Australia: New Consumer Credit Legislation Enhancements
Financial Services Alert

The Consumer Credit Legislation Amendment (Enhancements) Act 2012 (Cth) (the "Act") received Royal Assent on 18 September 2012.

The amendments introduced by the Act, most of which will come into force on 1 March 2013, deal with:

• short term and small amount credit contracts
• hardship applications
• caps on costs for credit contracts
• consumer lease amendments, and
• reverse mortgages.

The key issue for each for these amendments are:

1. Short term and small amount credit contracts
2. • A prohibition on credit contracts by non ADIs which are for under $2000 and have a term of 15 days or less
   • Regulation of small amount credit contracts, and
   • Introduction of required warnings and notices on premises and websites.

2. Caps on costs for credit contracts
3. • Introduction of specific caps for interest and fees for small, medium and other credit contracts where the lender is not an ADI, and
   • 48% interest cap for medium amount and other contracts.

3. Hardship application
4. • Expansion of the scope of the hardship application provisions, particularly, the removal of the $500,000 limit, and
   • No restriction on the ways in which a credit contract can be varied.

4. Consumer leases
5. • Requirement for the provision of periodic account statements and end of lease statements,
   • Introduction of statutory liability on a lessor for a supplier's misrepresentation.

5. Reverse Mortgages
6. • The debtor cannot be required to pay more than the "adjusted market value" of any property that is mortgaged to the credit provider. This is commonly referred to as the "no negative equity provision", and
   • Expansion of the definition of Reverse Mortgage.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.