Treasury released an exposure draft National Consumer Credit Protection Amendment (Credit Card and Home Loans) Bill on 4 March for consultation until 8 March 2011.

It is intended that the Bill be introduced in Parliament in the week beginning 21 March 2011.

If passed, it will amend the National Credit Act to give effect to the Government’s announced credit card reforms and introduce a requirement for lenders to give borrowers a Key Facts Sheet for home loans.

The changes will be made by making additional rules that apply to credit licensees that are credit providers under credit card contracts and standard home loans.

Other reforms announced as part of the Government’s Fairer, Simpler Banking policy (such as requiring lenders to inform consumers about the implications of only paying minimum repayment amounts on their statements) are intended to be introduced through regulations to the National Consumer Credit Protection Act 2009, and will be the subject of further consultation in the near future.

Credit card changes

The changes will:

• insert new restrictions on a licensee approving the use of a credit card in excess of the credit limit for the credit card contract. The Bill provides for a default buffer above the credit limit, and restricts the charging of fees or a higher rate of interest when a borrower goes over their specified limit. The default buffer for a credit card contract is the lesser of $500 and 10% of the credit limit of the contract. The default buffer applies to a credit card contract unless the consumer who is the debtor under the contract has elected not to have the default buffer apply to the contract and the election has not been withdrawn.
• require credit card providers to allocate repayments to higher interest debts first.
• prohibit a licensee making a credit limit increase invitation unless expressly consented to by the consumer.
• require a consumer is provided with, or given access to, a Key Facts Sheet before entering into a credit card contract. If a consumer applies to a licensee for a credit card contract under which the licensee would be the credit provider, the licensee must not enter into, or offer to enter into, the contract unless the application is made using an application form that includes a Key Facts Sheet for the contract that contains up-to-date information.

Standard Home Loans

A standard home loan of a licensee is a standard form of credit contract under which the licensee provides credit to purchase residential property or to refinance credit that has been provided wholly or predominantly to purchase residential property.

It will be mandatory for standard home loan borrowers to be provided with, or given access to, a Key Facts Sheet whether the application is made on a website or otherwise.

ASIC has released a report Overview of decisions on relief applications (June to September 2010) (REP 226 )

Report 226 summarises situations where ASIC has exercised, or refused to exercise, its exemption and modification powers under the Corporations Act, the licensing and responsible lending provisions of the National Credit Act and the registration provisions of Schedule 2 of the Transitional Act. Decisions by ASIC to refuse to exercise its powers are described on an anonymous basis.

In respect of the Credit Act ASIC’s report includes the following decisions:

Conditional relief for loans to clergy
ASIC granted conditional relief from the requirement to hold a credit licence for the provision of loans to clergy. Conditional relief was granted to bring the provision of loans to clergy into line with the employee loan exemption in s6(11) of the National Credit Code. Conditions were imposed on the relief to retain some key protections for these loans, including the hardship provisions in the National Credit Code. Relief was also granted from the responsible lending obligations.

Insurance brokers
ASIC refused to grant relief from the requirement to hold a credit licence to insurance brokers who provided credit assistance for contracts to finance insurance premiums (premium funding).

ADI branches
ASIC refused to grant permanent relief to certain credit representatives of authorised deposit-taking institutions (ADIs) (i.e. franchisee and agent companies that operate branches of those ADIs and their employees) from the requirement to have separate external dispute resolution (EDR) scheme membership. However, ASIC granted interim relief for a period of 12 months to allow the affected ADIs and credit representatives sufficient time to put in place administrative arrangements and systems for compliance.

Loans processor
ASIC refused to grant relief from the requirement to hold a credit licence to a loan processor, who operates externally to, and independent of, credit licensees or authorised representatives of a credit licensee.

Hardship relief
ASIC refused to grant interim relief from the requirement to give the debtor a written response under s72(3) of the National Credit Code outlining the reasons for not agreeing to changes to the terms of a credit contract requested in a hardship application. Interim relief was sought to allow the applicant time to make system changes for the electronic generation of these responses.