credit reformWe look at Amendments to important legislation to take effect from 1 March, and how this will impact consumers and all involved in the credit system.

By Graham Doessel, Founder and CEO of MyCRA Credit Rating Repair and

The Australian Securities and Investment Commission (ASIC) has advised subscribers in a recent newsletter to be aware of new credit obligations commencing as part of amendments to NCCP.

From March 1, the National Consumer Credit Protection Amendment (Enhancements) Act 2012 will bring reforms to a range of credit areas and ASIC will be the single regulator.

ASIC Commissioner Peter Kell has outlined the main areas of reform, which most impacted individuals and businesses should be familiar with. Here’s the main points:

* Changes to procedures for hardship applications under the National Credit Code.

* Restrictions on the use of certain words, including ‘independent’ and ‘financial counsellor’.

* Remedies for unfair or dishonest conduct by credit service providers.

* Specific protections for reverse mortgages – such as the requirement to provide consumers with projections of the debtor’s equity in the property under a reverse mortgage and a reverse mortgage information statement.

* Additional obligations, including new disclosure requirements, on consumer leases to provide greater regulatory consistency between leases and other functionally similar forms of credit.

* The introduction of disclosure requirements in relation to the use of employer payment authorisations.

* A ban on short-term credit contracts (that is not a continuing credit contract; where the credit provider is not an authorised deposit-taking institution (ADI); the credit limit of the contract is $2,000 or less; and the credit contract is for a maximum term of 15 days or less).

* New obligations for small amount credit contracts (that is not a continuing credit contract; where the credit provider is not an ADI; the credit limit of the contract is $2,000 or less; and the credit contract is for a maximum term of 1 year) including:

* introducing presumptions of unsuitability where a consumer is in default of an existing small amount credit contract; or in the preceding 90 days, a consumer has been a debtor under two or more other small amount credit contracts

* disclosure requirements for licensees’ premises and websites; and * a ‘Protected Income Amount’ where the borrower is Centrelink-dependent.


Immediately following the 1 March 2013 commencement date, ASIC will adopt a balanced approach to administering the new requirements when industry makes genuine efforts to comply. ASIC will generally be tolerant of those genuinely trying to achieve compliance and will work with industry participants to address and rectify any problems.

However, ASIC will certainly take a tougher approach where it encounters deliberate breaches, serious misconduct or significant risk of consumer detriment.

ASIC will review its approach and compliance expectations after the first few months after which industry should have fully adapted to the new obligations.

CONSUMERS who consider that a lender or broker has not complied with the new obligations can make a complaint to the lender or broker directly. If the problem cannot be resolved – the consumer can proceed to an external dispute resolution scheme (EDRS). Consumers can also make a complaint to ASIC to consider whether there has been a breach of the legislation.

Further information for consumers will be available from 1 March 2013 on ASIC’s website

The streamlining of laws around financial hardship is a significant step in credit reform. The encouragement of an open dialogue with Creditors at times of debt stress, and the option for people to negotiate alternative arrangements with their lender other than being hit with a default on their credit file is so vitally important.

The consequences of having a negative credit listing, whether that be a default, a Judgment, a writ or a clear-out being generally a ‘lock-down’ of mainstream credit services for the term of the listing (5-7 years).

This means some consumers unable to secure a hardship variation, can fall into a ‘debt trap.’ Once that lower-interest option is no longer available, then alternative lenders may be sought – especially in times of emergency.

Within this legislation, is also the cap on payday lenders which the Government hopes will stop loan sharks from exploiting vulnerable Australians:

“The Gillard Government has moved to reduce the financial harm caused by lenders who ruthlessly impose excessive fees and charges simply because vulnerable consumers cannot obtain alternative access to credit. These reforms continue the Gillard Government’s ongoing commitment to deliver a fair go for all Australians,” Minister for Financial Services Bill Shorten said in a statement to the media last year following the bills passing.

The Enhancements introduce a cap for small amount credit contracts where the amount borrowed is $2000 or less, and the term is 1 year or less. For these loans the maximum any lender can charge is an establishment fee of 20 per cent of the amount of credit upfront and 4 per cent for each month of the loan. This provides for maximum charges of $72 on a loan of $300 over 1 month.

Caps on payday loans may deter loan sharks – but there is a bigger picture for those forced out to the fringe. Some people who are in situations where they can’t get mainstream credit are there because the system has failed them. Not all defaults deserve to be there, but they all have the same outcome for prospective borrowers.

Where people are getting let down is in copping the mistake in the first place, and also in the correction of the credit reporting mistake. Whilst the powers that be say that there is a legitimate avenue for correcting credit reporting mistakes for the individual, any consumer who has had the pleasure of dealing with a big company for even small issues will attest to the difficulty in getting a straight answer, getting someone who knows what they’re talking about first time, and ultimately correcting the mistake. This is a common complaint of many of our credit repair clients. Most people are told if it’s paid up they can mark it as such but that’s about it.

The effectiveness of consumers being able to correct credit reporting mistakes will still be a large piece of the puzzle to complete when we talk about ‘fairness’ for disadvantaged Australians in the credit system. Promised reforms to the correction of credit reporting mistakes as part of the Privacy Act 1988 amendments won’t take effect till later this year.

Hopefully those amendments will genuinely ease the correction of credit reporting mistakes. But they must also be looked at in conjunction with the other amendments to the Privacy Act. It is not known how ‘late payment notations’ (collected now) will impact credit suitability and how unfair late payment notations will be viewed or whether they will be part of the new correction laws at all.

So there is still going to be a time of uncertainty for many involved in credit, including for consumers. My hope is that eventually, we will see a better and fairer credit system for all – but the road to that goal could be a rocky one.

If you are struggling with obtaining credit after being defaulted, and you believe the listing may be incorrect or unjust in any way, consider credit repair as an option to permanently remove unlawfully placed Defaults, Writs, Judgments and Clear-outs from your credit file. Call a Credit Repair Advisor today on 1300 667 218 to discuss whether you might be a suitable candidate for credit repair.

Image: Stuart Miles/