ASIC has announced that the Commonwealth Bank of Australia (CBA) has agreed to change advertised comparison rates for its Wealth Package loans in response to ASIC concerns the comparison rates used in ads were incorrect and potentially misleading.

ASIC was concerned CBA’s home loan ads promoting its Wealth Package loans did not include the Wealth Package $350 annual fee in the advertised comparison rate.

Section 166 of the National Credit Code and Regulation 100 require the comparison rate to 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).

A fee or charge is 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.

The Home Loan Key Facts Sheets personalised comparison rate is based on the normal comparison rate calculation except for the loan amount and term nominated by the consumer and any other information required by a lender.

Comlaw has published an updated National Credit Act and Regulations (as at 1 January 2012).

The National Consumer Credit Protection Act 2009 incorporates the home loan key facts sheet provisions of the National Consumer Credit Protection Amendment (Home Loans and Credit Cards) Act 2011 but not the credit card provisions.

The National Consumer Credit Protection Regulations 2010 includes the National Consumer Credit Protection Amendment Regulations 2011 (No. 5) (the home loan key facts sheet regulations) but not the National Consumer Credit Protection Amendment Regulations 2011 (No. 6) (for credit cards).

The solicitors conducting the class action against ANZ have announced that actions will be commenced against the Commonwealth Bank, Westpac, National Australia Bank and Citibank in relation to credit card late payment fees.

The claims are on behalf of 45,000 customers of Commonwealth Bank, 30,000 customers of Westpac, 30,000 customers of NAB, and 10,000 customers of Citibank. Including 38,000 customers in the ANZ case, proceedings have now been issued for over 150,000 bank customers.

The value of the claims against the five banks totals $197 million including $50 million against the ANZ, $56 million against Commonwealth Bank, $38 million each for National Australia Bank and Westpac and $15 million for Citibank.

The Senate Economics Committee has published its Report on the Consumer Credit and Corporations Legislation Amendment (Enhancements) Bill 2011.

With respect to small amount credit contracts (short term (“payday”) loans) the Committee has recommended that:

“the government review the measures… This review must re-engage with stakeholders to:

• carefully assess claims that the current provisions may have adverse consequences for consumers;
• carefully assess the merit of alternative approaches to focus the provisions on borrowers with low incomes; and
• review and publish modelling on the effect of the proposed 10 per cent, 2 per cent and 48 per cent caps on the commercial viability of the payday loan industry.”

The Committee made other recommendations in relation to the Bill’s provisions for hardship variations, reverse mortgages, remedies for
‘unfair or dishonest conduct’ and consumer leases.

In Andrews v Australian and New Zealand Banking Group Limited [2011] FCA 1376 Justice Gordon of the Federal Court made preliminary decisions about which of ANZ Bank’s exception fees for a range of banking products may be penalties.

Different fees were charged for different events and for different types of accounts: Retail Deposit Accounts, Consumer Credit Card Accounts, Commercial Credit Card Accounts and Business Classic Accounts.

Justice Gordon decided that the Late Payment Fees in respect of certain credit card accounts are capable of being characterised as a penalty. On the other hand she concluded that the Honour Fees, the Dishonour Fees, the Overlimit Fees and the Non-payment Fees were not penalties.

No decision was made in relation to the amounts of the fees.

Her reasons considered banker-customer law, the history of the law of penalties, the current state of the law of penalties in Australia, the regulatory framework relevant to the Exception Fees (including the Corporations Act, the UCCC and the Banking Code of Practice) and each of the Exception Fees and the distinctions between them.

UPDATE 28 December 2011: The customer plaintiffs have lodged an appeal in their class action against ANZ challenging the ruling that honour, dishonour and overlimit fees were not penalties.

The Consumer Credit and Corporations Legislation Amendment (Enhancements) Bill 2011 amongst other things contains provisions for:

• Small amount credit contracts (in Schedule 3) (“payday lender” or micro-loans) which commence on 1 July 2012
• Caps on interest rates and costs for all other credit contracts (in Schedule 4) which commence on 1 July 2013

The Bill is the subject of 2 inquiries: Senate Economics Committee is due to report on the Bill on 23 November and the Joint Committee on Corporations and Financial Services is due to deliver its report on 24 November.

UPDATE 21 November 2011: I have been informed that the Joint Committee may delay delivery of its report and that the Bill may be carried over to February 2012.

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In Carter and Anor v Fast Access Finance (Beaudesert) Pty Ltd and Anor [2011] QCAT 525 the Queensland Civil and Administrative Tribunal decided that contracts for the sale of purchase of diamonds were in fact a loan contract regulated by the Consumer Credit Code (as it then was) and as the charge for credit was well in excess of the permitted rate of 48% pa the loan should be reopened.

The lender was ordered to repay to the borrower the whole of interest [or credit charge or profit] received by it.

Rachael Carter and Michael Sinclair had fallen behind substantially with their rental. On 5 November 2009, they attended the offices of Fast Access Finance (Beaudesert) Pty Ltd in order to obtain a loan of $1,000 to pay the rent. They had 2 children and were unemployed.

They signed documentation to buy diamonds for $2000 by instalments by weekly repayments of $98.00 over a period of 5 months on the security of their 1993 Holden Commodore worth $2000 and at the same time to sell the same diamonds immediately for $1000.They were not shown any diamonds and there was no discussion about diamonds. They left with $1000.

The lender argued the arrangement was not a regulated loan even though the applicants signed a loan application form and the privacy consent referred to borrowing.

The [applicants submitted the] rate of interest was calculated at about 318% pa.

The Adjudicator concluded:

The respondents‘ submissions … would have one believe that the genuine nature of the transaction between the parties was one of the sale and purchase of diamonds…. that Mr Sinclair and Ms Carter attended their office for the purpose of purchasing diamonds and immediately reselling those diamonds as an essential part of that transaction so that as the net result they could lose $1,000. They would never see the diamonds which they contracted to purchase and nor would they get any benefit for example by Ms Carter being able to wear the diamonds…

I find that the characterisation of the transaction in that manner is so highly unlikely, improbable and implausible as to be a complete fiction. It is ridiculous that a person would wish to enter a business premises in order to buy a product no matter what it be, to sell it immediately and make a loss…

This transaction breaches the Code in many respects, pursuant to section 70 it is reopened and I find the respondents are not entitled to any interest, credit charge or profit. As they have not produced any evidence or statement of account then I accept the evidence of the applicant that they have paid $2,500 to repay the loan of $1,000 and I order that the respondents pay to the applicants the sum of $1,500 within 14 days.

AUTHOR’S NOTE 21 November 2011: The words in square brackets have been added as the solicitor for the respondent has pointed out that there was no specific finding as to interest.