International Law

Small amount credit changes

By djacobson

The National Consumer Credit Protection Amendment (Small Amount Credit Contracts) Regulation 2014 was registered on 12 June 2014.

The Regulation clarifies the changes introduced on 1 July 2013 which imposed a cap on costs and a limit on fees that credit providers (excluding ADI’s) can charge consumers for small amount credit contracts.

A small amount credit contract provides credit of $2,000 or less for a term of at least 16 days but not longer than 1 year.

The Regulation:

• clarifies that the small amount lending cap applies to loans of $2000 even if an additional amount is borrowed for an establishment fee and first monthly fee;
• ensures that where short-term credit is provided to consumers, no additional amount including for a stored value card, membership fees or account keeping fees can be charged above five per cent of the amount of credit, and interest is capped at 24 per cent;
• ensures that credit providers (other than authorised deposit-taking institutions) are only able to charge, for continuing credit contracts, an initial fee of $200, and $125 per annum in any subsequent years, per client, regardless of the number of continuing credit contracts the client enters into; and
• prohibits the following persons from requiring or accepting payment by the debtor of a fee or charge in relation to a small amount credit contract:
  1. A person who introduces a debtor to a credit provider (whether or not the person is associated with the credit provider).
  2. A person who has been introduced to a debtor by a credit provider to provide a service in relation to a small amount credit contract (whether or not the person is associated with the credit provider).

You can download the updated National Consumer Credit Protection Regulations 2010 here.

The post Small amount credit changes appeared first on Bright Law | Legal and regulatory information and advice for Australian financial service providers.

     

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Full post as published by Australian Regulatory Compliance Review on June 15, 2014 (boomark / email).