10-144AD ASIC helps consumers understand new credit laws
Thursday 1 July 2010
From today,ASIC will take over responsibility for consumer credit and finance broking from the states and territories under the National Consumer Credit Protection Act 2009 (National Credit Act). For the first time, home loans, personal loans, credit cards, consumer leases, overdrafts and line of credit accounts, among other products and services, will be regulated under a single, nationally consistent regime.
The new legislation includes a range of measures that are designed to better protect the interests of borrowers and improve standards across the industry. For the first time, credit providers, intermediaries and brokers will be licensed and subject to specific consumer protection regulation, including new ‘responsible lending obligations. They must also belong to an ASIC-approved independent dispute resolution scheme so that borrowers can pursue complaints for free. However, the best protection, as always, is a well-informed consumer.
Information for borrowers
ASIC has recently released a package of materials to help Australians from all walks of life use credit wisely, make better borrowing decisions and take control of their debt, including a new booklet, Credit, loans and debt: stay out of trouble when you borrow money and 15 factsheets covering topics like home loans, debt management and what to do if you’re in trouble, interest free deals, payday lending and other high-cost credit. All this information is available in a ‘one-stop-shop’ for consumers on FIDO, ASIC’s website for consumers and investors.
From today, anyone who wants to engage in credit activities (including brokers) must be registered or licensed with ASIC, or be a representative of someone who is registered or licensed (that is, they must either have their own licence or come under the umbrella of another licensee as an authorised credit representative or employee).
Individuals and businesses who are registered have up until 31 December 2010 to apply for an Australian credit licence. This means consumers should only deal with someone who is registered or licensed. If they aren’t registered, or do not hold a licence, they are likely operating illegally.
There is currently an exemption from registration and licensing for credit assistance provided through some businesses (for example, retail stores and car yards).
While the store may be exempt, the actual credit provider must still be licensed or registered. If borrowers are unsure who the credit provider is, they should ask the salesperson or broker.
To find out if a credit provider or broker is registered or licensed, search ASIC's online database or phone ASIC’s Infoline on 1300 300 630.
New ‘responsible lending’ obligations
The National Credit Act introduces new ‘responsible lending’ obligations for registered persons and credit licensees:
to verify the customer’s financial situation,
assess capacity to repay without substantial hardship, and
not offer credit products that are unsuitable.
These new obligations come into effect for smaller credit providers and intermediaries like mortgage and finance brokers from today. From 1 January 2011, these obligations will apply to all credit providers. This includes a requirement from 1 January, that anyone engaging in credit activities must give consumers a Credit Guide (with information including their licence number, fees and details of your right to complain) before they provide them with any credit assistance.
Where consumers should go if they have a problem
From today, credit providers, credit assistance providers and intermediaries who have registered for licensing must belong to an ASIC-approved independent dispute resolution scheme. Consumer disputes about credit services should be directed to the credit provider's independent dispute resolution scheme. This will either be the Financial Ombudsman Service (FOS) (www.fos.org.au) or the Credit Ombudsman Services Litd (COSL) at www.creditombudsman.com.au). Both schemes can be contacted by calling 1300 780 808.
Complaints about illegal or unfair conduct by the credit provider, or concerns about providers operating without being registered or licensed, should be directed to ASIC (rather than the states and territories) at www.asic.gov.au/complain or by calling ASIC’s Infoline on 1300 300 630.