Following the release of the Australian Government's Financial Services and Credit Reform Green Paper in June 2008 and agreement at the March and July 2008 Council of Australian Governments (COAG) meetings to transfer consumer credit regulation from the Australian States/Territories to the Australian Commonwealth, a 2-stage plan was agreed by the Premiers and Chief Ministers at the COAG meeting in Perth on 2 October 2008.

Press Release

In a joint press release on 2 October 2008 by the Treasurer, Wayne Swan and the Minister for Superannuation and Corporate Law, Nick Sherry, it was revealed that the Government has a two-stage plan for national consumer credit laws to be implemented over a period of four years. The press release can be accessed at www.pm.gov.au/media/Release/2008/media_release_0514.cfm.

First phase of the plan

According to the press release, the first phase changes will be dealt with in Commonwealth, State and Territory legislation by the end of 2009, with a two-year transition period for effected businesses.

Under the first phase:

  • The Uniform Consumer Credit Code will be enacted as federal law and extended to cover mortgages on investment properties
  • A national licensing scheme will be introduced (which will cover all finance brokers, advisers and credit providers)
  • Payday lenders will come under the national licensing regime which means payday lenders will need to lend responsibly, including assessing a borrower's capacity to repay loans
  • Lenders will be licensed by the corporate watchdog, Australian Securities and Investments Commission (ASIC) which will be given extra powers to police the scheme
  • All borrowers will be able to appeal to an external dispute resolution body to which all licensed lenders must belong
  • The Corporations Act 2001 (Cth) will be extended to cover margin lending products, which will have to provide disclosure statements similar to First Home Saver Accounts
  • The Commonwealth will be responsible for trustee companies.

Second phase of the plan

The second phase changes will become Commonwealth legislation in the first half of 2010.

Under the second phase:

  • Predatory lending practices such as a review of credit limit extension offers, reviewing interest rate caps and other fringe lending issues, will be looked at
  • Reverse mortgages will be dealt with to protect older Australians considering using the equity in their homes to gain access to credit.

What does this mean to you?

The proposed changes to the consumer credit laws may affect your business. You should watch out for the proposed legislative changes. We will be able to assist in making future submissions on your behalf.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.