Australia: Part 2 of Phase 2 of the National Consumer Credit Reforms proposed

Treasury has released for public consultation the draft National Consumer Credit Protection Amendment (Credit Reform Phase 2) Bill 2012 (draft Bill).

The draft Bill introduces proposed amendments to the National Consumer Credit Protection Act 2009 (NCCP Act), the National Consumer Credit Protection Regulations 2010 (Regulations) and the National Credit Code (NCC) - to give effect to Part 2 of Phase 2 of the National Credit Reforms.

Set out below is a summary of the proposed changes.

Credit provided to small business

The draft Bill introduces:

• specific responsible lending obligations in relation to a class of small business credit contracts; and
• regulatory requirements in relation to requirements for persons to obtain a permit from ASIC where they engage in credit activities in relation to small business credit contracts or a small business consumer lease.

Short term and indefinite term consumer leases

The amendments under the draft Bill extend the definition of consumer leases to include short-term leases and indefinite term leases that are currently exempt under subsection 171(1) of the NCC.

Both these classes of consumer lease will be regulated where the following criteria are met:

• at the time of entering into the lease, the lessor knew, or could have established through reasonable inquiries, that the consumer wanted the use of the goods for a longer or different period of time (the anticipated period of use); and
• the consumer would pay more than the cash price of the goods if they made rental payments for the anticipated period of use (rather than for the term of the lease).

Credit provided for investment purposes

The effect of the amendments proposed by the draft Bill is that, subject to exceptions, credit contracts will be regulated where the predominant use of the credit is for investment purposes.

Private Lending

The proposed amendments extend the definition of regulated contracts to include respectively credit contracts and consumer leases where the credit provider or lessor:

• is a private individual who is not in the business of providing credit or consumer leases;
• where the contract is arranged by an intermediary (rather than directly between the credit provider or lessor and the consumer).

Anti-avoidance measures

The draft Bill introduces amendments which prohibit a person from engaging in conduct with the aim of avoiding the application of the NCCP, the Regulations and the NCC.

Submissions

The closing date for submissions is Friday, 15 February 2013.

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.