Consumer Credit Legislation Amendment (Enhancements) Act 2012 (Cth)

Consumer Credit Legislation Amendment (Enhancements) Act 2012 No. 130, 2012 An Act to amend the law relating to consumer credit and consumer protection, and for related purposes Contents 1 Short title 2 Commencement 3 Schedule(s) Schedule 1—Enhancements Part 1—Protection of debtor in cases of hardship National Consumer Credit Protection Act 2009 Part 2—Remedies for unfair or dishonest conduct by credit service providers National Consumer Credit Protection Act 2009 Part 3—Representations about eligibility to enter credit contracts, consumer leases etc. without assessing unsuitability National Consumer Credit Protection Act 2009 Part 4—Prohibition on certain representations and other matters National Consumer Credit Protection Act 2009 Part 5—Civil remedies for contravention of the National Credit Code National Consumer Credit Protection Act 2009 Part 6—Miscellaneous amendments National Consumer Credit Protection Act 2009 Part 7—Technical corrections National Consumer Credit Protection Act 2009 Schedule 2—Reverse mortgages Part 1—Definitions Division 1—Definition of reverse mortgage National Consumer Credit Protection Act 2009 Division 2—Other definitions National Consumer Credit Protection Act 2009 Part 2—Provisions applying to licensees National Consumer Credit Protection Act 2009 Part 3—Provisions applying to credit providers generally National Consumer Credit Protection Act 2009 Schedule 3—Short‑term and small amount credit contracts National Consumer Credit Protection Act 2009 Schedule 4—Caps on costs etc. for credit contracts National Consumer Credit Protection Act 2009 Schedule 5—Consumer leases National Consumer Credit Protection Act 2009 Schedule 6—Application provisions National Consumer Credit Protection (Transitional and Consequential Provisions) Act 2009 Schedule 7—Lay‑by agreements etc. Competition and Consumer Act 2010 Consumer Credit Legislation Amendment (Enhancements) Act 2012 No. 130, 2012 An Act to amend the law relating to consumer credit and consumer protection, and for related purposes [Assented to 17 September 2012] The Parliament of Australia enacts: 1 Short title This Act may be cited as the Consumer Credit Legislation Amendment (Enhancements) Act 2012. 2 Commencement (1) Each provision of this Act specified in column 1 of the table commences, or is taken to have commenced, in accordance with column 2 of the table. Any other statement in column 2 has effect according to its terms. Commencement information Column 1 Column 2 Column 3 Provision(s) Commencement Date/Details 1. Sections 1 to 3 and anything in this Act not elsewhere covered by this table The day this Act receives the Royal Assent. 17 September 2012 2. Schedule 1 1 March 2013. 1 March 2013 2A. Schedule 2, Part 1 The day after this Act receives the Royal Assent. 18 September 2012 2B. Schedule 2, Part 2 1 March 2013. 1 March 2013 2C. Schedule 2, items 12 to 14 1 March 2013. 1 March 2013 2D. Schedule 2, item 15 The day after this Act receives the Royal Assent. 18 September 2012 2E. Schedule 2, items 16 to 18 1 March 2013. 1 March 2013 2F. Schedule 2, items 19 and 20 The day after this Act receives the Royal Assent. 18 September 2012 2G. Schedule 2, items 21 and 22 1 March 2013. 1 March 2013 2H. Schedule 2, item 23 The day after this Act receives the Royal Assent. 18 September 2012 2J. Schedule 2, items 24 to 26 1 March 2013. 1 March 2013 2K. Schedule 3 1 March 2013. 1 March 2013 3. Schedule 4 1 July 2013. 1 July 2013 4. Schedule 5 1 March 2013. 1 March 2013 4A. Schedule 6 The day after this Act receives the Royal Assent. 18 September 2012 5. Schedule 7 A single day to be fixed by Proclamation. 17 September 2013 However, if the provision(s) do not commence within the period of 12 months beginning on the day this Act receives the Royal Assent, they commence on the day after the end of that period. Note: This table relates only to the provisions of this Act as originally enacted. It will not be amended to deal with any later amendments of this Act. (2) Any information in column 3 of the table is not part of this Act. Information may be inserted in this column, or information in it may be edited, in any published version of this Act. 3 Schedule(s) Each Act that is specified in a Schedule to this Act is amended or repealed as set out in the applicable items in the Schedule concerned, and any other item in a Schedule to this Act has effect according to its terms. Schedule 1—Enhancements Part 1—Protection of debtor in cases of hardship National Consumer Credit Protection Act 2009 1 Section 72 of the National Credit Code Repeal the section, substitute: 72 Changes on grounds of hardship Hardship notice (1) 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. Further information (2) 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. (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. Notice of decision on changing credit contract (4) 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. (5) The credit provider must give the notice before the end of the period identified using the table. Period for giving notice If: The period is: 1 The credit provider does not require information under subsection (2) 21 days after the day of receiving the hardship notice 2 The credit provider requires information under subsection (2) but does not receive any information in compliance with the requirement 28 days after the stated date of the notice under subsection (2) 3 The credit provider requires information under subsection (2) and receives information in compliance with the requirement 21 days after the day of receiving the information Regulations may prescribe shorter periods for credit contracts (6) 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 subsection (2) or (5) to a number of days were a reference to a lesser number of days prescribed by the regulations. 2 Subsection 73(1) of the National Credit Code Omit "on any such application", substitute "to change the credit contract as a result of a hardship notice by the debtor". 3 Subsection 74(1) of the National Credit Code Omit "in accordance with the application", substitute "as a result of a hardship notice by the debtor". 4 Subsection 74(2) of the National Credit Code Repeal the subsection, substitute: (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. 5 Subparagraphs 88(3)(f)(i) and (ii) of the National Credit Code Repeal the subparagraphs, substitute: (i) give a hardship notice under section 72; or (ii) give a postponement request under section 94; or 6 After section 89 of the National Credit Code Insert: 89A Effect of hardship notices on enforcement (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. (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. (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. (4) Subsection (2) is an offence of strict liability. Note: For strict liability, see section 6.1 of the Criminal Code. 7 Subsection 94(1) of the National Credit Code Repeal the subsection, substitute: Postponement request (1) 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. 8 Subsection 94(2) of the National Credit Code Omit "makes the request", substitute "gives the postponement request". 9 Subsections 94(3) and (4) of the National Credit Code Repeal the subsections, substitute: Enforcement proceedings (3) 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. (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. (5) Subsections (2) and (3) are offences of strict liability. Note: For strict liability, see section 6.1 of the Criminal Code. Part 2—Remedies for unfair or dishonest conduct by credit service providers National Consumer Credit Protection Act 2009 10 After section 180 Insert: 180A Orders to remedy unfair or dishonest conduct by credit service providers (1) The court may make one or more of the orders described in subsection (2) if the court is satisfied that: (a) a person (the defendant) provided a credit service to a consumer (the plaintiff); and (b) the defendant engaged in conduct that: (i) was connected with the provision of the service; and (ii) was unfair or dishonest; and (c) the conduct had one or more of the following results: (i) the plaintiff entered a credit contract, consumer lease, mortgage or guarantee that the plaintiff would not have entered apart from the conduct; (ii) the plaintiff entered a credit contract, consumer lease, mortgage or guarantee whose terms were different from a credit contract, consumer lease, mortgage or guarantee the plaintiff would have entered apart from the conduct; (iii) the plaintiff became liable to pay fees, costs or charges to the defendant or someone else. (2) The orders are as follows: (a) an order that the defendant take, or refrain from taking, specified action; (b) an order that the defendant pay the plaintiff a specified amount; (c) an order that a specified amount is not due or owing by the plaintiff to the defendant; (d) any other order the court considers appropriate to: (i) redress the unfairness or dishonesty; or (ii) prevent the defendant from profiting from the plaintiff by engaging in the conduct; except an order that affects a credit contract, consumer lease, mortgage or guarantee to which the conduct related. Determining whether conduct was unfair or dishonest (3) In determining whether conduct was unfair or dishonest, the court: (a) must have regard to the extent (if any) to which one or more of the circumstances described in subsection (4) existed; and (b) must consider it more likely that the conduct was unfair or dishonest the more any of those circumstances existed and the more any of them affected the plaintiff's interests. This does not limit the matters to which the court may have regard. (4) The circumstances are as follows: (a) the plaintiff was at a special disadvantage in dealing with the defendant in relation to the transaction involving: (i) the conduct; and (ii) a credit contract, consumer lease, mortgage or guarantee to which the conduct related; and (iii) any other contract requiring the plaintiff to make payments for the purposes of which it is reasonable to expect the plaintiff would or did enter such a credit contract, consumer lease, mortgage or guarantee; (b) the plaintiff was a member of a class whose members were more likely than people who were not members of the class to be at such a disadvantage; (c) if the plaintiff was a member of a class referred to in paragraph (b)—a reasonable person would consider that the conduct was directed at that class; (d) the plaintiff was unable, or considered himself or herself unable, to make: (i) a credit contract with a credit provider other than the credit provider to which the conduct related; or (ii) a consumer lease with a lessor other than the lessor to which the conduct related; or (iii) a mortgage with a mortgagee other than the mortgagee to which the conduct related; or (iv) a guarantee with a beneficiary other than the beneficiary to which the conduct related; (e) the conduct involved a technique that: (i) should not in good conscience have been used; or (ii) manipulated the plaintiff; (f) the defendant could determine or significantly influence the terms of a contract covered by subparagraph (a)(ii) or (iii); (g) the terms of the transaction described in paragraph (a) were less favourable to the plaintiff than the terms of a comparable transaction. When order may be made (5) The court may make the order only if: (a) the plaintiff or ASIC (on behalf of the plaintiff) applies for an order under this section; and (b) the application is made within 6 years of the day the defendant first started engaging in the conduct. Applications for order (6) For the purposes of paragraph (5)(a), ASIC may make an application on behalf of the plaintiff, but only if the plaintiff has given consent in writing before the application is made. Recovery of amount as a debt (7) If the court makes an order that the defendant pay an amount specified in the order to the plaintiff, the plaintiff may recover the amount as a debt due to the plaintiff. When this section does not apply (8) This section does not apply to the provision of credit assistance by a person who is (or after the provision of the assistance becomes): (a) a credit provider under the credit contract to which the assistance relates; or (b) a lessor under the consumer lease to which the assistance relates; or (c) a mortgagee under a mortgage in relation to the credit contract to which the assistance relates; or (d) a beneficiary of a guarantee in relation to the credit contract to which the assistance relates. 11 Section 184 Add at the end "or another Act". Part 3—Representations about eligibility to enter credit contracts, consumer leases etc. without assessing unsuitability National Consumer Credit Protection Act 2009 12 Section 125 (paragraph relating to Division 3) Omit "entering or increasing the credit limit of a credit contract", substitute "doing particular things (such as entering a credit contract)". 13 Division 3 of Part 3‑2 (heading) Repeal the heading, substitute: Division 3—Obligation to assess unsuitability 14 Section 128 (heading) Repeal the heading, substitute: 128 Obligation to assess unsuitability 15 After paragraph 128(a) Insert: (aa) make an unconditional representation to a consumer that the licensee considers that the consumer is eligible to enter a credit contract with the licensee; or 16 After paragraph 128(b) Insert: ; or (ba) make an unconditional representation to a consumer that the licensee considers that the credit limit of credit contract between the consumer and the licensee will be able to be increased; 17 Section 148 (paragraph relating to Division 3) Omit "entering a consumer lease", substitute "doing particular things (such as entering a consumer lease)". 18 Division 3 of Part 3‑4 (heading) Repeal the heading, substitute: Division 3—Obligation to assess unsuitability 19 Section 151 Repeal the section, substitute: 151 Obligation to assess unsuitability A licensee must not: (a) enter a consumer lease with a consumer who will be the lessee under the lease; or (b) make an unconditional representation to a consumer that the licensee considers that the consumer is eligible to enter a consumer lease with the licensee; on a day (the lease day) unless the licensee has, within 90 days (or other period prescribed by the regulations) before the lease day: (c) made an assessment that: (i) is in accordance with section 152; and (ii) covers a period in which the lease day occurs; and (d) made the inquiries and verification in accordance with section 130. Civil penalty: 2,000 penalty units. 20 Section 152 Omit "paragraph 151(a)", substitute "paragraph 151(c)". 21 Subsection 153(1) Omit "paragraph 151(b)", substitute "paragraph 151(d)". Part 4—Prohibition on certain representations and other matters National Consumer Credit Protection Act 2009 22 Section 27 (paragraph relating to Division 3) Omit ", charging fees for unlicensed conduct, and giving misleading information", substitute ", and charging fees for unlicensed conduct". 23 Division 3 of Part 2‑1 (heading) Repeal the heading, substitute: Division 3—Other prohibitions relating to the requirement to be licensed 24 Section 33 Repeal the section. 25 After Part 3‑6 Insert: Part 3‑6A—Miscellaneous rules Division 1—Introduction 160A Guide to this Part This Part has a number of miscellaneous rules that require responsible lending conduct when engaging in credit activities or particular types of credit activities. Some of these rules apply to a person even if the person is not required to be licensed. Division 2 prohibits licensees from making particular representations when providing a credit service to a consumer. Division 3 prohibits a person (whether licensed or not) from giving false or misleading information in the course of engaging in a credit activity. Division 4 may require a credit provider or lessor (whether licensed or not) to give notice when, and in some cases before, giving an employer of a debtor or lessee an authorisation by the debtor or lessee to make deductions from amounts payable by the employer to the debtor or lessee. Division 2—Representations 160B "Independent", "impartial" or "unbiased" etc. (1) A licensee must not, in providing or offering to provide a credit service to a consumer, use any of the following terms (either alone or in combination with other words or letters) in a representation to the consumer about the licensee, the service or the licensee's actions in providing the service: (a) the word "independent"; (b) the word "impartial"; (c) the word "unbiased"; (d) another term (whether or not in English) that is of similar import to a word mentioned in paragraph (a), (b) or (c). Civil penalty: 2,000 penalty units. Defences (2) For the purposes of subsection (1), it is a defence if: (a) the licensee does not receive any of the following: (i) commissions (apart from commissions that are rebated in full to the licensee's clients); (ii) other gifts or benefits from a credit provider or a lessor that may reasonably be expected to influence the licensee; and (b) in providing a credit service, the licensee operates free from direct or indirect restrictions relating to the credit contracts and consumer leases to which the service relates (except restrictions imposed on the licensee by this Act or by an Australian credit licence); and (c) in providing a credit service, the licensee operates without any conflicts of interest that might: (i) arise from the licensee's associations or relationships with credit providers and lessors; and (ii) reasonably be expected to influence the licensee in providing the service; and (d) neither of the following persons receives any commission, gift, or benefit, covered by paragraph (a): (i) the licensee's employer (if any); (ii) any other person prescribed (whether by reference to a class of person or otherwise) by the regulations. (3) For the purposes of subsection (1), it is a defence if the representation uses any of the terms in the negative (for example, a representation that the licensee is not independent). 160C "Financial counsellor" etc. (1) A licensee must not, in providing or offering to provide a credit service to a consumer, use any of the following terms (either alone or in combination with other words or letters) in a representation to the consumer about the licensee, the service or the licensee's actions in providing the service: (a) the phrase "financial counsellor"; (b) the phrase "financial counselling"; (c) another term (whether or not in English) that: (i) is of similar import to a phrase mentioned in paragraph (a) or (b); and (ii) is prescribed by the regulations. Civil penalty: 2,000 penalty units. Defences (2) For the purposes of subsection (1), it is a defence if regulations made for the purposes of paragraph 110(a) exempt the licensee from section 29 in relation to a credit activity because the licensee engages in the activity as part of a financial counselling service. (3) For the purposes of subsection (1), it is a defence if: (a) the licensee is providing, or offering to provide, the credit service on behalf of another person (the principal); and (b) the licensee is a representative of the principal; and (c) regulations made for the purposes of paragraph 110(a) exempt the principal from section 29 in relation to a credit activity because the principal engages in the activity as part of a financial counselling service; and (d) the licensee's actions in providing or offering to provide the credit service are within the authority of the principal. (4) For the purposes of subsection (1), it is a defence if the representation uses any of the terms in the negative (for example, a representation that the licensee is not a financial counsellor). Division 3—Giving misleading information 160D Prohibition on giving misleading information etc. Prohibition on giving misleading information etc. (1) A person (the giver) must not, in the course of engaging in a credit activity, give information or a document to another person if the giver knows, or is reckless as to whether, the information or document is: (a) false in a material particular; or (b) materially misleading. Civil penalty: 2,000 penalty units. Offence (2) A person commits an offence if: (a) the person gives information or a document to another person; and (b) the person does so in the course of engaging in a credit activity; and (c) the information or document is false in a material particular or materially misleading. Criminal penalty: 100 penalty units, or 2 years imprisonment, or both. Division 4—Giving authorisation for deductions by employer of debtor or lessee 160E Requirements for giving authorisation to employer (1) This section applies to a credit provider or lessor giving, or intending to give, an employer of a debtor or lessee who is party to a credit contract or consumer lease with the credit provider or lessor an instrument that: (a) was made by the debtor or lessee; and (b) authorises the employer to: (i) make one or more deductions from one or more amounts payable by the employer in relation to the performance of work by the debtor or lessee; and (ii) pay the deductions to the credit provider or lessor. Credit provider or lessor must give statement to employer (2) If the credit contract or consumer lease is of a kind prescribed by the regulations, the credit provider or lessor must give the employer a statement, in the form prescribed by the regulations for that kind of contract or lease, with the instrument. Civil penalty: 2,000 penalty units. Credit provider or lessor must give 7 days' notice to defaulting debtor or lessee (3) If the debtor or lessee is in default under the credit contract or consumer lease, the credit provider or lessor must give the debtor or lessee at least 7 days' notice, in a form prescribed by the regulations, of the intention of the credit provider or lessor to give the instrument to the employer. Civil penalty: 2,000 penalty units. (4) To avoid doubt, subsection (3) does not apply if there are not regulations in force prescribing a form for the purposes of that subsection. Subsections (2) and (3) do not apply to some credit contracts (5) Subsections (2) and (3) do not apply in relation to a credit contract for the provision of credit relating to the provision of goods or services to the debtor in connection with the debtor's remuneration, or other benefits, for the debtor's employment. Part 5—Civil remedies for contravention of the National Credit Code National Consumer Credit Protection Act 2009 26 Section 124 of the Nati