Offering credit
Many customers may decide to buy from you if you provide credit. Credit can be a good way to help customers pay for your services and, if you are fair with the terms and conditions, a good way to keep them loyal to your business.
But, if you do provide credit to your customers for personal, household or domestic use, and you charge for it, then you must comply with the Consumer Credit Code, the law governing all credit provision in Australia.
Types of credit covered by the Consumer Credit Code include:
- personal loans
- credit cards
- overdrafts
- housing loans
- mortgages
- hire of goods
- guarantees
- continuing credit accounts
- consumer leases.
To find out more about the Consumer Credit Code, view or download the legislation, including all amendments, or to find out what changes have recently been made or are planned, visit the Code's national website.
In New South Wales, additional requirements apply to some consumer credit contracts and related transactions. These provisions are set out in the:
Please note that the Consumer Credit Code shown at the back of the Consumer Credit (New South Wales) Act 1995, is in the form originally adopted and does not contain subsequent amendments. You can find an up-to-date version of the Consumer Credit Code on the national Credit Code website.
If you are providing credit which is predominantly for personal, household or domestic use you will need more detailed information about credit contracts and contractual law and should contact a legal adviser.
Transfer of consumer credit regulation to the Commonwealth
In 2010 the Australian Securities and Investments Commission (ASIC) will take over responsibility for the regulation of consumer credit and finance broking. For more information and updates on the transfer, please visit the Commonwealth Treasury website and the Australian Securities and Investments Commission website.
Linked credit providers
A credit provider which has a trade tie, agreement or a strong commercial or business link with the supplier of goods and services is a linked credit provider – such as a finance company which offers finance to customers through motor dealers. The Code extends to any representation, warranty, or statement made by the linked supplier in relation to the credit contract.
Credit card fees
In August 2002, the Reserve Bank of Australia announced a number of reforms designed to improve efficiency and competition in Australia’s credit card system. Businesses have a number of obligations as part of the reforms. More information is available on the Credit card fees page.
Advertising credit
Credit advertising is regulated to ensure consumers are not misled about the total cost or conditions of using credit. As with all advertising, make sure that it is not false, misleading or deceptive.
If an advertisement includes a repayment amount, it must contain the annual percentage rate or rates, and a statement as to whether fees or charges are payable.
Where an advertisement contains the annual percentage rate, a comparison rate calculated according to a prescribed formula must also be shown.
A schedule of comparison rates must be available to consumers wherever credit is offered.
IMPORTANT – It is in your interest to make sure your customers have all the information they need up-front so that the chances of possible disputes are reduced.
Penalties for not complying with the Code
There is a maximum penalty of $500,000 for breaching one of the key disclosure requirements of the Credit Code as outlined in Part 6 of the Code.
If a debtor applies to the Court in relation to a breach and is successful, the debtor may avoid paying all or part of the interest charges under the affected contract. The Court may also order compensation to be paid to the debtor for any loss resulting from the breach.
For contraventions of the Code, other than a breach of the key requirements, the Court may order compensation to be paid to the affected person.
Monetary penalties also apply to breaches of specified provisions throughout the Code.