in relation

to the net profit from operating the pool of funds; and (c) the licensee has responsibility for creating the policy for usage of the credit contracts or consumer leases, including the eligibility requirements for consumers. [def insrt SLI 143 of 2011 reg 3 and Sch 2[9], eff 1 Oct 2011]

relevant provision of the Act is a section of the Act which requires a disclosure document to be provided to a consumer. trail commission means a commission that is contingent on a consumer’s conduct after the consumer has entered into a credit contract or consumer lease, and includes commission that is dependent on the amount of a repayment, or the number of repayments, made by the consumer under the contract or lease. [def insrt SLI 143 of 2011 reg 3 and Sch 2[10], eff 1 Oct 2011]

volume bonus arrangement means an arrangement between: (a) a credit provider, lessor or other person (the payer); and (b) a licensee or credit representative (the payee); under which the amount of commission payable by the payer to the payee increases as the total volume of business arranged by the payee with the payer increases. [def insrt SLI 143 of 2011 reg 3 and Sch 2[10], eff 1 Oct 2011]

COMMENTARY ON REGULATION 26 [R26.05] Definitions Regulation 26 lists the definitions used in Ch 3. Note that Class Order 10/1230 amends the definition of “disclosure document” to omit paragraph (e), “a precontractual statement or an information statement mentioned in s 16 of the NCC”. The Explanatory Statement for that class order explains that paragraph (e) of the definition is omitted because of its potential to be misleading, particularly in relation to reg. The definitions of “interest rate” and “lender” were inserted by National Consumer Credit Protection Amendment Regulations 2011 (No 5) as part of

the amendments made to the NCCP Act that introduced a requirement for home loan lenders to provide a key facts sheet for standard home loans (see National Consumer Credit Protection Amendment (Home Loans and Credit Cards) Act 2011 (Cth)).

Part 3-2 — Requirements about credit guides Credit guide of licensee — to include further information 26A (1) This regulation is made for the following provisions of the Act: (a) paragraphs 113(2)(j) and (3)(b) (credit guide of credit assistance providers for credit contracts); [page 765] (b) paragraphs 136(2)(j) and (3)(b) (credit guide of credit assistance providers for consumer leases). 26A (2) Payments to third parties The licensee’s credit guide must state if a commission is likely to be paid by the licensee to a third party for the introduction of credit business or business proposed to be financed by the credit contract or consumer lease and, if a commission is likely to be paid, include the following: (a) information about the classes of persons to whom such commission may be payable; (b) a statement that the consumer may, on request, obtain a reasonable estimate of the amount of commission and how it is worked out. 26A (3) Volume bonus arrangements The licensee’s credit guide must include the following information for each credit provider, lessor or other person with whom the licensee has a volume bonus arrangement: (a) a statement that there is a volume bonus arrangement in place with

the credit provider, lessor or other person; (b) a statement that the licensee may receive additional commission depending on the total volume of business that the licensee arranges with the credit provider, lessor or other person; (c) the person by whom the commission is payable; (d) the person to whom the commission is payable. 26A (4) Mortgage managers If a mortgage manager is likely to provide credit assistance to the consumer in relation to a managed contract, the mortgage manager’s credit guide must include the following information: (a) an explanation of the relationship between the mortgage manager and the credit provider, lessor or third party; (b) whether the mortgage manager will charge the consumer a fee for providing a credit service. 26A (5) Product designers A product designer’s credit guide must include the following information: (a) an explanation of the relationship between the product designer and the credit provider or lessor; (b) whether the product designer will charge the consumer a fee for providing a credit service. [reg 26A insrt SLI 143 of 2011 reg 3 and Sch 2[11], eff 1 Oct 2011]

COMMENTARY ON REGULATION 26A [R26A.05] In certain circumstances, a credit assistance provider must include additional information described in reg 26A in its credit guide. The circumstances in reg 26A are when: the credit assistance provider is referred business by a third party and pays commission for the referral; the credit assistance provider has volume bonus arrangements in place (see reg 26 for definition of “volume bonus arrangement”); the credit assistance provider is a mortgage manager (see reg 26 for

definition of “mortgage manager”); and the credit assistance provider is a product designer (see reg 26 for definition of “credit assistance provider”). The Explanatory Statement to Select Legislative Instrument 2011 No 143 explains that reg 26A will achieve the following: where the credit assistance provider is referred business by a third party and pays commission for this referral, it must disclose information about [page 766] the third party in the credit guide. The credit guide must also provide a statement to the effect that a reasonable estimate of the amount of commission will be provided to the consumer on request (reg 26A(2)); the credit assistance provider’s credit guide must include specified information about any volume bonus arrangements in place with the credit provider, lessor or any other person with whom it has a volume bonus arrangement (reg 26A(3)); where a credit contract or consumer lease arises as a result of credit assistance provided by a mortgage manager, the mortgage manager’s credit guide must include information about its relationship with the credit provider, lessor or third party and state whether any fees are payable (reg 26A(4)); and the product designer’s credit guide must include information about its relationship with the credit provider or lessor, and state whether any fees are payable (reg 26A(5)).

Credit guide of credit provider or lessor — information about mortgage managers and product

designers 26B (1) This regulation is made for the following provisions of the Act: (a) paragraph 126(2)(g) (credit guide of credit providers); (b) paragraph 149(2)(g) (credit guide of lessors). 26B (2) If a licensee is likely to enter into a credit contract or consumer lease with a consumer as a result of a mortgage manager or a product designer providing credit assistance to the consumer, the licensee’s credit guide must include the information in subregulation (3). 26B (3) The licensee must include an explanation of the relationship between: (a) the licensee and the mortgage manager; or (b) the licensee and the product designer. [reg 26B insrt SLI 143 of 2011 reg 3 and Sch 2[11], eff 1 Oct 2011]

COMMENTARY ON REGULATION 26B [R26B.05] Regulation 26B requires credit providers and lessors to include in their credit guides an explanation about their relationship with a mortgage manager or product designer, if the credit contract or consumer lease arose because of a mortgage manager or product designer.

Credit guide of licensees — when information about fees, charges and commission is not required 27 (1) This regulation is made for the following provisions of the Act: (a) paragraph 113(3)(a) (credit guide of credit assistance providers for credit contracts); (b) paragraph 136(3)(a) (credit guide of credit assistance providers for consumer leases). 27 (2) The information mentioned in subparagraphs 113(2)(e)(iii) and (g)(ii)

and (iii), or 136(2)(e)(iii) and (g)(ii) and (iii), of the Act need not be included in the licensee’s credit guide if: (a) the credit guide includes a statement that the consumer may obtain information from the licensee about: (i)

how fees and charges payable by the consumer are worked out; and [page 767]

(ii) a reasonable estimate of the commission likely to be received, directly or indirectly, by the licensee and how the commission is worked out; and (b) the licensee has in place arrangements to make the information available when requested by the consumer. 27 (3) Credit card contracts The information mentioned in subparagraphs 113(2)(g)(ii) and (iii) of the Act need not be included in the licensee’s credit guide if: (a) the commission is payable in relation to a credit card contract; and (b) the credit guide includes the maximum amount of commission payable on entering into the contract; and (c) if any additional commission is payable during the life of the contract — the credit guide includes a statement that additional commission is payable, and includes either: (i)

a reasonable estimate of the amount of the additional commission; or

(ii) if the amount of additional commission depends on the consumer’s use of the credit card — information about factors contributing to the amount of commission. [reg 27 insrt SLI 143 of 2011 reg 3 and Sch 2[11], eff 1 Oct 2011]

COMMENTARY ON REGULATION 27

[R27.05] In order to avoid presenting consumers with excessive information about fees and charges, reg 27 permits the credit guide of a credit assistance provider to include a statement that the consumer may obtain information from the credit assistance provider about how fees and charges payable are worked out and a reasonable estimate of the commission likely to be received and how the commission is worked out rather than including this information in the credit guide. Similarly, for credit card contracts, the credit assistance provider does not need to disclose a reasonable estimate of the amounts of the commissions it receives or the range of those amounts and the method for working out those amounts where: the credit guide discloses the maximum amount of commission payable on entering into the contract; and if any additional commission is payable during the life of the contract, the credit guide discloses certain information about the additional commission. [R27.10] The Explanatory Statement to Select Legislative Instrument 2011 No 143 explains: Where the credit assistance provider’s credit guide states that the method for working out fees, charges, commission and reasonable estimates of the amounts of commission will be available to the consumer upon request, the credit guide does not need to include this specific information. This avoids consumers being presented with excessive details about fees and charges (reg 27(2)). Where the credit assistance provider’s credit guide discloses the maximum amount of commission payable on entering the credit card contract, and any additional commissions payable in the future, the credit guide does not need to include the method for working out the commission or a reasonable estimate of the amount of additional commission. The regulations provide a limited exemption in relation to credit card contracts

[page 768] where the commission may depend on future use of the card and performance across a portfolio of debtors (reg 27(3)).

Credit guide of credit representatives — to include further information 27A (1) This regulation is made for paragraph 158(2)(i) of the Act (credit guide of credit representatives). 27A (2) Commissions paid to third parties The credit representative’s credit guide must state if a commission is likely to be paid by the credit representative to a third party for the introduction of credit business or business proposed to be financed by the credit contract or consumer lease and, if a commission is likely to be paid, include the following: (a) information about the classes of persons to whom such commission may be payable; (b) a statement that the consumer may, on request, obtain a reasonable estimate of the amount of commission and how it is worked out. 27A (3) Information about credit providers or lessors The credit representative’s credit guide must give the following information: (a) if there are 6 or fewer credit providers or lessors that the credit representative conducts business with when providing credit assistance in relation to credit contracts or consumer leases — the names of the credit providers or lessors; (b) if there are more than 6 credit providers or lessors that the credit representative conducts business with when providing credit assistance in relation to credit contracts or consumer leases — the names of the 6 credit providers or lessors with whom the credit representative reasonably believes it conducts the most business. 27A (4) Volume bonus arrangements The credit representative’s credit

guide must include the following information for each credit provider, lessor or other person with whom the credit representative has a volume bonus arrangement: (a) a statement that there is a volume bonus arrangement in place with the credit provider, lessor or other person; (b) a statement that the credit representative may receive additional commission depending on the total volume of business that the credit representative arranges with the credit provider, lessor or other person; (c) the person by whom the commission is payable; (d) the person to whom the commission is payable. 27A (5) However, the information in subregulations (3) and (4) is not required to be given if the credit representative’s redit guide is combined in a single document with the licensee’s credit guide. [reg 27A insrt SLI 143 of 2011 reg 3 and Sch 2[11], eff 1 Oct 2011]

COMMENTARY ON REGULATION 27A [R27A.05] Regulation 27A prescribes other requirements that a credit representative must incorporate in its credit guide including: where the credit representative is referred business by a third party and pays commission for this referral; the names of the top six credit providers it does business with; and information about any volume bonus arrangements it has in place. Where a licensee and credit representative provide a credit guide in a single, combined document, the credit representative is exempt from having to provide information about its top six credit providers and volume bonus arrangements. [page 769]

[R27A.10] The Explanatory Statement to Select Legislative Instrument 2011 No 143 explains that reg 27A achieves the following: Where the credit representative is referred business by a third party and pays commission for this referral they must disclose information about the third party in the credit guide. The credit guide must also provide a statement to the effect that a reasonable estimate of the amount of commission will be provided to the consumer on request (reg 27A(2)). The credit representative’s credit guide must provide the names of the credit providers or lessors with whom they conduct the most business (up to a maximum of six) (reg 27A(3)). The credit representative’s credit guide must include information about any volume bonus arrangements in place with the credit provider, lessor or any other person with whom they have a volume bonus arrangement (reg 27A(4)). The credit representative is exempt from having to provide additional information about its top credit providers or lessors, or its volume bonus arrangements if the credit guide is combined in a single document with the licensee’s credit guide. This exemption means that where the licensee and the credit representative operate closely, so that only a single combined credit guide is provided, information only needs to be disclosed in respect of the licensee (reg 27A(5)).

Credit guide of credit representatives — when information about fees, charges and commission not required 27B (1) This regulation is made for paragraph 158(3)(a) of the Act (credit guide of credit representatives). 27B (2) The information mentioned in subparagraph 158(2)(e)(iii) or (g)(ii) or (iii) of the Act need not be included in the credit guide if:

(a) the credit guide includes a statement that the consumer may obtain information from the credit representative about: (i)

how fees and charges payable by the consumer are worked out; and

(ii) a reasonable estimate of the commission likely to be received, directly or indirectly, by the credit representative and how the commission is worked out; and (b) the credit representative has in place arrangements to make the information available when requested by the consumer. [reg 27B insrt SLI 143 of 2011 reg 3 and Sch 2[11], eff 1 Oct 2011]

COMMENTARY ON REGULATION 27B [R27B.05] Regulation 27B provides for a credit representative to include a statement on its credit guide that the method for working out the fees, charges and commission and reasonable estimate of the commission is available to the consumer upon request instead of including the information in the actual credit guide. [page 770]

Credit guide of credit representatives — contact details for an approved external dispute resolution scheme 28 For paragraph 158(3)(a) of the Act, if: (a) a credit representative is not required to be a member of an approved external dispute resolution scheme; and (b) the credit representative is not a member of an approved external dispute resolution scheme; the credit representative is not required to include in the credit representative’s credit guide the contact details for a consumer to access an

approved external dispute resolution scheme under paragraph 158(2)(h) of the Act. COMMENTARY ON REGULATION 28 [R28.05] Where a credit representative is not required to be a member of an approved external dispute resolution scheme and the credit representative is not a member of an approved dispute resolution scheme, reg 28 exempts the credit representative from providing the contact details for a consumer to access an approved external dispute resolution scheme in accordance with s 158(2)(h) and (3)(a) of the NCCP Act. This regulation applies to employers and directors who are sub-authorised as credit providers and are not required to be members of an external dispute resolution scheme pursuant to reg 16.

Circumstances where credit guide not required 28A [reg 28A rep SLI 143 of 2011 reg 3 and Sch 2[12], eff 1 Oct 2011] COMMENTARY ON REPEALED REGULATION 28A [R28A.05] Regulation 28A was moved and renumbered as reg 28P by the National Consumer Credit Protection Amendment Regulations 2011 (No 4).

Credit guide — circumstances where not required to update information 28B (1) This regulation is made for subsections 126(3), 149(3) and 160(4) and paragraphs 113(3)(a), 136(3)(a) and 158(3)(a) of the Act. 28B (2) If information contained in a credit guide changes and requires updating, the updated information, other than the information mentioned in subregulation (3), need not be included in the credit guide given to a consumer if: (a) the updated information is less than 93 days old; and (b) the consumer is given a credit guide that contains information that

was correct and in accordance with the requirements in the Act at the time it was published. 28B (3) For subregulation (2), the information is contact details for a consumer to access an approved external dispute resolution scheme, if the person is required to give those contact details. Note Regulation 28 sets out circumstances where a credit representative is not required to give contact details for a consumer to access an approved external dispute resolution scheme.

[page 771] COMMENTARY ON REGULATION 28B [R28B.05] Prior to its subsequent repeal and substitution, reg 28B was a transitional provision that ceased to have effect on 1 October 2010. Regulation 28B exempted a credit provider from ss 128(a) and 133(1)(a) of the NCCP Act (obligations of credit providers before entering into credit contracts or increasing credit limits). The exemption only applied to credit providers entering into credit contracts, where the credit was provided wholly or predominantly to purchase, refinance, renovate or improve residential property for investment purposes and the offer in relation to the contract was made before 1 July 2010 and accepted by the borrower on or after 1 July 2010. Regulation 28B now provides in relation to ss 113(3)(a), 126(3), 136(3)(a), 149(3), 158(3)(a) and 160(4) of the NCCP Act that a person who is required to provide a credit guide is not required to update the information contained in the credit guide given to a consumer if: the updated information is less than 93 days old (reg 28B(2)(a)); the information was correct and in accordance with the requirements of the NCCP Act at the time of publication (reg 28B(2)(b)); and the contact details for the person’s EDR Scheme have not changed. The Explanatory Statement explains that reg 28B is intended to allow a

credit provider to continue to provide for a limited period a credit guide that contains outdated information while they are in the process of updating that information. The “93 day” period in reg 28B(2)(a) is based on industry practice to undertake quarterly reviews of documents. Importantly, while reg 28B provides that some information may be outdated during the 93 day period in reg 28B(2)(a), reg 28B(3) clarifies that contact details for the EDR Scheme to which a person belongs must be accurate. Accordingly, the explanatory statement explains that a person required to give a credit guide must have procedures in place to ensure that customers always have access to accurate EDR information. Note: reg 28 sets out the circumstances in which a credit representative is not required to provide a consumer with contact details for an approved EDR Scheme. See [R28.05] for commentary on reg 28.

Part 3-3 — Requirements about quotes Circumstances where no quote required 28C For subsection *114(2A) or 137(2A) of the Act, the circumstances are that: (a) the licensee’s credit guide includes a statement that the licensee does not impose fees or charges on consumers for providing credit assistance and other services; or (b) both the following apply: (i)

before the licensee provides credit assistance to a consumer, the licensee does not intend to impose a fee or charge on the consumer for providing the credit assistance or other services; [page 772]

(ii) the licensee’s proposal disclosure document includes a statement that no fee or charge has been imposed on the

consumer for credit assistance and other services provided by the licensee to the consumer. *Note The reference to “114(2A) or 137(2A)” appears to be an error, the sections referred to should read “114(2)(a) or 137(2)(a)”.

COMMENTARY ON REGULATION 28C [R28C.05] Regulation 28C exempts a person providing credit assistance from the requirement in ss 114(2)(a) or 137(2)(a) of the NCCP Act to provide a quote to the consumer where the licensee will not charge the consumer for providing their service. Specifically, reg 28C provides that a quote will not be required where: a licensee’s credit guide includes a statement that the licensee does not impose fees or charges on the consumer for providing credit assistance and other services (reg 28C(a)); or where a licensee does not intend to impose a fee or charge on consumers for providing credit assistance or other services and includes a statement in its credit proposal disclosure document that no fee or charge has been imposed on the consumer for the credit assistance and/or services provided (reg 28C(b)).

Quote for providing credit assistance — licensee to give information about fees and charges 28D (1) This regulation is made for the following provisions of the Act: (a) paragraph 114(2)(f) (quote by credit assistance providers for credit contracts); (b) paragraph 137(2)(f) (quote by credit assistance providers for consumer leases). 28D (2) The information given by a licensee under paragraph 114(2)(d) or 137(2)(d) of the Act must be described as follows: (a) for each fee and each charge payable to the licensee that the licensee does not describe under paragraph (b):

(i)

identify the fee or charge as a fee or charge payable to the licensee; and

(ii) include a clear explanation of the type of fee or charge; and (iii) if the fee or charge is not a fixed amount — explain the method used for working out the amount of the fee or charge; and (iv) if the method mentioned under subparagraph (iii) is expressed as a mathematical formula — include a clear explanation of the formula with the formula; and (v) include a reasonable estimate of the maximum amount of the fee or charge, expressed as required by paragraph (c); and (vi) state how frequently the fee or charge is to be paid; and (vii) describe the circumstances when the fee or charge will or will not be payable; and Note A fee payable to a credit representative of a licensee is a fee payable to the licensee.

(b) if the fee or charge is payable to the licensee for payment to another person on the consumer’s behalf — for each fee and each charge that the licensee does not describe under paragraph (a): (i)

identify the fee or charge as a fee or charge; and

(ii) include a clear explanation of the type of fee or charge; and (iii) include a reasonable estimate of the maximum amount of the fee or charge, expressed as required by paragraph (c); and [page 773] (c) the maximum amount of each fee or each charge, if known, must be expressed in dollars or, if unknown, in one of the following ways: (i)

as a proportion of the amount borrowed or total rental payments and a dollar amount;

(ii) as a percentage of the amount borrowed or total rental payments and a dollar amount; (iii) if payable periodically — as a maximum amount for each period and as a maximum amount for the life of the credit contract or consumer lease, both as dollar amounts; and (d) include a statement that clearly identifies the amounts as a quote. 28D (3) The quote must include the maximum amount of fees or charges that will be payable by the consumer to another person, whether or not a credit contract or consumer lease is entered into. 28D (4) The information mentioned in subregulations (2) and (3) must be set out in a way that is easy for the consumer to understand without being required to do any working out or to look elsewhere for additional information. [reg 28D insrt SLI 143 of 2011 reg 3 and Sch 2[13], eff 1 Oct 2011]

COMMENTARY ON REGULATION 28D [R28D.05] Regulation 28D provides further explanation on how fees and charges payable to the licensee are to be described in a quote and requires among other things a clear explanation of the type of fee and charge and any mathematical formula used to calculate the fee. [R28D.10] The Explanatory Statement to Select Legislative Instrument 2011 No 143 states: [N]ew regulation 28D … clarifies the specific manner in which information about fees and charges must be presented and described in the quote by a credit assistance provider in relation to credit contracts and consumer leases. It requires fees and charges to be clearly identified or explained. If the maximum amount is known, it must be expressed in dollar terms either as a single figure or a range of amounts. If the maximum amount is unknown, it must be expressed as a percentage or proportion of the amount borrowed. The amendment also requires the information to be set out in a clear manner which makes it easy for a consumer to understand.

Part 3-4 — Requirements about proposal disclosure documents

[Pt 3.4 insrt SLI 143 of 2011 reg 3 and Sch 2[14], eff 1 Oct 2011]

Proposal disclosure document — information about fees and charges 28E (1) This regulation is made for the following provisions of the Act: (a) paragraph 121(2)(f) (credit proposal disclosure document of credit assistance providers for credit contracts); (b) paragraph 144(2)(e) (lease proposal disclosure document of credit assistance providers for consumer leases). [page 774] 28E (2) The information given by a licensee under paragraph 121(2)(a) or 144(2)(a) of the Act must be described as follows: (a) for each fee and each charge payable to the licensee: (i)

identify the fee or charge as a fee or charge payable to the licensee; and

(ii) include a clear explanation of the type of fee or charge; and (iii) if the fee or charge is not a fixed amount — explain the method used for working out the amount of the fee or charge; and (iv) if the method mentioned under subparagraph (iii) is expressed as a mathematical formula — include a clear explanation of the formula with the formula; and (v) include the amount of the fee or charge, expressed as required by paragraph (b); and (vi) state how frequently the fee or charge is to be paid; and (vii) describe the circumstances when the fee or charge will or will not be payable; and

Note A fee payable to a credit representative of a licensee is a fee payable to the licensee.

(b) the amount of each fee or charge must be expressed in one of the following ways: (i)

in dollars;

(ii) as a proportion of the amount borrowed or total rental payments, expressed in dollars; (iii) as a range of amounts, expressed in dollars; (iv) as a percentage of the amount borrowed or total rental payments and a dollar amount. 28E (3) The information given by a licensee, for the credit provider or lessor, and any other person about whom information must be given, under paragraphs 121(2)(c) and (d), or 144(2)(c) and (d), of the Act, must be described as follows: (a) for each fee and each charge payable to the credit provider, lessor or other person: (i)

name the person to whom the fee or charge is payable personally or on behalf of another person; and

(ii) identify the fee or charge as a fee or charge; and (iii) include a clear explanation of the type of fee or charge; and (iv) if the fee or charge is not a fixed amount — explain the method used for working out the amount of the fee or charge; and (v) if the method mentioned under subparagraph (iv) is expressed as a mathematical formula — include a clear explanation of the formula with the formula; and (vi) if the amount of the fee or charge is a reasonable estimate of the fee or charge — state that it is an estimate, and express the amount as required by paragraph (b); and (vii) state how frequently the fee or charge is to be paid; and (viii)describe the circumstances when the fee or charge will or will

not be payable; and (b) the reasonable estimate of the amount of each fee or charge must be expressed in one of the following ways: (i)

in dollars;

(ii) as a proportion of the amount borrowed or total rental payments and a dollar amount; (iii) as a range of amounts, expressed in dollars; (iv) as a percentage of the amount borrowed or total rental payments and a dollar amount. 28E (4) The licensee’s proposal disclosure document must clearly state that the consumer will be liable to pay the fees and charges. 28E (5) The information mentioned in subregulations (2) to (4) must be set out in a way that is easy for the consumer to understand without being required to do any working out or to look elsewhere for additional information. [page 775] COMMENTARY ON REGULATION 28E [R28E.05] The National Consumer Credit Protection Amendment Regulations 2011 (No 4) inserted regs 28E, 28F, 28G and 28H to clarify the proposed document disclosure obligations of credit assistance providers, mortgage managers and product designers for credit contracts and consumer leases. [R28E.10] The Explanatory Statement to Select Legislative Instrument 2011 No 143 states: Regulation 28E clarifies the manner in which information about fees and charges must be presented and described in the credit proposal document by a credit assistance provider in relation to credit contracts and consumer leases. It requires fees and charges to be clearly identified or explained, and to be expressed in dollar terms (either as a single figure, a range of amounts, or as a percentage or

proportion of the amount borrowed). The amendment also requires that the information be set out in a clear manner which makes it easy for a consumer to understand.

Proposal disclosure document — when information about fees and charges not required 28F (1) This regulation is made for the following provisions of the Act: (a) subsection 121(3A) (credit proposal disclosure document of credit assistance providers for credit contracts); (b) subsection 144(3A) (lease proposal disclosure document of credit assistance providers for consumer leases). 28F (2) The licensee’s proposal disclosure document need not contain the information mentioned in subparagraphs 28E(2)(a)(iii) to (vii) and (3)(a)(iv) to (viii) if: (a) the amount of the fee or charge has previously been disclosed in the licensee’s quote for providing credit assistance and the amount has not changed; and (b) the quote was given to the consumer no more than 30 days before the day the licensee is required to provide the consumer with the proposal disclosure document; and (c) the proposal disclosure document includes a statement with the fees and charges that the consumer should refer to the quote for more information about the fees and charges. COMMENTARY ON REGULATION 28F [R28F.05] See [R28E.05]. The Explanatory Statement to Select Legislative Instrument 2011 No 143 states: Regulation 28F clarifies the circumstances when information about fees and charges are not required in the proposal disclosure document of the credit assistance provider. Information about fees and charges is exempt where the information has already been provided in an earlier quote.

Proposal disclosure document — information about

commissions 28G (1) This regulation is made for the following provisions of the Act: (a) paragraph 121(2)(f) and subsections 121(3) and (3A) (credit proposal disclosure document of credit assistance providers for credit contracts); [page 776] (b) paragraph 144(2)(e) and subsections 144(3) and (3A) (lease proposal disclosure document of credit assistance providers for consumer leases). 28G (2) A description of the amounts of commissions must include the following: (a) for each kind of commission forming part of the total amount of commission, a detailed description of the commission, including the following: (i)

identification of each kind of commission as commission;

(ii) a clear explanation of the kind of commission; (iii) the person by whom each kind of commission is payable; (iv) the person to whom each kind of commission is payable; (v) a reasonable estimate of the amount of each kind of commission, expressed as required by paragraph (b); Example for subparagraph (ii) A commission that is a benefit described as an advertising subsidy or attendance at a conference.

(b) the reasonable estimate of the amount of each kind of commission must be expressed in one of the following ways: (i)

in dollars;

(ii) as a proportion of the amount borrowed or total rental payments and a dollar amount;

(iii) as a range of amounts, expressed in dollars; (iv) as a percentage of the amount borrowed or total rental payments and a dollar amount; (v) if the commission is in the form of a benefit — the estimated value of the benefit, expressed in dollars; (c) a reasonable estimate of the total amount of commission, expressed in dollars, likely to be received by each of the following: (i)

the licensee;

(ii) a credit representative of the licensee; (d) a reasonable estimate of the total amount of commission, expressed in dollars and based on the amounts estimated for each kind of commission forming part of the total amount of commissions. Note Commission is defined in subsection 5(1) of the Act to include any financial or other benefit in the nature of a commission.

28G (3) The information mentioned in subregulation (2) must be set out in a way that is easy for the consumer to understand without being required to do any working out or to look elsewhere for additional information. 28G (4) Information not required to be included The proposal disclosure document need not contain the information mentioned in paragraph (2)(c) for an employee or a director of the licensee (even if the employee or director is a credit representative of the licensee). 28G (5) Assumptions For this regulation, a reasonable estimate of an amount of commission may be made on the following assumptions: (a) that the consumer will enter into the credit contract or consumer lease on the terms known to the licensee as at the time the consumer is given the proposal disclosure document; (b) that the consumer will make the repayments required by the credit contract or consumer lease at the times required by the contract or lease; (c) that, for an annual percentage rate or default rate, there will be no

variation in the rate as disclosed over the whole term of the credit contract or any shorter term for which the contract applies; (d) if the credit contract provides for a change to a variable rate, that the variable rate applicable over the term for which it applies is the same as the equivalent variable rate as at the time the consumer is given the proposal disclosure document; [page 777] (e) that, if the commission, or any part of the commission, is contingent on other credit assistance provided by, or activities conducted by, the licensee, the licensee may rely on credit assistance provided, or activities conducted, previously by the licensee for a similar period of time; (f)

that the method used to estimate the commission in the proposal disclosure document will not change.

28G (6) Payments to third parties The licensee’s proposal disclosure document must state if a commission is likely to be paid by the licensee to a third party for the introduction of credit business or business proposed to be financed by the credit contract or consumer lease and, if so, must include information about: (a) the person by whom each commission is payable; and (b) the person to whom each commission is payable; and (c) the amount of commission, if known, or a reasonable estimate of the amount of commission, expressed in accordance with paragraph (2)(b). Example of a third party A commission that is payable to a real estate agent who refers a consumer to the licensee.

28G (7) The licensee’s proposal disclosure document need not contain the information mentioned in paragraph (6)(c) if:

the amount of commission is contingent on the conduct of other (a) consumers who may be referred to the licensee; and (b) the proposal disclosure document includes information about factors contributing to the amount of commission payable by the consumer. 28G (8) Volume bonus arrangements The licensee’s proposal disclosure document must set out a reasonable estimate of the maximum amount of commission likely to be received by the licensee in relation to the credit contract or consumer lease that will result from a volume bonus arrangement. COMMENTARY ON REGULATION 28G [R28G.05] See [R28E.05]. The Explanatory Statement to Select Legislative Instrument 2011 No 143 states: Regulation 28G clarifies how information about commissions, including referral commissions and commissions from volume bonus arrangements, that must be set out in the credit proposal disclosure document. This includes estimates of the reasonable amount of commission and descriptions of the amounts of commission. The regulations also outline assumptions that will assist in calculating the commission. Finally, the regulations provide two exemptions. Firstly, specific amounts of commission do not need to be disclosed if the commission is payable under a referral arrangement and the amount depends on the overall number of referrals in a period. Secondly, credit assistance providers are exempt from having to disclose commission payable to employees or directors.

Proposal disclosure documents — when information about commissions not required 28H (1) This regulation is made for the following provisions of the Act: (a) subsection 121(3A) (credit proposal disclosure document of credit assistance providers for credit contracts); [page 778] (b) subsection 144(3A) (lease proposal disclosure document of credit assistance providers for consumer leases).

28H (2) Mortgage managers Subregulation (3) applies to commission worked out on the difference between the interest rate charged to the mortgage manager by the credit provider or lessor and the interest rate payable by the consumer. 28H (3) The information mentioned in subparagraph 28G(2)(a)(v) and paragraphs 28G(2)(c) and (d) need not be included for the commission in the mortgage manager’s proposal disclosure document if all of the following apply: (a) the mortgage manager provided credit assistance to the consumer in relation to a managed contract; (b) the mortgage manager told the consumer: (i)

about the mortgage manager’s written agreement with the credit provider, lessor or third party; and

(ii) that the mortgage manager is not acting for the consumer in relation to the managed contract; (c) the maximum cost of the managed contract at the time the mortgage manager provides the credit assistance, and the interest rate to be charged, are published on the credit provider’s or lessor’s website; (d) the mortgage manager cannot increase the interest rate above the interest rate that is published under paragraph (c). 28H (4) Product designers A product designer’s proposal disclosure document need not include the information mentioned in subparagraph 28G(2)(a)(v) and paragraphs 28G(2)(c) and (d) for commission worked out in relation to the net profit from operating the pool of funds from which credit contracts or consumer leases are provided. 28H (5) Trail commissions For trail commission that is payable in more than one instalment, the licensee’s proposal disclosure document need not contain the information mentioned in subparagraph 28G(2)(a)(v) or paragraph 28G(2)(c) if: (a) the proposal disclosure document includes a reasonable estimate of

the highest instalment of trail commission the licensee can expect to receive; and (b) the highest instalment of trail commission is expressed in accordance with paragraph 28G(2)(b); and (c) the following assumptions apply to the calculation of the highest instalment of trail commission: (i)

the assumptions mentioned in subregulation 28G(5); or

(ii) other assumptions set out in the licensee’s proposal disclosure document. COMMENTARY ON REGULATION 28H [R28H.05] See [R28E.05]. The Explanatory Statement to Select Legislative Instrument 2011 No 143 states: Regulation 28H clarifies the circumstances when information about commissions is not required in the proposal disclosure document of a credit assistance provider. The amendment outlines exemptions for mortgage managers, product manufacturers and a specific exemption for trail commissions. If the conditions are satisfied, mortgage managers and product manufacturers will not need to include reasonable estimates of the amounts of each kind of commission, or reasonable estimates of the total amount of commissions. In addition, estimates of the total amount of trail commissions do not need to be disclosed if information about the amount of the highest single payment of trail commission payable is disclosed.

[page 779]

Part 3-5 — Other obligations Reverse mortgages — credit assistance providers and credit providers to make reasonable inquiries 28HA (1) This regulation is made for the purposes of the following provisions of the Act: (a) section 115 (obligations of credit assistance providers before providing credit assistance for credit contracts);

(b) section 128 (obligations of credit providers before entering credit contracts or increasing credit limits). 28HA (2) For the purposes of paragraphs 117(1)(d) and 130(1)(d) of the Act, if the credit to be provided under the credit contract will be used to secure a reverse mortgage over a dwelling or land, the licensee must make reasonable inquiries about the consumer’s requirements and objectives in meeting possible future needs, including: (a) a possible need for aged care accommodation; and (b) whether the consumer prefers to leave equity in the dwelling or land to the consumer’s estate. Note: The licensee’s inquiries about the consumer’s requirements and objectives are not necessarily limited to the matters referred to in paragraphs (2)(a) and (b). [s 28HA insrt SLI 85 of 2013 s 4 and Sch 2 item 1, eff 1 June 2013]

COMMENTARY ON REGULATION 28HA [R28HA.05] In relation to a credit contract for a reverse mortgage, credit assistance providers and credit providers will be required to make reasonable inquiries about a consumer’s requirements and objectives in meeting future needs (NCCP Act ss 115 and 128). These additional inquiries must include, but are not limited to, a possible need for aged care accommodation expenses and whether the consumer prefers to leave the equity in their home to their estate. These additional inquiries will require credit licensees to discuss with reverse mortgage applicants not only the short-term effects of the reverse mortgage, but also how the loan may affect the debtor’s options as they age, or impact on the amount of equity they can leave to their estate. This will allow reverse mortgage applicants to better balance the short-term need to access the equity in their home against the long-term impacts of reducing their home equity. Although there is no certainty about the amount of equity that may exist at any point in the future, the intention of this provision is to require opening a discussion of possible future needs with the consumer, and the outcome of that conversation would reflect this uncertainty.

(Source: Explanatory Statement to Select Legislative Instrument 2011 No 143) [R28HA.10] See also commentary at [R28LC.10]. [page 780]

Obligations of credit providers before entering credit contracts or increasing credit limits 28J For section 128 of the Act, if: (a) the credit to be provided under the credit contract will be used for the purchase of a residential property; and (b) the credit will be secured by a mortgage over the property; the period is 120 days. Note Section 128 of the Act provides that a licensee must not enter into a credit contract with a consumer, or increase the credit limit of a credit contract with a consumer, on a day unless the licensee has, within 90 days (or other period prescribed by the regulations) before the day, made an unsuitability assessment and made particular inquiries and verification.

COMMENTARY ON REGULATION 28J [R28J.05] Where credit provided under a credit contract will be used for the purchase of residential property and the credit will be secured by a mortgage over that property, reg 28J modifies s 128 of the NCCP Act (obligations of credit providers before entering credit contracts or increasing credit limits) by increasing the time required to obtain an unsuitability assessment from within 90 days to within 120 days.

Inquiries about credit limit 28JA For paragraph 130(1)(d) of the Act, a licensee must make reasonable inquiries about the maximum credit limit that a consumer requires.

[reg 28JA insrt SLI 201 of 2011 reg 3 and Sch 1[1], eff 1 July 2012]

COMMENTARY ON REGULATION 28JA [R28JA.05] Regulation 28JA is an additional step to meet responsible lending obligations under s 130 of the NCCP Act. A credit card provider must ask a prospective debtor what credit limit they require when applying for a credit card. The credit provider is not required to provide that full amount, but must not offer a higher credit limit. [Editorial note: Regulation 28K was relocated and renumbered to reg 28Q by the National Consumer Credit Protection Amendment Regulations 2011 (No 4).]

Manner of giving disclosure documents 28L (1) This regulation is made for the following provisions of the Act: (a) subsection 113(4) (credit guide of credit assistance providers in relation to credit contracts); (b) subsection 114(3) (quote by credit assistance providers in relation to credit contracts); (c) subsection 121(4) (credit proposal disclosure document of credit assistance providers in relation to credit contracts); (d) subsection 126(4) (credit guide of credit providers in relation to credit contracts); (e) subsection 127(4) (credit guide of assignee credit providers in relation to credit contracts); (f)

subsection 136(4) (credit guide of credit assistance providers in relation to consumer leases);

(g) subsection 137(3) (quote by credit assistance providers in relation to consumer leases); [page 781] (h) subsection 144(4) (lease proposal disclosure document of credit

assistance providers in relation to consumer leases); (i)

subsection 149(4) (credit guide of lessors in relation to consumer leases);

(j)

subsection 150(4) (credit guide of assignee lessors in relation to consumer leases);

(k) subsection 158(4) (credit guide of credit representatives); (l)

subsection 160(5) (credit guide of debt collectors).

(m) section 18 of Schedule 1 (credit provider’s contract document). 28L (2) In this regulation: licensee includes a person who is a credit representative of a licensee. 28L (3) A licensee may, with the consent of the consumer, give a disclosure document to the consumer by: (a) making the document available for a reasonable period on the licensee’s information system for retrieval by electronic communication by the consumer; and (b) promptly notifying the consumer by electronic communication that the document is available for retrieval on that information system and the nature of document; and (c) providing the consumer with the ability to retrieve the document by electronic communication. 28L (4) A consumer may consent to the giving of documents by electronic communication only after being told that, if consent is given: (a) paper documents may no longer be given; and (b) electronic communications must be regularly checked for documents; and (c) consent to the giving of documents by electronic communication may be withdrawn at any time. 28L (5) If a disclosure document is given by sending it to a nominated

electronic address or in a manner described in this regulation: (a) it must be in a format that allows it to be saved to an electronic file and to be printed; and (b) at the time it was sent or was made available on the licensee’s information system, it would have been reasonable to expect that the intended recipient would be able to save it to an electronic file and print it. 28L (6) If a disclosure document is not given to a consumer personally, or to a person acting on the consumer’s behalf, the licensee must be reasonably satisfied that the consumer has received the disclosure document before engaging in further credit activities in relation to the consumer’s credit contract or consumer lease. 28L (7) For subregulation (6), a person is not acting on the consumer’s behalf if the person is engaging in credit activities. 28L (8) The licensee may be reasonably satisfied that a consumer has received a disclosure document (unless the consumer advises the licensee otherwise): (a) if the disclosure document is a credit guide and was made available to the consumer for retrieval on the licensee’s information system — when the consumer tells the licensee that he or she has accessed the document on the information system; or (b) in any other case — if the disclosure document was properly addressed to the consumer and sent to that address (including an electronic address or fax number). 28L (9) Two or more disclosure documents may be combined in a single document only if all other requirements of the Act and these Regulations are met. COMMENTARY ON REGULATION 28L [R28L.05] Regulation 28L provides that a licensee (which includes a person

who is a credit representative of a licensee) can provide a disclosure document to [page 782] a consumer electronically if the requirements in reg 28L are met and the consumer consents to the document being delivered this way. The explanatory statement explains that the intended effect of reg 28L is to provide a level of flexibility in allowing disclosing entities to provide disclosure documents in a manner that suits their business structure. Accordingly, under reg 28L a licensee or credit representative may give a disclosure document by: sending it to a nominated electronic address (that is, email) (reg 28L(5)); or by making it available for retrieval electronically by a consumer from a website or other information system if they notify the consumer by electronic communication of the nature of the document and that it is available for retrieval (reg 28L(3)); provided in each case that: the consumer consents to the giving of the credit guide in this way (reg 28L(3)); before that consent is given, the consumer is told the matters in reg 28L(4)(a)–(c); the credit guide is in a format that allows it to be saved to an electronic file and to be printed and, at the time it was sent or made available, it would have been reasonable to expect that the consumer would be able to save and print the document(s) (reg 28L(5)); and the licensee (or credit representative) is reasonably satisfied that the consumer has received the disclosure document (reg 28L(6) or (8)).

In addition to the above, reg 28L(9) provides that two or more disclosure documents may be combined in a single document, but only if all other requirements of the NCCP Act and NCCP Regulations are met. [R28L.10] Variations to regulation 28L Regulation 28L(1) lists the provisions of the NCCP Act under which the regulation is made. However, the Explanatory Statement for Class Order 10/1230, which amends reg 28L, states that although the list in reg 28L(1) includes s 18 of the NCC (credit provider’s contract document) at reg 28L(1)(m), s 18 does not refer to precontractual disclosure. Consequently, the Explanatory Statement explains that “regulation 28L has no operation in relation to precontractual disclosure, and [only] inadvertently refers to the credit provider’s contract document, to which 28L does not apply”. This effect is said in the Explanatory Statement to have been “unintended”. Consequently, the Explanatory Statement provides that due to the above and “drafting anomalies” which resulted in reg 28L not being reflective of its policy intent, the regulation has been amended by Class Order 10/1230 to ensure that’ “a credit provider may give a precontractual disclosure in the same manner as other disclosure documents under reg 28L”. Accordingly, Class Order 10/1230 now omits reg 28L(1)(m) which refers to “s 18 of Schedule 1 (credit provider’s contract document)” to remove any potential doubt as to the operation of reg 28L. To give effect to the objective that a credit provider may give a precontractual disclosure document in the same manner as in reg 28L, the Class Order enables “the credit provider to choose to comply with the equivalent requirements to reg 28L set out in the Class Order” by providing an exemption for a credit [page 783] provider from the operation of s 16(1) of the Code (regarding precontractual disclosure) if certain conditions are met. This variation is intended “to permit the credit provider to give disclosure documents to consumers in a manner consistent with their other disclosure obligations”. However, the Explanatory

Statement states that if a credit provider does not comply with the exemption outlined in CO 10/1230, s 16 of the Code and the requirements under the Electronic Transactions Regulations will continue to apply. [R28L.15] Disclosure document Note that “disclosure document” is defined in reg 26 to include a credit guide, a credit proposal disclosure document, a lease proposal disclosure document and a quote required to be given under Ch 3 of the NCCP Act. Importantly, the definition of “disclosure document” has also been amended by Class Order 10/1230 to omit paragraph (e) from the definition due to its potential to mislead.

Standard home loans 28LA For subsection 133AA(2) of the Act, a standard form of credit contract is a contract for a home loan that: (a) is described in the table; and (b) obliges the consumer to make repayments that repay principal and interest for the full term of the home loan. Item 1 2

Type of loan Variable rate home loan Fixed rate home loan

Characteristics The interest rate on the entire loan balance may vary at the lender’s discretion The interest rate on the entire loan balance is fixed for the whole or part of the loan

[reg 28LA insrt SLI 165 of 2011 reg 3 and Sch 1[2], eff 1 Jan 2012]

COMMENTARY ON REGULATION 28LA [R28LA.05] Regulation 28LA sets out how to determine if a credit contract is a standard form credit contract and consequently whether a key facts sheet must be provided under the NCCP Act. This is a home loan for which repayments require the payment of both principal and interest for the term of the loan. It must be either a variable rate, fixed rate, “honeymoon” rate or a discounting rate home loan. The Explanatory Statement to Select Legislative Instrument 2011 No 165

states: The purpose of the Key Facts Sheet is to provide potential home loan [debtors] with information about home loans in a consistent format so they can more easily compare different home loans. ASIC may use its discretionary powers under the [NCCP] Act to exempt, on a case by case basis, home loan products which are not ordinarily available to typical home loan [prospective debtors] when shopping around for a home loan (and therefore would be unlikely to be considered by typical home loan [prospective debtors] when comparing other home loans) and where the [credit provider] would not be able to produce the home loan due to the specific characteristics of the home loan, such as the interest rate could not be determined until a loan application is submitted.

[page 784]

Key Facts Sheets 28LB (1) For section 133AB of the Act, Schedule 5 sets out: (a) the Key Facts Sheet for a standard home loan; and (b) requirements for how the information in a Key Facts Sheet is to be prepared for a particular consumer and loan. 28LB (2) A Key Facts Sheet that is given to a consumer or published online must meet the following requirements: (a) the Key Facts Sheet must be in A4 size; (b) all text in the Key Facts Sheet must be black on a white background, unless otherwise specified in this regulation; (c) the text, except the heading, in the ‘Description of this home loan’ box must be black on a light blue background; (ca) the text in the second row of the ‘Estimated cost of this home loan’ box must be black on a light blue background; (d) the headings to all boxes must be white on a blue background; (e) all other headings must be blue on a white background. [subreg (2) am SLI 117 of 2012 reg 3 and Sch 1[1], eff 19 June 2012]

28LB (3) However, if a lender is not able to print the Key Facts Sheet using a

colour printer, the lender may print a Key Facts Sheet in black and white. [reg 28LB insrt SLI 165 of 2011 reg 3 and Sch 1[2], eff 1 Jan 2012]

COMMENTARY ON REGULATION 28LB [R28LB.05] Regulation 28LB sets out the requirements for a key facts sheet (KFS). If a credit provider cannot print a KFS in colour, then they may print it in black and white. The regulation outlines the requirements for how a KFS must be presented to a prospective debtor in paper form or published online. Schedule 5 sets out the model KFS. The Explanatory Statement to Select Legislative Instrument 2011 No 165 outlines: Part 1 is the Model of the Key Facts Sheet. It outlines the words that must be present in a Key Facts Sheet and the information that must be given to the consumer. The Key Facts Sheet is provided to potential consumers to assist them in comparing the cost and other features of home loans. Key features of the Key Facts Sheet document include: the date the Key Facts Sheet is produced and the lender’s logo; a disclaimer advising that the Key Facts Sheet is not a formal offer of credit from the lender; information provided by the consumer such as the preferred loan amount and loan term; description of the home loan including the repayment method, repayment frequency, interest rate, and the personalised comparison rate; estimated cost of the home loan including the total amount to be paid back, the cost of the loan for each $1 borrowed, establishment and ongoing fees, and monthly and annual repayments; a paragraph describing how consumers can shop around for the best deals; and further information about the Key Facts Sheet on the next page including an explanation of the personalised comparison rate. Other information that may be required in the Key Facts Sheet are: for loans where the interest rate may vary at any time during the loan contract — information about what happens to repayments when interest rates increase;

[page 785] for fixed rate loans — information about what happens to repayments at the end of a fixed rate period; and for loans where additional repayments may be made — information about how to repay the home loan faster. Part 2 sets out information about how to prepare a KFS.

Reverse mortgages — presumption of unsuitability of credit contract if certain loan to value ratios exist 28LC (1) This regulation: (a) is made for the purposes of the following provisions of the Act: (i)

paragraph 164(d);

(ii) paragraph 118(2)(c) (when the credit contract must be assessed as unsuitable — entering the contract or increasing the credit limit), as modified by subregulation (2); (iii) paragraph 123(2)(c) (prohibition on suggesting or assisting consumers to enter, or increase the credit limit under, unsuitable credit contracts), as modified by subregulation (3); (iv) paragraph 131(2)(c) (when credit contract must be assessed as unsuitable), as modified by subregulation (4); (v) paragraph 133(2)(c) (prohibition on entering, or increasing the credit limit of, unsuitable credit contracts), as modified by subregulation (5); and (b) sets out circumstances in which a credit contract is unsuitable. 28LC (2) Modifications of Act For the purposes of paragraph 164(d) of the Act, the provisions to which Part 3-7 of the Act applies apply as if paragraph 118(2)(c) of the Act were varied to read: “(c) if the regulations prescribe circumstances in which a credit contract is: (i)

unsuitable; or

(ii) unsuitable unless the contrary is proved; those circumstances will apply to the contract;”. 28LC (3) For the purposes of paragraph 164(d) of the Act, the provisions to which Part 3-7 of the Act applies apply as if paragraph 123(2)(c) of the Act were varied to read:

if the regulations prescribe circumstances in which a credit contract “(c) is: (i)

unsuitable; or

(ii) unsuitable unless the contrary is proved; those circumstances will apply to the contract;”. 28LC (4) For the purposes of paragraph 164(d) of the Act, the provisions to which Part 3-7 of the Act applies apply as if paragraph 131(2)(c) of the Act were varied to read: “(c) if the regulations prescribe circumstances in which a credit contract is: (i)

unsuitable; or

(ii) unsuitable unless the contrary is proved; those circumstances will apply to the contract;”. 28LC (5) For the purposes of paragraph 164(d) of the Act, the provisions to which Part 3-7 of the Act applies apply as if paragraph 133(2)(c) of the Act were varied to read: “(c) if the regulations prescribe circumstances in which a credit contract is: (i)

unsuitable; or [page 786]

(ii) unsuitable unless the contrary is proved; those circumstances will apply to the contract;”. 28LC (6) Circumstances A circumstance in which a credit contract is unsuitable unless the contrary is proved is that: (a) the credit contract is part of an arrangement that is a reverse mortgage; and

(b) at the time the credit contract is entered into, the youngest borrower under the reverse mortgage is 55 or younger; and (c) the loan to value ratio of the mortgage is higher than 15%. 28LC (7) A circumstance in which a credit contract is unsuitable unless the contrary is proved is that: (a) the credit contract is part of an arrangement that is a reverse mortgage; and (b) at the time the credit contract is entered into, the youngest borrower under the reverse mortgage is older than 55; and (c) the loan to value ratio of the mortgage is the sum of; (i)

15%; and

(ii) 1% for each year that the borrower is older than 55. Note: Examples of unsuitable loan to value ratios are: (a) if the youngest borrower is 60, a loan to value ratio that exceeds 20% is unsuitable unless the contrary is proved; and (b) if the youngest borrower is 70, a loan to value ratio that exceeds 30% is unsuitable unless the contrary is proved.

28LC (8) In this regulation: loan to value ratio, in relation to a reverse mortgage over a reverse mortgaged property, is:

where: A

is the amount of credit owed under the credit contract for the reverse mortgage.

B

is the value of the reverse mortgaged property.

[s 28LC insrt SLI 85 of 2013 s 4 and Sch 2 item 2, eff 1 June 2013]

COMMENTARY ON REGULATION 28LC [R28LC.05] Regulation 28LC prescribes when a credit contract for a reverse

mortgage is presumed to be unsuitable for the purposes of ss 118(2)(c) and 131(2)(c) or is presumed to be unsuitable for the purposes of ss 123(2)(c) and 133(2)(c) of the NCCP Act. A contract is presumed to be unsuitable if the loan to value ratio under the loan would exceed the prescribed amount when the loan is entered into. The prescribed amounts are: if the youngest debtor is 55 years or younger — 15%; if the youngest debtor is over 55 years — 15% plus 1% for each year the debtor is over 55. The use of a presumption allows reverse mortgage credit providers some flexibility to negotiate the loan to value ratio with a debtor and provide a loan to value ratio higher than those prescribed if they have sufficient reason (and evidence) that the higher ratio meets the debtor’s requirements and objectives. For example, a reverse mortgage is provided to a debtor at age 65 with a loan to value ratio of 25% (allowed under the prescribed amounts). When the debtor is 70, [page 787] they require an amount to fix their roof. While the value of their house has risen, so has the amount of their mortgage, and the amount required to fix the roof would exceed the prescribed allowed loan to value ratio. A further lump sum could be provided to the debtor to fix the roof if evidence is provided of the need for this amount, that the debtor is aware of the higher ratio, and in this instance, is not intending to leave a substantial amount of equity to their estate. (Source: Explanatory Statement to Select Legislative Instrument 2013 No 85) [R28LC.10] Regulation 28LC was introduced by the National Consumer Credit Protection Amendment Regulation 2013 (No 2). The Regulation also

introduced the following new regulations: regs 28LD, 28HA, 28LE and 110A. The Explanatory Statement (see [R28LC.05]) provides: Specifically, the regulation: introduces additional responsible lending obligations so that a credit licensee’s assessment of whether or not a reverse mortgage is unsuitable must include reasonable inquiries about the borrower’s potential future needs; introduces a presumption that a reverse mortgage is unsuitable if it involves a loan to value ratio (calculated by dividing the amount of credit owed under the credit contract for the reverse mortgage by the value of the reverse mortgaged property x 100) above those prescribed (depending upon the borrower’s age); prescribes the methods via which credit licensees can provide a consumer with the projections of their home equity; prescribes the reverse mortgage information statement (which must be given to all consumers before the licensee makes a preliminary assessment in connection with a reverse mortgage); prescribes the form of disclosure that must be given to a borrower if a credit contract for a reverse mortgage does not provide protections for persons who are not borrowers to reside in the mortgaged property; and prescribes how credit providers must keep records of nomination and withdraws of a borrower’s consent for a person to reside in the mortgaged property.

Small amount credit contracts — requirements for warning on licensee’s premises 28XXA (1) For paragraphs 124B(1)(a) and 133CB(1)(a) of the Act: (a) any premises from which a licensee engages in credit activities is prescribed; and

any premises from which the licensee engages in credit activities (b) must display a warning; and (c) the warning must: (i)

be as set out in Schedule 7; and

(ii) be in poster form; and (iii) be A4 in size; and (iv) unless otherwise illustrated in Schedule 7, be in typeface that is: (A) 18 points in size; and (B) in bold font; and (v) include the word ‘WARNING’: (A) printed at the top of the poster; and (B) in bold font; and (vi) include the words ‘Do you really need a loan today?’: [page 788] (A) printed immediately below the word ‘WARNING’; and (B) in typeface that is 36 points in size; and (C) in bold font; and (vii) include the words ‘This statement is an Australian Government requirement under the National Consumer Credit Protection Act 2009’: (A) printed at the bottom of the poster; and (B) in typeface that is 8 points in size; and (d) unless the licensee is prohibited, by the owner of the premises or under any requirement relating to the premises, from displaying a notice on the point of public entry, or a front window, of the

premises: (i)

the warning must be displayed on the point of public entry or a front window; and

(ii) if the warning is displayed on a front window, it must be displayed as close as practicable to the point of public entry; and (iii) the warning must be visible before entering the premises; and (e) the warning must also be displayed in an area inside the premises where it is visible from the location at which a consumer would deal with the licensee or a representative of the licensee. 28XXA (2) If the premises: (a) are not enclosed; or (b) are of a kind where a consumer can approach the licensee, or a representative of the licensee, without going through a door; the warning must be displayed so that it is visible on a counter, desk, table or other item of furniture at which the licensee or a representative of the licensee would deal with the consumer. Examples 1

A stand at an exhibition.

2

An open booth in a shopping centre.

[s 28XXA insrt SLI 314 of 2012 s 3 and Sch 1[1], eff 1 Mar 2013]

COMMENTARY ON REGULATION 28XXA [R28XXA.05] Regulation 28XXA was introduced by the National Consumer Credit Protection Amendment Regulation 2012 (No 4). It relates to small amount credit contracts (SACCs). The Explanatory Statement to Select Legislative Instrument 2012 No 314 provides: Schedule 1 — Amendments commencing on 1 March 2013 [Regulation 28XXA] inserts a requirement for licensees to display a warning on the licensee’s premises, or on the licensee’s website, or read a warning to a consumer for licensees where they are communicating by telephone. The obligation applies to licensees who meet the criteria in ss 124B

and 133CB of the National Consumer Credit Protection Act 2009 (Credit Act), and modified ss 124BA and 133CBA (as included in Item 1). The intention behind the insertion of Item 1 is for a consumer to be made aware of the alternatives to a small amount credit contract that may be available before he or she applies for credit. The disclosure will alert consumers to alternatives that may avoid the need to enter into a small amount credit. Repeated or continued use of credit provided through these small amount credit contracts can result in consumers entering into multiple contracts where their overall indebtedness increases over time, with a consequent serious impact on their financial position. The insertion of regulation 28XXA requires licensees to display a warning, in the form set out in Schedule 7, at the point of public entry or front window and in an area inside

[page 789] the premises where it is immediately visible upon entering the licensee’s premises from which a licensee engages in credit activities. For licensees whose premises are not enclosed (such as an open booth at a shopping centre) the regulation imposes similar warning requirements, addressing the need to specify a different location for the notice. The regulation specifies the size of the warning notice as 18 points in size, except as otherwise illustrated in Schedule 7; in practice this means the body of the information in Schedule must be 18 points in size.

[R28XXA.10] Forms The National Consumer Credit Protection Amendment Regulation 2012 (No 4) amendments introduce new forms. The Explanatory Statement to Select Legislative Instrument 2012 No 314 states: Schedule 7 would set out the warning that would be required under regulation 28XXA about small amount credit contracts that must be displayed at the licensee’s premises. Schedule 8 would set out the warning that would be required under proposed regulation 28XXB. Schedule 9 would set out the statement that must be provided for an employer authorisation under proposed regulation 28XXE. Note in the fact the forms and their numbers are as follows: Schedule 7 — SACC warning on premises (reg 28XXA) Schedule 8 — hyperlink (reg 28XXB) Schedule 9 — SACC website warning (reg 28XXB)

Schedule 10 — employer authorisation (reg 29XXE)

Small amount credit contracts — requirements for warning on licensee’s website 28XXB For paragraphs 124B(1)(b) and 133CB(1)(b) of the Act, the requirements for a licensee’s website are as follows: (a) a hyperlink, in the form of a boxed icon and the words ‘Warning about Borrowing’, must appear on the homepage and any webpage which contains information about the benefits or characteristics of small amount credit contracts and be displayed in a size that is not smaller than it would appear on the webpage using Arial font and 12 points in size; (b) the hyperlink must be in the form shown in Schedule 8; (c) the hyperlink must open a warning; (d) the warning must: (i)

be as set out in Schedule 9; and

(ii) use the typeface known as Arial; and (iii) unless otherwise illustrated in Schedule 9, be displayed in a size that is not smaller than it would appear on the webpage using Arial font and 10 points in size; and (iv) include the words ‘WARNING — Do you really need a loan today?’: (A) at the start of the warning; and (B) in bold font; and (v) include the words ‘This statement is an Australian Government requirement under the National Consumer Credit Protection Act 2009’, displayed in a size that is not smaller than it would appear on the webpage using Arial font and 8 points in size; (e) an identical warning must immediately appear when a person clicks

on an access point or link that would take the person to a webpage where the person can apply for a small amount credit contract; [page 790] (f)

an application form for a small amount credit contract must not be able to be accessed until the identical warning is closed or acknowledged.

Example for paragraph (f) The acknowledgement can be done by clicking on a ‘progress with application’ button offered on the page. [s 28XXB insrt SLI 314 of 2012 s 3 and Sch 1[1], eff 1 Mar 2013]

COMMENTARY ON REGULATION 28XXB [R28XXB.05] Regulation 28XXB was introduced at the same time as reg 28XXA (see [R28XXA.05]. It relates to SACCs and requires a licensee to display a hyperlink, in the form set out in Sch 8 to the regulations, to a warning that must be in the form of Sch 9 to the regulations (the warning would be on the web page setting out the benefits of the SACC).

Credit assistance in relation to small amount credit contracts — requirements for warning during telephone contact 28XXC (1) For section 164 of the Act, the provisions to which Part 3-7 of the Act applies apply as if Division 7 of Part 3-1 of the Act were modified by inserting the following section after section 124B: Licensee who makes representations about credit assistance in relation to small amount credit contracts must give information by telephone 124BA (1) Requirement If: (a) a licensee represents that the licensee provides, or is able to provide, credit assistance to consumers in relation to small amount credit contracts; and (b) a consumer communicates with the licensee by telephone in relation to the credit

assistance; and (c) the licensee reasonably believes that the consumer has not, in the previous 30 days, sighted the warning referred to in either regulation 28XXA or 28XXB of the National Consumer Credit Protection Regulations 2010 as a result of visiting premises from which the licensee engages in credit activities or as a result of using a website of the licensee; the licensee must give information in accordance with the regulations as part of dealing with the consumer and comply with any other requirements prescribed in the regulations. Civil penalty: 2,000 penalty units. Note: If the consumer has visited premises from which the licensee engages in credit activities, or used a website of the licensee, the consumer should already have seen a consumer warning required by this Act. 124BA (2) Offence A person commits an offence if: (a) the person is subject to a requirement under subsection (1); and (b) the person engages in conduct; and (c) the conduct contravenes the requirement. Criminal penalty: 50 penalty units.

28XXC (2) For subsection 124BA(1) of the Act, as modified by subregulation (1): (a) the licensee must: (i)

read the statement: ‘It is an Australian Government requirement to provide you with the following information’; to the consumer as part of the telephone communication mentioned in that subsection; and [page 791]

(ii) read the text of the warning in Schedule 7, except for the sentence: ‘This statement is an Australian Government requirement under the National Consumer Credit Protection Act 2009’; to the consumer as part of the telephone communication mentioned in that subsection; and

(iii) send the consumer the warning in Schedule 9; and (iv) reasonably believe that the consumer has received the warning mentioned in subparagraph (iii) before providing credit assistance in relation to a small amount credit contract; and (b) the licensee must not provide credit assistance to the consumer, as a result of the telephone communication, if the licensee has not been able to comply with paragraph (a). [s 28XXC insrt SLI 314 of 2012 s 3 and Sch 1[1], eff 1 Mar 2013]

COMMENTARY ON REGULATION 28XXC [R28XXC.05] See also commentary on regs 28XXA and 28XXB. The Explanatory Statement to Select Legislative Instrument 2012 No 314 provides: The insertion of regulation 28XXC requires a warning to be read to a consumer before a licensee can provide credit assistance. Similar requirements are inserted in regulation 28XXD in relation to a licensee before they enter into, or offer to enter into a small amount credit contract. Both 28XXC and 28XXD would amend the [NCCP] Act to insert a requirement where a licensee is communicating by telephone, and where, in general terms, the consumer would not access the warning through a visit to a licensee’s premises or website.

Small amount credit contracts — requirements for warning during telephone contact 28XXD (1) For section 164 of the Act, the provisions to which Part 3-7 of the Act applies apply as if Division 2 of Part 3-2C of the Act were modified by inserting the following section after section 133CB: Licensee who makes representations about small amount credit contracts must give information by telephone 133CBA (1) Requirement If: (a) a licensee represents that the licensee enters into, or is able to enter into, small amount credit contracts with consumers under which the licensee would be the credit provider; and (b) a consumer communicates with the licensee by telephone in relation to a small amount credit contract of that kind; and (c) the licensee reasonably believes that the consumer has not, in the previous 30 days, sighted the warning referred to in either regulation 28XXA or 28XXB of the

National Consumer Credit Protection Regulations 2010 as a result of visiting premises from which the licensee engages in credit activities or as a result of using a website of the licensee; the licensee must give information in accordance with the regulations as part of dealing with the consumer and comply with any other requirements prescribed in the regulations. Civil penalty: 2,000 penalty units. Note: If the consumer has visited premises from which the licensee engages in credit activities, or used a website of the licensee, the consumer should already have seen a consumer warning required by this Act. 133CBA (2) Offence A person commits an offence if: (a) the person is subject to a requirement under subsection (1); and

[page 792] (b) the person engages in conduct; and (c) the conduct contravenes the requirement. Criminal penalty: 50 penalty units.

28XXD (2) For subsection 133CBA(1) of the Act, as modified by subregulation (1): (a) the licensee must: (i)

read the statement: ‘It is an Australian Government requirement to provide you with the following information’; to the consumer as part of the telephone communication mentioned in that subsection; and

(ii) read the text of the warning in Schedule 7, except for the sentence: ‘This statement is an Australian Government requirement under the National Consumer Credit Protection Act 2009’; to the consumer as part of the telephone communication mentioned in that subsection; and (iii) send the consumer the warning in Schedule 9; and

(iv) reasonably believe that the consumer has received the warning mentioned in subparagraph (iii) before providing credit assistance in relation to a small amount credit contract; and (b) the licensee must not provide credit assistance to the consumer, as a result of the telephone communication, if the licensee has not been able to comply with paragraph (a). [s 28XXD insrt SLI 314 of 2012 s 3 and Sch 1[1], eff 1 Mar 2013]

COMMENTARY ON REGULATION 28XXD [R28XXD.05] See commentary on reg 28XXC.

Authorisation for deduction 28XXE (1) For subsection 160E(2) of the Act, a kind of credit contract or consumer lease is any credit contract or consumer lease under which a credit provider or lessor intends to give an employer an instrument as described in subsection 160E(1) of the Act. Note Subsection 160E(2) of the Act relates to credit contracts or consumer leases of a kind prescribed by the regulations.

28XXE (2) For subsection 160E(2) of the Act, the form of statement is set out in Schedule 10. Note Schedule 10 sets out the statement within a form of document that a credit provider or lessor may use as the instrument authorising the employer to pay amounts directly to the credit provider or lessor. To comply with the Act, the statement must comply with Schedule 10 whether or not the credit provider or lessor chooses to use the document as the formal instrument. [s 28XXE insrt SLI 314 of 2012 s 3 and Sch 1[1], eff 1 Mar 2013]

COMMENTARY ON REGULATION 28XXE [R28XXE.05] The Explanatory Statement to Select Legislative Instrument 2012 No 314 states: Regulation 28XXE, also included in Item 1 [of Sch 1], specifies, pursuant to subsection 160E(2) of the Credit Act, the written disclosure required to be provided by a credit provider or lessor may use as the instrument to be given to the employer where

[page 793] the debtor or lessee authorises the employer to make deductions from their salary or wages for the purpose of making payments to the credit provider or lessor. The disclosure assists consumers to be better informed about the terms of an arrangement to pay directly from their salary or wages. It addresses practices such as credit providers arranging for the consumer to sign a blank payment authority, and then only completing the amount to be deducted following default by the consumer; the credit provider may then use the form to seek payment from the employer of an amount including default charges that is higher than the repayments under the contract. This can cause short-term hardship to the consumer. To comply with the Act, the statement must be given in the prescribed form in Schedule 10, whether or not the credit provider or lessor chooses to use the document as the formal instrument required under subsection 160E(1) of the [NCCP] Act.

Unsuitable credit contracts — prescribed circumstances 28XXF (1) This regulation is made for the following provisions of the Act: (a) paragraph 118(2)(c) (when the credit contract must be assessed as unsuitable — entering contract or increasing the credit limit); (b) paragraph 123(2)(c) (prohibition on suggesting or assisting consumers to enter, or increase the credit limit under, unsuitable credit contracts); (c) paragraph 131(2)(c) (when credit contract must be assessed as unsuitable); (d) paragraph 133(2)(c) (prohibition on entering, or increasing the credit limit of, unsuitable credit contracts). 28XXF (2) A credit contract is unsuitable for a consumer if: (a) the consumer’s requirements and objectives are to receive an identified amount of credit; and (b) the credit contract is part of an arrangement by which the identified amount of credit is provided, or to be provided, by: (i)

2 or more small amount credit contracts; or

(ii) 2 or more medium amount credit contracts; or (iii) a combination of small amount credit contracts and medium amount credit contracts; and (c) the amount that is payable under the combination of credit contracts (in circumstances in which there is no default by the debtor) is higher than the maximum amount that could be charged under a single credit contract under section 32A of the Code. Example The consumer’s requirements and objectives are to receive the sum of $3,300. This could be provided by a medium amount credit contract for $3,300. However, the credit provider offers to enter into 2 small amount credit contracts with the consumer. The amount of credit under each contract is $1,500 and each term is 12 months. The credit provider is only prepared to advance $3,000 in total, and not $3,300, because the consumer cannot afford the higher repayments that would be required if the amount of credit under these 2 contracts were $3,300. The consumer agrees to this as the consumer still has a need for $3,000. The amount payable under each small amount credit contract is an upfront fee of 20% of the amount of $1,500, and a monthly fee of 4% of this amount, or charges of $1,020 for each contract, and total charges of $2,040. The maximum amount that could be charged under a medium amount credit contract for $3,000 would be interest charges of $768 plus an additional fee of $400 — a total of $1,168. The consumer has therefore been charged an additional amount of $872. Each of the 2 small amount credit contracts would be unsuitable. [s 28XXF insrt SLI 314 of 2012 s 3 and Sch 2[1], eff 1 July 2013]

[page 794] COMMENTARY ON REGULATION 28XXF [R28XXF.05] The Explanatory Statement to Select Legislative Instrument 2012 No 314 states: [Item 1 of Sch 2] addresses, in Regulation 28XXF, a practice that would result in avoidance of the cap on the maximum amount on costs that can be charged. It inserts a requirement on the credit provider to assess a credit contract as unsuitable for a consumer where the consumer’s requirements and objectives are to receive an identified amount of credit and the credit provider arranges for the identified amount of credit to be provided by two or more small or medium amount credit contracts or a combination thereof. This regulation applies to licensees meeting their responsible lending obligations under subsections 118(2)(c), 123(2)(c), 131(2)(c) and 133(2)(c) of the [NCCP] Act. The objective of this regulation is to prevent a credit provider from circumventing the cap on the

maximum amount that can be charged under a credit contract by “loan-splitting”. As the cap allows larger amounts to be charged under small amount credit contracts than under credit contracts for higher amounts a credit provider could charge more while still complying with the cap by arranging for the consumer to enter into two small amount credit contracts. It is arguable that conduct of this type would be in breach of section 191 of the Code (which prohibits a person from seeking to avoid or modify the effect of the Code). However, it is considered preferable to address the risk of this conduct directly, through a specific provision, given the history of avoidance by persons in response to previous State and Territory legislation introducing caps on costs. This will avoid uncertainty about whether conduct of this type necessarily falls within the scope of section 191, and prevent consequent unnecessary disputes between credit providers and debtors. Regulation 28XXF addresses this type of conduct by providing that a credit contract would be unsuitable where the consumer’s requirements and objectives are to receive a certain amount of credit, which could be provided through one loan, but the credit provider offers two or more loans which would be more expensive for a consumer.

Reverse mortgages — projections of home equity 28LD (1) For the purposes of paragraph 133DB(1)(a) of the Act, a projection may be given by the licensee to the consumer in the following way: (a) by mail; (b) by email; (c) by another form of written or electronic communication agreed to by the consumer. 28LD (2) For the purposes of subparagraph 133DB(1)(a)(ii) of the Act, the licensee must make the projections in accordance with any instructions for the making of the projections included on the website approved by ASIC for that subparagraph. [s 28LD insrt SLI 85 of 2013 s 4 and Sch 1 item 1, eff 22 May 2013]

COMMENTARY ON REGULATION 28LD [R28LD.05] Section 133DB(1)(a) of the NCCP Act requires licensees to provide consumers with projections of the equity in their home under a reverse mortgage using an equity projection calculator from a website approved by the ASIC. Regulation 28LD(1) allows these projections to be given either by mail,

[page 795] email, or any other form of written or electronic communication agreed to by the consumer. Section 28LD(2) requires licensees to generate the equity projections for a consumer in accordance with any instructions for the making of the projections included on the relevant website approved by ASIC. (Source: Explanatory Statement to Select Legislative Instrument 2013 No 85)

Reverse mortgage information statement 28LE For the purposes of the definition of reverse mortgage information statement in subsection 5(1) of the Act, Schedule 5A sets out the document. [s 28LE insrt SLI 85 of 2013 s 4 and Sch 2 item 3, eff 1 June 2013]

COMMENTARY ON REGULATION 28LE [R28LE.05] Section 133DB of the NCCP Act requires licensees to give consumers a reverse mortgage information statement. Regulation 28LE prescribes Sch 5A (reproduced below) as the information statement. The reverse mortgage information statement gives key information to inform prospective debtors about the features of reverse mortgages and the risks commonly associated with them. Credit providers and people providing credit assistance are required to provide prospective debtors with this information statement. (Source: Explanatory Statement to Select Legislative Instrument 2013 No 85)

[page 796] Schedule 5A — Reverse mortgage information statement Note: See regulation 28LE.

[page 797]

Regs 28LFA–28LN are misdescribed amendments located in Endnote 4 of the Regulations

Key Facts Sheets 28LFA (1) For section 133BB of the Act, Schedule 6 sets out: (a) the Key Facts Sheet for a credit card contract; and (b) requirements for how the information in a Key Facts Sheet is to be prepared. 28LFA (2) A Key Facts Sheet is taken to comply with Schedule 6 if: (a) it does not refer to a term or condition that is, or may, only be available to a particular class of consumer; and (b) the term or condition does not cause the consumers in that class to be worse off than they would be under the terms and conditions described in the Key Facts Sheet. Example: A licensee makes a special promotional offer to customers who have a home loan with the licensee. The terms and conditions of the credit card contract under the offer are more advantageous than the terms and conditions of the credit card contract as described in the Key Facts Sheet. It would be difficult to provide a new Key Fact Sheet for each promotional offer of this kind.

COMMENTARY ON REGULATION 28LFA [R28LFA.05] Regulation 28LFA relates to Div 3 of Pt 3-2B of the NCCP Act (s 133BB) requiring credit card applications to include a key facts sheet (KFS) for credit cards. Regulation 28LFA states that Sch 6 (to the regulations) sets out the format and content requirements for a KFS.

[page 798]

The KFS may be included on the credit card application form or on a separate page or sheet of paper. It is not sufficient to refer the prospective debtor to another source, such as a website. [page 799] If a credit card provider offers a special promotion, it will not have to issue a new KFS if the special promotion makes the prospective debtor better off than he or she would be under a term specified in the KFS (reg 28LFA(2)). The notes to reg 28LFA state this is because it would be difficult to provide a new key facts sheet for each promotional offer of this kind.

Application forms in electronic form 28LFB For subsection 133BC(1) of the Act, if a licensee: (a) makes available, in an electronic form, an application form that can be used to apply for a credit card contract; and (b) includes, as part of the electronic form, a hyperlink to a Key Facts Sheet for the contract; the application form is taken to include a Key Facts Sheet for the contract. Example of electronic form: A licensee may provide an application form as an online document, in an email, or as an attachment to an email. Note: Subsection 133BC(1) of the Act requires the Key Facts Sheet to contain up-to-date information.

COMMENTARY ON REGULATION 28LFB [R28LFB.05] Regulation 28LFB permits a credit card contract credit provider to use an electronic application form with a hyperlink to a KFS for the credit card contract. Electronic form includes online documentation, an email or an attachment to an email.

Circumstances in which application form may

include out-of-date Key Facts Sheet 28LF (1) For subsection 133BC(3) of the Act, a circumstance in which a licensee may make available an application form that includes a Key Facts Sheet, containing information that has ceased to be up-to-date, is that the information ceased to be up-to-date no more than 3 months before the day on which the licensee makes the application form available. 28LF (2) If the licensee makes the application form available by means that are under the licensee’s control, the period for which the licensee may make the application form available is 3 months after the day on which the information ceased to be up-to-date. 28LF (3) For subsection 133BC(3) of the Act, a circumstance in which a licensee may make available an application form that includes a Key Facts Sheet, containing information that has ceased to be up-to-date, is that: (a) the application form forms part of an advertisement in a publication published by a third party who is authorised to act for the licensee; and (b) the licensee approved the application form for publication by the third party; and (c) the information in the Key Facts Sheet was up to date when the licensee approved the application form for publication; and (d) the expected date of publication of the advertisement was less than 30 days after the licensee approved the application form for publication. COMMENTARY ON REGULATION 28LF [R28LF.05] Regulation 28LF describes the circumstances in which an application form may include an out-of-date KFS. Those circumstances are where: the KFS is no more than three months out-of-date; and

[page 800] the application form is part of an advertisement published by a third party provided that: —

the KFS was up-to-date when the licensee approved the application form for publication; and

—

the expected date of publication was less than 30 days after the approval was given.

(Source: Explanatory Statement to Select Legislative Instrument 2011 No 201)

Circumstances in which up-to-date information can be provided otherwise than in Key Facts Sheet 28LG For subparagraph 133BD(1)(b)(ii) of the Act, a requirement for the provision of up-to-date information to a consumer if a Key Facts Sheet contains information that has ceased to be up-to-date is that the licensee provides the up-to-date information no later than the time at which the licensee provides the consumer with the credit card to which the Key Facts Sheet related. COMMENTARY ON REGULATION 28LG [R28LG.05] Under s 133BD of the NCCP Act, a licensee may not enter into a credit card contract unless the debtor has been provided with up-to-date information in accordance with the regulations. Regulation 28LG provides that where the KFS contains information that has ceased to be up-to-date, a licensee must give the debtor the up-to-date information no later than the time they give the customer the credit card. (Source: Explanatory Statement to Select Legislative Instrument 2011 No 201)

Meaning of credit limit increase invitation

28LH (1) For subsection 133BE(6) of the Act, a written communication is covered by the definition of credit limit increase invitation in subsection 133BE(5) of the Act if it: (a) includes a proposed credit limit that is higher than the consumer’s existing credit limit; or (b) suggests that a higher credit limit may benefit the consumer. 28LH (2) For subsection 133BE(6) of the Act, a written communication is not covered by the definition of credit limit increase invitation in subsection 133BE(5) of the Act if it only provides generic information about credit limits that is applicable to each consumer who is a party to a credit card contract with the licensee. Note: Subsection 133BE(6) of the Act provides that regulations may make provisions that apply to determining whether a written communication is covered by the definition of credit limit increase invitation in subsection 133BE(5).

COMMENTARY ON REGULATION 28LH [R28LH.05] Division 4 of Pt 3-2B of the NCCP Act prohibits a licensee from making credit limit increase invitations unless a debtor has provided their express consent to receiving it. Section 133BE(5) of the NCCP Act defines a “credit limit increase invitation”. Regulation 28LH provides further guidance to determine whether a written communication is covered by the definition in [page 801] s 133BE(5). Under reg 28LH, a written communication is a credit limit increase invitation if it: includes a proposed credit limit higher than the debtor’s existing credit limit; or suggests that a higher credit limit may benefit the consumer. A written communication is not a credit limit increase invitation if it only

provides generic information about credit limits. This regulation gives further clarity to the definition in the NCCP Act in determining whether a written communication is a credit limit increase invitation, but does not override that definition. (Source: Explanatory Statement to Select Legislative Instrument 2011 No 201)

Giving consent to receive credit limit increase invitations 28LI (1) For subsection 133BF(7) of the Act, a requirement to be complied with is that, if consent to a licensee making credit limit increase invitations is to be provided in response to a written communication from the licensee, the written communication: (a) must seek the consumer’s consent only in relation to whether or not to receive credit limit increase invitations; and (b) must set out the matters mentioned in subsection 133BF(4) of the Act in a way that would allow a reasonable person to conclude that the consumer was aware of those matters when the consumer gave consent. 28LI (2) For subsection 133BF(7) of the Act, a requirement to be complied with in relation to withdrawing consent to a licensee making credit limit increase invitations is that if: (a) the licensee has arranged for a credit limit increase invitation (the current invitation) to be sent to a consumer in accordance with the consumer’s consent; and (b) the consumer withdraws his or her consent after the arrangements have been made; and (c) the withdrawal of the consumer’s consent is to be treated as not applying to the current invitation. the withdrawal of the consumer’s consent is to be treated as not applying to the current invitation.

COMMENTARY ON REGULATION 28LI [R28LI.05] Regulation 28LI outlines the obligations of licensees in relation to consents given by debtors to receive credit limit increase invitations. In seeking a debtor’s consent, a written communication provided by a licensee must: seek the debtor’s consent only in relation to receiving credit limit increase invitations; and set out the matters in s 133BF(4) of the NCCP Act in a way that is understandable to a reasonable person. The written communication may be part of a document used for other purposes, such as an application form. The consent must be an express standalone consent in that if selected, the consent does not apply to any other kind of consent (such as a consent to receive online account statements). Regulation 28LI(2) provides that where a licensee has arranged to send out a credit limit increase invitation, and a prospective debtor withdraws their consent after the arrangements have been made, and it is unreasonable to stop the invitation from being sent, the withdrawal of the consent is to be treated as not applying to the current invitation. (Source: Explanatory Statement to Select Legislative Instrument 2011 No 201) [page 802]

Licensee to notify consumer of use of credit card in excess of credit limit 28LJ (1) For subsection 133BH(1) of the Act, a licensee who is the credit provider under a credit card contract must take reasonable steps to notify the consumer who is the debtor under the contract if the licensee becomes aware that the consumer has used a card in excess of the credit limit for the contract.

28LJ (2) The licensee must notify the consumer not later than 2 business days after the day on which the licensee becomes aware that the consumer has used the card in excess of the credit limit for the contract. 28LJ (3) However, if: (a) the consumer pays the amount by which the credit limit has been exceeded within 2 business days after the day on which the balance under the credit card contract first exceeds the credit limit; and (b) the licensee has not already notified the consumer when the amount is paid; the licensee is not required to notify the consumer. 28LJ (4) The licensee is only required to notify the consumer once during a statement period. 28LJ (5) The licensee must include in the notification under subregulation (2) information about exceeding the credit limit that is sufficient to lead a reasonable consumer to check the balance under his or her credit card contract. COMMENTARY ON REGULATION 28LJ [R28LJ.05] Regulation 28LJ requires licensees who are credit providers on credit card contracts to take reasonable steps to notify debtors when their credit card balance has exceeded their credit limit. The notification must be made within two business days of when the balance on the credit card contract exceeds the credit limit. If a debtor has reduced their balance to less than the credit limit before the notification has been sent, the licensee is not required to notify the debtor. Notification need only be given once per statement period. The notification must include information about exceeding the credit limit sufficient to lead a reasonable debtor to check their balance. (Source: Explanatory Statement to Select Legislative Instrument 2011 No 201)

Fees charges and higher rates of interest

28LK For paragraph 133BI(1)(c) of the Act, if a licensee provides a form to allow a consumer to consent to have fees, charges or a higher rate of interest charged on a credit card that is used in a way mentioned in subsection 133BI(1) of the Act, the licensee must ensure that the invitation to give consent: (a) allows the consumer to withdraw the consent; and (b) discloses any fee charged in relation to the consumer’s consent; and (c) discloses the fee, charge or higher rate of interest that will be charged on the credit card if it is used in the way mentioned in subsection 133BI(1) of the Act; and (d) explains that the fee may increase at any time, in accordance with the terms of the credit card contract; and (e) explains that fees, charges or a higher rate of interest may be charged on the credit card for the amount by which the balance under the credit card contract exceeds the credit limit; and [page 803] (f)

explains that fees, charges or a higher rate of interest are likely to be charged on the credit card for the statement period in which the credit card was used in a way mentioned in subsection 133BI(1) of the Act. COMMENTARY ON REGULATION 28LK

[R28LK.05] Section 133BI of the NCCP Act allows regulations to be made outlining requirements to be complied with before an overlimit fee may be charged. Under reg 28LK if the licensee provides a form to obtain such consent, the form would be required to: allow the debtor to withdraw the consent; disclose any fee charged in relation to the debtor’s consent; disclose any fee, charge or higher rate of interest charged on the

overlimit transaction or balance; explain that the fee may increase at any time; and explain that the fee, charge or higher rate of interest in relation to the overlimit transaction may be charged at any time in the statement period to which the transaction relates (even if the debtor withdraws their consent after the overlimit transaction). (Source: Explanatory Statement to Select Legislative Instrument 2011 No 201)

Records of elections and withdrawals to be kept 28LL (1) For paragraph 133BJ(1)(a) of the Act, if a consumer in relation to a credit card contract has: (a) given a consent covering the imposition of fees or charges, or a higher rate of interest, in relation to the contract; or (b) withdrawn a consent of that kind; the licensee in relation to the contract must keep a record stating that a consent or withdrawal is current and showing the date on which the consent was given or withdrawn. Note: The consent is described in detail in section 133BI of the Act.

28LL (2) The licensee must keep the record for the period during which the consent or withdrawal is in effect. COMMENTARY ON REGULATION 28LL [R28LL.05] Regulation 28LL outlines record-keeping requirements for consents and withdrawals of consents in relation to fees and charges or higher rates of interest for overlimit transactions. If a debtor has given their consent or withdrawn that consent, a licensee must keep a record of the current status of their consent and the date on which the consent or withdrawal was given. The record must be kept for the period during which the consent is in effect. (Source: Explanatory Statement to Select Legislative Instrument 2011 No

201)

Agreement to apply payment against particular amount owed 28LM For subsection 133BP(5) of the Act, a licensee that proposes to agree to a request by a consumer to apply certain payments made under the credit card contract against a particular amount must, before agreeing to the request, advise the consumer that the consumer: [page 804] (a) may be liable to pay an amount or rate of interest under the agreement that is greater than the consumer would be liableto pay under subsection 133BQ of the Act; and (b) may withdraw the request at a later time. COMMENTARY ON REGULATION 28LM [R28LM.05] Division 6 of Pt 3-2 of the NCCP Act requires licensees to allocate repayments to balances as prescribed by the Division. Regulation 28LM prescribes requirements to be met before a licensee can agree to a request to allocate a repayment according to an agreement. Before entering into an agreement to apply payments against a particular amount, a licensee must advise the debtor that they: might pay more under the agreement than they would if the repayment were allocated to higher interest debts first; and may withdraw the request at any time. Credit providers may wish to include implications of withdrawing a request where the credit card contract requires the consumer to pay down a specific debt. For example, Bob purchases a $1,200 air conditioner on 12 month interest-free terms. The credit is available through a store credit card. Under the terms of the promotion Bob must pay $100 a month and pay off

the debt in 12 months. Bob agrees to have repayments allocated to this payment first. The creditor provider should disclose to Bob the implications of withdrawing the agreement if Bob subsequently decides to do so. An agreement to apply a payment against a particular debt cannot be used to avoid the application of s 133BQ of the NCCP Act for normal daily use of the credit card, as the agreement should identify a particular amount to which the payment is applied. A particular amount is not normally identifiable before the credit card contract is entered into or credit is provided. (Source: Explanatory Statement to Select Legislative Instrument 2011 No 201)

Modification — Divisions 5 and 6 of Part 3-2B 28LN For paragraph 164(d) of the Act, the provisions to which Part 3-7 of the Act applies apply as if Divisions 5 and 6 of Part 3-2B of the Act, as amended by Part 2 of Schedule 1 to the National Consumer Credit Protection Amendment (Home Loans and Credit Cards) Act 2011, were modified so that: (a) they apply to a credit card contract entered into after the commencement of Part 2 of Schedule 1 to the National Consumer Credit Protection Amendment (Home Loans and Credit Cards) Act 2011 (the commencement); and (b) they do not apply to a credit card contract under which a licensee has provided a consumer with a credit card, in the period of 90 days immediately before the commencement, for the purpose of entering a credit contract that is formed or entered by: (i)

the use by a consumer of the credit card to obtain credit from the licensee; or

(ii) the activation by a consumer of the credit card by arrangement with the licensee. COMMENTARY ON REGULATION 28LN [R28LN.05] Regulation 28LN applies Divs 5 and 6 of Pt 3-2B (relating to the use of credit cards in excess of the credit limit and order of application of [page 805] payments made under credit cards contracts respectively) to credit card

contracts entered into or after commencement of the National Consumer Credit Protection Amendment (Home Loans and Credit Cards) Act 2011. An exemption applies to credit cards where a contract is formed from the first use by the consumer of the credit card or the activation of the credit card by the consumer. For those credit card contracts, Divs 5 and 6 do not apply if the card was provided in the 90 days before commencement. (Source: Explanatory Statement to Select Legislative Instrument 2011 No 201)

Part 3-6 — Modifications and exemptions Modifications 28M (1) Disclosure requirements For paragraph 164(d) of the Act, the provisions to which Part 3-7 of Chapter 3 of the Act applies, apply as if the provisions were modified as set out in Schedule 4. 28M (2) Extended time period for consumer assessment Subregulation (3) applies to a licensee to whom the rights of a credit provider under a credit contract have been assigned. 28M (3) For paragraph 164(d) of the Act: (a) paragraph 132(2)(c) of the Act is modified by omitting ‘7 business days’ and inserting ‘15 business days’; and (b) paragraph 132(2)(d) is modified by omitting ‘21 business days’ and inserting ‘25 business days’. 28M (4) Subregulation (5) applies to a licensee to whom the rights of a lessor under a consumer lease have been assigned. 28M (5) For paragraph 164(d) of the Act: (a) paragraph 155(2)(c) of the Act is modified by omitting ‘7 business days’ and inserting ‘15 business days’; and (b) paragraph 155(2)(d) is modified by omitting ‘21 business days’ and inserting ‘25 business days’. Note Paragraph 164(d) of the Act provides that the regulations may provide that Chapter 3 of the Act applies as if specified provisions were omitted, modified or varied as specified in the regulations.

COMMENTARY ON REGULATION 28M [R28M.05] Regulation 28M amends the operation of ss 132 and 155 of the NCCP Act (giving the consumer the assessment) in certain circumstances if there has been an assignment by a credit provider or lessor by extending the

time limit in which an Australian Credit Licence holder must give the consumer a copy of the assessment. If a request is made within two years of the credit day, reg 28M increases the time limit under ss 132(2)(c) and 155(2) (c) of the NCCP Act from seven business days to 15 business days, and for other requests reg 28M increases [page 806] the time limit under ss 132(2)(d) and 155(2)(d) of the NCCP Act from 21 business days to 25 business days. Regulation 28M also modifies the operation of Pt 3-7 of Ch 3 of the Act in accordance with Sch 4 of the regulations.

Exemption — requirement to provide disclosure documents 28N (1) For paragraph 164(a) of the Act, a person who is a licensee or a credit representative engaging in a credit activity is exempted from a relevant provision of the Act, other than section 114 or 137, if: (a) the person gives the consumer information, in writing, about the contact details for a consumer to access the approved external dispute resolution scheme of which the person is a member; or (b) the person has given the information mentioned in paragraph (a) to the consumer within the previous 90 days. 28N (2) The information mentioned inparagraph (1)(a) may be given to the consumer as follows: (a) in the manner set out in regulation 28L; (b) together with some or all of the information mentioned in a relevant provision of the Act. 28N (3) For paragraph 164(a) of the Act, a person who is a credit

representative to whom regulation 28 applies is exempted from a relevant provision of the Act. Note Regulation 28 sets out circumstances where a credit representative is not required to give contact details for a consumer to access an approved external dispute resolution scheme.

28N (4) Quotes For paragraph 164(a) of the Act, a licensee providing credit assistance to a consumer is exempted from sections 114 and 137 of the Act if: (a) before the licensee provides credit assistance to a consumer, the licensee has entered into a written contract with the consumer setting out the maximum amount that will be payable by the consumer to the licensee in relation to the licensee’s credit assistance and other services; or (b) both the following apply: (i)

before the licensee provides credit assistance to a consumer, the licensee does not intend to impose a fee or charge on the consumer for providing the credit assistance or other services;

(ii) the licensee does not impose a fee or charge on the consumer for the licensee’s credit assistance and other services. 28N (5) This regulation ceases to have effect on 1 October 2011. [subreg (5) am SLI 39 of 2011 reg 3 and Sch 1[1], eff 24 Mar 2011; SLI 143 of 2011 reg 3 and Sch 1[1], eff 3 Aug 2011]

COMMENTARY ON REGULATION 28N [R28N.05] General exemption in relation to disclosure documents until October 2011 Regulation 28N(1) and (5) provides a person with an exemption until 1 October 2011 from the requirement to provide disclosure documents in ss 113, 121, 126, 127, 136, 144, 149, 150, 158 or 160 of the NCCP Act (which deal with credit guides and proposal disclosure documents) if: the person gives the consumer, in writing, the contact details of the person’s EDR Scheme of which the person is a member; or

[page 807] the person has given the contact details of the person’s EDR scheme within the previous 90 days. [R28N.10] While the wording of reg 28N(1) provides that a person is exempt from “a relevant provision of the Act, other than s 114 or s 137”, ASIC Class Order 10/1230 (as amended by ASIC Class Order 10/1269) amends the regulation by replacing the reference to “a relevant provision of the Act, other than s 114 or s 137” with “s 113, 121, 126, 127, 136, 144, 149, 150, 158 or 160 of the Act (which deal with credit guides and proposal disclosure documents)”. Further, ASIC CO 10/1230 provides that in para 28N(2)(b), the word “Act” be omitted and replaced with “Act or s 16 of the Code”. The Explanatory Statement for ASIC Class Order 10/1230 explains that reg 28N had some “minor drafting anomalies” which resulted in the regulation applying in a manner inconsistent with the policy behind the regulation. Accordingly, ASIC CO 10/1230 amended the wording of reg 28N to clarify that the commencement delay in reg 28N(1)–(3) was intended to be confined to credit guides. However, ASIC CO 10/1269, effective from 1 January 2011, has since varied ASIC CO 10/1230 to extend the application of reg 28N(1)–(3) to credit proposal disclosure documents and lease proposal disclosure documents under ss 121 and 144 of the NCCP Act, subject to certain requirements being met. Consequently, from 1 January 2011 to 1 August 2011 reg 28N(1)–(3) will apply to both credit guides and proposal disclosure documents. [R28N.15] Regulation 28N(2) and (5) provides that, until the transition period expired on 1 August 2011 (see [R28N.25]), a disclosure document could be given to the consumer in the manner set out in reg 28L (see [R28L.05]) together with some or all of the information mentioned in the relevant provision of the NCCP Act. Regulation 28(3) and (5) states that, until 1 August 2011, a person who was not required to provide details for a consumer to access an approved EDR Scheme under reg 28 was exempt from the relevant provision of the NCCP Act.

[R28N.20] Regulation 28N(4) and (5) states that a licensee providing credit assistance to a consumer was exempt, until 1 August 2011, from the requirement to provide a quote (see s 114 and s 137 of the NCCP Act) if: before the licensee provides credit assistance to the consumer, it entered into a written contract with the consumer setting out the maximum amount that would be payable by the consumer in relation to the licensee’s credit assistance and other services (reg 28N(4)(a)); or before the licensee provides credit assistance to the consumer, the licensee did not intend to impose a fee or charge on the consumer for provision of credit assistance or other services and the licensee does not impose a fee or charge on the consumer for the licensee’s credit assistance or services (reg 28N(4)(b)(i)–(ii)). [R28N.25] Regulation 28N was originally introduced to provide transitional arrangements from 1 January to 1 April 2011 for persons who were otherwise required to provide disclosure documents under a relevant provision of the [page 808] NCCP Act. The National Consumer Credit Protection Amendment Regulations 2011 (No 1) extended the transitional period. [Editorial note: There is no reg 28O.]

Circumstances where credit guide not required 28P (1) Franchisees For paragraph 164(a) of the Act, a person who is a credit representative is exempted from subsection 158(1) of the Act if: (a) the person is authorised by: (i)

a licensee; or

(ii) a body corporate that is a credit representative of a licensee; to engage in specified credit activities on behalf of the licensee; and

(b) the person is: (i)

a franchisee of the licensee under a franchise agreement with the licensee; or

(ii) an employee or director of a franchisee of the licensee who has a franchise agreement with the licensee; and (c) the franchise agreement: (i)

subjects the person to the policies of the licensee; and

(ii) requires compliance by the person with the policies of the licensee that were made to give effect to the licensee’s obligations under the licensee’s Australian credit licence; and (d) the credit guide of the licensee explains that the licensee takes responsibility for the credit activities engaged in by the person (or class of persons of which the person is a member). 28P (2) Previous dealings with consumer For paragraph 164(a) of the Act, a person who is a licensee or a credit representative is exempted from subsections 113(1), 126(1), 136(1), 149(1), 158(1) or 160(1) or (2) of the Act if: (a) the person has, in the previous 12 months, given the consumer the person’s credit guide in accordance with the requirements in the Act; and (b) if the person would have been required to give contact details for a consumer to access an approved external dispute resolution scheme — the person’s contact details for access to the scheme of which the person is a member have not changed. Note Regulation 28 sets out circumstances where a credit representative is not required to give contact details for a consumer to access an approved external dispute resolution scheme.

28P (3) Debt collectors For paragraph 164(a) of the Act, a person who is a licensee or a credit representative is exempted from subsection 160(1) or (2) of the Act if: (a) the person has given the consumer the person’s credit guide in

accordance with the requirements of section 113, 136 or 158 of the Act; and (b) the credit guide relates to: (i)

the same credit contract as that under which the person is authorised by the credit provider to collect, on behalf of the credit provider, repayments made by the consumer under the credit contract; or

(ii) the same consumer lease as that under which the person is authorised by the lessor to collect, on behalf of the lessor, payments made by the consumer under the consumer lease. 28P (4) Product designers For paragraph 164(a) of the Act, a person who is a product designer is exempted from subsection 113(1), 136(1), 158(1) or 160(1) or (2) of the Act if the credit provider or lessor has complied with regulation 26B. [reg 28P insrt SLI 143 of 2011 reg 3 and Sch 2[16], eff 1 Oct 2011]

[page 809] COMMENTARY ON REGULATION 28P [R28P.05] The National Consumer Credit Protection Amendment Regulations 2011 (No 4) relocated former reg 28A as the new reg 28P. This ensures a logical order in the regulations so that regulations covering similar topics are located in the same Part. In addition, the amending regulations amended reg 28P to include an exemption for product designers from providing a credit guide if the credit provider or lessor has already provided a credit guide and it included an explanation of their relationship with the product designer under reg 26. [R28P.10] Regulation 28P outlines three situations where an exemption exists to the requirement to provide a credit guide in s 158 of the NCCP Act. This regulation is made under s 164(a) of the NCCP Act which permits the

regulations to exempt a person or class of persons from all or specified provisions to which Pt 3–7 of the NCCP Act applies. [R28P.15] Regulation 28P(1) Franchisee exemption Under reg 28P(1) a person who is a credit representative who is a franchisee need not provide their own credit guide if: the person is authorised by a licensee, or a body corporate that is a credit representative of the licensee, to engage in specified credit activities on behalf of the licensee; and the person is: —

a “franchisee of the licensee under a franchise agreement” (reg 28P(1)(b)); or

—

an employee or director of a franchisee of the licensee who has a franchise agreement with the licensee; and

the franchise agreement subjects the person to the policies of the licensee; and the franchise agreement requires compliance by the person with the policies of the licensee that were made to give effect to the licensee’s obligations under the licensee’s ACL (reg 28P(1)(c)); and the licensee’s credit guide states that it takes responsibility for the credit activities engaged in by the person (or class of persons of which the person is a member) (reg 28P(1)(d)). The NCCP Act and regulations do not include a definition of “franchise agreement”. However, the franchisee exemption is based on reg 7.7.05B of the Corporations Regulations 2001 (Cth) and the Corporations Act contains a definition of “franchise” to which a court considering the franchisee exemption might have reference. That definition, in s 9 of the Corporations Act, states: franchise means an arrangement under which a person earns profits or income by exploiting a right, conferred by the owner of the right, to use a trade mark or design or other intellectual property or the goodwill attached to it in connection with the supply of goods or services. An arrangement is

not a franchise if the person engages the owner of the right, or an associate of the owner, to exploit the right on the person’s behalf.

[page 810] Although unlikely, a court might have regard to the definition of “franchise agreement” in cl 4 of the Franchising Code of Conduct, which is a mandatory industry code implemented by regulations made under s 51AE of the Competition and Consumer Act 2010 (Cth). The requirements of the definition in the Franchise Code of Conduct include: the grant of a right to carry on a business of offering, supplying or distributing goods or services under a system or marketing plan substantially determined, controlled or suggested by the franchisor; the operation of the business being substantially or materially associated with a trade mark, advertising or commercial symbol owned, used, licensed or specified by a franchisor; and payment by the franchisee to the franchisor of a fee or other amount before starting or continuing the business. Rationale for the exemption The Explanatory Statement provides the following rationale for this exemption: “the level of scrutiny and oversight by the licensee is such that it is only necessary for the consumer to be provided with the credit guide of the licensee”. Consequently, the exemption for franchisees is intended to exempt individual credit representatives from the obligation to provide credit guides which may “result in significant and in some cases onerous levels of duplication”. [R28P.20] Regulation 28P(2) Previous dealings with a consumer Under reg 28P(2) a person who is a licensee or credit representative is exempt from the obligation to provide a credit guide (the obligations are listed in reg 28P(2)) where: the person has, in the previous 12 months, given to the consumer

that person’s credit guide in accordance with the requirements set out under the NCCP Act (reg 28P(2)); and if the person would have been required to give contact details for a consumer to access an approved EDR Scheme, the person’s contact details for that scheme have not changed (reg 28P(2)). Conversely, the Explanatory Statement states that a new credit guide will need to be issued where the person “has changed the EDR Scheme to which they belong, resulting in a change in the information required to be provided under ss 113(2), 126(2), 136(2), 149(2), 158(2) or 160(2) of the NCCP Act”. Note: Regulation 28 (see [R28.05]) sets out the circumstances where a credit representative is not required to provide contact details for an approved EDR Scheme. See also reg 28B at [R28B.05] which states that a credit guide is not required to be updated if it is less than 93 days old and the contact details for the person’s EDR Scheme have not changed. [R28P.25] Regulation 28P(3) Debt collectors exemptions Regulation 28P(3) provides that a person who is a licensee or credit representative is exempt from the obligations in s 160(1) or (2) of the NCCP Act to provide a credit guide if: the person has given the consumer their credit guide in accordance with the requirements in ss 113,136 or 158 of the NCCP Act (reg 28P(3)(a)); and [page 811] the credit guide relates either to the same credit contract or the same consumer lease as that under which the person is authorised by the credit provider or lessor to collect, on behalf of the credit provider, repayments or payments made by the consumer under the credit contract or consumer lease. Again, the Explanatory Statement provides that the intention of the exemption in reg 28P(3) is to avoid duplication “where a person has provided

a credit guide in their capacity as a person providing credit assistance, and is also authorised by the credit provider or lessor to receive payments on their behalf”.

Exemption — credit assistance provider with shared responsibility for credit contract 28Q (1) For paragraph 164(a) of the Act, this regulation applies to a person in the following circumstances: (a) the person is: (i)

a credit assistance provider that: (A) is an ADI; and (B) holds an Australian credit licence, or has applied for an Australian credit licence in an application on which ASIC has not made a decision; and (C) engages in conduct under an agreement with the credit provider; or

(ii) a credit representative of a credit assistance provider mentioned in subparagraph (i); (b) the credit provider: (i)

is an ADI; and

(ii) holds an Australian credit licence or has applied for an Australian credit licence; (c) the agreement between the credit provider and the credit assistance provider allows the credit provider to use the credit assistance provider’s name or any other words, phrases, initials or logo associated with the credit assistance provider on the credit contract and any letter or other material; (d) the credit assistance provider: (i)

provides credit assistance in relation to a credit contract connected with the agreement mentioned in paragraph (c)

between the credit provider and the provider of credit assistance; and (ii) gives to the credit provider the consumer’s details and any other information requested by the credit provider (if it is a reasonable request) in order to enable the credit provider to make an assessment about the credit contract under section 130 of the Act. 28Q (2) The credit assistance provider is exempted from Division 4 and Division 6 of Part 3-1 of the Act in relation to: (a) a credit contract connected with the agreement mentioned in paragraph (1)(c) between the credit provider and the provider of credit assistance; and (b) an increase in the credit limit of the credit contract. 28Q (3) Despite subregulation (2): (a) the credit assistance provider is jointly and severally liable with the credit provider to pay any compensation which the credit provider is ordered to pay to the consumer under section 178 of the Act as a consequence of a breach by the credit provider of Division 4 of Part 3-2 of the Act in relation to a credit contract (including an increase in the credit limit of a contract) connected with the agreement mentioned in paragraph (1)(c) between the credit provider and the provider of credit assistance; and (b) without prejudice to any other rights or remedies to which a credit provider may be entitled, the credit assistance provider is entitled to be indemnified by the credit provider [page 812] against any loss or damage suffered by the credit assistance provider through the operation of paragraph (a). [reg 28K renum as reg 28Q SLI 143 of 2011 reg 3 and Sch 2[15], eff 1 Oct 2011]

COMMENTARY ON REGULATION 28Q [R28Q.05] Regulation 28K was relocated to become reg 28Q by the National Consumer Credit Protection Amendment Regulations 2011 (No 4). This was to ensure a logical structure and so that regulations covering similar topics are all located in the same Part. [R28Q.10] Where there is a white labelling arrangement between a credit provider who is a licensed ADI and a credit assistance provider who is also a licensed ADI and who refers customers to the credit provider, reg 28Q exempts the credit assistance provider and their credit representative (if any) from the: preliminary assessment obligations under Div 4 of Pt 3-1 of the NCCP Act (obligation of credit assistance providers before providing credit assistance for credit contracts); and prohibition on suggesting, or assisting with, unsuitable credit contracts under Div 6 of Pt 3-1 of the NCCP Act (which comprises s 123 which prohibits a licensee from suggesting or assisting consumers to enter into, or increase the credit limit under, unsuitable credit contracts and s 124 which prohibits a licensee from suggesting to a consumer to remain in an unsuitable credit contract). A “white labelling arrangement refers to an arrangement where a credit assistance provider permits a credit provider to use the credit assistance provider’s name or any other words, phrases, initials or logo associated with the credit assistance provider in the credit contract. [R28Q.15] The exemptions in reg 28Q have limited application. Persons who are involved as a credit assistance provider (including if they are a licensed ADI) who refer customers under a white labelling arrangement to a credit provider (including if they are also a licensed ADI) are still required to comply with the document disclosure requirements of Div 2 (which includes the obligation to provide a credit guide), Div 3 (which includes the obligation to provide a quote) and Div 5 (which includes the obligation to provide a

credit disclosure document) of Pt 3-1 of the NCCP Act, in circumstances where their conduct involves “credit assistance”. Paragraph 203.65 of ASIC Regulatory Guide RG 203 Do I Need a Credit Licence? states expressly that “a suggestion that a consumer approach a particular finance company or bank about a specific product will be credit assistance”. If this statement is correct, then the conduct of a credit assistance provider in a white labelling arrangement in referring a consumer to a credit provider’s website to apply for a specific type of credit product or marketing a particular credit product to a consumer could arguably, in each case, be “credit assistance”. This would mean that the credit assistance provider, in each of those situations, would be required to provide the disclosure documents required under Divs 2, 3 and 5 of Pt 3-1 of the NCCP Act to the consumer. Submissions have in the past been made to Treasury [page 813] to broaden the white labelling exemption in reg 28Q to exclude the requirement of a credit assistance provider to provide such disclosure documents where the credit assistance provider, for example, provides a referral or marketing service in relation to a specific type of credit product (but is otherwise not actively suggesting that a consumer enter into that credit product).

Exemption — intermediary’s requirement to provide proposal disclosure document 28R (1) For paragraph 164(a) of the Act, a person mentioned in subregulation 28Q(1) is exempted from a requirement in section 121 and 144 of the Act in the circumstances set out in this regulation. 28R (2) The exemption applies if: (a) the consumer is not liable to pay to the person any fees or charges in relation to the credit contract or consumer lease; and

(b) at the time, or as soon as practicable after, the person gives credit assistance the person tells the consumer, in writing, that no fees or charges will be payable. 28R (3) If the credit contract is a credit card contract, the consumer must be given information about: (a) any commissions that the person is likely to receive, directly or indirectly, from credit providers in relation to credit contracts for which the person has provided credit assistance; and (b) the maximum amount of commission payable by the consumer on entering into the contract; and (c) if any additional commission is payable during the life of the contract — a statement that additional commission is payable, and either: (i)

a reasonable estimate of the amount of the additional commission; or

(ii) if the amount of additional commission depends on the consumer’s use of the credit card — information about how the commission is worked out. 28R (4) If the contract is not a credit card contract, the consumer must be given a reasonable estimate of the total amount of any commissions that the person is likely to receive in relation to the credit contract or consumer lease, and the method used for working out that amount. 28R (5) The information mentioned in subregulations (3) and (4) must be given, in writing, no more than 15 business days before the day the person would have been required to provide the consumer with a proposal disclosure document. [reg 28R insrt SLI 143 of 2011 reg 3 and Sch 2[17], eff 1 Oct 2011]

COMMENTARY ON REGULATION 28R [R28R.05] The Explanatory Statement to Select Legislative Instrument 2011 No 143 provides:

[Regulation] 28R … outlines a limited exemption for credit assistance providers from having to provide a proposal disclosure document where no fees or charges are payable by the consumer in relation to the credit contract or consumer lease. The exemption will also apply if the information is not given to the consumer immediately, as long as it is passed on as soon as practicable after credit assistance is given.

[page 814]

Part 3-7 — Licensees that are credit providers under credit contracts — additional rules relating to small amount credit contracts [Pt 3-7 insrt SLI 314 of 2012 s 3 and Sch 1[2], eff 1 Mar 2013]

Licensee must not enter into small amount credit contract if repayments do not meet prescribed requirements 28S (1) For subsection 133CC(1) of the Act, this regulation sets out: (a) a class of consumers; and (b) requirements for repayments that would be required under a small amount credit contract (the proposed contract). Note Under subsection 133CC(1) of the Act, a licensee must not enter into, or offer to enter into, a small amount credit contract with a consumer who will be the debtor under the contract if: (a) the consumer is included in a class of consumers prescribed by the regulations; and (b) the repayments that would be required under the contract would not meet the requirements prescribed by the regulations.

28S (2) The class of consumers is consumers who receive at least 50% of their gross income as payments under the Social Security Act 1991. 28S (3) The requirement for the repayments that would reasonably be expected to be paid in each payment cycle of income under the proposed contract is that the total amount of repayments under each small amount credit contract for which the consumer is a debtor, including the proposed

contract, in a payment cycle of income during the term of the proposed contract must not exceed 20% of the consumer’s gross income for that payment cycle of income. 28S (4) For subregulation (3): (a) treat a payment cycle of income as the period during which the consumer receives the predominant amount of his or her income payments under the Social Security Act 1991; and (b) using the same information as was used for the purposes of section 128 of the Act, and having regard to the repayments under the proposed contract, work out, for each payment cycle of income during the term of the proposed small amount credit contract: (i)

the consumer’s expected gross income; and

(ii) the repayments that the consumer reasonably expects to pay under each small amount credit contract to which the consumer is a party; and (c) work out the expected gross income for each payment cycle of income during the term of the proposed small amount credit contract; and (d) work out the total amount of repayments that the consumer: (i)

has paid under each small amount credit contract for which the consumer is a debtor immediately before the time the consumer would enter into the proposed small amount credit contract; and

(ii) reasonably expects to continue making after entering into the proposed small amount credit contract. [page 815] COMMENTARY ON REGULATION 28S [R28S.05] The Explanatory Statement to Select Legislative Instrument 2012

No 314 provides: [Regulation 28S] inserts a prohibition on credit providers not to enter into a small amount loan or offer to enter into a small amount loan if the repayments in a payment cycle would exceed 20 per cent of the consumer’s gross income, for consumers who receive at least 50 per cent of their gross income as payments under the Social Security Act 1991. The regulation sets out the principles to be applied by a credit provider when completing the calculation. A payment cycle is defined as the period during which the consumer receives the predominant amount of payments as income. The regulation requires the credit provider to work out the consumer’s expected gross income and repayments for other small amount credit contracts and then compare the two amounts as a percentage.

[page 817]

Chapter 4 — Administration — Registers relating to credit activities Credit registers — licensees, credit representatives and registered persons 29 (1) For subsection 213(2) of the Act, ASIC must include the following details for each licensee included in a credit register of licensees: (a) the licensee’s name (including the licensee’s principal business name, if any); (b) the principal business address of the licensee; (c) the date on which the licensee’s Australian credit licence was granted; (d) the number of the licensee’s Australian credit licence; (e) if the licensee has an ABN — the ABN; (f)

details of any conditions on the licensee’s Australian credit licence, including details of the credit activities or classes of credit activities that the licensee is authorised to engage in;

(g) the name of the approved external dispute resolution scheme of which the licensee is a member; (h) any other information that ASIC believes should be included in the register. 29 (2) Subregulation (3) applies in relation to: (a) credit representatives of licensees; and (b) credit representatives of registered persons.

29 (3) For subsection 213(2) of the Act, ASIC must include the following details for each credit representative included in a credit register of credit representatives: (a) the credit representative’s name (including representative’s principal business name, if any);

the

credit

(b) the credit representative’s principal business address; (c) the number allocated to the credit representative by ASIC; (d) the name of each licensee or registered person for which the credit representative is a credit representative; (e) the: (i)

number of the Australian credit licence of each licensee; and

(ii) number allocated by ASIC to each registered person; for which the credit representative is a credit representative; (f)

if the credit representative has an ABN — the ABN;

(g) the date of the credit representative’s authorisation by the licensee or registered person; (h) the name of the approved external dispute resolution scheme of which the credit representative is a member; (i)

any other information that ASIC believes should be included in the register.

29 (4) For subsection 213(2) of the Act, ASIC must include the following details for each registered person included in a credit register of registered persons: (a) the registered person’s name (including the registered person’s principal business name, if any); (b) the principal business address of the registered person; (c) the date on which the registered person’s name was entered on the credit register as a registered person;

[page 818] (d) the number allocated to the registered person by ASIC; (e) if the registered person has an ABN — the ABN; (f)

details of any conditions on the registered person’s registration, including details of the credit activities or classes of credit activities that the registered person is authorised to engage in;

(g) the name of the approved external dispute resolution scheme of which the registered person is a member; (h) any other information that ASIC believes should be included in the register. 29 (5) For paragraphs (1)(b), (3)(b) and (4)(b), if: (a) the person’s principal business address is the person’s residential address; and (b) ASIC determines, in writing, that including the person’s residential address in a register would put at risk the personal safety of the person or members of the person’s family; and (c) the person provides an alternative address: (i)

that is in Australia; and

(ii) that is not a post office box or an electronic address; and (iii) that has a connection with the credit activities engaged in by the person; and (iv) at which documents can be served on the person; ASIC may include the alternative address in the register. 29 (6) If ASIC includes a person’s alternative address in the register under subregulation (5), the person must, in the approved form: (a) lodge with ASIC notice of the person’s residential address; and (b) lodge with ASIC notice of any change in the person’s residential address within 14 days after the change.

29 (7) If: (a) ASIC includes a person’s alternative address in the register under subregulation (5); and (b) a court gives a judgment for payment of a sum of money against the person; ASIC may give details of the person’s residential address to an officer of the court for the purposes of enforcing the judgment debt. COMMENTARY ON REGULATION 29 [R29.05] Regulation 29 prescribes the details required for each licensee, credit representative and registered person that ASIC must include in the relevant register to comply with s 213(2) of the NCCP Act.

Credit registers — persons against whom banning order or disqualification order is made 30 (1) For subsection 213(2) of the Act, ASIC must include the following details for each person against whom a banning order is made under Division 2 of Part 2-4 of the Act in a credit register of persons against whom a banning order is made: (a) the person’s name; (b) the day on which the banning order took effect; (c) whether the banning order is permanent or for a fixed period; (d) if the banning order is for a fixed period — the period; (e) the terms of the banning order; (f)

whether the banning order has been varied or cancelled;

(g) if the banning order has been varied: (i)

the date of the variation; and

(ii) the terms of the variation;

[page 819] (h) if the banning order has been cancelled — the date of the cancellation; (i)

any other information that ASIC believes should be included in the register.

30 (2) For subsection 213(2) of the Act, ASIC must include the following details for each person against whom a disqualification order is made under Division 3 of Part 2-4 of the Act in a credit register of persons against whom a disqualification order is made: (a) the person’s name; (b) the day on which the disqualification order took effect; (c) whether the disqualification order is permanent or for a fixed period; (d) if the disqualification order is for a fixed period — the period; (e) the terms of the disqualification order; (f)

whether the disqualification order has been varied or revoked;

(g) if the disqualification order has been varied: (i)

the date of the variation; and

(ii) the terms of the variation; (h) if the disqualification order has been revoked — the date of the revocation; (i)

any other information that ASIC believes should be included in the register.

30 (3) For subsection 213(2) of the Act, ASIC must include the following details for each person who is banned from engaging in a credit activity under a law of a State or Territory in a credit register of persons who are banned under a law of a State or Territory: (a) the person’s name;

(b) the day on which the ban took effect; (c) whether the ban is permanent or for a fixed period; (d) if the ban is for a fixed period — the period; (e) the terms of the ban; (f)

whether the ban has been varied or cancelled;

(g) if the ban has been varied: (i)

the date of the variation; and

(ii) the terms of the variation; (h) if the ban has been cancelled — the date of the cancellation; (i)

any other information that ASIC believes should be included in the register. COMMENTARY ON REGULATION 30

[R30.05] For s 213(2) of the NCCP Act, reg 30 prescribes the details for any banning order or disqualification order made under Pt 2-4 of the NCCP Act and the details for any other ban from engaging in a credit activity under relevant state and territory law that ASIC is required to record in the relevant register for each licensee, credit representative and registered person.

Credit register — unlicensed carried over instrument lender 30A (1) For subsection 213(2) of the Act, ASIC must include the following details for each unlicensed carried over instrument lender in a credit register for unlicensed carried over instrument lenders: (a) the lender’s name (including the lender’s principal business name, if any); (b) the postal address of the lender; (c) if the principal business address of the lender is different from the postal address — the principal business address;

(d) if the lender has an ABN — the ABN; (e) if the lender is required to engage in credit activities through a registered person or licensee under section 74 of the Act: [page 820] (i)

the reason why the lender is required to engage in the credit activities through the registered person or licensee; and

(ii) the name of the registered person or licensee; (f)

if the lender is a member of an approved external dispute resolution scheme — the name of the scheme.

30A (2) For paragraph (1)(d), ASIC may include in the credit register an alternative address to the lender’s principal business address if: (a) the lender’s principal business address is the lender’s residential address; and (b) ASIC determines, in writing, that including the lender’s residential address in the register would put at risk the personal safety of the lender or members of the lender’s family; and (c) the lender provides an alternative address: (i)

that is in Australia; and

(ii) that is not a post office box or an electronic address; and (iii) that has a connection with the credit activities engaged in by the lender. 30A (3) If ASIC includes a lender’s alternative address in the register, the lender must, in the approved form, lodge with ASIC notice of: (a) the lender’s residential address; and (b) any change of the lender’s address no later than 14 days after the change.

30A (4) ASIC may give details of the lender’s residential address to an officer of a court for the purposes of enforcing a judgement debt if: (a) ASIC includes the lender’s alternative address in the register; and (b) the court gives a judgement for payment of a sum of money against the person. [reg 30A insrt SLI 105 of 2010 reg 3 and Sch 1[27], eff 24 May 2010]

COMMENTARY ON REGULATION 30A [R30A.05] Regulation 30A prescribes the details required for each unlicensed carried-over instrument lender that ASIC must include in a credit register for unlicensed carried over instrument lenders to comply with s 213(2) of the NCCP Act.

[page 821]

Chapter 5 — Compliance and enforcement Investigations — distribution of report 31 For paragraph 251(2)(d) of the Act, the following are prescribed: (a) the Australian Competition and Consumer Commission; (b) APRA; (c) the Australian Taxation Office; (d) the CEO of the Australian Transaction Reports and Analysis Centre; (e) an authority of a State or Territory having functions and powers similar to those of the Director of Public Prosecutions; (f)

the police force or service of each State and the Northern Territory;

(g) the Department of Commerce (Office of Fair Trading) of New South Wales; (h) the Department of Justice (Consumer Affairs Victoria) of Victoria; (i)

the Department of Employment, Economic Development and Innovation of Queensland; (j) the Department of Commerce of Western Australia;

(k) the Office of Consumer and Business Affairs of South Australia; (l)

the Office of Consumer Affairs and Fair Trading of Tasmania;

(m) the Department of Justice and Community Safety (Office of Regulatory Services) of the Australian Capital Territory; (n) the Department of Justice of the Northern Territory; (o) the Australian Federal Police.

COMMENTARY ON REGULATION 31 [R31.05] This regulation sets out the agencies, bodies and authorities to whom ASIC may provide a copy of a report under s 251(2)(d) of the NCCP Act.

Examination of person — form of notice requiring assistance and appearance for examination 32 For subsection 253(2) of the Act, Form 1 is prescribed. COMMENTARY ON REGULATION 32 [R32.05] This regulation provides that Form 1 (contained in Sch 1 to the regulations) is prescribed for a notice given under s 253(2) of the NCCP Act.

Inspection of books and audit informationgathering powers — evidence of authority 33 If: (a) an ASIC member or ASIC staff member produces a document issued by ASIC; and (b) the document states that the person is authorised by ASIC under section 268 of the Act; [page 822] the document is evidence of: (c) the authority of the person to require other persons to produce books or give information under subsection 268(1); and (d) any limitation on that authority that is specified in the document under that subsection.

COMMENTARY ON REGULATION 33 [R33.05] This regulation sets out the instances where a document issued by ASIC is evidence of an ASIC staff member’s authority for the purposes of s 268 of the NCCP Act.

Hearings — form of summons to appear before ASIC 34 For subsection 284(1) of the Act, Form 2 is prescribed. COMMENTARY ON REGULATION 34 [R34.05] This regulation states that Form 2 (contained in Sch 1 to the regulations) is the prescribed form to be used for the purposes of s 284(1) of the NCCP Act.

Miscellaneous provisions — allowances and expenses 35 (1) For subsections 317(1) and (2) of the Act, a person who: (a) appears for examination under section 253 of the Act; or (b) appears pursuant to a summons issued under section 284 of the Act; is entitled to be paid the allowances and expenses set out in this regulation. 35 (2) A person summoned to appear as a witness before ASIC because of his or her professional, scientific or other special skill or knowledge must be paid: (a) if the person is remunerated in his or her occupation by wages, salary or fees — an amount equal to the amount of wages, salary or fees not paid to the person because of his or her attendance for the appearance; and (b) in any other case — an amount of not less than $81, or more than $407, for each day on which he or she so attends.

35 (3) A person summoned to appear as a witness before ASIC, other than a witness mentioned in subregulation (2), must be paid: (a) if the person is remunerated in his or her occupation by wages, salary or fees — an amount equal to the amount of wages, salary or fees not paid to the person because of his or her attendance for the appearance; and (b) in any other case — an amount of not less than $46, or more than $76, for each day on which he or she so attends. 35 (4) A person summoned to appear as a witness before ASIC must be paid a reasonable amount for allowances for: (a) transport between the usual place of residence of the person and the place that he or she attends for the appearance; and (b) if he or she is required to be absent overnight from his or her usual place of residence — meals and accommodation during the absence. COMMENTARY ON REGULATION 35 [R35.05] Regulation 35 sets out the entitlement to allowances and expenses of a person appearing for examination under s 253 of the NCCP Act or pursuant to a summons issued under s 284 of the NCCP Act.

[page 823]

Chapter 6 — Miscellaneous Part 6-1 — Court proceedings Where proceedings may be brought 36 (1) For section 330 of the Act, this regulation sets out where court proceedings may be brought. 36 (2) This regulation does not apply to a court proceeding if the court proceeding is: (a) commenced by ASIC; or (b) a class action or representative action on behalf of consumers from more than 1 State or Territory; or (c) commenced by a credit provider under section 112 of the Code for an order under section 113 of the Code. 36 (3) Subject to subregulation (4), a court proceeding must be brought in a court of the State or Territory where the debtor, mortgagor or guarantor ordinarily resides, if the court proceeding: (a) is in relation to: (i)

a credit contract; or

(ii) a consumer lease; or (iii) a mortgage; or (iv) a guarantee; regulated under the Act; and (b) involves a debtor, mortgagor or guarantor.

36 (4) For subregulation (3), if it is not known where the debtor, mortgagor or guarantor ordinarily resides, the court proceeding must be brought in a court of the State or Territory where the debtor, mortgagor or guarantor ordinarily resided at the time the credit contract, consumer lease, mortgage or guarantee was made. 36 (5) Subject to subregulation (6), a court proceeding should be filed in the registry of a court of the State or Territory where the debtor, mortgagor or guarantor ordinarily resides, if the court proceeding: (a) is in relation to: (i)

a credit contract; or

(ii) a consumer lease; or (iii) a mortgage; or (iv) a guarantee; regulated under the Act; and (b) involves a debtor, mortgagor or guarantor; and (c) is brought in the Federal Court or the Federal Circuit Court. [subs (5) am SLI 51 of 2013 s 4 and Sch 1 item 104, eff 12 Apr 2013]

36 (6) For subregulation (5), if it is not known where the debtor, mortgagor or guarantor ordinarily resides, the court proceeding must be filed in the registry of a court of the State or Territory where the debtor, mortgagor or guarantor ordinarily resided at the time the credit contract, consumer lease, mortgage or guarantee was made. [page 824] 36 (7) Subregulation (8) applies if a court proceeding is in relation to a credit contract: (a) that is not a standard form contract (within the meaning of section 12BK of the Australian Securities and Investments Commission Act 2001); and (b) that states that a court proceeding in relation to the credit contract

must be brought in a court of a particular State or Territory. 36 (8) For subregulation (7): (a) subregulations (3) to (6) do not apply to the court proceedings; and (b) the court proceeding must be brought in a court of the State or Territory stated in the credit contract. 36 (9) The court proceedings mentioned in subregulations (3), (4) and (8) may be transferred to a court of another State or Territory under Part 4-3, Division 2, Subdivision C of the Act. COMMENTARY ON REGULATION 36 [R36.05] Regulation 36 is to be read in conjunction with s 330 of the NCCP Act. It sets out in what circumstances court proceedings may be brought and in what jurisdiction. Once proceedings are commenced, they may be transferred to another state or territory under Pt 4-3, Div 2, Subdiv C of the NCCP Act.

Part 6-2 — Infringement notices

Purpose of Part 6-2 37 (1) The purpose of this Part is to set out a scheme under section 331 of the Act under which: (a) a person who is alleged to have committed an offence against the Act that is stated to be an offence of strict liability may pay a penalty to the Commonwealth as an alternative to prosecution; and (b) a person who is alleged to have contravened a civil penalty provision may pay a penalty to the Commonwealth as an alternative to civil proceedings. 37 (2) This Part does not require an infringement notice to be given to a person for the alleged commission of an offence or contravention of a civil penalty provision. 37 (3) This Part does not affect the liability of a person to prosecution for the commission of an alleged offence or contravention of a civil penalty provision if an infringement notice is not given to the person. 37 (4) This Part does not affect the liability of a person to prosecution for the commission of an alleged offence or contravention of a civil penalty provision if: (a) an infringement notice is given to the person; and (b) the person does not pay the penalty stated in the notice in accordance with regulation 44. 37 (5) This Part does not limit or otherwise affect: (a) the penalty that a court could impose on the person for the offence; or (b) the penalty that a court could impose on the person for contravention of the civil penalty provision. COMMENTARY ON REGULATION 37

[R37.05] As stated in the Explanatory Statement, reg 37 explains that the purpose of Pt 6-2 of the regulations is to set out an infringement notice scheme [page 825] in accordance with s 331 of the NCCP Act. Regulation 37 explains that ASIC may issue an infringement notice (although it is not obligatory) to a person who is alleged to have committed a strict liability offence against the NCCP Act (including the Code) or to have contravened a civil penalty provision of the NCCP Act and that person may pay a penalty to the Commonwealth as an alternative to prosecution. This regulation sets out the various legal consequences that apply, whether or not an infringement notice is or is not given, and if the person who receives an infringement notice does not pay the penalty in accordance with reg 44.

Definitions for Part 6-2 38 In this Part: infringement notice means an infringement notice under regulation 39. infringement notice offence means: (a) an offence against the Act that is stated to be an offence of strict liability; or (b) a contravention of 1 of the following civil penalty provisions in the Act: (i)

subsection 30(1) or (2);

(ii)

subsection 32(1);

(iii)

subsection 51(1);

(iv)

subsection 73(3) or (5);

(v)

subsection 88(1);

(vi)

subsection 95(1);

(vii)

subsection 98(1);

(viii)

subsection 99(1), (2) or (3);

(ix)

subsection 100(1) or (2);

(x)

subsection 114(1), (4), (5) or (6);

(xi)

subsection 115(1) or (2);

(xii)

subsection 117(1);

(xiii)

subsection 118(1);

(xiv)

subsection 119(1);

(xv)

subsection 121(1);

(xvi)

subsection 122(1);

(xvii) subsection 123(1);

(xviii) subsection 124(1); (xix)

section 128;

(xx)

subsection 130(1);

(xxi)

subsection 131(2);

(xxii) subsection 133(1); (xxiii) subsection 137(1), (4), (5) or (6); (xxiv) subsection 138(1) or (2); (xxv) subsection 140(1); (xxvi) subsection 141(1); (xxvii) subsection 142(1); (xxviii)subsection 144(1); (xxix) subsection 145(1); (xxx) subsection 146(1); (xxxi) subsection 147(1); (xxxii) section 151; (xxxiii)subsection 153(1); (xxxiv) subsection 154(2); [page 826] (xxxv) subsection 156(1); (xxxvi) subsection 229(1). nominated person, in relation to an infringement notice, means the person specified in the notice as the nominated person. Note The nominated person is responsible for the administration of the infringement notice for the purposes of the payment of a penalty and the withdrawal of the notice.

recipient, in relation to an infringement notice, means the person to

whom the notice is given under regulation 39. COMMENTARY ON REGULATION 38 [R38.05] Regulation 38 provides definitions for certain terms used in regs 38–48, namely “infringement notice”, “infringement notice offence” (which includes the list of the specific civil penalty provisions which are applicable), “nominated person” and “recipient”. The “nominated person” is the person at ASIC who is responsible for the administration of the infringement notice for the purposes of payment of the penalty and the withdrawal of the notice.

When an infringement notice can be given 39 (1) Alleged commission of offence against the Act If ASIC has reasonable grounds to believe that a person has committed an offence against the Act that is stated to be an offence of strict liability, ASIC may give to the person an infringement notice relating to the alleged commission of the offence. 39 (2) The infringement notice must be given within 12 months after the day on which the offence is alleged to have been committed. 39 (3) If an infringement notice given to a person in relation to the alleged commission of a particular offence is withdrawn, ASIC may give the person a new infringement notice in relation to the alleged commission. Example for subregulation (3) An infringement notice given to a person in relation to the alleged commission of a particular offence may be withdrawn, and a new infringement notice given to the person in relation to that alleged commission, if the original infringement notice contained an error.

39 (4) Alleged contravention of civil penalty provision If ASIC has reasonable grounds to believe that a person has contravened a civil penalty provision mentioned in paragraph (b) of the definition of infringement notice offence in regulation 38, ASIC may give to the person an infringement notice relating to the alleged contravention. 39 (5) The infringement notice must be given within 12 months after the day

on which the civil penalty provision is alleged to have been contravened. 39 (6) If an infringement notice given to a person in relation to the alleged contravention of a particular civil penalty provision is withdrawn, ASIC may give the person a new infringement notice in relation to the alleged contravention. Example for subregulation (6) An infringement notice given to a person in relation to the alleged contravention of a particular civil penalty provision may be withdrawn, and a new infringement notice given to the person in relation to that alleged contravention, if the original infringement notice contained an error.

[page 827] COMMENTARY ON REGULATION 39 [R39.05] Regulation 39 requires ASIC, before giving a person an infringement notice, to have: reasonable grounds to believe that a person has committed an offence against the NCCP Act that is stated to be an offence of strict liability; or reasonable grounds to believe that a person has contravened a civil penalty provision (being one of the civil penalty provisions included in the definition of “infringement notice” offence). There is a time limit of 12 months for ASIC to give an infringement notice (from the date when the offence is alleged to have occurred). ASIC may withdraw an infringement notice and issue a new infringement notice provided it is within this time period. This allows ASIC to withdraw an infringement notice that has an error in it and issue a corrected one.

Contents of infringement notice 40 An infringement notice: (a) must be in accordance with Form 3; and

(b) may contain any other information that ASIC considers necessary. COMMENTARY ON REGULATION 40 [R40.05] Regulation 40 provides that the form of an infringement notice must be in accordance with Form 3 of Sch 1 to the regulations and may contain any other information that ASIC considers necessary.

Amount of penalty if infringement notice given 41 (1) The penalty payable under an infringement notice for an alleged commission of an offence against the Act that is stated to be an offence of strict liability is: (a) for an individual — one-fifth of the maximum penalty that a court could impose on the person for that offence; and (b) for a body corporate — the maximum penalty that a court could impose on an individual for that offence. 41 (2) The penalty payable under an infringement notice for an alleged contravention of a civil penalty provision mentioned in paragraph (b) of the definition of infringement notice offence in regulation 38 is: (a) for an individual — 50 penalty units; and (b) for a body corporate — 250 penalty units. Note Under section 331 of the Act: the penalty for an offence against the Act that is stated to be an offence of strict liability must not exceed one-fifth of the maximum penalty that a court could impose on the person for that offence; and the penalty for a contravention of a civil penalty provision must not exceed one-fortieth of the maximum penalty that a court could impose on the person for contravention of that provision.

COMMENTARY ON REGULATION 41 [R41.05] Regulation 41 prescribes the amounts of penalty payable under an infringement notice by individuals and bodies corporate for an alleged commission of an offence of strict liability and an alleged contravention of a civil

[page 828] penalty provision, which must be consistent with the maximum amount permitted in s 331 of the NCCP Act. The maximum amount permitted under s 331 of the NCCP Act for offences of strict liability is one fifth of the maximum penalty that a court could impose on the person for that offence, and for civil penalty provisions is one-fortieth of the maximum penalty that a court could impose on the person for that offence.

Extension of time to pay penalty 42 (1) Within 28 days after receiving an infringement notice, the recipient may apply, in writing, to the nominated person for a further period of up to 28 days in which to pay the penalty stated in the notice. 42 (2) The application must: (a) specify the infringement notice’s unique identification code; and (b) set out the reasons for the application. 42 (3) Within 14 days after receiving the application, the nominated person must: (a) grant or refuse a further period not longer than the period sought (but less than 28 days); and (b) notify the recipient in writing of the decision and, if the decision is a refusal, the reasons for the decision. 42 (4) If the nominated person has not granted, or refused to grant, the further period within 14 days after receiving the application, the nominated person is taken to have refused to grant the further period. COMMENTARY ON REGULATION 42 [R42.05] Regulation 42 prescribes the process by which a person can apply to extend the time to pay a penalty to ASIC. The Explanatory Statement summarises the process as follows:

[A] recipient of an infringement notice [may] apply in writing to ASIC for a further period of up to 28 days in which to pay the penalty stated in the infringement notice. The application must be made within 28 days after receiving the infringement notice and must include reasons for the application. ASIC may grant or refuse such an application. If, 14 days after receiving an application, ASIC has not granted or refused to grant the application, ASIC is taken to have refused to grant the further period to pay the penalty.

Payment of penalty by instalments 43 (1) Within 28 days after receiving an infringement notice, the recipient may apply, in writing, to the nominated person for permission to pay the amount of the infringement notice penalty by instalments. 43 (2) The application must: (a) specify the infringement notice’s unique identification code; and (b) set out the reasons for the application; and (c) specify the amount and frequency of the instalments that the recipient proposes to pay. 43 (3) Within 14 days after receiving the application, the nominated person must: (a) grant or refuse to grant permission for payment by instalments; and [page 829] (b) give the recipient written notice of the decision, including: (i)

if permission is granted — the amount and frequency of the instalments; and

(ii) if permission is refused — the reasons for refusal. 43 (4) If the nominated person has not granted, or refused to grant, permission for payment by instalments within 14 days after receiving the application, the nominated person is taken to have refused to grant permission for payment by instalments.

COMMENTARY ON REGULATION 43 [R43.05] Regulation 43 prescribes the process by which a person can apply to pay a penalty to ASIC by instalments. The Explanatory Statement summarises the process as follows: [A] recipient of an infringement notice [may] apply in writing to ASIC for permission to pay a penalty under an infringement notice by instalments. Such an application must be made within 28 days after receiving the infringement notice and include the reasons for the application and details of the amount and frequency with which the recipient proposes to pay. [ASIC may grant or refuse such an application.] If, after 14 days after receiving an application, ASIC has not granted, or refused to grant, the application, ASIC is taken to have refused to grant permission to pay a penalty under an infringement notice by instalments.

Time for payment of penalty 44 (1) The penalty stated in an infringement notice must be paid within: (a) 28 days after the day on which the notice is given to the recipient; or (b) another period required by this regulation. 44 (2) If the recipient applies for a further period of time in which to pay the penalty, and the application is granted, the penalty must be paid within the further period allowed. 44 (3) If the recipient applies for a further period of time in which to pay the penalty, and the application is refused or is taken to have been refused, the penalty must be paid within the later of: (a) 7 days after: (i)

the notice of the refusal is given to the recipient; or

(ii) the application is taken to have been refused; and (b) 28 days after the day on which the infringement notice was given to the recipient. 44 (4) If the recipient applies for permission to pay the penalty by instalments, and permission is granted, the penalty must be paid in accordance with the permission.

44 (5) If the recipient applies for permission to pay the penalty by instalments, and permission is refused or is taken to have been refused, the penalty must be paid within the later of: (a) 7 days after: (i)

the notice of the refusal is given to the recipient; or

(ii) the application is taken to have been refused; and (b) 28 days after the day on which the infringement notice was given to the recipient. 44 (6) If the recipient applies for the notice to be withdrawn, and the application is refused or is taken to have been refused, the penalty must be paid within the later of: (a) 7 days after: (i)

the notice of the refusal is given to the recipient; or

(ii) the application is taken to have been refused; and (b) 28 days after the day on which the infringement notice was given to the recipient. [page 830] COMMENTARY ON REGULATION 44 [R44.05] This regulation prescribes the time period for payment of a penalty in an infringement notice. As stated in the Explanatory Statement, the penalty must be paid within 28 days after the day on which the notice is given to the recipient, unless the recipient takes action such as requesting an extension of time to pay the penalty or requesting permission to pay the penalty by instalments or requesting that the notice be withdrawn.

Effect of payment of penalty 45 (1) Alleged commission of offence against the Act If:

(a) an infringement notice is given in relation to an alleged commission of an offence against the Act that is stated to be an offence of strict liability; and (b) the infringement notice is not withdrawn; and (c) the recipient pays the penalty stated in the notice in accordance with regulation 44; the consequences mentioned in subregulation (2) apply. 45 (2) The effects are: (a) any liability of the recipient for the alleged offence is discharged; and (b) no prosecution may be brought against the recipient for the alleged offence; and (c) the recipient is not taken to have admitted guilt in respect of the alleged offence; and (d) the recipient is not taken to have been convicted of the offence. 45 (3) Alleged contravention of civil penalty provision If: (a) an infringement notice is given in relation to an alleged contravention of a civil penalty provision; and (b) the infringement notice is not withdrawn; and (c) the recipient pays the penalty stated in the notice in accordance with regulation 44; the consequences mentioned in subregulation (4) apply. 45 (4) The effects are: (a) any liability of the recipient for the alleged contravention is discharged; and (b) no civil proceedings may be brought by the Commonwealth against the recipient for the alleged contravention; and (c) the recipient is not taken to have admitted guilt in respect of the alleged contravention; and

(d) the recipient is not taken to have been found guilty of the contravention. Note A consumer is not prevented from commencing a civil proceeding against the recipient under section 178 or 179 of the Act. ASIC is not prevented from applying for an order on behalf of a plaintiff in accordance with those sections.

COMMENTARY ON REGULATION 45 [R45.05] This regulation sets out the consequences if a person pays the penalty in an infringement notice in accordance with reg 44 as follows: the person’s liability is discharged; the Commonwealth may not bring a prosecution or civil proceedings against the person; the person is not taken to have admitted guilt in respect of the alleged contravention or offence; and the recipient is not taken to have been convicted of the offence or to be found guilty of the contravention. [page 831] As provided in the Explanatory Statement, if a person pays a penalty under an infringement notice for the alleged contravention of a civil penalty provision, neither a consumer nor ASIC on behalf of a consumer is prevented from commencing civil proceedings for compensation or other orders under ss 178 or 179 of the NCCP Act, for conduct the subject of the alleged contravention.

Withdrawal of infringement notice by nominated person 46 (1) Within 28 days after receiving an infringement notice, the recipient may apply, in writing, to the nominated person for the infringement notice to be withdrawn.

46 (2) The application must: (a) specify the infringement notice’s unique identification code; and (b) set out the reasons for the application. 46 (3) Within 14 days after receiving the application, the nominated person must: (a) withdraw or refuse to withdraw the notice; and (b) notify the recipient in writing of the decision and, if the decision is a refusal, the reasons for the decision. 46 (4) Without limiting subregulation (3), the nominated person may withdraw the infringement notice after taking into account the following matters: (a) whether the recipient: (i)

has been previously convicted of an offence against the Act; or

(ii) has been previously found to have contravened a civil penalty provision; (b) the circumstances in which the commission or contravention set out in the infringement notice offence specified in the notice is alleged to have occurred; (c) whether an infringement notice has previously been given to the recipient in relation to an infringement notice offence of the same kind as the offence specified in the notice, and in relation to which the recipient paid the penalty under the notice; (d) any other relevant matter. 46 (5) If the nominated person has not withdrawn, or refused to withdraw, the notice within 14 days after receiving the application, the nominated person is taken to have refused to withdraw the notice. COMMENTARY ON REGULATION 46

[R46.05] A recipient of an infringement notice may apply in writing to ASIC to have the infringement notice withdrawn. Such an application must be made within 28 days after receiving the infringement notice and include the reasons for the application. ASIC may grant or refuse such an application. If, after 14 days after receiving an application, ASIC has not granted or refused to grant the application, ASIC is taken to have refused withdrawing the notice. Without limiting its rights to withdraw a notice, ASIC may withdraw the notice after taking into account the following matters: whether the recipient has previously been convicted of an offence under the NCCP Act or previously been found to have contravened a civil penalty provision; the circumstances of the alleged commission of the offence or contravention; whether the recipient had previously been given an infringement notice for an offence of the same kind and for which the recipient paid the penalty under the notice; and any other relevant matter. [page 832]

Withdrawal of infringement notice by ASIC 47 (1) ASIC may withdraw an infringement notice given by ASIC without an application under regulation 46 having been made. 47 (2) Without limiting subregulation (1), ASIC may withdraw the infringement notice after taking into account a matter mentioned in paragraph 46(4)(a), (b), (c) or (d). COMMENTARY ON REGULATION 47 [R47.05] This regulation permits ASIC to withdraw an infringement notice without an application for withdrawal having been made by a recipient.

Without limiting its rights to withdraw a notice, ASIC may withdraw the notice after taking into account any of the matters referred to in reg 46.

Notice of withdrawal of infringement notice 48 (1) A notice withdrawing an infringement notice must include the following information: (a) the full name, or surname and initials, and address of the recipient; (b) the date the infringement notice was given; (c) the infringement notice’s unique identification code. 48 (2) The notice must also state that the notice is withdrawn. COMMENTARY ON REGULATION 48 [R48.05] Regulation 48 prescribes the information that must be included in a notice withdrawing an infringement notice.

Refund of penalty 49 If an infringement notice is withdrawn after the penalty stated in it has been paid, the Commonwealth must refund the amount of the penalty to the person who paid it. COMMENTARY ON REGULATION 49 [R49.05] If an infringement notice is withdrawn after the penalty stated in it has been paid, the Commonwealth must refund the amount of the penalty to the person who paid it.

Part 6-3 — Transitional arrangements [Pt 6-3 insrt SLI 117 of 2012 reg 3 and Sch 1[2], eff 19 June 2012]

Transitional — Schedule 1 to National Consumer

Credit Protection Amendment Regulation 2012 (No 1) 49A (1) This regulation applies if, during the period commencing on the commencement of this regulation and ending on 1 October 2012, a document complies with the requirements for a [page 833] Key Facts Sheet set out in Schedule 5 as in force immediately before the commencement of Schedule 1 to the National Consumer Credit Protection Amendment Regulation 2012 (No 1). 49A (2) The document is taken, during that period, to be a Key Facts Sheet that complies with Schedule 5 as amended by Schedule 1 to the National Consumer Credit Protection Amendment Regulation 2012 (No 1). COMMENTARY ON REGULATION 49A [R49A.05] Regulation 49A was introduced by the National Consumer Credit Protection Amendment Regulations 2012 (No 1). The Explanatory Statement to Select Legislative Instrument 2012 No 117 explains: … [The] Regulation[s]: clarify obligations for describing home loan product in home loan Key Facts Sheets; allow producers of home loan Key Facts Sheets to describe future changes to the interest rate during the life of the contract more accurately; permit alternative methods for providing customers with a credit card Key Facts Sheet where a customer applies for a credit card online; clarify the conditions under which credit card providers may obtain the consent of a consumer to send credit limit increase invitations; introduce an exemption from the requirement to include a Minimum Repayment Warning where credit card balances are low; and clarify that the requirement to provide a Minimum Repayment Warning in a statement of account applies only to credit card contracts.

And further:

Item 2 [of Sch 1] inserts regulation 49A, which gives home loan providers up until 1 October 2012 to modify their systems to transition to the revised obligations introduced by these regulations. The regulation allows a document to be taken as compliant with Schedule 5 if it complies with the requirements for a Key Fact Sheet set out in Schedule 5 as in force immediately before the commencement of Schedule 1 of these regulations.

Transitional — Schedule 2 to National Consumer Credit Protection Amendment Regulation 2012 (No 1) 49B (1) This regulation applies if, during the period commencing on the commencement of this regulation and ending on 1 October 2012, a person complies with a requirement of these Regulations as in force immediately before the commencement of Schedule 2 to the National Consumer Credit Protection Amendment Regulation 2012 (No 1). 49B (2) The person is taken, during that period, to have complied with these Regulations as amended by Schedule 2 to the National Consumer Credit Protection Amendment Regulation 2012 (No 1). [reg 49B insrt SLI 117 of 2012 reg 3 and Sch 2[8], eff 1 July 2012]

COMMENTARY ON REGULATION 49B [R49B.05] Regulation 49B was a transitional regulation for the period from its commencement and ending on 1 October 2012.

[page 835]

Chapter 7 — Matters in relation to the National Credit Code Part 7-1 — Exemptions, declarations and other matters

Continued application of Part 12 of the Code and interpretation provisions 50 (1) This regulation applies despite a statement in a provision of this Part that: (a) the Code does not apply to a particular matter; or (b) the Code, other than a particular provision or provisions (the prescribed provision or provisions), does not apply to a particular matter; or (c) a particular provision or provisions of the Code (the prescribed provision or provisions) does not apply to a particular matter. 50 (2) The Code applies in relation to the particular matter and the prescribed provision or provisions to the extent necessary for the interpretation of the particular matter and the prescribed provision or provisions. 50 (3) Part 12 of the Code applies in relation to the particular matter and the prescribed provision or provisions to the extent the context permits. COMMENTARY ON REGULATION 50 [R50.05] Despite any exemption or modification of the Code pursuant to Pt 7-1 of the regulations (Exemptions, declarations and other matters) in respect of any matter, reg 50 provides that the Code will continue to apply to the extent necessary to interpret the exemption or modification. Specifically, the Explanatory Statement to reg 50 states: “[T]he Code still applies to the extent necessary for the interpretation of a particular matter, and for the interpretation of those provisions of the Code that have not been excluded; and the application of Pt 12 (Miscellaneous — covering assumptions, documentary provisions, offences, exemptions etc) expressly continues to apply to the matter and to those provisions of the Code that have not been excluded (to the extent the context permits).”

Exemption for short term credit

50A For paragraph 6(1)(b) of the Code: (a) credit fees and charges imposed or provided for under a contract are taken to include a fee or charge specified in the following table if the fee or charge is a credit fee or charge within the meaning of the definition of credit fees and charges in section 204 of the Code; and (b) the fee or charge is taken to be included whether or not it is payable under the contract. [page 836] Fees and charges Item Fee or charge 1 A fee or charge payable in connection with the supply of the amount of credit provided under the contract. 2 A fee or charge payable in connection with the consumer receiving an amount of credit provided, under the contract, as cash or by transfer to an account. 3 A fee or charge payable in connection with the management or repayment of the amount of credit provided under the contract. Example 1: A fee for providing the credit through a stored value card. Example 2: A fee or charge for obtaining a membership (however described) which is a prerequisite to the debtor obtaining access to a service to receive funds paid by cheque as cash (whether or not with other services). Example 3: Account keeping fees (however described). [s 50A insrt SLI 89 of 2014 s 4 and Sch 1 item 2, eff 13 June 2014]

COMMENTARY ON REGULATION 50A

[R50A.05] Proposed reg 50A was set out in an exposure draft (06/01/2014) National Consumer Credit Protection Amendment (Small Amount Credit Contracts) Regulation 2014. The Explanatory Statement explains: Subsections 6(1), (2) and (3) of the [Code] currently provide an exemption from the [NCCP] Act for low-cost credit contracts. The exemption applies if the loan has a maximum term of 62 days, and the credit provider only charges maximum costs of an upfront fee of 5 per cent of the amount of credit, and interest at 24 per cent. In practice this means that on a loan of $100, over 2 months a credit provider could charge a maximum of about $9. The Regulation addresses concerns that a number of credit providers are relying on this exemption while charging amounts more than are permitted under the cap on costs in Division 4 of the [Code]. They do this by charging additional amounts they do not consider to be included in the charges allowed under paragraph 6(1)(b). The Regulation addresses this conduct by specifying the particular fees that are considered credit fees and charges for the purpose of the application of this exemption. This will ensure that no additional amounts can be charged above 5 per cent of the amount of credit, and interest at 24 per cent allowed under the exemption.

[R50A.10] Regulation 50A was introduced by the National Consumer Credit Protection Amendment (Small Amount Credit Contracts) Regulation 2014 — see [R4D.05] and [R4D.10].

Exempt credit — maximum account charges 51 For subsection 6(5) of the Code, the prescribed maximum charge in relation to a continuing credit contract is specified in the following table. [page 837] Prescribed maximum charge Item If… 1

the prescribed maximum charge is… the debtor is not already a party to (a) for the period of 12 months a continuing credit contract with commencing when the the credit provider, or an debtor enters into the associate of the credit provider, continuing credit contract —

when the continuing credit contract is entered into

2

$200; and (b) for any subsequent period of 12 months during which the continuing credit contract is in effect — $125. both of the following apply when (a) for the period of 12 months the continuing credit contract (the commencing when the new contract) is entered into: debtor enters into the new (a) the debtor is already a party contract — nil; and to a continuing credit (b) for any subsequent period of contract with the credit 12 months during which the provider, or an associate of new credit contract is in the credit provider, or was effect — nil. such a party within the previous 12 months; (b) neither the credit provider nor the associate of the credit provider is an ADI

Note: Subsection 6(5) of the Code provides that the Code does not apply to the provision of credit under a continuing credit contract if the only charge that is or may be made for providing the credit is a periodic or other fixed charge that does not vary according to the amount of credit provided. However, the Code applies if the charge exceeds the maximum charge (if any) prescribed by the regulations. [s 51 subst SLI 89 of 2014 s 4 and Sch 1 item 3, eff 13 June 2014]

COMMENTARY ON REGULATION 51 [R51.05] Regulation 51 is made pursuant to s 6(5) of the Code which exempts from the Code the provision of credit under a continuing credit contract for which only an account charge is payable, unless that charge exceeds an amount prescribed by the regulations. The effect of reg 51 is that the Code will apply to the provision of credit under a continuing credit contract with a fixed or periodic charge if that charge exceeds $200 for the first 12 months or $125 for any subsequent period of 12 months (see [6.20]). [R51.10] The exposure draft (06/01/2014) National Consumer Credit Protection Amendment (Small Amount Credit Contracts) Regulation 2014

proposed replacing reg 51. The Explanatory Statement to the draft regulation states: Regulation 51 currently specifies the circumstances in which the exemption provided in subsection 6(5) of the [Code] for low-cost continuing credit contracts from the [NCCP] Act operates. The exemption currently applies if the maximum charges are $200 in the initial 12 months of the contract, and $125 in any subsequent 12 month period. A practice has developed among some small amount credit providers of arranging for a consumer to enter into a new continuing credit contract each time they require a further advance, when the credit provider charges a further fee of $200 on each such occasion. An effect of this practice is that, for loans for small amounts, the credit provider can charge more than would be permitted under the cap on costs introduced

[page 838] by the Consumer Credit Legislation Amendment (Enhancements) Act 2012. The credit provider also avoids the licensing and responsible lending obligations under the [NCCP] Act. The Regulation ensures that credit providers (other than authorised deposit-taking institutions) are only able to charge an initial fee of $200, and $125 per annum in any subsequent years, per client, regardless of the number of credit contracts that are entered into.

See further [23A.45] and [R4D.05]. [R51.15] Regulation 51 was introduced by the National Consumer Credit Protection Amendment (Small Amount Credit Contracts) Regulation 2014 — see [R4D.05] and [R4D.10].

Additional exempt credit 52 The Code, other than Division 3 of Part 4 and Part 5, does not apply to a contract, other than a continuing credit contract, to the extent that the contract provides for the provision of credit in the following circumstances: (a) the amount of credit to be provided does not at any time exceed $50; (b) there is no insurance financed under the contract; (c) there is no mortgage or guarantee taken by the credit provider; (d) the annual percentage rate for the contract does not exceed the

maximum annual percentage rate (if any) for the contract if it were a contract to which the Code applies. Note Section 203B of the Code provides, among other things, that the regulations may exempt a contract or a class of contracts from all or specified provisions of the Code.

COMMENTARY ON REGULATION 52 [R52.05] Regulation 52 is made under s 203B of the Code which permits the regulations to exclude particular types of credit contracts from regulation by the Code. Regulation 52 prescribes that a credit contract (other than a continuing credit contract) will not be regulated by the Code (apart from the provisions of the Code dealing with changes on hardship grounds and enforcement) if the amount of credit does not exceed $50 and the other requirements of reg 52 are satisfied (see [6.55]) including the requirement that the annual percentage rate under the contract does not exceed any maximum annual percentage rate applying to Code-regulated contracts. (See [28.40] for a discussion of maximum annual percentage rates.)

GIO Finance Limited’s No Interest Loan Scheme — exemption from Code 53 (1) This regulation applies to the scheme (the No Interest Loan Scheme) that is operated by GIO Finance Limited ACN 002 812 704 in accordance with the deed of agreement executed on 26 June 1992 by the New South Wales Minister for Further Education, Training and Employment and GIO Finance Limited. [page 839] 53 (2) The Code does not apply to the provision of credit under the No Interest Loan Scheme. Note Subsection 6(13) of the Code provides that the regulations may exclude the provision of credit of any class from the Code.

COMMENTARY ON REGULATION 53

[R53.05] Regulation 53 is made under s 6(13) of the Code. It excludes from the application of the Code the product offered by GIO Finance Ltd described in the regulation.

Rental Purchase Plan — exemption from certain provisions of Code 54 The Code, other than sections 76 to 81, does not apply to a contract to the extent that the contract provides for the provision of credit under the Queensland Government scheme known as the Rental Purchase Plan Scheme, and formerly known as the H.O.M.E. Shared Scheme. Note Section 203B of the Code provides, among other things, that the regulations may exempt a contract or a class of contracts from all or specified provisions of the Code.

COMMENTARY ON REGULATION 54 [R54.05] Regulation 54 is made under s 203B of the Code. It excludes from the application of the Code (except for ss 76–81) the Queensland Government Rental Purchase Plan Scheme (formerly the H.O.M.E Shared Scheme).

Partnership loans — exemption from certain provisions of Code 55 (1) The Code, other than: (a) Part 1; and (b) Division 3 of Part 4; and (c) Divisions 4 and 5 of Part 5; and (d) Part 7; does not apply to a contract to the extent that the contract provides for the provision of credit by a firm, or by a related body corporate of the firm, to a partner of the firm, whether or not the credit is provided to the partner with another person.

55 (2) However, for a credit provider who provides credit in the course of a business of providing credit to which the Code applies to partners of a firm and to others, this regulation applies only to the provision of credit on terms that are more favourable to the debtor than the terms on which the credit provider provides credit to which the Code applies to persons who are not partners of the firm. 55 (3) In this regulation: (a) a partner of a firm includes a former partner of a firm and an employee or former employee of the firm; and (b) a related body corporate of a firm is a body corporate that is ultimately wholly owned by all or some of the partners of the firm or by other persons on their behalf. Note Section 203B of the Code provides, among other things, that the regulations may exempt a contract or a class of contracts from all or specified provisions of the Code.

COMMENTARY ON REGULATION 55 [R55.05] Regulation 55 is made under s 203B of the Code. It excludes from the application of the Code (except for Pt 1, Div 3 of Pt 4, Divs 4 and 5 of Pt 5 and Pt 7) credit provided by a firm (or a body related to a firm) to a partner of the [page 840] firm. Where the credit provider provides the credit in the course of a business of providing credit, this exemption only applies to credit provided on terms more favourable than credit that would be offered to non-partners. The terms “partner” and “related body corporate” are defined broadly for the purposes of reg 55.

Student loans — exemption from certain provisions of Code

56 (1) The Code, other than subsection 61(1) and sections 76 to 81, does not apply to a contract to the extent that the contract provides for the provision of credit by a higher educational institution, or by an association of students of the institution, to a student of the institution on the grounds of hardship or of an emergency. 56 (2) However, subsection (1) applies only if the institution or association gives the debtor and any guarantor the following things before the contract for the provision of credit is entered into by the debtor or the guarantee is signed by the guarantor: (a) a statement of the costs of the provision of credit, which must include any fees or charges payable and the interest rate applicable and may include other information; (b) a copy of the terms and conditions of the contract for the provision of credit. 56 (3) In this regulation: association of students, of a higher educational institution, means a union, guild or other association of students: (a) of the institution; or (b) of the institution and of other higher educational institutions. higher educational institution means an institution within the meaning given by section 4 of the Higher Education Funding Act 1988. Note Section 203B of the Code provides, among other things, that the regulations may exempt a contract or a class of contracts from all or specified provisions of the Code.

COMMENTARY ON REGULATION 56 [R56.05] Regulation 56 is made under s 203B of the Code. It excludes from the application of the Code (except ss 61(1) and 76–81) credit provided by a higher education institution or related student association to a student on the grounds of hardship or in an emergency. “Hardship” and “emergency” are not defined. Regulations 52–56 are currently the only regulations made that exclude

types of credit contracts from the application of the Code.

Loans for conservation of heritage items — exemption from Code 57 (1) The Code does not apply to the provision of credit under section 106 of the Heritage Act 1977 (NSW). 57 (2) The Code does not apply to the provision of credit under section 12 of the Heritage Act 1993 (SA), but only in respect of loans made from the State Heritage Fund to owners of land constituting places entered in the State Heritage Register established under that Act. 57 (3) The Code does not apply to the provision of credit under section 140 of the Heritage Act 1995 (Vic). [page 841] Note Subsection 6(13) of the Code provides that the regulations may exclude the provision of credit of any class from the Code.

COMMENTARY ON REGULATION 57 [R57.05] Regulation 57 is made under s 6(13) of the Code. It operates to exempt credit provided under the NSW, SA and Victorian Heritage Acts from the operation of the Code. Broadly, the relevant sections of these Acts establish government bodies capable of making loans for the conservation of items of environmental or cultural heritage.

ADIs — exemption from Code 58 The Code does not apply to the provision of credit by an ADI limited by the contract to a total period not exceeding 62 days. Note Subsection 6(13) of the Code provides that the regulations may exclude the provision of credit of any class from the Code.

COMMENTARY ON REGULATION 58 [R58.05] Regulation 58 is made under s 6(13) of the Code. The amendment came about in response to changes to the Code targeting “pay-day lending”. The new regulation operates to exclude short-term credit (for a total period stipulated in the contract of not more than 62 days) provided by an authorised deposit-taking institution (ADI) from the application of the Code. The definition of “ADI” is contained in s 204 of the Code and refers to the definition in s 5(1) of the Banking Act 1959 (Cth). For more discussion of short-term credit, refer to [6.10] and [6.55].

Estate administrators — exemption from certain provisions of Code 59 (1) The Code, other than sections 76 to 81, does not apply to a public official or a public body authorised by any law or court to administer a person’s estate, to the extent that the public official or public body is providing credit to the person’s estate, whether or not the person is deceased. 59 (2) In this regulation: estate includes trust property. public body includes a corporation owned or controlled by: (a) the Commonwealth; or (b) a State or Territory; or (c) an authority of the Commonwealth or a State or Territory. Note Section 203B of the Code provides, among other things, that the regulations may exempt a person or a class of persons from all or specified provisions of the Code.

COMMENTARY ON REGULATION 59 [R59.05] Regulation 59 is made under s 203B of the Code. It provides that the application of the Code to credit provided to a person’s estate by a public official or public body authorised by any law to administer that estate will be

[page 842] limited to ss 76–81 of the Code. These sections relate to the reopening or reviewing of unjust transactions or unconscionable interest or charges. This regulation will apply regardless of whether or not the person is deceased.

Credit under Aged Care Act 1997 — exemption from certain provisions of Code 60 The Code, other than sections 72 to 74 and 76 to 81, does not apply to an approved provider (within the same meaning as in the Aged Care Act 1997) to the extent that the approved provider is providing credit that is made and regulated under that Act. Note Section 203B of the Code provides, among other things, that the regulations may exempt a person or a class of persons from all or specified provisions of the Code.

COMMENTARY ON REGULATION 60 [R60.05] Regulation 60 is made under s 203B of the Code. It limits the application of the Code to credit provided by an approved aged care provider who is regulated under the Aged Care Act 1997 (Cth) to ss 72–74 and ss 76–81 of the Code. These sections of the Code broadly relate to any changes, reopening or reviewing of transactions that are unjust or contain unconscionable terms.

Firefighter’s Benefit Fund of WA Incorporated — exemption from certain provisions of Code 61 The Code, other than Division 3 of Part 2, Division 3 of Part 4 and Divisions 1 and 2 of Part 5, does not apply to a contract to the extent that the contract provides for the provision of credit to a person by the Firefighter’s Benefit Fund of WA Incorporated (the fund) in the following circumstances: (a) the person is a member of the fund; (b) the application form by which the person applies for the credit

states an annual percentage rate for the credit; (c) the contract: (i)

fixes, for the whole term of the contract, an annual percentage rate that is the same as the rate stated in the application form; and

(ii) does not provide for varying the rate. Note Section 203B of the Code provides, among other things, that the regulations may exempt a contract or a class of contracts from all or specified provisions of the Code.

COMMENTARY ON REGULATION 61 [R61.05] Regulation 61 is made under s 203B of the Code. It excludes from the application of the Code (except for Div 3 of Pt 2, Div 3 of Pt 4 and Divs 1 and 2 of Pt 5) credit provided by the Firefighter’s Benefit Fund of WA Incorporated to its members in specific circumstances.

Charge card contracts — exemption of certain contracts from Code 62 (1) The Code does not apply to the provision of credit under a charge card contract made available by any of the following credit providers: (a) American Express Australia Limited ACN 108 952 085; [page 843] (b) American Express International Inc. ARBN 000 618 208; (c) Diners Club Pty Limited ACN 004 343 051; (d) Motorcharge Limited ACN 008 962 132. Examples 1

American Express Platinum Card.

2

Diners Club Personal Card.

3

Motorcharge Card.

62 (2) In subsection (1): charge card contract means a credit contract under which: (a) credit is ordinarily obtained by the use of a card; and (b) multiple advances of credit are contemplated; and (c) the provision of an advance of credit is limited to a total period of not more than 62 days; and (d) monthly or other periodic statements of account are provided to the debtor; and (e) liquidated damages or charges for late payment are payable by the debtor if the debtor does not repay an advance of credit mentioned in a monthly or other periodic statement of account within a stated period. Note Subsection 6(13) of the Code provides that the regulations may exclude the provision of credit of any class from the Code.

COMMENTARY ON REGULATION 62 [R62.05] Regulation 62 is made under s 6(13) of the Code and excludes the application of the Code to credit provided under a “charge card contract” by American Express Australia Ltd, American Express International Inc, Diners Club Pty Limited or Motorcharge Limited. The definition of “charge card contract” for the purposes of reg 62 is defined in reg 62(2).

Credit providers providing credit to directors — exemption from certain provisions of Code 63 (1) The Code, other than: (a) Part 1; and (b) Part 4; and (c) Division 3 of Part 5; and (d) Divisions 4 and 5 of Part 7; and

(e) Parts 12, 13 and 14; does not apply to a credit provider, or a related body corporate of a credit provider, to the extent that the credit provider or related body corporate is providing credit to a director of the credit provider, other than a former director, whether or not the credit is provided to the director with another person. 63 (2) However, for a credit provider who provides credit in the course of a business of providing credit to which the Code applies to directors and to others, this regulation applies only to the provision of credit on terms that are more favourable to the debtor than the terms on which the credit provider provides credit to which the Code applies to persons who are not directors of the employer. [page 844] Note Section 203B of the Code provides, among other things, that the regulations may exempt a person or a class of persons from all or specified provisions of the Code.

COMMENTARY ON REGULATION 63 [R63.05] Regulation 63 is made under s 203B of the Code and excludes from the application of the Code (except for Pt 1, Pt 4, Div 3 of Pt 5, Divs 4 and 5 of Pt 7 and Pts 12, 13 and 14) credit provided to a director of the credit provider or a related body corporate of the credit provider, whether or not the credit is provided to the director with another person. The exemption only applies to current directors and does not include former directors. That is, the person must be a director at the time the credit is provided to be eligible for the exemption. In addition, where the credit provider provides the credit in the course of a business of providing credit, this exemption only applies to credit provided on terms more favourable than credit that would be offered to non-directors.

Mortgages — exemptions from Code

64 (1) The Code does not apply to the following mortgages: (a) a mortgage relating to perishable goods, livestock, primary produce or food stuffs; (b) a banker’s right to combine accounts; (c) a lien or charge arising by operation of any Act or law or by custom. 64 (2) However, sections 16 and 17 of the Code (relating to disclosures) apply in respect of a mortgage mentioned in paragraph (1)(a). 64 (3) Section 91 of the Code does not apply to any mortgage relating to goods that are lawfully in the possession of the credit provider. Note This regulation is made under subsection 7(3) of the Code.

COMMENTARY ON REGULATION 64 [R64.05] Regulation 64 is made under s 7(3) of the Code. Section 7(3) of the Code permits the regulations to exclude types of mortgages from the Code’s application. Regulation 64 prescribes the types of mortgages to which the Code does not apply (see [7.20]). In addition, reg 64(3) states that the requirements prescribed in s 91 of the Code, which must be met before credit providers can repossess mortgaged goods, do not apply to mortgages of goods that are lawfully in the possession of a credit provider. Regulation 64 indicates the breadth of the Code’s definition of “mortgage”. The Code defines a mortgage to include rights which, at general law, would not be regarded as mortgages in the strict sense, or as security interests at all. The most obvious example is a contractual right of set-off which, quite arguably, falls within the words of the definition of mortgage in s 204 of the Code. The argument that it does fall within the Code definition of mortgage is validated by reg 64(1)(b). Regulation 64(1)(b) expressly excludes a banker’s right to combine accounts from the definition of “mortgage”, which would be unnecessary if the definition of mortgage in the Code did not extend to rights of that kind.

Consequently, the regulation implies that any other right of set-off would be caught by the mortgage [page 845] definition in the Code. Recent cases suggest that a banker’s right to combine accounts is different from contractual set-off. The exclusion by reg 64(1)(b) of banking combinations from the term “mortgage” in the Code suggests that the term “mortgage” is to be read widely. Both the rights to combine accounts and set-off have as a common element that they are concerned with exercising rights against accounts or debts which have the effect of reducing money owing. Therefore, the safest view for credit providers to follow is that an authority to set-off deposits is regulated as a mortgage for the purposes of the Code. This seems the prudent course in light of the finding of the Commercial Tribunal of New South Wales in respect of a substantially similar provision under the Credit Act (discussed below). In State Bank of New South Wales Ltd v Various Respondents (1995) ASC ¶56-307, the Commercial Tribunal of New South Wales held that a clause in a contract under which a bank was given a discretion to debit an account of the customer with amounts required to be paid under the loan in the event of the customer’s default was a security interest under the Credit Act (NSW). The definition of “security interest” in the Credit Act was in substantially similar terms to the definition of “mortgage” in the Code. “Security interest” in the Credit Act (NSW) was defined as “an interest or power: reserved in or over an interest in goods or other property; or created or otherwise arising in or over an interest in goods or other property under a bill of sale, mortgage, charge, lien, pledge, trust or power, by way of security for payment of a debt or other pecuniary obligation or the performance of any other obligation”. In that case, the bank did not dispute that the customer’s funds were the

property of the customer or that the relevant contractual clause involved the creation of power in that property. Argument centred on whether the power was by way of security for payment of a debt. While the tribunal noted the concession made by the bank, the tribunal did not comment on it. The tribunal considered the power was created by way of security and that that “construction reflects the significance given by the [Credit] Act [(NSW)] to disclosure and truth in lending”.

Guarantees — exemption from Code 65 The Code does not apply to any guarantee by the supplier under a tied loan contract or tied continuing credit contract. Note This regulation is made under subsection 8(3) of the Code.

COMMENTARY ON REGULATION 65 [R65.05] Regulation 65 is made under s 8(3) of the Code. Section 8(3) of the Code enables the regulations to exclude classes of guarantees from the Code. Regulation 65 prescribes that a guarantee by a supplier under a tied loan contract or a tied continuing credit contract is so excluded (see [127.25]). This regulation means that the Code does not, for example, apply to a guarantee given to a finance company by a car dealer who is an individual, under a floor plan arrangement in respect of finance provided to an individual customer of the dealer. [page 846]

Indigenous Business Australia — exemption from certain provisions of Code 65A The Code, other than sections 72 to 81, does not apply to Indigenous Business Australia. Note 1 Section 203B of the Code provides, among other things, that the regulations may exempt a person or a class of persons from all or specified provisions of the Code.

Note 2 Indigenous Business Australia is the former Aboriginal and Torres Strait Islander Commercial Development Corporation, renamed in accordance with subsection 145(1) of the Aboriginal and Torres Strait Islander Act 2005. [reg 65A insrt SLI 59 of 2010 reg 3 and Sch 1[2], eff 1 July 2010]

COMMENTARY ON REGULATION 65A [R65A.05] Regulation 65A is made under s 203B of the Code and excludes from the operation of the Code (except for ss 72–81) Indigenous Business Australia, a body established by the Aboriginal and Torres Strait Islanders Act 2005 (Cth). Sections 72–81 of the Code broadly relate to any changes, reopening or reviewing of credit obligations on grounds of hardship or unjust transactions.

Exemption — providing credit in relation to a residential investment property 65B (1) Section 16 of the Code does not apply to a person to the extent that: (a) the person enters into a credit contract as a credit provider; and (b) the credit is provided or intended to be provided wholly or predominantly for a purpose mentioned in subparagraph 5(1)(b)(ii) or (iii) of the Code; and (c) the person made the offer in relation to the contract before 1 July 2010; and (d) the borrower accepted the offer on or after 1 July 2010. Note Section 203B of the Code provides, among other things, that the regulations may exempt a person or a class of persons from all or specified provisions of the Code.

65B (2) This regulation ceases to have effect on 1 October 2010. [reg 65B insrt SLI 235 of 2010 reg 3 and Sch 1[12], eff 22 July 2010]

COMMENTARY ON REGULATION 65B [R65B.05] Section 16 of the Code requires a credit provider to give a precontractual disclosure statement before entering into a credit contract.

Regulation 65B is a transitional regulation made under s 203B of the Code. It exempts a credit provider from s 16 of the Code where the credit is provided or intended to be provided wholly or predominantly to purchase, refinance, renovate or improve residential property for investment purposes and where the offer for credit was made before 1 July 2010 and accepted by the consumer on or after 1 July 2010. The regulation ceased to have effect on 1 October 2010.

Residential investment property loans — exemption from Code 65C The Code does not apply to the provision of credit if: (a) the credit is provided for either of the following purposes: (i)

to purchase, renovate or improve residential property for investment purposes; or [page 847]

(ii) predominantly to refinance credit that has been provided wholly or predominantly to purchase, renovate or improve residential property for investment purposes; and (b) the credit is not provided for the purpose of investment in a single residence; and (c) the total amount if the credit provided, or to be provided, is more than $5 000 000. Note Subsection 6(13) of the Code provides that the regulations may exclude the provision of credit of any class from the Code. [reg 65C insrt SLI 303 of 2010 reg 3 and Sch 1[24], eff 26 Nov 2010; am SLI 143 of 2011 reg 3 and Sch 2[18], eff 1 Oct 2011]

COMMENTARY ON REGULATION 65C [R65C.05] Section 6(13) of the Code provides that the regulations may

exclude from the application of the Code the provision of credit of any class where the amount of credit provided exceeds or may exceed a specified amount. Regulation 65C removes from the application of the Code credit which is provided for residential property investment purposes where the credit is provided for the purpose of investment in more than one residence and the total amount of the credit provided exceeds $5 million dollars. This exemption is important because from 1 July 2010, the Code (in contrast to the UCCC) regulates investment by individuals and strata corporations in residential property where the predominant purpose of the investment is a Code purpose, or more specifically, where a loan involves: Credit provided or intended to be provided wholly or predominantly to purchase, renovate or improve residential property for investment purposes or to refinance such credit: NCCP Act: s 5(1) (b)(ii) and (iii).

Together, all of these purposes are Code-regulated purposes. Consequently, only loans to corporations (other than strata corporations) or loans for the purpose of buying multiple properties for more than $5 million dollars or more are clearly outside the scope of the NCCP Act. [R65C.10] The National Consumer Credit Protection Amendment Regulations 2011 (No 4) (as provided by the Explanatory Statement to Select Legislative Instrument 2011 No 143): … amends regulation 65C to exempt credit for the purposes of purchasing, renovating or improving a residential property with a value over $5,000,000 for investment purposes, from the operation of the National Credit Code. Currently, regulation 65C only exempts credit provided for the purchase of a residential investment property, but not credit taken out to refinance the initial loan. The amendment clarifies that credit provided for the predominant purpose of refinancing credit for investment purposes is also exempt.

Deemed mortgages for goods lease with option to purchase 66 For paragraph 9(3)(f) of the Code, the terms and conditions of a mortgage are set out in Form 4. [page 848]

Note Section 9 of the Code treats a goods lease with an option to purchase to be a sale of goods by instalments for the purposes of the Code. If the lease is a credit contract because of subsection 5(1) of the Code, a mortgage containing the terms and conditions set out in the regulations is taken by paragraph 9(3)(f) of the Code to have been entered into between the person to whom the goods are hired and the supplier as security for payments to the supplier by the hirer.

COMMENTARY ON REGULATION 66 [R66.05] Section 9 of the Code changes the legal nature of a consumer hire purchase contract into a sale of goods by instalments secured by a mortgage of goods (see [9.05]–[9.30]). If a hire purchase agreement is deemed, by virtue of s 9 of the Code, to be a credit contract then under s 9(3)(f) of the Code, a mortgage in the form prescribed by the regulations is deemed to be entered into between the supplier of goods and the hirer, since security for payments is to be made to the supplier by the hirer. Regulation 66 states that the mortgage terms and conditions are those set out in Form 4 of Sch 1 to the regulations.

Prescribed person in relation to a declaration 67 For subsection 13(3) of the Code, the prescribed person is: (a) if the person who obtained the declaration from the debtor was the credit provider — a person associated with the credit provider; or (b) if the person who obtained the declaration from the debtor was a person associated with the credit provider — the person associated with the credit provider; or (c) if the person who obtained the declaration from the debtor was not the credit provider or a person associated with the credit provider — any of the following: (i)

a person who obtained the declaration from the debtor;

(ii) a person who referred the debtor to the person who obtained the declaration (whether the referral was for the purpose of obtaining the declaration or otherwise); (iii) a person who suggested that the debtor apply for the provision

of credit, and the suggestion was made during the course of, as part of, or incidentally to, a business carried on in this jurisdiction by the person; (iv) a person who assisted the debtor to apply for the provision of credit, and the assistance was given during the course of, as part of, or incidentally to, a business carried on in this jurisdiction by the person. COMMENTARY ON REGULATION 67 [R67.05] Business purpose declarations A business purpose declaration is a declaration that credit received under a credit contract will be applied or is intended to be applied wholly or predominantly for business or investment purposes (other than residential investment purposes). A credit provider may not rely on a business purpose declaration if the credit provider or a “prescribed person” “knew or had reason to believe that the declaration was false” (see [13.30]). Regulation 67 defines who a “prescribed person” is for the purposes of s 13(3) of the Code. Regulation 68 prescribes the form and content of, as well as other requirements for, the business purpose declaration (as referred to in s 13(5) [page 849] of the Code (see [13.15])). In summary, the effect of the Code requirements (s 13 and regs 67 and 68) for business purpose declarations is as follows: It is advisable for the business purpose declaration to be documented in a way that makes it clear that it was made before the contract was entered into. Regardless of how it is documented, the declaration must actually be obtained before the credit contract is entered into. The Code does not specify where the business purpose declaration should appear. Therefore, it could be:

on the application form; on the credit contract; or on a separate document. It is preferable to have it on either the application form or the credit contract because: it demonstrates the link between the declaration and the loan in question; and it helps in proving that the declaration was made before the contract was entered into. A separate document is less satisfactory because: it would be necessary to identify the relevant credit contract on that document; it is more likely to be misplaced or forgotten; and it does not give any indication as to when it was signed. The advantage of putting the business purpose declaration on the application form is, as noted above, that it makes it clear that the declaration was made before the contract was entered into (see [13.25]). The disadvantage is that the declaration may go stale if there is too long a gap between the completion of the application form and entry into the credit contract. Alternatively, the advantage of putting the business purpose declaration on the credit contract itself is that there can be no argument that the declaration is stale. The disadvantage is that it is more difficult to establish that the declaration was made before the contract was entered into. In order to make this clear: the business purpose declaration should appear before the final contract signatures and require separate signatures from the final contract signatures; and the business purpose declaration should include a declaration that it was made before the contract was signed.

Declaration of purposes for which credit provided 68 (1) For subsection 13(5) of the Code, the form of the declaration is: ‘I/We declare that the credit to be provided to me/us by the credit provider is to be applied wholly or predominantly for: business purposes; or investment purposes other than investment in residential property.’ 68 (2) The declaration must contain the following warning immediately below the words of the declaration mentioned in subregulation (1) or, if the declaration is to be made by electronic communication, prominently displayed when (but not after) the person signs: [page 850]

IMPORTANT You should only sign this declaration if this loan is wholly or predominantly for: business purposes; or investment purposes other than investment in residential property. By signing this declaration you may lose your protection under the National Credit Code. 68 (3) The declaration must contain: (a) the signature of each person making the declaration; and (b) either: (i)

the date on which the declaration is signed; or

(ii) the date on which it is received by the credit provider.

Note The Code applies only to credit provided or intended to be provided for: (a) personal, domestic or household purposes; or (b) the purchase, renovation or improvement of residential property used for investment purposes; or (c) the refinancing of credit that has been provided wholly or predominantly for the purchase, renovation or improvement of residential property used for investment purposes. Subsection 13(2) of the Code provides that credit is presumed not to be provided for Code purposes if the debtor declares, before entering into the credit contract, that the credit is to be applied wholly or predominantly for business or investment purposes (or for both purposes), other than investment in residential property. The declaration is not effective unless it is substantially in the form required by the regulations.

COMMENTARY ON REGULATION 68 [R68.05] Regulation 68 sets out the required wording and basic format of the business purpose declaration. A business purpose declaration must be substantially in this form to be effective (s 13(5) of the Code; see [13.40]). Note that the words required by reg 68(1) must be followed immediately by the box required by reg 68(2), unless the declaration is made by electronic communication and it is prominently displayed when (but not after) the person signs (reg 68(2)). The words and the box should not be separated. The declaration must contain: the signature of each person making the declaration (for example, in the case of credit provided to a husband and wife, both should sign); and the date on which the declaration is signed or the date it is received by the credit provider. If the declaration is received after the contract has been signed, and there is no evidence that it was made before the contract was signed, it may be ineffective. Preferably, a credit provider should obtain a fresh business purpose declaration in these circumstances and arrange for the signing of a fresh credit contract after the business purpose declaration is signed. [R68.10] Format of business purpose declaration Business purpose declaration I/We declare that the credit to be provided to me/us by the credit provider is to be applied wholly or

predominantly for: business purposes; or investment purposes other than investment in residential property.

[page 851]

IMPORTANT You should only sign this declaration if this loan is wholly or predominantly for: business purposes; or investment purposes other than investment in residential property. By signing this declaration you may lose your protection under the National Credit Code.

Name: ….….….….…. Name: ….….….….….

Date signed: ….….…. …. Date signed: ….….…. ….

Signature ….….….…. …. Signature ….….….…. ….

Direct debit default notices — exemption for credit providers 69 (1) Subsection 87(2) of the Code does not apply to a credit provider if the default mentioned in subsection 87(1) of the Code is rectified before the credit provider is required to give the direct debit default notice under subsection 87(2). 69 (2) Disregard a default in relation to which, in reliance on subregulation (1), no direct debit default notice is given. [subs (2) subst SLI 43 of 2013 s 4 and Sch 1 item 1, eff 4 Apr 2013]

COMMENTARY ON REGULATION 69 [R69.05] Section 87 of the Code requires a credit provider to give the debtor and any guarantor a one-off notice the first time a direct debit default occurs. Section 87(2) of the Code requires the notice to be given within 10 business

days of the default occurring. Regulation 69 is made under s 203B of the Code and provides that a credit provider is not required to give the one-off notice if the default is rectified before the credit provider is required to give the notice. Where a default is rectified and the credit provider chooses not to give a notice, the default is not taken to be the first occasion the default occurs for the purposes of s 87(1)(c). [R69.10] Regulation 69(2) gives an exemption to a credit provider from the requirement to give a notice where there has been a default in relation to payment by a direct debit. This change provides for consistency in drafting in the provisions applying to credit providers (in reg 69) and to lessors (in reg 69D).

Exemption — requirement to give notice of agreement to change credit contract 69A (1) This regulation applies to a person who: (a) is a credit provider; and (b) enters into a credit contract during a period mentioned in an item of the following table; and (c) would, but for this regulation, be required to comply with the provision of the Code mentioned in that item of the table. [page 852] Notice requirement Item Period during which person entered into credit contract 1 any period 2

the period that ends on 28 February 2013

Provision of Code subsection 73(1) of the Code in relation to a simple arrangement paragraph 72(3)(a) of the Code

3

the period that begins on 1 March paragraph 72(4)(a) of the Code 2013

69A (2) The person is exempt from the provision until 1 March 2014. 69A (3) In this regulation: simple arrangement means an agreement that defers or reduces the obligations of a debtor for a period of no more than 90 days. Note: Section 203B of the Code provides, among other things, that the regulations may exempt a person or a class of persons from all or specified provisions of the Code. [s 69A insrt SLI 43 of 2013 s 4 and Sch 1 item 2, eff 4 Apr 2013]

COMMENTARY ON REGULATION 69A [R69A.05] The exemptions in regs 69A and 69B relate to the previous hardship regime (for contracts entered into before 1 March 2013) and under the new regime (for contracts entered into on or after 1 March 2013). Regulations 69A and 69B provided several exemptions for credit providers and lessors from their statutory obligations to provide notice where a change to the contract is agreed to by the credit provider or lessor. The exemptions were provided on the basis that the fact of agreement avoids the need to stipulate the form of notice, and allows flexibility as to how this is done. Regulations 69A and 69B exempt credit providers and lessors from the requirement to give notice: where they have decided to agree to a change under the contract; and where the change is a simple arrangement of the changes to the contract. A “simple arrangement” is defined as an agreement between the credit provider or lessor and the debtor or lessor that defers or reduces the amount owed by a debtor for no more than 90 days. The effect of the exemptions was that: where the change is a simple arrangement, there is no statutory

obligation to give notice of the changes, but that the debtor would necessarily be aware of the changes as they are the result of agreement between themselves and the credit provider or lessor; and where the change is not a simple arrangement, there is no statutory obligation to give notice of the fact of agreement, but the requirement to give written notice of the changes remains. The exemption only applied until 1 March 2014 to allow consideration of changes needed for privacy reform laws which commenced on 12 March 2014. (Source: Explanatory Statement to Select Legislative Instrument 2013 No 43) [page 853] [R69A.10] ASIC Class Order CO 14/41 extended the life of regs 69A and 69B by one year to 1 March 2015. The Explanatory Statement to ASIC CO 14/41 states: The Consumer Credit Legislation Amendment (Enhancements) Act 2012 (the Amendment Act) amended the National Consumer Credit Protection Act 2009 (the Credit Act), including the Code, to introduce a number of reforms to the regulation of hardship variations. Where a consumer is experiencing financial difficulties in repaying their loan, a consumer may ask their credit provider to vary or change their loan repayments under the hardship provisions of the Credit Act. The Amendment Act introduced changes to the pre-existing hardship application processes, with the relevant provisions in effect from 1 March 2013. Contracts that were entered into prior to 1 March 2013 remain subject to the pre-existing hardship variation provisions. This has the effect of creating two hardship systems. The National Consumer Credit Protection Amendment Regulations 2013 (No 1) (the Amendment Regulations) amended the National Consumer Credit Protection Regulations 2010 (the Principal Credit Regulations) to provide transitional exemptions for credit providers and lessors from the obligation to record the fact that the credit provider and debtor (or lessor and lessee) have agreed to change a contract (or consumer lease) in a hardship variation. The exemptions will last until 1 March 2014 and are intended to allow ASIC time to consult with stakeholders to develop a permanent solution. The procedures for processing hardship variation applications require credit providers and lessors to record any changes to the contract and provide written notice to the debtor or lessee, even where the parties come to an agreement for a simple arrangement (that is, any agreement that defers or

reduces the obligations of a debtor or lessee for a period of no more than 90 days). To minimise the administrative burden on industry the Amendment Regulations exempt credit providers and lessors from the obligation to provide written notice setting out the particulars of any changes to the terms of the contract in the case of simple arrangements. These transitional exemptions are provided in regulations 69A and 69B of the Principal Credit Regulations. 2. Purpose of the class order The purpose of this class order is to extend the transitional exemptions in regulations 69A and 69B for an interim period in order to: facilitate consistency between the old and new hardship processes; reduce the administrative burden for industry; make it easier for consumers to seek variations to contracts; and allow ASIC time to complete its consultations and make its recommendations to Treasury. 3. Operation of the class order This class order provides relief from requirements in the Code for a credit provider or lessor to: record the fact that the credit provider and debtor (or lessor and lessee) have agreed to change the contract (or consumer lease) in a hardship variation; and provide written notice setting out the particulars of any changes in the terms of the contract (or consumer lease) in the case of simple arrangements. The relief has effect from 2 March 2014 to 1 March 2015.

[page 854] [R69A.15] ASIC Class Order CO 14/41 provides relief from the Code requirements for a credit provider or lessor to: record an agreement to change the contract or consumer lease in a hardship variation; and give written notice of the particulars of any changes in the credit contract or consumer lease in the case of simple arrangements. It extends by one year (to 1 March 2015) relief to the same effect as that given by regs 69A and 69B.

Exemption — requirement to give notice of

agreement to change consumer lease 69B (1) This regulation applies to a person who: (a) is a lessor in relation to a consumer lease; and (b) grants the lease during a period mentioned in an item of the following table; and (c) would, but for this regulation, be required to comply with each provision of the Code mentioned in that item of the table. Notice requirement Item Period during which lease granted 1 the period that ends on 28 February 2013 2 the period that ends on 28 February 2013 3 the period that begins on 1 March 2013 4 the period that begins on 1 March 2013

Provision of Code subsection 73(1) of the Code, in relation to a simple arrangement paragraph 72(3)(a) of the Code paragraph 177B(4)(a) of the Code subsection 177C(1) of the Code, in relation to a simple arrangement

69B (2) The person is exempt from the provision until 1 March 2014. 69B (3) In this regulation: simple arrangement means an agreement that defers or reduces the obligations of a lessee for a period of no more than 90 days. Note: Section 203B of the Code provides, among other things, that the regulations may exempt a person or a class of persons from all or specified provisions of the Code. [s 69B insrt SLI 43 of 2013 s 4 and Sch 1 item 2, eff 4 Apr 2013]

COMMENTARY ON REGULATION 69B [R69B.05] See commentary for reg 69A.

Exemption — requirement to disclose information about dispute resolution scheme 69C (1) This regulation applies to a person to whom the following apply: (a) the person is: (i)

an unlicensed carried over instrument lender; or

(ii) exempt under section 109 or 110 of the Act from the requirement to hold a licence; (b) the person is not a member of an approved external dispute resolution scheme; [page 855] (c) the person would, but for this regulation, be required to comply with a requirement, under one or more of the following provisions of the Code, to disclose information about rights under, or access to, an approved external dispute resolution scheme: (i)

subparagraph 72(3)(b)(i) or (ii);

(ii) subsection 85(3); (iii) subsection 87(3); (iv) paragraph 88(3)(g); (v) paragraph 102(1)(c); (vi) subsection 136(2); (vii) subsection 149(2); (viii)subsection 175(1).

69C (2) The person is exempt from the relevant provision or provisions. [s 69C insrt SLI 43 of 2013 s 4 and Sch 1 item 2, eff 4 Apr 2013]

COMMENTARY ON REGULATION 69C [R69C.05] Regulation 69C effectively results in the renumbering of reg 111A as reg 69C. Regulation 111A related to the notice requirements on a person who is not a member of an approved external dispute resolution scheme, and is either an unlicensed carried over instrument lender, or is exempt from holding an Australian credit licence. The renumbering places the provision in Pt 7-1 of the regulations, which is consistent with its effect. (Source: Explanatory Statement to Select Legislative Instrument 2013 No 43) Regulation 111A has been substantially replicated as reg 69C by the National Consumer Credit Protection Amendment Regulation 2013 (No 1) Sch 1, cl 6. That same amendment regulation introduces new forms to be included in Sch 1 of the regulations, after Form 11. The new forms are: Form 11A which is to be provided by a credit provider where a debtor has arranged to make a payment under a contract by direct debit and there has been a default in payment; Form 12A which is to be provided by a credit provider where a debtor has defaulted in respect of their obligations under the contract and gives information about a debtor’s rights after default; Form 18 which is to be provided by a lessor where a debtor has arranged to make a payment under a contract by direct debit and there has been a default in payment (direct debit default notice); and Form 18A which is to be provided by a lessor where a lessee has defaulted in respect of their obligations under the contract. See Schedule A — Reverse Mortgage Information Statement — reg 28LE. [R69C.10] Regulation 69C provides an exemption to certain persons (who are credit providers who are exempt from licensing and registration under the

NCCP Act and therefore not required to be members of an approved external dispute resolution scheme) from certain provisions of the Code (being those that would otherwise require the person to disclose information about rights or access [page 856] to an approved external dispute resolution scheme). The persons to whom the exemption applies are unlicensed carried over instrument lenders: a person who is exempt from the requirement to hold a licence under s 109 of the NCCP Act (being a person whom ASIC declares under s 109 is exempt) or s 110 of the NCCP Act (being a person who is determined to be exempt by the regulations); and a person who is exempt from the requirement to be registered under item 41 (being a person whom ASIC declares is exempt) or item 42 (being a person who is determined to be exempt by the regulations) of Sch 2 to the National Consumer Credit Protection (Transitional and Consequential Provisions) Act 2009. If any of those persons is not a member of an external dispute resolution scheme, the regulation applies to them.

Exemption — requirement to give notice of direct debit default 69D (1) Subsection 179C(2) of the Code does not apply to a lessor if the default mentioned in subsection 179C(1) is rectified before the lessor is required to give the direct debit default notice under subsection 179C(2). 69D (2) Disregard a default in relation to which, in reliance on subregulation (1), no direct debit default notice is given. Note: Section 203B of the Code provides, among other things, that the regulations may exempt a person or a class of persons from all or specified provisions of the Code. [s 69D insrt SLI 43 of 2013 s 4 and Sch 1 item 2, eff 4 Apr 2013]

COMMENTARY ON REGULATION 69D [R69D.05] Regulation 69D provides an exemption for lessors from the requirement to give a notice where there has been a default in relation to payment by a direct debit. It effectively results in the renumbering of reg 105H as reg 69D. (Source: Explanatory Statement to Select Legislative Instrument 2013 No 43)

Part 7-2 — Credit contracts Statement about debtor’s statutory rights and obligations 70 (1) For paragraph 16(1)(b) of the Code, an information statement must: (a) be in writing; and (b) be in accordance with Form 5. 70 (2) The information statement may be in the form of a separate document or a part of the credit contract document. Note Paragraph 16(1)(b) of the Code requires a credit provider to give a prospective debtor an information statement in the form required by the regulations of the debtor’s statutory rights and statutory obligations. The statement must be given before the contract is entered into or before the debtor makes an offer to enter into the contract, whichever first occurs.

[page 857] In accordance with subregulation 6(5), the information need not contain any matter set out in Form 5 if it is not relevant to the credit contract concerned. For example, information about mortgages is not required for an unsecured loan.

COMMENTARY ON REGULATION 70 [R70.05] Information statement Regulation 70 states that the information

statement required to be given to a debtor under s 16(1)(b) of the Code is Form 5 of Sch 1 to the regulations (see [16.55]). The information statement may be included as part of the documentation for the credit contract itself. This is an important point in practice because including Form 5 in the contract document will help to ensure that the form is always given and not overlooked, as could happen if the form were separate.

Comparison rate 71 (1) This regulation applies if: (a) a credit provider, before entering into a credit contract, informs the debtor of the comparison rate in accordance with subsection 16(3) of the Code; or (b) a person publishes, or causes to be published, an advertisement that states or implies that credit is available and includes in the advertisement the comparison rate in accordance with Part 10 of the Code. 71 (2) The comparison rate must be calculated as a nominal rate per annum, together with the compounding frequency, in accordance with this regulation. 71 (3) The comparison rate is calculated using the formula: where: n

is the number of repayments per annum to be made under the credit contract (annualised if the term of the contract is less than 12 months), except that: (a) if repayments are to be made weekly, n is 52.18; and (b) if repayments are to be made fortnightly, n is 26.09; and (c) if the contract does not provide for a constant interval between repayments, n is to be derived from the interval selected for the purposes of the definition of j.

r

is the solution of:

where: Aj is the amount of credit to be provided under the contract at time j (the value of j for the provision of the first amount of credit is taken to be zero). Cj is the fee or charge (if any) payable by the debtor at time j in addition to the repayments Rj, being a credit fee or charge (other than a government fee, charge or duty) that is ascertainable when the comparison rate is disclosed (whether or not the credit fee or charge is payable if the credit is not provided). j

is the time, measured as a multiple (not necessarily integral) of the interval between contractual repayments that will have elapsed since the first amount of credit is [page 858] provided under the credit contract, except that if the contract does not provide for a constant interval between repayments an interval of any kind is to be selected by the credit provider as the unit of time.

Rj is the repayment to be made at time j. t

is the time, measured as a multiple of the interval between contractual repayments (or other interval so selected) that will elapse between the time when the first amount of credit is provided and the time when the last repayment is to be made under the contract.

71 (4) The comparison rate must be correct to at least the nearest one hundredth of 1% per annum. 71 (5) In the application of the above formulae, reasonable approximations

may be made if it would be impractical or unreasonably onerous to make a precise calculation. Example If repayments are to be made on a fixed day each month, it may be assumed that repayments will be made on that day each month even though the credit contract provides for payment on the preceding or succeeding business day when the due date is not a business day.

71 (6) The tolerances and assumptions under sections 180 to 182 of the Code apply to the calculation of the comparison rate. 71 (7) The comparison rate must be accompanied by a statement of the amount of credit on which it is based and the term for which credit is provided. 71 (8) In the case of a comparison rate under subsection 16(3) of the Code: (a) the amount of credit is to be the amount (or the maximum amount) required by the debtor; and (b) the term for which credit is provided is to be the term (or the maximum term) required by the debtor; and (c) the amount of credit, in the case of a continuing credit contract, is not to exceed the credit limit required by the debtor. 71 (9) If the debtor does not make a requirement in relation to a matter mentioned in paragraph (8)(a), (b) or (c), the credit provider may determine the matter. 71 (10) In the case of a comparison rate under Part 10 of the Code: (a) the amount of credit and term are to be typical of the type of credit contract offered in the advertisement; and (b) a number of comparison rates may be included in the advertisement for different credit contracts if the amount of credit and term applicable to each of the rates are clearly stated. 71 (11) At the time that the debtor is informed of the comparison rate under subsection 16(3) of the Code, the debtor must be given the following warning by the credit provider in writing:

‘WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan.’ 71 (12) An advertisement that contains a comparison rate in accordance with Part 10 of the Code must include a warning that the comparison rate is accurate only for the example given. 71 (13) A warning under this regulation must be given immediately after the comparison rate is given. [page 859] Note 1 Subsection 16(3) of the Code provides that the credit provider may inform the debtor of the comparison rate before entering into the contract. Note 2 Part 10 of the Code provides that a person who publishes an advertisement about the availability of credit may include in the advertisement the comparison rate. If the credit provider or person does so, the comparison rate must be calculated as prescribed by the regulations and be accompanied by the warnings set out in the regulations.

COMMENTARY ON REGULATION 71 [R71.05] Comparison rate Credit providers can give a debtor a comparison rate before he or she enters into a credit contract (s 16(3) of the Code), or they may have to include a comparison rate in an advertisement (s 160 of the Code). In the case of a precontractual comparison rate, the rate must be calculated using the formula given in reg 71(3) and must contain the warning set out in reg 71(11). The comparison rate is a percentage rate which is calculated to show the total cost of credit under a credit contract. The method of calculation takes into account the annual percentage rate and other fees and charges payable under the credit contract (whether or not those fees are payable if the credit is not provided), the amount of credit and the number of repayments. The tolerances and assumptions allowed under the Code (see ss 180–182 of the Code) apply to the comparison rate (reg 71(6)).

Regulation 71 contains some subjective words which credit providers will have to interpret carefully. Regulation 71(5) allows “reasonable” “approximations to be made if it would be ‘impractical or unreasonably onerous’” to make precise calculations. Regulation 71(10) refers to “typical” credit contracts (but see [R71.15] regarding reg 71(10) generally). It remains to be seen how the courts will interpret “reasonable”, “impractical”, “unreasonably onerous” and “typical” for the purposes of reg 71. [R71.10] Assumptions Regulation 71(9) was inserted by the NCCP Act regime changes. Together with reg 71(8), it is intended to give credit providers the assumptions they should make for products “such as drawdown facilities and continuing credit contracts where this information is unknown at the disclosure date” (Draft Explanatory Statement to Select Legislative Instrument 2009). [R71.15] Relationship between reg 71 and regulations made for Pt 10 of the Code Regulation 71 contains the comparison rate formula and the warnings that must be used for comparison rates given voluntarily by the credit provider precontractually. Regulation 100 reiterates the same formula, which is to be used in relevant credit advertisements and includes an additional optional warning which may be used. However, three paragraphs of reg 71 purport to apply to comparison rates required under Pt 10 of the Code (see reg 71(10) and (12) by virtue of reg 71(1)(b)). The inclusion of those paragraphs is curious. The equivalent paragraphs under the UCCC (reg 12(9) and (11) of the UCCC Regulation by virtue of reg 12(1)(b) of the UCCC Regulation) were to have no effect during the period that Pt 9A of the UCCC/Pt 8A of the UCCC Regulation (that is, the comparison rate regime under the UCCC) was in force: see reg 12(1A) of the UCCC Regulation. There is no equivalent of reg 12(1A) of the UCCC [page 860] Regulation in reg 71. This is logical because Pt 10 of the Code (the comparison rate regime) is not subject to any sunset provision (whereas the

UCCC equivalent — Pt 9A of the UCCC — was subject to a sunset provision). However, the paragraphs to which former para 12(1A) referred have been left in the Code. This leads to a question as to whether there is an intention to change the advertising comparison rate regime as it applied under the UCCC or whether the retention of those paragraphs is an oversight. The Explanatory Statement to the regulations does not indicate any intention to amend the regime that applied under the UCCC (other than to end the comparison rate schedule requirement) and neither regulation cross refers to the other. Regulation 71(10) conflicts with s 161(2) and reg 97. It is thought that the safer course for credit providers is to follow the Pt 10 regime regulations (that is, regs 97–100) in relation to credit advertisements rather than reg 71.

Pre-contractual statement 72 (1) For subsection 16(4) of the Code, the following financial information (relevant financial information) mentioned in section 17 of the Code, which is to be contained in the precontractual statement, is prescribed: (a) for subsection 17(3) (Amount of credit): (i)

the amount of credit agreed to be provided (if ascertainable); or

(ii) if the amount is not ascertainable — the maximum amount of credit agreed to be provided, or the credit limit under the contract (if any); (b) for subsection 17(4) (Annual percentage rate or rates) — the information mentioned in the subsection, other than the information mentioned in subparagraph 17(4)(c)(iii); (c) for subsection 17(5) (Calculation of interest charges) — the maximum duration of any interest free period under the credit contract; (d) for subsection 17(6) (Total amount of interest charges payable) — the information mentioned in the subsection; (e) for subsection 17(7) (Repayments) — the information mentioned in

the subsection; (f)

for subsection 17(8) (Credit fees and charges) — the information mentioned in paragraphs 17(8)(a) and (b), but only in respect of: (i)

retained credit fees and charges (being credit fees and charges retained by the credit provider and not passed on to or retained in reimbursement of an amount paid to a third party); and

(ii) lenders mortgage insurance. 72 (2) The relevant financial information is to be set out: (a) separately from the remainder of the information under section 17 of the Code that is to be set out in the precontractual statement; and (b) in tabular form (the financial table), in either portrait or landscape format. 72 (3) Additional information may be included in the financial table, but only in the following circumstances: (a) any information mentioned in subsection 17(3), (4), (5) or (8) of the Code that is not relevant financial information may be included with the relevant financial information; (b) any other information mentioned in subsection 17(2) or subsections 17(9) to (16) of the Code may be included after the relevant financial information and any information included under paragraph (a). 72 (4) If the relevant financial information relates to more than one type of credit facility, the information may be set out in a single financial table or in separate financial tables. 72 (5) The financial table is to be set out at the beginning of the precontractual statement, after any formal cover page or pages that have no substantive content. [page 861]

72 (6) However: (a) if the precontractual statement is not a separate document, the financial table is to be set out at the beginning of the proposed contract document; and (b) the financial table may be preceded by information necessary to identify the loan. 72 (7) If the precontractual statement consists of more than one document, the financial table need not be repeated. 72 (8) If any of the relevant financial information can change under the credit contract because of a unilateral change by the credit provider: (a) a clear statement must be made in the financial table that it is subject to change and that the change can be made without the debtor’s consent; and (b) a single statement may be made for 2 or more items of information that are subject to change. 72 (9) An expression may be used for the purposes of the relevant financial information if the expression is defined in the precontractual statement. 72 (10) The relevant date of disclosure of the information in the financial table may be set out in the financial table. 72 (11) This regulation does not prevent a repetition of the relevant financial information in the financial table in any other form in connection with the remainder of the information under section 17 of the Code that is to be set out in the precontractual statement. Note Paragraph 16(1)(a) of the Code requires a credit provider to give a prospective debtor a precontractual statement setting out matters required by section 17 of the Code to be included in the credit contract document. The precontractual statement must be given before the credit contract is entered into or before the debtor makes an offer to enter into the contract, whichever first occurs. Under subsection 16(4) of the Code, the regulations may specify the financial information that is to be contained in the precontractual statement, and prescribe the form in which the information must appear.

COMMENTARY ON REGULATION 72

[R72.05] Section 16(1)(a) of the Code requires a credit provider to give a prospective debtor a precontractual statement before they enter into a credit contract. Regulation 72 prescribes requirements for the form of the financial information contained in the precontractual statement to be given to a debtor before they enter into a credit contract, or before they make an offer to enter into a credit contract, whichever first occurs. See [16.05]–[16.55] for a full discussion of reg 72. This is a significant provision in terms of ensuring compliance with the Code’s contract formation formalities.

Additional disclosures about insurance financed by contract 73 For paragraph 17(15)(c) of the Code, the term of each credit-related insurance contract, if ascertainable, is prescribed. Note Subsection 17(15) of the Code sets out the disclosures to be made about credit-related insurance contracts that are to be financed under the credit contract. Paragraph 17(15)(c) enables the regulations to prescribe additional particulars about the insurance that is to be disclosed.

COMMENTARY ON REGULATION 73 [R73.05] Section 17(15) requires a credit contract to include certain information concerning credit-related insurance financed under the contract. [page 862] Section 17(15)(c) permits the regulations to prescribe additional particulars about insurance that must be included in the credit contract. Regulation 73 requires that the term of each credit-related insurance contract must be so included (see [17.80]).

Additional disclosures about credit contracts to be signed by debtor

74 (1) For subsection 17(16) of the Code, the information and warnings set out in Form 6 or 7, as relevant, are prescribed, but only if the credit contract document is to be signed by the debtor. 74 (2) Form 6 is the relevant form if the document signed by the debtor constitutes an offer. 74 (3) Form 7 is the relevant form if the document signed by the debtor constitutes the acceptance of an offer by the credit provider. 74 (4) The information and warnings mentioned in subsection (1): (a) are to be in the relevant form (including in the form of boxes); and (b) must: (i)

be set out immediately above, and on the same page as, each place where the debtor (or at least one of the debtors) is to sign the contract document; or

(ii) if a contract is made by electronic communication — be prominently displayed when, but not after, the debtor (or if 2 or more debtors, each debtor) signs. Note 1 Section 17 of the Code sets out the matters to be included in the credit contract document. subsection 17(16) requires the contract document to contain any additional information or warnings required by the regulations. Note 2 Section 18 of the Code requires a contract document to conform to the requirements of the regulations as to its form and the way it is expressed.

COMMENTARY ON REGULATION 74 [R74.05] This is a significant regulation for ensuring compliance with the Code’s contract formation formalities. It relates to ss 17 and 18 of the Code. For the purpose of s 17(16) of the Code, reg 74 prescribes that credit contract documents are to contain warnings set out in: Form 6 of Sch 1 to the regulations, if the credit contract signed by the debtor is an offer; or Form 7 of Sch 1 to the regulations, if the credit contract is signed by a debtor in acceptance of a credit provider’s offer.

Those forms are not required to appear in a credit contract which is not signed by the debtor (for example, a credit card contract under which the debtor accepts the credit provider’s written offer by accessing credit or using their card). Regulation 74(4)(b) requires the forms to appear immediately above each place where at least one of the debtors signs the contract. This means that if more than one debtor is to sign a credit contract, and they sign on different pages, either Form 6 or Form 7 (as appropriate) must appear above the place on each of those pages where at least one of the debtors is to sign (that is, the warning box will need to appear in the credit contract more than once). Alternatively, if a contract is made by electronic communication, the information and warnings must be prominently displayed when (but not after) the debtor (or, if two or more debtors, each debtor) signs the contract. [page 863]

Reverse mortgages — disclosure about credit contract not including tenancy protection provision 74A For the purposes of subsections 18B(2) and (4) of the Code, Form 7A is prescribed. [s 74A insrt SLI 85 of 2013 s 4 and Sch 2 item 4, eff 1 June 2013]

COMMENTARY ON REGULATION 74A [R74A.05] If a credit contract for a reverse mortgage does not include a tenancy protection provision, s 18B of the Code requires licensees to inform a debtor that the contract does not include such a provision, before providing a credit service or entering into the contract. Regulation 74A prescribes Form 7A for the purposes of informing the debtor of this, with the Form included as Form 7A in Schedule 1 of the regulations. This form provides consumers with disclosure information that the rights of any spouse, partner or other resident in the consumer’s home would be

affected by the reverse mortgage, and provides information of where the consumer can get further information regarding reverse mortgages. (Source: Explanatory Statement to Select Legislative Instrument 2013 No 85)

Deduction of amount for interest charges 75 subsection 25(1) of the Code does not apply to the deduction of an amount for the first payment of interest charges under a credit contract, but only if the deduction relates to interest charges for a period that is less than the normal period for which interest charges are to be periodically debited to the debtor’s account. Note 1 Subsection 25(1) of the Code provides, among other things, that a credit provider must not deduct from a payment to, or in accordance with the instructions of, the debtor an amount for interest charges under the credit contract. Note 2 Subsection 25(3) of the Code authorises the making of regulations that exempt from that prohibition the deduction of an amount for the first payment of interest charges.

COMMENTARY ON REGULATION 75 [R75.05] The Code generally prohibits the charging of interest in advance (ss 25 and 29 of the Code) (subject in the case of s 29 to an exception for residential investment loans (see s 30A of the Code and reg 78)). However, reg 75 permits the deduction from the loan amount of the first payment of interest charges if the deduction relates to a period that is less than a normal period for which interest charges are to be periodically debited to the debtor’s account (see [25.10]).

Calculation of unpaid daily balances 76 (1) This regulation applies to the calculation of average unpaid daily balances if interest charges under a credit contract are determined under subsection 28(2) of the Code for a month, a quarter or a half-year by applying the relevant fraction of the annual percentage rate. 76 (2) The actual unpaid daily balances for each day in the month, quarter or

half-year concerned are to be added together and divided by the total number of days in the whole of that month, quarter or half-year. [page 864] 76 (3) If the annual percentage rate applies to part (but not the whole) of the month, quarter or half-year, the calculation of the average unpaid daily balances for that part is to be made by adding together the actual unpaid daily balances for each day in that part and dividing the sum obtained by the total number of days in that month, quarter or half-year. 76 (4) If the last day or days of the month, quarter or half-year fall on a nonbusiness day or days, the average unpaid daily balances for the month, quarter or half-year may be calculated without reference to the unpaid daily balances for the non-business day or days. 76 (5) In the event mentioned in subregulation (4), the unpaid daily balances for the non-business day or days must be included in the next month, quarter or half-year for the purposes of calculating the average unpaid daily balances for that next month, quarter or half-year. Note Subsection 28(1) of the Code limits the maximum amount of an interest charge that may be imposed or provided under a credit contract generally to an amount determined by applying the daily percentage rate to the unpaid daily balances (as defined in section 27 of the Code). However, subsection 28(2) of the Code allows an interest charge for a month, a quarter or half-year to be determined by applying the annual percentage rate or rates, divided by: (a) 12 (for a month); or (b) by 4 (for a quarter); or (c) by 2 (for a half-year); to the relevant average unpaid daily balances for the period. The regulations may provide for the calculation of unpaid daily balances in these circumstances.

COMMENTARY ON REGULATION 76 [R76.05] Regulation 76 prescribes rules for the calculation of average unpaid daily balances for the purpose of calculating interest charges using the method permitted by s 28(2) of the Code (see [28.15]).

In summary, to determine the average unpaid daily balance, the actual daily balances for each day in the month, quarter or half-year concerned must be added together and divided by the actual total number of days in the whole of that month, quarter or half-year. That is, the average unpaid daily balance in a period must be calculated on the actual number of days in the period (and not, for example, on the basis that each month has 30 days where interest is calculated on monthly rests) (see the definitions of “month” and “calendar month” in s 22 of the Interpretation Act). If an annual percentage rate applies to part (but not the whole) of the month, quarter or half-year (for example, where a loan is paid out, a tiered interest rate structure is used, or where the interest rate has changed during the interest period), the calculation of the average unpaid daily balances for that part is to be made by adding together the actual unpaid daily balances for each day in that part and dividing the sum obtained by the total number of days in that month, quarter or half-year. Example — calculating interest on monthly rests Whole period: —

interest charges cover the month of January (that is, 31 days);

—

unpaid daily balance — $100 on each of days 1–31;

—

average unpaid daily balance: [page 865] $100 × 31 = $3100 ÷ 31 [days] = $100;

Part period: —

interest charges cover the first 15 days of January — assume the loan is paid out on 16 January;

—

the unpaid daily balance on each of days 1–15 is $100;

—

average unpaid daily balance:

Part period — APR changes during period: —

unpaid daily balance — $100 on each of days 1–31;

—

APR for days 1–15 is x%;

—

APR for days 16–31 is (x + 2)%;

—

Interest charges for January:

If the last day or days of the month, quarter or half-year fall on a nonbusiness day or days, the average unpaid balances for the month, quarter or half-year may be calculated without reference to the unpaid balances for the non-business day or days, but the unpaid balances for any such non-business day must be included in the next period for the purpose of calculating the average unpaid daily balance for that period. If there is no “next period” (for example, because a loan is being paid out), the non-business day(s) must be included in the calculation. However, it would seem that in practice, loans (especially of the kind that would involve periodic rather than daily interest) are not generally paid out on non-business days.

Early debit or payment of interest charges 77 Subsection 29(1) of the Code does not apply to the first payment of interest charges under a credit contract, but only if it relates to interest charges for a period that is less than the normal period for which interest charges are to be periodically debited to the debtor’s account. Note 1 Subsection 29(1) of the Code provides that a credit provider must not require payment of or debit an interest charge at any time before the end of a day to which the interest charge applies. Note 2 Subsection 29(3) of the Code authorises the making of regulations that exempt from that prohibition the first payment of interest charges under the credit contract.

[page 866]

COMMENTARY ON REGULATION 77 [R77.05] Regulation 77 is similar in its effect to reg 75. Section 29(1) of the Code does not permit a credit provider to require payment of, or debit, an interest charge for a day before the end of the day to which the interest charge applies. Section 29(3) allows the regulations to make an exemption from that prohibition in relation to the first interest payment under a credit contract. Regulation 77 exempts the first payment of interest charges under a credit contract if it relates to interest charges for a period that is less than the normal period for which interest charges are to be periodically debited (see [29.05]–[29.15]). (See and compare the commentary on s 30A of the Code and reg 78 regarding residential investment loans.)

Interest charges in relation to residential investment property 78 (1) This regulation applies to a provision of credit that is provided or intended to be provided wholly or predominantly: (a) to purchase, renovate or improve residential property for investment purposes; or (b) subject to subregulation (3), to refinance credit that has been provided wholly or predominantly to purchase, renovate or improve residential property for investment purposes. 78 (2) For section 30A of the Code, Division 3 of Part 2 of the Code applies to the provision of credit as if section 29 of the Code were omitted. Note Section 30A of the Code provides, among other things, that the regulations may provide that Division 3 of Part 2 of the Code applies in relation to a provision of credit covered by subparagraph 5(1)(b)(ii) or (iii) of the Code as if specified provisions were omitted as specified in the regulations.

78 (3) For paragraph (1)(b), this regulation does not apply if, at the time the credit contract is entered into, the predominant use of the residential property is for personal, domestic or household purposes. [subreg (3) am SLI 105 of 2010 reg 3 and Sch 1[28], eff 24 May 2010]

COMMENTARY TO REGULATION 78 [R78.05] Section 29(1) of the Code does not permit a credit provider to require payment of, or debit, an interest charge for a day before the end of the day to which the interest charge applies. Regulation 78 excludes s 29 of the Code in circumstances where credit is provided or intended to be provided wholly or predominantly to purchase, refinance, renovate or improve residential property for investment purposes. The Explanatory Statement explains that the intention of reg 78 is to allow requirements in respect of such credit on “borrowers to pay interest in advance during the life of the contract (in order to obtain taxation benefits)” to continue. Note that there is a carve-out in reg 78(3) in relation to refinancing a residential investment loan where the use of the property has changed since the original loan was taken out. Where the property is no longer an investment property (for example, the debtor now resides in the property), s 29 of the Code will apply to the refinancing credit contract. [page 867]

When statement of account not required 79 For paragraph 33(3)(b) of the Code, the level is $10. Note Section 33 of the Code requires the credit provider to give the debtor periodic statements of account. Subsection 33(3) sets out the circumstances in which a statement is not required to be given. Paragraph 33(3)(b) provides that a statement is not required if no amount has been debited or credited to the debtor’s account during the statement period and the amount outstanding on the debtor’s account is zero or below a level fixed by the regulations.

COMMENTARY TO REGULATION 79 [R79.05] Regulation 79 is made under s 33(3)(b) of the Code, and together they have the effect that a statement of account need not be sent to a debtor if no amount has been debited or credited to the account during the statement period and the amount outstanding is below $10 (see [33.20]).

Part 7-2A — Prohibited credit fees and charges [Pt 7-2A insrt SLI 40 of 2011 reg 3 and Sch 1[1], eff 1 July 2011]

Termination fees for certain credit contracts 79A (1) For section 31 of the Code, a credit fee or charge is prohibited if: (a) it is provided for in a credit contract entered into on or after 1 July 2011; and (b) it is to be paid on or in relation to the termination of the credit contract, whether the liability to make the payment is incurred at that time or at an earlier time; and (c) any of the amount of credit provided under the credit contract is secured over residential property. 79A (2) However, subregulation (1) does not apply to: (a) a credit fee or charge that is: (i)

a break fee; or

(ii) a discharge fee; or (b) a credit fee or charge that is incurred before the termination of a credit contract that is terminated before any credit has been provided under the credit contract. 79A (3) In this regulation: break fee means a credit fee or charge that relates: (a) only to the early repayment of an amount provided under a credit contract for a fixed rate loan; and (b) only to the portion of the loan that is fixed; and (c) to the part of the credit provider’s loss, arising from the early repayment, that is a result of differences in interest rates. [def am SLI 67 of 2011 reg 3 and Sch 1[1], eff 1 July 2011]

discharge fee means a credit fee or charge that only reimburses the credit

provider for the reasonable administrative cost of terminating the credit contract. fixed rate loan means a credit contract under which the annual percentage rate is fixed, for an agreed term, for the whole or a part of the amount due under the credit contract. [page 868] 79A (4) For the definition of discharge fee, a cost is a reasonable administrative cost only if it does not exceed a reasonable estimate of the average reasonable administrative cost to the credit provider of terminating that class of credit contract. COMMENTARY ON REGULATION 79A [R79A.05] Outline Regulation 79A, in combination with the other relevant provisions referred to below, effectively provides that a credit fee or charge provided for in a credit contract (that is subject to regulation by the Code) entered into on or after 1 July 2011 will be prohibited (reg 79A(1)(a)) if: the fee or charge is to be paid on or in relation to the termination of the credit contract (notwithstanding the time the liability was incurred) (reg 79A(1)(b)); and any part of the credit provided under the credit contract is secured by residential property (reg 79A(1)(c)), unless the credit fee or charge is: —

a break fee (discussed below) (regs 79A(2)(a)(i) and 79A(3));

—

a discharge fee (discussed below) (regs 79A(2)(a)(ii) and 79A(3)); or

—

incurred before the termination of a credit contract that is terminated before any credit has been provided under the contract (reg 79A(2)(b)).

The following fees and charges do not fall within the definition of “credit fee or charge” in s 204 of the NCCP Act, and therefore will not be prohibited under reg 79A: an interest charge (including a default charge); a fee or charge payable in connection with a credit contract providing both credit and debit facilities, and the fee or charge would be payable even if no credit facilities were available (not including annual fees or credit card charges); a government charge or duty on receipts or withdrawals; or an enforcement expense. Further, credit fees and charges appearing in credit contracts not regulated by the Code will not be prohibited under reg 79A, including where the credit provided under the credit contract is more than $5 million, is provided for investment in residential real estate and is not provided for investment in one residence (reg 65C). [R79A.10] “Break fee” The definition of “break fee” in reg 79A(3) refers to fees that relate to the part of the credit provider’s loss, arising from the early repayment, that is a result of difference in interest rates. This approach is consistent with the current industry practice of calculating break fees with reference to the wholesale market interest rate. The Explanatory Statement to the National Consumer Credit Protection Amendment Regulations 2011 (No 3) indicates that the prescribed method of calculation of exit fees is intended to be consistent with guidelines issued by the Financial Ombudsman Service (FOS) in the Banking and Finance Bulletin 60 of December 2008. The Explanatory Statement also confirms that a break fee may be calculated with reference to retail interest rates. [page 869] [R79A.15] “Discharge fee” An identification of costs that are “administrative” in nature is central to the definition of discharge fees.

Explanatory Statement to the National Consumer Credit Protection Amendment Regulations 2011 (No 2) provides: Administrative costs of terminating a credit contract may include, for example, the cost of calculating the payout figure on termination, the cost of processing the termination, the cost of discharging a related mortgage, and third party costs that arise because of the termination.

ASIC has previously issued guidance on the review of early termination fees for residential loans under the Code and the unfair terms provisions of the ASIC Act. This guidance includes an indication of the types of loss caused by early termination, one aspect of which is administrative costs. RG 220 at RG 220.30, which bears a striking similarity to the wording of the Explanatory Statement quoted above, identifies the types of loss that may be caused by early termination of a credit contract: (a) break fees when a fixed rate loan is terminated; (b) administrative costs for calculating the payout figure and the amount of the fees payable on early termination; (c) administrative costs for processing the early termination; (d) third party costs that arise because of the early termination (for example, if a function associated with processing an early termination is outsourced); (e) costs that have not been recovered because a loan with a honeymoon or introductory interest rate is terminated early. Loans with a honeymoon or introductory interest rate are those which offer a discounted interest rate at the start of a loan, typically for the first one to two years; and (f)

unrecovered establishment costs arising from a lender’s inability to recover establishment costs during the shortened period the loan was on foot.

It appears that the administrative costs that would be recoverable as part of a discharge fee would include (b), (c) and (d) but not the other items in the above list. RG 220.33 provides a non-exclusive list of what might be included in

unrecovered establishment costs (RG 220.30(f) above), one of the types of loss that would not be a valid component of a discharge fee. It is noteworthy that it includes in that category commissions paid to loan originators (for example, brokers, mortgage managers and aggregators). Importantly, reg 79A(4) has the effect that credit providers must base their discharge fees on a reasonable estimate of the average reasonable administrative cost of terminating that class of credit contract. This means that credit providers cannot take into account any special circumstances relating to a particular credit contract that may result in an increased cost of termination. Any discharge fees that exceed this estimate are prohibited (even where they may be actually incurred costs). [R79A.20] Unconscionability/unfairness Even where fees, including break fees, comply with reg 79A, they will nevertheless potentially be subject to review under s 78 of the Code as unconscionable and under the unfair contract [page 870] terms provisions of the ASIC Act for unfairness. ASIC RG 220 provides further guidance as to ASIC’s interpretation of the circumstances in which a fee will be unconscionable or unfair. It is also relevant that, in determining whether a term of a consumer contract is unfair, a court must take into account the extent to which the term is “transparent” (which relates, in part, to whether the term is expressed in reasonably plain language and is presented clearly). While break cost calculations are, by their nature, complex, it is likely that courts and EDR Schemes will look unfavourably on any calculations that over-compensate the credit provider.

Small amount credit contracts (fees and charges) — prescribed persons

79AE For subsection 31B(1) of the Code, a person specified in the following table is a prescribed person. Prescribed persons Item Person 1 A person who introduces a debtor to a credit provider (whether or not the person is associated with the credit provider). 2 A person who has been introduced to a debtor by a credit provider to provide a service in relation to a small amount credit contract (whether or not the person is associated with the credit provider). Note: Section 31B of the Code relates to fees and charges in relation to: (a) a small amount credit contract; or (b) the provision of an amount of credit under a small amount credit contract; or (c) a thing that is connected with a small amount credit contract or the provision of an amount of credit under such a contract. Section 31B of the Code applies to a credit provider or a person prescribed by the regulations. [s 79AE insrt SLI 89 of 2014 s 4 and Sch 1 item 4, eff 13 June 2014]

COMMENTARY ON REGULATION 79AE [R79AE.05] The exposure draft (6/01/2014) National Consumer Credit Protection Amendment (Small Amount Credit Contracts) Regulation 2014 proposed a new reg 79AE. (See [23A.45], [R4D.05], [R50A.05] and [R51.10].) The Explanatory Statement to the draft regulation provides: Practiced [sic] have been developed under which credit providers establish a brokerage arm to their business, in which the broker only ever arranged credit with the related credit provider, in order to charge brokerage fees where they were not included in the calculation of the amount payable under the cap. Subsection 31B(1) of the Code prohibits a person, as prescribed by the regulations, from requiring or accepting payment of a fee or charge in relation to a SACC. The Regulation addresses these avoidance arrangements by specifying that the following persons are prescribed persons for the purposes of subsection 31B(1) of the Code: [page 871]

a person who introduces the debtor to a credit provider (whether or not the person is associated with the credit provider); or a person who has been introduced to a debtor by a credit provider to provide a service in relation to a small amount credit contract (whether or not the person is associated with the credit provider). The Regulation is consistent with the approach taken to the exemption for low-cost loans in subsections 6(1), (2) and (3) of the [Code], which similarly provides that these types of fees cannot be charged outside the cap on costs.

[R79AE.10] Regulation 79AE was introduced by National Consumer Credit Protection Amendment (Small Amount Credit Contracts) Regulation 2014 — see [R4D.05] and [R4D.10].

Credit provider or prescribed person must not require or accept payment of fee or charge in relation to small amount credit contract etc 79AB For subsection 31B(1) of the Code, a person who has been introduced to a debtor by a credit provider to provide a service in relation to a small amount credit contract is a prescribed person (whether or not the person is associated with the credit provider). Note Section 31B of the Code applies to a credit provider or a person prescribed by the regulations. [s 79AB insrt SLI 314 of 2012 s 3 and Sch 2[2], eff 1 July 2013]

COMMENTARY ON REGULATION 79AB [R79AB.05] This regulation addresses potential avoidance of the cap on costs for credit contracts. If a person has been introduced to a debtor by a credit provider to provide a service in relation to an small amount credit contract (SACC), they are a prescribed person under s 31B of the Code. The regulation prohibits the debtor incurring costs charged by a third party.

Prohibition relating to annual cost rate of credit contracts — later increases of annual percentage rate etc

79AC (1) For subparagraph 32AA(1)(c)(ii) of the Code, an amount is a prescribed amount if it: (a) is referred to in subsection 32B(3) of the Code; and (b) is payable in relation to a medium amount credit contract. 79AC (2) For subparagraph 32AA(1)(c)(ii) of the Code, an amount is a prescribed amount if: (a) it is referred to in subsection 32B(3) of the Code; and (b) it is not payable in relation to a medium amount credit contract; and (c) the credit provider has a practice of requesting debtors to increase the amount of repayments above the amount the debtor is required to pay under the credit contract; and (d) the debtor becomes liable to pay the fee as a result of making increased repayments because of a request by the credit provider. [page 872] Note Subparagraph 32AA(1)(c)(ii) of the Code refers to an amount referred to in subsection 32B(3) of the Code that is prescribed by the regulations. Section 32AA of the Code applies if the prescribed amount increases after a credit contract is entered into and other circumstances occur. [s 79AC insrt SLI 314 of 2012 s 3 and Sch 2[2], eff 1 July 2013]

COMMENTARY ON REGULATION 79AC [R79AC.05] This regulation is an anti-avoidance measure. The Explanatory Statement to Select Legislative Instrument 2012 No 314 provides: Regulation 79AC addresses potential avoidance of the cap on costs in respect of credit contracts other than [SACCs], through charging fees which are not ascertainable when the contract is entered into, but where the fee should be included in calculating the annual cost rate (for example, by the credit provider introducing new fees after the contract has been entered into). Subregulation 79AC(1) addresses avoidance of the cap on costs in relation to medium amount contracts, through charging fees which are not ascertainable when the contract is entered into, but where the fee should be included in calculating the annual cost rate (for example, by the credit provider introducing new fees after the contract has been entered into). In practice the credit

provider would need to identify all charges and fees and interest that the consumer is liable to pay before the contract is entered into. Subregulation 79AC(2) provides that, in relation to credit contracts other than medium amount credit contracts, any fee or charge that is a deferred establishment fee, payable as a result of the practice of a credit provider seeking repayments that result in the contract being paid out early. The provisions address a current practice in which the existing State and Territory legislation imposing caps on costs is avoided through the debtor incurring, after the contract has been entered into, a liability to pay a fee as a result of the contract terminating before the end date specified in the contract, through the debtor increasing the amount of their repayments.”

Minimum Repayment Warning 79B (1) For subsection 34(12) of the Code, a statement of account for a credit card contract must contain the warning and details mentioned in subregulation (2). [subreg (1) subst SLI 117 of 2012 reg 3 and Sch 2[9], eff 1 July 2012]

79B (1A) However, the warning and details are not required if: (a) the outstanding balance shown on the statement is $50 or less; or (b) there is no outstanding balance; or (c) a payment arrangement is in effect which replaces the normal monthly minimum payments. Note If there is an outstanding balance of $50 or less, the licensee may choose to provide the warning and details. In that case, subregulation (3) may affect the content of the warning. [subreg (1A) insrt SLI 117 of 2012 reg 3 and Sch 2[9], eff 1 July 2012]

79B (1B) If the licensee provides the warning and details, they must be shown on the front page of the statement of account. [subreg (1B) insrt SLI 117 of 2012 reg 3 and Sch 2[9], eff 1 July 2012]

79B (2) The warning and details must be in the following form: Minimum Repayment Warning:If you make only the minimum payment each month, you will pay more interest and it will take you longer to pay off your balance. For example: [page 873]

If you make no additional charges using this card and each month you pay … Only the minimum payment [repayment 2]

You will pay off the Closing Balance shown on this statement in about … [period] 2 years

And you will end up paying an estimated total of interest charges of … [total interest 1] [total interest 2], a saving of [savings 2]

Having trouble making repayments? If you are having difficulty making credit card repayments, please contact us on [phone number]. We may be able to assist you. [subreg (2) am SLI 117 of 2012 reg 3 and Sch 2[10], eff 1 July 2012]

79B (3) If the time to pay off the closing balance, making only the minimum payment each month, is 2 years or less, the item for [repayment 2] in the table in the Minimum Payment Warning is not required. Note If the time to pay off the closing balance, making only the minimum payment each month, is 2 years or less, the licensee may choose to provide the item for [repayment 2] in the warning. [subreg (3) am SLI 117 of 2012 reg 3 and Sch 2[11], eff 1 July 2012]

79B (4) [Period] must be calculated on the assumption that: (a) the borrower pays the amount of the minimum payment mentioned in the statement of account each month; and (b) no other purchases or advances are added to the outstanding balance. 79B (5) If more than one interest rate applies, the licensee may elect to use the purchase rate as the applicable rate to be applied to the whole of the outstanding balance. Note The tolerances and assumptions in section 180 of the Code will apply to the calculation.

79B (7) In this regulation: [date] means the repayment due date. [late fee] [def rep SLI 117 of 2012 reg 3 and Sch 2[12], eff 1 July 2012]

[penalty interest] [def rep SLI 117 of 2012 reg 3 and Sch 2[12], eff 1 July 2012]

[period] means the time, in years and months, needed to repay the closing balance, making the minimum repayment each month until the balance is repaid. purchase rate means the rate which applies to the purchase of goods and services under the credit card contract. [repayment 2] means the monthly repayment required to pay off the closing balance in 2 years. [savings 2] is the difference between [total interest 1] and [total interest 2]. [total interest 1] means the total interest payable if the customer is making the minimum repayment each month until the balance is repaid. [total interest 2] means the total interest that the consumer would be charged if the consumer made payments of [repayment 2] to pay off the closing balance in 2 years. [reg 79B insrt SLI 201 of 2011 reg 3 and Sch 1[3], eff 1 July 2012]

COMMENTARY ON REGULATION 79B [R79B.05] Regulation 79B was first enacted by the National Consumer Credit Protection Amendment Regulations 2011 (No 6). The Explanatory [page 874] Statement to Select Legislative Instrument 2011 No 201 provides: [R]egulation 79B … introduces a requirement for credit providers to provide a minimum repayment warning on the front page of a credit card statement. The warning provides information on: the time it would take to pay off the closing balance if only minimum repayments are made and the total amount a consumer would pay over that time; an alternative repayment amount which would extinguish the closing balance within 2 years

and the total amount a consumer would pay over that time; the saving the consumer would make if they repaid the closing balance within 2 years instead of making minimum repayments; and contact details that the consumer can use to contact the lender if they are in financial difficulty. If the closing balance of the statement would be repaid by making minimum repayments in 2 years or less, then the disclosure of the alternative repayment amount is not required. If more than one interest rate applies to the balance, the licensee may elect to use the purchase rate (the rate which applies to the purchase of goods and services under the credit card contract) to the whole of the outstanding balance in calculating the information. Regulation 79B(1A) sets out when a statement of account need not contain the minimum repayment warning (and that this warning only applies to credit card contracts and not to accounts such as debit card accounts).

Part 7-2B — Additional rules in relation to small amount credit contracts [Pt 7-2B insrt SLI 314 of 2012 s 3 and Sch 2[3], eff 1 July 2013]

Default in payment by direct debit under small amount credit contract 79C (1) For subsection 39C(1) of the Code, the credit provider must refrain from seeking a repayment due under a small amount credit contract by relying on a direct debit request if: (a) the credit provider has twice sought to obtain the repayment using the direct debit request; and (b) the credit provider: (i)

has not told the debtor that the direct debit requests have been unsuccessful; or

(ii) has not made reasonable attempts to contact the debtor. 79C (2) If the credit provider receives the repayment to which subregulation (1) relates: (a) subregulation (1) ceases to apply; and (b) the credit provider may seek repayments due under the small

amount credit contract by relying on a direct debit request. COMMENTARY ON REGULATION 79C [R79C.05] The Explanatory Statement to Select Legislative Instrument 2012 No 314 provides: [page 875] [Regulation 79C] inserts requirements on a credit provider to refrain from seeking a repayment due under a small amount credit contract where payments are made by a direct debit authority from the debtor, and the credit provider has twice sought unsuccessfully to obtain the repayment through the direct debit authority. The regulation requires the credit provider to make reasonable attempts to contact the debtor in order to clarify why the direct debit is being rejected (in circumstances where a debtor is in default and likely to be in financial hardship). The intention is to prevent the debtor’s liability to other persons increasing through dishonour fees incurred from repeated attempts to secure payment through the direct debit authority, and when the debtor may not be aware there are insufficient funds in their account to meet the repayment. The obligation to make reasonable attempts to contact the debtor ceases to apply when a credit provider receives the repayment, as this would indicate that the debtor is aware of the default and therefore should bear the responsibility to take appropriate action to prevent fees being charged.

Part 7-3 — Related mortgages and guarantees

Mortgage arising from certain home ownership schemes — exemption from subsection 50(1) of the Code 80 (1) This regulation applies to: (a) the home ownership scheme operated by the Mt Newman Joint Venturers, being: (i)

BHP Billiton Minerals Pty Ltd ACN 008 694 782; and

(ii) Mitsui-Itochu Iron Pty Ltd ACN 088 702 761; and (iii) CI Minerals Australia Pty Ltd ACN 009 256 259; and (b) the home ownership scheme operated by the Mount Goldsworthy Mining Associates Joint Venturers, being: (i)

BHP Billiton Minerals Pty Ltd ACN 008 694 782; and

(ii) Mistsui Iron Ore Corporation Pty Ltd ACN 050 157 456; and (iii) CI Minerals Australia Pty Ltd ACN 009 256 259; that assist employees, whether alone or jointly with one or more other persons, to purchase land owned respectively by the Mt Newman Joint Venturers and the Mount Goldsworthy Mining Associates Joint Venturers. 80 (2) Subsection 50 (1) of the Code does not apply to any mortgage created over an interest that is acquired by an employee under a contract for the purchase of land entered into by the employee, whether alone or jointly with one or more other persons, under a home ownership scheme to which this regulation applies. 80 (3) In this regulation: employee means: (a) if BHP Billiton Iron Ore Pty Ltd ACN 008 700 981 is the manager of the Mt Newman Joint Venture or the Mount Goldsworthy Mining Associates Joint Venture:

(i)

an employee of that corporation; or

(ii) an employee of a corporation that is a related body corporate in relation to BHP Billiton Iron Ore Pty Ltd; or [page 876] (b) if BHP Billiton Iron Ore Pty Ltd ceases to manage the Mt Newman Joint Venture or the Mount Goldsworthy Mining Associates Joint Venture — an employee of the person for the time being exercising the functions of the manager of the Mt Newman Joint Venture or of the Mount Goldsworthy Mining Associates Joint Venture. Note Section 50 of the Code provides that a mortgage can not be created over employees’ remuneration or employment benefits or benefits under a superannuation scheme unless the regulations permit it to do so.

COMMENTARY ON REGULATION 80 [R80.05] Regulation 80 exempts mortgages arising under certain home ownership schemes from the application of s 50(1) of the Code. Section 50(1) of the Code prohibits mortgages from being created over employees’ remuneration, employment benefits or superannuation schemes. The regulation operates to permit such a mortgage in respect of various home ownership schemes associated with two mining joint ventures in Western Australia.

Form of guarantees 81 (1) For section 55 of the Code, a guarantee must contain the warning set out in Form 8. 81 (2) The warning must comply with the following requirements: (a) it must be in the form of a box as indicated in Form 8; (b) it must be set out immediately above, and on the same page as, the

place where the guarantor (or at least 1 of the guarantors) is to sign the guarantee document; (c) if the guarantors are to sign the guarantee document on separate pages, it must be set out in that way on each page. Note Section 55 of the Code requires a guarantee to be in writing signed by the guarantor. Subsection 55(3) provides that the regulations may make provision for or with respect to the content of guarantees and the way they are expressed.

COMMENTARY ON REGULATION 81 [R81.05] Regulation 81 is made under s 55 of the Code, which provides that the regulations may make provisions for the content of guarantees. Regulation 81 (which follows generally the requirements of reg 74 in relation to credit contracts) states that a guarantee must contain a warning in accordance with Form 8 of Sch 1 to the regulations and that the warning must be set out immediately above, and on the same page as, the place where at least one of the guarantors signs the guarantee. This means that if more than one guarantor is to sign a guarantee, and they sign on different pages, the Form 8 warning must appear above every place on each of those pages where one or more guarantors is to sign (that is, where guarantors are to sign a guarantee on different pages, the warning box will need to appear in the guarantee more than once) (see [55.15]).

Explanation about guarantor’s rights and obligations 82 (1) For paragraph 56(1)(b) of the Code, the document explaining the rights and obligations of a guarantor must be in accordance with Form 9. 82 (2) The document may be a separate document or a part of the guarantee document. [page 877] Note Paragraph 56(1)(b) of the Code requires a credit provider to give a prospective guarantor an

explanation in the form required by the regulations of the guarantor’s rights and obligations. The explanation must be given before the obligations under the relevant credit contract are secured by the guarantee.

COMMENTARY ON REGULATION 82 [R82.05] Regulation 82 follows generally the requirements of reg 70 in relation to credit contracts. A credit provider must give a prospective guarantor an explanation in the form of Form 9 of Sch 1 to the regulations setting out the guarantor’s rights and obligations, before the obligations under the relevant credit contract are secured by the guarantee (see [56.05] and the commentary on reg 70).

Part 7-4 — Changes to obligations under credit contracts, mortgages and guarantees Information about increases in the amount of credit 83 (1) For subsection 71(3) of the Code, as much of the following information as is ascertainable is prescribed in respect of a credit contract (other than a continuing credit contract): (a) the date of the change in the contract; (b) the unpaid daily balance at the date of the notice; (c) the amount by which the amount of credit will be increased in accordance with the agreement; (d) the persons, bodies or agents (including the credit provider) to whom the amount mentioned in paragraph (c) is to be paid and the amounts payable to them; (e) the total of the amounts mentioned in paragraphs (b) and (c); (f)

details of any change to the annual percentage rate;

(g) details of any credit fees or charges that will be payable after the change in the contract; (h) current repayment details, being:

(i)

the number of repayments yet to be made; and

(ii) the amount of each of those repayments; and (iii) the total amount of those repayments yet to be paid; (i) (i)

the repayment details once the agreement is made, being:

the number of repayments yet to be made once the agreement is made; and (ii) the amount of each of those repayments; and (iii) the total amount of those repayments; and (iv) details of any changes in the times or frequency of repayment;

(j)

if commission is to be paid by or to the credit provider for the introduction of credit business or business financed by the increased amount of credit under the contract — information of the kind mentioned in subsection 17(14) of the Code;

(k) the proposed increase in the term of the contract; (l)

the proposed new expiry date for the contract. [page 878]

Note 1 Subsection 71(1) of the Code requires a credit provider to give notice to the other party of a change to a credit contract, mortgage or guarantee that has been agreed to by the credit provider and the other party. The notice must be given within 30 days after the date of the agreement. Note 2 Subsection 71(3) of the Code provides that, if the parties propose to increase the amount of credit by agreement, the credit provider must also give to the debtor, before the agreement is made, a written notice containing the information required by the regulations.

83 (2) Despite subregulation (1), the matter in paragraphs (1)(h) and (i) relating to the total amount of repayments need only be included in the written notice given under subsection 71(3) of the Code if the contract concerned would, on the assumptions under sections 180 and 182 of the Code, be paid out within 7 years of the date on which credit is first provided under the contract.

COMMENTARY ON REGULATION 83 [R83.05] If a credit provider agrees to increase the amount of credit under a credit contract which is not a continuing credit contract (regardless of whether it was entered into before or after the commencement of the Code), a written notice containing the information set out in reg 83 must be given before the agreement to increase the amount of credit is made (see [71.05] and [71.25]). The information required by reg 83 in effect constitutes a modified version of the precontractual disclosures required before a credit contract is first entered into. One noticeable difference, however, is that under reg 83 information does not have to be disclosed if it is not ascertainable (see commentary on s 17). Information about the total amount of the repayments need only be given in a s 71(3) notice if the contract will be paid out within seven years of credit being first provided under the contract (reg 83(2)). “Unpaid daily balance” for a specific day under reg 83(1)(b) is defined in s 27 of the Code by reference to the “unpaid balance” at the end of the day. This can cause difficulties for credit providers because at the time of disclosure (that is, the date of the notice) it will be impossible to ascertain the unpaid balance at the end of the day. To deal with this problem, industry practice has been to use the unpaid balance amount from the start of business on the day of the notice (see [27.25] and [71.25]).

Part 7-5 — Ending and enforcing credit contracts, mortgages and guarantees Information after surrender of goods 84 For subsection 85(3) of the Code, the information required to be contained in a notice must include the information set out in Form 10. [page 879]

Note Section 85 of the Code enables a debtor of goods sold by instalments or mortgagor to surrender the goods. Subsection 85(3) requires a credit provider to give a debtor or mortgagor a written notice containing the estimated value of the goods and any other information required by the regulations.

COMMENTARY ON REGULATION 84 [R84.05] When goods are surrendered, either by a debtor of goods sold by instalments, or by a mortgagor of goods, the credit provider must give the debtor or mortgagor a written notice containing the estimated value of the goods and the information set out in Form 10 of Sch 1 to the regulations (see [85.05]).

Market value of reverse mortgaged property 84A (1) This regulation is made for subsection 86A(2) of the Code. 84A (2) The market value of a reverse mortgaged property is: (a) if the property has not been sold — the property’s market value, as determined by an accredited valuer within 3 months before the credit provider receives an amount from the debtor to discharge the reverse mortgage; or (b) if the property has been sold — the property’s sale price. 84A (3) However, if the market value under paragraph (2)(b) is reduced because: (a) the debtor, or a person who occupied the property with the debtor’s consent, deliberately damaged the property; or (b) the sale was not conducted in good faith; or (c) the sale was not conducted on fair and reasonable terms; the market value of the property is the market value at the time of the sale, as determined by an accredited valuer. 84A (4) In this regulation: accredited valuer, in relation to a property, means a person who is: (a) accredited as a certified practising valuer by the Australian

Property Institute; or (b) a professional member of the Royal Institution of Chartered Surveyors who is entitled to be described as a Chartered Valuation Surveyor; or (c) registered or otherwise authorised, under the laws of the State or Territory in which the property is situated, to value that kind of property. [s 84A insrt SLI 313 of 2012 s 3 and Sch 1[1], eff 12 Dec 2012]

COMMENTARY ON REGULATION 84A [R84A.05] Regulation 84A sets out how the market value of a reverse mortgage property is calculated for the purposes of the protection against negative equity. The Explanatory Statement to Select Legislative Instrument 2012 No 313 provides: The Consumer Credit Legislation Amendment (Enhancements) Act 2012 inserted section 86A into the National Credit Code. Subsection 86A(1) provides that a debtor’s obligations under a reverse mortgage contract and the mortgage securing those obligations are discharged if the credit provider receives an amount from the debtor at least equal to the adjusted market value of the property. Subsection 86A(2) defines the adjusted market value as the amount worked out by calculating the market value of the property and adjusting that value in accordance with the regulations.

[page 880] Subsection 84A(2) of the Regulation provides that the adjusted market value should be calculated as below: If the reverse mortgaged property has not been sold the adjusted market value is the property’s market value as determined by an accredited valuer within three months before the credit provider receives an amount from the debtor to discharge the reverse mortgage; or If the property has been sold the adjusted market value is the property’s sale price. However, subsection 84A(3) of the Regulation would provide that if the reverse mortgage property has been sold and the market value is reduced because of the prescribed circumstances, the market value of the property is its market value at the time of sale as determined by an accredited valuer. The first prescribed circumstance is that the property was deliberately damaged either by the debtor, or a person who occupied the property with the debtor’s consent. The second prescribed circumstance is that the sale of the property was not conducted in good faith.

This may occur if for example the property is sold without due consideration given to the interests of the mortgagee. The third prescribed circumstance is that the sale was not conducted on fair and reasonable terms. This may occur if for example: the property was sold without reasonable steps to advertise its sale; the property was not presented for sale in a reasonable condition such as being in need of essential repairs; reasonable evidence of the property’s value was not obtained prior to the sale; or the property was not sold by auction, unless it was appropriate to sell it in another way. The effect of subsection 84A(2) is that if the market value of the property as determined by an accredited valuer is more than the sale price of the property and the debtor only pays an amount to the credit provider equal to the sale price, the debtor’s obligations under the reverse mortgage and the mortgage securing those obligations will not be discharged. The debtor will need to pay the credit provider the amount determined by the accredited valuer as the property’s market value to discharge their obligations and the mortgage. Subsection 84A(4) defines an accredited valuer as a person who is either: accredited as a certified practising valuer by the Australian Property Institute; is a professional member of the Royal Institution of Chartered Surveyors who is entitled to be described as a Chartered Valuation Surveyor; or registered or authorised under a State or Territory law in which the property is situated to value that kind of property.

Information to be contained in direct debit default notice 85 For subsection 87(3) of the Code, the information that a direct debit default notice must contain is set out in the following table. Prescribed information Item If the credit contract and the direct debit the information that is entered into … default notice is the notice must given … contain is the information set out in … 1 before 1 March 2013 on or after 1 March Form 11 or 11A 2013 2 on or after 1 March before 1 December Form 11 or 11A 2013 2013

3

on or after 1 March 2013

on or after 1 December 2013

Form 11A

[page 881] [s 85 subst SLI 43 of 2013 s 4 and Sch 1 item 3, eff 4 Apr 2013]

COMMENTARY ON REGULATION 85 [R85.05] Regulation 85 was updated following the changes to hardship provisions after the commencement of the Enhancements Act. Amendments to regs 85 and 86, which allow credit providers to send default notices, are as follows: If the credit contract was entered into before 1 March 2013, and the notice is given on or after 1 March 2013, the credit provider can send either the existing notices (Forms 11 and 12) or the new notices (Forms 11A and 12A). If the credit contract was entered into on or after 1 March 2013, and the notice is given before 1 December 2013, the credit provider can also send either the existing notices (Forms 11 and 12) or the new notices (Forms 11A and 12A). If the credit contract was entered into on or after 1 March 2013, and the notice is given on or after 1 December 2013, the credit provider can only send the new notices (Forms 11A and 12A). (Source: Explanatory Statement to Select Legislative Instrument 2013 No 43)

Information to be contained in default notice 86 For paragraphs 88(3)(f) and (g) of the Code, the information that a default notice must contain is set out in the following table. Prescribed information Item If the credit contract and the direct debit the information that

or mortgage is entered into …

1 2 3

default notice is given …

before 1 March 2013 on or after 1 March 2013 on or after 1 March before 1 December 2013 2013 on or after 1 March on or after 1 2013 December 2013

the notice must contain is the information set out in … Form 12 or 12A Form 12 or 12A Form 12A

[s 86 subst SLI 43 of 2013 s 4 and Sch 1 item 3, eff 4 Apr 2013]

COMMENTARY ON REGULATION 86 [R86.05] For s 88(3)(f) and (g) of the Code (the requirements to inform the debtor about the external dispute resolution scheme and their rights under the Code), the information set out in Form 12 or 12A of Sch 1 to the regulations is prescribed.

Consent to enter premises 87 For subsection 99(2) of the Code, consent by the occupier of premises to entry to the premises is taken to have been given only if the following requirements have been complied with: (a) a request to the occupier for entry to the premises must be made by the credit provider or agent by application in writing or by calling at the premises concerned; (b) if the request is made personally, it may only be made between the hours of 8 am and 8 pm on any day other than a Sunday or public holiday; [page 882]

the consent in writing must be in accordance with Form 13 and (c) signed by the occupier; (d) the document of consent is not to be presented to the occupier for signature with, or as part of, any other document (unless the other document, or the remainder of the other document, contains only the provisions of section 99 of the Code). Note 1 Subsection 99(1) of the Code provides that a credit provider, or an agent of the credit provider, must not enter any part of premises used for residential purposes for the purpose of taking possession of mortgaged goods under a goods mortgage unless the court has authorised entry or the occupier of the premises (after being informed in writing of the provisions of section 99) consented in writing to the entry. Note 2 Under subsection 99(2) of the Code, the regulations may provide procedures for the purposes of section 99 and set out circumstances in which consent is or is not taken to have been given.

COMMENTARY ON REGULATION 87 [R87.05] Regulation 87 prescribes that, for the purposes of s 99(2) of the Code, a credit provider must obtain the written consent of an occupier of residential premises in the form of Form 13 of Sch 1 to the regulations before the credit provider or its agent enters those premises to take possession of mortgaged goods. Regulation 87 sets out additional procedures for obtaining consent. The purpose of reg 87(c) and (d) is to try to ensure that the occupier gives informed consent, and does not sign a consent form thinking it is something else. In the absence of obtaining consent for entry from the occupier of residential premises, a credit provider can only enter those premises to obtain possession of mortgaged goods with the consent of a court (see [99.05]).

Statement about mortgagor’s rights and obligations 88 For paragraph 102(1)(c) of the Code, a statement of a mortgagor’s rights and obligations must be a written statement in accordance with Form 14. Note Subsection 102(1) of the Code requires a credit provider that has taken possession of goods under a mortgage to give the mortgagor certain information, including a statement of the mortgagor’s rights and obligations in the form set out in the regulations.

COMMENTARY ON REGULATION 88

[R88.05] Regulation 88 prescribes that a credit provider who has repossessed goods must give the mortgagor an information statement about the mortgagor’s rights and obligations in accordance with Form 14 of Sch 1 to the regulations (see [102.10]).

Information about proceeds of sale of mortgaged goods 89 For subsection 104(3) of the Code, the information required to be given to a mortgagor is an itemised account of each deduction made from the gross amount realised on the sale to arrive at the net proceeds of sale. Note Subsection 104(3) of the Code requires a credit provider that sells mortgaged goods to give the mortgagor a written notice stating the gross amount realised on the sale, the net proceeds of the sale and certain other information, including other information required by the regulations.

COMMENTARY ON REGULATION 89 [R89.05] Regulation 89 prescribes the additional information that must be given to a mortgagor following the sale of mortgaged goods. In addition to the [page 883] itemisation specified in s 104(3) of the Code, the credit provider who sells mortgaged goods must give the mortgagor an itemised account of each deduction made from the gross amount realised on the sale to arrive at the net proceeds of sale (see [104.30]).

Part 7-6 — Related sale contracts Rate of interest on damages 90 For subsection 132(1) of the Code, the prescribed rate of interest in

respect of the relevant credit contract is the annual percentage rate under that contract as at: (a) the date of the judgment; or (b) if the contract was not still in force at that date — the date immediately before the contract was terminated. Note subsection 132(1) of the Code allows interest to be paid on damages awarded under the linked credit provider provisions of the Code. The rate of interest is to be the rate prescribed by the regulations.

COMMENTARY ON REGULATION 90 [R90.05] Regulation 90 prescribes the rate of interest in respect of interest to be paid on damages awarded under the linked credit provider provisions of the Code (see [132.05]).

Informing debtor of rights 91 For subsection 136(2) of the Code, the information given by the credit provider to the debtor must be: (a) a written statement in accordance with Form 15; and (b) given to the debtor within 21 days after the termination of the tied loan contract or the tied continuing credit contract. Note 1 Subsection 136(1) of the Code provides for the termination of a linked maintenance services contract if a credit contract is terminated. Note 2 Subsection 136(2) of the Code requires the credit provider in that case to inform the debtor in accordance with the regulations of the debtor’s rights under section 136.

COMMENTARY ON REGULATION 91 [R91.05] If a tied loan contract or a tied continuing credit contract is terminated before the end of a linked maintenance services contract, then the debtor must be given a written statement in the form of Form 15 of Sch 1 to the regulations within 21 days of the termination of the tied credit contract. The Form 15 notice advises the debtor that they may, following the termination of the credit contract, also terminate the maintenance services

contract and recover from the supplier a proportionate rebate of the amount paid. The rebate is calculated in reg 92. [page 884]

Rebate of consideration 92 For subsection 136(4) of the Code, the proportionate rebate of consideration is calculated using the formula:

where: C

is the amount of the charges under the maintenance services contract financed under the credit contract.

S

is the number of whole months in the unexpired portion of the period for which maintenance was agreed to be provided.

T

is the number of whole months for which maintenance was agreed to be provided.

Note 1 Subsection 136(1) of the Code provides that, if a debtor terminates a linked maintenance services contract because of the termination of the credit contract, the debtor is entitled to a proportionate rebate of consideration under the maintenance services contract. Note 2 Subsection 136(4) of the Code provides that the regulations may prescribe the manner of calculating that proportionate rebate of consideration.

COMMENTARY ON REGULATION 92 [R92.05] Where a linked maintenance services contract is terminated, the debtor is also entitled to a proportionate rebate of consideration paid under the maintenance services contract. Regulation 92 sets out the formula for calculating that rebate (see [136.05]).

Part 7-7 — Related insurance contracts

Particulars of insurance entered into by credit provider 93 (1) For subsection 146(2) of the Code, the prescribed particulars of the insurance that a credit provider is to give to the debtor are the key features of the credit-related insurance contract. 93 (2) The key features of the contract are the following: (a) the name of the insurer; (b) the kind of insurance, the risks insured against and the exclusions; (c) the beneficiaries under the policy; (d) the expiry date of the policy; (e) the premium payable (to the extent ascertainable); (f)

the fees and charges payable (to the extent ascertainable);

(g) the person by whom, and the person with whom, a claim may be made in respect of the policy, and the manner of making such a claim. 93 (3) A particular mentioned in subregulation (2) may be given by providing a copy of the policy containing the particular. Note Subsection 146(2) of the Code provides that, if a credit provider enters into a credit-related insurance contract in which the debtor has a beneficial interest, the credit provider must ensure that a written notice containing particulars of the insurance prescribed by the regulations is given to the debtor within 14 days after the beneficial interest is acquired by the debtor. Credit-related insurance consists of insurance over mortgaged property or consumer credit insurance

[page 885] COMMENTARY ON REGULATION 93 [R93.05] If a credit provider enters into a credit-related insurance contract (that is, consumer credit or mortgaged property insurance; see s 142 of the

Code), and if a debtor has a beneficial interest in that insurance, then the credit provider must give a written notice containing the information prescribed by reg 93 to the debtor within 14 days after that interest is acquired. Note that s 146 of the Code, and therefore reg 93, does not apply in respect of compulsory insurance (that is, compulsory third party personal injury insurance; see definition in s 204 of the Code). See [146.05]. Alternatively, instead of providing a written notice containing the information required by reg 93(2), the credit provider can give the debtor a copy of the policy containing that information.

Proportionate rebate of consumer credit insurance premium 94 For subsection 148(4) of the Code, the proportionate rebate of premium is calculated using the formula:

where: P

is the amount of the premium paid (not including any amount payable in respect of a government charge).

S

is the number of whole months in the unexpired portion of the period for which insurance was agreed to be provided.

T

is the number of whole months for which insurance was agreed to be provided. COMMENTARY ON REGULATION 94

[R94.05] Regulation 94 is made under s 148(4) of the Code and sets out the method of calculating the proportionate rebate of premium paid under a consumer credit insurance contract financed under a credit contract. Section 148(1) of the Code provides that any such consumer credit insurance contract is automatically terminated on the termination of a credit contract under which it is financed. The premium rebate must be paid by the credit provider to the debtor when the credit contract is terminated (see [148.05]).

Notice of right to cancel mortgaged property insurance 95 For subsection 149(2) of the Code, the information given to the debtor by the credit provider must be a written statement in accordance with Form 16. Note Section 149 of the Code provides that if a credit contract is terminated before the end of the term of a credit-related insurance contract over mortgaged property financed under the credit contract, the debtor may terminate the insurance contract and recover from the insurer a proportionate rebate of premium. Subsection 149(2) provides that a credit provider must inform the debtor, in accordance with the regulations, of the debtor’s rights under section 149. The information is to be given on the termination of the credit contract.

COMMENTARY ON REGULATION 95 [R95.05] Regulation 95 requires a credit provider to give a debtor a notice in the form of Form 16 of Sch 1 to the Regulations if a debtor terminates the credit [page 886] contract before the end of the term of a credit-related insurance contract over mortgaged property which is financed under that contract. Form 16 informs the debtor that they are entitled to terminate that credit-related insurance contract over mortgaged property and recover from the insurer a proportionate rebate of premium. Note that a Form 16 is only required to be given on termination of a credit contract which finances credit-related insurance if it is insurance over mortgaged property, securing obligations under that credit contract (see [149.10]).

Proportionate rebate of premium for insurance over mortgaged property 96 For subsection 149(4) of the Code, the manner of calculating the proportionate rebate of premium is to calculate the sum of:

the amount of premium paid in respect of any period of the (a) insurance contract that has not yet commenced; and (b) 90% of the proportion of the amount of the premium for insurance paid in respect of the current period of the insurance contract attributable to the unexpired portion of that period consisting of whole months. Note Subsection 149(4) of the Code provides that the regulations may prescribe the manner of calculating the proportionate rebate of premium for the purposes of section 149.

COMMENTARY ON REGULATION 96 [R96.05] Regulation 96 prescribes the manner of calculating the proportionate rebate of premium payable by an insurer to a debtor in respect of mortgaged property insurance. The debtor may terminate the mortgaged property insurance following the termination of a credit contract secured by that mortgaged property (see [149.05]).

Part 7-8 — Comparison rates Relevant comparison rate where annual percentage rate stated 97 For subsection 161(2) of the Code, the designated amounts and terms for which a comparison rate is to be calculated are: (a) $250 for a term of 2 weeks; and (b) $1 000 for a term of 6 months; and (c) $2 500 for a term of 2 years; and (d) $10 000 for a term of 3 years; and (e) $30 000 for a term of 5 years; and (f)

$150 000 for a term of 25 years. COMMENTARY ON REGULATION 97

[R97.05] Regulation 97 relates to the amounts and terms to be used to calculate the relevant comparison rate for any consumer credit product advertisement that includes an interest rate. Section 161(1) and (2) of the Code requires the credit provider advertising the product to select one or more of the [page 887] amount and period combinations from reg 97 that most closely represent the typical amount of credit and term being provided. [R97.10] Relationship between reg 97 and reg 71 See [R71.15] for discussion of a conflict between the provisions of regs 97 and 71.

Information about whether comparison rate relates to secured loan 98 For subsection 162(2) of the Code, the following amounts of credit are prescribed as amounts for which a statement must be made as to whether a comparison rate is for a secured loan or an unsecured loan: (a) $10 000; (b) $30 000. COMMENTARY ON REGULATION 98 [R98.05] Regulation 98 applies for the purposes of s 162(2) of the Code. It prescribes $10,000 and $30,000 as the amounts for which a statement must be made as to whether a comparison rate is for a secured or unsecured loan.

Warnings about comparison rate 99 (1) For subsection 163(1) of the Code, the warning about the accuracy of a comparison rate in a credit advertisement must:

(a) include the short statement or long statement; and (b) be given in the same form as the comparison rate is given unless the credit advertisement is on television, the internet or other electronic display medium. Note Subsection 164(3) of the Code explains the way in which the warning must be given for a credit advertisement on an electronic display medium.

99 (2) The warning may also contain a statement that the credit provider does not provide credit for an amount, or a term, or both, specified in a credit advertisement or comparison rate schedule. 99 (3) The long statement is: ‘WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan.’ 99 (4) The short statement is: ‘WARNING: This comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate.’ COMMENTARY ON REGULATION 99 [R99.05] Regulation 99(1) contains two forms of warning about the accuracy of a comparison rate appearing in a credit advertisement. The regulation stipulates that, for the purposes of s 163(1) of the Code, a credit advertisement must contain either the prescribed long form or short form warning about the accuracy of a comparison rate. [page 888] [R99.10] Relationship between reg 99 and reg 71 Note that the subject

matter of reg 99 is also covered in reg 71(12) (but in less detail). The reg 71(12) requirement appears to be less prescriptive and does not stipulate the form of warning. See [R71.15] for discussion of this potential conflict.

Calculation of comparison rates 100 (1) For section 166 of the Code, comparison rates are to be calculated in accordance with this regulation. 100 (2) The comparison rate must be calculated as a nominal rate per annum, together with the compounding frequency. 100 (3) The comparison rate is calculated using the formula: where: n

is the number of repayments per annum to be made under the credit contract (annualised if the term of the contract is less than 12 months), except that: (a) if repayments are to be made weekly, n is 52.18; and (b) if repayments are to be made fortnightly, n is 26.09; and (c) if the contract does not provide for a constant interval between repayments, n is to be derived from the interval selected for the purposes of the definition of j.

r

is the solution of the following:

where: Aj

is the amount of credit to be provided under the contract at time j (the value of j for the provision of the first amount of credit is taken to be zero).

Cj

is the fee or charge (if any) payable by the debtor at time j in addition to the repayments Rj, being a credit fee or charge (other than a government fee, charge or duty) that is ascertainable when the comparison rate is disclosed (whether or not the credit fee or charge is payable if the credit is not provided).

j

is the time, measured as a multiple (not necessarily integral) of the interval between contractual repayments that will have elapsed since the first amount of credit is provided under the credit contract, except that if the contract does not provide for a constant interval between repayments an interval of any kind is to be selected by the credit provider as the unit of time.

Rj

is the repayment to be made at time j.

t

is the time, measured as a multiple of the interval contractual repayments (or other interval so selected) elapse between the time when the first amount of provided and the time when the last repayment is to under the contract.

between that will credit is be made

100 (4) The comparison rate must be correct to at least the nearest one hundredth of 1% per annum. 100 (5) In the application of the formulae, reasonable approximations may be made if it would be impractical or unreasonably onerous to make a precise calculation. [page 889] Example If repayments are to be made on a fixed day each month, it may be assumed that repayments will be made on that day each month even though the credit contract provides for payment on the preceding or succeeding business day when the due date is not a business day.

100 (6) The tolerances and assumptions under sections 180 to 182 of the Code apply to the calculation of the comparison rate. 100 (7) The comparison rate must be accompanied by a statement of the

amount of credit on which it is based and the term for which credit is provided. COMMENTARY ON REGULATION 100 [R100.05] In calculating the comparison rate for advertisements, the credit provider is calculating a rate based on the annual percentage rate but which also takes into account fees and charges payable under the contract in addition to principal and interest repayments. The comparison rate must be accompanied by a statement of the amount of credit on which it is based and the terms for which credit is provided (reg 100(7)). (These amounts and terms are, in turn, prescribed under reg 97.) [R100.06] The formula Regulation 100 is made under s 166 of the Code and provides the formula to be used for the calculation of comparison rates. As part of that formula, “t” represents the total number of repayments, and there is a separate value of “j” for each repayment. Thus, for a loan of one year, assuming monthly payments, “t” would be 12, and there would be a separate calculation of the equation for each value of “j” between 0 and 12. The meaning of “j” is not clearly worded in reg 100. The clearest meaning is that “j” marks the time of each repayment. However, there is sufficient ambiguity to conclude that “j” represents not only the repayment dates, but also the interval between repayment dates. “Cj” represents the amount of credit fees and charges, “Aj” the amount of credit provided, and “Rj” the amount of the repayment, for each value of “j”. The results of the calculations of each value of “j” are added together to obtain “r”. The formula works on the assumptions that: the annual percentage rate will be determined prior to the preparation of advertising for the consumer credit product; repayments will be scheduled, and made at least annually; and progressive drawdowns of credit will be scheduled. The tolerances and assumptions under ss 180–182 of the Code apply to the calculation of the comparison rate (reg 100(6)). This suggests that no

additional assumptions can be made outside these assumptions and tolerances. Therefore, in order to use the formula provided under reg 100 to calculate the comparison rate, credit providers must make several assumptions and approximations in relation to: the period of time between repayments, if this is not specified by the loan contract; the credit fees and charges which are ascertainable at the time the comparison rate is disclosed (see discussion below); approximations of all figures used in the calculations of the comparison rate, if it would be impracticable or unreasonably onerous to make a precise calculation (reg 100(5)); and the amount and term of the loan. [page 890] Clearly, these assumptions are not applicable to some consumer credit products. Further, the Code does not provide an avenue for credit providers to be exempted from the mandatory comparison rate requirements where the formula is inappropriate for the consumer credit products they offer. Section 168 of the Code makes provision for the making of regulations exempting a class of persons or matters from provisions under Pt 10 of the Code or requirements with which a credit advertisement containing a comparison rate must comply. Currently, however, the regulations do not exempt any specific consumer credit products. This places credit providers in a difficult position because they can only comply with the Code obligations in relation to these consumer credit products if they do not include an annual percentage rate in the advertisement for those products. [R100.10] Products priced for risk Some credit products do not have a set interest rate, but a rate which varies according to the risk profile of individual consumers. For example, some credit providers offer loan products where the

interest rate for each debtor will be determined by applying a margin above or below a base rate of interest, depending on the risk profile of the debtor. The formula provided for the calculation of the comparison rate does not encompass the central feature of these loan products — that the annual percentage rate which applies to the product is not ascertainable at the time when advertisements are prepared. [R100.15] Fees and charges The comparison rate formula set out in reg 100 includes the following definition of “Cj”: … the fee or charge (if any) payable by the debtor at time j in addition to the repayments Rj, being a credit fee or charge (other than a government fee, charge or duty) that is ascertainable when the comparison rate is disclosed (whether or not the credit fee or charge is payable if the credit is not provided).

In the equation, the better view is that “j” is defined as the time that will have elapsed since the first amount of credit is provided under the credit contract. (See discussion under [R100.06] above in relation to the ambiguity associated with the definition of “j”.) “Rj” is the repayment to be made at that time. All fees and charges which come within the definition of “credit fees and charges” must be included in the calculation of the comparison rate. Generally, this will include all fees and charges disclosed in the credit contract which it is certain that the debtor must pay at some time during the term of the contract, where the amount of those fees and charges is ascertainable at the time the comparison rate is disclosed. The definition of “Cj” provides that all fees and charges payable by the debtor at time “j” in addition to the repayment “Rj” must be included in the calculation of the comparison rate. If a credit provider takes the view that “j” includes not only the repayment dates but also the interval between repayments, this definition includes all fees and charges payable from the time credit is first provided until the end of the loan term. Fees and charges included in the repayment amount will be included in the calculation of the comparison rate through the value of “Rj”. On a strict interpretation, the definition of “Cj” could be interpreted as

including only fees and charges payable at or after the time when credit is first [page 891] provided. The formula states that the first value of “j” (which is 0) will be when credit is provided. Therefore, the legal effect of the formula is that fees paid by a debtor from their own funds, before credit is provided, should not be included in the calculation of the comparison rate. However, this is contrary to the stated intention of the legislation, as explained in the guidance note to the UCCC Regulation which states that the calculation is designed to: … ensure that credit application and establishment fees, which are often payable before credit is provided and which may not be refunded even if the credit is not provided, are included in the comparison rate.

Although arguably not required to do so, clearly there is nothing preventing a credit provider from including fees and charges payable by the debtor before credit is provided in the calculation of the comparison rate, in compliance with the spirit of the Code. Section 166(2) of the Code states that for the purpose of calculating the comparison rate, credit fees or charges are not ascertainable and need not be included in the calculation if their imposition or amount is dependent on events that may or may not happen. A fee is “ascertainable” if it is “capable of being fixed, settled or decided” (Oxford English Dictionary, Clarendon Press, Oxford, 1933). Therefore, the comparison rate does not allow for changes in the type and amount of fees and charges payable. Regulation 100(6) provides that the tolerances and assumptions provided in ss 180–182 of the Code apply to the calculation of the comparison rate. Section 180(4) of the Code provides that disclosures relating to fees and charges may be made on the assumption that, at the date disclosed, there will be no change in the credit fees and charges as so disclosed, no new fees and charges will be imposed, and the debtor will pay the fees and charges at the times required by the contract. Section 167 of the Code allows a grace period of seven days for

amendments to a credit advertisement where there is a change in the annual percentage rate or any credit fees or charges. [R100.20] Valuation fees As referred to above, the Amendment Act 2002 provides that the calculation of the comparison rate is to include all credit fees and charges that are ascertainable at the time the comparison rate is disclosed. The Standing Committee of Officials of Consumer Affairs (SCOCA) stated (in relation to the UCCC) that there was some ambiguity about whether valuation fees which vary according to customer circumstances should be included in the comparison rate calculation if the exact amount of the fee to be charged was not known at the time the comparison rate was disclosed. Therefore, SCOCA agreed to the following enforcement approach by government consumer agencies in relation to valuation fees: Where there is no uncertainty over whether a consumer will be charged a valuation fee, but the exact amount of the fee is not known at the time a comparison rate is disclosed, a reasonable estimate of the likely valuation fee is to be included for the purposes of calculating the comparison rate. [SCOCA, Statement of Enforcement Policy, “Valuation fees” (see www.creditcode.gov.au/content/downloads/eps_valuationfees.pdf).]

[page 892] It is not clear if this will be followed by ASIC. At a minimum, ASIC is likely to have regard to it. [R100.25] Government fees and charges Government fees and charges are excluded from the calculation of the comparison rate. However, it is not clear whether this includes service charges charged by service providers who are contracted by government agencies to deal with the public on the agency’s behalf. SCOCA has endorsed the following enforcement approach by government consumer agencies in relation to this issue: If a Government agency to which a fee or charge must be paid deals with the public only through a

contracted service provider, any service charges paid to this service provider should be considered to be a government fee or charge for the purposes of the comparison rate formula. [SCOCA, Statement of Enforcement Policy, “Government fees, charges and duties” (see www.creditcode.gov.au/content/downloads/eps_govfees.pdf).]

It is not clear if this will be followed by ASIC. At a minimum, ASIC is likely to have regard to it. [R100.30] Approximations Regulation 100(5) provides that, in the application of the comparison rate formula, reasonable approximations may be made if it would be impractical or unreasonably onerous to make a precise calculation. It is reasonable to approximate the calculation of the comparison rate on the assumption that payments relating to repayments, interest and monthly fees will be made on the same day each month, and on the assumption that months are of equal length. The definition of “j” in reg 100(3) relies on there being a constant interval between repayments, indicating that it is expected that credit providers will approximate the minor differences in the length of months. It is unlikely that it is the intention of the Code to require credit providers to differentiate the comparison rate between the different months of the year. [R100.35] Relationship between regs 100 and 71 See [R71.15] for discussion of a conflict between reg 100 and reg 71.

Matters that may be included in comparison rate schedules 101 [reg 101 rep SLI 105 of 2010 reg 3 and Sch 1[29], eff 24 May 2010]

Part 7-9 — Consumer leases

Consumer lease excluded from application of Part 11 of the Code 102 (1) For subsection 171(3) of the Code, a consumer lease is excluded from the application of Part 11 of the Code if the consumer lease is in the class of consumer leases mentioned in subregulation (2). [page 893] 102 (2) The class of consumer leases is consumer leases under which: (a) the lessee is a director of the lessor; and (b) the director hires goods from the lessor in connection with the director’s remuneration or other financial benefits derived from acting as a director. COMMENTARY ON REGULATION 102 [R102.05] This provision is a similar exemption for leases to a director as that provided in s 171(2) of the Code for employees. The resultant effect of this regulation is that leases to directors who hire goods in connection with their remuneration benefits are exempt from the application of the Code. The person must be a current director at the time the lease is entered into in order to fall under this section.

Prescribed person in relation to declarations 103 For subsection 172(3) of the Code, the prescribed person is: (a) if the person who obtained the declaration from the lessee was the lessor — a person associated with the lessor; or (b) if the person who obtained the declaration from the lessee was a person associated with the lessor — the person associated with the lessor; or

(c) if the person who obtained the declaration from the lessee was not the lessor or a person associated with the lessor — any of the following: (i)

a person who obtained the declaration from the lessee;

(ii) a person who referred the lessee to the person who obtained the declaration (whether the referral was for the purpose of obtaining the declaration or otherwise); (iii) a person who suggested that the lessee apply for a consumer lease, and the suggestion was made during the course of, as part of, or incidentally to, a business carried on in this jurisdiction by the person; (iv) a person who assisted the lessee to apply for a consumer lease, and the assistance was given during the course of, as part of, or incidentally to, a business carried on in this jurisdiction by the person. COMMENTARY ON REGULATION 103 [R103.05] This regulation relates to s 172 of the Code which states that a business purpose declaration is ineffective if when the declaration was made, the lessor or a “prescribed person” as defined in the regulations knew or had reason to believe that the goods were to be hired for personal, household or domestic purposes. The regulation defines “prescribed person” for the purposes of s 172 of the Code.

Declaration about purpose of lease 104 (1) For subsection 172(5) of the Code, the form of the declaration is: ‘I/We declare that the goods to be hired by me/us from the lessor are to be hired wholly or predominantly for business purposes.’ 104 (2) The declaration must contain the following warning immediately below the words of the declaration mentioned in subregulation (1) or, if the consumer lease is to be made by electronic communication, prominently displayed when (but not after) the person signs:

[page 894]

IMPORTANT You should only sign this declaration if the goods are hired wholly or predominantly for business purposes. By signing this declaration you may lose your protection under the National Credit Code. 104 (3) The declaration must contain: (a) the signature of each person making the declaration; and (b) either the date on which the declaration is signed or the date on which it is received by the lessor. Note The Code applies to consumer leases only if the goods are hired for personal, domestic or household purposes. Subsection 172(2) of the Code provides that goods hired under a consumer lease are presumed not to be hired for those purposes if the lessee declares, before hiring the goods, that the goods are hired wholly or predominantly for business purposes. The declaration is not effective unless it is substantially in the form required by the regulations.

COMMENTARY ON REGULATION 104 [R104.05] Regulation 104 prescribes the form and content of the business purpose declaration for consumer leases (see [172.10]). See also commentary on the business purpose declaration for credit contracts at [13.05] and commentary on regs 67 and 68, which prescribe the form and content of the business purpose declaration for credit contracts. That commentary applies equally to business purpose declarations for consumer leases.

Explanation about rights and obligations of consumer lessees 105 (1) For subsection 175(1) of the Code, a statement must: (a) be in writing; and

(b) be in accordance with Form 17. 105 (2) The statement may be in the form of a separate document or a part of the consumer lease document. Note Section 175 of the Code requires a lessor under a consumer lease to give a lessee a statement in the form required by the regulations explaining the lessee’s rights and obligations. The statement must be given within 14 days after entering into the lease.

COMMENTARY ON REGULATION 105 [R105.05] A lessee under a consumer lease must be given, within 14 days after entering into that lease, an information statement in the form of Form 17 of Sch 1 to the regulations explaining the lessee’s rights and obligations. The form may be in a separate document or part of the consumer lease document (see [175.10] and commentary on reg 70).

Information to be contained in statement of account 105A For section 175D of the Code, the information that must be contained in a statement of account is a disclosure that: (a) the lessee will not own the goods at the end of the consumer lease; and [page 895] (b) the lessee will not have an obligation or a right to purchase the goods at the end of the consumer lease. [s 105A insrt SLI 313 of 2012 s 4 and Sch 2[1], eff 1 Mar 2013]

COMMENTARY ON REGULATION 105A [R105A.05] The National Consumer Credit Protection Amendment Regulation 2012 (No 3) introduced regs 105A–105L. The Explanatory Statement to Selective Instrument 2012 No 313 provides:

Regulation 105A requires a lessor to disclose, in periodic statements of account, the fact that the lessee will not own the goods at the end of the consumer lease and the lessee will not have an obligation or a right to purchase the goods at the end of the lease. It was identified during consultations with stakeholders that many consumers expect to own the goods at the end of the lease through “nod and wink” arrangements with the lessor (known as implied purchase leases). This regulation alerts lessees to the need to consider their options at an earlier point in time than is currently the case.

Information to be contained in statement of account about amount owing and other matters 105B For paragraph *175E(1)(d) of the Code, the other information to be contained in a statement of account is the following: (a) the dates on which the statement period begins and ends; (b) particulars of any amounts paid by the lessee to the lessor during the statement period; (c) particulars of any amounts credited to the lessee’s account during the statement period; (d) particulars of payments debited from the lessee’s account and paid to a third party during the statement period; (e) any corrections to information contained in a previous statement of account. Example for paragraph (d) Insurance. [s 105B insrt SLI 313 of 2012 s 4 and Sch 2[1], eff 1 Mar 2013] *Note: Regulation 105B refers to s 175E(1)(d) of the Code. However, this reference appears to be incorrect. Instead the regulation should cross refer to s 175D of the Code. The Code refers to statements of account in s 175C and 175D. Section 175E deals with statements of amount owing and these are not the same thing as a statement of account.

COMMENTARY ON REGULATION 105B [R105B.05] Regulation 105B sets out the additional information that a lessor is required to provide in a periodic statement of account, including: the dates on which the statement period begins and ends; particulars of any amounts paid by the lessee to the lessor during the statement period; particulars of any

amounts credited to the lessee’s account; particulars of any payments debited from the lessee’s account and paid to a third party (such as insurance payments); and any corrections to information contained in a previous statement of account. (Source: Explanatory Statement to Selective Instrument 2012 No 313)

Information to be contained in end of lease statement 105C For subsection 175H(1) of the Code, the information to be contained in an end of lease statement is the following: (a) the date when the consumer lease ends; [page 896] (b) a statement that the goods leased under the consumer lease must be returned; (c) the total amount that the lessee will pay for the goods under the consumer lease (assuming that the lessee will make each payment on the dates required by the consumer lease); (d) the date when the goods must be returned; (e) the following information about the return of the goods: (i)

if the goods can be collected by the lessor — a statement that the goods can be collected by the lessor, the particulars of how the collection can be arranged and an estimate of the costs (if any) that may be charged for the collection of the goods;

(ii) if the goods are to be returned by the lessee — a statement that the goods must be returned to the lessor by the lessee and the particulars of how and where the goods are to be returned; (f)

the amounts the lessee is liable to pay if the goods are not returned, expressed as an amount for each month that the goods are not

returned; (g) a statement as to whether the lessor is prepared to negotiate the sale of the goods; (h) if the lessor is prepared to negotiate the sale of the goods: (i)

an estimate of the sale price of the goods; and

(ii) contact details for the person through whom the sale of the goods may be negotiated. [s 105C insrt SLI 313 of 2012 s 4 and Sch 2[1], eff 1 Mar 2013]

COMMENTARY ON REGULATION 105C [R105C.05] Regulation 105C sets out the information that a lessor must include in a statement to be provided before the end date of a lease. This information includes: … information on the date the lease ends; that the goods leased under the consumer lease must be returned; the total amount the lessee will pay for the goods under the lease (assuming the payments are made on the dates required under the lease); and the date when the goods must be returned.

(Source: Explanatory Statement to Selective Instrument 2012 No 313)

Circumstances in which lessor is not required to provide end of lease statement 105D For subsection 175H(2) of the Code, the circumstances in which the lessor is not required to provide an end of lease statement are: (a) the lessor wrote off the debt of the lessee under the consumer lease; or (b) the lessor has commenced enforcement proceedings; or (c) the lessee has died, or is insolvent, and the lessee’s personal representative or trustee in bankruptcy has not requested a statement of account. [s 105D insrt SLI 313 of 2012 s 4 and Sch 2[1], eff 1 Mar 2013]

COMMENTARY ON REGULATION 105D

[R105D.05] Regulation 105D sets out when a lessor does not need to provide an end of lease statement. This includes where: … the lessor has written off the debt of the lessee under the consumer lease; the lessee

[page 897] was in default and the lessor has commenced enforcement proceedings; or the lessee has died or is insolvent, and the lessee’s personal representative or trustee has not requested a statement of account.

(Source: Explanatory Statement to Selective Instrument 2012 No 313)

Information to be contained in written notice about change by agreement to consumer lease 105E For paragraph 177A(1)(b) of the Code, the information to be contained in a written notice about a change by agreement to a consumer lease is the following: (a) the date of the change in the consumer lease; (b) particulars of any change in respect of goods hired under the consumer lease; (c) the amounts of any fees or charges payable after the change; (d) particulars of any amounts payable to third parties after the change; (e) the rental details under the consumer lease: (i)

before the change; and

(ii) after the change; (f)

the amounts of any commission to be paid by or to the lessee in relation to the change;

(g) the period of time by which the term of the consumer lease is increased; (h) the expiry date for the consumer lease.

Example for paragraph (d) Insurance. [s 105E insrt SLI 313 of 2012 s 4 and Sch 2[1], eff 1 Mar 2013]

COMMENTARY ON REGULATION 105E [R105E.05] Regulation 105E sets out the information that must be provided in writing to a lessee where there has been a change by agreement to a consumer lease. This information includes: … the date of the change; particulars of any change; fees and charges payable; particulars of any amounts payable to third parties; repayment details before and after the change; amounts of any commission to be paid by or to the lessee; the period of time by which the term of the consumer lease is increased; and the proposed new expiry date for the consumer lease.

(Source: Explanatory Statement to Selective Instrument 2012 No 313) [Editorial note: There is no reg 105F.]

Information to be contained in statement of amount payable on termination of consumer lease 105G For paragraph 179A(2)(d) of the Code, the matters that must be contained in a statement of amount payable on the termination of a consumer lease are the following: (a) the total amount to be paid, on the date of the statement, to terminate the lease; (b) the amounts the lessee is liable to pay to terminate the lease, expressed as an amount for each month from the date of the statement; (c) a statement as to whether the lessor is prepared to negotiate the sale of the goods; (d) if the lessor is prepared to negotiate the sale of the goods: (i)

an estimate of the sale price of the goods; and [page 898]

(ii) contact details for the person through whom the sale of the goods may be negotiated. [s 105G insrt SLI 313 of 2012 s 4 and Sch 2[1], eff 1 Mar 2013]

COMMENTARY ON REGULATION 105G [R105G.05] Regulation 105G sets out the information to be included in a statement of account that is payable on the termination of a consumer lease. Lessors are required to provide the following information: the total amount to be paid to end a lease; the amounts the lessee is liable to pay if the leased goods are not returned; whether the lessor is prepared to negotiate the sale of the goods; an estimate of the sale price of goods; and the contact details for the person through whom the goods can be purchased, if the lessor is prepared to negotiate the sale of goods. (Source: Explanatory Statement to Selective Instrument 2012 No 313)

Exemption for lessors from giving one-off notice about direct debit default 105H [s 105H rep SLI 43 of 2013 s 4 and Sch 1 item 4, eff 4 Apr 2013] COMMENTARY ON REPEALED REGULATION 105H [R105H.05] Regulation 105H was repealed by National Consumer Credit Protection Regulation 2013 (No 1). [R105H.10] The Explanatory Statement to Select Legislative Instrument 2012 No 313 (National Consumer Credit Protection Amendment Regulation 2012 (No 3)) states: Regulation 105H provides an exemption to section 179C of the National Credit Code. Section 179C requires a lessor to provide a one-off notice to a lessee the first time a direct debit default occurs within 14 days of the default occurring. The regulation provides that a lessor is not required to give the lessor a notice about a direct debit default if the default is rectified within 14 days and prior to the lessor having sent the direct debit default notice. [Editorial note: There is no reg 105I.]

Information to be contained in one-off notice about direct debit default 105J For subsection 179C(3) of the Code, the information required to be contained in a one-off notice about a direct debit default is the information set out in Form 18. [s 105J insrt SLI 313 of 2012 s 4 and Sch 2[1], eff 1 Mar 2013]

COMMENTARY ON REGULATION 105J [R105J.05] Regulation 105J prescribes Form 18 as the form a lessor is required to send where the obligation under s 179C of the Code is triggered. A [page 899] lessor is required to send a notice where a lessee has authorised payment of an amount for a consumer lease by direct debit, and there has been a default in payment by the lessee. (Source: Explanatory Statement to Selective Instrument 2012 No 313)

Information to be contained in default notice 105K For paragraphs 179D(2)(e) and (f) of the Code, the information that a default notice must contain is set out in Form 18A. [s 105K insrt SLI 43 of 2013 s 4 and Sch 1 item 5, eff 4 Apr 2013]

COMMENTARY ON REGULATION 105K [R105K.05] Regulation 105K provides for a lessor to provide notice as set out in Form 18A where there has been a default by a lessee in respect of their obligations under the contract (and, in practice, enforcement action is contemplated by the credit provider).

(Source: Explanatory Statement to Selective Instrument 2012 No 313)

Consent to enter residential property to take possession of goods 105L For subsection 179N(2) of the Code, consent by the occupier of premises to entry to the premises is taken to be given only if the following requirements have been complied with: (a) a request to the occupier for entry to the premises must be made by the lessor or agent by application in writing or by calling at the premises concerned; (b) if the request is made personally, it may only be made between the hours of 8 am and 8 pm on any day other than a Sunday or public holiday; (c) the consent in writing must be in accordance with Form 19 and signed by the occupier; (d) the document of consent is not to be presented to the occupier for signature with, or as part of, any other document (unless the other document, or the remainder of the other document, contains only the provisions of section 179N of the Code). Note 1 Subsection 179N(1) of the Code provides that a lessor, or an agent of the lessor, must not enter any part of premises used for residential purposes for the purpose of taking possession of goods hired under a consumer lease unless the court has authorised entry or the occupier of the premises (after being informed in writing of the provisions of section 179N) has consented in writing to the entry. Note 2 Under subsection 179N(2) of the Code, the regulations may provide procedures for the purposes of section 179N and set out circumstances in which consent is or is not taken to have been given. [s 105L insrt SLI 313 of 2012 s 4 and Sch 2[1], eff 1 Mar 2013]

COMMENTARY ON REGULATION 105L [R105L.05] Regulation 105L sets out requirements that a lessor has to comply with in order to obtain consent from an occupier to enter a residential property to take possession of goods. An occupier’s consent is only obtained where a request for entry has been made by the lessor, or the lessor’s agent, in writing or in person at the premises.

Where a request is made in writing, it must be made in accordance with Form 19. Where a request is made in person, the request may only be made between 8 am and 8 pm on any day except for a Sunday or public holiday and the [page 900] occupier must be presented with Form 19. Paragraph 105L(d) prohibits a consent form from being presented for signature by an occupier with, or as part of, any other document. The intention is to ensure informed consent by the occupier so that the form is not presented for signature with other documents, such as where a consumer is given the form to sign at the same time as the lease contract. (Source: Explanatory Statement to Selective Instrument 2012 No 313)

Part 7-10 — Miscellaneous Tolerances relating to disclosures 106 (1) For paragraph 180(1)(a) of the Code: (a) information about a percentage rate that contains more than 4 decimal places is within permissible tolerances if it is rounded-off to not less than 4 decimal places (so long as it is correct to the nearest fourth decimal place); and (b) information about any amount payable that includes a fraction of a cent is within permissible tolerances if it is rounded-off to the nearest whole cent. 106 (2) For paragraph 180(1)(a) of the Code, information about any amount payable that: (a) depends for its accuracy on an interest charge that is correct only because of a permissible tolerance under subsection (1); and

(b) is not inaccurate for any other reason; is also within permissible tolerances. 106 (3) For this regulation and regulation 107: (a) a percentage rate may be rounded up to the nearest highest fourth decimal place only if the part of the rate being rounded up exceeds 0.00005; and (b) a fraction of a cent may be rounded up to the nearest highest whole cent only if the fraction being rounded up exceeds 0.5 cents. Note Section 180 of the Code provides that information disclosed in a precontractual statement or contract document etc under the Code is taken to be correctly disclosed if it is within tolerances allowed by the regulations and the disclosure is made as at a date stated in it.

106 (4) For paragraph 180(1)(a) of the Code, information disclosed about: (a) interest charges or repayments payable; or (b) credit fees or charges that are government fees or government charges; is within permissible tolerances if it overstates the amount or amounts payable. 106 (5) However, an overstatement mentioned in subregulation (4): (a) does not affect the amounts payable under the credit contract; and (b) is not within permissible tolerances for section 181 of the Code unless it is within permissible tolerances because of regulation 107. COMMENTARY ON REGULATION 106 [R106.05] Regulation 106 is made under s 180(1)(a) of the Code and prescribes the tolerances in relation to the rounding of percentage rates and cents (reg 106(1) and (3)). Note that reg 106 allows a credit provider to round amounts, but does not require amounts or percentages to be rounded, or to be rounded at a particular time. If amounts or percentages are to be rounded, they may not be rounded up in contravention of reg 106(3).

[page 901] The tolerance set out in reg 106 is permissive, not prescriptive. That is, if a percentage is exact to less than four decimal places (for example, 9% is exact to zero decimal places; 8.15% to two decimal places), it is not necessary for it to be expressed to four decimal places (for example, 9.0000%; 8.1500%). [R106.10] Rounding Money amounts may be rounded to the nearest whole cent, and percentages may be rounded to four decimal places. In both cases, an amount can only be rounded up where the part to be rounded is greater than half of the unit to be rounded (that is, money amounts may only be rounded up if the part to be rounded is greater than 0.5 cents; percentages can only be rounded up if the part to be rounded is greater than 0.00005). This is because reg 106(3) qualifies reg 106(1). Regulation 106(3) provides that an amount of money may not be rounded up unless the part to be rounded exceeds 0.5 cents. For example, 33.5 cents may not be rounded up (but may be rounded down to 33 cents); 33.500001 cents may be rounded up to 34 cents, because the part to be rounded exceeds 0.5 cents. A similar prohibition in reg 106(3) applies to rounding of percentage rates. A percentage rate may only be rounded up where the fifth and following decimal places are greater than five (that is, where the part to be rounded exceeds 0.00005). For example, 33.00005% may not be rounded up to 33.0001%, because the fifth decimal place is equal to five. 33.00004% may not be rounded up, because the fifth and following decimal places are less than five. 33.00006% may be rounded up to 33.0001%, because the fifth and following decimal places are greater than five. 33.00065001% may be rounded up to 33.0007% because the part to be rounded exceeds five. A percentage equal to 0.05 may not be rounded at all because it only has two decimal places. The Code only allows percentages that exceed four decimal places to be rounded. [R106.15] Overstatement Regulation 106(4) states that it is not a breach of the Code to overstate interest charges, repayments or credit fees or charges that are government fees or government charges (for example, stamp duty).

The effect of this is that a credit provider may, for example, overdisclose the total amount of interest charges payable under a credit contract in the precontractual statement and the credit contract, and this will not be a breach of a “key requirement” (see s 111 of the Code). However, reg 106(5) indicates that any overstatement in reliance on reg 106(4) will not affect the debtor’s liability under the credit contract, and the debtor can only be required to repay the amounts which are permitted by the Code and required by the credit contract. [R106.20] Understatement The common practice of “truncation” (that is, “cutting off” numbers after a certain number of decimal places) is not affected by the Code as it essentially involves “rounding down”. For example, if 33.00006% is truncated to four decimal places it becomes 33.0000%, which is within the tolerance permitted by reg 106.

Tolerances relating to amounts payable etc 107 (1) For section 181 of the Code: (a) if the daily or other percentage rate to be used for the calculation of an amount of [page 902] interest contains more than 4 decimal places, the amount of interest is within permissible tolerances if the rate used for the calculation is rounded-off to not less than 4 decimal places (so long as it is correct to the nearest fourth decimal place); and (b) an amount charged, payable or calculated that includes a fraction of a cent is within permissible tolerances if it is rounded-off to the nearest whole cent; and (c) if the credit provider is authorised by a law of the Commonwealth to charge (or obtain reimbursement in respect of) an amount of duty in the nature of receipts or financial institutions duty that is not within a permissible tolerance under paragraph (a) or (b), that

amount is within permissible tolerances. 107 (2) For section 181 of the Code, an amount which depends for its accuracy on an interest charge that is correct only because of a permissible tolerance under subsection (1) (and is not inaccurate for any other reason) is within permissible tolerances. Note Section 181 of the Code provides that all amounts charged, payable or calculated under or in connection with a credit contract, mortgage, guarantee or consumer lease comply with the Code if they are within tolerances allowed by the regulations.

COMMENTARY ON REGULATION 107 [R107.05] Regulation 107 prescribes the tolerances for the purposes of s 181 of the Code (which states that any amount charged, payable or calculated will be taken to comply with the Code if the amount is within the tolerances allowed by the Code or the regulations) (see [181.05]). Regulation 107 prescribes the permissible tolerances in relation to the calculation of interest, and amounts charged, calculated or payable. It also provides that an amount of duty in the nature of receipts or financial institutions duty will be within permissible tolerances if it reflects the amount which the credit provider is authorised by law to charge. Note that the tolerances in reg 106 relating to rounding apply also to calculations made under reg 107(1)(a) and (b) (see reg 106(3)). Regulation 107(2) states that an amount that is calculated based on an interest charge that falls within the tolerances allowed by the Code is also within permissible tolerances. This is important in order to give full effect to the tolerance allowed by reg 107, because some calculations (for example, interest charges and repayments) are interdependent. It is not possible to calculate the amount of repayment instalments without first calculating the amount of interest charges. If the Code tolerances applied only to interest, but not to repayments, the tolerances would not fully achieve their purpose.

Additional assumptions relating to disclosures 108 (1) Disclosures for the purposes of the Code relating to interest charges, repayments, and fees and charges may, if any repayment is to be made, or

interest charge, or fee or charge, is to be paid or debited, on a particular day, be made on the assumption that: (a) the repayment will be made, or the interest charge, or fee or charge, paid or debited, on that day even though it is not a business day; and (b) the contract provides that the repayment is to be made, or the interest charge, or fee or charge, paid or debited, on the next preceding or succeeding business day. 108 (2) Disclosures for the purposes of the Code relating to repayments and interest charges may also be made on the assumption that the amount of credit will be provided: (a) on the date nominated for that purpose in the pre-contractual statement given under section 16 of the Code; or [page 903] (b) if no date is nominated — on the relevant date of disclosure set out in the financial statement as mentioned in subregulation 72(10); or (c) if no date is so set out — the date on which the statement is given to the debtor. 108 (3) Subregulation (2) does not apply to: (a) a continuing credit contract; or (b) a credit contract under which credit is provided progressively and the dates on which the credit is to be provided are not ascertainable. COMMENTARY ON REGULATION 108 [R108.05] A credit provider may when making the disclosures required by the Code, assume that interest charges, repayments and fees and charges are paid or debited on a particular day even though that day is not a business day, and the contract provides that the relevant amount is to be paid or debited on

the next preceding or succeeding business day (see [182.15]). In the absence of this regulation, credit providers would need to ensure that the programming of their computer systems for calculating those amounts was based on a calendar distinguishing between business and non-business days, and whether amounts were to be paid on the succeeding or preceding business day if their payment day was a non-business day, for the life of the loan (unless they overdisclosed those amounts; see reg 106(4)). This would produce extremely difficult systems programming issues. Regulation 108(2) allows credit providers to assume that, for the purpose of disclosures relating to repayments and interest charges, the amount of credit will be provided on either the date nominated in the precontractual statement, the disclosure date in that statement, or the date on which the precontractual statement is given to the debtor. Regulation 108(3) makes it clear that a credit provider is not required to use the assumptions in reg 108(2) in relation to continuing credit contracts or contracts with progressive drawdowns on dates yet to be ascertained. The effect of this is to confirm that the Code regards repayment amounts and the amounts of interest charges for these kinds of contracts as being unascertainable for disclosure purposes. Instead of disclosing amounts in these circumstances, credit providers are required to disclose methods of calculation (for example, under s 17(7)(a)(i) and (b)) of the Code.

Contracts linked to loan account offset arrangements 109 (1) Disclosures for the purposes of the Code relating to a credit contract linked to a loan account offset arrangement may be made on the assumption that the contract is not linked to the arrangement. 109 (2) If the amount of interest charges under a credit contract is affected by a loan account offset arrangement during a statement period: (a) the statement of account is to disclose the net interest charge debited under the credit contract during the statement period; and (b) the statement of account must also show the amount by which the

net interest differs from the interest charge that would otherwise have been payable under the credit contract if the interest charge had not been affected by the loan account offset arrangement. [page 904] COMMENTARY ON REGULATION 109 [R109.05] Outline Regulation 109 permits disclosures to be made on the assumption that a credit contract linked to a loan account offset arrangement is not so linked. It also prescribes disclosure obligations for statements of account if a credit contract is linked to a loan account offset arrangement (see [17.25], [34.50] and [182.30]–[182.35]). Without reg 109 it would be very difficult, if not impossible, to make meaningful precontractual disclosures in relation to credit contracts which were linked to interest offset arrangements. The effect of reg 109 is to authorise overdisclosure which, arguably, is no more than is already permitted by reg 106(4), but it is just as well to have the matter put beyond doubt by reg 109. [R109.10] Loan account offset arrangement “Loan account offset arrangement” is not defined for the purposes of the Code, but it would include the kinds of arrangements, commonly offered by credit providers, under which interest which would otherwise be earned on a debtor’s deposit account with the credit provider is not paid by the credit provider, but is instead offset against the interest payable under the debtor’s credit contract. These arrangements, if properly structured, can produce tax benefits for the debtor thereby reducing the debtor’s cost of credit. Care must be taken to ensure compliance with Income Taxation Ruling No TR93/06 (Income tax and fringe benefits tax: loan account offset arrangements) particularly when making the disclosures required by reg 109(2). See also [182.30] and [182.35].

Requirements for print or type 110 For paragraph 184(1)(b) of the Code, print or type must be not less than

10 point. Note Paragraph 184(1)(b) of the Code provides that a credit contract, guarantee or notice given by a credit provider under the Code, to the extent that it is printed or typed, must conform with the provisions of the regulations as to print or type.

COMMENTARY ON REGULATION 110 [R110.05] Regulation 110 prescribes that the print or type size requirement is a minimum of 10 point for the purposes of s 184(1)(b). The same requirement applies to both printed and typewritten material. The advances in technology since the enactment of the UCCC in 1996 (for example, word processors and laser printers in place of typewriters) means that the distinction between printing and typewriting seems academic as printing (rather than typewriters) is now the norm. This print or type size requirement applies to all credit contracts, guarantees, mortgages and notices given by a credit provider under the Code. Note that it does not apply to notices provided to the debtor by persons other than the credit provider (for example, notices required by insurers under s 147 of the Code) (see [184.05]). Note that the “Note” to this regulation is incorrect in that it does not refer to mortgages being covered by s 184(1)(b) of the Code. This is probably an oversight dating from before the UCCC equivalent of the section was amended by the e-Commerce Act to relate also to mortgages (see commentary on s 184). [page 905] These provisions do not apply to a credit contract, mortgage or guarantee, or to a notice given by a credit provider under the Code, in each case that is transmitted by electronic communication. Instead, s 184(2) of the Code sets out the requirements for electronic communications.

Reverse mortgages — manner of keeping

nominations or revocations 110A (1) This regulation is made for the purposes of subsection 185A(1) of the Code. 110A (2) If a nomination is current, or a revocation is still in effect because a new nomination of a person has not been made, the record of the nomination or revocation must include: (a) a statement that the nomination or revocation is current; and (b) the date the nomination or revocation was given. 110A (3) If a nomination is revoked, or a revocation is no longer in effect because a new nomination of a person has been made, the record of the nomination or revocation must include: (a) the date the nomination was revoked; or (b) the date the revocation ceased to have effect because the new nomination was made. 110A (4) The record of the nomination or revocation must be kept during the period for which the nomination or revocation is in effect. [s 110A insrt SLI 85 of 2013 s 4 and Sch 2 item 5, eff 1 June 2013]

COMMENTARY ON REGULATION 110A [R110A.05] Section 185A(1) of the Code relates to reverse mortgages and requires credit providers to keep records of a debtor’s nomination that a person may reside in the mortgaged property on the same terms as themselves. Revocations of nominations records must also be kept. Regulation 110A requires credit licensees to keep records: for current nominations and revocations — the record must include a statement that is current and the date on which the nomination or revocation was given; and for nominations or revocations which have been revoked — the record must include the date on which the nomination was revoked

or the revocation ceased to have effect because a new nomination was made. All records must be kept for the period in which they are in effect. (Source: Explanatory Statement to Selective Instrument 2012 No 313)

Notices 111 (1) For subsection 194(9) of the Code, a nomination under subsection 194(4) or (6) of the Code must be in the following form: (a) the nomination must contain the words: ‘I/We nominate [full name of person nominated] to receive notices and other documents under the National Credit Code on behalf of me/all of us.’; (b) the nomination must contain a prominent statement: (i)

that each debtor, mortgagor or guarantor is entitled to receive a copy of any notice or other document under the Code; and

(ii) that, by signing the form, the debtor, mortgagor or guarantor is giving up the right to be provided with information direct from the credit provider; [page 906] (c) the nomination must contain a prominent statement that any person who has signed the form can advise the credit provider at any time in writing that the person wishes to cancel the nomination. 111 (2) For subsection 194(9) of the Code, a consent under subsection 194(5) of the Code must be in the following form: (a) the consent must contain the words: ‘We consent to notices and other documents under the National Credit Code being sent jointly to us at [address for service].’;

(b) the consent must contain a prominent statement: (i)

that each debtor, mortgagor or guarantor is entitled to receive a copy of any notice or other document under the Code; and

(ii) that, by signing the form, the debtor, mortgagor or guarantor is giving up the right to be provided with information separately from the credit provider; (c) the consent must contain a prominent statement that any person who has signed the form can advise the credit provider at any time in writing that the person wishes to cancel the consent. COMMENTARY ON REGULATION 111 [R111.05] Regulation 111 is similar to the previous reg 40 of the UCCC Regulation with some minor changes. Regulation 111(1) prescribes the form of a nomination given by one or more persons who nominate someone else to receive a notice or other document on their behalf for the purposes of s 194(4) and (6) of the Code. The nomination must contain the exact words set out in reg 111(1)(a) and must contain a prominent statement that each debtor, mortgagor or guarantor is entitled to receive a copy of any notice or other document under the Code, a prominent statement that, by signing the form, the debtor, mortgagor or guarantor is giving up the right to be provided with information direct from the credit provider and a prominent statement that any person who has signed the form can advise the credit provider at any time in writing that the person wishes to cancel the nomination. See commentary on s 194 of the Code at [194.20]–[194.60]. [R111.10] Regulation 111(2) prescribes the form of consent given by joint debtors, mortgagors or guarantors at the same address if they consent to a single copy of a notice or other document being provided to them which is addressed jointly to them (for the purpose of s 194(5) of the Code) (see commentary on s 194(5) of the Code). The consent must contain the exact words in reg 111(2)(a) and must contain a prominent statement that each debtor, mortgagor or guarantor is entitled to receive a copy of any notice or other document under the Code, a prominent statement that, by signing the form, the debtor, mortgagor or guarantor is giving up the right to be provided

separately with information from the credit provider and a prominent statement that any person who has signed the form can advise the credit provider at any time in writing that the person wishes to cancel the consent. See commentary on s 194 of the Code at [194.20]–[194.60].

Exemption from Code — persons who are not members of approved external dispute resolution scheme 111A [s 11A subst SLI 43 of 2013 s 4 and Sch 1 item 6, eff 4 Apr 2013] [page 907] COMMENTARY ON REPEALED REGULATION 111A [R111A.05] Regulation 111A was replicated in reg 69D, and consequently repealed by the National Consumer Credit Protection Amendment Regulation 2013 (No 1).

Part 7-11 — Saving and transitional provisions — reliance on State and Territory Consumer Credit Codes References in documents to Consumer Credit Code of a State or Territory 112 (1) If a person is required to provide or use a form prescribed by these Regulations, the person may provide or use a form (the equivalent form) that: (a) is prescribed by regulations made under the Consumer Credit Code of a State or Territory mentioned in subregulation (2); and

has the same effect, or is the same in substance, as the form (b) prescribed by these Regulations. 112 (2) The Consumer Credit Codes of the States and Territories are the following: (a) the Consumer Credit (New South Wales) Code mentioned in the Consumer Credit (New South Wales) Act 1995; (b) the Consumer Credit (Victoria) Code mentioned in the Consumer Credit (Victoria) Act 1995; (c) the Consumer Credit (Queensland) Code mentioned in (and appendixed to) the Consumer Credit (Queensland) Act 1994; (d) the Consumer Credit (Western Australia) Code mentioned in the Consumer Credit (Western Australia) Act 1996; (e) the Consumer Credit (South Australia) Code mentioned in the Consumer Credit (South Australia) Act 1995; (f)

the Consumer Credit (Tasmania) Code mentioned in the Consumer Credit (Tasmania) Act 1996;

(g) the Consumer Credit (Australian Capital Territory) Code mentioned in the Consumer Credit Act 1995 (ACT); (h) the Consumer Credit (Northern Territory) Code mentioned in the Consumer Credit (Northern Territory) Act 1995. 112 (3) If: (a) a person is required to provide or use a form prescribed by these Regulations; and (b) under subregulation (1), the person provides or uses an equivalent form; and (c) the form prescribed by these Regulations requires the person to provide more information than required by the equivalent form; the person may provide the additional information in a separate document with the equivalent form.

[page 908] 112 (4) Subregulations (1) and (3) cease to have effect at the end of the period of 2 years starting when this regulation commences. COMMENTARY ON REGULATION 112 [R112.05] Regulation 112 provides a transitional period of two years in which a person will not be in contravention of the regulations if they use a form prescribed in the UCCC Regulation where the form has the same effect, or is the same in substance, as the form prescribed by the regulations. This regulation also provides that where the form prescribed by the regulations requires additional information (compared to the UCCC prescribed form), such additional information can be provided in a separate document appended to the UCCC prescribed form. As stated in the Explanatory Statement, the purpose of this regulation is to reduce the cost to business in updating documents, for example, by allowing changes to be made contemporaneously with new print runs.

[page 909]

SCHEDULE 1 FORMS Form 1 — Notice requiring reasonable assistance in connection with an investigation and appearance at an examination subsection 253(2) of the Act regulation 32 of the Regulations To:

1

In relation to an investigation of

2

you are notified that under subsection 253(2) of the National Consumer Credit Protection Act 2009 (the Act) you are required:

(a) to give the Australian Securities and Investments Commission (ASIC) all reasonable assistance in connection with the investigation; and 3 on (b) to appear at 4 at 5 before 6 for examination on oath or affirmation and to answer questions put to you in relation to the investigation. Please note the provisions of subsection 257(1) of the Act (relating to legal representation) and section 295 of the Act (relating to selfincrimination). The effect of those provisions is set out at the end of this form. 4 Dated Signature of person authorised by ASIC to conduct the examination: NOTICE OF RELEVANT STATUTORY PROVISIONS

1.

2.

Subsection 257(1) of the Act provides that a person who is required to submit to an examination is entitled to have his or her lawyer attend the examination. It also provides that the person’s lawyer may address the inspector or ask the person questions about matters raised with the person by the inspector. (1) You must not fail to comply with this notice without reasonable excuse (see subsection 290(1) of the Act). (2) It is not a reasonable excuse for failure to comply with this notice that giving information or signing a record or producing a book might tend to incriminate you or expose you to a penalty (see subsection 295(1) of the Act). (3) However, if: (a) before making an oral statement or signing a record in answer to this notice you claim that making the statement or signing the record might tend to incriminate you or expose you to a penalty; and (b) making the statement or signing the record might in fact tend to incriminate you or expose you to a penalty;

[page 910] the statement, or the fact that you have signed the record, is not admissible in evidence in any criminal proceedings, or proceedings for the imposition of a penalty, against you other than proceedings in respect of the falsity of the statement or the record. (4) The right to make a claim of this kind is not available to a body corporate (see section 295 of the Act). 1

Insert full name and address of the person to whom the notice is to be given.

2

Insert the nature of the matter to which the investigation relates.

3

Insert time of day.

4

Insert date.

5

Insert full particulars of the address of the place at which the requirement is to be satisfied.

6

Insert full name of the person conducting the examination.

[page 911] Form 2 — Summons to witness subsection 284(1) of the Act regulation 34 of the Regulations

1 In the matter of 2 To: 3 you are summoned to appear before the Australian at Securities and Investments Commission (ASIC) 4 on 5 and thereafter to attend from at day to day until the hearing in this matter is completed or you are excused or released from further attendance by a member of ASIC. You are required to produce the following document(s) at the hearing: 6 4

Dated

Signature of person authorised by ASIC to issue summons: 1

Insert description of matter.

2

Insert full name and address of the person to be summoned to appear.

3

Insert time of day.

4

Insert date.

5

Insert full particulars of the address of the place where the hearing is to be held.

6

Insert description(s) of the documents that are to be produced at the hearing.

[page 912] Form 3 — Infringement notice section 331 of the Act paragraph 40(a) of the Regulations Date of issue: Unique identification code: TO [name and address of recipient]: 1.

I, [name of authorised ASIC officer giving the infringement notice], give this infringement notice under regulation 39 of the National Consumer Credit Protection Regulations 2010.

*2. I have reasonable grounds to believe that you have committed the following offence: [Details of alleged offence, including the provision of the Act that creates the offence, the nature of the offence, the time and date of the alleged offence, and the place of the alleged offence.] *2. I have reasonable grounds to believe that you have contravened the following civil penalty provision: [Details of alleged contravention, including the provision of the Act, the nature of the contravention, the time and date of the alleged contravention, and the place of the alleged contravention.] * Omit if not applicable. Penalty under this notice 3.

The penalty for the alleged offence under this notice is [dollar amount in figures] for an individual or [dollar amount in figures] for a body corporate. This penalty can be paid by [methods of payment].

*4. If you pay the penalty stated in this notice within the time for payment mentioned below then (unless this notice is subsequently withdrawn and any penalty paid refunded): (a) any liability you have for the commission of the alleged offence will be discharged; and (b) you will not be prosecuted for the alleged offence; and (c) you will not be taken to have admitted guilt in respect of the alleged offence; and (d) you will not be taken to have been convicted of the alleged offence. *4. If you pay the penalty stated in this notice within the time for payment mentioned below then (unless this notice is subsequently withdrawn and any penalty paid refunded): (a) any liability you have for the alleged contravention of the provision will be discharged; and (b) no civil proceedings will be brought against you by the Commonwealth for the alleged contravention; and

(c) you will not be taken to have admitted guilt in respect of the alleged contravention; and (d) you will not be taken to have been found guilty of the alleged contravention. * Omit if not applicable. Consequences of failure to pay penalty under this notice *5. If you do not pay the penalty specified in this notice within the time for payment mentioned below, you may be prosecuted for the alleged offence. *5. If you do not pay the penalty specified in this notice within the time for payment mentioned below, civil proceedings may be brought against you for the alleged contravention.

[page 913] * Omit if not applicable. 6.

The maximum penalty that a court may impose for this offence is [insert] penalty units for an individual and [insert] penalty units for a body corporate.

Time for payment 7.

The time for payment is: (a) within 28 days after the day on which the notice is given to you; or (b) if you apply for a further period of time in which to pay the penalty, and the application is granted — within the further period allowed; or (c) if you apply for a further period of time in which to pay the penalty, and the application is refused or is taken to have been refused — within the later of: (i)

7 days after: (A) the day you receive the notice of refusal; or (B) the application is taken to have been refused; and

(ii) 28 days after the day on which the infringement notice was given to you; or (d) if you apply for permission to pay the penalty by instalments, and the permission is granted — in accordance with the permission; or (e) if you apply for permission to pay the penalty by instalments, and the permission is refused or is taken to have been refused — within the later of: (i)

7 days after: (A) the day you receive the notice of refusal; or (B) the application is taken to have been refused; and

(ii) 28 days after the day on which the infringement notice was given to you; or (f)

if you apply for the notice to be withdrawn, and the application is refused or is taken to have been refused — within the later of:

(i)

7 days after: (A) the day you receive the notice of refusal; or (B) the application is taken to have been refused; and

(ii) 28 days after the day on which the infringement notice was given to you. Further penalty for continuing offence *8. If the commission of the alleged offence continues beyond [date of alleged offence], a further penalty may be imposed even if the penalty imposed by this notice is paid. *8. If the alleged contravention of the civil penalty provision continues beyond [date of alleged offence], a further penalty may be imposed even if the penalty imposed by this notice is paid. * Omit if not applicable. Applying to have this notice withdrawn 9.

Within 28 days after you receive this notice, you may apply to [name and/or position title] to have this notice withdrawn. The person is the nominated person for this notice.

Applying for more time to pay the penalty under this notice 10. Within 28 days after you receive this notice, you may apply to the nominated person for a further period of up to 28 days in which to pay the penalty under this notice.

[page 914] Applying to pay the penalty under this notice by instalments 11. Within 28 days after you receive this notice, you may apply to the nominated person for permission to pay the penalty under this notice by instalments. Requirements for applications 12. An application to have this notice withdrawn, or for more time to pay the penalty under this notice, or for permission to pay the penalty under this notice by instalments: (a) must be in writing; and (b) must include the unique identification code set out at the top of this notice; and (c) must include your reasons for making the application; and (d) for an application for permission to pay the penalty under this notice by instalments — include the proposed amount and frequency of instalments; and (e) may be made by [methods of making application].

Signature of authorised ASIC officer issuing the notice

[page 915] Form 4 — Prescribed terms and conditions of mortgage paragraph 9(3)(f) of the Code regulation 66 of the Regulations 1 In this mortgage— Code means the National Credit Code. goods means the goods hired under the hire contract. hire contract means the contract for the hire of goods as a consequence of which the mortgagor and the supplier are deemed by paragraph 9(3)(f) of the Code to have entered into this mortgage. mortgagor means the person to whom the goods are hired under the hire contract. supplier means the person from whom the goods are hired under the hire contract. 2 The mortgagor gives and the supplier takes a mortgage of the goods. 3 The mortgagor’s right or obligation to purchase the goods, which is contained in the hire contract, is extinguished. 4 Subject to item 5, the supplier may take possession of the goods, or may take possession of, and sell, the goods if— (a) the supplier was induced by fraud on the part of the mortgagor to enter into the hire contract; or (b) the mortgagor, contrary to a term of the hire contract, has attempted to assign or dispose of the goods; or (c) the mortgagor, contrary to a term of the hire contract, has— (i) failed to keep the goods in good order and repair; or (ii) failed to keep the goods insured or registered; or (d) the mortgagor has made default in the payment of any instalment or other monetary sum due under the hire contract; or (e) the mortgagor has made default in any other obligation under the hire contract which is likely to affect directly the value of the supplier’s security; or (f) the mortgagor has returned the goods to the supplier, or has given notice in writing to the supplier, that the mortgagor can not continue to observe the obligations imposed by the hire contract. 5 Nothing in item 4 affects the operation of any statute or any principle of law or equity applicable to the rights and duties of the mortgagor or supplier in relation to each other.

[page 916] Form 5 — Information statement paragraph 16(1)(b) of the Code regulation 70 of the Regulations

THINGS YOU SHOULD KNOW ABOUT YOUR PROPOSED CREDIT CONTRACT This statement tells you about some of the rights and obligations of yourself and your credit provider. It does not state the terms and conditions of your contract. If you have any concerns about your contract, contact the credit provider and, if you still have concerns, your credit provider’s external dispute resolution scheme, or get legal advice.

THE CONTRACT 1 How can I get details of my proposed credit contract? Your credit provider must give you a precontractual statement containing certain information about your contract. The precontractual statement, and this document, must be given to you before— • your contract is entered into; or • you make an offer to enter into the contract; whichever happens first. 2 How can I get a copy of the final contract? If the contract document is to be signed by you and returned to your credit provider, you must be given a copy to keep. Also, the credit provider must give you a copy of the final contract within 14 days after it is made. This rule does not, however, apply, if the credit provider has previously given you a copy of the contract document to keep. If you want another copy of your contract, write to your credit provider and ask for one. Your credit provider may charge you a fee. Your credit provider has to give you a copy— • within 14 days of your written request if the original contract came into existence 1 year or less before your request; or • otherwise within 30 days of your written request. 3 Can I terminate the contract? Yes. You can terminate the contract by writing to the credit provider so long as— • you have not obtained any credit under the contract; or • a card or other means of obtaining credit given to you by your credit provider has not been used to acquire goods or services for which credit is to be provided under the contract.

However, you will still have to pay any fees or charges incurred before you terminated the contract. 4 Can I pay my credit contract out early? Yes. Pay your credit provider the amount required to pay out your credit contract on the day you wish to end your contract. 5 How can I find out the pay out figure? You can write to your credit provider at any time and ask for a statement of the pay out figure as at any date you specify. You can also ask for details of how the amount is made up. Your credit provider must give you the statement within 7 days after you give your request to the credit provider. You may be charged a fee for the statement. 6 Will I pay less interest if I pay out my contract early? Yes. The interest you can be charged depends on the actual time money is owing. However, you may have to pay an early termination charge (if your contract permits your credit provider to charge one) and other fees. 7 Can my contract be changed by my credit provider? Yes, but only if your contract says so.

[page 917] 8 Will I be told in advance if my credit provider is going to make a change in the contract? That depends on the type of change. For example— • you get at least same day notice for a change to an annual percentage rate. That notice may be a written notice to you or a notice published in a newspaper. • you get 20 days advance written notice for— • a change in the way in which interest is calculated; or • a change in credit fees and charges; or • any other changes by your credit provider; except where the change reduces what you have to pay or the change happens automatically under the contract. 9 Is there anything I can do if I think that my contract is unjust? Yes. You should first talk to your credit provider. Discuss the matter and see if you can come to some arrangement. If that is not successful, you may contact your credit provider’s external dispute resolution scheme. External dispute resolution is a free service established to provide you with an independent mechanism to resolve specific complaints. Your credit provider’s external dispute resolution provider is (name of external dispute resolution provider) and can be contacted at [insert telephone number, email/website and postal address]. Alternatively, you can go to court. You may wish to get legal advice, for example from your community legal centre or Legal Aid.

You can also contact ASIC, the regulator, for information on 1300 300 630 or through ASIC’s website at http://www.asic.gov.au.

INSURANCE 10 Do I have to take out insurance? Your credit provider can insist you take out or pay the cost of types of insurance specifically allowed by law. These are compulsory third party personal injury insurance, mortgage indemnity insurance or insurance over property covered by any mortgage. Otherwise, you can decide if you want to take out insurance or not. If you take out insurance, the credit provider can not insist that you use any particular insurance company. 11 Will I get details of my insurance cover? Yes, if you have taken out insurance over mortgaged property or consumer credit insurance and the premium is financed by your credit provider. In that case the insurer must give you a copy of the policy within 14 days after the insurer has accepted the insurance proposal. Also, if you acquire an interest in any such insurance policy which is taken out by your credit provider then, within 14 days of that happening, your credit provider must ensure you have a written notice of the particulars of that insurance. You can always ask the insurer for details of your insurance contract. If you ask in writing, your insurer must give you a statement containing all the provisions of the contract. 12 If the insurer does not accept my proposal, will I be told? Yes, if the insurance was to be financed by the credit contract. The insurer will inform you if the proposal is rejected. 13 In that case, what happens to the premiums? Your credit provider must give you a refund or credit unless the insurance is to be arranged with another insurer. 14 What happens if my credit contract ends before any insurance contract over mortgaged property? You can end the insurance contract and get a proportionate rebate of any premium from the insurer.

MORTGAGES 15 If my contract says I have to give a mortgage, what does this mean?

[page 918] A mortgage means that you give your credit provider certain rights over any property you mortgage. If you default under your contract, you can lose that property and you might still owe money to the credit provider. 16 Should I get a copy of my mortgage? Yes. It can be part of your credit contract or, if it is a separate document, you will be given a copy of the mortgage within 14 days after your mortgage is entered into.

However, you need not be given a copy if the credit provider has previously given you a copy of the mortgage document to keep. 17 Is there anything that I am not allowed to do with the property I have mortgaged? The law says you can not assign or dispose of the property unless you have your credit provider’s, or the court’s, permission. You must also look after the property. Read the mortgage document as well. It will usually have other terms and conditions about what you can or can not do with the property. 18 What can I do if I find that I can not afford my repayments and there is a mortgage over property? See the answers to questions 22 and 23. Otherwise you may— • if the mortgaged property is goods—give the property back to your credit provider, together with a letter saying you want the credit provider to sell the property for you; • sell the property, but only if your credit provider gives permission first; OR • give the property to someone who may then take over the repayments, but only if your credit provider gives permission first. If your credit provider won’t give permission, you can contact their external dispute resolution scheme for help. If you have a guarantor, talk to the guarantor who may be able to help you. You should understand that you may owe money to your credit provider even after the mortgaged property is sold. 19 Can my credit provider take or sell the mortgaged property? Yes, if you have not carried out all of your obligations under your contract. 20 If my credit provider writes asking me where the mortgaged goods are, do I have to say where they are? Yes. You have 7 days after receiving your credit provider’s request to tell your credit provider. If you do not have the goods you must give your credit provider all the information you have so they can be traced. 21 When can my credit provider or its agent come into a residence to take possession of mortgaged goods? Your credit provider can only do so if it has the court’s approval or the written consent of the occupier which is given after the occupier is informed in writing of the relevant section in the National Credit Code.

GENERAL 22 What do I do if I can not make a repayment? Get in touch with your credit provider immediately. Discuss the matter and see if you can come to some arrangement. You can ask your credit provider to change your contract in a number of ways— • to extend the term of your contract and reduce payments; or • to extend the term of your contract and delay payments for a set time; or

• to delay payments for a set time. 23 What if my credit provider and I can not agree on a suitable arrangement? If the credit provider refuses your request to change the repayments, you can ask the credit provider to review this decision if you think it is wrong.

[page 919] If the credit provider still refuses your request you can complain to the external dispute resolution scheme that your credit provider belongs to. Further details about this scheme are set out below in question 25. 24 Can my credit provider take action against me? Yes, if you are in default under your contract. But the law says that you can not be unduly harassed or threatened for repayments. If you think you are being unduly harassed or threatened, contact the credit provider’s external dispute resolution scheme or ASIC, or get legal advice. 25 Do I have any other rights and obligations? Yes. The law will give you other rights and obligations. You should also READ YOUR CONTRACT carefully. IF YOU HAVE ANY COMPLAINTS ABOUT YOUR CREDIT CONTRACT, OR WANT MORE INFORMATION, CONTACT YOUR CREDIT PROVIDER. YOU MUST ATTEMPT TO RESOLVE YOUR COMPLAINT WITH YOUR CREDIT PROVIDER BEFORE CONTACTING YOUR CREDIT PROVIDER’S EXTERNAL DISPUTE RESOLUTION SCHEME. IF YOU HAVE A COMPLAINT WHICH REMAINS UNRESOLVED AFTER SPEAKING TO YOUR CREDIT PROVIDER YOU CAN CONTACT YOUR CREDIT PROVIDER’S EXTERNAL DISPUTE RESOLUTION SCHEME OR GET LEGAL ADVICE. EXTERNAL DISPUTE RESOLUTION IS A FREE SERVICE ESTABLISHED TO PROVIDE YOU WITH AN INDEPENDENT MECHANISM TO RESOLVE SPECIFIC COMPLAINTS. YOUR CREDIT PROVIDER’S EXTERNAL DISPUTE RESOLUTION PROVIDER IS [INSERT NAME OF EXTERNAL DISPUTE RESOLUTION PROVIDER] AND CAN BE CONTACTED AT [INSERT TELEPHONE NUMBER, EMAIL/WEBSITE AND POSTAL ADDRESS]. PLEASE KEEP THIS INFORMATION STATEMENT. YOU MAY WANT SOME INFORMATION FROM IT AT A LATER DATE.

[page 920] Form 6 — Disclosure about credit contracts subsection 17(16) of the Code subregulation 74(2) of the Regulations

IMPORTANT BEFORE YOU SIGN THINGS YOU MUST KNOW READ THIS CONTRACT You can withdraw this offer at DOCUMENT so that you any time before the credit know exactly what contract provider accepts it. When the you are entering into and what credit provider does accept it, you will have to do under the you are bound by it. However, contract. you may end the contract before you obtain credit, or a card or other means is used to obtain goods or services for which credit is to be provided under the contract, by telling the credit provider in writing, but you will still be liable for any fees or charges already incurred. You should also read the You do not have to take out information statement: consumer credit insurance ‘THINGS YOU SHOULD unless you want to. However, KNOW ABOUT YOUR if this contract document says PROPOSED CREDIT so, you must take out CONTRACT’. insurance over any mortgaged property that is used as security, such as a house or car. Fill in or cross out any blank If you take out insurance, the spaces. credit provider can not insist

Get a copy of this contract document.

Do not sign this contract document if there is anything you do not understand.

on any particular insurance company. If this contract document says so, the credit provider can vary the annual percentage rate (the interest rate), the repayments and the fees and charges and can add new fees and charges without your consent. If this contract document says so, the credit provider can charge a fee if you pay out your contract early.

[page 921] Form 7 — Disclosure about credit contracts subsection 17(16) of the Code subregulation 74(3) of the Regulations

IMPORTANT BEFORE YOU SIGN THINGS YOU MUST KNOW READ THIS CONTRACT Once you sign this contract DOCUMENT so that you document, you will be bound know exactly what contract by it. However, you may end you are entering into and what the contract before you obtain you will have to do under the credit, or a card or other contract. means is used to obtain goods or services for which credit is to be provided under the contract, by telling the credit provider in writing, but you will still be liable for any fees or charges already incurred. You should also read the You do not have to take out information statement: consumer credit insurance ‘THINGS YOU SHOULD unless you want to. However, KNOW ABOUT YOUR if this contract document says PROPOSED CREDIT so, you must take out CONTRACT’. insurance over any mortgaged property that is used as security, such as a house or car. Fill in or cross out any blank If you take out insurance, the spaces. credit provider can not insist on any particular insurance company.

Get a copy of this contract document.

Do not sign this contract document if there is anything you do not understand.

If this contract document says so, the credit provider can vary the annual percentage rate (the interest rate), the repayments and the fees and charges and can add new fees and charges without your consent. If this contract document says so, the credit provider can charge a fee if you pay out your contract early.

[page 922] Form 7A — Disclosure about credit contracts (reverse mortgages) subsections 18B(2) and (4) of the Code regulation 74A of the Regulations The rights of any spouse, partner or other resident in your home will be affected by this reverse mortgage

IMPORTANT THIS NOTICE INFORMS YOU HOW THIS REVERSE MORTGAGE WILL AFFECT THE RIGHTS OF OTHER PEOPLE LIVING IN YOUR HOME. When this reverse mortgage needs to be repaid, if another person (including a spouse, partner or other family member) is living in your house THEY WILL HAVE TO MOVE OUT SO YOUR HOUSE CAN BE SOLD. BEFORE YOU SIGN THE CONTRACT FOR THIS REVERSE MORTGAGE — You should carefully consider whether you want other people to continue living in the house, even if, for example, you move into aged care accommodation. To help you, you may wish to obtain independent legal advice. If it is important to you that other people who live with you continue to have the right to remain in your home, then you should: find a reverse mortgage that provides rights to other residents; consider options other than a reverse mortgage. If you need further information, go to www.moneysmart.gov.au. MoneySmart shows you how reverse mortgages work. Or call the Australian Securities and Investment Commission infoline on [provider to insert ASIC number]. The National Information Centre on Retirement Incomes [NICRI] also provides a free independent telephone information service to consumers covering all aspects of reverse mortgages. To speak to an information officer from NICRI call [provider to insert NICRI number]. [Form 7A insrt SLI 85 of 2013 s 4 and Sch 2 item 5, effective 1 Jun 2013] Note: See Sch 5A for the Reverse Mortgage Information Statement.

[page 923] Form 8 — Disclosure about guarantee section 55 of the Code regulation 81 of the Regulations

IMPORTANT BEFORE YOU SIGN THINGS YOU MUST KNOW READ THIS GUARANTEE Understand that, by signing AND THE CREDIT this guarantee, you may CONTRACT DOCUMENT. become personally responsible instead of, or as well as, the debtor to pay the amounts which the debtor owes and the reasonable expenses of the credit provider in enforcing the guarantee. You should also read the If the debtor does not pay you information statement: must pay. This could mean ‘THINGS YOU SHOULD you lose everything you own KNOW ABOUT including your home. GUARANTEES’. You should obtain You may be able to withdraw independent legal advice. from this guarantee or limit your liability. Ask your legal adviser about this before you sign this guarantee. You should also consider You are not bound by a obtaining independent change to the credit contract, financial advice. or by a new credit contract, that increases your liabilities You should make your own under the guarantee unless you inquiries about the credit have agreed in writing and

worthiness, financial position and honesty of the debtor.

have been given written particulars of the change or a copy of the new credit contract document.

[page 924] Form 9 — Information statement section 56(1)(b) of the Code regulation 82 of the Regulations

THINGS YOU SHOULD KNOW ABOUT GUARANTEES This information tells you about some of the rights and obligations of yourself and the credit provider. It does not state the terms and conditions of your guarantee.

GUARANTEES 1 What is a guarantee? A promise by you that the person who is getting credit under a credit contract (the debtor) will keep to all the terms and conditions. If that person does not do so, you promise to pay the credit provider all the money owing on the contract (and any reasonable enforcement expenses) as soon as the money is asked for, up to the limit, if any, stated in the guarantee. If you do not pay, then the credit provider can take enforcement action against you which may result in the forced sale of any property owned by you such as your house. 2 How do I know how much the debtor is borrowing and how the credit charges are worked out? These details are on the copy of the credit contract or proposed credit contract that you should be given before you sign the guarantee. 3 What documents should I be given? Before you sign the guarantee you should get— • the document you are reading now; and • a copy of the credit contract or proposed credit contract. Your guarantee is not enforceable unless you get a copy of the credit contract or proposed credit contract before you sign. Within 14 days after you sign the guarantee and give it to the credit provider, the credit provider must give you a copy of— • the signed guarantee (if you do not already have a copy of the guarantee); and • the credit contract or proposed credit contract (if you do not already have a copy of the contract). 4 Can I get a statement of the amount that the debtor owes? Yes. You can ask the credit provider at any time for a statement of the amount the debtor currently owes or any amounts credited or debited during a period you specify or any amounts which are overdue and when they became overdue or any amount payable and the date it became due. The credit provider must give you the requested information— • within 14 days if all the information requested related to a period 1 year or less before your request is given; or

• otherwise within 30 days. This statement must be given to you in writing if you ask for it in writing but otherwise may be given orally. You may be charged a fee for the statement You are not entitled to more than 1 written statement every 3 months. 5 How can I find out the payout figure? You can write to the credit provider at any time and ask for a statement of the amount required to pay out the credit contract as at any date you specify. You can also ask for details of the items that make up the amount. The credit provider must give you the statement within 7 days after you give your request to the credit provider. You may be charged a fee for the statement. 6 What other information can I get? You can write to the credit provider and ask for a copy of—

[page 925] • the guarantee; or • any credit-related insurance contract (such as insurance on mortgaged property) the credit provider has; or • a notice previously given to you, the debtor or the mortgagor under the National Credit Code. The credit provider must give you the requested copy— • within 14 days of your written request if the contract came into existence 1 year or less before the request was given to the credit provider; or • otherwise within 30 days. The credit provider may charge you a fee. Your request can be made any time up to 2 years after the end of the credit contract. 7 Can I withdraw from my guarantee? You can withdraw from your guarantee at any time by written notice to the credit provider if the final credit contract is materially different from the proposed credit contract given to you before you signed the guarantee. 8 Can I limit my guarantee? Yes, if it relates to a continuing credit contract (such as a credit card contract or an overdraft). In that case you can give the credit provider a notice limiting the guarantee so that it only applies to— • credit previously given to the debtor; and • any other amount you agree to guarantee. 9 Can my guarantee also apply to any future contracts? No, unless the credit provider has given you a copy of the proposed new credit contract and you have

given your written acceptance. 10 If my guarantee says I have to give a mortgage, what does this mean? A mortgage means that you give the credit provider certain rights over any property you mortgage. If you default under your guarantee, you can lose that property and you might still owe money to the credit provider. 11 Should I get a copy of my mortgage? Yes. It can be part of your guarantee or, if it is a separate document, you will be given a copy of the mortgage within 14 days after your mortgage is entered into. 12 Is there anything that I am not allowed to do with the property I have mortgaged? The law says you can not assign or dispose of the property unless you have the credit provider’s, or the court’s, permission. You must also look after the property. Read the mortgage document as well. It will usually have other terms and conditions about what you can or can not do with the property. 13 What can I do if I find that I can not afford to pay out the credit contract and there is a mortgage over my property? See the answer to question 22. Otherwise you may— • if the mortgaged property is goods—give the property back to your credit provider, together with a letter saying you want the credit provider to sell the property for you; • sell the property, but only if the credit provider gives permission first; OR • give the property to someone who may then pay all amounts owing under the guarantee or give a similar guarantee, but only if the credit provider gives permission first. If the credit provider won’t give permission, you may contact the credit provider’s external dispute resolution scheme for help. You should understand that you may owe money to the credit provider even after the mortgaged property is sold. External dispute resolution is a free service established to provide you with an independent mechanism to resolve specific complaints. Your credit provider’s external dispute resolution

[page 926] provider is (name of external dispute resolution provider) and can be contacted at [insert telephone number, email/website and postal address]. 14 Can the credit provider take or sell the mortgaged property? Yes, if you have not carried out all of your obligations under your guarantee. 15 If the credit provider writes asking me where the mortgaged goods are, do I have to say where they are? Yes. You have 7 days after receiving the credit provider’s request to tell the credit provider. If you do not have the goods you must give the credit provider all the information you have so they can be traced.

16 When can the credit provider or its agent come into a residence to take possession of mortgaged goods? The credit provider can only do so if it has the court’s approval or the written consent of the occupier which is given after the occupier is informed in writing of the relevant section in the National Credit Code. 17 If the debtor defaults, do I get any warning that the credit provider wants to take action against the debtor? In most cases both you and the debtor get at least 30 days from the date of a notice in writing to do something about the matter. The notice must advise— • why the credit provider wants to take action; and • what can be done to stop it (if the default can be remedied); and • that if the same sort of default is committed within 30 days of the date of the notice and is not remedied within that period, the credit provider can take action without further notice. You should immediately discuss any warning notice with the debtor and consider getting independent legal advice and/or financial advice. However, there will be no warning notice if— • there is a good reason to think the debtor committed a fraud to persuade the credit provider to enter into the contract; or • the credit provider has been unable to locate the debtor after making reasonable efforts to do so; or • the court says so; or • there is a good reason to think that the debtor has, or will, remove or dispose of mortgaged goods without the credit provider’s consent, or that urgent action is necessary to protect mortgaged property. 18 When can the credit provider enforce a judgment against me? When— • the credit provider has judgment against the debtor and if the judgment amount has still not been met 30 days after the credit provider has asked the debtor in writing to pay it; or • the court says so because recovery from the debtor is unlikely; or • the credit provider has been unable to locate the debtor after making reasonable efforts to do so; or • the debtor is insolvent. 19 If the debtor can not be found and the credit provider intends to take legal action against me do I get any warning? You may not. See the answer to question 17. 20 Can the credit provider take action against me without first taking action against the debtor? Yes, but the credit provider will not be able to enforce any judgement against you except in the circumstances described in the answer to question 18. 21 How much do I have to pay the credit provider if the debtor defaults?

[page 927]

You have to pay what the debtor owes the credit provider, subject to any limit provided in the guarantee, plus the credit provider’s reasonable expenses in making you honour your contract of guarantee. GENERAL 22 What can I do if I am asked to pay out the credit contract and I can not pay it all at once? Talk to the credit provider and see if some arrangement can be made about paying. If you can not come to a suitable arrangement, contact your credit provider’s external dispute resolution scheme. There are other people, such as financial counsellors, who may be able to help. 23 If I pay out money for a debtor, is there any way I can get it back? You can sue the debtor, but remember, if the debtor can not pay the credit provider, he or she probably can not pay you back for a while, if at all. 24 What happens if I go guarantor for someone who is under 18 when he or she signs a credit contract? You are responsible for the full debt if the contract of guarantee has a clear and obvious warning. The warning has to tell you that the courts might not let you sue the debtor if you have to pay out the credit contract for him or her. 25 Do I have any other rights and obligations? Yes. The law does give you other rights and obligations. You should also READ YOUR GUARANTEE carefully. IF YOU HAVE ANY DOUBTS, OR WANT MORE INFORMATION, CONTACT YOUR CREDIT PROVIDER. YOU MUST ATTEMPT TO RESOLVE YOUR COMPLAINT WITH YOUR CREDIT PROVIDER BEFORE CONTACTING YOUR CREDIT PROVIDER’S EXTERNAL DISPUTE RESOLUTION SCHEME. IF YOU HAVE A COMPLAINT WHICH REMAINS UNRESOLVED AFTER SPEAKING TO YOUR CREDIT PROVIDER YOU CAN CONTACT YOUR CREDIT PROVIDER’S EXTERNAL DISPUTE RESOLUTION SCHEME OR GET LEGAL ADVICE. EXTERNAL DISPUTE RESOLUTION IS A FREE SERVICE ESTABLISHED TO PROVIDE YOU WITH AN INDEPENDENT MECHANISM TO RESOLVE SPECIFIC COMPLAINTS. YOUR CREDIT PROVIDER’S EXTERNAL DISPUTE RESOLUTION PROVIDER IS [INSERT NAME OF EXTERNAL DISPUTE RESOLUTION PROVIDER] AND CAN BE CONTACTED AT [INSERT TELEPHONE NUMBER, EMAIL/WEBSITE AND POSTAL ADDRESS]. PLEASE KEEP THIS INFORMATION STATEMENT. YOU MAY WANT SOME INFORMATION FROM IT AT A LATER DATE. [Form 9 am SLI 137 of 2010 reg 3 and Sch 1[32], effective 19 Jun 2010]

[page 928] Form 10 — Information after surrender of mortgaged goods subsection 85(3) of the Code regulation 84 of the Regulations TO: (name of mortgagor)

(address of mortgagor) FROM: (name of credit provider) (Australian credit licence number) (address of credit provider)

Date CONTACT PERSON: (name, telephone number and address) You have returned mortgaged goods to the credit provider/asked the credit provider to sell the mortgaged goods.* This information tells you some of your rights and obligations and some of the options open to you.

DETAILS YOU SHOULD KNOW Description of the goods: Date you returned the goods to the credit provider/asked the credit provider to sell the goods*:. The cost of enforcing the mortgage up to the date you returned the goods to the credit provider/asked

the credit provider to sell the goods* is $................... The cost of the goods being in the credit provider’s possession is $................... per ...................** The credit provider’s estimate of the value of the goods is $ ........................

HOW TO GET THE GOODS RETURNED OR NOT SOLD YOU CAN GET THE GOODS BACK OR STOP THEM BEING SOLD BY THE CREDIT PROVIDER IF YOU ASK THE CREDIT PROVIDER AND IF THE REPAYMENTS AND OTHER OBLIGATIONS UNDER THE CREDIT CONTRACT HAVE BEEN MET. YOUR REQUEST MUST BE MADE IN WRITING WITHIN 21 DAYS OF THIS NOTICE BEING GIVEN TO YOU. IF YOU DO NOTHING, YOU MAY LOSE THE GOODS.

[page 929] SALE OF GOODS The law says that the credit provider must get the best price reasonably obtainable for the goods. If you want to, you can introduce a buyer to the credit provider. This has to be done in writing within 21 days after the date of this notice and the buyer must be willing to pay the credit provider’s estimate of the value of the goods or any greater amount for which the credit provider has obtained a written offer to buy the goods. The credit provider must offer to sell the goods to the buyer you have introduced. Your letter introducing the buyer has to reach the credit provider before the goods are sold. If you post the letter, it is best to send it by certified or registered mail. Then you can check that it was delivered. If you take it to the credit provider’s office, you should get an employee of the credit provider to sign and date something to say that your letter has been received. Make sure you keep anything that was signed by that employee. Once the 21 day period has expired, the credit provider must sell the goods as soon as reasonably practicable unless you and the credit provider agree on some other time for sale. As mentioned above, the goods must be sold for the best price reasonably obtainable.

FINALISING THE CONTRACT As soon as the goods are sold, the total amount payable under the credit contract becomes due. The credit provider must credit you with the proceeds of the sale less— the amount owing under your mortgage (which can not be more than the amount owing under the contract); and any amount owing under a prior mortgage of the goods; and any amount owing under a subsequent mortgage of the goods which the credit provider knows about; and the credit provider’s reasonable expenses of enforcing the mortgage; and the expenses reasonably incurred by the credit provider in connection with the possession and

sale of the mortgaged goods. After the goods are sold the credit provider must give you a notice setting out certain information including— what the sale price was; and the net proceeds of the sale; and the amount credited to you; and amount required to pay out the credit contract or the amount due under the guarantee.

GENERAL You should discuss this matter with the credit provider as soon as possible. You should know that even after the goods are sold, you will still have to pay the credit provider any amount still outstanding. You may be able to work out some alternative arrangement about your contract if you are the debtor. For example, you could ask the credit provider— to extend the term of the contract and either reduce the amount of each payment accordingly or defer payments for a specified period; or to simply defer payments for a specified period. The name and telephone number of the person to contact is on the front of this document. If you can not come to a suitable arrangement with the credit provider, contact the credit provider’s external dispute resolution scheme immediately. If you are the debtor and have been unemployed, sick or there is another good reason why you are having problems making payments under your contract, then your contract may be able to be varied under the law to meet your situation. IF YOU HAVE ANY DOUBTS, OR WANT MORE INFORMATION, CONTACT YOUR CREDIT PROVIDER. YOU MUST ATTEMPT TO RESOLVE YOUR COMPLAINT WITH YOUR CREDIT PROVIDER BEFORE CONTACTING YOUR CREDIT [page 930] PROVIDER’S EXTERNAL DISPUTE RESOLUTION SCHEME. IF YOU HAVE A COMPLAINT WHICH REMAINS UNRESOLVED AFTER SPEAKING TO YOUR CREDIT PROVIDER YOU CAN CONTACT YOUR CREDIT PROVIDER’S EXTERNAL DISPUTE RESOLUTION SCHEME. EXTERNAL DISPUTE RESOLUTION IS A FREE SERVICE ESTABLISHED TO PROVIDE YOU WITH AN INDEPENDENT MECHANISM TO RESOLVE SPECIFIC COMPLAINTS. YOUR CREDIT PROVIDER’S EXTERNAL DISPUTE RESOLUTION PROVIDER IS [INSERT NAME OF EXTERNAL DISPUTE RESOLUTION PROVIDER] AND CAN BE CONTACTED AT [INSERT TELEPHONE NUMBER, EMAIL/WEBSITE AND POSTAL ADDRESS]. Alternatively, you can seek legal advice, for example from a community legal centre or Legal Aid. There are other people, such as financial counsellors, who may be able to help. (signature of credit provider or person signing on behalf of credit provider)

(name of person signing) (position of person signing) * Omit whichever is not applicable. ** Indicate the daily, monthly or other rate at which enforcement expenses may accrue. [Form 10 am SLI 137 of 2010 reg 3 and Sch 1[33], effective 19 Jun 2010]

[page 931] Form 11 — Direct debit default notice subsection 87(3) of the Code regulation 85 of the Regulations

DIRECT DEBITS FROM YOUR BANK ACCOUNT A direct debit repayment has been dishonoured (not paid). Contact us [insert telephone number or email address] to arrange to make your payment. Check your direct debit request before your next payment is due. Make sure you understand how your direct debit works and what to do if you have a problem. Are you unable to make a payment? If you can not make a payment, you should contact us immediately. Depending on your circumstances, we may make changes to the repayments under your contract to help you repay the debt. You can ask us to: extend the term of your contract and reduce repayments; or extend the term of your contract and delay payments for a set time; or delay payments for a set time without extending the term of your contract. If we refuse your request, you can ask us to reconsider. If we still refuse, you can go to [insert name of relevant external dispute resolution scheme] by [insert contact details and method(s) for lodging complaints]. You should apply as soon as we refuse your request or if we do not respond to you within 21 days. EXTERNAL DISPUTE RESOLUTION IS A FREE SERVICE ESTABLISHED TO PROVIDE YOU WITH AN INDEPENDENT MECHANISM TO RESOLVE SPECIFIC COMPLAINTS. Alternatively, you can seek legal advice, for example from a community legal centre or Legal Aid. There are other people, such as financial counsellors, who may be able to help. Some useful tips on direct debits Make sure you have the correct account number. Ensure that you have not given the wrong account number, or that the direct debit has not been dishonoured due to the account being changed or closed. Read your Direct Debit Request Service Agreement carefully. Make sure you understand how much we will withdraw from your account and when we will withdraw it. Contact us if you need to change the dates on which the direct debit occurs. Have adequate funds in your account to meet your payments. This will ensure you don’t default again or incur a fee for not having sufficient funds in your account. Check your bank statements. Make sure we are withdrawing the correct amount at the right time. Cancelling your direct debit. In most situations, you can cancel a direct debit with us or with the bank or financial institution where your account is held (provided you comply with any specific requirements). However, you need to make sure you have made alternative payment arrangements with

us so that you do not default on your payment. Your instruction to cancel a direct debit may have to be in writing. Contact your bank or financial institution a few days after you have sent your written notification to check that the direct debit has been cancelled. Resolving a problem with your direct debit. If you have a problem with a direct debit you can make a complaint to us or to the bank or financial institution where your account is held. You can also contact our external dispute resolution scheme for assistance in resolving the complaint if you were unable to resolve it with us. Our external dispute resolution scheme is [insert name of external dispute resolution scheme] and can be contacted at [insert telephone number, email/website and postal address]. Get further information. If you have questions about direct debit authorities, talk to your bank or financial institution.

[page 932] Form 11A — Direct debit default notice subsection 87(3) of the Code regulation 85 of the Regulations

IMPORTANT We have not received a payment because your arrangements to pay by direct debit have been dishonoured. YOU NEED TO CONTACT US IMMEDIATELY 1. Is there a reason why your direct debit arrangements have failed? There may be reasons why your direct debit may fail, and you may wish to check with your bank or financial institution. If you need to change your direct debit arrangements, contact us at [insert telephone number or email address for dealing with variations to direct debit arrangements]. If you continue to fail to make the payments due under your credit contract we may take action against you. 2. Are you experiencing financial difficulty? Contact us immediately Contact us* [insert telephone number or email address for dealing with financial hardship applications] to discuss your situation. We may be able to help you to repay your debt by varying your contract (for example, changing the amount or timing of your repayments). The sooner you contact us, the easier it will be to help you. If we refuse to change your contract, we will notify you in writing and you can seek a review of our decision by going to [insert name of relevant external dispute resolution scheme] by [insert contact details and method(s) for lodging complaints]. If you go to [insert name of relevant external dispute resolution scheme], you may have enforcement action put on hold while your complaint is considered. You are not bound by the decision that [insert name of EDR scheme] makes and you can still apply to a court if you are not satisfied. EXTERNAL DISPUTE RESOLUTION IS A FREE AND INDEPENDENT SERVICE TO RESOLVE COMPLAINTS. 3. If you are having financial difficulties you can also contact a financial counsellor on 1800 007 007 (free call) For information about your options for managing your debts, ring 1 800 007 007 from anywhere in Australia to talk to a free and independent financial counsellor. * Credit providers may replace the word “us” with the name of a relevant area. For example: “Contact our Hardship Team”.

Some useful tips on direct debits Make sure you’ve given the right account number and there is enough money in the account to cover the direct debits. Read your Direct Debit Request Service Agreement carefully and check your bank statements to make sure the right amount is being taken out at the right time. If there is not enough money in the account, you will be in default and may have to pay a fee for that default. Changing or cancelling your direct debit Contact us if you need to change the dates when the direct debit is taken out.

[page 933] If you close the account, remember to change the direct debit so it comes from another account. You can usually cancel a direct debit with us or with your bank or financial institution. You may need to do this in writing. Contact your bank or financial institution a few days after you’ve sent your written instruction to check that the direct debit has been cancelled. Before you cancel a direct debit, make sure you’ve made other payment arrangements with us so you don’t default on your payment. Resolving a problem with your direct debit If you have a problem with a direct debit you can complain to us or to your bank or financial institution. If you can’t resolve your complaint with us, contact our external dispute resolution scheme, [insert name of external dispute resolution scheme], by [insert contact details and method(s) for lodging complaints]. For more information about direct debits, talk to your bank or financial institution. [Form 11A insrt SLI 43 of 2013 s 4 and Sch 1 item 7, effective 4 Apr 2013]

[page 934] Form 12 — Information about debtor’s rights after default paragraphs 88 (3)(f) and (g) of the Code regulation 86 of the Regulations

If you cannot make a repayment: 1. Contact us immediately Contact us [insert telephone number or email address for dealing with financial hardship applications] to discuss your situation. If there is a reason why you cannot make repayments we may be able to help you by agreeing to vary your contract. The sooner you contact us the easier it will be to assist you. You have specific legal rights to request changes be made to your contract to help you repay the debt if: you cannot make repayments due to hardship (for example, illness, unemployment or some other good reason); and you expect to be able to make the repayments if the terms of your contract are changed; and you entered into your contract: —

on or after 1 July 2010 and the amount you have borrowed is less than $500 000; or

—

before 1 July 2010 and the amount you have borrowed is less than the relevant threshold.*

You may request that we: extend the term of your contract and reduce repayments; or extend the term of your contract and delay payments for a set time; or delay payments for a set time without extending the term of your contract. Alternatively, you may request that we negotiate with you to postpone any further action that we may take against you. If you do not contact us before [insert default notice period end date], we may commence further action against you. IMPORTANT There is no guarantee that we will agree to change your contract or postpone any further action. After we receive your application, we will provide you with a written notice within 21 days stating whether or not we agree to the change. If we agree, you will receive a written notice detailing the agreement within 30 days. If we refuse, we will provide you with reasons. You have the right to have the decision reviewed. 2. Right to review

If we refuse your request to change your contract, you can ask us to reconsider. If we still refuse, or if we do not respond to your request within 21 days, you can go to [insert name of relevant external dispute resolution scheme] by [insert contact details and method(s) for lodging complaints]. You should apply as soon as we refuse your request or fail to respond. EXTERNAL DISPUTE RESOLUTION IS A FREE SERVICE ESTABLISHED TO PROVIDE YOU WITH AN INDEPENDENT MECHANISM TO RESOLVE SPECIFIC COMPLAINTS. If we fail to respond, we may have breached our obligation to you. You can contact ASIC on 1300 300 630 or through ASIC’s website at http://www.asic.gov.au. Alternatively, if we refuse, you can ask a court to make changes to your contract.

[page 935] You can also ask a court to delay enforcement action against you. You may wish to get legal advice, for example from a community legal centre or Legal Aid, on how to go about this. There are other people, such as financial counsellors, who may be able to help. * You can find out what the relevant threshold is by contacting us or referring to ASIC’s website at http://www.asic.gov.au or contacting ASIC on 1300 300 630. [Form 12 subst SLI 105 of 2010 reg 3 and Sch 1[31], effective 24 May 2010; am SLI 137 of 2010 reg 3 and Sch 1[34], effective 19 Jun 2010]

[page 936] Form 12A — Information about debtor’s rights after default paragraphs 88(3)(f) and (g) of the Code regulation 86 of the Regulations

IMPORTANT You are in default of your credit contract because you have not made a payment [alternative wording can be used if the default is not the result of failing to make a payment]. YOU NEED TO CONTACT US IMMEDIATELY 1. Are you in financial hardship? Contact us immediately Contact us* [insert telephone number or email address for dealing with financial hardship applications] to discuss your situation. We may be able to help you to repay your debt by agreeing to vary your contract (for example, changing the amount or timing of your repayments). The sooner you contact us, the easier it will be to help you. If you do nothing before [insert default notice period end date], we can commence enforcement action against you. If we refuse to change your contract, we will notify you in writing and you can seek a review of our decision by going to [insert name of relevant external dispute resolution scheme] by [insert contact details and method(s) for lodging complaints]. If you go to [insert name of external dispute resolution scheme], you may have enforcement action put on hold while your complaint is considered. You are not bound by the decision that [insert name of EDR scheme] makes and you can still apply to a court if you are not satisfied. EXTERNAL DISPUTE RESOLUTION IS A FREE AND INDEPENDENT SERVICE TO RESOLVE COMPLAINTS. 2. If you are having financial difficulties you can also contact a financial counsellor on 1800 007 007 (free call) For information about your options for managing your debts, ring 1 800 007 007 from anywhere in Australia to talk to a free and independent financial counsellor. 3. Your other rights You have other rights, including the right to ask us to postpone any enforcement action before [insert default notice period end date].

* Credit providers may replace the word “us” with the name of a relevant area. For example: “Contact our Hardship Team”. [Form 12A insrt SLI 43 of 2013 s 4 and Sch 1 item 8, effective 4 Apr 2013]

[page 937] Form 13 — Consent to enter premises subsection 99(2) of the Code regulation 87 of the Regulations .................................... Date TO: ................................................................... (name of credit provider) ................................................................... (Australian credit licence number) FROM: ................................................................... (name of occupier) ................................................................... (address of occupier’s premises) ................................................................... ................................................................... (‘the premises’) I consent to the credit provider entering the premises for the purpose of taking possession of the mortgaged goods described below. The mortgaged goods are:* .............................................................. .............................................................. IMPORTANT YOU HAVE THE RIGHT TO REFUSE CONSENT. IF YOU DO THE CREDIT PROVIDER MAY GO TO COURT FOR PERMISSION TO ENTER THE PREMISES.

(signature of occupier giving consent) (name, address and signature of credit provider’s representative by whom the consent was obtained.) * Insert brief details of the mortgaged goods.

[page 938] Form 14 — Notice after taking possession of mortgaged goods paragraph 102(1)(c) of the Code regulation 88 of the Regulations .................................... Date TO: ........................................................................ (name of mortgagor) ........................................................................ ........................................................................ (address of mortgagor) FROM: ........................................................................ (name of credit provider) ........................................................................ (Australian credit licence number) ........................................................................ (address of credit provider) ........................................................................ (name, telephone and address) This information tells you some of your rights and obligations and some of the options open to you. DETAILS YOU SHOULD KNOW

Description of the goods: Date the goods were taken: The goods were taken because: The cost of enforcing the mortgage up to the date the goods were taken is $ ............................................... The cost of the goods remaining in the credit provider’s possession is $ ............................... per ..............................* The credit provider’s estimate of the value of the goods is $ ................................................

HOW TO GET THE GOODS BACK IF YOU WANT THE GOODS BACK YOU MUST DO ONE OF THE THINGS LISTED BELOW AS SOON AS POSSIBLE. IF YOU DO NOT ACT WITHIN 21 DAYS AFTER THE DATE OF THIS NOTICE, THE CREDIT PROVIDER MAY SELL THE GOODS. IT IS ALSO POSSIBLE THAT THE GOODS MIGHT BE SOLD EARLIER IF THE CREDIT PROVIDER GETS A COURT ORDER.

[page 939] Either You can get the goods back if you pay $ ...................................... and there is no repetition of the default that caused the goods to be taken. This amount of $ ...................................... is calculated as follows— Arrears ...................................... $ ...................................... Enforcement expenses ................... $ ...................................... TOTAL ...................................... $ ...................................... OR You can pay out the credit contract. If you do this you can get the goods back and you do not have any further obligations. To give you an idea of what the amount required to pay out the credit contract may be, 2 figures are given below. The first is the amount required to pay out the contract at the date of this notice. The second is the amount required calculated 21 days from that date. Any difference is the result of further payments or charges that fall due between the 2 dates. 1

Amount required to pay out the credit contract on / / $

2

Amount required to pay out the credit contract on / / $ IF YOU DO NOTHING, YOU WILL LOSE THE GOODS. SALE OF GOODS

The law says that the credit provider must get the best price reasonably obtainable for the goods. If you want to, you can introduce a buyer to the credit provider. This has to be done in writing within 21 days after the date of the notice you receive and the buyer must be willing to pay the credit provider’s estimate of the value of the goods or any greater amount for which the credit provider has obtained a written offer to buy the goods. The credit provider must offer to sell the goods to the buyer you have introduced. Your letter introducing the buyer has to reach the credit provider before the goods are sold. If you post the letter, it is best to send it by certified or registered mail then you can check that it was delivered. If you take it to

the credit provider’s office, you should get an employee to sign and date something to say that your letter has been received. Make sure you keep anything that was signed by the employee. Once the 21 day period has expired, the credit provider must sell the goods as soon as reasonably practicable unless— you and the credit provider agree on some other time for sale; or legal proceedings have been taken which prevent the sale. As mentioned above, the goods must be sold for the best price reasonably obtainable. FINALISING THE CONTRACT As soon as the goods are sold, the total amount payable under the contract becomes due. However, the credit provider will have to deduct from what you owe any amount the credit provider gets for the goods less — the amount owing under your mortgage (which can not be more than the amount owing under the contract); and any amount owing under a prior mortgage of the goods; and any amount owing under a subsequent mortgage of the goods which the credit provider knows about; and the credit provider’s reasonable expenses of enforcing the mortgage. [page 940] After the goods are sold, the credit provider must give you a notice setting out certain information including— what the sale price was; and the net proceeds of the sale after the amounts mentioned above have been deducted; and the amount due under the credit contract or the amount of any surplus due to you; and details of any further recovery action that might be taken against you under the credit contract if you are the debtor. GENERAL You should discuss this matter with the credit provider as soon as possible. You should know that after the goods have been sold, you will still have to pay the credit provider any amount still outstanding. You may be able to work out some alternative arrangement about the contract and mortgage. For example, if your are the debtor, you could ask the credit provider— to extend the term of the contract and either reduce the amount of each payment accordingly or defer payments for a specified period; or to simply defer payments for a specified period. The name, telephone number and address of the person to contact is on the front of this form. If you can not come to a suitable arrangement with the credit provider, contact the credit provider’s external dispute resolution scheme immediately. If you are the debtor and have been unemployed, sick or there is another good reason why you are having problems with your contract, then your contract may be able to be varied under the law to meet your situation.

IF YOU HAVE ANY DOUBTS, OR WANT MORE INFORMATION, CONTACT YOUR CREDIT PROVIDER. YOU MUST ATTEMPT TO RESOLVE YOUR COMPLAINT WITH YOUR CREDIT PROVIDER BEFORE CONTACTING YOUR CREDIT PROVIDER’S EXTERNAL DISPUTE RESOLUTION SCHEME. IF YOU HAVE A COMPLAINT WHICH REMAINS UNRESOLVED AFTER SPEAKING TO YOUR CREDIT PROVIDER YOU CAN CONTACT YOUR CREDIT PROVIDER’S EXTERNAL DISPUTE RESOLUTION SCHEME. EXTERNAL DISPUTE RESOLUTION IS A FREE SERVICE ESTABLISHED TO PROVIDE YOU WITH AN INDEPENDENT MECHANISM TO RESOLVE SPECIFIC COMPLAINTS. YOUR CREDIT PROVIDER’S EXTERNAL DISPUTE RESOLUTION PROVIDER IS [INSERT NAME OF EXTERNAL DISPUTE RESOLUTION PROVIDER] AND CAN BE CONTACTED AT [INSERT TELEPHONE NUMBER, EMAIL/WEBSITE AND POSTAL ADDRESS]. Alternatively, you can seek legal advice, for example from a community legal centre or Legal Aid. There are other people, such as financial counsellors, who may be able to help. (signature of credit provider or person signing on behalf of credit provider) (name of person signing) (position of person signing) * Indicate the daily, monthly or other rate at which enforcement expenses accrue.

[page 941] Form 15 — Notice of right to terminate maintenance services contract subsection 136(2) of the Code regulation 91 of the Regulations .................................... Date TO: ...................................................................... (name of debtor) ...................................................................... ...................................................................... (address of debtor) FROM: ...................................................................... (name of credit provider) ...................................................................... (Australian credit licence number) ....................................................................... (address of credit provider) ........................................................................ The law says that you must be told, now that your credit contract has terminated, that you can also — terminate your maintenance services contract with .................................................................................. dated ........................................................................................................................... * (supplier); and recover from the supplier a proportionate rebate of the amount you have paid under the maintenance services contract. You must tell the supplier in writing if you want to terminate the maintenance services contract. The proportionate rebate must be calculated in accordance with the law. IF YOU HAVE ANY DOUBTS, OR WANT MORE INFORMATION, CONTACT YOUR CREDIT PROVIDER. YOU MUST ATTEMPT TO RESOLVE YOUR COMPLAINT WITH YOUR CREDIT PROVIDER BEFORE CONTACTING YOUR CREDIT PROVIDER’S EXTERNAL DISPUTE RESOLUTION SCHEME. IF YOU HAVE A COMPLAINT WHICH REMAINS UNRESOLVED AFTER SPEAKING TO YOUR CREDIT PROVIDER YOU CAN CONTACT YOUR CREDIT PROVIDER’S EXTERNAL DISPUTE RESOLUTION SCHEME OR GET LEGAL ADVICE.

EXTERNAL DISPUTE RESOLUTION IS A FREE SERVICE ESTABLISHED TO PROVIDE YOU WITH AN INDEPENDENT MECHANISM TO RESOLVE SPECIFIC COMPLAINTS. YOUR CREDIT PROVIDER’S EXTERNAL DISPUTE RESOLUTION PROVIDER IS [INSERT NAME OF EXTERNAL DISPUTE RESOLUTION PROVIDER] AND CAN BE CONTACTED AT [INSERT TELEPHONE NUMBER, EMAIL/WEBSITE AND POSTAL ADDRESS].

[page 942]

(signature of credit provider of person signing on behalf of credit provider) (name of person signing) (position of person signing) * Insert name and address of supplier under the maintenance services contract.

[page 943] Form 16 — Notice of right to cancel mortgaged property insurance subsection 149(2) of the Code regulation 95 of the Regulations .................................... Date TO: ............................................................................. (name of debtor) ............................................................................. ............................................................................. (address of debtor) FROM: ............................................................................. (name of credit provider) ............................................................................. (Australian credit licence number) ............................................................................. (address of credit provider) ............................................................................. The law says that you must be told, now that your credit contract has terminated, that you can also— terminate your insurance contract over mortgaged property financed under the credit contract; and recover from the insurer a proportionate rebate of premium paid under the insurance contract. Your insurer will not terminate the insurance contract unless you ask the insurer in writing to do so. If you terminate the insurance, you will not be covered in the event of loss or damage to the property.

According to our records you insurer is The mortgaged property is—

The proportionate rebate of insurance must be calculated in accordance with the law.

IF YOU HAVE ANY DOUBTS, OR WANT MORE INFORMATION, CONTACT YOUR CREDIT PROVIDER. YOU MUST ATTEMPT TO RESOLVE YOUR COMPLAINT WITH YOUR CREDIT PROVIDER BEFORE CONTACTING YOUR CREDIT PROVIDER’S EXTERNAL DISPUTE RESOLUTION SCHEME. IF YOU HAVE A [page 944] COMPLAINT WHICH REMAINS UNRESOLVED AFTER SPEAKING TO YOUR CREDIT PROVIDER YOU CAN CONTACT YOUR CREDIT PROVIDER’S EXTERNAL DISPUTE RESOLUTION SCHEME OR GET LEGAL ADVICE. EXTERNAL DISPUTE RESOLUTION IS A FREE SERVICE ESTABLISHED TO PROVIDE YOU WITH AN INDEPENDENT MECHANISM TO RESOLVE SPECIFIC COMPLAINTS. YOUR CREDIT PROVIDER’S EXTERNAL DISPUTE RESOLUTION PROVIDER IS [INSERT NAME OF EXTERNAL DISPUTE RESOLUTION PROVIDER] AND CAN BE CONTACTED AT [INSERT TELEPHONE NUMBER, EMAIL/WEBSITE AND POSTAL ADDRESS]. (signature of credit provider or person signing on behalf of credit provider) (name of person signing) (position of person signing)

[page 945] Form 17 — Information statement subsection 175(1) of the Code regulation 105 of the Regulations

THINGS YOU SHOULD KNOW ABOUT YOUR CONSUMER LEASE This statement tells you about some of the rights and obligations of yourself and your lessor. It does not state the terms and conditions of your lease.

THE LEASE 1 How can I get details of my lease? Your lessor must give you a copy of your consumer lease with this statement. Both documents must be given to you within 14 days after the lessor enters into the consumer lease, unless you already have a copy of the consumer lease. If you want another copy of your lease write to your lessor and ask for one. Your lessor may charge you a fee. Your lessor has to give you a copy— • within 14 days of your written request if the contract came into existence 1 year or less before your request; or • otherwise within 30 days. 2 What should my lease tell me? You should read your lease carefully. Your lease should tell you about your obligations, and include information on matters such as— • details of the goods which have been hired; and • any amount you have to pay before the goods are delivered; and • stamp duty and other government charges you have to pay; and • charges you have to pay which are not included in the rental payments; and • the amount of each rental payment; and • the date on which the first rental payment is due and either the dates of the other rental payments or the interval between them; and • the number of rental payments; and • the total amount of rent; and • when you can end your lease; and • what your obligations are (if any) when your lease ends. This information only has to be included in your lease if it is possible to give it at the relevant times. If your lease does not tell you all these details, contact your credit provider’s external dispute resolution

scheme, or get legal advice, for example from a community legal centre or Legal Aid, as you may have rights against your lessor. 3 Can I end my lease early? Yes. Simply return the goods to your lessor. The goods may be returned in ordinary business hours or at any other time you and the lessor agree on or the court decides. 4 What will I have to pay if I end my lease early? The amount the lease says you have to pay. If you have made rental payments in advance then it is possible that your lessor might owe you money if you return the goods early. 5 Can my lease be changed by my lessor? Yes, but only if your lease says so. 6 Is there anything I can do if I think that my lease is unjust? Yes. You should talk to your lessor. Discuss the matter and see if you can come to some arrangement. If that is not successful, you may contact your credit provider’s external dispute resolution scheme.

[page 946] EXTERNAL DISPUTE RESOLUTION IS A FREE SERVICE ESTABLISHED TO PROVIDE YOU WITH AN INDEPENDENT MECHANISM TO RESOLVE SPECIFIC COMPLAINTS. YOUR CREDIT PROVIDER’S EXTERNAL DISPUTE RESOLUTION PROVIDER IS [INSERT NAME OF EXTERNAL DISPUTE RESOLUTION PROVIDER] AND CAN BE CONTACTED AT [INSERT TELEPHONE NUMBER, EMAIL/WEBSITE AND POSTAL ADDRESS]. Alternatively, you can go to court. You may also wish to get legal advice, for example from a community legal centre or Legal Aid, and/or make a complaint to ASIC. ASIC can be contacted on 1300 300 630 or through ASIC’s website at http://www.asic.gov.au.

THE GOODS 7 If my lessor writes asking me where the goods are, do I have to say where they are? Yes. You have 7 days after receiving your lessor’s request to tell your lessor. If you do not have the goods you must give your lessor all the information you have so they can be traced. 8 When can my lessor or its agent come into a residence to take possession of the goods? Your lessor can only do so if it has the court’s approval or the written consent of the occupier which is given after the occupier is informed in writing of the relevant section in the National Credit Code.

GENERAL 9 What do I do if I can not make a rental payment? Get in touch with your lessor immediately. Discuss the matter and see if you can come to some arrangement.

You can ask your lessor to change your lease in a number of ways— • to extend the term of your lease and reduce rental payments; or • to extend the term of your lease and delay rental payments for a set time; or • to delay rental payments for a set time. 10 What if my lessor and I can not agree on a suitable arrangement? If the lessor refuses your request to change the rental payments, you can ask your lessor to review this decision if you think it is wrong. If the lessor still refuses your request, you can complain to the external dispute resolution scheme that your lessor belongs to. Further details about this scheme are set out below in question 12. 11 Can my lessor take action against me? Yes, if you are in default under your lease. But the law says that you can not be unduly harassed or threatened for rental payments. If you think you are being unduly harassed or threatened, contact your credit provider’s external dispute resolution scheme or ASIC, or get legal advice. 12 Do I have any other rights and obligations? Yes. The law will give you other rights and obligations. You should also READ YOUR LEASE carefully. IF YOU HAVE ANY DOUBTS, OR WANT MORE INFORMATION, CONTACT YOUR CREDIT PROVIDER. YOU MUST ATTEMPT TO RESOLVE YOUR COMPLAINT WITH YOUR CREDIT PROVIDER BEFORE CONTACTING YOUR CREDIT PROVIDER’S EXTERNAL DISPUTE RESOLUTION SCHEME. IF YOU HAVE A COMPLAINT WHICH REMAINS UNRESOLVED AFTER SPEAKING TO YOUR CREDIT PROVIDER YOU CAN CONTACT YOUR CREDIT PROVIDER’S EXTERNAL DISPUTE RESOLUTION SCHEME OR GET LEGAL ADVICE. PLEASE KEEP THIS INFORMATION STATEMENT. YOU MAY WANT SOME INFORMATION FROM IT AT A LATER DATE.

[page 947] Form 18 — Direct debit default notice subsection 179C(2) of the Code regulation 105J of the Regulations

IMPORTANT We have not received a payment because your arrangements to pay by direct debit have been dishonoured. YOU NEED TO CONTACT US IMMEDIATELY 1. Is there a reason why your direct debit arrangements have failed? There may be reasons why your direct debit may fail, and you may wish to check with your bank or financial institution. If you need to change your direct debit arrangements contact us at [insert telephone number or email address for dealing with variations to direct debit arrangements]. If you continue to fail to make the payments due under your consumer lease, we may take action against you. 2. Are you experiencing financial difficulty? Contact us immediately Contact us* [insert telephone number or email address for dealing with financial hardship applications] to discuss your situation. We may be able to help you to repay your debt by agreeing to vary your contract (for example, changing the amount or timing of the rental payments). The sooner you contact us, the easier it will be to help you. If we refuse to change your contract, we will notify you in writing and you can seek a review of our decision by going to [insert name of relevant external dispute resolution scheme] by [insert contact details and method(s) for lodging complaints]. If you go to [insert name of relevant external dispute resolution scheme], you may have enforcement action put on hold while your complaint is considered. You are not bound by the decision that [insert name of EDR scheme] makes and you can still apply to a court if you are not satisfied. EXTERNAL DISPUTE RESOLUTION IS A FREE AND INDEPENDENT SERVICE TO RESOLVE COMPLAINTS. 3. If you are having financial difficulties you can also contact a financial counsellor on 1800 007 007 (free call) For information about your options for managing your debts, ring 1 800 007 007 from anywhere in Australia to talk to a free and independent financial counsellor. * Lessors may replace the word “us” with the name of a relevant area. For example: “Contact our

Hardship Team”. Some useful tips on direct debits Make sure you’ve given the right account number and there is enough money in the account to cover the direct debits. Read your Direct Debit Request Service Agreement carefully and check your bank statements to make sure the right amount is being taken out at the right time. If there is not enough money in the account, you will be in default and may have to pay a fee for that default. Changing or cancelling your direct debit Contact us if you need to change the dates when the direct debit is taken out.

[page 948] If you close the account, remember to change the direct debit so it comes from another account. You can usually cancel a direct debit with us or with your bank or financial institution. You may need to do this in writing. Contact your bank or financial institution a few days after you’ve sent your written instruction to check that the direct debit has been cancelled. Before you cancel a direct debit make sure you’ve made other payment arrangements with us so you don’t default on your payment. Resolving a problem with your direct debit If you have a problem with a direct debit you can complain to us or to your bank or financial institution. If you can’t resolve your complaint with us, contact our external dispute resolution scheme, [insert name of external dispute resolution scheme], by [insert contact details and method(s) for lodging complaints]. For more information about direct debits, talk to your bank or financial institution. [Form 18 subst SLI 43 of 2013 s 4 and Sch 1 item 9, effective 4 Apr 2013]

[page 949] Form 18A — Information about lessee’s rights after default section 179C of the Code regulation 105K of the Regulations

IMPORTANT You are in default of your credit contract because you have not made a payment [alternative wording can be used if the default is not the result of failing to make a payment].

YOU NEED TO CONTACT US IMMEDIATELY 1. Are you in financial hardship? Contact us immediately Contact us* [insert telephone number or email address for dealing with financial hardship applications] to discuss your situation. We may be able to help you to repay your debt by varying your contract (for example, changing the amount or timing of your rental payments). The sooner you contact us, the easier it will be to help you. If you do nothing before [insert default notice period end date], we can commence enforcement action against you. If we refuse to change your contract, we will notify you in writing and you can seek a review of our decision by going to [insert name of relevant external dispute resolution scheme] by [insert contact details and method(s) for lodging complaints]. If you go to [insert name of relevant external dispute resolution scheme], you may have enforcement action put on hold while your complaint is being

considered. You are not bound by the decision that [insert name of EDR scheme] makes, and you can still apply to a court if you are not satisfied with the outcome. EXTERNAL DISPUTE RESOLUTION IS A FREE AND INDEPENDENT SERVICE TO RESOLVE SPECIFIC COMPLAINTS. 2. If you are having financial difficulties you can also contact a financial counsellor on 1800 007 007 (free call) For information about your options for managing your debts, ring 1 800 007 007 from anywhere in Australia to talk to a free and independent financial counsellor. 3. Your other rights You have other rights, including the right ask us to postpone any enforcement action before [insert default notice period end date]. *Lessors may replace the word “us” with the name of a relevant area. For example: “Contact our Hardship Team”. [Form 18A insrt SLI 43 of 2013 s 4 and Sch 1 item 9, effective 4 Apr 2013]

[page 950] Form 19 — Consent to enter premises subsection 179N(1) of the Code paragraph 105L(c) of the Regulations ................................................... Date TO: (name of lessor) (Australian credit licence number) FROM: (name of occupier) (address of occupier’s premises)

(‘the premises’) I consent to the lessor entering the premises for the purpose of taking possession of the hired goods described below. The hired goods are:*

IMPORTANT YOU HAVE THE RIGHT TO REFUSE CONSENT. IF YOU DO THE LESSOR MAY GO TO COURT FOR PERMISSION TO ENTER THE PREMISES. ................................................................................... (signature of occupier giving consent) ................................................................................... (name, address and signature of lessor’s representative by whom the consent was obtained) * Insert brief details of the hired goods. [Form 19 insrt SLI 313 of 2012 s 4 and Sch 2[2], effective 1 Mar 2013]

[page 951] COMMENTARY ON SCHEDULE 1 [S1.05] Schedule 1 of the regulations contains the forms which are referred to by the NCCP Act, the Code and the regulations and described in reg 6 as being the forms referred to by the regulations. See [R6.05] for commentary on reg 6. [S1.10] The forms in Sch 1 and the relevant section of the Act, Code or regulation to which the form applies are as follows: Form 1 — Notice requiring reasonable assistance in connection with an investigation and appearance at an examination (s 253(2) of the NCCP Act and reg 32) Form 2 — Summons to witness (s 284(1) of the NCCP Act and reg 34) Form 3 — Infringement notice (s 331 of the NCCP Act and reg 40(a))

Form 4 — Prescribed terms and conditions of mortgage (s 9(3)(f) of the Code and reg 66) Form 5 — Information statement — Things you should know about your proposed credit contract (s 16(1)(b) of the Code and reg 70) Form 6 — Disclosure about credit contracts (s 17(16) of the Code and reg 74(2)) (if a debtor signs an offer) Form 7 — Disclosure about credit contracts (s 17(16) of the Code and reg 74(3)) (if debtor signs an acceptance of an offer by the credit provider) Form 7A — Disclosure about credit contracts (reverse mortgages) (s 18B(2) and (4) of the Code or reg 74A) Form 8 — Disclosure about guarantee (s 55 of the Code and reg 81) Form 9 — Information statement — Things you should know about guarantees (s 56(1)(b) of the Code and reg 82) Form 10 — Information after surrender of mortgaged goods (s 85(3) of the Code and reg 84) Form 11 — Direct debit default notice (s 87(3) of the Code and reg 85) Form 11A — Direct debit default notice — Direct debits from your bank account (s 87(3) of the Code and reg 85) Form 12 — Information about debtor’s rights after default (s 88(3) (f) and (g) of the Code and reg 86) Form 12A — Information about debtors’ rights after default (s 88(3)(f) and (g) of the Code and reg 86) Form 13 — Consent to enter premises (s 99(2) of the Code and reg 87) Form 14 — Notice after taking possession of mortgaged goods (s 102(1)(c) of the Code and reg 88) Form 15 — Notice of right to terminate maintenance services

contract (s 136(2) of the Code and reg 91) Form 16 — Notice of right to cancel mortgaged property insurance (s 149(2) of the Code and reg 95) Form 17 — Information statement (s 175(1) of the Code and reg 105) Form 18 — Direct debit default notice (s 179C(2) of the Code and reg 105J) Form 18A — Information about lessee’s rights after default (s 179C of the Code and reg 105K) Form 19 — Consent to enter premises (s 179N(1) of the Code and reg 105L(c)) [page 952] [S1.15] The numbering of the forms in Sch 1 of the regulations differs to the numbering of the forms under the UCCC Regulation (and there are additional forms (see [1.20] below)). Other than the change in numbering, the forms in Sch 1 that were also in the UCCC remain substantially similar to their UCCC counterparts. However, the degree of similarity between the forms varies. For example, Sch 1 Form 4 “Prescribed terms and conditions of mortgage” is identical to UCCC Form 1 “Prescribed terms and conditions of mortgage” in all respects save for the definition of “Code”. In contrast, while Sch 1 Form 5 “Information Statement” is in parts identical to UCCC Form 2 “Information Statement”, it also contains updated provisions in respect of external dispute resolution and insurance arrangements. [S1.20] The regulations also introduce a number of new forms that were not previously prescribed by the UCCC Regulation. The following table is a comparison between the Sch 1 forms and the forms under the UCCC regime:

Sch 1 form number

UCCC form number

1

—

2

—

3

—

4

1

5

2

6

3A

7

3B

7A

—

8

4

9

5, 5A

10

6

11

—

11A

—

12

—

12A

—

13

7

14

8

15

9

16

10

17

11

18

—

18A

—

19

—

[page 953]

SCHEDULE 2 MODIFICATIONS — CARRIED OVER INSTRUMENTS (regulation 25E) [Sch 2 insrt SLI 105 of 2010 reg 3 and Sch 1[32], eff 24 May 2010]

Subsection 5(1), after definition of carried on in this jurisdiction 2.1 insert carried over instrument has the meaning given by subsection 4(1) of the Transitional Act.

Subsection 5(1), after definition of prescribed State or Territory order 2.2 insert prescribed unlicensed carried over instrument lender has the meaning given by section 5A.

Subsection 5(1), after definition of registered company auditor 2.3 insert registered person has the meaning given by subsection 4(1) of the Transitional Act.

Subsection 5(1), after definition of tribunal 2.4 insert unlicensed carried over instrument lender means a credit provider or lessor who: (a) was a credit provider or lessor in relation to a carried over instrument immediately before 1 July 2010; and (b) on and after 1 July 2010 has been the credit provider or lessor in relation to the carried over instrument on a continuous basis; and (c) is not any of the following persons: (i)

a licensee;

(ii) a registered person; (iii) a person exempt from the requirement to hold a licence under this Act or to be a registered person under the Transitional Act.

After section 5 2.5 insert [page 954] Meaning of prescribed unlicensed carried over instrument lender 5A (1) A prescribed unlicensed carried over instrument lender means a person: (a) for whom: (i)

a prescribed State or Territory order is in force; or

(ii) a banning or disqualification order under Division 8 of Part 7.6 of the Corporations Act 2001 is in force; or (iii) a judgement has been entered against as a result of a civil action taken by an agency of a State or Territory government under the old Credit Code in the last 10 years; or (b) who is banned from engaging in a credit activity under: (i)

a law of a State or Territory; or

(ii) Part 2-4; or (c) who is disqualified from managing a corporation under Part 2D.6 of the Corporations Act 2001; or (d) who has been convicted of a serious fraud during the last 10 years; or (e) who is incapable of managing his or her affairs because of physical or mental incapacity; or (f)

who is not a trustee of a trust and who is insolvent; or

who is or has been registered to engage in credit activities (g) under Schedule 2 to the Transitional Act and whose registration was suspended or cancelled under item 23 of Schedule 2 to the Transitional Act, other than under paragraph 23(1)(a) or (b); or (h) who is or has been the holder of an Australian credit licence and whose licence is suspended or was cancelled under section 54, other than under paragraph 54(1)(a) or (b); or (i)

who is or has been the holder of an Australian financial services licence and whose licence is suspended or was cancelled under section 915B of the Corporations Act 2001, other than under any of the following paragraphs of that Act: (i)

paragraphs 915B(1)(a) or (e);

(ii) paragraphs 915B(2)(a) or (d); (iii) paragraphs 915B(3)(a) or (d); (iv) paragraphs 915B(4)(a) or (d). 5A (2) In this section person means: (a) if the person is a natural person — that person; and (b) if the person is a body corporate — each director or secretary of the body corporate; and (c) if the person is a partnership or a trustee of a trust — each partner of the partnership or each trustee of the trust. [item 2.5 am SLI 137 of 2010 reg 3 and Sch 1[35] and [36], eff 19 June 2010; SLI 235 of 2010 reg 3 and Sch 1[17], eff 22 July 2010]

Chapter 2, heading 2.6 substitute Chapter 2 — Unlicensed carried over instrument lenders

Part 2-1, Divisions 1 and 2 2.7 omit [page 955]

Section 30 2.8 omit

Subsection 31(1) 2.9 omit A licensee insert An unlicensed carried over instrument lender

Sections 32 and 33 2.10 omit

Part 2-2, heading 2.11 substitute Part 2-2 — Obligations of unlicensed carried over instrument lenders

Part 2-2, Divisions 1 to 3 2.12 omit

Part 2-2, Division 4 heading 2.12A substitute Division 4 — Conditions for unlicensed carried over instrument lender [item 2.12A insrt SLI 137 of 2010 reg 3 and Sch 1[37], eff 19 June 2010]

Section 45 2.13 substitute Conditions for unlicensed carried over instrument lender 45 (1) This section applies to an unlicensed carried over instrument lender who engages in a credit activity in relation to a carried over instrument. [page 956] 45 (2) The lender in relation to the credit activity in relation to the instrument is subject to the conditions prescribed in the regulations.

Section 46 2.14 omit

Part 2-2, Division 5, heading 2.15 substitute Division 5 — General obligations

Section 47, heading 2.16 substitute 47 General conduct obligations of unlicensed carried over instrument lender

Subsection 47(1) 2.17 substitute (1) An unlicensed carried over instrument lender must: (a) do all things necessary to ensure that the credit activities engaged in in relation to the carried over instrument are engaged in efficiently, honestly and fairly; and (b) have in place adequate arrangements to ensure that its clients are not disadvantaged by any conflict of interest in relation to a carried over instrument that may arise wholly or partly in relation to credit activities engaged in by it or its representatives; and (c) ensure that its representatives are adequately trained and competent to engage in the credit activities in relation to the carried over instrument; and (d) maintain its competence to engage in the credit activities in relation to the carried over instrument; and (e) have an internal dispute resolution procedure that: (i)

complies with standards and requirements made or approved by ASIC in accordance with section 48; and

(ii) covers disputes in relation to the credit activities the lender engages in in relation to the carried over instrument; and (f)

if the lender is not a member of an approved external dispute resolution scheme: (i)

keep a register of complaints in relation to carried over instruments and include the information mentioned in subsection (1A); and

(ii) keep a register of applications by a debtor for changes to the terms a credit contract under section 72 of the

National Credit Code and include the information mentioned in subsection (1B); and (iii) keep a register of requests by a debtor, mortgagor or guarantor to negotiate a postponement of enforcement proceedings in relation to the credit [page 957] contract, mortgage or guarantee under section 94 of the National Credit Code and include the information mentioned in subsection (1C); and (g) have adequate arrangements and systems to ensure compliance with its obligations under this section, and a written plan documenting those arrangements and systems; and (h) unless the unlicensed carried over instrument lender is a body regulated by APRA: (i)

have adequate resources (including financial, technological and human resources) available so it can engage in credit activities in relation to the carried over instrument and to carry out supervisory arrangements; and

(ii) have adequate risk management systems. (1A) For the purposes of subparagraph (1)(f) (i), the information is: (a) the name of the person making the complaint; and (b) the date the complaint was made; and (c) details of the substance of the complaint; and (d) details of the outcome of the compliant. (1B) For the purposes of subparagraph (1)(f)(ii), the information is: (a) the name of the person making the application; and (b) the date the application was made; and

(c) details of the information included in the application; and (d) details of the written notice given under subsection 72(3) of the National Credit Code. (1C) For the purposes of subparagraph (1)(f)(iii), the information is: (a) the name of the person making the request; and (b) the date the request was made; and (c) details of the information included in the request; and (d) details of the written notice given under subsection 94(2) of the National Credit Code.

Subsection 47(2) 2.18 omit For the purposes of paragraphs (1)(b), (g), (k) and (l), insert For the purposes of paragraphs (1)(b), (c), (g) and (h),

Subsection 47(2) 2.18A omit licensee insert unlicensed carried over instrument lender [item 2.18A insrt SLI 137 of 2010 reg 3 and Sch 1[38], eff 19 June 2010]

Subsection 47(3), including subsection heading 2.19 omit [page 958]

Section 48 2.20 substitute Standards or requirements for internal dispute resolution approved or made by ASIC 48 (1) ASIC must take the following matters into account when considering whether to approve standards or requirements for internal dispute resolution for an unlicensed carried over instrument lender: (a) Australian Standard AS ISO 10002-2006: (i)

known as Complaints Handling; and

(ii) published by Standards Australia; and (iii) as in force when this Act commences; (b) any other matters ASIC considers relevant. 48 (2) ASIC may vary or revoke: (a) a standard or requirement that it has made in relation to an internal dispute resolution procedure; and (b) the operation of a standard or requirement that it has approved in its application to an internal dispute resolution procedure.

Section 49, heading 2.21 substitute 49 Obligation to provide a statement or audit report

Subsections 49(1) to (3) 2.22 omit each mention of licensee insert unlicensed carried over instrument lender

After subsection 49(3) 2.23 insert (3A) Requirement to lodge audit report An unlicensed carried over instrument lender who is not a member of an approved external dispute resolution scheme must lodge with ASIC an audit report, prepared by a suitably qualified person and in accordance with subsection (10), about whether the lender has complied with the following requirements in relation to a carried over instrument for the lender: (a) if the carried over instrument is a credit contract — the requirements mentioned in section 17 of the National Credit Code; (b) if the carried over instrument is a consumer lease — the requirements mentioned in section 174 of the National Credit Code. Civil penalty: 2,000 penalty units. [page 959] [item 2.23 am SLI 137 of 2010 reg 3 and Sch 1[39], eff 19 June 2010; SLI 303 of 2010 reg 3 and Sch 1[25] and [26], eff 26 Nov 2010]

Subsections 49(5) and (6) 2.24 omit each mention of licensee insert unlicensed carried over instrument lender

After subsection 49(9) 2.25 insert (10) When audit report due For subsection (3A), the unlicensed carried over instrument lender must lodge the audit report with ASIC on or before 31 December 2010. ASIC may extend the day by giving written notice to the lender. [item 2.25 am SLI 303 of 2010 reg 3 and Sch 1[27], eff 26 Nov 2010]

Subsections 50(1) and (2), including subsection headings and penalty 2.26 substitute (1) Requirement to give information ASIC may request an unlicensed carried over instrument lender to give ASIC information about the registers the lender is required to keep under paragraph 47(1)(f). (2) If ASIC requests the lender give ASIC the information mentioned in subsection (1), the lender must give ASIC the information. Civil penalty: 2,000 penalty units.

Subsection 51(1) 2.26A omit each mention of licensee insert unlicensed carried over instrument lender [item 2.26A insrt SLI 137 of 2010 reg 3 and Sch 1[40], eff 19 June 2010]

Section 52 2.27 substitute Obligation to lodge certain matters with ASIC 52 (1) Requirement to lodge report of contravention or likely contravention If an unlicensed carried over instrument lender is not a member of an approved external dispute [page 960] resolution scheme and the lender becomes aware of a contravention, or a likely contravention, mentioned in subsection (2), the lender must lodge a written report with ASIC on the matter: (a) as soon as practicable; and (b) in any case no later than 10 business days after becoming aware of the contravention or likely contravention. Civil penalty: 2,000 penalty units. 52 (2) When there is a contravention or likely contravention For the purposes of subsection (1), there is a contravention, or a likely contravention, if: (a) the unlicensed carried over instrument lender contravenes, or is likely to contravene, this Act, the Transitional Act or the ASIC Act; and (b) the contravention, or likely contravention, is significant having regard to the following: (i)

the number and frequency of similar previous contraventions;

(ii) the impact of the contravention, or likely contravention, on the lender’s ability to engage in the

credit activities; (iii) the extent to which the contravention, or likely contravention, indicates that the lender’s arrangements to ensure compliance with its obligations under this Part are inadequate; (iv) the actual or potential financial loss to consumers, or the lender itself, arising from the contravention, or likely contravention. 52 (3) For the purposes of subsection (2), an unlicensed carried over instrument lender is likely to contravene an obligation referred to in that subsection if, and only if, the person is not longer able to comply with the obligation. 52 (4) Offence A person commits an offence if: (a) the person is subject to a requirement under subsection (1); and (b) the person engages in conduct; and (c) the conduct contravenes the requirement. Criminal penalty: 25 penalty units, or 6 months imprisonment, or both. 52 (5) Strict liability offence A person commits an offence if: (a) the person is subject to a requirement under subsection (1); and (b) the person engages in conduct; and (c) the conduct contravenes the requirement. Criminal penalty: 10 penalty units. 52 (6) Subsection (5) is an offence of strict liability. Note: For strict liability, see section 6.1 of the Criminal Code. [item 2.27 am SLI 303 of 2010 reg 3 and Sch 1[28]–[30], eff 26 Nov 2010]

Subsection 53(1) 2.28 omit A licensee must, no later than 45 days after the licensee’s licence anniversary in each year, insert An unlicensed carried over instrument lender must, no later than 15 August in 2011 and each subsequent year, [page 961]

Subsection 53(1) 2.29 omit to the licensee. insert to the unlicensed carried over instrument lender.

Paragraph 53(3)(a) 2.30 omit each mention of licensee insert unlicensed carried over instrument lender

Paragraph 53(3)(b) 2.31 substitute (b) if the unlicensed carried over instrument lender is a body corporate — a kind of person mentioned in subsection 53(7); or

Paragraph 53(3)(c) 2.32 omit licensee

insert unlicensed carried over instrument lender

Subsection 53(4) 2.33 omit licensee insert unlicensed carried over instrument lender

Subsection 53(7), including subsection heading 2.34 substitute (7) Kinds of persons For paragraph (3)(b), the kinds of persons are: [page 962] (a) if the body corporate is not an ADI: (i)

the Chief Executive Officer of the body corporate; or

(ii) if the body corporate does not have a Chief Executive Officer — the person who: (A) is responsible for managing the affairs of the body corporate; and (B) has authority to make decisions in relation to the allocation of resources so that the body corporate complies with the Act; and (b) if the body corporate is an ADI: (i)

the Chief Executive Officer of the body corporate; or

(ii) a person who satisfies the criteria to be a fit and proper person to hold a responsible person position under Prudential Standard APS 520. Note: Prudential Standard APS 520 is in Schedule 1 to the Banking (prudential standard) determination No 1 of 2006 — Prudential Standard APS 520 Fit and Proper.

Division 6, Part 2-2 2.35 omit

Part 2-3, heading 2.36 substitute Part 2-3 — Representatives of unlicensed carried over instrument lender

Part 2-3, Divisions 1 and 2 2.37 omit

Section 73, including the heading and subsection headings 2.38 omit each mention of licensee insert unlicensed carried over instrument lender

Part 2-3, Division 4 2.39 substitute Division 4 — Appointment of licensee or registered person to act on behalf of prescribed unlicensed carried over instrument lender Obligation for prescribed unlicensed carried over instrument lender to appoint licensee or registered person 74 (1) This section applies to a prescribed unlicensed carried over instrument lender on or after 1 July 2010. [page 963] 74 (2) The prescribed unlicensed carried over instrument lender: (a) must not engage in a credit activity in relation to a carried over instrument (other than the credit activity that is engaged in solely by the lender being the credit provider under a credit contract or the lessor under a consumer lease); and (b) must appoint, in writing, a licensee or registered person as the lender’s representative to engage in a credit activity in relation to the carried over instrument (other than the credit activity that is engaged in solely by the lender being the status of the credit provider under a credit contract or the lessor under a consumer lease) on behalf of the lender. Civil penalty: 2,000 penalty units. Note: Having the status of a credit provider under a credit contract or a lessor under a consumer lease is itself a credit activity.

74 (3) Offence A person commits an offence if: (a) the person is subject to a requirement under subsection (2);

and (b) the person engages in conduct; and (c) the conduct contravenes the requirement. Criminal penalty: 25 penalty units, or 6 months imprisonment, or both. 74 (4) Strict liability offence A person commits an offence if: (a) the person is subject to a requirement under subsection (2); and (b) the person engages in conduct; and (c) the conduct contravenes the requirement. Criminal penalty: 10 penalty units. 74 (5) Subsection (4) is an offence of strict liability. Note: For strict liability, see section 6.1 of the Criminal Code.

Lodgment obligations for prescribed unlicensed carried over instrument lender 75 (1) If a licensee or registered person is appointed by a prescribed unlicensed carried over instrument lender to act on the lender’s behalf, the lender must lodge with ASIC, no later than 15 business days after the appointment is made: (a) a copy of the appointment under section 74; and (b) a document, in an approved form, setting out the following information: (i)

the basis, under section 5A, on which the lender is a prescribed unlicensed carried over instrument lender;

(ii) the licensee’s or registered person’s name (including the licensee’s or registered person’s principal business name if any); (iii) the postal address of the licensee or registered person; (iv) if the principal business address of the licensee or registered person is different from the postal address

— the principal business address. Civil penalty: 2,000 penalty units. 75 (2) Offence A person commits an offence if: (a) the person is subject to a requirement under subsection (1); and (b) the person engages in conduct; and (c) the conduct contravenes the requirement. Criminal penalty: 25 penalty units, or 6 months imprisonment, or both. 75 (3) Strict liability offence A person commits an offence if: (a) the person is subject to a requirement under subsection (1); and (b) the person engages in conduct; and (c) the conduct contravenes the requirement. Criminal penalty: 10 penalty units. 75 (4) Subsection (3) is an offence of strict liability. [page 964] Note: For strict liability, see section 6.1 of the Criminal Code.

Obligation for prescribed unlicensed carried over instrument lender if appointment of licensee or registered person ceases 75A (1) This section applies if a licensee or registered person is appointed, in accordance with paragraph 74(2)(b), by a prescribed unlicensed carried over instrument lender to engage in a credit activity mentioned in that paragraph on behalf of the lender. 75A (2) The appointment is continuous until the first of the following events occurs: (a) the licensee, or registered person dies or otherwise ceases to engage in the business;

(b) the licensee, or registered person is unable to perform its duties. 75A (3) If the licensee’s or registered person’s appointment ceases under subsection (2): (a) section 74 applies to the prescribed unlicensed carried over instrument lender as if it required the lender to appoint another licensee or registered person to engage in a credit activity, as described in paragraph 74(2)(b), on behalf of the lender no later than 15 business days after the previous appointment ceased; and (b) section 75 applies to the prescribed unlicensed carried over instrument lender in relation to the appointment. Obligation if person ceases to be prescribed unlicensed carried over instrument lender 75B (1) If a person is a prescribed unlicensed carried over instrument lender because a matter mentioned in subsection 5A(1) applies to the person and the matter ceases to apply to the person, the person must lodge with ASIC a notice, in an approved form and no later than 15 business days after the day on which the matter ceases to apply to the person, that the matter has ceased to apply to the person. Civil penalty: 2,000 penalty units. 75B (2) Offence A person commits an offence if: (a) the person is subject to a requirement under subsection (1); and (b) the person engages in conduct; and (c) the conduct contravenes the requirement. Criminal penalty: 25 penalty units, or 6 months imprisonment, or both. 75B (3) Strict liability offence A person commits an offence if: (a) the person is subject to a requirement under subsection (1); and (b) the person engages in conduct; and

(c) the conduct contravenes the requirement. Criminal penalty: 10 penalty units. 75B (4) Subsection (3) is an offence of strict liability. Note: For strict liability, see section 6.1 of the Criminal Code.

Lodgement obligation for licensee or registered person acting on behalf of prescribed unlicensed carried over instrument lender 76 (1) If a licensee or registered person is appointed by a prescribed unlicensed carried over instrument lender to act on the lender’s behalf, the licensee or registered person must lodge with ASIC a notice, in an approved form, of the appointment no later than 15 business days after the appointment. Civil penalty: 2,000 penalty units. 76 (2) Offence A person commits an offence if: (a) the person is subject to a requirement under subsection (1); and (b) the person engages in conduct; and (c) the conduct contravenes the requirement. Criminal penalty: 25 penalty units, or 6 months imprisonment, or both. 76 (3) Strict liability offence A person commits an offence if: (a) the person is subject to a requirement under subsection (1); and [page 965] (b) the person engages in conduct; and (c) the conduct contravenes the requirement. Criminal penalty: 10 penalty units. 76 (4) Subsection (3) is an offence of strict liability.

Note: For strict liability, see section 6.1 of the Criminal Code. [item 2.39 am SLI 137 of 2010 reg 3 and Sch 1[41]–[46], eff 19 June 2010; SLI 185 of 2010 reg 3 and Sch 1[5]-[14], eff 1 July 2010; SLI 303 of 2010 reg 3 and Sch 1[31]–[35], eff 26 Nov 2010]

Part 2-4 2.39B omit [item 2.39B insrt SLI 137 of 2010 reg 3 and Sch 1[47], eff 19 June 2010]

Part 2-5, heading 2.39C substitute Part 2-5 — Financial records and audit reports [item 2.39C insrt SLI 137 of 2010 reg 3 and Sch 1[47], eff 19 June 2010]

Section 87 2.40 omit [item 2.40 subst SLI 137 of 2010 reg 3 and Sch 1[48], eff 19 June 2010]

Subsection 88(1) 2.40A omit A licensee insert An unlicensed carried over instrument lender [item 2.40A insrt SLI 137 of 2010 reg 3 and Sch 1[48], eff 19 June 2010]

Subsection 88(1) 2.40B omit licensee. insert lender. [item 2.40B insrt SLI 137 of 2010 reg 3 and Sch 1[48], eff 19 June 2010]

[page 966]

Paragraph 88(2)(c) 2.40C omit [item 2.40C insrt SLI 137 of 2010 reg 3 and Sch 1[48], eff 19 June 2010]

Subsection 88(4) 2.40D omit A licensee insert An unlicensed carried over instrument lender [item 2.40D insrt SLI 137 of 2010 reg 3 and Sch 1[48], eff 19 June 2010]

Subsection 88(4) 2.40E omit licensee. insert lender. [item 2.40E insrt SLI 137 of 2010 reg 3 and Sch 1[48], eff 19 June 2010]

Sections 90 to 92 2.41 omit each mention of licensee insert unlicensed carried over instrument lender

Section 94, heading 2.42 substitute 94 Financial records taken to be made with unlicensed carried over instrument lender’s authority

Section 94 2.43 omit licensee. [page 967] insert unlicensed carried over instrument lender.

Subsection 95(1) 2.44 omit A licensee insert An unlicensed carried over instrument lender

Subsection 96(2) 2.45 omit each mention of licensee insert unlicensed carried over instrument lender

Part 2-5, Division 3 2.46 omit

Subsection 102(1) 2.47 substitute (1) An auditor (the auditor) who prepares an audit report required under subsection 49(3) or 49(3A) in relation to an unlicensed carried over instrument lender has a right of access at all reasonable times to the financial records or other credit books of the lender for purposes relating to the audit report. [item 2.47 am SLI 137 of 2010 reg 3 and Sch 1[49], eff 19 June 2010]

Subsections 102(2) and (3) 2.48 omit each mention of licensee insert unlicensed carried over instrument lender

Section 103 2.49 omit each mention of [page 968] licensee insert unlicensed carried over instrument lender

Paragraph 104(1)(b) 2.50 omit licensee insert unlicensed carried over instrument lender

Paragraph 104(2)(a) 2.51 omit licensee to meet the licensee’s obligations as a licensee; or insert unlicensed carried over instrument lender to meet its obligations under section 47 or the National Credit Code; or

Paragraph 104(2)(b)

2.52 substitute (b) constitutes or may constitute a contravention of section 47 or Division 2; or [item 2.52 subst SLI 137 of 2010 reg 3 and Sch 1[50], eff 19 June 2010; am SLI 185 of 2010 reg 3 and Sch 1[15], eff 1 July 2010]

Section 105 2.53 omit each mention of licensee insert unlicensed carried over instrument lender

Paragraph 106(b) 2.53A omit [item 2.53A insrt SLI 137 of 2010 reg 3 and Sch 1[51], eff 19 June 2010]

2.54 [item 2.54 rep SLI 137 of 2010 reg 3 and Sch 1[52], eff 19 June 2010] [page 969]

2.55 [item 2.55 rep SLI 137 of 2010 reg 3 and Sch 1[52], eff 19 June 2010] COMMENTARY ON SCHEDULE 2 [S2.05] Modifications for UCOI lenders Schedule 2 of the regulations details the modifications to the NCCP Act that are applicable only to a carried over instrument lender where reg 25E applies. Refer to [R25E.05] for commentary on reg 25E.

[page 971]

SCHEDULE 3 MODIFICATIONS — SPECIAL PURPOSE FUNDING ENTITY (regulation 25G) [Sch 3 insrt SLI 137 of 2010 reg 3 and Sch 1[53], eff 19 June 2010]

Section 5, after definition of contravention 3.1 insert court has the same meaning as it has in Part 4-3.

Section 5, after definition of function 3.2 insert fund raising special purpose entity means a body corporate or trust that: (a) has the sole purpose of raising funds in order to be: (i)

a credit provider for a credit contract; or

(ii) a lessor for a consumer lease; and (b) raises funds from persons other than natural persons; and (c) only engages in credit activities as a credit provider under a credit contract or a lessor under a consumer lease; and (d) does not have any employees; and (e) is not a licensee or registered person.

Section 5, after definition of registered company auditor 3.3 insert registered person has the meaning given by section 4 of the Transitional Act.

Section 5, after definition of representative 3.4 insert securitisation entity means a body corporate or trust that: (a) carries on a business consisting of managing by way of a securitisation transaction some or all of the economic risk associated with assets, liabilities or investments (whether the body corporate or trust assumes the risk from another person or creates the risk itself); and (b) is an insolvency remote special purpose funding entity according to the criteria of an internationally recognised rating agency that are applicable to the circumstances of the body corporate or trust (regardless of whether the agency has determined that the body corporate or trust satisfies the criteria); and

[page 972] (c) raises substantially all of its funds by issuing securitisation products on terms that the funds raised would be applied to the business mentioned in paragraph (a); and (d) is a credit provider under a credit contract or a lessor under a consumer lease. securitisation product means a debt instrument or an interest in a managed investment scheme (within the meaning of section 9 of the Corporations Act 2001). servicing agreement means an agreement: (a) that is between: (i)

a special purpose funding entity; and

(ii) a licensee or registered person; and (b) under which the licensee or registered person, on behalf of the special purpose funding entity, performs obligations, or exercises the rights of: (i)

a credit provider in relation to a credit contract or proposed credit contract; or

(ii) a lessor in relation to a consumer lease or proposed consumer lease; or (iii) a mortgagee in relation to a mortgage or proposed mortgage; or (iv) a person who is a beneficiary of a guarantee or proposed guarantee in relation to the guarantee or proposed guarantee. special purpose funding entity means a fund raising special purpose entity or a securitisation entity. [item 3.4 am SLI 137 of 2010 reg 3 and Sch 1[16], eff 1 July 2010]

Subsection 29(4) 3.5 omit

Subsection 45(1), including the subheading 3.6 substitute (1) ASIC may impose, vary or revoke conditions on licensee who is party to a servicing agreement ASIC may, at any time: (a) impose conditions or additional conditions on a licensee who is a party to a servicing agreement with a special purpose funding entity, including a condition requiring the licensee to cease engaging in a credit activity on behalf of a special purpose funding entity; and (b) vary or revoke conditions imposed on the licensee.

Section 46 3.7 omit

Before section 74 3.8 insert in Division 4

[page 973] Definitions for this Division 74A In this Division: represented person means a special purpose funding entity that is exempt from the requirement to be licensed under the Credit Act or exempt from the requirement to be registered under the Transitional Act. representative includes a licensee or registered person who is a party to a servicing agreement with a special purpose funding entity.

Section 74 3.9 omit licensee insert represented person

Section 75, heading 3.10 substitute 75 Responsibility if representative of only one represented person

Section 75 3.11 omit each mention of licensee insert represented person

Section 76, heading 3.12 substitute 76 Representatives of multiple represented persons

Subsections 76(1) and (2) 3.13 omit each mention of licensee insert represented person

[page 974]

Subsection 76(2) 3.14 omit licensees insert represented persons

Paragraph 76(3)(a) 3.15 omit licensees insert represented persons

Paragraph 76(3)(c) 3.16 substitute (c) the conduct is within the authority of: (i)

only one of those represented persons (the authorising represented person); or

(ii) 2 or more of those represented persons (the authorising represented persons);

Paragraph 76(3)(d) 3.17 omit authorising licensee insert authorising represented person

Paragraph 76(3)(d)

3.18 omit licensee insert represented person

Paragraph 76(3)(e) 3.19 omit

[page 975] authorising licensees insert authorising represented persons

Section 77 3.21 omit each mention of licensee insert represented person

Section 78 3.22 omit each mention of licensee insert represented person

Subsection 78(2) 3.23 omit licensees insert represented persons

Section 112 3.24 substitute Application of this Part 112 This Part does not apply in relation to credit assistance provided by a licensee or registered person in relation to a credit contract if: (a) a special purpose funding entity is or will be the credit provider under the contract; and (b) the licensee or registered person is party to a servicing agreement with the special purpose funding entity. [item 3.24 am SLI 303 of 2010 reg 3 and Sch 1[36] and [37], eff 26 Nov 2010]

Section 125 3.25 substitute

[page 976] Definition for this Part 125 In this Part: licensee means a licensee or registered person.

Subsection 126(1) 3.26 substitute (1) As soon as practicable after it becomes apparent to an exempt special purpose funding entity that it is likely to enter a credit contract with a consumer who will be the debtor under the contract, the entity must take reasonable steps to ensure that the licensee who is a party to a servicing agreement with the entity gives the consumer the licensee’s credit guide in accordance with subsection (2). Civil penalty: 2,000 penalty units. [item 3.26 am SLI 143 of 2011 reg 3 and Sch 2[19], eff 1 Oct 2011]

Subsection 127 (1) 3.27 substitute (1) If an exempt special purpose funding entity has been assigned any rights or obligations of a credit provider under a credit contract and the licensee is acting on behalf of the entity, the entity must take reasonable steps to ensure that the licensee: (a) gives the debtor under the contract the licensee’s credit guide in accordance with subsection (2); and (b) gives the credit guide to the debtor as soon as practicable after the entity has been assigned the rights or obligations. Civil penalty: 2,000 penalty units. [item 3.27 am SLI 143 of 2011 reg 3 and Sch 2[19], eff 1 Oct 2011]

Section 128 3.28 omit A licensee insert An exempt special purpose funding entity [item 3.28 subst SLI 143 of 2011 reg 3 and Sch 2[20], eff 1 Oct 2011]

Section 128 3.28A omit the licensee insert the exempt special purpose funding entity [item 3.28A insrt SLI 143 of 2011 reg 3 and Sch 2[20], eff 1 Oct 2011]

[page 977]

Section 129 3.29 omit each mention of licensee insert exempt special purpose funding entity [item 3.29 am SLI 143 of 2011 reg 3 and Sch 2[21], eff 1 Oct 2011]

Section 130 3.30 omit each mention of licensee insert exempt special purpose funding entity [item 3.30 am SLI 143 of 2011 reg 3 and Sch 2[21], eff 1 Oct 2011]

Section 131 3.31 omit each mention of licensee insert exempt special purpose funding entity [item 3.31 am SLI 143 of 2011 reg 3 and Sch 2[21], eff 1 Oct 2011]

Section 132 3.32 omit each mention of licensee insert exempt special purpose funding entity [item 3.32 am SLI 143 of 2011 reg 3 and Sch 2[21], eff 1 Oct 2011]

Section 133 3.33 omit each mention of licensee insert exempt special purpose funding entity [item 3.33 am SLI 143 of 2011 reg 3 and Sch 2[21], eff 1 Oct 2011]

[page 978]

Section 134 3.34 omit

Section 135 3.35 substitute Application of this Part 135 This Part does not apply in relation to credit assistance provided by a licensee or registered person in relation to a consumer lease if: (a) an exempt special purpose funding entity will be the lessor under the lease; and (b) the licensee or registered person is party to a servicing agreement with the exempt special purpose funding entity. [item 3.35 am SLI 143 of 2011 reg 3 and Sch 2[22]–[23], eff 1 Oct 2011]

Section 148 3.36 substitute Definition for this Part 136 In this Part: licensee means a licensee or registered person.

Subsection 149(1) 3.37 substitute (1) As soon as practicable after it becomes apparent to an exempt special purpose funding entity that a licensee with whom it has a servicing agreement is likely to enter a consumer lease with a consumer who will be the lessee under the lease, the entity must take reasonable steps to ensure that the licensee gives the consumer the licensee’s credit guide in accordance with subsection (2). Civil penalty: 2,000 penalty units. [item 3.37 am SLI 143 of 2011 reg 3 and Sch 2[24], eff 1 Oct 2011]

Subsection 150(1) 3.38 substitute (1) If an exempt special purpose funding entity has been assigned any rights or obligations of a lessor under a consumer lease and a licensee is acting on behalf of the entity, the entity must take reasonable steps to ensure that the licensee: (a) gives the lessee under the lease the licensee’s credit guide in accordance with subsection (2); and

[page 979] (b) gives the credit guide to the lessee as soon as practicable after the entity has been assigned the rights or obligations. Civil penalty: 2,000 penalty units. [item 3.38 am SLI 143 of 2011 reg 3 and Sch 2[24], eff 1 Oct 2011]

Section 151 3.39 omit A licensee insert An exempt special purpose funding entity [item 3.39 subst SLI 143 of 2011 reg 3 and Sch 2[25], eff 1 Oct 2011]

Section 151 3.39A omit the licensee insert the exempt special purpose funding entity [item 3.39 insrt SLI 143 of 2011 reg 3 and Sch 2[25], eff 1 Oct 2011]

Section 152 3.40 omit each mention of licensee insert exempt special purpose funding entity [item 3.40 am SLI 143 of 2011 reg 3 and Sch 2[26], eff 1 Oct 2011]

Section 153 3.41 omit licensee insert special purpose funding entity

Section 154 3.42 omit each mention of

[page 980] licensee insert special purpose funding entity

Section 155 3.43 omit each mention of licensee insert special purpose funding entity

Section 156 3.44 omit licensee insert special purpose funding entity

After section 159 3.45 insert Application of this Part 159A This Part does not apply in relation to a licensee or registered person who is authorised by a credit provider or lessor to collect repayments if: (a) the credit provider or lessor is a special purpose funding entity; and (b) the licensee or registered person is party to a servicing agreement with the special purpose funding entity. [item 3.45 am SLI 303 of 2010 reg 3 and Sch 1[38] and [39], eff 26 Nov 2010]

COMMENTARY ON SCHEDULE 3 [S3.05] Modifications for securitisation Schedule 3 of the regulations details the modifications to the NCCP Act applicable to a special purpose funding entity (being a fund raising special purpose entity or a securitisation entity) or an Australian Credit Licence holder or registered person who is a party to a servicing agreement with a special purpose funding entity where reg 25G applies. This schedule includes new defined terms “fund raising special purpose entity”, “securitisation entity” and “servicing agreement”. This schedule modifies s 45(1) of the NCCP Act so that it provides that ASIC may at any time vary or revoke conditions, or impose conditions on an Australian Credit Licence holder who is a party to a servicing agreement with a special purpose funding entity, including a condition requiring the Australian Credit Licence holder to cease engaging in a credit activity on behalf of a special purpose funding entity. Refer to [R25G.05] for commentary on reg 25G. [page 981] [S3.10] The National Consumer Credit Protection Amendment Regulations 2011 (No 4) amended terminology in Sch 3 to ensure internal consistency:

“special purpose” was changed to “exempt special purpose”; and “licensee” was changed to “exempt special purpose funding entity” (for the purposes of ss 128 and 151 of the NCCP Act).

[page 983]

SCHEDULE 4 MODIFICATIONS — RESPONSIBLE LENDING CONDUCT (regulation 28M) [Sch 4 insrt SLI 333 of 2011 reg 3 and Sch 1[2], eff 1 Jan 2011]

Subsection 5(1), definition of licensee 1 substitute licensee means: (a) a person who holds a licence; or (b) a person who has applied for a licence before 1 January 2011 in an application on which ASIC has not made a decision.

After paragraph 114(1)(e) 4.2 insert (ea) the licensee is not required to give the consumer a quote in the circumstances prescribed by the regulations; and

After subsection 114(2) 4.3 insert (2A) The regulations may prescribe circumstances where a licensee is not required to give the consumer a quote in accordance with subsection (2).

After subsection 114(4) 4.4 insert (4A) No demanding payment if no quote given The licensee must not request or demand payment of an amount for the licensee’s credit assistance if the licensee has not given the consumer a quote in accordance with subsection (2). Civil penalty: 2,000 penalty units.

Paragraph 121(2)(e) 4.5 omit made. insert made;

[page 984]

After paragraph 121(2)(e) 4.6 insert (f)

any other information prescribed by the regulations.

After subsection 121(3) 4.7 insert (3A) The regulations may prescribe information that need not be included in the credit proposal disclosure document, despite subsection (2).

After paragraph 137(1)(d) 4.8 insert (da) the licensee is not required to give the consumer a quote in the circumstances prescribed by the regulations; and

After subsection 137(2) 4.9 insert (2A) The regulations may prescribe circumstances in which a licensee is not required to give the consumer a quote in accordance with subsection (2).

After subsection 137(4) 4.10 insert (4A) No demanding payment if no quote given The licensee must not request or demand payment of an amount for the licensee’s credit assistance if the licensee has not given the consumer a quote in accordance with subsection (2). Civil penalty: 2,000 penalty units.

Paragraph 144(2)(d) 4.11 omit lease. insert lease;

[page 985]

After paragraph 144(2)(d) 4.12 insert (e) any other information prescribed by the regulations.

After subsection 144(3) 4.13 insert (3A) The regulations may prescribe information that need not be included in the lease proposal disclosure document, despite subsection (2).

COMMENTARY ON SCHEDULE 4 [S4.05] Modifications to responsible lending conduct Schedule 4 of the NCCP Regulations deals with the modifications to the NCCP Act applicable to responsible lending conduct where reg 28M applies. Refer to [R28M.05] for commentary on reg 28M. [S4.10] Importantly, cl 4.1 extends the definition of “licensee” in s 5(1) of the NCCP Act to include both those persons in possession of an ACL and persons who have applied for an ACL before 1 January 2011 on which ASIC is yet to make a determination. The Explanatory Statement explains that the extended definition is intended to enable an ACL applicant to rely on conditional transitional arrangements and exemptions introduced by the amendment regulations. [S4.15] Additionally, the Explanatory Statement explains that cll 4.2 to 4.13 operate to “modify the requirements in the NCCP Act so as to enable reg 28C to have effect in relation to both contracts and consumer leases”. Refer to [R28C.05] for commentary on reg 28C. Notably, clauses 4.4 and 4.10 create offences with civil liability where a demand for payment from a consumer has been made without a quote having been provided to the consumer prior to the consumer deciding whether or not to use the services. The offences in cll 4.4 and 4.10 are consistent with those in ss 114(4) and 137(4) of the NCCP Act.

[page 987]

SCHEDULE 5 KEY FACTS SHEETS (regulation 28LB) [Sch 5 insrt SLI 165 of 2011 reg 3 and Sch 1[3], eff 1 Jan 2012]

Part 1 — Model of Key Facts Sheets [Pt 1 am SLI 117 of 2012 reg 3 and Sch 1[3]–[6], eff 19 June 2012]

This Key Facts Sheet is an Australian Government requirement under the National Consumer Credit Protection Act 2009 KEY FACTS ABOUT THIS HOME LOAN

Date produced: [date]

[lender logo] Australian credit licence number: [lender’s ACL number]1

THIS IS NOT AN OFFER OF CREDIT. This Key Facts Sheet is provided to help you compare this home loan with the home loans of other lenders.

What you have told us Loan Amount: [loan amount] Term of the home [loan term] loan: [fixed or variable]2 [lender and product name] Interest type: Lender and product name: HOW DOES THIS HOME LOAN COMPARE?

Description of this home loan Repayment method Principal and interest3 Repayment Monthly (other repayment options are available)4 5[variable interest rate] per annum frequency Interest rate [fixed interest rate] per annum fixed for [number]

Personalised comparison rate: (interest rate including fees)

years, then a variable rate currently [variable interest rate] per annum [variable interest rate] per annum variable for [number] years, then a [*fixed/*variable/*discount interest rate] per annum * Delete whichever is not applicable [*fixed/*variable] [introductory interest rate] per annum for [number] years, then a variable rate currently [variable interest rate] per annum * Delete whichever is not applicable [Personalised comparison rate] per annum6 [page 988]

Estimated cost of this home loan Total amount to be paid back (including the loan amount and fees) This means you will pay back Establishment fees Ongoing fees

10Repayment

per month (including ongoing fees)

10Repayment

per year (including ongoing fees)

10Repayment

per month for first [number]15 years (including ongoing fees) 10Repayment per year for first [number]15 years (including ongoing fees) 10Repayment per month after [number]15 years

[repaid amount]7 [amount] for every $1 borrowed8 [establishment fees]9 [monthly fees]11 per month [annual fees]12 per year [monthly repayment]13 [yearly repayment]14 [monthly repayment]13 [yearly repayment]14 [monthly

(including ongoing fees) 10Repayment per year after [number]15 years (including ongoing fees)

repayment]13 [yearly repayment]14

There may be circumstances in which other fees are payable. Fees applicable for the loan you apply for will be shown in the loan contract. You can also obtain a list of fees applicable to this type of loan from our branches16 or through our website at [lender’s website]. Other loan set-up fees, such as valuation fees16A and lender’s mortgage insurance, and Government charges, such as registration fees and stamp duty on property transfer, have not been included. These will be determined after application. Additional fees may be payable if you choose to repay your fixed rate home loan early.17

18What

happens at the end of the fixed rate period? At the end of the fixed rate period you may be able to fix the rate at a new fixed interest rate for a further period. If a further fixed rate is not entered into, the rate will convert to the applicable variable interest rate. Under the current variable interest rate, if interest rates do not change, your monthly repayment would [increase/decrease] by around [change in repayment].19 At the end of the fixed rate period, the rate will convert to the applicable variable interest rate. Under the current variable interest rate, if interest rates do not change, your monthly repayment would [increase/decrease] by around [change in repayment].19 18What

happens if interest rates increase? This is a variable rate loan. If your interest rate was to increase by 1% per annum, your monthly repayment would increase by around [change in repayment 2].19 [page 989]

This is a fixed rate loan. Your repayments will not change during the fixed rate period. After the fixed rate period, if the variable interest rate was to increase by 1% per annum, from the current variable interest rate of [variable interest rate], your monthly repayment would increase by around [change in repayment].19

How can I repay my loan faster? This loan allows you to make additional repayments to pay off your home loan faster. If you increased your monthly repayments by $200 a month to [monthly repayment + $200] you would repay the loan in [new loan term], instead of [loan term], based on the current variable interest rate stated in this Key Facts Sheet. 19 This loan allows you to make additional repayments to pay off your loan faster but such repayments may attract a fee. You should ask your lender about the fee before making additional repayments.19 This loan does not allow you to make additional repayments to pay off your home loan faster.19 Altering the frequency of repayments may also help repay the loan faster. How to find the best deal for you To obtain the best deal for you, it is important to shop around and compare interest rates, fees and features before you apply for a home loan. Choosing the best home loan for you may save you money. For more information about how to get the best deal on your home loan visit the ASIC consumer website at www.moneysmart.gov.au. FURTHER INFORMATION ABOUT THIS KEY FACTS SHEET Which home loan is right for you? When choosing a home loan, it’s important to work out what you want from your loan and how much it will cost you. Given the wide range of loans on offer — with different interest rates, product features and fees — it pays to shop around to find the loan that fits your needs and circumstances. Some loans offer features that may be appropriate for your situation and result in savings over the life of the loan. Some features you may wish to consider include: ability to split your loan between fixed and variable interest rates; ability to make extra repayments; an offset account; a redraw facility; and linked credit card and savings accounts. But compare the costs and benefits of these features before you agree to them. For more information on choosing the right home loan for you, you may also wish to visit the ASIC consumer website at www.moneysmart.gov.au.

Where can I find out more about this loan? If you want more information on the terms used in this document or about this home loan, please contact us [lender’s contact details], or visit our website at [lender’s contact website]. This Key Facts Sheet is an Australian Government requirement. The Australian Government requires all lenders selling standard home loans to give you a Key Facts Sheet like this one when you ask for one and provide the necessary information. Key Facts Sheets contain information presented in the same way to help you compare and select the most appropriate home loan for you. You should request Key Facts Sheets when shopping around for a home loan to help you find the home loan that is right for you.

[page 990] This Key Facts Sheet is not an offer of credit. The lender is not obliged to provide you with the home loan described in this Key Facts Sheet. You will need to apply for the loan and meet our lending criteria before we can determine whether you are eligible for this loan. You should also be aware: the interest rates and fees and charges are those that apply as at the date of production of this Key Facts Sheet. the amount required to be paid does not include fees which are dependent on events that may not occur (for example, late payment fees if you do not make repayments on time). the amount of the repayments shown in this Key Facts Sheet will change if interest rates, fees and charges change and if a different loan type, loan term or loan amount is used. What is the personalised comparison rate? The personalised comparison rate helps you understand what the total cost of your home loan might be, taking into account known fees and charges that will apply (other than government fees, charges or duties) by building those costs into the interest rate. It also helps you understand the impact of fixed or introductory rates of interest on the total amount of interest you could pay over the life of the loan.

Part 2 — Information about preparing a Key Facts Sheet [Pt 2 am SLI 201 of 2011 reg 3 and Sch 1[4] and [5], eff 1 July 2012; SLI 117 of 2012 reg 3 and Sch 1[7] and [8], eff 19 June 2012] Notes in model of Key Facts Sheet 2.1 A lender that prepares a Key Facts Sheet for a particular consumer must include the following information at the numbers marked in the model in Part 1: 1

If the lender is an ACL holder — this is the lender’s ACL number. If the lender is not an ACL holder, no ACL number is required. However, the lender must disclose that the credit provider’s ACL will be provided in the credit contract. The lender is exempted from the requirement to set out its ACN or ABN in

subsection 153(2) of the Corporations Act 2001 on the Key Facts Sheet. 2

This must be an interest type in the table in regulation 28LA. If a fixed loan is specified, the term of the fixed rate period must also be indicated.

3

Under regulation 28LA, the repayments under the home loan must repay principal and interest for the full term of the loan.

4

The repayment frequency must be based on monthly repayments.

5

This is the current interest rate applicable to the loan on the date on which the Key Facts Sheet is produced. If discounts to this interest rate apply, the discount and the period in which it will apply must also be disclosed here. Only one of the 4 paragraphs in this box is required. Omit the paragraphs that do not apply to the loan this Key Facts Sheet relates to. A licensee may replicate this item if more than 1 discount period applies

6

This rate must be calculated in accordance with the formula in subregulation 100(3) but using the designated amounts provided by the consumer under sections 133AC and 133AD of the Act. This rate includes each fee or charge (if any) payable by the debtor at the time each repayment is made, being a credit fee or charge (other than a government fee, charge or duty) that is ascertainable when the comparison rate is disclosed (whether or not the credit fee or charge is payable if the credit is not provided). The tolerances in subregulations 100(4), (5) and (6) also apply to this rate.

[page 991] 7

This is the sum of the principal and all interest and fees certain to be payable over the life of the home loan. The fees include each fee or charge (if any) payable by the debtor at the time each repayment is made, being a credit fee or charge (other than a government fee, charge or duty) that is ascertainable when the comparison rate is disclosed (whether or not the credit fee or charge is payable if the credit is not provided).

8

This is the total amount to be paid back, divided by the loan amount, expressed as a dollar amount for every dollar borrowed.

9

These are the fees and charges, paid to the lender on the commencement of the loan, used for the purpose of calculating the Personalised Comparison Rate.

10

If the home loan is a variable rate loan or a fixed rate loan with a term that expires at the end of the fixed rate period, only the first 2 sections (‘Repayment per month (including ongoing fees)’ and ‘Repayment per year (including ongoing fees)’) are required. If the home loan is any other type of standard home loan, the remaining sections are required.

11

This is any fee paid each month to the lender on a regular and ongoing basis.

12

This is any fee paid each year to the lender on a regular and ongoing basis. It does not include the monthly ongoing fee in note 11.

13

This is the sum of amounts payable per month on the home loan and any fees paid to the lender that are charged in that month.

14

This is the sum of the amounts payable per year on the home loan and any fees paid to the lender that are charged during the year.

15

This is the length of the fixed rate period for fixed loans, the length of the discount rate period for introductory rate loans, and the length of the period before the discounted rate applies for discounting rate loans.

16

The reference to the lender’s branches in this sentence may be removed if not applicable.

16A Omit the reference to valuation fees if: (a) a credit provider charges a valuation fee in all cases; and (b) the amount of the valuation fee is included in the amount for establishment fees mentioned in the Key Fact Sheet. 17

Only include if break fees are payable on the loan.

18

Omit this section if: (a) the interest rate will be fixed for the entire term of the loan; or (b) the loan is a variable rate loan for which a fixed interest rate component is not available after the initial fixed rate period expires.

19

Only one of these paragraphs is required. Omit the paragraph that does not apply to the loan this Key Facts Sheet relates to.

Assumptions 2.2 The tolerances and assumptions under section 180 of the Code apply to the calculation of any amounts in this Key Facts Sheet. Publication online 2.3 If a Key Facts Sheet is published online, links must be provided to the websites mentioned in the Key Facts Sheet. Adopting the Key Facts Sheet for non-prescribed purposes 2.4 A lender may produce a Key Facts Sheet for home loans if Part 3-2A of the Credit Act does not require the lender to provide a Key Facts Sheet. A lender that provides such a Key Facts Sheet must, to a reasonable extent, comply with the requirements for producing the Key Facts Sheet, but must omit any reference to the production of the Key Facts Sheet being an Australian Government requirement.

[page 992] COMMENTARY ON SCHEDULE 5 [S5.05] See [R28LB.05]. Schedule 5 sets out a model key facts sheet (KFS)

for home loans. The Explanatory Statement to Select Legislative Instrument 2011 No 165 (relating to National Consumer Credit Protection Amendment Regulations 2011 (No 5)) explains as follows with regard to Pt 2 (information to be included in a KFS): Part 2 provides information on preparing a Key Facts Sheet. Paragraph 2.1 provides notes in the model of the Key Facts Sheet. Note 1 explains how the lender’s Australian credit licence number (ACL) is to be disclosed. If the lender is not an ACL holder, no ACL number is required, however the lender must disclose that the credit provider’s ACL number will be provided in the credit contract. The lender does not need to disclose their Australian company number or their Australian business number. Note 2 explains that the type of loan must be either a fixed or variable rate home loan. If a fixed rate loan is specified, then the term of the fixed rate period must also be provided. Note 3 explains that repayments must pay off principal and interest. This is the only repayment method available for loans to which the Key Facts Sheet applies. Note 4 explains that the only repayment frequency available on the Key Facts Sheet are monthly repayments. The product for which the Key Facts Sheet is generated may offer alternative repayment frequencies, such as weekly or fortnightly, but for the purposes of the Key Facts Sheet, calculations will be based on monthly repayments. Note 5 explains how the interest rate is to be disclosed. If the interest rate may change over the term of the loan than this must also be disclosed. For example: For a variable rate loan: 7.09% per annum. For a fixed rate loan: 7.29% per annum fixed for three years, then a variable rate currently 7.09% per annum. For a discount rate loan which discounts 0.2% per annum after the first year: 7.09% per annum for one year, then 6.89% per annum.

For an introductory rate loan which gives a 1.0% per annum discount during the first year: 6.09% per annum for one year, then a variable rate currently 7.09 per annum. Note 6 explains the calculation of the personalised comparison rate. The personalised comparison rate is to be calculated in accordance with the formula in subregulation 100(3) of the Principal Credit Regulations to calculate comparison rates, but using the designated amounts for the loan amount and loan term as provided by the consumer. The fees included in the calculation of the personalised comparison rate are the same as those that would be included in the calculation of a mandatory comparison rate under regulation 100 of the Principal Credit Regulations. That is fees and charges (other than government fees, charges and duty) that are ascertainable at the time the Key Facts Sheet is provided. The tolerances and assumptions used for the calculation of the mandatory comparison rate also apply to the personalised comparison rate in the Key Facts Sheet. Note 7 explains the calculation of the total amount to be paid back. This is the total amount inclusive of all interest and fees to be payable over the life of the loan. It uses the same tolerances and assumptions as those to calculate the personalised comparison rate. [page 993] Note 8 explains that the field entitled “This means you will pay back” is to provide the total amount to be paid back divided by the loan amount. This is expressed as a dollar amount for every dollar borrowed. Note 9 explains that the establishment fee includes fees and charges that are included in the calculation of the personalised comparison rate (in Note 6) which are paid to the lender on the commencement of the loan. Note 10 explains that for a variable rate loan or a fixed rate loan which expires at the end of the fixed rate period, the repayment per month and the repayment per year need to be disclosed. For other loans which may

have changes in the interest rate written into the credit contract, the repayment per month and repayment per year for the initial period before the change in interest rate must be provided along with the repayment per month and repayment per year for the later period under the changed interest rate. Note 11 explains that the monthly repayment is to include the repayment for the month and any fees and charges incurred in that month. Note 12 explains that the yearly repayment is to include the total of all repayments made in that year and all fees and charges incurred in the year. Note 13 explains that the disclosure provided in Note 10 for where there is a change in the interest rate includes the length of time before the change in interest rate occurs. For example, Repayment per month for the first 3 years. Note 14 allows the sentence “Additional fees may be payable if you choose to repay your fixed rate home loan early” to be omitted if break fees are not payable under the home loan. Note 15 allows the box entitled “What happens at the end of the fixed rate period?” to be omitted if the interest rate is variable or will be fixed for the entire term of the loan. Note 16 explains that there are three options to provide the disclosure entitled “How can I repay my loan faster”. The first is for instances where additional repayments are permitted without charge, where the disclosure must include the impact of making $200 more than the minimum repayment a month. The second is where additional repayments are permitted but attract a fee. The third is where no additional repayments are permitted. Paragraph 2.2 allows tolerances and assumptions under section 180 of the National Credit Code to apply to the calculation of amounts for the Key Facts Sheet. Paragraph 2.3 requires Key Facts Sheets that are generated online to provide working links to websites mentioned in the Key Facts Sheet.

Paragraph 2.4 allows lenders who are not required to provide a Key Facts Sheet to provide a Key Facts Sheet if they comply, to a reasonable extent, with the requirements for producing the Key Facts Sheet. Lenders that do so, must omit references to the production of the Key Facts Sheet being an Australian Government requirement. Annexes A to C provide examples of Key Facts Sheets. Annex A provides an example of a Key Facts Sheet for a variable loan of $400,000. Annex B provides an example of a Key Facts Sheet for a fixed loan of $400,000 with a fixed interest rate for 1 year. Annex C provides an example of the reverse side of a Key Facts Sheet.

[page 995]

SCHEDULE 5A REVERSE MORTGAGE INFORMATION STATEMENT regulation 28LE [Sch 5A insrt SLI 85 of 2013 s 4 and Sch 2 item 7, eff 1 June 2013]

[page 996]

COMMENTARY ON SCHEDULE 5A

[S5A.05] Schedule 5A sets out the prescribed reverse mortgage information statement for the purposes of s 5(1) of the NCCP Act (reg 28LE). See commentary on reg 13A. See also [R28LE.05].

[page 997]

SCHEDULE 6 KEY FACTS SHEETS FOR CREDIT CARD CONTRACTS (regulation 28LFA) [Sch 6 insrt SLI 201 of 2011 reg 3 and Sch 1[6], eff 1 July 2012]

Part 1 — Model of Key Facts Sheets [Pt 1 am SLI 117 of 2012 reg 3 and Sch 2[13] and [14], eff 1 July 2012] KEY FACTS ABOUT THIS CREDIT CARD

Correct as at: [date on which Key Facts Sheet is produced]

Lender’s logo and/or name

This information sheet is an Australian Government requirement under the National Consumer Credit Protection Act 2009 DESCRIPTION OF CREDIT CARD

Product name Minimum credit limit Minimum repayments1

Interest on purchases Interest-free period2 Interest on cash advances Promotional interest rate3 Balance transfer interest rate3

[name of credit card product] [minimum credit limit] [minimum repayment or how the minimum repayment will be calculated] [interest rate payable on purchases] [description of interest-free period] [interest payable on cash advances] [promotional interest rate] [interest rate payable on transferred balances and (if applicable) the

number of months for which the rate is applicable] Annual fee [annual fee] Late payment fee [late payment fee] There may be circumstances in which you have to pay other fees. You can only be charged a fee for exceeding your credit limit if you separately agree to being charged that fee4. A full list of current fees applicable to this credit card can be obtained from [web address for lender’s fees page]. For more information on choosing and using credit cards visit the ASIC consumer website at www.moneysmart.gov.au The terms on which this credit card is offered can change over time. You can check if any changes have been made by visiting [web address for lender’s credit card Key Facts Sheet page] or by contacting us on [lender’s contact phone number]5. Notes for using model 1

Minimum repayments may be expressed as amounts or as an explanation of how minimum repayments will be calculated.

2

The expression ‘interest free’ must be used in accordance with section 30B of the Credit Act and the regulations made under that section.

3

This item may be omitted if it is not relevant or applicable to the credit card contract.

[page 998] 4

This sentence may be omitted if it is not relevant or applicable to the credit card contract.

5

The licensee may provide both a web address and a phone number or only one of those contact methods. If the licensee only provides one of those methods, the licensee may omit the phrase that refers to the option that is not provided

Part 2 — Information about preparing a Key Facts Sheet Notes for using model of Key Facts Sheet 2.1 The notes for using the model Key Facts Sheet in Part 1 are to be deleted from a Key Facts Sheet provided to a consumer. Key Facts Sheet for more than one credit card

2.2 A licensee may publish a Key Facts Sheet about more than one credit card in a table format by adding columns to the right of the tables in the model Key Facts Sheet in Part 1. If the licensee does so, the Key Facts Sheet provided to a consumer must enable the consumer to clearly identify or select each credit card for which the consumer is applying. Publication online 2.3 If a Key Facts Sheet is published online, links must be provided to the websites mentioned in the Key Facts Sheet.

COMMENTARY ON SCHEDULE 6 [S6.05] Schedule 6 sets out the key facts sheet for credit card contracts (reg 28LFA). See [R28LFA.05].

[page 999]

SCHEDULE 7 WARNING ABOUT SMALL AMOUNT CREDIT CONTRACTS — WARNING ON PREMISES (subparagraph 28XXA(1)(c)(i)) [Sch 7 insrt SLI 314 of 2012 s 3 and Sch 1[3], eff 1 Mar 2013]

Do you really need a loan today?* It can be expensive to borrow small amounts of money and borrowing may not solve your money problems Check your options before you borrow: For information about other options for managing bills and debts, ring 1800 007 007 from anywhere in Australia to talk to a free and independent financial counsellor Talk to your electricity, gas, phone or water provider to work out a payment plan If you are on government benefits, ask for an advance payment from Centrelink: 13 17 94 Go to www.moneysmart.gov.au — MoneySmart shows you how small amount loans work and suggests other options that may help you. * This statement is an Australian Government requirement under the National Consumer Credit Protection Act 2009.

COMMENTARY ON SCHEDULE 7 [S7.05] Schedule 7 sets out the prescribed warning for small amount credit contracts (SACCs) to be displayed at the premises of an SACC credit provider (reg 28XXA(1)(c)(i)). See commentary on s 23A of the Code. See [R28XXA.05] and [R28XXA.10].

[page 1001]

SCHEDULE 8 FORM OF HYPERLINK (paragraph 28XXB(b)) [Sch 8 insrt SLI 314 of 2012 s 3 and Sch 1[3], eff 1 Mar 2013] Warning about Borrowing

COMMENTARY ON SCHEDULE 8 [S8.05] Schedule 8 sets out the form of the hyperlink for the warning to be on an SACC provider’s website as required by s 28XXB. See commentary on s 23A of the Code. See [R28XXB.05].

[page 1003]

SCHEDULE 9 WARNING ABOUT SMALL AMOUNT CREDIT CONTRACTS — WARNING ON WEBSITES (subparagraph 28XXB(d)(i)) [Sch 9 insrt SLI 314 of 2012 s 3 and Sch 1[3], eff 1 Mar 2013] Do you Really need a loan today?* It can be expensive to borrow small amounts of money and borrowing may not solve your money problems. Check your options before you borrow: For information about other options for managing bills and debts, ring 1800 007 007 from anywhere in Australia to talk to a free and independent financial counsellor Talk to your electricity, gas, phone or water provider to see if you can work out a payment plan If you are on government benefits, ask if you can receive an advance from Centrelink: Phone: 13 17 94 The Government’s MoneySmart website shows you how small amount loans work and suggests other options that may help you. * This statement is an Australian Government requirement under the National Consumer Credit Protection Act 2009.

COMMENTARY ON SCHEDULE 9 [S9.05] Schedule 9 sets out additional requirements for the warning to appear on an SACC credit provider’s website, as required under s 28XXB(d)(i). See commentary on s 23A of the Code. See [R28XXB.05].

[page 1005]

SCHEDULE 10 EMPLOYER AUTHORISATION — PRESCRIBED FORM OF STATEMENT (subregulation 28XXE(2)) [Sch 10 insrt SLI 314 of 2012 s 3 and Sch 1[3], eff 1 Mar 2013]

[Form] Consent to make direct deductions from salary or wages Subsection 160E(2) of the Act [Regulation 28XXC of the Regulations]

TO: (name of employer of debtor/lessee)

(address of employer of debtor/lessee) FROM: (name of credit provider/lessor) (Australian credit licence number) (address of credit provider/lessor) Complete all of the following information (except as indicated) before signing the form Date of first deduction: Date of last deduction: Amount of each deduction:

IMPORTANT YOU CAN CANCEL THIS DEDUCTION REQUEST DIRECTLY WITH YOUR EMPLOYER AT ANY TIME. IF YOU CANCEL THIS DEDUCTION REQUEST YOU WILL BE IN DEFAULT IF YOU DO NOT MAKE ALTERNATIVE ARRANGEMENTS TO MAKE REPAYMENTS. ...................................................................................... (signature of debtor/lessee giving consent) I confirm I have been provided with a copy of this form. ...................................................................................... (signature of debtor/lessee giving consent) ...................................................................................... Date of signing The following information is optional

[page 1006]

INFORMATION TO THE EMPLOYER These arrangements relate to a contract between your employee and a third party. You are not liable for any failure of your employee to make payments to that person. Your employee may ask you to cancel these arrangements at any time or may vary them by completing a new form. ...................................................................................... (signature of employer) ...................................................................................... Date of signing COMMENTARY ON SCHEDULE 10 [S10.05] Schedule 10 sets out the statement form for a document that a credit provider or lessor may use to authorise an employer to pay amounts directly to the credit provider or lessor. Regulation 28XXXE(2) requires the statement form complies with Sch 10. See commentary at [R28XXE.05].

Index References are to paragraph numbers NCC: References to the new National Credit Code (italicised references refer to repealed sections that have been reproduced in this book) NCCP regs: References to the National Consumer Credit Protection Regulations Acceleration clause definition …. [92.05], NCC s 204, [204.01] Enhancement Act, provision repealed by …. [92.01] goods mortgages, for …. [85.35], [104.25] on demand facility, not applicable to …. [92.10] requirements to be met before credit provider can enforce …. NCC s 93(1), [93.05]–[93.35] — acceleration …. [93.10] — amount required to pay out …. [93.20] — case …. [93.35] — effect of clause …. [93.15] — exceptions …. [93.25] — other laws to be satisfied …. [93.30] — reverse mortgaged property, where …. NCC s 93A, [93A.05] explanatory memorandum …. [93A.10] what is …. [92.05] Acceptance offer in credit contract, of …. NCC s 14(2), [21.30] Account

adjustment of debits and credits …. NCC s 39(2), [39.05]–[39.20] — corrections …. [39.20] — liability of credit provider …. NCC s 39(4) credit contract distinguished …. [4.15] date when debit or credit has effect …. NCC s 39(1), [39.05]–[39.20] disputed see Disputed accounts statement of see Statement of account Address for service cancellation of …. NCC s 195(3), [195.20] change of …. NCC s 195(3), [195.20] debtors …. NCC s 195(1), [195.10] other persons …. NCC s 195(2), [195.15] Advertisement application of NCC to …. NCC s 150, [150.01]–[150.45] credit, concerning …. NCC s 150 — ASIC, enforcement by …. [150.03] — balloon payments …. [150.30] — common law …. [150.40] — comparison rate where annual percentage rate stated …. NCC s 160, [160.05]–[160.10], NCCP regs 97, [R97.05] — contravention of requirements …. NCC s 150 recovery of amount of loss by third parties …. NCC s 150(4) — cost of credit …. NCC s 150 annual percentage rates …. NCC s 150(3), [150.15] — defence …. NCC s 152, [152.05]–[152.20] — false or misleading representations …. NCC s 154, [154.05]–[154.35]

— interest-free products …. [150.30] — interest rates, disclosure of …. NCC s 153, [153.05]–[153.30] nominal percentage rate per annum …. [153.20]–[153.25] penalty for non-compliance …. [153.30] — liability for …. NCC s 151(1), [151.05]–[151.30] onus of proof …. [151.30] — management committee guidance …. [150.35] — penalties …. NCC s 150(1), [150.45] — persons liable, intermediaries as agents …. NCC s 199, [199.05]–[199.50] — publish, meaning of …. [150.05] — regulations …. NCC s 150(2), [150.20] — standing committee guidance …. [150.30]–[150.31] definition …. [150.10] false or misleading …. NCC s 154, [154.05]–[154.35] — ASIC guide to …. [150.26] — civil effect …. [154.30] — defence to prosecution …. NCC s 154(2), [154.25] — penalties …. NCC s 154 — similar provisions …. [154.35] intermediaries, liability of credit provider for …. NCC s 199, [199.05]–[199.50] internet and electronic display mediums …. NCC s 164(3), [164.10] radio advertisements …. NCC s 164(3), [164.15] television and electronic display mediums …. NCC s 164(3), [164.10] third parties, recovery of amount of loss by …. NCC s 150(4) Age

debtor, of, effect on guarantor’s liability …. NCC s 60(3), [60.25] matters relating to …. NCC s 218, [218.05] Agents conduct imputed to credit provider …. NCC s 199(1), [199.05]–[199.50] — credit hawking …. NCC s 199, [199.05]–[199.50] — harassment …. NCC s 155, [155.05]–[155.20] — home visits …. NCC s 156, [156.05]–[156.25] offences by …. NCC s 200, [200.05] Agreement changes by consent …. NCC s 71, [71.05]–[71.70] — agreed changes …. [71.10] examples of …. [71.35] — case …. [71.70] — changes other than increase …. [71.20] — comparison rate schedules …. [71.30] — continuing credit contracts …. [71.40] — guarantor liabilities …. [71.50] — increase in credit …. [71.25] — non-continuing credit contracts …. [71.40] — particulars of matters as changed …. NCC s 71(5) — penalties for non-compliance …. [71.60] — reduction in obligations …. [71.15] — refinancing …. [71.55] — top-ups and redraws …. [71.45] merchant service see Merchant service agreement Alteration

consumer lease …. [19.06], NCC s 174A, [174A.05] credit contract, of …. NCC s 19(1), [19.05]–[19.30] — agreed changes …. [19.30] — Electronic Transactions Act …. [19.10] — guarantee, after signing of …. [56.15] — margin, signing or initialling …. [19.15] — presigning …. [19.20] — unilateral changes …. [19.25], NCC s 63, [63.05]–[63.35], NCC s 68 increase in obligations …. [68.10] notice of …. [63.20]–[63.30] particulars of matters as changed …. NCC s 69, [69.05] penalties for non-compliance …. [68.25] reduction in obligations …. [68.15] types of …. [63.20] statement of account, of …. NCC s 34(11), [34.100] Amend definition …. NCC s 204 Amount of credit contract document, to be included in …. NCC s 17(3), [17.20] definition …. NCC s 3(2), [3.35], NCC s 204 — case …. [3.55] — exclusions from …. [3.45] statement of account, information to be included in …. NCC s 34(4), [34.30] unascertainable amounts …. [17.20] Annual cost rate

credit contracts — calculation …. NCC s 32B, [32B.05]–[32B.10] —

prohibitions where [32A.05]–[32A.15]

rate

exceeds

48

….

NCC

s

32A,

history of regulation …. [32A.15] key requirement …. [32A.10] definition …. NCC s 204, [204.03] Annual percentage rate advertisement, specified in see Advertisement contract document, to be included in …. NCC s 17(4), [17.25] credit contract, for — prohibition relating to later increases in rate …. NCC s 32AA, [32AA.05], NCCP regs 79AC explanatory statement regarding …. [R79AC.05] definition …. NCC s 27(1), NCC s 204 fixed, prohibition on unilateral change by credit provider …. [63.35], NCC s 70(1), [70.05] unconscionable change to, power of court to review …. NCC s 78(2), [78.05]–[78.50] — time limit for application …. NCC s 80(2), [80.05] case …. [80.10] ASIC credit contracts — changes to obligations under, application for …. NCC s 79, [79.05]–[79.10] unfair terms regime, concurrent operation …. [79.10] credit excluded by …. NCC s 6(14), NCC s 6(15), [6.60] Assignment

credit provider, by …. NCC s 188, [188.05]–[188.30] — Code, application of …. [188.20] other person, to …. [188.10] — due diligence by incoming person …. [188.25] — legal and equitable assignments …. [188.30] debtor, by …. NCC s 189, [189.05]–[189.15] — sale of mortgaged property …. [189.10] guarantor, by …. NCC s 189, [189.05]–[189.15] mortgaged property, of, by mortgagor …. NCC s 51(1), [51.05]–[51.10] — consent of credit provider to …. NCC s 51(1) conditions on …. NCC s 52(1), [52.05]–[52.10] court authorisation where unreasonably withheld …. NCC s 51(3) mortgagor, by …. NCC s 189, [189.05]–[189.15] — sale of mortgaged property …. [189.10] Australian credit licence see Credit licence Australian Securities and Investment Commission see ASIC Authorised Deposit-taking Institutions (ADIs) credit provider licensee obligations, exemption for …. NCCP regs 24A, [R24A.05] exemption from Code …. NCCP regs 58, [R58.05] Balance opening and closing — information to be included in statement of account …. NCC s 34(3), [34.25] — previous statement, opening balance not to exceed closing balance of …. NCC s 35(1), [35.05] key requirement …. [35.10]

unpaid see Unpaid balance Beneficiary credit provided by trustee to, application of Code …. NCC s 6(10), [6.45] Bill of exchange credit provided under, application of Code to …. NCC s 6(7), [6.30] postdated, prohibition on payment for goods or services by …. NCC s 141(1), [141.05] — penalty …. [141.10] Breach mortgage, of see Mortgage sale contract, of see Sale contract Business day definition …. [182.20], NCC s 204 Business purpose declaration consumer leases, for …. [172.10] — lessor’s reliance on …. [172.15] — penalty for inducement to make false or misleading …. [172.25] — substantially in the form …. [172.20] credit, for …. [13.15], [R67.05] — false declaration judicial consideration …. [13.28] penalties for …. [13.55] — form of …. NCC s 13(4), [13.40], NCCP regs 68, [R68.05], [R68.10] — ineffective, consequences of …. [13.20] — knowledge of credit provider relating to …. NCC s 13(3), [13.15], [13.16], [R67.05] “knew, or had reason to believe” …. [13.35]

— prescribed person in relation to …. [13.30], NCCP regs 67 — presumption created by …. [13.06] nature of …. [13.07], [13.08] — signing …. [13.45] suggested approach …. [13.27] time for …. [13.26] — time for …. [13.25] Canvassing credit, of, at home …. NCC s 156(1), [156.05]–[156.25] — penalty for breach …. [156.25] — person who resides there …. [156.15] — place of residence …. [156.10] — prior arrangement …. [156.20] — scope of prohibition …. [156.05] Cash price definition …. [9.15], NCC s 204 lowest price under credit contract, definition …. NCC s 204 Charge credit see Credit fees and charges interest see Interest charges Civil penalty see Penalty Clause acceleration see Acceleration clause Commission consumer credit insurance, for …. NCC s 145, [145.05]–[145.25] — limit …. NCC s 145(2), [145.10]–[145.15]

— penalty …. [145.25] — regulation of …. NCC s 145(2) credit provider, paid by or to, information in contract regarding …. NCC s 17(14), [17.75] — non-compliance …. [17.75] definition …. [17.75], [145.20], NCC s 204 scope of …. [17.75] Comparison rate annual percentage rate stated, where …. NCC s 160, [160.05]–[160.10], NCCP regs 97, [R97.05] — computer display or printout …. [160.10] — conflicting provisions …. [R71.15] calculation of …. [157.25], NCC s 166(1), [166.05], NCCP regs 100, [R100.05] — approximations …. [R100.30] — conflicting provisions …. [R71.15] — fees and charges …. [166.05], [R100.15] — formula …. [R100.06] — Government fees and charges …. [R100.25] — products priced for risk …. [R100.10] — valuation fees …. [R100.20] compliance grace period following changes in interest or fees …. NCC s 167, [167.05] consumer credit product …. [157.45], NCC s 159, [159.10] — case law …. [159.15] — name of product …. [159.35] — ordinary meaning …. [159.20]

— relevance under Code …. [159.25] continuing credit contracts, not applicable to …. NCC s 158, [158.05] credit advertisement …. NCC s 159 credit contracts, provision to debtors under …. NCC s 16(3) definition …. [150.01], [157.10] documents other than credit advertising, in …. NCC s 165, [165.05] example …. [157.15] history …. [157.20] mandatory …. NCC s 157 overview of regime …. [157.05], [157.30] Pt 10 NCC or Pt 9A UCCC — exemptions …. NCC s 168, [168.05] — provisions …. NCC ss 157–168 — relevant comparison rate …. NCC s 161 precontractual statement …. [16.40], NCCP regs 71, [R71.10] — application …. [R71.15] — assumptions …. [R71.10] — conflicting provisions …. [R71.15] relevant rate …. NCC s 161, [161.05] requirements …. NCC s 162, [162.05], NCC s 164, [164.05] — information about whether relating to secured loan …. NCCP regs 98, [R98.05] — internet and electronic display mediums …. NCC s 164(3), [164.10] — radio advertisements …. NCC s 164(3), [164.15] — television and electronic display mediums …. NCC s 164(3), [164.10] schedules in UCCC …. [157.40]

warnings about accuracy of …. NCC s 163, [163.05], NCCP regs 99, [R99.05] — additional warnings …. [163.10] — duplicated provisions …. [163.20] — potentially conflicting provisions …. [R99.10] — UCCC position …. [163.15] Compensation debtor or guarantor, to, for loss incurred by contravention of key requirement …. NCC s 118(1), [118.05]–[118.40] — case …. [118.25] — court not to make order …. [118.15] — former provisions …. [118.30]–[118.40] — maximum payable …. NCC s 118(2) — preservation of right …. [118.10] debtor or mortgagor, to, where sale of mortgaged goods by credit provider …. NCC ss 86(1), 106(1) Compulsory insurance definition …. [143.10], [146.20], NCC s 204 regulations, approved by …. NCC s 143(1), [143.50] Consent credit provider, of see Credit provider Consumer credit see also Credit advertisements for see Advertisement contract see Credit contract door-to-door hawking see Credit hawking product, meaning of …. [157.45], NCC s 159

responsible lending see Responsible lending conduct Consumer Credit Code see National Credit Code (NCC) Consumer credit insurance see also Credit-related insurance contracts; Insurance ASIC report on …. [142.30] commission see Commission definition …. [142.20], [142.30], [148.15], NCC s 204 false and misleading representations …. NCC s 143(1) legislation regulating …. [204.08] termination of, where termination of credit contract …. NCC s 148(1), [148.05]–[148.25] — life insurance/death benefit …. [148.25] — override insurance contract …. [148.20] — rebate of premium …. NCC s 148(4), [148.10], NCCP regs 94, [R94.05] — relevant insurance …. [148.15] third party payment, as …. [32.20] Consumer lease alteration of lease document …. [19.06], NCC s 174A, [174A.05] amount payable …. NCC s 170(3), [170.15], NCC s 170(3) — tolerances allowed …. NCC s 181, [181.05]–[181.15], NCCP regs 107, [R107.05] business purpose declaration …. [172.10] — lessor’s reliance on …. [172.15] — penalty for inducement to make false or misleading …. [172.25] — substantially in the form …. [172.20] certain transactions not to be treated as new consumer leases …. NCC s

175J, [175J.05] — further provision of goods …. [176.10], NCC s 176 changes to obligations — agreement, by …. NCC s 177A, [177A.05]–[177A.10] — applications by ASIC …. NCC s 177H, [177H.05] — court, by …. NCC s 177D, [177D.05] — court may reopen unjust transactions …. NCC s 177F, [177F.05] criteria …. [177F.15] unjust defined …. [177F.10] — exemption to notice requirements …. [R69A.05]–[R69A.15], NCCP regs 69B — hardship, grounds …. NCC s 177B, [177B.05]–[177B.10] — joinder of parties …. NCC s 177K, [177K.05] — lessor may apply for variation of change …. NCC s 177E, [177E.05] — notice of change …. NCC s 177C, [177C.05] — orders on reopening transactions …. NCC s 177G, [177G.05] — time limit …. NCC s 177J, [177J.05] Code provisions, application of …. [169.05], [177.05]–[177.15], NCC s 179W, [179W.05], NCC s 177

[169.07],

— application of …. NCC s 170, [170.05]–[170.35], NCC s 170 — conditions precedent …. [170.35] — non-application of …. NCC s 171, [171.05], NCC s 171, NCCP regs 102, [R102.05] — presumptions relating to application of …. NCC s 172, [172.05]–[172.25], NCC s 172 prescribed person in relation to declarations …. NCCP regs 103, [R103.05] — right or obligation to purchase, not to be …. [169.25]

— table outlining …. [179W.10] content of …. NCC s 173 copy of, for lessee …. NCC s 175, [175.05]–[175.30], NCC s 175 — information statement …. [175.10] — joint lessees …. [175.25] — multiple lessees …. [175.20] — notice period …. [175.15] — penalty for non-compliance …. [175.30] deferrals and waivers under, whether new consumer lease created …. NCC s 176 definition …. NCC s 169, [169.10], NCC s 169, NCC s 204 disclosures in …. NCC s 174, [174.05]–[174.35], NCC s 174 — ascertainable, whether …. [174.25] — assumptions …. [174.15] — no disadvantage …. [174.30] — penalty for non-compliance …. [174.35] — tolerances …. [174.20] enforcement of consumer lease, requirements …. NCC s 179D, [179D.05] — acceleration clause …. NCC s 179G, [179G.05], NCC s 204 — court, postponement by …. NCC s 179K, [179K.05] — default notice requirements …. NCC s 179D, [179D.05], NCCP regs 105K, [R105K.05] — defaults may be remedied …. NCC s 179E, [179E.05] — effect of negotiated postponement …. NCC s 179J, [179J.05] — hardship notices, effect …. NCC s 179F, [179F.05] — lessor may apply for variation of postponement order …. NCC s

179L, [179L.05] — non-remedial default …. NCC s 179D — postponement of exercise of rights …. NCC s 179H, [179H.05] — privacy amendments …. [179D.10] — when default notice not required …. NCC s 179D, [179D.05] enforcement procedures for goods hired — court may order entry …. NCC s 179P, [179P.05] — entry into residential property to take possession …. NCC s 179N, [179N.05] consent form …. NCCP regs Form 19 — information as to location of goods hired …. NCC s 179M, [179M.05] — order for possession …. NCC s 179Q, [179Q.05] — recovery of expenses …. NCC s 179R, [179R.05] Enhancement Act reforms …. [169.06] false or misleading representations …. NCC s 179U, [179U.05] fees and charges — prohibited …. NCC s 175A, [175A.05] — third parties …. NCC s 175B, [175B.05] form of …. NCC s 173, [173.05]–[173.15], NCC s 173A, NCC s 173 — multiple documents …. [173.15] further goods, provision of …. [176.05]–[176.10], NCC s 176 harassment …. NCC s 179V, [179V.05] — penalties …. [179V.10] information about rights …. NCC s 175, [175.10], NCCP regs 105, [R105.05], NCCP regs Form 17 jurisdiction …. [170.30] lessee

— copy of lease for …. NCC s 175, [175.05]–[175.30], NCC s 175 — residence of …. [170.25] — signature of …. NCC s 173(1) lessor — business of hiring goods …. [170.20] — business purpose declaration, reliance on …. [172.15] — statement of account …. NCC s 175C, [175C.05] amount owing and other matters …. NCC s 175E, [175E.05] content …. NCC s 175D, [175D.05] court order, by …. NCC s 175F, [175F.05] disputed accounts …. NCC s 175G, [175G.05] end of lease statement …. NCC s 175H, [175H.05] penalty rationale …. [175C.10] linked lessors and tied consumer leases …. NCC s 179S, [179S.05] — lessor liable for supplier’s misrepresentations about hired goods …. NCC s 179T, [179T.05] personal, domestic or household purposes …. [170.10] repossession — notice of …. NCC s 178, [178.05]–[178.30], NCC s 178 jurisdiction to hear matters relating to …. [178.20] penalty for non-compliance …. [178.25] personal property securities law …. [178.30] when not required …. [178.15] — restrictions on …. NCC s 178 signature of lessee on …. NCC s 173(1) statement of account

— amount owing, of …. NCCP regs 105B, [R105B.05] — amount payable on termination of consumer lease …. NCCP regs 105G, [R105G.05] — change by agreement to consumer lease …. NCCP regs 105E, [R105E.05] — end of lease …. NCCP regs 105C, [R105C.05] circumstances where lessor not required to provide …. NCCP regs 105D, [R105D.05] — information contained in …. NCCP regs 105A explanatory statement regarding …. [R105A.05] summary table …. [169.30] termination of …. NCC s 179 — after goods provided …. NCC s 179, [179.10] penalties …. [179.05] — amount payable by lessee on …. NCC s 179(2), [179.10] — before goods provided …. NCC s 178A, [178A.05] — consent to enter residential property to take possession of goods …. NCCP regs 105L, [R105L.05], NCCP regs Form 19 — court may determine amount payable if lessor does not …. NCC s 179B, [179B.05] — one-off notice to be given the first time a direct debit default occurs …. NCC s 179C, [179C.05], NCCP regs Form 18 information about lessee’s rights …. NCCP regs Form 18A information contained in …. NCCP regs 105J, [R105J.05] repealed exemption …. [R105H.05]–[R105H.10] — return of goods, by …. NCC s 179(1), [179.10] — statement of amount payable …. NCC s 179A, [179A.05] Continuing credit contract

amount of credit …. NCC s 17(3), [17.20] credit limits in, notification to debtor of …. NCC s 67(1), [67.05]–[67.30] definition …. NCC s 204, [204.10] enforcement see Enforcement proceedings goods supplied under, subject to mortgage …. NCC s 46(1), [46.05] guarantees see Guarantees key requirement for see Key requirements mortgages see Mortgages paying out …. [82.30] penalties …. [33.75] — civil penalties …. [33.70] statement of account see Statement of Account tied see Tied continuing credit contract Contract continuing credit see Continuing credit contract credit see Credit contract credit card see Credit cards credit-related insurance contract see Credit-related insurance contract definition …. [3.10], [4.05], [4.20], [9.25], NCC s 204, [204.15] document see Contract document formation see Contract formation insurance see Insurance contract multi-credit facilities …. [4.20], NCC s 33(4) pre-contractual information see Pre-contractual disclosure sale see Sale contract termination of see Termination of contract

tied loan see Tied loan contract unfair contracts legislation …. [76.70] — standard form contract, what is …. [76.70] — terms that cannot be reviewed …. [76.70] — unfair term, what is …. [76.70] — unfair terms and financial products …. [76.70] vendor term contracts …. [5.60] writing, required to be in …. NCC s 14, [14.05]–[14.35] — cases …. [14.35] Contract document see also Credit contract definition …. [14.15], NCC s 204 requirements …. [14.15] Contract formation see also Credit contract credit fees and charges, requirement …. NCC s 17(8), [17.45] — non-compliance …. [17.45] methods of …. [14.10] — accessing or drawing down credit …. [14.20] pre-contractual documents — comparison rate …. NCC s 16(3) see also Comparison rate Contracting out examples …. [191.10] indemnity by guarantor …. [191.15] penalty …. [191.20]

prohibition of …. NCC s 191, [191.05] Contravention Code, of — compensation for …. NCC s 124(1), [124.05]–[124.25] — key requirement, of see Key requirements Copy consumer lease, of, for lessee …. NCC s 175, [175.05]–[175.30] — information statement …. [175.10] — joint lessees …. [175.25] — multiple lessees …. [175.20] — notice period …. [175.15] — penalty for non-compliance …. [175.30] contracts, of …. NCC s 185(1), [185.05]–[185.35] — date of notice …. [185.20] — life of contract …. [185.15] — penalties for non-compliance …. [185.35] — period …. [185.25] — who can request …. [185.30] credit contract, of — debtor, to be provided to …. NCC s 20(1), [20.05]–[20.25] joint debtors …. [20.15] methods of provision …. [20.10] precontractual obligations …. [20.20] — guarantor, to be provided to …. [20.25], NCC s 57(1), [57.05]–[57.25] credit-related insurance contract, of, duty of insurer to supply to debtor …. NCC s 146(1), [146.05]–[146.35]

— obligations of insurer and credit provider …. [146.15] — particulars prescribed …. [146.10], NCCP regs 93, [R93.05] — penalty for non-compliance …. [146.35] — period for …. [146.30] documents, of, provision by credit provider of …. NCC s 185(1), [185.05]–[185.35] — guarantor, to …. [20.25], NCC s 57(1), [57.05]–[57.25] — time for …. NCC s 185(2), [185.25] guarantee documents, of, for guarantor …. [20.25], NCC s 57, [57.05]–[57.25] — joint guarantors …. [57.25] — procedures …. [57.15] — summary of documents …. [57.20] mortgage, of, for mortgagor …. [20.25], NCC s 43, [43.05]–[43.20] — form of …. [43.10] — joint mortgagors …. [43.20] — registered mortgage memorandum …. [43.15] Corporation express references to …. NCC s 211, [211.05] notices to, manner of giving …. [195.16] offences by …. NCC s 201, [201.05]–[201.15] strata see Strata corporation Courts changes on hardship or unjust grounds — application for …. NCC s 74(1) time limit for …. NCC s 80(1), [80.05]–[80.10] — discretion of court …. NCC s 74(2)

— joinder of parties …. NCC s 81(1), [81.05] mortgagee …. [81.10] — stay of enforcement proceedings …. NCC s 74(3) — variation or revocation of order, application by credit provider for …. NCC s 75(1), [75.05] delivery of goods to credit provider, power to order …. NCC s 101(1), [101.05]–[101.20] — entitlement to take possession …. [101.10] — penalty for non-compliance …. [101.20] disputed liability, determination of …. NCC s 38(7), [38.15] extension of time by …. NCC s 197, [197.05] key requirement, order where contravention of see Key requirements orders of …. NCC s 198, [198.05] pay out figure, determination of …. NCC s 84(1), [84.05]–[84.20] postponement of enforcement proceedings by — application for …. NCC s 96(1), [96.05] — discretion to grant or refuse …. NCC s 96(2) — stay of proceedings where …. NCC s 96(3), [96.15] — variation of order, application by credit provider for …. NCC s 97(1), [97.05]–[97.10] proceedings, prescribing location of …. NCCP regs 36, [R36.05] review by — unconscionable change to annual percentage rate, of …. NCC s 78(2), [78.10] time limit for application …. NCC s 80(2), [80.05]–[80.10] — unconscionable interest and other charges, of …. NCC s 78(1) time limit for application …. NCC s 80(2), [80.05]–[80.10]

statement of amount owing requested by debtor, power to order provision of …. NCC s 37, [37.05]–[37.15] — applicable statements …. [37.10] — effect of determination …. [37.15] unconscionable interest and other charges, review of …. NCC s 78(1), [78.05]–[78.50] — amounts paid to third parties …. [78.25] — annual percentage rate change …. [78.10] — break costs and early termination fees …. [78.30] — case …. [78.50] — establishment fees …. NCC s 78(3), [78.15] — “honeymoon rate” loans …. [78.30]–[78.35] — personal property security law …. [78.45] — precontractual conduct …. [78.20] — reopening …. [78.40] — time limit for application …. NCC s 80(2), [80.05] case …. [80.10] unjust transactions — power to reopen see Unjust transaction Credit activity see Credit activity advertising of see Advertisement amount of see Amount of credit annual percentage rates see Annual percentage rate ASIC may exclude provision of …. NCC s 6(14), NCC s 6(15), [6.60] canvassing of, at home …. NCC s 156, [156.05]–[156.25] comparison rates see Comparison rates

contract see Credit contract cost of …. NCC s 150 course of business, provided in …. [5.50] deferred debt — interpretation …. [3.20] — payment after benefit received …. [3.30] — payment after ordinary time for …. [3.25] — requirement …. [3.15] definition …. NCC s 3(1), [3.05], NCC s 204 — case …. [3.55] fees and charges see Credit fees and charges guide see Credit guide hawking see Credit hawking licence see Credit licence licensee see Credit licensee pawnbroker, provided by see Pawnbroker prior agreement, without, whether Code applicable to …. NCC s 6(4), [6.15] provider of see Credit provider provision of — Code applicable to …. NCC s 5, [5.05]–[5.65] cases …. [5.65] — Code not applicable to …. NCC s 6, [6.05]–[6.65] case …. [6.65] costs in proceedings where …. [13.50] regulations may exclude provision of …. NCC s 6(13), [6.55]

substitutes for …. [3.50] Credit activity activities exempt from being …. NCCP regs 24, [R24.05] — clerks and cashiers …. [R24.30] — lawyers …. [R24.10] — passing on documents …. [R24.20] — passing on information …. [R24.25] — tax agents …. [R24.15] registers relating to see Credit registers Credit assistance provider credit contract, exemption from providing, where …. NCCP reg 28Q prohibited monetary obligations imposed by …. NCC s 24A, [24A.05]–[24A.15] — effect …. [24A.10] — penalties …. [24A.15] responsible lending obligations — shared responsibility for credit contract …. NCCP regs 28K reverse mortgage — obligation to make reasonable inquiries about …. NCCP regs 28HA, [R28HA.05] Credit cards credit card contract, regulations …. NCC s 30B, [30B.05] credit fees and charges, changes in — notification …. NCC s 66, [66.05]–[66.50] credit limit — exceeding consents and withdrawals relating to fees, records to be kept ….

NCCP regs 28LL, [R28LL.05] fees, charges and higher rates of interest where …. NCCP regs 28LK, [R28LK.05] notification of …. NCCP regs 28LJ, [R28LJ.05] — increasing inquiries about …. NCCP regs 28JA, [R28JA.05] invitations, consent to receive …. NCCP regs 28LI, [R28LI.05] invitations, meaning of …. NCCP regs 28LH, [R28LH.05] — modification relating to …. NCCP regs 28LN, [R28LN.05] minimum repayment warning …. NCCP regs 79B — explanatory statement regarding …. [R79B.05] payments, application of …. NCCP regs 28LM, [R28LM.05] — modification relating to …. NCCP regs 28LN, [R28LN.05] Credit contract see also Continuing credit contract, Contract document acceptance …. NCC s 14(2), [21.30] account distinguished …. [4.15] alterations and additions …. NCC s 19(1), [19.05]–[19.30] — agreed changes …. [19.30] — Electronic Transactions Act …. [19.10] — guarantee, after signing of …. [56.15] — margin, signing or initialling …. [19.15] — presigning …. [19.20] — unilateral changes …. [19.25], NCC s 63, [63.05]–[63.35] notice of …. [63.22]–[63.30] prohibited changes …. [63.35]

types of …. [63.20] unfair unilateral rights …. [63.21] amount charged under, tolerances allowed …. [181.05]–[181.15], NCCP regs 107, [R107.05]

NCC

s

181,

s

32A,

amount of credit …. NCC s 17(3), [17.20] annual cost rate — calculation …. NCC s 32B, [32B.05]–[32B.10] — definition …. NCC s 204 —

prohibitions where [32A.05]–[32A.15]

rate

exceeds

48

….

NCC

history of regulation …. [32A.15] key requirement …. [32A.10] annual percentage rate — inclusion of …. NCC s 17(4), [17.25] — prohibition in relation to later increase in …. NCC s 32AA, [32AA.05], NCCP regs 79AC explanatory statement regarding …. [R79AC.05] authorised person for signing documents …. [14.30] certain transactions not to be treated as new contracts …. NCC s 40, [40.05]–[40.15] — change to existing contract …. [4.10] — further credit being provided …. NCC s 40 changes to obligations under — agreement of parties, by …. NCC s 71, [71.05]–[71.70] agreed changes …. [71.10], [71.35] case …. [71.70] changes other than increase in amount of credit …. NCC s 71, [71.20]

comparison rate schedules …. [71.30] continuing credit contracts …. [71.40] exemption to notice requirements [R69A.05]–[R69A.15]

….

NCCP

regs

69A,

guarantor liabilities …. [71.50] increasing credit, where parties propose …. NCC s 71(1), [71.25], NCCP regs 83, [R83.05] liability of guarantor …. NCC s 61, [61.05]–[61.15] non-continuing credit contracts …. [71.40] notice requirements …. NCC s 71(3), NCC s 71(5) particulars of matters as changed …. NCC s 71(5) penalties for non-compliance …. [71.60] reduction in obligations …. [71.15] refinancing …. [71.55] top-ups and redraws …. [71.45] — ASIC, applications by …. NCC s 79, [79.05]–[79.10] unfair terms regime, concurrent operation …. [79.10] — provision of credit as result of …. NCC s 40 commission paid by or to credit provider, information to be included …. NCC s 17(14), [17.75] continuing see Continuing credit contract copies — debtor, for …. NCC s 20(1), [20.05]–[20.25] joint debtors …. [20.15] methods of provision …. [20.10] precontractual obligations …. [20.20] — guarantor, for …. [20.25], NCC s 56(1), [56.10]

credit card contract — key facts sheet …. [14.07], [16.21], NCCP regs 28LFA, [R28LFA.05], NCCP regs Sch 6, [S6.05] electronic application [R28LFB.05]

forms,

in

….

NCCP

regs

28LFB,

out of date, where …. NCCP regs 28LF, [R28LF.05] up-to-date information provided otherwise …. NCCP regs 28LG, [R28LG.05] — regulations …. NCC s 30B, [30B.05] day, specifying end of …. NCC s 27(2), [27.25] deferral of amount under, whether new contract created …. NCC s 40 definition …. NCC s 4, [4.05], [23.30], NCC s 204, [204.25] — cases …. [4.25], [23.35], [23.40], [23.45] disclosures see Disclosure electronic — Electronic Transactions Act, application of …. NCC s 187, [187.20] — legibility of …. NCC s 184(2), [184.10] enforcement of see Enforcement exemption from providing …. NCCP regs 28Q —

credit assistance provider [R28Q.05]–[R28Q.15]

with

shared

responsibility

….

false or misleading representations as inducement to enter …. NCC s 154(1), [154.05]–[154.35] — ASIC guide to …. [150.26] — civil effect …. [154.30] — defence to prosecution …. NCC s 154(2), [154.25] — penalties …. NCC s 154 — similar provisions …. [154.35]

fees and charges see Credit fees and charges fixed rate loan …. NCCP regs 79A form and expression of …. NCC s 18, [18.05]–[18.15] — print size …. [18.15] — separate documents …. [18.10] formation …. [14.10] — accessing or drawing down credit, by …. [14.20] forms of …. NCC s 15, [15.05] hire purchase agreement deemed as …. [9.30] home loan see Home loans interest charges see Interest charges joint credit and debit facilities under, application of Code to …. NCC s 6(6), [6.25] key requirement for see Key requirements legibility of …. NCC s 184(1), NCC s 184(2), [184.05]–[184.30] — print or type size requirement …. [18.15], [184.15], NCCP regs 110, [R110.05] matters required to be in …. NCC s 17, [17.05]–[17.95] — cases …. [17.95] medium amount credit contract — definition …. NCC s 204, [204.45] more than one document …. NCC s 14(4) name of credit provider …. NCC s 17(2), [17.15] name of payee …. [17.20] non-compliance with requirements, offence of …. NCC s 22, [22.05]–[22.15] non-continuing, amount of credit …. [17.20]

offer to debtor …. NCC s 14(1) — acceptance …. NCC s 14(2), [21.30] one or more separate documents …. NCC s 18, [18.10] pay out figure for — assumptions made for …. [83.15] — calculation method …. [83.10] — contents of statement of …. NCC s 83(2), [83.20] — continuing credit contracts …. [83.40] — court may determine …. NCC s 84(1), [84.05]–[84.20] — joint debtors or guarantors, statement for …. NCC s 83(4), [83.30] — penalty for non-compliance …. [83.35] — request for written statement …. NCC s 83(1), [83.05] — statement that amount may change …. [83.25] — time for credit provider to give statement of …. NCC s 83(3) paying out of — amount required …. NCC s 82(2), [82.10] calculating …. [82.15] continuing credit contract …. [82.30] net or gross amount …. [82.20] reasonable enforcement expenses …. [82.25] — debtor’s or guarantor’s right as to …. NCC s 82(1), [82.05] — early …. [26.20] — notice of …. [82.35] — pay out figure see pay out figure for above — right to pay out …. [26.06] postponement of obligations …. NCC s 94, [94.05]–[94.30]

— carried over instruments …. [94.12] — exceptions …. [94.10] — external dispute resolution …. [94.25] — penalties for non-compliance …. [94.30] pre-contractual disclosure see Pre-contractual disclosure pre-contractual statement see Pre-contractual statement predetermined credit charges …. [28.25] price, lowest …. NCC s 204 prohibited provisions …. NCC s 184(3), [184.25] — contravention of prohibition …. NCC s 184(4) repayments to be included in …. NCC s 17(7), [17.40] requirement for provision of credit …. [3.10] residential property investment purposes …. [5.31] reverse mortgages …. [17.81] short term and small amount — credit limit increase to cover fees …. NCCP regs 4D, [R4D.05] — warning during telephone contact, requirements …. NCCP regs 28XXD — warning on licensee’s premises, requirements …. NCCP regs 28XXA explanatory statement regarding …. [R28XXA.05] forms …. [R28XXA.10] — warning on licensee’s website, requirements …. NCCP regs 28XXB, [R28XXB.05] — warning when providing credit assistance by telephone …. NCCP regs 28XXC explanatory statement regarding …. [R28XXC.05] signatures on …. NCC s 14

— authorised person …. [14.30] small amount see Small amount credit contract statements of account, information to be included in …. NCC s 17(10), [17.55] termination fees …. NCCP regs 79A, [R79A.05] — break fee …. [R79A.10] — discharge fee …. [R79A.15] — disclosure of …. [17.45] — unconscionability/unfairness …. [R79A.20] tied continuing see Tied continuing credit contract unsuitable — circumstances …. NCCP regs 28XXF explanatory statement regarding …. [R28XXF.05] — reverse mortgage, in relation to …. NCCP regs 28LC, [R28LC.05] explanatory statement regarding …. [R28LC.10] variation see changes to obligations above waiver of amount under, whether new contract created …. NCC s 40 writing, required to be in …. NCC s 14, [14.05]–[14.35] — cases …. [14.35] — otherwise than in …. NCC s 15, [15.05] Credit fees and charges administrative cost, reasonable …. NCCP regs 79A amount of credit, excluded from …. [3.45] annual cost rate — prohibition in relation to later increase of annual percentage rate …. NCC s 32AA, [32AA.05], NCCP regs 79AC

explanatory statement regarding …. [R79AC.05] — prohibitions where annual rate exceeds 48 …. NCC s 32A, [32A.05]–[32A.15] history of regulation …. [32A.15] key requirement …. [32A.10] break costs/fee …. NCCP regs 79A, [R79A.10] — disclosure of …. [17.45] changes to — notification to debtor of …. NCC s 66(1), [66.05]–[66.50] particulars of matters as changed …. NCC s 69, [69.05] Code, limited by …. NCC s 23(1), [23.05]–[23.50] — key requirement …. [23.25] — offence of imposing …. NCC s 24, [24.05]–[24.10] — penalty for contravention …. [23.15] — unauthorised by contract, simultaneous breach …. [23.50] contract document, information to be included in …. NCC s 17(8), [17.45] — changes affecting …. NCC s 17(9), [17.50] — non-compliance …. [17.45] definition …. [17.45], NCC s 204, [204.30] discharge fee …. NCCP regs 79A, [R79A.15] disclosure of — assumptions relating to …. NCC s 180(4), [180.45] — tolerances relating to …. NCCP regs 106, [R106.05] overstatement …. [180.30], [R106.15] rounding …. [R106.10] understatement …. [R106.20]

duplicate statement, for …. [33.60] early termination or prepayment fees …. [26.20], NCC s 78, [78.30]–[78.35] — unconscionability …. NCC s 78 establishment fee, unconscionable …. NCC s 78(3), [78.15] lump sum …. [28.30] other parties, passed on to …. NCC s 32, [32.05]–[32.20] predetermined …. [28.25] prohibited or excessive …. NCC s 31, [31.05]–[31.10], NCCP regs 79A, [R79A.05] — recovery of …. NCC s 23(2), [23.15] recovery of see Recovery requirement for regulation of credit …. [5.45] retained, definition …. NCC s 204, [204.54] small amount credit contracts …. [17.26] — prohibited monetary obligations imposed on debtor …. [23.06], NCC s 23A, [23A.05]–[23A.50] offence …. [24.10] — requirement or acceptance by credit provider or prescribed person …. NCC s 31B, [31B.05], NCCP regs 79AB, [R79AB.05] prescribed persons …. NCCP regs 79AE, [R79AE.05]–[R79AE.10] — restrictions …. NCC s 31A statement of account, information to be included in …. NCC s 34(7), [34.65] statement of amount owing requested by debtor …. [36.45] termination of contract by debtor, effect of …. NCC s 21(2), [21.05]–[21.30] — before credit utilised …. [21.25]

— fees and charges, effect on …. NCC s 21(2), [21.10] third parties …. NCC s 32, [32.05]–[32.20] — consumer credit insurance …. [32.20] — fee for service …. [32.10] — lenders mortgage insurance …. [32.15] — reimbursement by debtor …. [26.12] unauthorised by contract …. NCC s 23(3) — limited by Code, simultaneous breach …. [23.50] — penalty …. [23.15] — recovery of amount …. NCC s 23(4), [23.15], [23.20] unconscionable, power of court to review …. NCC s 78(1), [78.05]–[78.50] — amounts paid to third parties …. [78.25] — annual percentage rate change …. [78.10] — break costs and early termination fees …. [78.30] — case …. [78.50] — establishment fees …. NCC s 78(3), [78.15] — “honeymoon rate” loans …. [78.30]–[78.35] — personal property security law …. [78.45] — precontractual conduct …. [78.20] — reopening …. [78.40] — time limit for application …. NCC s 80(2), [80.05] case …. [80.10] Credit guide circumstances where not [R28P.05]–[R28P.10]

required

— debt collectors exemption …. [R28P.25]

….

NCCP

regs

28P,

— franchisee exemption …. [R28P.15] — previous dealings with a consumer …. [R28P.20] requirements as to —

circumstances where [R28P.05]–[R28P.25]

not

required

….

NCCP

regs

28P,

— credit provider or lessor, of …. NCCP regs 26B, [R26B.05] — credit representatives, of …. NCCP regs 27A, [R27A.05] credit provider or lessor, as to …. NCCP regs 27A explanatory statement regarding …. [R27A.10] payments to third parties …. NCCP regs 27A volume bonus arrangement …. NCCP regs 27A when fees, charges, commission information not required …. NCCP regs 27B, [R27B.05] — licensee, of …. NCCP regs 26A, [R26A.05] mortgage managers …. NCCP regs 26A payments to third parties …. NCCP regs 26A product designers …. NCCP regs 26A volume bonus arrangements …. NCCP regs 26A when fees, charges, commission information not required …. NCCP regs 27, [R27.05]–[R27.10] Credit hawking liability for intermediary’s conduct …. NCC s 199, [199.05]–[199.50] prohibition — harassment …. NCC s 155, [155.05]–[155.20] — home visits …. NCC s 156, [156.05]–[156.25] Credit licence see also Credit licensee

ADIs, exemption from Code …. NCCP regs 58, [R58.05] application for — foreign entity to appoint local agent, requirements for …. NCCP regs 7, [R7.05] carried over instruments and …. NCCP regs 7A, [R7A.05] — streamlined process for particular applicants …. NCCP regs 8, [R8.05] conditions on …. NCCP regs 9, [R9.05] — referrals …. NCCP regs 9AB, [R9AB.05] — special purpose funding entity …. NCCP regs 9AA, [R9AA.05] — unlicensed carried over instrument lender …. NCCP regs 9A, [R9A.05] exemptions and modifications …. NCCP regs 20–25 — activities exempt from …. NCCP regs 24, [R24.05] clerks and cashiers …. [R24.30] lawyers …. [R24.10] passing on documents …. [R24.20] passing on information …. [R24.25] tax agents …. [R24.15] — authorised persons …. [R20.35] — beneficiaries of a guarantee …. NCCP regs 25L, [R25L.05] — card provided before 1/7/12 …. NCCP regs 25M, [R25M.05] — charitable bodies …. [R20.45] — credit card contracts …. NCCP regs 25K, [R25K.05] — credit providers …. NCCP regs 25L, [R25L.05] — credit representatives …. NCCP regs 25A–25C, [R25A.05] — debt collectors …. NCCP regs 21, [R21.05]

sunset clause …. [R21.10] — employment agencies …. NCCP regs 23D, [R23D.05] — exempted persons …. NCCP regs 25J, [R25J.05] — financial counselling agencies …. [R20.20] — fund raising special purpose entity …. NCCP regs 23B definitions …. [R23B.05] purpose …. [R23B.10] timing of EDR scheme membership …. [R23B.15] — general …. NCCP regs 20, [R20.05] — government bodies …. [R20.30] — lessors …. NCCP regs 25L, [R25L.05] — licence requirements …. NCCP regs 25 — linked credit provider …. NCCP regs 25B–25C, [R25B.10] — locums …. NCCP regs 25I, [R25I.05] — mortgagees …. NCCP regs 25L, [R25L.05] — organisations providing services or benefits …. [R20.40] — other persons …. [R20.50] — point of sale credit services, providers of …. NCCP regs 23, [R23.05]–[R23.10] branded or co-branded credit card …. NCCP regs 23A, [R23A.05]–[R23A.10] responsible lending obligations exemption …. [R23.15] services defined …. [R23.20] — related bodies corporate …. [R20.25] — securitisation entity …. NCCP regs 23C, [R23C.05] — special purpose funding entity …. NCCP regs 25G, [R25G.05] — specific exemptions …. [R20.15]

— temporary staff …. NCCP regs 25H, [R25H.05] — third parties …. NCCP regs 22, [R22.05] — trustees etc …. [R20.10] — unlicensed carried over instrument lender …. NCCP regs 25E, [R25E.05] licensee see Credit licensee requirements of — activities exempt from …. NCCP regs 25 dealing with referrers …. [R25.10] exemptions available to referrers …. [R25.15] mere referrers …. [R25.20] referrers engaging in credit activity …. [R25.05] referrers’ exemption …. [R25.30] specific activities …. [R25.25] suspension or cancellation — grounds for …. NCCP regs 15, [R15.05] Credit licensee audit reports — auditors who prepare …. NCCP regs 19, [R19.05] — regulations in relation to …. NCCP regs 19, [R19.05] compliance with key requirements, obligations …. [111.09] credit provider licensees — credit guide of circumstances where not [R28P.05]–[R28P.25]

required

….

NCCP

regs

quote, when not required in …. NCCP regs 28C, [R28C.05] requirements as to quotes …. NCCP regs 28D, [R28D.05]

28P,

updating information not required, when …. NCCP regs 28B, [R28B.05] — obligations of credit contracts, before entering …. NCCP regs 28J, [R28J.05] exemption for ADI or registrable corporation …. NCCP regs 24A, [R24A.05] extended time period for assessment …. NCCP regs 28M, [R28M.05] increasing credit limits, before …. NCCP regs 28J, [R28J.05] disclosure document — definition …. NCCP regs 26, [R28L.15] omission from …. [R26.05] — exemption from requirement to provide …. NCCP regs 28N, [R28N.05]–[R28N.25] — manner of giving …. NCCP regs 28L, [R28L.05] variations to …. [R28L.10] exemptions and modifications — regulations, by credit assistance provider, exemption for …. NCCP reg 28A residential investment property, credit in relation to …. NCCP reg 28B obligations — alternative dispute resolution systems …. NCCP regs 10, [R10.05] exemption from requirements [R69C.05]–[R69C.10]

….

NCCP

regs

69C,

— compensation arrangements, requirements for …. NCCP regs 12, [R12.05] — compliance certificate

explanatory statement regarding …. [R14.10] who must be signed by …. NCCP regs 14, [R14.05] — failure to cite licence number in documents, offence in relation to …. NCCP regs 13, [R13.05] — foreign entity to have local agent …. NCCP regs 11, [R11.05] representatives of see Credit representatives trust account — audit report, obligation to lodge eligibility of auditors to prepare …. NCCP regs 18, [R18.05] information to be contained in …. NCCP regs 17, [R17.05] Credit products interest disclosure requirements under contract — calculation of charges …. NCC s 17(5), [17.30] — changes affecting …. NCC s 17(10), [17.55] — total amount payable …. NCC s 17(6), [17.35] Credit provider account, obligation to see Statement of account advertising and marketing by see Advertisement; Credit hawking agent of, liability for conduct …. NCC s 199(1), [199.05]–[199.50] — assumptions that should be made …. [199.40] — control of agents …. [199.35] — examples …. [199.45] — knowledge credit provider, of …. [199.10] other persons, of …. [199.15] — limitation on appointment …. [199.20]

— offence …. [199.25] — person associated, definition …. [199.30], NCC s 204(2), [204.65] assignment by …. NCC s 188, [188.05]–[188.30] — Code, application of …. [188.20] other person, to …. [188.10] — due diligence by incoming person …. [188.25] — legal and equitable assignments …. [188.30] assistance see Credit assistance provider associated person, definition …. NCC s 204 authorisation for deductions by employer or debtor or lessee …. NCCP regs 28XXE, NCCP regs Sch 10, [S10.05] — explanatory statement regarding …. [R28XXE.05] civil effect of contraventions …. NCC s 124, [124.05]–[124.25] commission paid by or to, information in contract document as to …. NCC s 17(14), [17.75] consent of, to assignment or disposal of mortgaged property by mortgagor …. NCC s 51(1), [51.05]–[51.10] — conditions on …. NCC s 52(1), [52.05]–[52.10] examples …. [52.10] — unreasonably withholding …. NCC s 51(2) court authorisation where …. NCC s 51(3) contravention of Code by — compensation payable for …. NCC s 124(1) — key requirement see Key requirements course of business, credit provided in …. [5.50] credit contract — see also Credit contract

— continuing see Continuing credit contract — requirements, contravening, penalty for …. NCC s 22 — signed by …. NCC s 14 credit guide, obligation to provide — requirements as to …. NCCP regs 26B, [R26B.05] definition …. NCC s 204 disclosure see Disclosure fees and charges on small amount credit contracts …. [17.26], NCC s 31B, [31B.05] — requirement or acceptance prohibited …. NCC s 31B, NCCP regs 79AB, [R79AB.05] prescribed persons …. NCCP regs 79AE, [R79AE.05]–[R79AE.10] harassment by …. NCC s 155, [155.05]–[155.20] — debt collection guidelines …. [155.15] — harass, meaning of …. [155.10] home visits …. NCC s 156, [156.05]–[156.25] — penalty for breach …. [156.25] — person who resides there …. [156.15] — place of residence …. [156.10] — prior arrangement …. [156.20] — scope of prohibition …. [156.05] imputed knowledge …. NCC s 199(4), [199.10] key requirement, contravention of see Key requirements liability of see Liability linked see Linked credit provider misrepresentations of supplier — indemnification …. NCC s 128(2)

— liability for …. NCC s 128(1), [128.05]–[128.10] monetary obligations, prohibited …. NCC s 24, [24.05]–[24.10] mortgage that is void or unenforceable — penalty for entering into …. NCC s 53(2), [53.05] multi-credit facilities …. [4.20], NCC s 33(4) name of, to be in contract document …. NCC s 17(2), [17.15] notification to be provided to debtor by see Notification offences by see Offence offer by, in credit contract …. NCC s 14(1) possession of mortgaged goods by — power of court to order …. NCC s 101, [101.05]–[101.20] entitlement to take possession …. [101.10] penalty for non-compliance …. [101.20] — procedures to be followed after …. NCC s 102, [102.05]–[102.55] disposal of goods …. [102.20] enforcement expenses …. [102.15] notice …. [102.10] notice period …. [102.40] payment during notice period …. [102.35] penalty for non-compliance …. [102.55] print type …. [102.40] stay of proceedings …. [102.30] —

purchaser, nomination [103.05]–[103.25]

by

mortgagor

notice period …. [103.20] penalty for non-compliance …. [103.25]

….

NCC

s

103,

purchase price …. [103.10] sale …. [103.15] precontractual statement to be given to debtor by …. NCC s 16, [16.05]–[16.55] purpose of credit, knowledge of …. NCC s 13(3), [13.16] — business purpose declaration …. [13.15], [R67.05] — “knew, or had reason to believe” …. [13.35] registration of see Credit licence repossession by see Repossession reverse mortgage — obligation to make reasonable inquiries about …. NCCP regs 28HA, [R28HA.05] sale of mortgaged goods by …. NCC s 85(6), [85.05]–[85.10], [85.30] — acceleration clause …. [85.35], [104.25] — “as soon as reasonably practicable” …. [104.15] — “best price reasonably obtainable” …. [104.10] — compensation to debtor or mortgagor …. NCC s 86(1), [86.05], NCC s 106(1), [106.05] manner of sale …. [86.10], [106.10] onus of proof …. [86.15], [106.15] — deductions from proceeds of …. NCC s 85(7), NCC s 85(8) enforcement expenses …. [85.40] — duty to account …. NCC s 85(9) — penalties for non-compliance …. [85.45], [104.55] — PPSA requirements …. [104.60] — procedure for …. NCC s 104(1), [104.05]–[104.60] — surplus of sale proceeds …. NCC s 104(2), [104.20]

— written notice to mortgagor estimated value of goods …. [85.15] gross proceeds, of …. NCC s 104(3), [104.35], NCCP regs 89, [R89.05] net proceeds, of …. NCC s 104(3), [104.35] notice periods …. [85.25], [104.50] print type …. [85.20], [104.50] sale, of …. [104.30] timing of …. [104.45] small amount credit contracts …. [17.26] — direct debit default, prescribed actions following …. NCC s 39C, [39C.05], NCCP regs 79C explanatory statement regarding …. [R79C.05] — requirement or acceptance of fees and charges prohibited …. NCC s 31B, [31B.05], NCCP regs 79AB, [R79AB.05] prescribed persons …. NCCP regs 79AE, [R79AE.05]–[R79AE.10] statements, duty to provide to debtor or guarantor …. NCC s 33(1), NCC s 36(1) — exceptions …. NCC s 33(3), [33.20], NCCP regs 79, [R79.05] — periodic statements …. NCC s 33 effective dating …. NCC s 39(1), [39.15] maximum period …. NCC s 33(2) — statement of amount owing requested by debtor …. NCC s 36, [36.05]–[36.50] contents …. [36.30] effective dating …. [36.40] exceptions …. [36.25] failure to comply …. [36.50]

fees …. [36.45] form …. [36.35] joint debtors or guarantors …. NCC s 36(4), [36.20] unilateral changes by …. [19.25], NCC s 63, [63.05]–[63.35] — notice of …. [63.22] changes not requiring …. [63.25] notice periods …. [63.30] — prohibited changes …. [63.35] — types of …. [63.20] — unfair unilateral rights …. [63.21] Credit registers ASIC to establish and maintain — licensees, special purpose funding entities, credit representatives and registered persons …. NCCP regs 29, [R29.05] — persons against whom banning order made …. NCCP regs 30, [R30.05] unlicensed carried over instrument lender …. NCCP regs 30A, [R30A.05] Credit registration see Credit activity Credit-related insurance contract definition …. [17.80], NCC s 142, [142.05], [146.20], [147.10], NCC s 204 disclosure requirements …. [142.35] notification of particulars to debtor …. NCC s 146(1), [146.05]–[146.35] — obligations of insurer and credit provider …. [146.15] — particulars prescribed …. [146.10], NCCP regs 93, [R93.05] — penalty for non-compliance …. [146.35]

— period for …. [146.30] Regulations, not prescribed by …. [142.25] termination …. NCC s 148, [148.05]–[148.25] — life insurance/death benefit …. [148.25] — override insurance contract …. [148.20] — rebate of premium …. NCC s 148(4), [148.10], NCCP regs 94, [R94.05] — relevant insurance …. [148.15] Credit representatives authorisation of — body corporate, sub-authorisation by …. NCCP regs 16, [R16.05] EDR scheme, without membership of …. [R16.10] credit guide of — approved external dispute resolution scheme, contact details for …. NCCP regs 28, [R28.05] —

circumstances where [R28P.05]–[R28P.10]

not

required

….

NCCP

regs

28P,

debt collectors exemption …. [R28P.25] franchisee exemption …. [R28P.15] previous dealings with a consumer …. [R28P.20] — quote, when not required in …. NCCP regs 28C, [R28C.05] — requirements as to …. NCCP regs 27A, [R27A.05], NCCP regs 27B, [R27B.05] — updating information not required, when …. NCCP regs 28B, [R28B.05] responsible lending obligations see Responsible lending conduct Daily percentage rate definition …. NCC s 27(1), NCC s 204

Damages debtor’s right to, under sale contract, against supplier and linked credit provider …. NCC s 129(1), [129.10] — defences of credit provider …. NCC s 129(2), [129.15] — joint proceedings against …. NCC s 130(2), [130.10] interest on …. NCC s 132(1), [132.05], NCCP regs 90, [R90.05] Date notice, of …. NCC s 196(2), [196.20] — case …. [196.30] — definition …. NCC s 204 — matters relating to …. NCC s 218, [218.05] — service of …. NCC s 196(1), [196.15] transaction, of …. NCC s 39, [39.05]–[39.20] Day credit contract specifying end of …. NCC s 27(2), [27.25] Death debtor, of, personal representative requesting statement of account …. NCC s 33(3), [33.20], [33.45] Debtor acceptance of offer in credit contract …. NCC s 14(2), [21.30] accounts disputed by see Disputed accounts assignment by …. NCC s 189, [189.05]–[189.15] — sale of mortgaged property …. [189.10] capacity to repay see Repayments compensation to, on sale of goods by credit provider …. NCC s 86(1), [86.05] — manner of sale …. [86.10]

— onus of proof …. [86.15] credit contract — alteration of, acknowledgement of …. NCC s 19(1) — postponement of obligations …. NCC s 94, [94.05]–[94.30] carried over instruments …. [94.12] exceptions …. [94.10] external dispute resolution …. [94.25] penalties for non-compliance …. [94.30] — signature on …. NCC s 14 — variation on grounds of hardship …. NCC s 72, [72.01]–[72.65], NCC s 72 credit fees and charges, notification of changes to …. NCC s 66(1), [66.05]–[66.50] — case …. [66.50] — change to contract …. [66.20] — government charges varied …. [66.45] — industry codes of practice …. [66.40] — next statement of account, in …. [66.25] — particulars of matters as changed …. NCC s 69, [69.05] — penalties for non-compliance …. [66.35] — reductions in obligations …. [66.15] credit limits in continuing credit contracts, notification of changes to …. NCC s 67(1), [67.05]–[67.30] — increase in limit …. [67.15] invitations …. [67.06] — penalty for non-compliance …. [67.30] — reduction or no further credit …. [67.10]

— reissue of card …. [67.25] — unsolicited contracts and increases (ACT) …. [67.20] damages, right to see Damages declaration of, as to purpose of credit …. NCC s 13(2) — business purpose declaration …. [13.15], [R67.05] false declaration, judicial consideration …. [13.28] format of …. [13.40], [R68.10] nature of presumption created by …. [13.07], [13.08] — false declaration judicial consideration …. [13.28] penalties for …. [13.55] — form of declaration …. NCC s 13(4), NCCP regs 68, [R68.05] — ineffective, consequences of …. [13.20] — prescribed person in relation to …. [13.30], NCCP regs 67 — presumption created by …. [13.06] — signing …. [13.45] suggested approach …. [13.27] time for …. [13.26] — time for …. [13.25] definition …. [153.15], NCC s 204 direct debit default notice to …. NCC s 87, [87.05]–[87.30] — direct debit defined …. [87.25] — exemption from requirement to give credit providers, for …. NCCP regs 69, [R69.05]–[R69.10] lessors, for …. NCCP regs 69D, [R69D.05] — form of …. [87.15]

— implementation issues …. [87.30] — information to be contained in …. NCCP regs 85, [R85.05], NCCP regs Forms 11, 11A — penalties for non-compliance …. [87.20] — timing of …. [87.10] enforcement see Enforcement insurance by see Insurance interest rate changes, notification of …. NCC s 64(1), [64.05]–[64.45] — particulars of matters as changed …. NCC s 69, [69.05] joint see Joint Debtors key requirement, application for order where contravention of see Key requirements liability of, prohibited increases in …. NCC s 70(1), [70.05] monetary obligations, prohibited …. NCC s 23(1), [23.05]–[23.50] — key requirement …. [23.25] — offences related to …. NCC s 24, [24.05]–[24.10] — penalty …. [23.15] — small amount credit contracts …. [23.06], NCC s 23A, [23A.05]–[23A.50], [24.10] more than one jurisdiction, in, application of Code to …. NCC s 5(2) paying out of credit contract by see Credit contract payment by see Payment precontractual statement to be given to …. NCC s 16, [16.05]–[16.55] purpose of credit, declaration as to …. NCC s 13(2) — business purpose declaration …. [13.15], [R67.05] false declaration, judicial consideration …. [13.28] format of …. [13.40], [R68.10]

nature of presumption created by …. [13.07], [13.08] — false declaration judicial consideration …. [13.28] penalties for …. [13.55] — form of declaration …. NCC s 13(4), NCCP regs 68, [R68.05] — ineffective, consequences of …. [13.20] — prescribed person …. [13.30], NCCP regs 67 — presumption created by …. [13.06] — signing …. [13.45] suggested approach …. [13.27] time for …. [13.26] — time for …. [13.25] repayment changes, notification of …. NCC s 65(1), [65.05]–[65.50] — automatic increases …. [65.25] — calculation method …. [65.20] — change to contract …. [65.35] — changes to legislative regime …. [65.50] — increase or no change …. [65.10] — interest-only loans …. [65.25] — next statement of account, in …. [65.40] — penalties for non-compliance …. [65.45] — reduction …. [65.15] request for statement of amount owing by …. NCC s 36(1), [36.05]–[36.50] — contents …. [36.30] — court, power to order …. NCC s 37, [37.05]–[37.15]

applicable statements …. [37.10] effect of determination …. [37.15] — effective dating …. [36.40] — exceptions …. [36.25] — failure to comply …. [36.50] — fees …. [36.45] — form …. [36.35] — oral or written statements …. [36.15] — time for giving …. NCC s 36(2), [36.10] statements of account to be given to see Statement of account Declaration see also Business purpose declaration court, by, as to contravention of key requirement …. NCC s 113(1), [113.05] debtor, by, as to purpose of credit …. NCC s 13(2) — business purpose declaration …. [13.15], [R67.05] false declaration, judicial consideration …. [13.28] format of …. [13.40], [R68.10] nature of presumption created by …. [13.07], [13.08] — conduct and knowledge of agents see Agents — false declaration judicial consideration …. [13.28] penalties for …. [13.55] — form of declaration …. NCC s 13(4), NCCP regs 68, [R68.05] — ineffective, consequences of …. [13.20] — prescribed person …. [13.30], NCCP regs 67

— presumption created by …. [13.06] — signing …. [13.45] suggested approach …. [13.27] time for …. [13.26] — time for …. [13.25] Default administration fee, enforcement expenses and …. [107.30] notice see Default notice rate see Default rate remedy of, within period specified in default notice …. NCC s 89, [89.05] — subsequent breaches …. [89.10] Default notice definition …. NCC s 204 enforcement of credit contract or mortgage …. [88.20] — combined notices …. NCC s 88(4) — date of …. [88.55] — information about debtor’s rights …. NCCP regs Forms 12, 12A — non-compliance …. [88.70] — print type …. [88.25] — requirements of …. NCC s 88(3), [88.30], NCCP regs 86, [R86.05] — service of …. [88.55] — specification of default …. [88.35] — when not required …. NCC s 88(5), [88.15] remedy of default within period specified …. NCC s 89, [89.05] — subsequent breaches …. [89.10]

Default rate definition …. NCC s 27(1), NCC s 204 interest charges, of …. NCC s 30(2), [30.05]–[30.20] — accelerated amount …. [30.10] — general law of penalties …. [30.20] — inclusion of information in contract document …. NCC s 17(11), [17.60] — unjust transaction …. [30.15] Direct debit default — one-off notice to be given at first occurrence …. NCC s 87, [87.05]–[87.30] exemption for credit [R69.05]–[R69.10]

providers

….

NCCP

regs

69,

form of …. [87.15] implementation issues …. [87.30] information to be contained in …. NCCP regs 85, [R85.05], NCCP regs Forms 11, 11A penalties for non-compliance …. [87.20] timing of …. [87.10] — small amount credit contract, duties of credit provider …. NCC s 39C, [39C.05], NCCP regs 79C explanatory statement regarding …. [R79C.05] definition …. [87.25] Directors personal liability …. NCC s 201(1), [201.05] Disclosure amount of credit …. NCC s 17(3), [17.20]

annual percentage rate …. NCC s 17(4), [17.25] assumptions relating to …. NCCP regs 108, [R108.05] — contracts linked to loan account offset arrangements …. NCCP regs 109, [R109.05] — variation of, by regulations …. NCC s 182, [182.05] additional assumptions …. [182.10] date credit provided …. [182.25] loan account offset arrangements …. [182.35] non-business day, payments due on …. [182.15] offset arrangements …. [182.30] consumer leases, in …. NCC s 174, [174.05]–[174.35], NCC s 174, NCC s 180(5), [180.60] — ascertainable, whether …. [174.25] — assumptions …. [174.15] — no disadvantage …. [174.30] — penalty for non-compliance …. [174.35] — tolerances …. [174.20] continuing credit contracts see Continuing credit contracts contracts linked to loan account offset arrangements, in …. NCCP regs 109, [R109.05] — definition …. [R109.10] — statement of account, effect on …. [34.50] credit card contracts — key facts sheet …. [14.07], [16.21], NCCP regs 28LFA, [R28LFA.05], NCCP regs Sch 6, [S6.05] electronic application [R28LFB.05]

forms,

in

….

NCCP

regs

28LFB,

out of date, where …. NCCP regs 28LF, [R28LF.05] up-to-date information provided otherwise …. NCCP regs 28LG, [R28LG.05] — responsible lending …. [14.06] credit charges and fees, of …. NCC s 180(4), [180.45] disclosure requirements …. [142.35] document — definition …. NCCP regs 26, [R28L.15] omission from …. [R26.05] — exemption from requirement to provide …. NCCP regs 28N, [R28N.05]–[R28N.25] — manner of giving …. NCCP regs 28L, [R28L.05] variations to …. [R28L.10] guarantor, to, by credit provider …. [20.25], NCC s 56(1), [56.05]–[56.15] — rights and obligations, explanation concerning …. NCCP regs 82, [R82.05], NCCP regs Form 9 information and warnings …. NCC s 17(16), [17.85], NCCP regs 74, [R74.05], NCCP regs Forms 6, 7 interest charges, of …. NCC s 180(2), [180.35] names, of …. NCC s 180(7), [180.55] pre-contractual …. NCC s 16, [16.05]–[16.55] proposal document, requirements as to — commissions …. NCCP regs 28G explanatory statement regarding …. [R28G.05] not required, when …. NCCP regs 28H, [R28H.05] — fees and charges …. NCCP regs 28E, [R28E.5] explanatory statement regarding …. [R28E.10]

not required, when …. NCCP regs 28F, [R28F.05] repayments, of …. NCC s 180(3), [180.40] reverse mortgages — credit contract does not protect tenancy of person other than debtor …. NCC s 18B, [18B.05]–[18B.15], NCCP regs 74A, [R74A.05] explanatory memorandum …. [18B.10] penalty for failure to tell debtor …. [22.15] prescribed form …. [18B.15] tolerances relating to …. NCCP regs 106, [R106.05] — overstatement …. [180.30], [R106.15] — rounding …. [R106.10] — understatement …. [R106.20] — variation of, by regulations …. NCC s 182, [182.05] additional assumptions …. [182.10] date credit provided …. [182.25] loan account offset arrangements …. [182.35] non-business day, payments due on …. [182.15] offset arrangements …. [182.30] Dispose property, of — definition …. [51.10], NCC s 204 — mortgaged property, disposal by mortgagor …. NCC s 51(1), [51.05]–[51.10] Disputed accounts application to court …. NCC s 38(7), [38.15] — effect of …. [38.20]

enforcement proceedings …. NCC s 38(6), [38.10] — leave to commence …. NCC s 38(8) external dispute resolution …. [38.30] — approved scheme …. [204.04] notice of liability …. NCC s 38(1) — form of …. [38.25] — time for …. NCC s 38(4) continuing credit contract …. NCC s 38(3) no statement of account …. NCC s 38(5) Distance matters relating to …. NCC s 218, [218.05] Document contract see Contract document copy of see Copy deposited, mortgages of …. [44.15] electronic transactions legislation, application of …. NCC s 187, [187.05]–[187.20] guarantee see Guarantee document mortgage see Mortgage document signing of …. NCC s 186(1), [186.05] — application to written documents …. [186.10] — credit provider may not be authorised …. [186.15] — name of agent …. [186.20] Door-to-door sales application of NCC — agents and intermediaries …. NCC s 199, [199.05]–[199.50]

— credit, of …. NCC s 156(2) — person who resides there …. NCC s 156(1), [156.15] — prior arrangement …. NCC s 156, [156.20] Electronic communication attribution of electronic communications …. NCC s 196(1), [196.10] definition …. NCC s 204, [204.31] Electronic display mediums regulation of credit promotions …. NCC s 164(3), [164.10] Electronic funds transfer (EFT) attribution of electronic communications …. NCC s 196(1), [196.10] Employee loan see Employee loan offences by …. NCC s 200, [200.05] remuneration of, as prohibited mortgage security …. NCC s 50(1), [50.05] — exemption …. NCCP regs 80, [R80.05] Employee loan Code, application of …. NCC s 6(11), [6.50] Enforcement see also Investigation acceleration clause, of, by credit provider …. NCC s 93(1), [93.05]–[93.35] — acceleration …. [93.10] — amount required to pay out …. [93.20] — case …. [93.35] — effect of clause …. [93.15] — exceptions …. [93.25]

— other laws to be satisfied …. [93.30] — reverse mortgaged property, where …. NCC s 93A, [93A.05] explanatory memorandum …. [93A.10] consumer lease see Consumer lease credit contract, of …. NCC s 88, [88.05]–[88.95] — cases …. [88.95] — default notice …. [88.10] contents …. [88.30] costs of issuing …. [88.75] date of …. [88.60] non-compliance with requirements …. [88.70] notice period …. [88.65] print type …. [88.25] requirements of …. [88.20] service of …. [88.55] specification of default …. [88.35] when not required …. [88.15] — effect of hardship notices — enforcement expenses, information to be included …. NCC s 17(12), [17.65] — non-remediable default …. [88.40] — other laws to be satisfied …. [88.45] — Privacy Act reforms …. [88.85] — requirements to be met prior to …. NCC s 88(1) reasonable belief …. [88.06] — subsequent defaults …. [88.50]

expenses of see Enforcement expenses goods mortgaged, procedures for — delivery to credit provider, power of court to order …. NCC s 101, [101.05]–[101.20] entitlement to take possession …. [101.10] penalty for non-compliance …. [101.20] — entry of residential premises to take possession of …. NCC s 99(1), [99.05]–[99.35] court may order …. NCC s 100, [100.05]–[100.15] — location of goods, information as to …. NCC s 98(1), [98.05]–[98.20] guarantee, of, requirements to be met prior to …. NCC s 90, [90.05]–[90.20] — notice period …. [90.15] — penalties for non-compliance …. [90.20] investigation see Investigation mortgage, of, requirements to be met prior to …. NCC s 88(2), [88.80] proceedings see Enforcement proceedings reverse mortgages …. [88.90] Enforcement expenses contract document, inclusion of information in …. NCC s 17(12), [17.65] default administration fee, and …. [107.30] definition …. NCC s 204, [204.35] recovery of …. NCC s 107, [107.05]–[107.35] — case …. [107.35] — dispute over amount …. NCC s 107(3), [107.25] — reasonably incurred …. [107.05] excess expenses …. NCC s 107(1), [107.10]

void contractual provisions …. [107.15] Enforcement proceedings default notice …. NCC s 88(1) definition …. NCC s 204, [204.40] disputed liability, where …. NCC s 38(6), [38.10] postponement of …. NCC s 96 — court, by …. NCC s 96, [96.05]–[96.15] application for …. NCC s 96(1), [96.05] discretion to grant or refuse …. NCC s 96(2) order, application by credit provider for variation of …. NCC s 97(1), [97.05]–[97.10] stay of proceedings where …. NCC s 96(3), [96.15] — credit provider’s notice about …. NCC s 94(2) penalties for non-compliance …. [94.30] — negotiation of …. NCC s 94(1) agreed changes …. [95.15] condition as to costs …. NCC s 95(2), [95.20] default notice treated as if not given …. NCC s 95(1) effect of …. NCC s 95(1), [95.05]–[95.25] external dispute resolution …. [94.25] further default notice …. NCC s 95(6) notice of conditions …. NCC s 95(3), [95.10] penalties for non-compliance …. [95.25] — postponement request …. NCC s 94(1), [94.05]–[94.30] carried over instruments …. [94.12] exceptions …. [94.10]

statement of account not required where …. NCC s 33(3), [33.35] stay of — hardship or unjust transaction, application to court regarding …. NCC s 74(3) — negotiated postponement where …. NCC s 96(3), [96.15] Entry residential premises, to, to take possession of goods …. NCC s 99(1), [99.05]–[99.35] — consent of occupier …. NCC s 99(1), [99.15]–[99.25], NCCP regs 87, [R87.05], NCCP regs Form 13 — court may order …. NCC s 100, [100.05]–[100.15] entitlement required …. [100.10] — meaning of residential premises …. [99.10] — penalty for non-compliance …. [99.35] Examination of persons ASIC, by — notice requiring appearance for …. NCCP regs 32, [R32.05], NCCP regs Form 1 allowances and expenses …. NCCP regs 35, [R35.05] Exemptions from Code ADIs (authorised deposit taking institutions) …. NCCP regs 58, [R58.05] Aged Care Act 1997, credit under …. NCCP regs 60, [R60.05] bill facilities …. NCC s 6(7), [6.30] charge card contracts …. NCCP regs 62, [R62.05] continuing credit contracts — additional exempt credit …. NCCP regs 52, [R52.05] — fixed charge only …. NCC s 6(5), [6.20]

— maximum charges …. NCCP regs 51, [R51.05] explanatory statement regarding …. [R51.10] credit excluded by ASIC …. NCC s 6(14), NCC s 6(15), [6.60] credit excluded by regulations …. NCC s 6(13), [6.55] credit providers providing credit to directors …. NCCP regs 63, [R63.05] deceased estates …. NCC s 6(10), [6.45] direct debit default notices, requirement to give — credit providers …. NCCP regs 69, [R69.05]–[R69.10] — lessors …. NCCP regs 69D, [R69D.05] dispute resolution scheme, disclosure requirements …. NCCP regs 69C, [R69C.05]–[R69C.10] — repeal of former provision …. [R111A.05] employee loans …. NCC s 6(11), [6.50] estate administrators …. NCCP regs 59, [R59.05] Firefighter’s Benefit Fund of WA Inc …. NCCP regs 61, [R61.05] GIO no interest loan …. NCCP regs 53, [R53.05] guarantees …. NCCP regs 65, [R65.05] heritage items, loans for …. NCCP regs 57, [R57.05] Indigenous Business Australia …. NCCP regs 65A, [R65A.05] insurance premiums by instalments …. NCC s 6(8), [6.35] joint credit and debit facilities …. NCC s 6(6), [6.25] margin loans …. NCC s 6(12), [6.51] mortgages …. NCCP regs 64, [R64.05] no prior agreement for credit …. NCC s 6(4), [6.15] notice of agreement to change obligations, requirement to give — consumer lease, under …. [R69A.05]–[R69A.15], NCCP regs 69B

— credit contract, under …. NCCP regs 69A, [R69A.05]–[R69A.15] partnership loans …. NCCP regs 55, [R55.05] pawnbrokers …. NCC s 6(9), [6.40] Qld Rental Purchase Plan Scheme …. NCCP regs 54, [R54.05] residential investment property, credit in relation to …. NCCP regs 65B, [R65B.05], NCCP regs 65C, [R65C.05] — explanatory statement regarding …. [R65C.10] short term credit …. NCC s 6(1)–(3), [6.10], NCCP regs 50A — explanatory statement regarding …. [R50A.05] student loans …. NCCP regs 56, [R56.05] False or misleading representations consumer leases, relating to …. NCC s 179U, [179U.05] credit contract, inducement to person to enter …. NCC s 154(1), [154.05]–[154.35] — ASIC guide to …. [150.26] — civil effect …. [154.30] — defence to prosecution …. NCC s 154(2), [154.25] — penalties …. NCC s 154 — similar provisions …. [154.35] NCC prohibition …. NCC s 154 tied credit contracts …. NCC s 128, [128.05]–[128.10] Fee see Credit fees and charges Financial hardship see Hardship Goods contract for sale of see Sale contract credit providers, liability — interest, award …. NCC s 132, [132.05]

— liability of supplier to linked credit provider …. NCC s 131, [131.05] — limits on debtor’s right of action against linked credit provider …. NCC s 130, [130.05]–[130.20] — right to damages under sale contract against both supplier and linked credit provider …. NCC s 129, [129.10] — subrogation of credit provider …. NCC s 133, [133.05] definition …. NCC s 204 lease with option to purchase regarded as sale by instalments …. NCC s 9, NCCP regs 66, [R66.05] liability of credit providers in relation to …. NCC s 129, [129.05]–[129.25] — damages …. [129.10] — defences …. [129.15] — inducement, meaning of …. [129.20] — procedures …. [129.25] mortgaged — delivery to credit provider, power of court to order …. NCC s 101, [101.05]–[101.20] entitlement to take possession …. [101.10] penalty for non-compliance …. [101.20] — enforcement procedures for see Enforcement — possession by credit provider of power of court to order …. NCC s 101, [101.05]–[101.20] procedures to be followed after …. NCC s 102, [102.05]–[102.55] — repossession of see Repossession — sale by credit provider see Sale — surrender to credit provider of …. NCC s 85(1) delivery of …. NCC s 85(2)

sale by instalments — lease with option to purchase to be regarded as …. NCC s 9, [9.05]–[9.35] cases …. [9.35] — right or obligation to purchase, whether …. [9.25] surrender of goods to credit provider …. NCC s 85(1) — delivery of …. NCC s 85(2) — information after surrender …. NCC s 85(3), NCCP regs 84, [R84.05], NCCP regs Form 10 Goods mortgage definition …. NCC s 204 form of …. NCC s 42(3) PPSA security interest, usually a …. [42.10] Guarantee document definition …. NCC s 204 requirements …. NCC ss 54, 56 Guarantees amount charged under …. NCC s 60 — tolerances allowed by regulations …. NCC s 181, [181.05]–[181.15], NCCP regs 107, [R107.05] bank guarantees …. [3.50] changes to obligations under — agreement of parties, by …. NCC s 71, [71.05]-[71.70] Code, application to …. NCC s 8, [8.05]–[8.20] contract document, information to be included in …. NCC s 17(13), [17.70] copy of credit contract for guarantor …. [20.25], NCC s 56, [56.10]

debtor under 18 years of age, liability of guarantor where …. NCC s 60(3), [60.25] definition …. [8.15], [55.10], NCC s 204 disclosure about …. NCCP regs Form 8 documents — information in …. NCC s 17(13), [17.70] — material alteration of, after guarantor signs …. NCC s 58(1)(b) electronic — electronic transactions legislation, application of …. NCC s 187, [187.05]–[187.20] — legibility of …. NCC s 184(2), [184.10] enforceability of — non-compliance with Code …. NCC s 55(4), [55.15] enforcement of see Enforcement excluded by regulations from operation of Code …. [8.20] extension of …. NCC s 59, [59.05]–[59.20] — information statement not required …. [59.10] — initial obligations …. [59.15] — timing …. [59.20] form of …. NCC s 55(1), [55.05]–[55.25], NCCP regs 81, [R81.05], NCCP regs Form 8 indemnities, restricted …. NCC s 60, [60.35] legibility of …. [55.20], NCC s 184(1), NCC s 184(2), [184.05]–[184.30] — print or type size requirement …. [184.15], NCCP regs 110, [R110.05] mortgage document, in …. [55.25] offence of non-compliance with requirements …. NCC s 62(1), [62.05]

prohibited provisions …. NCC s 184(3), [184.25] — contravention of prohibition …. NCC s 184(4) unconscionable, setting aside …. [76.20] withdrawal by guarantor see Guarantor writing, necessity to be in …. NCC s 55(1), [55.15] Guarantor assignment by …. NCC s 189, [189.05]–[189.15] definition …. [8.15], NCC s 204 disclosure to — credit provider, by …. NCC s 56(1), [56.05]–[56.15] rights and obligations, explanation concerning …. NCCP regs 82, [R82.05], NCCP regs Form 9 enforcement against, requirements …. NCC s 90(1), [90.05]–[90.20] — notice period …. [90.15] — penalties for non-compliance …. [90.20] increase in liabilities …. NCC s 61(1), [61.05]–[61.15] — exclusion of section …. NCC s 61(2) — no acceptance required …. [61.10] — particulars …. [61.15] insurance by see Insurance joint — notice, giving of …. NCC s 194, [194.25] capacity issues …. NCC s 194, [194.65] use of nominations and consent …. NCC s 194(4), [194.55] — statement of amount owing …. NCC s 36(4), [36.20] contents …. [36.30]

effective dating …. [36.40] exceptions …. [36.25] failure to comply …. [36.50] fees …. [36.45] form …. [36.35] — statement of pay out figure …. NCC s 83(4), [83.30] jurisdiction of residence, relevance of …. [8.10] key requirement, application for order where contravention of see Key requirements liability of …. NCC s 59 — continuing credit contract, under …. NCC s 60(4), [60.30] — debtor under 18 years of age …. NCC s 60(3), [60.25] — extension of …. NCC s 59, [59.05]–[59.20] — increase in …. NCC s 61(1), [61.05]–[61.15] — limitation of …. NCC s 60(1), [60.10] — unenforceable contracts …. NCC s 60(2), [60.20] limitation of liability …. NCC s 60(1), [60.05]–[60.35] paying out of credit contract by see Credit contract signature of, on guarantee …. NCC s 55(1), [55.15] — alteration of credit contract after …. [56.15] withdrawal by …. NCC s 58, [58.05]–[58.20] — changes to proposed contract …. [58.20] — effect of provision …. [58.15] — implications …. [58.10] Harassment consumer leases, regarding …. NCC s 179V, [179V.05]

— penalties …. [179V.10] credit provider, by …. NCC s 155, [155.05]–[155.20] — debt collection guidelines …. [155.15] — harass, meaning of …. [155.10] penalties …. NCC s 155 Hardship cases …. [72.65] changes to credit contract, mortgage or guarantee on grounds of …. NCC s 72, [72.01]–[72.65], NCC s 72 — application by debtor for …. NCC s 72(2) table of requirements …. [72.03] — court, by …. NCC s 74, NCC s 74, [74.05]–[74.35] application for …. NCC s 74(1) discretion of court …. NCC s 74(2) joinder of parties …. NCC s 81(1), [81.05]–[81.10] stay of enforcement proceedings where …. NCC s 74(3) time limit for application …. NCC s 80(1), [80.05]–[80.10] variation of, application by credit provider for …. NCC s 75(1), [75.05] — notice of change by credit provider …. NCC s 73, NCC s 73, [73.05]–[73.10] credit contracts and consumer leases, comparison of sections …. [72.55] Credit (Home Finance Contracts) Act 1984 (NSW) …. [72.25] decision on …. [72.50] effect of hardship notices on enforcement of credit contract …. NCC s 89A, [89A.05] Enhancements Act, before enactment …. [72.05], [72.10]

— grounds for change …. [72.15] — maximum amount of credit …. [72.12] — notice of change …. [72.21] — types of changes …. [72.20] external dispute resolution …. [72.40] key changes …. [72.60] penalties for non-compliance …. [72.22] regimes …. [72.02] — Enhancements Act …. [72.45] threshold amount …. [72.05] — determining …. [72.11] — floating threshold …. [72.07] carried over instruments, for …. [72.06] variation requests, table of requirements …. [72.03] Western Australian position …. [72.04] Hearings ASIC, held by — summon witnesses and take evidence, power to …. NCCP regs 34, [R34.05], NCCP regs Form 2 Home loans see also Mortgage interest rate, definition …. NCCP regs 26 key facts sheet …. [14.07], [16.21], NCCP regs 28LB, [R28LB.05], NCCP regs Sch 5 — explanatory statement regarding …. [S5.05] lender, definition …. NCCP regs 26 standard …. NCCP regs 28LA, [R28LA.05]

— key facts sheet …. NCCP regs 28LB, [R28LB.05], NCCP regs Sch 5 Home visits prohibition on credit providers …. NCC s 156, [156.05]–[156.25] — penalties …. NCC s 156, [156.25] — person who resides there …. [156.15] — place of residence …. [156.10] — prior arrangement …. [156.20] — scope of prohibition …. [156.05] Household property instalments, sale and repurchasing by …. [5.55] prohibited mortgage security …. NCC s 50(2)–(4), [50.05] valuation of, fee prohibited for …. [5.55] Indemnities liability, from — where void …. NCC s 192, [192.05] application …. [192.15] person giving indemnity …. [192.20] securitisation programs …. [192.10] Information statement reverse mortgage, about …. NCCP regs 28LE, [R28LE.05], NCCP regs Sch 5A Insolvency debtor, of, trustee in bankruptcy requesting statement of account …. NCC s 33(3), [33.20], [33.45] Insolvent definition …. NCC s 204 Instalments

household goods, sale and repurchasing by …. [5.55] insurance premium payable by …. NCC s 6(8), [6.35] sale by …. NCC s 9 — lease with option to purchase to be regarded as …. NCC s 9, [9.05]–[9.35] cases …. [9.35] — right or obligation to purchase, whether …. [9.25] vendor term contracts …. [5.60] Insurance application of Code to …. NCC s 142(1), [142.05]–[142.35] — disclosure requirements …. [142.35] — mortgaged property …. [142.15] compulsory see Compulsory insurance consumer credit see Consumer credit insurance contract, financed by, information in contract document regarding …. NCC s 17(15), [17.80] — term of contract prescribed …. NCCP regs 73, [R73.05] credit-related insurance contract see Credit-related insurance contract disclosure requirements …. [142.35] exclusive dealing laws …. [143.35] lenders mortgage insurance …. [32.15] mortgage indemnity insurance …. [143.15] mortgaged property, over …. [142.15] — termination of contract …. NCC s 149(1), [149.05]–[149.30] debtor’s rights …. NCC s 149(2), [149.10], NCCP regs 95, [R95.05], NCCP regs Form 16 override insurance contract …. [149.25]

penalties for non-compliance …. [149.30] rebate of premium …. NCC s 149(4), [149.15], NCCP regs 96, [R96.05] written notice …. [149.20] premium see Insurance premium rejection of proposal by insurer …. [147.05]–[147.15] — notice of …. NCC s 147(1), [147.05] — refund of premium …. NCC s 147(2), [147.05] penalty for non-compliance …. [147.15] requirement to take out, with particular insurer …. [143.05]–[143.75] — offence of …. NCC s 143(1) penalty …. [143.75] — regulations, approved by …. NCC s 143(1) — standing committee guideline …. [143.60]–[143.70] — supplier company, liability of …. [143.55] statement of account, particulars of payments to be included in …. NCC s 34(10), [34.95] types of insurance …. NCC s 143 — Regulations, specified by …. [143.25] tyre and wheel rim insurance …. [144.25] unreasonable requirement as to terms …. [143.45] Insurance contract see Credit-related insurance contract Insurance premium advance debit of …. NCC s 144(2), [144.25] instalments, payable by, application of Code to …. NCC s 6(8), [6.35] mortgaged property, [144.05]–[144.25]

over,

financing

of

….

NCC

s

144(1),

— acknowledgment from debtor …. [144.10] — knowledge requirement …. [144.15] — penalty …. [144.05] — scope of provision …. [144.20] — tyre and wheel rim insurance …. [144.25] refund of, where rejection of insurance by insurer …. NCC s 147(2), [147.05] — penalty for non-compliance …. [147.15] Insurer copy of credit-related insurance contract, duty to supply to debtor …. NCC s 146(1), [146.05]–[146.35] — obligations of insurer and credit provider …. [146.15] — particulars prescribed …. [146.10], NCCP regs 93, [R93.05] — penalty for non-compliance …. [146.35] — period for …. [146.30] particular, requirement to take out insurance with …. NCC s 143(1), [143.05]–[143.75] rejection of proposal for insurance by …. [147.05]–[147.15] — notice of …. NCC s 147(1), [147.05] — refund of premium …. NCC s 147(1), [147.05] Interest calculation — general principles …. [27.10] — methods …. [28.15], [28.20] credit contracts, requirements to disclose see Credit contract damages, on …. NCC s 132(1), [132.05], NCCP regs 90, [R90.05] default rate …. [27.15]

definitions relating to …. NCC s 27, [27.05]–[27.30] “holdbacks” …. NCC s 17(3), [17.20], [17.25] interest free offers …. NCC s 17(5), [17.30] interpretation …. [3.40] land or property, in, definition …. NCC s 204 rate, definition …. [3.40], NCCP regs 26 Interest charges advance, in …. NCC s 29(1), [29.05]–[29.25], NCCP regs 77, [R77.05] — capitalisation …. [29.10] — day end …. [29.15] — transaction date …. [29.20] — voluntary payments in advance …. [29.25] advertising regulations see Advertisements change to, notification to debtor of …. NCC s 64(1), [64.05]–[64.45] — ascertainable from contract …. [64.25] — calculation, manner of …. [64.20] — change to contract …. [64.35] — circulation of newspaper published in …. [64.40] — increase in annual percentage rate …. [64.10] — particulars of matters as changed …. NCC s 69, [69.05] — penalties for non-compliance …. [64.45] — reduction in obligations …. [64.30] — reference rate …. [64.15] credit contract, inclusion in — calculation, method of …. NCC s 17(5), [17.30] — changes affecting …. NCC s 17(9), [17.50]

— total amount payable …. NCC s 17(6), [17.35] — unilateral changes by credit provider …. NCC s 63, NCC s 68(1) deduction for …. NCC s 25, [25.10] default rate of see Default rate disclosure of, assumptions concerning …. NCC s 180(2), [180.35] early payment of …. NCC s 29(1), [29.05]–[29.25], NCCP regs 77, [R77.05] — capitalisation …. [29.10] — day end …. [29.15] — transaction date …. [29.20] — voluntary payments in advance …. [29.25] interpretation …. [3.40] limit on …. NCC s 28, [28.05]–[28.45] — case …. [28.45] maximum annual percentage rates …. NCC s 28(1), [28.10], [28.31] — Code position …. [28.40] — state-specific …. [28.35] maximum charge …. [28.15] non-daily calculations of …. NCC s 28(2) — unpaid daily balances, calculation of …. NCCP regs 76, [R76.05] penalties for breach of requirements …. [27.20] small credit contracts, application to …. NCC s 27A, [27A.05] statement of account, information to be included in …. NCC s 34(6), [34.45], [34.55] — changes in interest rates …. [34.60] unconscionable, power of court to review …. NCC s 78(1), [78.05]–[78.50]

— amounts paid to third parties …. [78.25] — annual percentage rate change …. [78.10] — break costs and early termination fees …. [78.30] — case …. [78.50] — establishment fees …. NCC s 78(3), [78.15] — “honeymoon rate” loans …. [78.30]–[78.35] — personal property security law …. [78.45] — precontractual conduct …. [78.20] — reopening …. [78.40] — time limit for application …. NCC s 80(2), [80.05] case …. [80.10] Intermediaries liability of credit provider for …. NCC s 199, [199.05]–[199.50] — credit hawking …. NCC s 199 — home visits …. NCC s 156, [156.05]–[156.25] proposal disclosure document, exemption from providing …. NCCP regs 28R — explanatory statement regarding …. [R28R.05] Internet regulation of credit promotions …. NCC s 164(3), [164.10] Interpretation Code, of …. NCC ss 205–208 Investigation see also Enforcement ASIC, by — distribution of report …. NCCP regs 31, [R31.05]

— giving of information, authorise persons to require evidence of authority …. NCCP regs 33, [R33.05] — production of books evidence of authority …. NCCP regs 33, [R33.05] Joinder of parties Government Consumer Agency/ASIC, where application for order regarding contravention of key requirement …. NCC s 120, [120.05] unjust mortgage or credit contract, joinder of third party sharing in profits of …. NCC s 81(1), [81.05] — mortgagee …. [81.10] Joint debtors notices to …. [20.15], NCC s 194(3), [194.25] — capacity issues …. NCC s 194, [194.65] — consent to single copy …. NCC s 194(5), [194.35] — nomination of one party to receive …. NCC s 194(4), [194.30] prescribed form of …. NCC s 194(9), [194.50], NCCP regs 111, [R111.05]–[R111.10] statement to — amount owing, of …. NCC s 36(4), [36.20] contents …. [36.30] effective dating …. [36.40] exceptions …. [36.25] failure to comply …. [36.50] fees …. [36.45] form …. [36.35] — pay out figure, of …. NCC s 83(4), [83.30] Judgment

supplier or linked credit provider, against, for breach of sale contract see Sale contract Key requirements annual cost rate …. [32A.10] cases …. [111.60] compensation to debtor or guarantor for loss arising from contravention of …. NCC s 118(1), [118.05]–[118.40] — case …. [118.25] — court not to make order …. [118.15] — former provisions …. [118.30]–[118.40] — maximum payable …. NCC s 118(2) — preservation of right …. [118.10] continuing credit contracts, for …. [33.70], NCC s 111(2), [111.25] credit contracts, for …. NCC s 111, [111.20] credit provider, application for order by …. NCC s 112(1) — maximum penalty payable where application by …. NCC s 116(1), [116.05] — multiple credit contracts …. NCC s 119(1), [119.05] — notice to ASIC …. [119.15] — payment of penalty …. NCC s 117, [117.05] — publication of notice of application …. NCC s 119(2), [119.10] debtor or guarantor —

compensation for [118.05]–[118.40]

loss

incurred

case …. [118.25] court not to make order …. [118.15] former provisions …. [118.30]–[118.40]

by

….

NCC

s

118(1),

maximum payable …. NCC s 118(2) preservation of right …. [118.10] — court directions pending decision, to protect interests of …. NCC s 121(1), [121.05] variation of, application by credit provider for …. NCC s 121(4) — payment of penalty to …. NCC s 115(1), [115.05]–[115.25] appropriation …. [115.25] directions …. [115.20] guarantors …. [115.15] set-off …. [115.05] set-off by guarantor …. [115.10] — penalty if application made by …. NCC s 114(1), [114.05]–[114.30] declaration by court as to …. NCC s 113(1), [113.05] definition …. NCC s 204 directions pending court’s decision, to protect interests of debtor …. NCC s 121(1), [121.05] — variation of, application by credit provider for …. NCC s 121(4) Government Consumer Agency/ASIC, application by …. NCC s 116(1), [116.05]–[116.30] — Australia, all contraventions in …. [116.10] — joinder as party, representing interests of debtors …. NCC s 120, [120.05] — maximum penalty payable …. NCC s 116(1), [116.05] — multiple contraventions …. [116.25] — multiple credit contracts …. NCC s 119(1), [119.05] — notice to ASIC …. [119.15] — payment of penalty …. NCC s 117, [117.05]

— proportionality approach …. [116.15] across jurisdictions …. [116.20] — publication of notice of application …. NCC s 119(2), [119.10] — registration of orders …. [116.30] modification of …. [111.10] offences …. NCC s 122, [122.05] omissions …. [111.30] opening balance on statement …. [35.10] order relating to, application for …. NCC s 112, [112.05]–[112.35] — ASIC, by …. NCC s 116(1), [116.05]–[116.30] — directions pending court’s decision …. NCC s 121(1), [121.05] — guarantor, by …. NCC s 112(1), [112.20] — jurisdiction of court …. [112.06] — one application per contravention …. NCC s 112(2) — party to credit contract, by …. NCC s 112(1) — standing to apply …. NCC s 112(1), [112.30] — suppression of publication of …. NCC s 113(6), [113.30] payment of penalty — ASIC, to …. NCC s 117, [117.05] — debtor or guarantor, to …. NCC s 115(1), [115.05]–[115.25] appropriation …. [115.25] directions …. [115.20] guarantors …. [115.15] set-off …. [115.05] set-off by guarantor …. [115.10] penalty for contravention of …. [17.10]

— ASIC, maximum penalty where application made by …. NCC s 116(1), [116.05] — credit provider, maximum amount where application made by …. NCC s 116(1), [116.05] — debtor or guarantor, maximum amount where application made by …. NCC s 114(1), [114.05]–[114.30] loss suffered by debtor …. [114.20] maximum civil penalty …. [114.10] multiple contraventions …. [114.15] small amount credit contracts …. [114.30] — payment of penalty …. NCC s 117, [117.05] debtor or guarantor, to …. NCC s 115(1), [115.05]–[115.25] penalty orders, power of court to make …. NCC s 113(2), [113.10] — cases …. [113.35] — matters to be considered …. NCC s 113(4), [113.20] — prudential standing of provider …. [113.15] — related contraventions …. NCC s 113(5), [113.25] prohibited monetary obligations …. [23.25] Regulations and …. [111.35] reverse mortgages …. [111.55] time limit for applications …. NCC s 123, [123.05] Land definition …. NCC s 204 Leases consumer see Consumer lease goods, of see Goods purpose of lease, declaration …. NCC s 172, NCCP regs 104, [R104.05]

Legibility document, of …. NCC s 184(1), NCC s 184(2), [184.05]–[184.30] — print or type size requirement …. [18.15], [184.15], NCCP regs 110, [R110.05] Lender definition …. NCCP regs 26 Liability advertisements concerning credit, for see Advertisement credit provider, of — goods, in relation to …. NCC s 129, [129.05]–[129.25] damages …. [129.10] defences …. [129.15] inducement, meaning of …. [129.20] procedures …. [129.25] — interest, award …. NCC s 132, [132.05] — liability of supplier to linked credit provider …. NCC s 131, [131.05] — limits on debtor’s right of action against linked credit provider …. NCC s 130, [130.05]–[130.20] —

misrepresentations [128.05]–[128.10]

of

supplier,

for

….

NCC

s

128(1),

indemnification …. NCC s 128(2) — right to damages under sale contract against both supplier and linked credit provider …. NCC s 129, [129.10] — subrogation of credit provider …. NCC s 133, [133.05] debtor, of, prohibited increases in …. NCC s 70(1), [70.05] disputed — determination by court of …. NCC s 38(7), [38.15]

— enforcement proceedings where …. NCC s 38(6), [38.10] guarantor, of see Guarantor indemnities from, where void …. NCC s 192, [192.05] — application …. [192.15] — person giving indemnity …. [192.20] — securitisation programs …. [192.10] Licensees credit guide — quotes requirements as to …. NCCP regs 28D, [R28D.05] when not required in …. NCCP regs 28C, [R28C.05] — requirements as to …. [R26A.05] circumstances where not [R28P.05]–[R28P.25]

required

….

NCCP

regs

28P,

mortgage managers …. NCCP regs 26A payments to third parties …. NCCP regs 26A product designers …. NCCP regs 26A volume bonus arrangements …. NCCP regs 26A when fees, charges, commission information not required …. NCCP regs 27, [R27.05]–[R27.10] Licensing credit licence see Credit licence credit providers see Credit providers Linked credit provider definition …. NCC s 127(1), [127.10], NCC s 204 sale contract, liability and duties under — limits on debtor’s right of action against …. NCC s 129, NCC s 130,

[130.05]–[130.20] Loan employee, to see Employee loan home see Home loans low documentation …. [76.40] money or equivalent, to be in …. NCC s 25(1), [25.05]–[25.15] — deduction of amount for interest charges …. [25.10], NCCP regs 75, [R75.05] — penalties …. [25.15] responsible lending see Responsible lending conduct Maintenance services contract termination of, where termination of credit contract …. NCC s 136(1), [136.05]–[136.10] — information of debtor’s rights …. NCC s 136(2), NCCP regs 91, [R91.05], NCCP regs Form 15 — rebate of consideration …. NCC s 136(4), NCCP regs 92, [R92.05] Margin loans Code, application of …. NCC s 6(12), [6.51] Medium amount credit contract calculation of annual cost rate …. [32B.10] definition …. NCC s 204, [204.45] Merchant service agreement definition …. NCC s 204 Misrepresentation supplier, by — indemnification of credit provider …. NCC s 128(2) — liability of credit provider for …. NCC s 128(1), [128.05]–[128.10]

Mortgagee joinder of party sharing in profits of unjust mortgage …. [81.10] notice by, information required to be given in …. NCC s 183(2) — combined notices …. [183.20] Mortgages see also Home loans all accounts …. NCC s 47(1), [47.05]–[47.25] — enforceability requirements …. [47.10] — initial obligations …. [47.20] — timing …. [47.25] amount charged under …. NCC s 181, [181.05]–[181.15] breach of, information regarding enforcement expenses in contract document …. NCC s 17(12), [17.65] changes to obligations under — agreement of parties, by …. NCC s 71, [71.05]-[71.70] Code — application of …. NCC s 7, [7.05]–[7.25] — non-compliance with …. NCC s 53(2), [53.05] — types excluded from …. [42.15] continuing credit contract, goods supplied under …. NCC s 46(1), [46.05] contract document, information to be in …. NCC s 17(13), [17.70] copy of, for mortgagor …. [20.25], NCC s 43, [43.05]–[43.20] — form of …. [43.10] — joint mortgagors …. [43.20] — registered mortgage memorandum …. [43.15] definition …. [7.15], [42.10], NCC s 204, [204.50]

deposited documents, of …. [44.15] document see Mortgage document electronic — electronic transactions legislation, application of …. NCC s 187, [187.05]–[187.20] — legibility of …. NCC s 184(2), [184.10] enforceability of …. NCC s 42(4), [42.20] enforcement expenses, information in contract regarding …. NCC s 17(12), [17.65] enforcement of see Enforcement form of …. NCC s 42(1), [42.05]–[42.30] future property, restriction on mortgage of …. NCC s 45(1), [45.05]–[45.20] — case …. [45.20] — exceptions …. [45.10] — liens or mortgages of deposited documents …. [45.15] goods see Goods mortgage insurance see Insurance legibility of …. [42.25], NCC s 184(1), NCC s 184(2), [184.05]–[184.30] — print or type size requirement …. [184.15], NCCP regs 110, [R110.05] maximum amount which may be secured …. NCC s 49(1), [49.05]–[49.15] — guarantees …. [49.15] — reasonable enforcement expenses …. [49.10] mortgage document — definition …. NCC s 204 — unjust transaction, court may reopen …. NCC s 76(2), [76.36]

see also Unjust transaction — writing, necessity for …. NCC s 42(1) mortgage indemnity insurance …. [143.15] notices — joint mortgagees use of nominations and consent …. NCC s 194(4), [194.55] offence of non-compliance with requirements …. NCC s 53(1), [53.05] personal property securities law …. [42.30] prohibited provisions …. NCC s 184(3), [184.25] — contravention of prohibition …. NCC s 184(4) prohibited securities …. NCC s 50(1)–(5), [50.05] — exemption …. NCCP regs 80, [R80.05] property — assignment or disposal of, by mortgagor …. NCC s 51(1), [51.05]–[51.10] conditions on consent of credit provider to …. NCC s 52(1), [52.05]–[52.10] consent of credit provider to …. NCC s 51(1) court authorisation where consent of credit provider unreasonably withheld …. NCC s 51(3) — description of, in mortgage document …. NCC s 44(1), [44.20] provision securing credit provided under …. NCC s 47(1) — enforceability …. NCC s 47(2), [47.10] registration under PPSA …. [7.25] remuneration, over …. NCC s 50(1), [50.05] — exemption …. NCCP regs 80, [R80.05] reverse see Reverse mortgage

set-off, contractual right as …. [42.10] terms and conditions, prescribed …. NCCP regs Form 4 third party mortgages, prohibition on …. NCC s 48(1), [48.05]–[48.15] — proposed credit contract or guarantee …. [48.15] — unregulated credit …. [48.10] variation — agreement for …. NCC s 71, [71.05]-[71.70] — unilateral changes …. NCC s 68 void see Void writing, to be in …. NCC s 42(1) Mortgagor assignment of rights by …. NCC s 189, [189.05]–[189.15] — sale of mortgaged property …. [189.10] compensation to, on sale of goods by credit provider …. NCC s 86(1), [86.05], NCC s 106(1), [106.05] — manner of sale …. [86.10], [106.10] — onus of proof …. [86.15], [106.15] court may reopen unjust transaction …. NCC s 76(2), [76.36] — see also Unjust transaction definition …. NCC s 204 information as to location of mortgaged goods, refusal to give …. NCC s 98(1), [98.10] jurisdiction of residence, relevance of …. [7.10] nomination of purchaser of goods taken by credit provider by …. NCC s 103, [103.05]–[103.25] — notice period …. [103.20] — penalty for non-compliance …. [103.25]

— purchase price …. [103.10] — sale …. [103.15] remedies — ancillary or consequential orders …. NCC s 110, [110.05] — order for possession …. NCC s 109, [109.05] — regain possession of mortgaged goods, application to …. NCC s 108, [108.05] repossession …. NCC s 91, [91.05]–[91.35] — burden of proof as to lawfulness …. NCC s 91(4), [91.25] — case …. [91.35] — exceptions to requirements …. [91.10] — obligations on credit provider …. NCC s 102, [102.05]–[102.55] best price …. NCC s 102(3) — penalties for non-compliance …. [91.30] — restrictions on …. NCC s 91 signature of, on mortgage document …. NCC s 42(1) transfer of property by …. NCC s 51, [51.05]–[51.10] Name credit provider, of, to be in contract document …. NCC s 17(2), [17.15] disclosure of …. NCC s 180(7), [180.55] National Consumer Credit Protection Amendment Regulation 2012 transitional provisions …. NCCP regs 49A, [R49A.05], NCCP regs 49B, [R49B.05] National Consumer Credit Protection Regulations 2010 amendments made to …. [R4D.10] associate, meaning of …. NCCP regs 4, [R4.05] commencement …. NCCP regs 2, [R2.05]

definitions …. NCCP regs 3, [R3.05] forms …. NCCP regs 6, NCCP regs Sch 1, [S1.05] — new forms introduced …. [S1.20] — numbering of …. [S1.15] — relevant provisions applicable to …. [S1.10] — use of …. [R6.05] modifications — carried over instruments …. NCCP regs Sch 2, [S2.05] — responsible lending conduct …. NCCP regs Sch 4, [S4.05]–[S4.15] — special purpose funding entity …. NCCP regs Sch 3, [S3.05]–[S3.10] prescribed orders …. NCCP regs 5, [R5.05] savings and transitional provisions — State and Territory Consumer Credit Codes, reliance on …. NCCP regs 112, [R112.05] title …. NCCP regs 1, [R1.05] National Credit Code (NCC) Acts and enactments, reference to …. NCC s 207, [207.05] — Commonwealth legislation …. [207.10] — inclusive …. NCC 213, [213.05] — State or territory legislation …. [207.15] amend or repeal, power to …. NCC s 214, [214.05] amount of credit, meaning of …. NCC s 3, [3.35] — exclusions from …. [3.45] application …. NCC s 5, [5.05]–[5.65] — cases …. [5.65] — presumptions relating to …. [5.40], NCC s 13, [13.05]–[13.60]

cases …. [13.60] commencement …. [1.05] contracting out, prohibition of …. NCC s 191, [191.05]–[191.20] contravention of, compensation for …. NCC s 124(1), [124.05]–[124.25] credit, meaning of …. NCC s 3, [3.05] credit contract, meaning of …. NCC s 4 defined terms, provisions relating to …. NCC s 209, [209.05]–[209.10] displacement of part by contrary intention …. NCC s 205, [205.05] distance, time and age, matters relating to …. NCC s 218, [218.05] exemptions — see also Exemptions from Code — ASIC, by …. NCC s 203A, [203A.05] conditions …. [203A.10] form of …. [203A.15] — regulations, by …. NCC s 203B, [203B.05]–[203B.10], NCCP regs 50–69 application …. [R50.05] forms, compliance with …. NCC s 208, [208.05] — completion of prescribed forms …. [208.15] — substantial compliance …. [208.10] functions and powers …. NCC ss 214–217 gender and numbers, provisions relating to …. NCC s 209, [209.05], [209.15] goods leases with option to purchase regarded as sale by instalments …. NCC s 9, [9.05]–[9.35] guarantees, application to …. NCC s 8, [8.05]–[8.20] information disclosure by credit provider …. NCC s 18(1)

instalment — sale of goods, application of Code …. NCC s 11, [11.05] — sale of goods under related contracts by, application of Code …. NCC s 12, [12.05] — sale of land, application of Code …. NCC s 10, [10.05] insurance, application to …. NCC s 142(2), [142.05]–[142.35] interest rates for credit contracts — maximum annual percentage rates …. NCC s 28(1), [28.10], [28.31] Code position …. [28.40] state-specific …. [28.35] interpretation …. NCC s 2, [2.05], NCC ss 205–208 key requirements of see Key requirements litigation under …. [111.40]–[111.45] material that is/is not part of Code …. [206.05]–[206.15] mortgages, application to …. NCC s 7, [7.05]–[7.25] non-compliance, effect of …. NCC s 193, [193.05] — credit contracts, for …. NCC s 22 — general law …. [193.10] — guarantees, for …. NCC s 62(2), [62.05] — mortgages, for …. NCC s 53(2), [53.05] powers between enactment and commencement, exercise of …. NCC s 217, [217.05] provision of credit — Code applicable to …. NCC s 5, [5.05]–[5.65] — Code not applicable to …. NCC s 6, [6.05]–[6.65] references to certain provisions of …. NCC s 212, [212.05], NCC 213, [213.05]

short title …. NCC s 1 statutory instruments make provision, matters for which …. NCC s 215, [215.05] terms and references …. NCC ss 209–213 transitional arrangements …. [1.10] validity, presumption of …. NCC s 216, [216.05] Non-compliance Code, with, effect of …. NCC s 193, [193.05] — general law …. [193.10] Notice bodies corporate, to …. [195.16] Code, applicable to …. [183.25] combined notices …. [183.20] date of see Date default see Default notice electronic — legibility of …. NCC s 184(2), [184.10] form, regulations may prescribe …. NCC s 183(1), [183.05]–[183.10] giving of …. NCC s 194(1), [194.05]–[194.65] — electronic communications, using see electronic above — manner of giving …. NCC s 195, [195.05]–[195.35] — unsuccessful attempts, where …. NCC s 194(2), [194.20] joint parties, to …. NCC s 194(3), [194.25] — capacity issues …. NCC s 194, [194.65] — consent to single copy …. NCC s 194(5), [194.35] use of …. NCC s 194(4), [194.55]

— nomination of one party to receive …. NCC s 194(4), [194.30] prescribed form of …. NCC s 194(9), [194.50], NCCP regs 111, [R111.05]–[R111.10] use of …. NCC s 194(4), [194.55] — separate notices …. NCC s 194(3), [194.25] lawyers, given to …. NCC s 194(7), [194.45] legibility of …. NCC s 184(1), NCC s 184(2), [184.05]–[184.30] — print or type size requirement …. [184.15], NCCP regs 110, [R110.05] manner of giving …. NCC s 195, [195.05]–[195.35] mortgagee, by, information required to be given in …. NCC s 183(2), [183.20] prohibited provisions …. NCC s 184(3), [184.25] — contravention of prohibition …. NCC s 184(4) specification of appropriate address …. NCC s 195, [195.10] time when taking effect, matters relating to …. NCC s 218, [218.05] unsuccessful attempts by credit provider …. NCC s 194(2), [194.20] writing, to be in …. NCC s 183(3) Notification credit fees and charges changes, of …. NCC s 66(1), [66.05]–[66.50] — case …. [66.50] — change to contract …. [66.20] — government charges varied …. [66.45] — industry codes of practice …. [66.40] — next statement of account, in …. [66.25] — particulars of matters as changed …. NCC s 69, [69.05] — penalties for non-compliance …. [66.35]

— reductions in obligations …. [66.15] credit limits in continuing credit contracts, changes to …. NCC s 67(1), [67.05]–[67.30] — increase in limit …. [67.15] invitations …. [67.06] — penalty for non-compliance …. [67.30] — reduction or no further credit …. [67.10] — reissue of card …. [67.25] — unsolicited contracts and increases (ACT) …. [67.20] interest rate changes, of …. NCC s 64(1), [64.05]–[64.45] — ascertainable from contract …. [64.25] — calculation, manner of …. [64.20] — change to contract …. [64.35] — circulation of newspaper published in …. [64.40] — increase in annual percentage rate …. [64.10] — particulars of matters as changed …. NCC s 69, [69.05] — penalties for non-compliance …. [64.45] — reduction in obligations …. [64.30] — reference rate …. [64.15] particulars of matters as changed …. NCC s 69, [69.05] publication, by see Publication repayment changes, of …. NCC s 65(1), [65.05]–[65.50] — automatic increases …. [65.25] — calculation method …. [65.20] — change to contract …. [65.35] — changes to legislative regime …. [65.50]

— increase or no change …. [65.10] — interest-only loans …. [65.25] — next statement of account, in …. [65.40] — penalties for non-compliance …. [65.45] — reduction …. [65.15] unilateral changes by credit provider, of …. [63.22], NCC s 68, [68.05] — changes not requiring …. [63.25] — increase in obligations …. [68.10] — notice periods …. [63.30] — particulars of matters as changed …. NCC s 69, [69.05] — penalties for non-compliance …. [68.25] — reduction in obligations …. [68.15] Offence agents, by …. NCC s 200, [200.05] canvassing of credit at home …. NCC s 156(1), [156.05]–[156.25] civil penalties, infringement notice for …. NCCP regs 37–49, [R37.05] contracting out …. NCC s 191(3), [191.05]–[191.20] corporations, by …. NCC s 201, [201.05]–[201.15] credit assistance providers — prohibited monetary obligations …. NCC s 24A, [24A.05]–[24A.15] effect …. [24A.10] penalties …. [24A.15] credit contracts — false or misleading representations as inducement to enter …. NCC s 154(1), [154.05]–[154.35] — non-compliance with requirements concerning …. NCC s 22, [22.05]–[22.15]

— prohibited monetary obligations imposed under small amount contracts …. [23.06], NCC s 23A, [23A.05]–[23A.50], [24.10] credit of payment after receipt, necessity for …. NCC s 26(2), NCC s 26(3), [26.10] — exception …. [26.15] — strict liability …. [26.30] credit providers — prohibited monetary obligations …. NCC s 24, [24.05]–[24.10] Crimes Act 1914 s 4K, non-application of …. NCC s 203, [203.05] early payment, non-acceptance of …. NCC s 26(1), (3) — strict liability …. [26.30] employees, by …. NCC s 200, [200.05] entry to residential property without authority …. NCC s 99(3), [99.35] full provision of funds in money or equivalent, necessity for …. NCC s 25(1), [25.05]–[25.15] — deduction of amount for interest charges …. [25.10], NCCP regs 75, [R75.05] — penalties …. [25.15] guarantees, non-compliance with requirements concerning …. NCC s 55(1), [55.15] harassment by credit provider …. NCC s 155, [155.05]–[155.20] information as to location of mortgaged goods, refusal of mortgagor to give …. NCC s 98(2), [98.10] infringement notices for …. NCCP regs 37–49, [R37.05] — amount of penalty if notice given …. NCCP regs 41, [R41.05] — contents of …. NCCP regs 40, [R40.05], NCCP regs Form 3 — definitions …. NCCP regs 38, [R38.05] — effect of payment of penalty …. NCCP regs 45, [R45.05]

— extension of time to pay penalty …. NCCP regs 42 explanatory statement regarding …. [R42.05] — payment of penalty by instalments …. NCCP regs 43 explanatory statement regarding …. [R43.05] — refund of penalty …. NCCP regs 49, [R49.05] — time for payment of penalty …. NCCP regs 44, [R44.05] — when given …. NCCP regs 39, [R39.05] — withdrawal of notice ASIC, by …. NCCP regs 47, [R47.05] nominated person, by …. NCCP regs 46, [R46.05] notice of …. NCCP regs 48, [R48.05] limitations on proceedings for …. NCC s 202, [202.05]–[202.10] mortgages, non-compliance with requirements concerning …. NCC s 53(1), [53.05] non-compliance with requirements — credit contracts …. NCC s 22, [22.05]–[22.15] — guarantees …. NCC s 62(1), [62.05] — mortgages …. NCC s 53(1), [53.05] officers, by …. NCC s 200, [200.05] payments under credit [26.05]–[26.35]

contract,

concerning

….

NCC

s

26,

— strict liability …. [26.30] prohibited monetary obligations imposed on debtor …. NCC s 24, [24.05]–[24.10] statement of account …. NCC s 33(1) Offer credit contract, in …. NCC s 14(1)

— acceptance by debtor …. NCC s 14(2), [21.30] Officers offences by …. NCC s 200, [200.05] Order court, of see Courts Party credit contract, mortgage or guarantee, to, changes by agreement of …. NCC s 71, [71.05]-[71.70] —

exemption to notice [R69A.05]–[R69A.15]

requirements

….

NCCP

regs

69A,

definition …. [13.10] joinder of see Joinder of parties notices to joint parties, where …. NCC s 194(4), [194.25] — nomination of one party to receive …. NCC s 194(4), [194.30] prescribed form of …. NCC s 194(9), [194.50], NCCP regs 111, [R111.05]–[R111.10] Pawnbroker credit provided by, application of Code to …. NCC s 6(9), [6.40] Paying out credit contract, of see Credit contract Payment application of, specification by debtor as to …. NCC s 190(1) — credit card, on …. NCCP regs 28LM, [R28LM.05] appropriation of …. NCC s 190, [190.05] — penalty for non-compliance …. [190.20] — prior agreement …. [190.15] credit provider, duties of

— credit of payment after receipt …. NCC s 26(2), (3), [26.10] exception …. [26.15] strict liability …. [26.30] — early payment, acceptance of …. NCC s 26(1), (3) paying out early …. [26.20] strict liability …. [26.30] early payment — acceptance of …. NCC s 26(1), (3) strict liability …. [26.30] — non-acceptance of …. NCC s 26(4) strict liability …. [26.30] — paying out early …. [26.20] — reverse mortgages and …. [26.35] — right to pay out contract …. [26.06] interest charges, of, prohibition of early debit of …. NCC s 29(1), [29.05]–[29.25] — capitalisation …. [29.10] — day end …. [29.15] — exemption …. NCCP regs 77, [R77.05] — transaction date …. [29.20] — voluntary payments in advance …. [29.25] overpayments …. [26.11] penalty, of, where breach of key requirement see Key requirements statement of account, payments to or from account to be included in …. NCC s 34(8), [34.70] — multiple cheque deposits …. [34.75] third party fees, reimbursement by debtor …. [26.12]

Penalty application by ASIC …. NCC s 116(1) canvassing of credit at home, for …. NCC s 156(1), [156.25] civil — application by credit provider, whether required …. [111.05] — Code, under …. [111.05] — contravention of Code, for …. NCC s 124(1), [124.05]–[124.25] — Credit Act, under …. [111.05] — infringement notice for …. NCCP regs 37–49, [R37.05] — key requirement, for contravention of see Key requirements continuing credit contracts …. [33.70], [33.75] contracting out, for …. NCC s 191(3), [191.20] credit of payment after receipt, necessity for …. NCC s 26(2), (3), [26.10] — exception …. [26.15] — strict liability …. [26.30] criminal penalty regime …. [111.50] definition …. NCC s 204 early payment, non-acceptance of …. NCC s 26(1), (3) — strict liability …. [26.30] false or misleading representations as inducement to enter credit contract …. NCC s 154 guarantee that is void or unenforceable, entering into …. NCC s 62(2), [62.05] harassment by credit provider …. NCC s 155 home visits by credit provider …. NCC s 156, [156.25] insurance

— failure to refund premium where rejection by insurer …. [147.15] — requirement to take out with particular insurer …. [143.75] key requirement, where contravention of see Key requirements mortgage that is void or unenforceable, entering into …. NCC s 53(2), [53.05] mortgaged property, assignment or disposal by mortgagor of …. NCC s 51(1), [51.05] non-compliance with requirements — credit contracts, for …. NCC s 22, [22.05] — guarantees, for …. NCC s 62(2), [62.05] — mortgages, for …. NCC s 53(2), [53.05] non-key requirements — compensation for breach of …. NCC s 124, [124.05]–[124.25] notification by credit provider to debtor — credit fees and charges changes …. NCC s 66(1), [66.35] — credit limits in continuing credit contracts, changes in …. NCC s 67(2), [67.30] — interest rate changes …. NCC s 64, [64.45] — repayment changes …. NCC s 65(2), [65.45] — unilateral changes by credit provider …. NCC s 68(1), [68.25] pay out figure, failure of credit provider to give statement of …. NCC s 83(3), [83.35] payment of — debtor or guarantor, to, contravention of key requirement …. NCC s 115, [115.05]–[115.25] — set-off …. NCC s 115(1), [115.05]–[115.10] prohibited monetary obligations imposed on debtor …. NCC s 24, [24.05]–[24.10]

relevant circumstances …. NCC s 113(4) statement of account …. NCC s 33(1) — amount owing on request, failure to comply …. [36.50] systemic contraventions Percentage rate annual see Annual percentage rate comparisons see Comparison rate daily see Daily percentage rate Personal, domestic or household purposes provision of credit for …. NCC s 13(3) — application of Code to …. NCC s 5(3), [5.05] — form of declaration …. NCCP regs 68, [R68.05] — prescribed person …. NCCP regs 67 — presumption as to …. [5.40], NCC s 13(2) — “provided or intended to be provided for” …. [5.25] — whose purpose …. [5.30] what constitutes …. [5.30] Postponement application to court for …. NCC s 94, [94.05]–[94.30] — carried over instruments …. [94.12] — exceptions …. [94.10] — external dispute resolution …. [94.25] — penalties for non-compliance …. [94.30] enforcement proceedings, of see Enforcement proceedings Pre-contractual disclosure see also Precontractual statement

credit provider, by, to debtor …. NCC s 16, [16.05]–[16.55] Pre-contractual statement comparison rate …. [16.40], NCCP regs 71, [R71.10] — application …. [R71.15] — assumptions …. [R71.10] financial table …. [16.20] — additional information …. [16.30] — cover sheet …. [16.25] — disclosure date …. [16.35] format …. [16.15] information statement …. [16.55], NCCP regs 70, [R70.05], NCCP regs Form 5 interest charges …. NCC s 17(5), NCC s 17(6), [17.30], [17.35] key facts sheet …. [14.07], [16.21] prescribed content of …. NCC s 16(4), [16.10], [16.50] — relevant financial information …. [16.20], NCCP regs 72, [R72.05] variation of …. NCC s 16(7), [16.45] Predominant purpose Code, application of …. NCC s 5(4), [5.05] — “provided or intended to be provided for” …. [5.25] definition …. NCC s 5(4), [5.35] Premium see Insurance premium Privacy credit providers’ obligations — prohibition on home visits by credit providers …. NCC s 156, [156.05]–[156.25] Proceedings

Code, under …. [111.40]–[111.45] costs where Code not applicable …. [13.50] definition …. NCC s 204 enforcement see Enforcement proceedings limitation on bringing of …. NCC s 202, [202.05]–[202.10] sale contract, for debtor suffering loss for breach of see Sale contract Promissory note credit provided under, application of Code to …. NCC s 6(7), [6.30] Property definition …. NCC s 204 disposal of see Dispose future, restriction on mortgage of …. NCC s 45(1), [45.05]–[45.20] — case …. [45.20] — exceptions …. [45.10] — liens or mortgages of deposited documents …. [45.15] mortgaged, description in mortgage of …. NCC s 44(1), [44.20] Proposal disclosure document requirements as to — commissions …. NCCP regs 28G explanatory statement regarding …. [R28G.05] not required, when …. NCCP regs 28H, [R28H.05] — fees and charges …. NCCP regs 28E, [R28E.5] explanatory statement regarding …. [R28E.10] not required, when …. NCCP regs 28F, [R28F.05] Provider credit, of see Credit provider

Publication application for order where contravention of key requirement — credit provider or Government Consumer Agency, where application by …. NCC s 119(2), [119.10] — suppression of …. NCC s 113(6), [113.30] notification by — credit fees and charges changes …. NCC s 66(2), [66.10] — interest rate changes …. NCC s 64(2), [64.10] Purchaser definition …. NCC s 204 goods taken by credit provider, of, mortgagor may nominate …. NCC s 103, [103.05]–[103.25] — notice period …. [103.20] — penalty for non-compliance …. [103.25] — purchase price …. [103.10] — sale …. [103.15] Rate advertisements, disclosure in …. NCC s 153, [153.05]–[153.30] — nominal percentage rate per annum …. [153.20]–[153.25] — penalty for non-compliance …. [153.30] annual percentage see Annual percentage rate change in, notification to debtor of …. NCC s 64(1), [64.05]–[64.45] — particulars of matters as changed …. NCC s 69, [69.05] daily percentage see Daily percentage rate default see Default rate reference see Reference rate Recovery

enforcement expenses, of see Enforcement expenses fees and charges, of — limited by Code …. NCC s 23(2), [23.15] — unauthorised by contract …. NCC s 23(4), [23.15] insurance premium, of see Insurance premium Reference rate change in …. NCC s 64(3), [64.15] definition …. NCC s 204 Regulations contract not involving a written document, authorising …. NCC s 15, [15.05] court proceedings, prescribing location of …. NCCP regs 36, [R36.05] definition …. NCC s 204 infringement notices …. NCCP regs 37–49 provision of credit, power to exclude …. NCC s 6(13), [6.55] Related guarantee see Guarantee Related insurance contract see Credit-related insurance contract Related mortgage see Mortgage Related sale contract see Sale contract Remedies see also Rights and remedies mortgagor’s see Mortgagor Repayments balloon payments …. [17.40] changes in — automatic increases …. [65.25]

— change to contract …. [65.35] — changes to legislative regime …. [65.50] — increase or no change …. [65.10] — interest-only loans …. [65.25] — method of calculation …. NCC s 65(3), [65.20] — next statement of account, in …. [65.40] — notification to debtor of …. NCC s 65(1), [65.05]–[65.50] — particulars of matters as changed …. NCC s 69, [69.05] — penalties for non-compliance …. [65.45] — reductions …. NCC s 65(2), [65.15] contract document, information to be included in …. NCC s 17(7), [17.40] disclosure of, assumptions regarding …. NCC s 180(3), [180.40] Repossession consumer lease, under, notice of …. NCC s 178, [178.05]–[178.30], NCC s 178 — jurisdiction to hear matters relating to …. [178.20] — penalty for non-compliance …. [178.25] — personal property securities law …. [178.30] — when not required …. [178.15] mortgaged goods, of, by credit provider …. NCC s 91, [91.05]–[91.35] — burden of proof as to lawfulness of …. NCC s 91(4), [91.25] — case …. [91.35] — exceptions to requirements …. [91.10] — obligations of credit provider …. NCC s 102, [102.05]–[102.55] — penalties for non-compliance …. [91.30] — restrictions …. NCC s 91(1)

statement of mortgagor’s rights required …. NCC s 102(1), NCCP regs 88, [R88.05], NCCP regs Form 14 Residential investment property provision of credit for …. NCC s 5, [5.31] purchase shortfall …. [5.61] regulations concerning …. NCC s 26A, [26A.05], NCC s 30A, [30A.05] — interest charges in relation to …. NCCP regs 78, [R78.05] vendor term contracts …. [5.60] Responsible lending conduct credit guides, requirements as to —

circumstances where [R28P.05]–[R28P.10]

not

required

….

NCCP

regs

28P,

debt collectors exemption …. [R28P.25] franchisee exemption …. [R28P.15] previous dealings with a consumer …. [R28P.20] — credit provider or lessor, of …. NCCP regs 26B, [R26B.05] — credit representatives, of …. NCCP regs 27A, [R27A.05] credit provider or lessor, as to …. NCCP regs 27A explanatory statement regarding …. [R27A.10] payments to third parties …. NCCP regs 27A volume bonus arrangement …. NCCP regs 27A when fees, charges, commission information not required …. NCCP regs 27B, [R27B.05] — licensee, of …. NCCP regs 26A, [R26A.05] mortgage managers …. NCCP regs 26A payments to third parties …. NCCP regs 26A product designers …. NCCP regs 26A

volume bonus arrangements …. NCCP regs 26A when fees, charges, commission information not required …. NCCP regs 27, [R27.05]–[R27.10] definitions …. NCCP regs 26, [R26.05] — disclosure document …. NCCP regs 26 — managed contract …. NCCP regs 26 — mortgage manager …. NCCP regs 26 — product designer …. NCCP regs 26 — trail commission …. NCCP regs 26 — volume bonus arrangement …. NCCP regs 26 disclosures regarding credit contract …. [14.06] exemptions from obligations — ADI or registrable corporation …. NCCP regs 24A, [R24A.05] — point of sale credit service providers …. [R23.15] modifications relating to …. NCCP regs Sch 4, [S4.05]–[S4.15] proposal disclosure document, requirements as to — commissions …. NCCP regs 28G explanatory statement regarding …. [R28G.05] not required, when …. NCCP regs 28H, [R28H.05] — fees and charges …. NCCP regs 28E, [R28E.5] explanatory statement regarding …. [R28E.10] not required, when …. NCCP regs 28F, [R28F.05] — intermediary’s requirement to provide, exemption …. NCCP regs 28R explanatory statement regarding …. [R28R.05] quotes, licensee requirements as to …. NCCP regs 28D, [R28D.05] — explanatory statement regarding …. [R28D.10]

reverse mortgages and …. [13A.40], [13A.55] — information statement availability other situations …. [13A.55] website, on …. [13A.55] — projections of equity given beforehand …. [13A.55] — representations using term …. [13A.55] small amount credit contracts …. [23A.40] — specific prohibitions …. [23A.40] — website disclosures …. [23A.40] Reverse mortgage bridging finance contracts …. [13A.80] — definition …. [204.05] cases where provisions do not apply …. NCC s 86E, [86E.05] changes to requirements …. [13A.05] — ending of contract by debtor …. [13A.65] — enforcement of contract or mortgage …. [13A.65] — independent legal advice …. [13A.65] — restrictions on default events …. [13A.65] — tenancy protection for non-title holding residents …. [13A.65] Code provisions relating to …. [13A.30] contract document requirements …. [17.81] credit assistance provider — obligation to make reasonable inquiries …. NCCP regs 28HA, [R28HA.05] credit provider — must not demand or accept further payments …. NCC s 86D, [86D.05]

— obligation to make reasonable inquiries …. NCCP regs 28HA, [R28HA.05] — pay excess of receipt, to …. NCC s 86C, [86C.05] debtor’s liability exceeded value of property, where …. NCC s 93A, [93A.05] — explanatory memorandum …. [93A.10] definition …. NCC s 13A, [13A.10], [13A.50], NCC s 204 discharge of debtor’s obligations …. NCC s 86B, [86B.05] discharge of mortgage …. NCC s 86B, [86B.05] disclosure about credit contracts — form …. NCCP regs Form 7A — tenancy of person other than debtor not protected …. NCC s 18B, [18B.05]–[18B.15], NCCP regs 74A, [R74A.05] explanatory memorandum …. [18B.10] penalty for failure to tell debtor …. [22.15] prescribed form …. [18B.15] early payments and …. [26.35] EDR schemes …. [13A.60] ending of …. NCC s 86A, [86A.05] — by debtor …. [13A.65] — explanatory memorandum …. [86A.10] enforcement of …. [88.90] Enhancements Act …. [13A.15], [18A.10] — explanatory memorandum …. [13A.20] home equity, projection of …. NCCP regs 28LD, [R28LD.05] independent legal advice, requirement …. [13A.65], NCC s 18C, [18C.05]

information statement …. [13A.45], NCCP regs 28LE, [R28LE.05], NCCP regs Sch 5A, [S5A.05] — availability of …. [13A.55] key requirements …. [111.55] lending policy …. [13A.70] loan to value ratio, calculation of …. NCCP regs 28LC, [R28LC.05] — explanatory statement regarding …. [R28LC.10] mandatory provisions [18A.05]–[18A.20]

in

credit

contract

….

NCC

s

18A,

market value …. NCCP regs 84A, [R84A.05] — ending and enforcing credit contract …. NCCP regs 84A prohibition, reason for …. [18A.20] records of nominations of persons to occupy reverse mortgaged properties …. NCC s 185A, [185A.05] — manner of keeping …. NCCP regs 110A, [R110A.05] relationship with other provisions …. NCC s 86F, [86F.05] remedies for unsuitable/unjust contracts …. [13A.75] — proposed remedy …. [13A.60] requirements …. [13A.45], [18A.15] — changes to …. [13A.05], [13A.65] responsible lending and …. [13A.40], [13A.55] — information statement availability other situations …. [13A.55] website, on …. [13A.55] — projections of equity given beforehand …. [13A.55] — representations using term …. [13A.55] SEQUAL Code …. [13A.35]

statement of account, maximum period …. [33.80] summary tables of requirements …. [13A.30] tenancy protection in credit contracts …. NCC s 67A, [67A.05] — non-title holding residents, for …. [13A.65] unjust, reopening …. [76.45] unsuitable contracts — proposed remedy …. [13A.60] — remedies …. [13A.75] unsuitable credit contracts with certain loan to value ratios …. NCCP regs 28LC, [R28LC.05] — explanatory statement regarding …. [R28LC.10] Review court, by see Courts Rights and remedies consumer — civil penalties and compensation see Penalty — disputed accounts see Statement of account — early payment see Payment — early termination and pay-out see Termination of contract — negotiated variations see Unjust transaction — postponement of obligations see Postponement — reopening unjust transactions see Unjust transaction — reviewing unconscionable charges see Unconscionable — variations on grounds of hardship see Unjust transaction — voluntary return of goods see Termination of contract credit provider see Enforcement proceedings

Sale contract see Sale contract instalments, by, goods leases with option to purchase to be regarded as …. NCC s 9, [9.05]–[9.35] — cases …. [9.35] — right or obligation to purchase, whether …. [9.25] mortgaged goods, of, by credit provider …. NCC s 85(6), [85.05]–[85.10], [85.30] — acceleration clause …. [85.35], [104.25] — “as soon as reasonably practicable” …. [104.15] — “best price reasonably obtainable” …. [104.10] — compensation to debtor or mortgagor …. NCC s 86(1), [86.05], NCC s 106(1), [106.05] manner of sale …. [86.10], [106.10] onus of proof …. [86.15], [106.15] — deductions from proceeds of …. NCC s 85(7), NCC s 85(8), NCC s 105, [105.05]–[105.10] enforcement expenses …. [85.40] — duty to account …. NCC s 85(9) — penalties for non-compliance …. [85.45], [104.55] — PPSA requirements …. [104.60] — procedure for …. NCC s 104(1), [104.05]–[104.60] — surplus of sale proceeds …. NCC s 104(2), [104.20] — written notice to mortgagor estimated value of goods …. [85.15] gross proceeds, of …. NCC s 104(3), [104.35], NCCP regs 89, [R89.05] net proceeds, of …. NCC s 104(3), [104.35]

notice periods …. [85.25], [104.50] print type …. [85.20], [104.50] sale, of …. [104.30] timing of …. [104.45] Sale contract breach of, debtor’s right to damages …. NCC s 129(1), [129.10] — credit provider’s defences …. NCC s 129(2), [129.15] conditional on obtaining credit, termination of see termination below credit from particular source, supplier not to require purchaser to obtain …. NCC s 140, [140.05] — penalty …. [140.10] debtor — action against linked credit provider, limits on …. NCC s 130(1) — award of interest to …. NCC s 132(1), [132.05] — limit on right of action …. NCC s 130, [130.05]–[130.20] — right to damages under, against supplier and linked credit provider …. NCC s 129(1), [129.10] defences of credit provider …. NCC s 129(2), [129.15] definition …. NCC s 125, [125.10], NCC s 204 failure of consideration under, debtor’s right to damages …. NCC s 129(1), [129.10] — credit provider’s defences …. NCC s 129(2), [129.15] instalment — sale of goods, application of Code …. NCC s 11, [11.05] — sale of goods under related contracts by, application of Code …. NCC s 12, [12.05] — sale of land, application of Code …. NCC s 10, [10.05]

linked credit provider …. [125.05], [125.15] — definition …. NCC s 127(1), [127.10], NCC s 204 — liability …. [125.20] — limits on debtor’s right of action against …. NCC s 130, [130.05]–[130.20] postdated bills of exchange, prohibition on payment for goods or services by …. NCC s 141(1), [141.05] — penalty …. [141.10] Pt 7 Code — application of …. NCC s 126, [126.05] suppliers and linked credit provider — damages, joint and several liability for …. NCC s 129(1), [129.10] defences to action …. NCC s 129(2), [129.15] — enforcement of right against …. NCC s 130(6) — joint proceedings against …. NCC s 130(2), [130.10] — judgment against enforcement of …. NCC s 130(5), [130.20] interest, award of …. NCC s 132(1), [132.05] subrogation of credit provider …. NCC s 133, [133.05] — liability, limit on …. NCC s 130(4), [130.15] — supplier’s liability to linked credit provider …. NCC s 131, [131.05] termination — conditional on purchaser obtaining credit, where …. NCC s 134(1), [134.05]–[134.25] reasonable endeavours …. [134.15] remedies of supplier …. NCC s 134(3), [134.25] return of goods …. NCC s 134(2), [134.20]

— Pt 5 not to apply to …. NCC s 139, [139.05] —

tied credit contract, [135.05]–[135.35]

termination

of

….

NCC

s

135(1),

cases …. [135.35] dominant purpose …. [135.30] insurance contracts …. [135.25] limitation …. [135.20] rights of parties …. [135.15] supplier’s obligations …. [135.10] — validity of, power of court to determine …. NCC s 138, [138.05] — writing, necessity to be in …. NCC s 137, [137.05] tied credit contract …. NCC s 127, [127.15]–[127.20] — termination effect on maintenance services contract …. NCC s 136, [136.05]–[136.10] Security mortgage, for, prohibited …. NCC s 50(1)–(5), [50.05] — exemption …. NCCP regs 80, [R80.05] Service address for service — change of …. NCC s 195(3), [195.20] — debtors …. NCC s 195(1), [195.10] — other persons …. NCC s 195(1), [195.15] documents, of …. NCC s 195, [195.05]–[195.35] — date of …. NCC s 196(1), [196.15] case …. [196.30] Services

contract for supply of see Sale contract definition …. [125.10], NCC s 204, [204.55] Short term credit Code, whether applicable to …. NCC s 6(1), [6.10], NCCP regs 50A — explanatory statement regarding …. [R50A.05] Signature consumer lease, on …. NCC s 173(1) credit contract, on …. NCC s 14 — authorised person …. [14.30] documents, on …. NCC s 186(1), [186.05] — application to written documents …. [186.10] — credit provider may not be authorised …. [186.15] — name of agent …. [186.20] guarantee, on …. NCC s 55(1), [55.15] mortgage document, on …. NCC s 42(1) sign, definition …. NCC s 204 Small amount credit contracts adjusted credit amount — calculation …. NCC s 204(3) — definition …. NCC s 204, [204.02] — fees, to cover …. NCCP regs 4D, [R4D.05] anti-avoidance amendments …. [23A.45], [23A.50] Code provisions dealing with …. [23A.15] — changes to …. [23A.35] definition …. [23A.05], [23A.30], [204.56] direct debit payment, default in …. NCC s 39C, [39C.05], NCCP regs

79C — explanatory statement regarding …. [R79C.05] Enhancements Act, regulations in …. [23A.05] — changes to Code …. [23A.35] — explanatory memorandum …. [23A.10] fees and charges …. [17.26] — credit limit increase to cover …. NCCP regs 4D, [R4D.05] — credit provider or prescribed person not to require or accept …. NCC s 31B, [31B.05], NCCP regs 79AB, [R79AB.05] prescribed persons …. NCCP regs 79AE, [R79AE.05]–[R79AE.10] — restrictions …. [31.10], NCC s 31A, [31A.05] limit on application of amount of credit provided …. NCC s 39A, [39A.05] penalty for contravention of key requirement — debtor or guarantor, application made by …. [114.30] prescribed requirements for repayments …. NCCP regs 28s prohibited monetary obligations imposed on debtor …. [23.06], NCC s 23A, [23A.05]–[23A.50] — offence …. [24.10] prohibition from entering …. NCCP regs 28S — explanatory statement regarding …. [R28S.05] recovery after default — limit on amount …. NCC s 39B, [39B.05] regulation …. [17.26] responsible lending conduct …. [23A.40] — specific prohibitions …. [23A.40] — website disclosures …. [23A.40]

statement of account, exclusion from interest requirement …. [34.46] summary tables of requirements …. [23A.25] warning during telephone contact, requirements …. NCCP regs 28XXD warning on licensee’s premises, requirements …. NCCP regs 28XXA, NCCP regs Sch 7, [S7.05] — explanatory statement regarding …. [R28XXA.05] — forms …. [R28XXA.10] warning on licensee’s website, requirements …. NCCP regs 28XXB, [R28XXB.05], NCCP regs Sch 9, [S9.05] — form of hyperlink …. NCCP regs Sch 8, [S8.05] warning when providing credit assistance by telephone …. NCCP regs 28XXC — explanatory statement regarding …. [R28XXC.05] Standard home loans see Home loans Statement account, of see Statement of account amount owing, statement of …. NCC s 36(1), [36.05]–[36.50] — contents …. [36.30] — court, power to order …. NCC s 37, [37.05]–[37.15] applicable statements …. [37.10] effect of determination …. [37.15] — effective dating …. [36.40] — exceptions …. [36.25] — failure to comply …. [36.50] — fees …. [36.45] — form …. [36.35] — further statements within three months …. NCC s 36(5), [36.25]

— joint debtors and guarantors …. NCC s 36(4), [36.20] — oral or written statements …. [36.15] — time in which must be given …. NCC s 36(2), [36.10] current balance of debtor’s account, of …. NCC s 36(1), [36.05]–[36.50] — contents …. [36.30] — effective dating …. [36.40] — exceptions …. [36.25] — failure to comply …. [36.50] — fees …. [36.45] — form …. [36.35] pay out figure, of — assumptions made for …. [83.15] — calculation method …. [83.10] — contents of statement of …. NCC s 83(2), [83.20] — continuing credit contracts …. [83.40] — court may determine …. NCC s 84(1), [84.05]–[84.20] — joint debtors or guarantors, statement for …. NCC s 83(4), [83.30] — penalty for non-compliance …. [83.35] — request for written statement …. NCC s 83(1), [83.05] — statement that amount may change …. [83.25] — time for credit provider to give statement of …. NCC s 83(3) precontractual see Precontractual statement Statement of account alteration of …. NCC s 34(11), [34.100] amount of credit provided, particulars to be included in …. NCC s 34(4), [34.30]

combined where multiple facilities …. [33.65] commencement of cycle …. [33.55] continuing credit contracts — delivery requirement …. NCC s 33 — key requirements …. NCC s 111(2), [111.25] contract document, information to be included in …. NCC s 17(10), [17.55] credit provider, duty to provide to debtor or guarantor …. NCC s 33(1), [33.05], NCC s 36(1) — exceptions …. NCC s 33(3), [33.20], NCCP regs 79, [R79.05] — statement of amount owing requested by debtor, for giving …. NCC s 36, [36.05]–[36.50] contents …. [36.30] effective dating …. [36.40] exceptions …. [36.25] failure to comply …. [36.50] fees …. [36.45] form …. [36.35] date for giving, requirements …. NCC s 196, [196.05]–[196.30] death of debtor …. NCC s 33(3), [33.20], [33.45] debtor, particulars of amounts payable to be included in …. NCC s 34(9) — minimum payment …. [34.90] debtors who cannot be located …. NCC s 33(3), [33.50], NCC s 194(2), [194.20] default of continuing credit contract …. [33.40] disputed accounts see Disputed accounts duplicate, fee for …. [33.60]

effective dating, and …. [34.105] enforcement proceedings commenced, where …. [33.35] fees and charges — information to be included in …. NCC s 34(7), [34.65] fixed-rate loans …. [33.25] foreign currency transactions …. NCC s 34(4), [34.35] form …. [34.10] given, when taken to be …. [33.15] identity of supplier to be included in …. NCC s 34(5), [34.40] information to be contained in …. NCC s 34, [34.05]–[34.110] — summary of requirements …. [34.110] insolvency of debtor …. NCC s 33(3), [33.20], [33.45] insurance payments, particulars to be included in …. NCC s 34(10), [34.95] interest charges, information to be contained in …. NCC s 34(6), [34.45], [34.55] — changes in interest rates …. [34.60] interest offset accounts …. [34.50] maximum period for …. NCC s 33(2) minimum amount payable …. [34.90] multi-credit facilities …. [4.20], NCC s 33(4) multiple accounts with provider …. [34.61] multiple documents, where …. [34.80] opening and closing balances — inclusion in …. NCC s 34(3), [34.25] — previous statement, opening balance not to exceed closing balance of …. NCC s 35(1), [35.05]

key requirement …. [35.10] payments to or from account, particulars to be included …. NCC s 34(8), [34.70] — multiple cheque deposits …. [34.75] periodic statements — content requirements …. NCC s 34 — effective dating …. NCC s 39(1), [39.15] — maximum period …. NCC s 33(2) print size …. [34.15] reverse mortgages …. [33.80] statement period to be contained in …. NCC s 34(2), [34.20] summary of requirements …. [34.110] time for sending …. [33.10] transfers …. [34.85] written off, where debt …. [33.30] Stay of proceedings enforcement see Enforcement proceedings Strata corporation definition …. [5.20], NCC s 204, [204.60] Superannuation benefits, prohibited mortgage security …. NCC s 50(1), [50.05] — exemption …. NCCP regs 80, [R80.05] Supplier definition …. NCC s 204 harassment by …. NCC s 155, [155.05]–[155.20] — debt collection guidelines …. [155.15]

— harass, meaning of …. [155.10] — penalties …. NCC s 155 identity of, to be included in statement of account …. NCC s 34(5), [34.40] misrepresentations by — indemnification of credit provider …. NCC s 128(2) — liability of credit provider for …. NCC s 128(1), [128.05]–[128.10] sale contract, liability under see Sale contract Supply definition …. NCC s 204 Television advertisements regulation of credit promotions …. NCC s 164(3), [164.10] Termination of contract credit-related insurance contract, termination of …. NCC s 148(1), [148.05]–[148.25] — life insurance/death benefit …. [148.25] — override insurance contract …. [148.20] — rebate of premium …. NCC s 148(4), [148.10], NCCP regs 94, [R94.05] — relevant insurance …. [148.15] debtor, by …. NCC s 21(1), [21.05]–[21.30] — before credit utilised …. [21.25] — fees and charges, effect on …. NCC s 21(2), [21.10] definition …. [21.15], NCC s 204 fee paid on, whether unconscionable …. [26.20], NCC s 78(4), [78.30]–[78.35] insurance contract over mortgaged property, termination of …. NCC s 149(1), [149.05]–[149.30]

— information of debtor’s rights …. NCC s 149(2), [149.10], NCCP regs 95, [R95.05], NCCP regs Form 16 — override insurance contract …. [149.25] — penalties for non-compliance …. [149.30] — rebate of premium …. NCC s 149(4), [149.15], NCCP regs 96, [R96.05] — written notice …. [149.20] linked maintenance services contract terminated …. NCC s 136(1), [136.05]–[136.10] — information of debtor’s rights …. NCC s 136(2), NCCP regs 91, [R91.05], NCCP regs Form 15 — rebate of consideration …. NCC s 136(4), NCCP regs 92, [R92.05] — termination of tied credit contract …. NCC s 136(1) return of goods …. NCC s 85 — compensation for mortgagees, other …. NCC s 86(2), [86.05]–[86.15] — notice of estimated value …. NCC s 85(3), [85.15] — onus of proof …. NCC s 86(3), [86.15] — right to nominate purchaser of goods …. NCC s 85(5) — right to withdraw notice …. NCC s 85(4) — sale of goods …. NCC s 85(6), [85.05]–[85.10], [85.30] acceleration clause …. [85.35], [104.25] application of proceeds of sale …. NCC s 85(7) “as soon as reasonably practicable” …. [104.15] “best price reasonably obtainable” …. [104.10] compensation for sale at undervalue …. NCC [86.05]–[86.15], NCC s 106(1), [106.05]–[106.15]

s

86(1),

deductions from proceeds of …. NCC s 85(7), NCC s 85(8) duty to account …. NCC s 85(9) enforcement expenses …. [85.40] penalties for non-compliance …. [85.45], [104.55] PPSA requirements …. [104.60] procedure for …. NCC s 104(1), [104.05]–[104.60] surplus of sale proceeds …. NCC s 104(2), [104.20] written notice to mortgagor …. [85.15]–[85.25], NCC s 104(3), [104.30]–[104.50], NCCP regs 89, [R89.05] — time for …. NCC s 85(2) — voluntary …. NCC s 85(1) sale contract see Sale contract Third line forcing prohibition of …. NCC s 140, [140.05] — penalty …. [140.10] Third party mortgages, prohibition on …. NCC s 48(1), [48.05]–[48.15] — proposed credit contract or guarantee …. [48.15] — unregulated credit …. [48.10] Tied continuing credit contract application of Code …. NCC s 127, [127.15] definition …. NCC s 127(2), [127.15], NCC s 204 liabilities of linked credit providers for goods and services …. NCC s 129, [129.05]–[129.25] — damages …. [129.10] — defences …. [129.15] — inducement, meaning of …. [129.20]

— procedures …. [129.25] sale contract termination, effect of …. NCC s 135(1), [135.05]–[135.35] — cases …. [135.35] — dominant purpose …. [135.30] — insurance contracts …. [135.25] — limitation …. [135.20] — related guarantee or mortgage, effect on …. NCC s 135(2) — rights of parties …. [135.15] — supplier’s obligations …. [135.10] supplier guarantees under, Code not applicable to …. [127.25] termination of — Pt 5 not to apply to …. NCC s 139, [139.05] — sale contract, effect on …. NCC s 136(1), [136.05]–[136.10] — validity of, power of court to determine …. NCC s 138, [138.05] — writing, necessity to be in …. NCC s 137, [137.05] Tied loan contract definition …. NCC s 127(3), [127.20], NCC s 204 sale contract termination, effect of …. NCC s 135(1), [135.05]–[135.35] — cases …. [135.35] — dominant purpose …. [135.30] — insurance contracts …. [135.25] — limitation …. [135.20] — related guarantee or mortgage, effect on …. NCC s 135(2) — rights of parties …. [135.15] — supplier’s obligations …. [135.10] supplier guarantees under, Code not applicable to …. [127.25]

termination of — Pt 5 not to apply to …. NCC s 139, [139.05] — sale contract, effect on …. NCC s 136(1), [136.05]–[136.10] — validity of, power of court to determine …. NCC s 138, [138.05] — writing, necessity to be in …. NCC s 137, [137.05] Time application to court, for — case …. [80.10] — hardship and unjust transactions …. NCC s 80(1), [80.05] — unconscionable interest and other charges, for review of …. NCC s 80(2), [80.05] copy of documents, for provision of …. NCC s 185(2), [185.25] extension of, by court …. NCC s 197, [197.05] matters relating to …. NCC s 218, [218.05] statement of amount owing requested by debtor, for giving of …. NCC s 36(2), [36.10] Trustees credit licence, exemption from requirement to hold …. [R20.10] credit to beneficiary of estate by, application of Code to …. NCC s 6(10), [6.45] Unconscionable change to annual percentage rate, power of court to review …. NCC s 78(2), [78.10] — time limit for application …. NCC s 80(2), [80.05] case …. [80.10] guarantees, setting aside …. [76.20] interest and other charges, power of court to review …. NCC s 78(2), [78.05]–[78.50]

— amounts paid to third parties …. [78.25] — annual percentage rate change …. [78.10] — break costs and early termination fees …. [78.30] — case …. [78.50] — establishment fees …. NCC s 78(3), [78.15] — “honeymoon rate” loans …. [78.30]–[78.35] — personal property security law …. [78.45] — precontractual conduct …. [78.20] — reopening …. [78.40] — time limit for application …. NCC s 80(2), [80.05] case …. [80.10] Unjust transaction see also Hardship changes to credit contract, mortgage or guarantee on grounds of …. NCC s 72(1), NCC s 76 — application by debtor for …. NCC s 72(2) — court, by …. NCC s 74 application for …. NCC s 74(1) discretion of court …. NCC s 74(2) joinder of parties …. NCC s 81(1), [81.05]–[81.10] stay of enforcement proceedings where …. NCC s 74(3) time limit for application …. NCC s 80(1), [80.05]–[80.10] variation of, application by credit provider for …. NCC s 75(1) — notice of change by credit provider …. NCC s 73 determination of, factors to be taken into consideration in …. NCC s 76(2), [76.15]

foreseeability …. NCC s 76(4) form of document, due to …. [184.25] reopen, power of court to …. NCC s 76, [76.05]–[76.80] — adjustment of credit limits …. [76.50] additional ACT requirements …. [76.51] — cases …. [76.80] — consumer leases, relating to …. NCC s 177F, [177F.05] criteria …. [177F.15] unjust defined …. [177F.10] — criteria to determine whether unjust …. [76.15] — equitable jurisdiction …. [76.20] — exclusions from …. [76.35] — interest and maximum annual rates …. [76.55] — legislation …. [76.65] — low documentation loans …. [76.40] — mortgages …. [76.36] — orders on …. NCC s 77, [77.05]–[77.15] cases …. [77.15] court’s power …. [77.10] — reducing the risk of …. [76.25] — remedies for unfairness or dishonesty by providers of credit services …. [76.75] — reverse mortgages …. [76.45] — unfair contracts legislation …. [76.70] — unjust defined …. NCC s 76, [76.10], NCC s 204 — who can apply …. [76.30]

Unpaid balance definition …. NCC s 27(1), NCC s 204 Unpaid daily balance definition …. NCC s 27(1), NCC s 204 section 71(3) notice to include details of …. [27.30] Void mortgage — all property, over …. NCC s 44(2), [44.05]–[44.20] — amount secured exceeding maximum …. NCC s 49, [49.05]–[49.15] — continuing credit contract, goods supplied under …. NCC s 46(1), [46.05] — future property, over …. NCC s 45(1), [45.05]–[45.20] — penalty for credit provider entering into …. NCC s 53(2), [53.05] — prohibited securities …. NCC s 50(7), [50.05] Warnings accuracy of comparison rates, of …. NCC s 163, [163.05], NCCP regs 99, [R99.05] — additional warnings …. [163.10] — duplicated provisions …. [163.20] — potentially conflicting provisions …. [R99.10] — UCCC position …. [163.15] Words and phrases acceleration clause …. NCC s 2(1), [92.05], NCC s 204, [204.01] Act …. [183.15] adjusted credit amount …. NCC s 204, [204.02] advertisement …. [150.10] amend …. NCC s 204

amount of credit …. NCC s 3, [3.35], NCC s 204 annual cost rate …. NCC s 204, [204.03] annual percentage rate …. NCC s 27, NCC s 204 approved external dispute resolution scheme …. [204.04] arrangement …. [127.30] associated person, definition …. NCC s 204 Bank Electronic Clearing System …. NCC s 204 bridging finance contract …. [204.05] business day …. [182.20], NCC s 204 carried on in this jurisdiction …. [204.06] cash price …. [9.15], NCC s 204 change …. [63.10] charge …. [151.25] commission …. [17.75], [145.20], NCC s 204 Commonwealth …. [204.07] comparison rate …. [150.01], [157.10] compulsory insurance …. [143.10], [146.20], NCC s 204 consumer credit insurance …. [142.20], [142.30], [148.15], NCC s 204 consumer credit product …. [157.45], NCC s 159 consumer lease …. NCC s 169, [169.10], NCC s 169, NCC s 204 continuing credit contract …. NCC s 204, [204.10] contract …. [3.10], [4.05], [4.20], [9.25], NCC s 204, [204.15] contract document …. [14.15], NCC s 204 credit …. NCC s 3, [3.05], NCC s 204 credit contract …. NCC s 4, [4.05], [23.30], NCC s 204, [204.25] credit cost amount …. NCC s 32B(3), [204.26]

credit fees and charges …. [17.45], NCC s 204, [204.30] credit-related insurance contract …. [17.80], NCC s 142, [142.05], [146.20], [147.10], NCC s 204 daily percentage rate …. NCC s 27, NCC s 204 date …. NCC s 204 debtor …. [153.15], NCC s 204 default notice …. NCC s 204 default rate …. NCC s 27, NCC s 204 deferred debt …. [3.20] deposit …. NCC s 10(4) direct debit …. [87.25], NCC s 204 disclosure document …. NCCP regs 26 dispose …. [51.10], [91.20], NCC s 204 electronic communication …. NCC s 204, [204.31] enforcement expenses …. [82.25], [102.15], NCC s 204, [204.35] enforcement proceedings …. [88.10], NCC s 204, [204.40] establishment fee …. [78.15] goods …. [125.10], [169.15], NCC s 204 goods mortgage …. [98.15], NCC s 204 guarantee …. [8.15], [55.10], NCC s 204 guarantee document …. NCC s 204 guarantor …. NCC s 204, NCC s 204 harass …. [155.10] hardship notice …. NCC s 204 holdback …. [17.20] induced …. [129.20]

insolvent …. NCC s 204 interest …. [3.40] interest in land or property …. [151.20], NCC s 204 interest rate …. NCCP regs 26 key requirement …. NCC s 204 land …. NCC s 204 lender …. NCCP regs 26 lessee …. NCC s 204 lessor …. NCC s 204 linked credit provider …. [125.15], NCC s 127(1), [127.10], NCC s 204 linked lessor …. NCC s 204 lowest price …. NCC s 204 managed contract …. NCCP regs 26 may …. NCC s 210(1), [210.10] medium amount credit contract …. NCC s 204, [204.45] merchant service agreement …. NCC s 204 mortgage …. [7.15], [42.10], NCC s 204, [204.50] mortgage document …. NCC s 204 mortgage indemnity insurance …. [143.15] mortgage manager …. NCCP regs 26 mortgagor …. NCC s 204 must …. NCC s 210(2), [210.15] name of a consumer credit product …. [159.35] natural person …. [5.10], [169.20] obtain …. [21.20] officer …. NCC s 201(4), [201.10]

on demand facility …. NCC s 204 ordinarily resident …. [5.15] outgoings …. NCC s 10(4) party …. [13.10] penalty …. NCC s 204 person …. [5.10], [150.02], [169.20], [188.15] person associated with credit provider …. [199.30], NCC s 204(2), [204.65] personal, domestic or household purpose …. [5.30] postponement request …. NCC s 204 predominant purpose …. NCC s 5(4), [5.35] proceedings …. NCC s 204 product designer …. NCCP regs 26 property …. NCC s 204 publish …. [150.05] purchaser …. NCC s 204 reasonable enforcement expenses …. [82.25] reference rate …. NCC s 204 regulation …. NCC s 204 related contract to sale of goods contract …. NCC s 12 rent payment …. NCC s 10(4) residential property …. [5.31], NCC s 204 retained credit fees and charges …. NCC s 204, [204.54] reverse mortgage …. NCC s 13A, [13A.10], [13A.50], NCC s 204 sale contract …. NCC s 125, [125.10], NCC s 204 services …. [125.10], NCC s 204, [204.55]

sign …. NCC s 204 small amount credit contracts …. [23A.05], [23A.30], [204.56] strata corporation …. [5.20], NCC s 204, [204.60] supplier …. NCC s 204 supply …. NCC s 204 suspect …. [152.15] termination …. [21.15], NCC s 204 tied consumer lease …. NCC s 204 tied continuing credit contract …. NCC s 127(2), [127.15], NCC s 204 tied loan contract …. NCC s 127(3), [127.20], NCC s 204 trail commission …. MCCP regs 26 understanding …. [127.30] unfair term …. [76.70] unjust …. NCC s 76, [76.10], [177F.10], NCC s 204 unjust transaction …. NCC s 76 unpaid balance …. NCC s 27, NCC s 204 unpaid daily balance …. NCC s 27, [27.30], NCC s 204 volume bonus arrangement …. MCCP regs 26 writing …. NCC s 204 Writing credit contract to be in …. NCC s 14, [14.05]–[14.35] — cases …. [14.35] definition …. NCC s 204 guarantee to be in …. NCC s 55(1), [55.15] lease documents to be in …. NCC s 173 mortgage to be in …. NCC s 42(1)

notices to be in …. NCC s 183(3)