Car Loans Australia Articles

Personal Loans And The Consumer Credit Code

 Introduction of Credit Code

The Consumer Credit Code commenced operation on November 1, 1996. 

This is a national code that is applicable in each State.

Despite what its title suggests, it is not a code of conduct but legislation that is enforceable in certain situations where credit is offered. 

Any non-business credit transactions are governed by the Code if entered into after that date, including continuing contracts that were in force at that date.

This includes:

• credit provided predominantly for domestic, personal or household purposes;

• where a charge is made for the credit; and

• credit is provided in the course of a business of providing credit, or incidental to any other business of the credit provider. Definition of credit contract The Consumer Credit Code covers a wide range of credit contracts, which is defined as:

• the payment of a debt owed by one person to another is deferred; or

• one person incurs a deferred debt to another. Different categories of credit under the Consumer Credit Code include:

• instalment contracts;

• consumer leases;

• continuing credit.

What it covers

• all consumer credit e.g. credit cards, housing etc loans that are characterised as being domestic, personal or household - not for business purposes;

• in all Australian jurisdictions;

• where charges are made for the credit;

• where the credit provider does so in the course of business.

Personal, domestic & household purposes

According to the Code the nature of the credit does not have to be wholly concerned with domestic credit, but will be caught by the provisions of the Consumer Credit Code if:

• more than half the credit is for personal, domestic & household purposes; or

• if the credit is to purchase goods that are to be used for different purposes, then the purpose is mostly for personal, domestic & household purposes.

Goods mortgages

This means that the lender has the right to take the property/goods and sell it if the borrower defaults on the loan. 

There are certain requirements that must be met before the mortgage comes under the Consumer Credit Code, including that the goods or land must be specifically described.

Applicable credit providers

• in the course of a business that provides credit; or

• where it is incidental to any other business of the credit provider.

In the first case the contract would probably be covered by the Consumer Credit Code; in the latter case it would not be covered.

Exclusions from the Consumer Credit Code

• short term credit;

• where credit provision occurs without contemplation e.g. a savings account goes into debit;

• within certain limits, where the only charges are periodic or fixed and not changed according to the level of credit that is provided e.g. an annual fee to a credit card provider or a arrangement with a supplier that allows goods to be bought on account and a fixed charge is applied;

• insurance premiums payable on instalment;

• most pawnbroker transactions;

• employee loans.

Credit Code & guarantees

• in writing;

• signed by the guarantor;

They must also receive a copy of a document that sets out the obligations of the guarantor under the contract.