National Credit Code
Recent reforms to consumer credit law have resulted in a single national consumer credit regime governed by National Consumer Credit Protection Act 2009 (Cth) (NCCP) which includes the National Credit Code (NCC) as Schedule 1 to the Act. The NCC replaces previous state-based consumer credit codes and the Uniform Consumer Credit Code (UCCC) and it continues to apply to the conduct of Australian credit licence holders. ASIC is responsible for administering the NCCP.
The NCC applies to credit contracts entered into on or after 1 July 2010 where:
the lender is in the business of providing credit
a charge is made for providing the credit
the debtor is a natural person or strata corporation
the credit is provided:
for personal, domestic or household purposes, or
to purchase, renovate or improve residential property for investment purposes, or to refinance credit previously provided for this purpose.
The NCC does not apply to certain loans, including: low cost short term credit (less than 62 days), insurance premiums paid by instalments, bill facilities and staff loans.
The NCC largely incorporated the UCCC. Key changes in the NCC include:
amended hardship provisions
removal of requirements relating to comparison rates schedules (except in credit advertisement, outlined below)
inclusion of loans for residential investment properties
introduction of new default notice requirements.
The NCC was a part of a larger reform process that introduced a licensing regime for lenders and brokers which includes obligations such as responsible lending and mandatory External Dispute Resolution scheme membership.
Part 10 of the NCC requires that credit providers include a comparison rate when they advertise fixed term credit which is for, or mainly for, personal domestic or household purposes. The comparison rate includes:
the interest rate
most fees and charges.
For example if a lender advertises an interest rate of 5.49% its comparison rate might be 5.75%. The comparison rate regime aims to inform consumers of the true cost of credit that applies to a specific credit product and make it easier for consumers to compare the different credit products available on the market.
A comparison rate does not include all fees and charges. For example, the comparison rate does not include:
government fees and charges
charges that are only charged in certain circumstances, for example if you pay off the loan early
The comparison rate only allows comparison based on cost, and will not include other factors that may make a loan more attractive, such as access to fee free accounts or flexible repayments arrangements.