Victoria proposes to amend its Consumer Credit (Victoria) Act and Sale of Land Act to provide better protection for consumers in line with the Consumer Credit Review Report released in 2006.
The proposals only apply to Uniform Consumer Credit Code ('UCCC') regulated lending where the borrower is resident in Victoria. It is unfortunate that this legislation is a further reduction in the uniformity of credit laws in Australia. The key proposals are as follows:
Consumer Affairs May Take Action For Or Defend Actions For Consumers
Under the proposals, the Director of Consumer Affairs Victoria may institute or continue proceedings on behalf of, or defend proceedings brought against, a debtor, mortgagor, guarantor or lessee under a consumer lease in respect of any "consumer credit matter".
A "consumer credit matter" means any matter in respect of which proceedings may be brought under the UCCC. The Bill also implies that class actions can be taken in respect of these matters.
Consumer bodies have long argued that bad practice can be resolved by lenders "buying off" a disgruntled consumer. This new power may create a platform under which these practices can be challenged, and represents a significant new challenge for lenders. For example, this power could be used to challenge exorbitant fees or interest rates. However, there is significant comfort that this power will not be used unreasonably as the Director must be satisfied that it is in the public interest to take or defend the action. The Director can also be liable for costs.
UCCC Lenders Must Be Members Of An ASIC Approved EDR Scheme
Lenders must be members of an external dispute resolution ('EDR') scheme approved by the Australian Securities and Investments Commission('ASIC') or approved by regulation. This is in line with the Mortgage and Finance Association of Australia's ('MFAA') recent change to its Code of Practice which requires MFAA members to only introduce UCCC regulated loans to lenders who are members of an ASIC approved EDR scheme.
New Criteria For Registration Of Credit Providers
The criteria for registration of credit providers in Victoria are changed. Additional information will be required to obtain registration.
The changes do not impose any particular hurdles to registration other than usual prudential standards (eg not bankrupt, not an associate of a person who has had a licence suspended). Lenders who are already registered in Victoria will roll over into the new regime but must provide details of their EDR membership within 14 days of the new law commencing.
Currently ACT and Victoria require registration and WA requires licensing of lenders who provide UCCC regulated credit.
Status Of These Proposals
This is an incomplete summary of the proposals. The Bill also amends other legislation.
The proposals are contained in the Consumer Credit (Victoria) and Other Acts Amendment Bill 2007. The bill and the explanatory material can be accessed by clicking here.
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