National Consumer Credit Protection Amendment (Credit Reform Phase 2) Bill 2012 (March 2013)
The CCLC has recently had the opportunity to make submissions in relation to Phase 2 of the National Consumer Credit legislative changes. As a whole the CCLC is extremely supportive of the Phase 2 Reforms. We were particularly supportive of the anti-avoidance and private lending reforms as these are areas where systemic avoidance of applicable credit legislation has been rife, causing considerable harm to vulnerable consumers. We submitted that there were discrete changes to certain legislative language that were still needed before this bill could be passed into law.
Primary Concerns
- Anti-Avoidance provisions should be enacted as a priority, even if that means separating the other proposed sections and passing anti-avoidance legislation separately.
- We strongly support the drafting of the proposed Section 323A, although we made some minor recommendations for changes.
- We support the current amendments to Section 171 which remove the short term and indefinite lease exemptions currently in Section 171 of the National Credit Act.
- We recommended changes to the current drafting of Section 171A(3) which classify ‘Rent to Own’ arrangements as indefinite leases and not as credit contracts.
- We support the extension of the National Credit Act to regulate private lending.
- We support the extension of the National Credit Act to investment lending but we are concerned that the provisions do not go far enough in relation to protecting borrowers with Regulated product (home-secured) investment credit contracts.
Consumer Leases
The Consumer Credit Legal Centre has made a submission to the Commonwealth Treasury on regulation of consumer leases. The CCLC strongly agrees with the Treasury that the lease provisions in the Credit Act are now out of date in relation to the common use of leases. The decision in the original Consumer Credit Code to enact separate and less effective provisions for leases meant that the consumer lease industry developed business strategies to avoid the tougher protections for credit contracts. Currently, many consumers are in contracts that do not reflect the intention of the parties, with leases being sold as indistinguishable from loans but the consumer has no right to own the goods in the contract. Further, these contracts can be deceptively expensive.
Our submission recommends:
- Enhanced disclosure for leases including :
- Cash value of the goods
- Amount payable under the contract relative to the cash value of the goods (as proposed)
- A nominal interest rate for comparison purposes
- Any ancillary services and products
Point of Sale Retailer Exemptions
The Consumer Credit Legal Centre has made a submission to the Commonwealth Treasury in relation to the exemption of retailers from the National Consumer Credit Protection Act 2009 (Credit Act). The CCLC has not supported the exemption of Point of Sale (POS) retailers from the Credit Act at any time. The CCLC considers the exemption to be a large loophole in the current consumer protections under the Credit Act.We believe it is critical that the protections of the National Credit Act be extended to POS retailers that engage in credit activities in relation to the sale of goods and services, rather than allow this unsatisfactory gap in consumer protection to continue.
Our submission recommends:
- ALL retailers (e.g. car dealerships, department stores that sell furniture and/or electrical goods) who engage in credit activities (arrange finance) should be regulated by the Credit Act, including:
- Retailers who help arrange financing must either hold an Australian Credit License (ACL), or be appointed as a Credit Representative of someone who has an ACL
- Retailers must join an External Dispute Resolution scheme
- Retailers must meet Credit Act disclosure requirements and responsible lending obligations
- Alternatively (as a second best option):
- Car dealerships must either hold an ACL, or be appointed as a Credit Representative of one financier (with full disclosure about there only being one option available)
- Other retail outlets (supplier representatives) would have modified obligations including-
- EDR membership for the retailer (as opposed to individual staff members)
- Modified responsible lending provided all financial details are taken directly from the consumer by the financier.
CCLC considers car yard finance an extremely high risk area for consumers and does not therefore support applying any modifications to the regulatory regime applying to other credit industry participants for car yard finance.
Productivity Commission Review of the Consumer Protection Framework
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Financial Services and Credit Reform – Improving, Simplifying and Standardising Financial Services and Credit Regulation
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Responsible lending practices in relation to consumer credit cards
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