Currently credit providers and lessors are required under the
National Credit Act to provide pre-contractual disclosure of key
terms of the proposed contract. This can be combined with the
contract document itself and most often is.
Treasury is conducting a review of these requirements and has
recently issued a discussion paper. The closing date for
submissions is Monday 13 May 2013.
When the discussion paper was released by Federal Treasury in
April 2013, it was heralded as a move towards simplifying
disclosure in the pre-contractual and contractual process. However,
our reading of the proposals contained in the Treasury discussion
paper indicate otherwise.
The Treasury proposals are based on the recommendations made in
the Uniquest report released in March 2010 entitled
"Simplification of Disclosure Regulation for Consumer Credit
Code: Empirical Research and Redesign – Final
Basically what the report recommended was that pre-contractual
disclosures be simplified and be made earlier in the loan
As it has turned out, the introduction of key facts sheets for
certain standard loan products has already gone a long way towards
implementing the recommendations of the Uniquest report.
The current Treasury proposals are to:
introduce financial summary tables for most loan and leasing
credit cards, including store cards
personal loans, including car loans
The format would be similar to the key facts sheets already
potentially remove the statutory information notice (Form 5)
now issued with the loan contract documents.
consider enhancing disclosures in loan contract documents, in
particular with regard to:
lenders mortgage insurance, and
require pre-contractual disclosure to be given, where
practical, at an earlier point in time than is currently the
introduce a standard information statement about lenders
mortgage insurance (LMI).
This is how the loan process might look for lenders under the
current Treasury way of thinking. Documents likely to be disbanded
are denoted thus "document
Key facts sheet for some loan products? (unclear as to
whether will still be required)
Financial table summary for all loans (new
4.1 pre-contractual disclosure document (no longer
4.2 statutory notice (Form 5) (not required)
4.3 contract document
If any changes are made to the disclosure regime then
Treasury's current view is a minimum period of 12 months should
be allowed to implement the changes.
We intend making a submission to Federal Treasury on this issue.
Should any clients have any specific comments they wish us to
raise, then please do not hesitate to contact us.
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.
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