In 2009 the Commonwealth Parliament passed new legislation providing additional protections for consumers relating to finance and lending. The National Consumer Credit Protection Act (2009), or the NCCP as it is known is a piece of legislation that governs all forms of consumer credit. The Act is administered by the Australian Securities and Investment Commission (ASIC), and it replaced the former Uniform Consumer Credit Code (UCCC) that was introduced in the early 1990s.

Consumer credit regulations were originally introduced to provide an industry standard for all providers of consumer credit services to adhere to.

Whilst most lenders and banks acted morally, ethically and in accordance with industry standards, there were of course some credit providers that did not. In addition, some smaller providers of credit were not subject to any legislation, and were charging exorbitant fees and interest rates.

The introduction of the UCCC in the 1990s brought some regulation to the industry with a view to stamping out unscrupulous credit providers. Penalties under the old UCCC included large fines and terms of imprisonment. The NCCP is a substantial upgrade of those protections, with new regulations centred on mandatory licensing for all providers of consumer credit and services.

The legislation was also developed to protect the consumer, and to ensure they are provided with information about credit products and costs so they can make informed decisions.

A key component of the NCCP legislation is Responsible Lending Conduct. The legislation mandates that credit service providers (i.e. finance broker) must make reasonable enquiries to ascertain whether a loan is suitable for their clients’ needs, and is affordable considering income, existing debt, and future life events.

When determining loan affordability, the credit service provider will need to examine income documentation (payslips, tax returns or similar) and expense information (living expenses, loan payments, rent etc). If the credit service provider is satisfied the borrower has the capacity to afford their desired loan, then an application can proceed. A Statement of Credit Advice is then generated containing the brokers recommendation and detailed costs of the finance product.

Likewise, the application cannot proceed if the credit service provider isn’t satisfied with the borrower’s capacity to afford the loan.

The credit service provider must also provide the borrower with a Financial Service Credit Guide that contains a range of information including details of the business, product offering details, and dispute resolution options.

For further information on this legislation, visit the Government website www.treasury.gov.au/consumercredit or the ASIC website www.asic.gov.au/credit.

Dave Challinor, Fortified Finance & Leasing

 

SPECIAL NOTE:

No one method of finance is ideal for everyone. All decisions should be made in consideration of your current and expected circumstances, and after discussion with your financial advisor.

 

ABOUT DAVE CHALLINOR AND FORTIFIED FINANCE

Dave Challinor brings diverse banking and lending experience developed since 1993 into his work as owner and principal broker at Fortified Finance and Leasing. Finance for earthmoving, agricultural and other heavy machinery is a highly specialised area, requiring expertise and knowledge of their unique financing criteria.  Dave recognises the need to continually adapt by bringing new and enhanced products to clients at a competitive price.  The team at Fortified Finance has an industry renowned reputation for service and results in securing finance, and are committed to delivering the right finance @ the right time and price.