Uniform Consumer Credit Code Content

Uniform Consumer Credit Code © Credit Education Services Australia Pty Ltd 2006

Uniform Consumer Credit Code
This module will help you understand:
The Code’s purpose
Linked supplier liabilities and obligations
Advertising obligations
Comparison Rates & Schedules
Contract formation disclosure & conduct requirements
Guarantees & Mortgages
Insurance
Customer management obligations
Enforcement processes & obligations
Unjust contracts
Co-borrower issues
Penalties

General Overview

General
The Uniform Consumer Credit Code is commonly known as
the " Code "
" CCC " or
the " UCCC "
It regulates consumer or personal lending only
Business lending is not covered BUT
The loan can be used for some business purposes provided it is not for more than 49% of the total loan.
There are 8 Codes in Australia
The legislation is State/Territory based, but
It is uniform across all Australian States and Territories
with some minor differences between States

Application
The Code applies if the following key requirements are met:
There is a loan, which is an amount to be repaid over time ("deferred debt")
The lender is in the business of providing loans
The loan is for more than 62 days
A charge is made for providing the credit (e.g. interest or fees)
The loan is predominantly for personal, domestic or household purposes –
more than 50% of the loan must be for these purposes
The debtor is
a natural person who usually resides in Australia or
a strata corporation

Application – Key Questions
The best way to decide if the Code applies is to decide if the key requirements are met is by asking the following questions:
Is the loan for an individual or Strata Corporation?
Is the loan mainly for the customer's personal, domestic or household use?
Is the loan term for more than 62 days?
Will fees and charges apply?
If the answer is ' yes ' to all four questions, then you can be fairly sure the Code applies, although there are some exceptions.

Exclusions
The Code does not apply if :
the customer is a business entity such as
a company
corporate trustee
incorporated association or
government body and/or
the loan is to be used mainly for business purposes
If there is a business and personal purposes mix
the main purpose of the loan is the key indicator.
So, if the loan is mainly for business purposes, i.e. more than 50%, then the loan is not covered by the Code
Business purpose loans are known as 'unregulated' loans, as the contract itself, rather than any particular law, states what rights the lender and customer have.

Exclusion Criteria
The Code does not apply to the following:
Business purpose loans
or where more than 50% of the loan is to be used for business purposes
Short term credit of 62 days or less, except
if the fees and charges exceed 5% of the amount borrowed; or
where the interest rate is greater than 24% p.a.
Continuing credit where no interest is paid and
where account charges do not exceed $200 in the first year or $125 in any subsequent year
Consumer leases for a fixed period of four months or less or which are for an indefinite period
Consumer leases of goods as part of an employee's employment package or benefits
Credit for investments
Loans between friends or family members - who are not in the business of lending money

Product Types
It applies to the following consumer products:
Personal Loans
Housing Loans
Continuing Credit
Credit cards
Store cards
Mortgages
Land and goods
Pay Day Loans (some)
Overdrafts
Hire of Goods
Guarantees
Consumer Leases

Purpose

Purpose
The Code’s main purposes are to:
Simplify consumer credit lending process through similar laws in all Australian States and Territories;
Promote 'truth in lending' (disclosure) as the basis for consumer choice and market competition;
Assist consumers to compare and make informed credit choices based on
disclosures about fees, &charges and
contract terms and conditions
Provide for product flexibility and choice in a competitive market; &
Improve consumer protection through a range of penalties for Code breaches.

Purpose
The Code uses disclosure to assist consumers to make informed credit choices.
It regulates
advertising,
disclosure,
comparison rates,
contract formation,
fees and charges,
insurances
mortgages,
guarantees,
account management,
account finalisation and
related sales, all important elements of the credit cycle.

Purpose - Disclosure
Lenders must manage consumer lending in a very specific way, such as:
Certain information must be clearly disclosed
Before and during contract formation
In a particular order
In a specified format and font
Certain notices must be given:
within particular timelines and
In a particular format & font
Customers must given time to respond
Some exceptions exist

Linked Suppliers

Linked Suppliers
The Code links together all those involved in the overall credit process, including:
Introducers of any kind, such as
Car dealers
Finance brokers
Vendors and
External debt collection agents
Lenders can be held responsible for:
The introducer’s conduct and/or
The quality of any financed goods or services provided to customers.

Linked Supplier - Liabilities
Lenders can be held responsible for any misrepresentations made by those associated with the lending process about
a financed product such as a car or insurance policy
the finance itself or
the debt collection process.
Those involved in the lending process must conduct their businesses honestly, ethically and in keeping with the law
This includes brokers, introducers, car dealers, door to door sales etc
Penalties for fail to comply with the Code include
court action that
could result in civil penalties up to $500,000 and/or
criminal charges

Comparison Rates & Schedules

Comparison Rates - General
A comparison rate is a tool used to help consumers compare credit products
It is a percentage figure, like an interest rate, calculated on the
Amount borrowed
Loan term
Interest Rate
Fees and charges associated with the loan, but excluding
Government charges, such as stamp duty or mortgage registration fees:
Fees and charges which may or may not be charged, because they depend on some event which may or may not occur (for example, fees for early repayment or redraw fees); and
Fees and charges where the amounts are unknown at the time the comparison rate is provided.
Comparison rates only have to be provided for Code regulated fixed term credit
Fixed term credit is a loan, such as a home loan or personal loan, which must be repaid within a specified amount of time, e.g. 5 or 30 years.
Comparison rates do not apply to continuing credit products, such as credit cards or store cards.

Comparison Rate Schedules
A Comparison Rate Schedule (CRS)
Is a list of comparison rates for a range of standard loan amounts and terms for a particular credit product
should give an indication of the effect of fees and charges on the proposed loan
The standard amounts and terms have been set by legislation to cover what is considered fairly standard loan scenarios but
do not represent all the possible combinations of loan amounts and terms,
so customers are unlikely to have a perfect match between their loan and the comparison rate schedule
The CRS must be headed "Comparison Rate Schedule“ & state
The lender's name
The product name, although generic names are acceptable
The credit amount - according to the Regulations
The loan - according to the Regulations
Both the interest rate and the comparison rate
The date of issue
If the loan is secured or unsecured
Display a specified warning about the comparison rate's accuracy
Be a printed document or text on a screen
Not contain any other information other than permitted information, listed above

CRS – Availability & Changes
CRS must be made available:
At a lender's offices and branches
At the office of any dealer, finance broker or other linked supplier
where the lender's consumer credit products are advertised, or
credit applications can be taken in person
On lender’s website, if credit is advertised electronically
It must also accompany any credit application that is sent or given to the customer
Must be updated & distributed within 7 days of any change in any of the calculation elements e.g. fees, charges, interest rate etc

Advertising

Advertising
Advertisements include
any form of promotional material that is
displayed in business premises, public places or provided to a customer.
Where interest rates or repayment amounts are shown, the Code requires lenders to provide additional information in the advertisement, including the comparison rate and a statutory warning
Where an advertisement for credit contains an annual percentage rate, it must also state:
the equivalent comparison rate for the credit amount and the term for the closest amount and term as specified in the Code Regulations and
that credit fees and charges are payable, either by
a statement that fees and charges are payable, or
stating the fees; or
stating some fees and that others are payable.

Comparison Rates – Advertising
Must be
included if repayments or the interest rate are advertised &
clearly identified as the comparison rate &
be equally prominent with the annual percentage rate and any repayment amounts shown,
all three must have the same size, boldness and similar placement in the advertisement
The advertisement must also include:
the product's name
the credit amount and
term to which the comparison rate applies;
whether the loan is secured or unsecured and
the Code prescribed warning, either the long or short version, about the comparison rate's accuracy.

Comparison Rates - Advertising
The comparison rate must also be included in
any advertisement for fixed term consumer credit that contains an interest rate or repayment amount
Comparison rates are not required for continuing credit products
Comparison rates must be based on the amount and term in a legislated standard list
Lenders must select the combination most typical of the loan being advertised
For example, the standard list includes
a loan of $30,000 for 5 years, which is similar to a typical car loan, and
$150,000 for 25 years, which is similar to a typical home loan. A credit advertisement must clearly state the amount and term on which a comparison rate is based. It must also include a warning. The Code specifies the warning's wording.

Advertising breaches
Advertising breaches of the Code can result in penalties of
up to $10,000 and
compensation to those affected by the breach
Those who can be held responsible are:
Lenders who provide the advertised credit
Suppliers, or those with an interest in, the good and services promoted
Those identified in the advertisement by their personal or business names, address, phone or fax number
A person will not be found guilty of a breach of the Code if they can prove that they could not, despite reasonable care, have prevented the breach.

Contract Formation Disclosure

Disclosure
The Code is very specific about a range of contract formation and account management processes
Consumers must receive information about aspects of their loan, particularly at:
Contract Formation
Pre-contractual statement
Comparison Rate Schedule
Loan Contract
Mortgage
Guarantee & Indemnity
Account Management/Servicing
Statements
Payout Figures
Hardship Variations
Account Finalisation
Collections Processes
Default Notices
Voluntary Surrender
Repossession
Sale of Mortgaged Property
Statement of Sale Proceeds
Enforcement
Documents must be clearly understandable (plain language) and printed in not less than 10 point type.

Disclosure – Additional Obligations
The Privacy Act imposes additional obligations
particularly those involved with credit reporting procedures
Those requirements impact on:
Contract Formation
Privacy Statement & Consent
Application Rejection - where credit bureau report a factor
Account Management
Third Party Authorisation
Collections Processes
Default Listing Notification

Pre-contract formation
Before a customer signs a contract, s/he must have the opportunity to
understand the terms and conditions of the loan and
to compare products if they wish.
Before signing a contract, each customer must receive:
A Comparison Rate Schedule, if they also receive a copy of the application or they request one; &
A Precontractual Statement and an Information Statement
Often this is also the contract document

Post contract formation
Once the contract has been signed, copies of the contract must be given to
Each customer &
The guarantor, if any
who must receive both a copy of the guarantee & the contract
Or sent to each within 14 days if not given when contract signed
During the course of the loan, the customer is entitled to receive:
Regular account statements, if the interest rate is variable
Only on request for fixed interest rate loans
Payout statement - verbal or written
Document copies
contract and all issued documents
Default notices for overdue payments or other contract breaches
Notice of intention to list a default on a credit reporting bureau

Pre contract formation - conduct
The Code prohibits the following behaviour when selling consumer credit:
false or misleading representations
about something that affects a customer's decision to take out credit or
a related transaction e.g. insurance/goods/services or
any attempts to induce a person to enter into a credit contract or related transaction
harassing a person to apply for, or enter into, a credit contract or related transaction; and
home visits to induce the occupant to apply for, or obtain, credit, unless the visit is arranged in advance.
This means that credit cannot be sold door to door by cold calling
The lender can visit a potential customer at their home to discuss his/her credit requirements only if that person requests, or agrees, to the visit

Pre-contractual Statements
Lenders must give each applicant a Precontractual Statement before they sign the contract
This Statement and the credit contract contain much of the same information
Most lenders combine the Precontractual Statement and the loan contract
so customers only receive one document
There are two parts to the Precontractual Statement
The first part is a table that must disclose specific financial details
Where the Statement and contract are combined, the front page of the loan includes a 'Financial Table' to meet this requirement
The second part contains other important information

Precontractual Statements
The Table form must contain the following information:
The credit amount
If the amount is not known at the time the contact is made, e.g. a continuing credit product, then the maximum amount of credit to be provided must be stated *
The annual percentage rate or rates*
Details of any interest free period*
The total amount of interest if the contract is to be paid out within 7 years *
The number, amount and frequency of repayments
Any credit fees and charges *
The rest of the Statement must disclose:
The lender's name
The amount of credit and to whom it is to be paid*
Details of any changes that can be made under the contract *
The frequency of account statements
Any default rate of interest
Whether enforcement expenses are payable by the customer if they breach the contract
Mortgage or guarantee details, if taken
Commission payable, if applicable
Details of insurance financed under the contract *
If a number of documents are provided, each document must state it does not contain all of the required information.
* All information marked with a '*' is a key disclosure requirement and must be contained in the Precontractual Statement. Failure to provide any of these details can lead to a civil penalty of up to $500,000, plus compensation for any loss suffered by the debtor or guarantor.

The Contract

Contracts - General
Credit contracts must always be in writing
In a 10 point font – as a minimum and
Can be formed in two ways
a written contract signed by the customer(s) and the lender; or
a written offer by the lender, which is accepted by the customer through a particular action
e.g. by use of a credit or store card
The credit contract must also contain a prescribed "Things you must know" warning
on the same page and immediately above the place the customer is to sign it
content is specified by the Code
The information provided must cover the terms and conditions of the loan, including
the financial details &
how the loan will be managed &
what rights and obligations both the customer and lender have
The customer must be given a copy of the credit contract at the time the contract is signed, or a copy must be forwarded within 14 days.

Contracts - Variations
If, during the course of a loan, a lender wants to
vary the fees and charges; or
introduce new ones, then
the contract must disclose this right
If the variation right is not included in the terms and conditions
No changes in fees and charges are permissible during the loan

Contract Details
Regardless of how the contract is formed, the contract must include the following specific information:
The lender's name
To whom the credit is to be paid *
Credit amount to be provided.
If the amount is not known at the time, then the maximum amount of credit to be provided*
Annual percentage rate or rates *
Details of any interest free period *
Total amount of interest, if the contract is to be paid out within 7 years *
Number, amount and frequency of repayments
Credit fees and charges *
Details of any changes that can be made under the contract *
Frequency of account statements
Any default rate of interest and how it is calculated (eg. from a published reference rate)
Whether enforcement expenses must be paid by the debtor in the event of a breach
Details of any mortgage or guarantee that may apply
Details of any commission to be paid
Details of insurance financed under the contract*
* All information marked with a '*' is a key disclosure requirement and must be contained in the contract. Failure to provide any of these details can lead to a civil penalty of up to $500,000, plus compensation for any loss suffered by the debtor or guarantor.

Contracts – Customer Withdrawal
A customer has a statutory right to withdraw from the contract
before credit has been provided
The lender must be informed of the termination
in writing; or
where a particular action is required to form the contract, such as use of a credit or store card,
the customer has not performed that action
The lender is entitled to be paid any fees or charges involved in establishing the loan
provided the contract allows for them

Maximum Interest Rates
Some States/Territories have capped the annual percentage rate (interest rate or APR) a lender can charge.
These caps are not imposed under the Code itself but under either the Consumer Credit Act or Regulations of the State concerned
The States/Territories with maximum APRs have taken different approaches to how they are calculated
In Victoria , a consumer credit contract is unenforceable if the APR exceeds 48%. Also, if the contract is secured by a mortgage, the mortgage is unenforceable if the APR exceeds 30%
New South Wales the APR cannot exceed 48%
It is calculated by combining the actual interest rate and all fees and charges that can be quantified at the time the calculation is made.
The Australian Capital Territory takes a similar approach to MSE
Queensland is currently drafting a Bill to introduce a cap of 48%
It will include fees and charges in the cap calculation
The Northern Territory, Western Australia and South Australia have not introduced caps to date.

Credit Cards – Fair Trading legislation
Fair Trading legislation imposes some additional compliance obligations for credit cards
In all States and Territories , Fair Trading legislation prohibits a lender from issuing a credit card unless the customer has made a written request for such a credit facility.
The only exception is if the card is to be renewed, replaced or substituted for a card already issued to the customer
In the Australian Capital Territory , there are additional obligations imposed under its Fair Trading Act (FTA).
A lender has a positive obligation to assess a customer's capacity to repay the credit card debt.
This obligation applies both when the card is first issued and also if any increased credit limit is requested
A satisfactory assessment process includes a customer’s written statement providing the following information:
Current income
Details of all credit accounts, including limits and balances
Current repayment commitments
The lender cannot rely on a customer's statement that they have the capacity to manage repayments on an increased continuing credit limit.
NB: If a customer wishes an increased credit limit, the request must be in writing. If the lender offers an increase, the customer must also accept it in writing

Guarantees

Guarantees
Definition: A guarantee is where someone, other than the customer, agrees to repay the loan if the customer does not
The guarantor receives no benefit from the loan and is only asked to repay the account when things go wrong
The Code is very specific about how a guarantee can be taken and the type of information that must be provided to the guarantor.
Before taking a guarantee, the lender must give the guarantor:
A copy of the credit contract to be guaranteed; and
The Information Statement "Things you should know about guarantees“; and
The guarantor must be given a copy of the guarantee at the time they sign it, or it must be sent to them within 14 days
A guarantor can
withdraw from a guarantee any time before the customer is provided with the finance; or
withdraw later if the credit contract differs in any significant way from the copy given to them before they signed the guarantee; &
limit their liability to the amount stated in the contract
They are not obliged to guarantee any further increases the borrower may request.

Guarantees – Code Requirements
Guarantee documents must:
be signed by the guarantor;
contain a prescribed warning immediately above the place the guarantor signs the guarantee;
disclose that the amount recoverable under the guarantee is limited to the total amount payable under the loan, plus the reasonable enforcement costs;
if any debtor is a minor (under 18 years of age), contain a prominent statement warning the guarantor they may not be able to recover guaranteed amounts from the customer if the guarantee is called upon; &
not prevent, or limit, the guarantor's right to protect his or her own interests against the customer, such as prohibiting the guarantor from lodging a proof of debt if the customer files for bankruptcy.
be in plain language and be printed in a minimum 10 point font
The guarantee will not apply to any increased liabilities under the contract unless
the lender sends the guarantor details of the increase &
seeks their agreement to it &
obtains a written acceptance of the increased credit amount from them.

Guarantees - Enforcement
When a customer is unable to meet their obligations under a loan, the lender will require the guarantor to do so
If the guarantor chooses not to, or is unable to, the lender is entitled to take legal action against both the customer and the guarantor
Where the lender takes legal action through the courts, a judgment cannot be enforced against a guarantor unless:
the customer is insolvent/bankrupt;
a court approves the action because recovery from the customer is unlikely;
the lender has made reasonable attempts to locate the customer, without success; or
judgment has already been obtained against the customer and remains unsatisfied 30 days after written demand.

Mortgages

Mortgages
Definition: A mortgage is where the customer agrees to the lender taking security over their property or goods
The goods offered can be a car, house or piece of equipment
Where a customer agrees to a mortgage over their property
they are then called a 'mortgagor'
the lender is called a 'mortgagee’
the lender has the right to take that particular piece of property and sell it if
the loan repayments cannot be maintained as agreed or
the customer does not manage their other loan obligations such as keeping the property insured or properly cared for
These other requirements must be set out in the loan contract
They are not enforceable otherwise

Mortgages - Obligations
A mortgage must
be in writing &
signed by the mortgagor (customer) &
clearly identify the property so there can be no disputes over what the security is.
Where a car is taken as security, its model, make, colour, registration number, chassis number and vehicle identification number provide the information needed to identify it clearly.
These details should be listed in the mortgage to avoid any confusion or disputes about what vehicle has been taken as security
.
The mortgage can only secure recovery of
the total amount payable under the contract and
any reasonable enforcement costs
If mortgaged goods are sold
The customer must be refunded any surplus
If there is a shortfall, the customer must repay the lender

Mortgages - Limitations
A mortgage cannot be taken over the following
All the mortgagor's (customer's) property;
Unidentified property
The lender must be able to describe the property accurately, so there can be no dispute about rights;
Continuing credit contract (credit & store cards) purchases, unless the goods are specifically identified in the mortgage;
The customer's future property, unless:
it is to be purchased with the credit provided & is described in the contract; or
is in replacement, or addition, to other mortgaged goods
Employee remuneration (wages, salary, commission etc) or superannuation; or
Cheques, bills of exchange or promissory notes issued or endorsed by customer or guarantor.
The Code also specifies processes for the repossession and sale of the goods if the mortgagor cannot meet their obligations. These are discussed under Enforcement.

Mortgages – Property Transfers
The mortgagor (customer) cannot transfer the mortgaged property without the lender's (or a Court's) consent
The lender cannot
unreasonably withhold consent or
make the transfer subject to unreasonable condition
.
If the mortgagor wants to transfer the property, the lender can require any, or all, of the following:
Alternative security of an equivalent kind and value;
Any contract breaches to remedied;
The person to whom the goods are being transferred to accept liability for the customer's debt and mortgage obligations (assignment);
The payment of any costs involved in transferring the goods, such as stamp duty and legal costs.

Insurances

Insurances
Customers may wish to finance certain insurance products when they take out a loan
Generally, lenders cannot insist a customer take our, or finance, insurance
Exception:
A lender can require customers to take out insurances such as mortgage indemnity insurance, mortgaged property insurance (e.g. motor vehicle comprehensive insurance) or other insurances that are permitted by Code regulations
Mortgage property insurance can be required because it provides some level of protection for damage to secured property.
Customers can also be required to maintain compulsory insurances such as those the law requires for vehicles used on public roads
Customers are entitled to choose what insurances, if any, they require, and from whom they wish to purchase
The lender cannot insist insurance be taken with a particular insurance company
Lenders cannot require customers to take out
Warranties;
GAP insurance;
Consumer Credit ;or
Any other form of life, unemployment, sickness or disability insurances
The customer must be able to choose their insurance provider.
The lender cannot insist the insurance be taken out with any particular insurance company.

Insurances - Prohibitions
A lender must not:
require a customer or guarantor to take out, or pay the cost of, insurance
except for mortgaged property insurance, mortgage indemnity insurance or compulsory insurance;
require the customer to take out insurance with a specified insurer
unless it is the only one providing the relevant insurance or
make unreasonable requirements as to the terms of the required insurance;
finance mortgaged property insurance premiums for more than one year at a time; or
debit the premium to the customer's account more than 30 days before the insurance cover commences

Insurances – Consumer Credit
Consumer Credit Insurance, also know as Loan Protection Insurance, is a product that
covers some, or all, loan repayments if the customer is
unemployed or
unable to work due to sickness or injury, or
if they die
No customer can be required to take out this type of insurance
Commissions cannot exceed 20%, whether paid to:
the lender or
linked supplier or
an agent
When a loan contract is terminated, regardless of the reason, any consumer credit insurance financed under it must also be terminated.
In this situation, the lender must give the customer a rebate on the premium when calculating the pay out amount.
The lender can then recover this amount from the insurer.

Linked Credit

Linked Credit
Where a lender has an arrangement with a dealer or supplier to finance their goods or services, the lender is known as a 'linked credit provider’
Suppliers, such as motor dealers, are known as a 'linked supplier' because they introduce customers to the lender to finance the goods they wish to buy
This relationship increases the lender's legal obligations
Lenders must take some responsibility for the linked supplier's conduct and the quality of their goods and / or services

Linked Credit
A lender can be liable, along with the linked supplier, for any:
representation, warranty or statement by the linked supplier about the loan contract; or
misrepresentation about the sale contract or a breach of it, including the failure to provide the goods or to provide goods of an inferior quality or standard for their age or type
If a lender is held responsible for incorrect representations about the finance, goods (e.g. the vehicle), or services or the products are defective, the lender has some defences:
only if the lender made appropriate enquiries about the supplier's reputation and financial standing before becoming linked; and/or
There was no any reason, at any time, to suspect that the supplier's conduct may be unethical or the goods sold are faulty or not as represented.
The lender cannot be held responsible for the supplier's goods or conduct if the customer chose to apply for finance without any introduction or inducement from the supplier
If a lender becomes liable for damages, they are entitled to be indemnified by the linked supplier
This means the supplier must reimburse the lender for any compensation paid to the customer and/or penalty imposed by a regulator

Commissions
A lender must disclose all commission payments associated with financed consumer credit products
Disclosure is required
For both introduced and financed business
whether the lender pays or receives the commission
A lender is required to disclose:
That commission is to be paid or received
The name of person to whom commission is paid (dealer, broker, introducer or lender)
Name of person paying the commission
The commission amount, if known
A lender must also disclosure any commission they know is paid to anyone involved in arranging consumer credit insurance and/or mortgaged property insurance.

Customer Service

Statements - General
There are two types of statements of account
One is a periodic one given through the life of the loan (depending on whether the rate is variable or fixed);
the other is one generated on request giving account status and history (regardless of the type of rate).
Periodic Statements
must be provided at least every six months to customers who have variable interest rate loans.
The information in the statement must include the following: Statement period
Balances - opening & closing
Interest charges
Fees & Charges
Payments
Account corrections/variations
Other information
There is no obligation to provide account statements for fixed rate loans.

Statements - Customer Request
Customers have the right to request a statement of account status and history at any time, regardless of their contract type
Where there is more than one borrower, the statement only needs to be given to the customer who requested it
The statement can be given orally but, if the request is in writing, then it must be provided in writing
The Code also specifies timelines for the provision of the statement. It must be provided within: 14 days - if the information requested is within the last 12 months; or 30 days - if the information required relates to a period of longer than 12 months
If a written statement has been given in the last three months, there is no obligation to provide that information again.
Lenders are not required to provide statements for transactions that occurred more than 7 years ago.

Disputed Accounts
If a customer disputes an account, the lender must provide a written explanation of how the liability was incurred
If the lender agrees with the customer, this must also be confirmed in writing.
If there is no agreement, either the customer or the lender can apply to the Court for it to settle the dispute
.
If a customer wishes to dispute an account, they must provide written notice within the following timeframes:
Continuing Credit
Before the next payment is due
Other Contracts - where Statements are given:
Within 30 days of receiving a Statement
Finalised Contracts
Within 3 months after finalisation
Enforcement proceedings cannot be commenced on a disputed account until at least 30 days after the customer has been given a written explanation about it.

Contract Variations
If the contract allows the lender to vary the contract terms such as interest rate, payment amount and/or frequency, fees and charges etc the customer to be notified of any change
This notification can be by press advertisement or by mail for most variations. The loan contract will specify how this is done
The timing of the notification varies as shown below:
Fees and charges
20 days before the change
Repayments
20 days before the change *
Interest calculation methodology
Other unilateral changes
Interest rate
Not later than the day on which the change is introduced
* NB: Customers must be given notice of loan repayment changes in writing.

Account Closure
A customer always has the right to finalise a contract at any time.
Where it is finalised early, a lender may be able to charge early termination fees
provided they are disclosed in the loan contract
There are two main processes associated with account closure where the account is not in arrears.
The first is a payout statement that must be provided to the customer on request.
The other is a statutory notice about mortgaged property insurance that must be sent to the customer once the account is finalised.

Payout Statement
A lender must provide a written payout statement to the customer if they request one in writing.
Where the request is verbal, the statement can be provided orally
The lender is only obliged to provide details of how the payout figure is calculated if the customer requests that detail
The statement must be provided within 7 days of the request and only needs to be given to the person making the request.
A fee can be charged for the provision of written information only if the loan contract contains terms that allow for it.
EXCEPTION: While a customer's account information is confidential and can generally only be released to a third party with the customer's written authority, the payout figure is the exception. Any person at all (e.g. dealer, family member, friend, another lender etc) can request a payout figure on a customer's account without written permission
No other details other than the payout amount can be released.

Insurance Cancellation Rights
When an account is finalised, or a repossessed/surrendered vehicle sold, the lender must send the customer a letter advising of the right to cancel the mortgaged property insurance
This only applies to financed insurance, provided it is still current
this type of insurance can only be financed for one year, so generally the requirement will only apply to contracts less than a year old when finalised
Notice must be in writing, with the wording exactly as prescribed by the Code
This is a statutory obligation that gives the customer the opportunity to claim a proportionate rebate from the insurer

Hardship Management
Any customer in financial difficulties has the right to apply for a contract variation
The customer can apply for a variation on the following grounds:
financial hardship due to illness, unemployment or other reasonable grounds; and
an expectation they will be able to complete the contract if a variation is given
The types of variation to which a lender can agree are:
deferment of some payments
extension of the contract term
both deferment and extension
Under s66, the customer has no right to request a decrease in the interest rate, nor does the lender have a legal obligation to reduce it
Where the lender makes an agreement with the customer to vary the contract terms, they must provide written confirmation of the changes within 30 days
.
If the lender does not agree, the customer has the right to apply to the Court to vary the contract
If the Court does grant a variation, the lender also has the right to apply to the Court for that order to be varied or revoked

Collections

Collections - General
The Code is very specific about collections processes, documentation and their time frames.
A lender's right to enforce its loan contracts, and associated mortgages and guarantees, depends on managing these processes as the Code directs.
The main collections functions requiring specific documentation, processes and timelines are:
Default Notice
Voluntary Surrender
Consent to Enter Premises
Repossession & Sale

Default Notices
Before any enforcement action can be taken, a default notice must be issued to each customer on the loan contract.
A lender cannot send one jointly addressed to spouses or partners (co-borrowers)
Guarantors must also receive a copy of the default notice, regardless of whether the customer wishes the default to remain confidential
The customer has 30 days from the date of the notice to bring the account back into order.
This applies to both payment and non-payment breaches (e.g. no insurance or assignment of a vehicle etc).
During the 30 day time frame, the customer must not default in the same way again.
if another repayment is due in that time, that must be paid as well as the default, otherwise the customer remains in default.

Default Notices
Enforcement action can be taken if
the customer does not rectify the account within the specified time, or
defaults in the same way during the default period, or
does not make a payment arrangement
NB: Secured goods cannot be repossessed, or legal action commenced, until the default notice time frame has expired.
The customer must always be given the opportunity to rectify the default, where it is possible.
If they do, then the contract continues as if no default occurred
Any subsequent default must follow the same default procedure again
Where the default cannot be rectified (e.g. goods destroyed), the lender can commence enforcement action 31 days after the date of the notice.

Default Notices - Exceptions
A lender does not need to issue a default notice if they can establish:
The customer cannot be found; or
There are reasonable grounds for believing the credit was obtained fraudulently; or
There are reasonable grounds for believing the customer has, or will, dispose of secured goods without permission.

Voluntary Surrender
When a customer voluntarily surrenders the mortgaged goods to the lender, they must receive a written notice within 14 days of handing the goods back which advises them of their rights
This is a statutory document that cannot be altered in any way
In that document, the lender must give the customer the following information:
an estimate of value of the goods
details of enforcement expenses
to the date of the notice
daily rate
how to get the goods back
the sale process
account finalisation process
The customer has 21 days to introduce a buyer or take the goods back
An introduced buyer must be willing to pay the estimated value of the goods or any higher amount already offered
The offer should be in writing
Once the 21 days has expired, the lender can sell the goods.
The lender has an obligation to do this as quickly as possible and to get the best price reasonably obtainable for the goods.

Consent to Enter Premises
Where the lender needs to repossess goods that are on residential property, they must obtain the written consent of the occupier or a Court order.
The occupier may be one of the owners or a co-tenant
It does not need to be the customer
If the lender cannot obtain consent to enter the property, they can apply to the Court for permission.
If the Court grants the request, the occupier no longer needs to give consent
The lender can enter the property against the occupier's will
Whether the lender uses a debt collection agency or repossesses the goods themselves, the consent of the occupier must be given in writing.
The Code specifies both the form and the procedure that must be used
EXCEPTION : If the vehicle is on public property or at business premises, it can be repossessed without the consent process the Code requires for vehicles on private property.

Repossession
Where the lender repossesses goods, the process is similar to a voluntary surrender
The customer must receive a written notice within 14 days of the repossession which advises them of their rights
This also is a statutory document that cannot be altered in any way
In that document, the lender must give the customer the following information:
Reason for repossession
Date of repossession
Amount required to redeem the vehicle
Estimated value of the vehicle
Enforcement expenses
to the date of the notice
daily rate
How to get the goods back
Sale process
Account finalisation process

Repossession
The customer has the right to
introduce a buyer for the estimated value
This offer should be in writing
take the goods back, provided all the arrears and enforcement costs (insurance, storage, towage etc) are paid
Either action must be taken within 21 days of the notice
Once the 21 days has expired, the lender can sell the goods
The lender has an obligation to do this as quickly as possible and to get the best possible price for it
EXCEPTION : A vehicle repossession can only proceed with a Court order if less than $10,000 or 25% of the credit amount is owed on it.

Once the goods are sold, the lender must give the customer a statement detailing
all costs involved
the amount realised at the sale and
the amount of any refund or balance outstanding
While the Code does not specify a particular time frame for giving this notice, it should be provided as soon as possible after the sale so the customer is advised of any surplus or balance outstanding
Where there is a balance outstanding, the customer must also be advised of intended enforcement action if the shortfall is not paid or a payment arrangement made

Unjust Contracts

Unjust Contracts
Under the Code , the term "unjust" includes unconscionable, harsh, or oppressive conduct.
If a customer, or guarantor, considers their credit contract to be unjust, or unfair, in some way, s/he can apply to a Court or Tribunal to re-open the contract
The Court/Tribunal looks at
the contract terms and conditions and
the circumstances that led to the customer or guarantor signing the contract
If an unjust contract is reopened, the terms of the agreement can be changed, or set aside in some circumstances
The customer obtain an order that says s/he
may have to pay less,
may have to pay over a different period,
may be released entirely or,
in some limited circumstances, may be refunded amounts already paid.

Unjust Contracts - Elements
Factors the Court or Tribunal can consider when judging whether a contract is unjust include:
The bargaining positions of the parties;
The benefit received from the loan;
The customer’s ability to negotiate the terms of the contract;
Whether the contract imposes unfair conditions;
The customer's age, mental and/or physical capacity;
The customer's income, educational background and literacy;
Whether the contract was difficult to read and/or understand;
Whether independent legal advice or other expert advice was received;
Whether the contract was explained to the customer and whether they understood that explanation;
Whether unfair tactics or pressure were used;
Whether the consequences of the contract were explained;
Whether the lender knew, or should have known, the customer could not repay the loan, or could not pay without substantial hardship; and
Whether, in comparison with other similar loans, the interest and fees are excessive
The above list is only a guide of the factors that may be considered to determine whether a contract is unjust.

Unjust Contracts – Third Parties
A customer can bring an application to re-open the contract up to two years after it has been finalised
Any third party can be joined, or legally required to participate, in this action
This includes a motor dealer, broker or any other introducer
What this means in practice is the customer cannot be pressured into a contract by anyone, including a dealer, broker or a co-borrower

Unjust Contracts – Disadvantaged Customers
For all customers, the Code requires two main things: willing and knowing acceptance of the responsibilities and obligations of the credit contract
Lenders are entitled to offer finance to customers with special needs on the same grounds as any other customer
The customer must have the capacity to repay and understand their obligations
Additional assistance may be required to assist the customer understand the loan and their obligations under it
For a customer with a disability, it may mean more time and assistance is given to assist them express their credit requirements, understand the options and make their choice.
Some examples of this are:
Where English is not a customer's first language, an interpreter is used;
Where a customer has some form of intellectual disability, a caseworker or family member or friend provides assistance, or the process is taken more slowly and more simply; or
Where a customer has health problems, the process occurs on a day when they feel as well as the situation permits

Co-borrowers

Co-borrowers
Co-borrowers must both be actively engaged in the credit application/decision-making process
The application should not proceed in joint names if
it becomes clear one party does not wish to be involved in the loan; and/or
is under pressure from the other

Penalties

Penalties
Accountability for Code breaches sits at various levels depending on the type of breach
and how it occurred. Accountability is as follows:
Company/Business
For conduct of officers, agents and employees
Staff
For offences, committed knowingly, even if action not taken against the business entity
Management & Directors
If company liable, each officer of the company considered liable
There is a range of penalties that can be incurred for Code breaches that include:
Civil Penalties ss. 100 - 113A
Awarded against the company/business
For breaches of key contract requirements
Paid into a regulator (Consumer Affairs/Fair Trading) trust fund
Fines
Anyone, including staff, who aids or abets an offence,
whether directly or indirectly
Compensation
Paid to customer or guarantor
Amount of loss or detriment

Penalties & the Contract
A Code breach does not make the contract, mortgage or guarantee illegal.
Generally, the terms of the contract, mortgage and guarantee remain valid and can be enforced
There are some situations, however, where enforcement is not possible. For example, the Code will not allow enforcement of the following:
A mortgage over remuneration (wages etc) or superannuation
A guarantee if, before the guarantor signed
s/he was not given a copy of the loan contact and
a copy of the mandatory rights and obligations statement that the Code specifies

Uniform Consumer Credit Code Content

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