National Consumer Credit Regulation

Currently credit is regulated at a state level through the Uniform Consumer Credit Code (UCCC) in each state and territory.  The UCCC provides consumer protection in relation to consumer credit contracts, and the disclosure of interest rates, fees, commissions and other information about contractual provisions, and their enforcement.

National regulation has been on the agenda now for several years and in 2008, the Council of Australian Governments (COAG) agreed that the Federal Government should adopt responsibility for the national regulation of consumer credit.

COAG reached an in-principle agreement on 26 March 2008 that the Australian Government would assume responsibility for regulating mortgage credit and advice, including non-bank lenders and mortgage brokers, as well as margin loans. COAG also agreed to investigate what other credit products, such as store credit and personal loans, best sat within the Commonwealth's regulatory responsibility.

Subsequently, on 3 July 2008, COAG agreed that the Australian Government would assume responsibility for regulating all consumer credit products.

The Government's implementation plan for the transfer of consumer credit was announced at the 2 October meeting of COAG.

In early October 2008 COAG also agreed to an  implementation plan for the Government to take over and assume responsibility for all areas of consumer credit.

The objective of the National Consumer Credit regime is to address the deficiencies and inconsistencies in various states across Australia in credit regulation by establishing a consistent and robust consumer credit protection framework that is flexible, competitive and adaptable for a rapidly evolving sector both domestically and internationally.The Government will implement national credit regulation in two phases, to make the transition as smooth as possible. 

Phase one will be in place by mid-2009 and phase two by mid-2010.

 The Plan Key points of the Plan:

•           $71 million in credit reform

•           Two-phase action plan for credit reform for minimal disruption

•           Enhance credit protection for consumers

•           Nationally consistent consumer credit regulation and enforcement

•           Internationally competitive credit regime

•           Phase one by mid 2009-03-17 Phase two by mid 2010 

The Basics of phase one are:

To be enacted by mid 2009.

•           Enacting the existing State legislation, the Uniform Consumer Credit Code (UCCC), into Commonwealth legislation.

•           Establishing a national licensing regime to require providers of consumer credit and credit-related brokering services and advice to obtain a licence from ASIC.

•           Extending the powers of the Australian Securities and Investment Commission (ASIC) to be the sole regulator of the new national credit framework with enhanced enforcement powers.

 •           Requiring licensees to observe a number of general conduct requirements including responsible lending practices.

•           Requiring mandatory membership of an external dispute resolution (EDR) body by all providers of consumer credit and credit-related brokering services and advice.

•           Extending the scope of credit products covered by the UCCC to regulate the provision of consumer mortgages over residential investment properties.

•           Extending the operation of the Corporations Act to regulate margin lending.

•           Regulation of trustee corporations.  

The basics of phase two:

Phase Two is to be enacted in by mid 2010

•           Enhancements to specific conduct obligations to stem unfavourable lending practices, such as a review of credit card limit extension offers, an examination of State approaches to interest rate caps; and other fringe lending issues as they arise.

•           Regulation of the provision of credit for small businesses.

•           Regulation of investment loans other than margin loans and mortgages for residential investment properties.

•           Reform of mandatory comparison rates and default notices.

•           Enhancements to the regulation and tailored disclosure of reverse mortgages.

•           Examination of remaining existing State and Territory reform projects.

•           Phase Two legislation in place by mid 2010.

 A fuller version of the Government's Action Plan is available for download [PDF 819KB].

Green Paper on Financial Services and Credit Reform

The Government released the Green Paper on Financial Services and Credit Reform: Improving, Simplifying and Standardising Financial Services and Credit Regulation in June 2008.

The Green Paper and public submissions are available from the Treasury

This information is provided for clients. It represents a summary of the applicable legislation at the date it has been published. It should not be relied upon as complete or conclusive. No responsibility is taken for its accuracy.