Car Loans Australia :: Articles
SHARE

Share this article with your friends!

Personal Loans And The Consumer Credit Code

Personal Loans And The Consumer Credit Code

Understanding your rights as a consumer is essential in dealing with complex issues like personal loans and other finance.
Here we reveal, in simple terms, how the Credit Code works for you.

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
  • Insuring your most valuable asset
    While many people would consider their home or their car to be their most valuable asset, it's your ability to earn an income that is most important in shaping your financial future. Statistically, two thirds of working Australians will suffer an injury or illness that will sideline them for 90 days or more. The majority of these people would not be able to pay their mortgage or meet car finance and other loan commitments without adequate income insurance.
    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.

The Consumer Credit Code covers credit contracts entered into after November 1, 1996 including:

  • 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

The Consumer Credit Code does not apply for business 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

Mortgages are a security over goods (sometimes called "chattels") or real property. 

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

For a credit contract to be covered by the Consumer Credit Code, the credit provider must supply the credit:

  • in the course of a business that provides credit; or
  • where it is incidental to any other business of the credit provider.

There is no hard and fast way to determine this, but it can be important where the seller simply allows the buyer to pay for the goods in instalments, or when a family member offers a loan. 

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

This can be complicated, and it is always worth asking whether the contract is covered by the Consumer Credit Code. There are many situations where the Consumer Credit Code will not apply, including:

  • 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

A guarantee must be:

  • in writing;
  • signed by the guarantor;

A copy of the credit contract must be received by the guarantor. 

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

Share this article:

Need a Boat Loan?
We provide direct access to the best Boat Loan rates and options in Australia through our national panel of specialist marine finance brokers. Simply complete our quick & easy Boat Loan quote enquiry form to see if you qualify - and to gain access to the best Boat Loan offers from our broker panel.
Debt Stressed?
If you're struggling to pay your debts as well as covering living expenses, we are here to help. Through our national panel of Debt Management specialists, we can help customers with $10k or more in debt by consolidating your existing loans, stopping Debt collectors from contacting you and re-negotiating repayments on your terms!


Finance Articles

Loan Finance: How to Shop Around Without Damaging Your Credit Loan Finance: How to Shop Around Without Damaging Your Credit
If you are considering taking out a loan, you wouldn’t go out of your way to make it harder on yourself to get approved or to get a good interest rate, would you? Yet many loan applicants would enjoy a considerably better outcome on their loan application if they followed this important rule. - read more
Business Loans: Managing interest rate risks Business Loans: Managing interest rate risks
"I want the protection in the current low interest rate environment but I don't want to be locked in for too long a period" - a commonly heard requirement from business borrowers. - read more
How to Buy a House with Bad Credit How to Buy a House with Bad Credit
Most people would expect that a bad credit rating would make it impossible to get a mortgage to buy a home - but it's not as simple as that. Can you buy a house with bad credit? The short answer is YES, but it is not all that easy. - read more

Finance News

Interest rates up another 50 basis points with more hikes to come Interest rates up another 50 basis points with more hikes to come
03 Aug 2022: .

As expected, the Reserve Bank of Australia (RBA) raised interest rates by another 50 basis points this month. The fourth rate hike in as many months, today’s decision takes the cash rate from an emergency low of 0.1% to 1.85%. - read more
Business loans on the rise while mortgage growth remains flat Business loans on the rise while mortgage growth remains flat
02 Jun 2022: .

Australian business loans growth accelerated in April as mortgage growth stayed consistent, with major banks growing at less than the system average according to latest RBA data. - read more
Homebuyers up in the air despite new  government home loan support Homebuyers up in the air despite new government home loan support
29 May 2022: .

The government’s promise of an equity contribution will help the most disadvantaged Australians to get a home loan, but they still won't be able to afford one. - read more

Need Help Finding a Loan?
Get a free car loan eligibility assessment and compare offers tailored specifically to your circumstances.
Loan Amount:
Postcode:
All finance quotes are provided free (via our secure server) and without obligation.
We respect your privacy.

Knowledgebase
Personal Loan:
a loan that is granted for personal use, normally unsecured and granted by a lender on the borrower's integrity and capacity to repay