Credit Contracts Legislation Amendment Bill receives Royal assent

Yesterday, the Credit Contracts Legislation Amendment Bill received Royal assent. The first of these provisions takes effect today, 20 December 2019. Consultation on the draft Credit Contracts and Consumer Finance Amendment Regulations 2020 is also open until 5 February 2020.

View the Bill and the draft Regulations consultation page.

Also, the Regulatory Systems (Economic Development) Amendment Act 2019 will make some minor amendments to the Credit Contracts and Consumer Finance Act 2003. These changes will come into force on 13 January 2020. Importantly, the changes disapply some rules to credit contracts which are not consumer credit contracts which will be welcomed.

A link to the Regulatory Systems (Economic Development) Amendment Act 2019 is available here.

Who needs to read it? Why?

These changes will affect banks and financial institutions who enter into any consumer credit contract.

What does it cover?

The new enforcement and penalty regime comes into force today. This means that all creditors should ensure, more than ever, that they comply under the current regime as the increases in penalties are significant.

Lenders should review documentation and processes in light of this change as the enforcement approach has evolved considerably since 2015. We recommend annual reviews given that even small errors can result in systemic problems with a book of loans.

The Bill’s main provisions and the commencement dates are shown in the table below.

Commencement dates

20 December 2019
  • new enforcement provisions, including pecuniary penalties, statutory damages and enforceable undertakings
  • expanded options for creditors to make electronic disclosure
1 June 2020
  • new requirements on high-cost lenders, including the total cost of credit cap and rate cap
  • mobile traders to be treated as creditors under consumer credit contracts
  • duties on directors and senior managers
1 September 2020
  • applications open for certifications of directors and senior managers as fit and proper persons
1 April 2021
  • requirements to keep records of affordability and suitability assessments, and how fees are calculated
  • providing disclosure to borrowers in languages used in advertising language
  • providing information about disputes resolution schemes and financial mentoring services
  • creditors and mobile traders required to hold certifications (currently registered creditors have until their next annual confirmation to obtain a certification)
  • regulations setting minimum requirements for affordability, suitability, responsible advertising

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