National Consumer Credit Protection Amendment (Small Amount Credit Contract and Consumer Lease Reforms) Bill 2018

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National Consumer Credit Protection Amendment (Small Amount Credit Contract and Consumer Lease Reforms) Bill 2018

- C2018B00033

A Bill for an Act to amend the National Consumer Credit Protection Act 2009, and for related purposes

For authoritative information on the progress of bills and on amendments proposed to them, please see the House of Representatives Votes and Proceedings, and the Journals of the Senate as available on the Parliament House website.

Registered	26 Feb 2018

Introduced HR	26 Feb 2018

2016‑2017‑2018

The Parliament of the

Commonwealth of Australia

HOUSE OF REPRESENTATIVES

Presented and read a first time

National Consumer Credit Protection Amendment (Small Amount Credit Contract and Consumer Lease Reforms) Bill 2018

No. , 2018

(Mr Hammond)

A Bill for an Act to amend the National Consumer Credit Protection Act 2009, and for related purposes

Contents

1............ Short title............................................................................................. 1

2............ Commencement................................................................................... 1

3............ Schedules............................................................................................ 2

Schedule 1—Amendments 3

National Consumer Credit Protection Act 2009 3

A Bill for an Act to amend the National Consumer Credit Protection Act 2009, and for related purposes

The Parliament of Australia enacts:

1 Short title

This Act is the National Consumer Credit Protection Amendment (Small Amount Credit Contract and Consumer Lease Reforms) Act 2018.

2 Commencement

(1) Each provision of this Act specified in column 1 of the table commences, or is taken to have commenced, in accordance with column 2 of the table. Any other statement in column 2 has effect according to its terms.

Commencement information
Column 1	Column 2	Column 3
Provisions	Commencement	Date/Details
1. The whole of this Act	12 months after the day this Act receives the Royal Assent.

Note: This table relates only to the provisions of this Act as originally enacted. It will not be amended to deal with any later amendments of this Act.

(2) Any information in column 3 of the table is not part of this Act. Information may be inserted in this column, or information in it may be edited, in any published version of this Act.

3 Schedules

Legislation that is specified in a Schedule to this Act is amended or repealed as set out in the applicable items in the Schedule concerned, and any other item in a Schedule to this Act has effect according to its terms.

Schedule 1—Amendments

National Consumer Credit Protection Act 2009

1 Subsection 5(1)

Insert:

consumer lease for household goods has the same meaning as in section 204 of the National Credit Code.

hardship notice has the same meaning as in section 204 of the National Credit Code.

household goods has the same meaning as in section 204 of the National Credit Code.

unsolicited invitation by another person means a communication made by a person to a consumer that the person would have been prohibited from making under sections 124C or 133CF had the person been a licensee.

2 Section 111 (paragraph relating to Division 4)

Repeal the paragraph, substitute:

Division 4 requires a licensee, before providing credit assistance to a consumer in relation to a credit contract, to make a preliminary assessment as to whether the contract will be unsuitable for the consumer. To do this, the licensee must make inquiries and verifications about the consumer’s requirements, objectives and financial situation. It also imposes requirements in relation to recording the preliminary assessment that a small amount credit contract is not unsuitable. The licensee must give the consumer a copy of the assessment if requested.

3 Section 111 (paragraph relating to Division 7)

Repeal the paragraph, substitute:

Division 7 prohibits a licensee from providing credit assistance to a consumer in relation to short‑term credit contracts. It also imposes requirements on a licensee who makes representations about providing credit assistance in relation to small amount credit contracts. It also prohibits a licensee from making third party unsolicited small amount credit contract invitations.

4 After section 116

Insert:

116A Recording the preliminary assessment for a small amount credit contract

(1) The licensee must:

(a) record in writing the preliminary assessment made for the purposes of paragraph 115(1)(c) or paragraph 115(2)(a) that a small amount credit contract is not unsuitable at the time the assessment is made; and

(b) comply with any requirements for that written assessment determined by ASIC under subsection (2).

Civil penalty: 2,000 penalty units.

(2) ASIC may, by legislative instrument, determine the form and content of the written assessment for the purposes of subsection (1).

Strict liability offence

(3) A person commits an offence if:

(a) the person is subject to a requirement under subsection (1); and

(b) the person engages in conduct; and

Criminal penalty: 50 penalty units.

(4) Subsection (3) is an offence of strict liability.

Note: For strict liability, see section 6.1 of the Criminal Code.

5 Subsection 118(3A)

Repeal the subsection.

6 After subsection 120(1)

Insert:

(1A) Without limiting the provisions of this Act, the requirement to give a written copy of the assessment in subsection (1) may be met in accordance with the Electronic Transactions Act 1999.

7 Subsection 123(3A)

Repeal the subsection.

8 Section 124B (heading)

Repeal the heading, substitute:

124B Licensee who makes representations about credit assistance in relation to small amount credit contracts must provide information etc.

9 Subsection 124B(1)

Repeal the subsection, substitute:

(1) If a licensee represents that the licensee provides, or is able to provide, credit assistance to consumers in relation to small amount credit contracts, the licensee must provide information in accordance with any instrument made pursuant to subsection (1A).

Civil penalty: 2,000 penalty units.

(1A) ASIC may, by legislative instrument, determine:

(a) the information that must be provided by a licensee; and

(b) how the information is to be provided; and

10 At the end of Division 7 of Part 3‑1

Add:

124C Licensee not to make third party unsolicited small amount credit contract invitations

Requirement

(1) A licensee must not make a third party unsolicited small amount credit contract invitation.

Civil penalty: 2,000 penalty units.

Offence

(2) A person commits an offence if:

(a) the person is subject to a requirement under subsection (1); and

(b) the person engages in conduct; and

Criminal penalty: 100 penalty units.

Strict liability offence

(3) A person commits an offence if:

(a) the person is subject to a requirement under subsection (1); and

(b) the person engages in conduct; and

Criminal penalty: 10 penalty units.

(4) Subsection (3) is an offence of strict liability.

Note: For strict liability, see section 6.1 of the Criminal Code.

Meaning of third party unsolicited small amount credit contract invitation

(5) A licensee makes a third party unsolicited small amount credit contract invitation if:

(a) the licensee makes any form of communication to a consumer who is a person that the licensee knows:

(i) is a debtor under a small amount credit contract; or

(ii) was a debtor under a small amount credit contract at any time in the 2 year period before the time the communication is made; and

(b) one or more of the following conditions is satisfied in relation to the communication:

(i) the communication offers to enter into a small amount credit contract with the consumer; or

(ii) the communication invites the consumer to apply for a small amount credit contract; or

(iii) the communication is about a small amount credit contract referred to in paragraph (5)(a) and a reasonable person would conclude that the licensee made the communication to the consumer for the purpose (or for purposes including the purpose) of encouraging the consumer to consider applying for a small amount credit contract.

(6) The regulations may make provisions that apply to determining whether a communication is covered by the definition in subsection (5).

11 Section 125 (paragraph relating to Division 3)

Repeal the paragraph, substitute:

Division 3 requires a licensee, before doing particular things (such as entering into a credit contract), to make an assessment as to whether the contract will be unsuitable. To do this, the licensee must make inquiries and verifications about the consumer’s requirements, objectives and financial situation. It also imposes requirements in relation to recording the assessment that a small amount credit contract is not unsuitable. The licensee must give the consumer a copy of the assessment if requested.

12 After section 129

Insert:

129A Recording the assessment for a small amount credit contract

(1) The licensee must:

(a) record in writing the assessment made for the purposes of paragraph 128(c) that a small amount credit contract is not unsuitable at the time the assessment is made; and

(b) comply with any requirements for that written assessment determined by ASIC under subsection (2).

Civil penalty: 2,000 penalty units.

(2) ASIC may, by legislative instrument, determine the form and content of the written assessment for the purposes of subsection (1).

Strict liability offence

(3) A person commits an offence if:

(a) the person is subject to a requirement under subsection (1); and

(b) the person engages in conduct; and

Criminal penalty: 50 penalty units.

(4) Subsection (3) is an offence of strict liability.

Note: For strict liability, see section 6.1 of the Criminal Code.

13 Subsection 131(3A)

Repeal the subsection.

14 After subsection 132(2)

Insert:

(2A) Without limiting the provisions of this Act, the requirement to give a written copy of the assessment in subsections (1) and (2) may be met in accordance with the Electronic Transactions Act 1999.

15 Subsection 133(3A)

Repeal the subsection.

16 Section 133C (paragraph relating to Division 2)

Repeal the paragraph, substitute:

Division 2 prohibits a licensee from entering into, or increasing the credit limit of, short‑term credit contracts. It also imposes requirements on a licensee who makes representations about entering into small amount credit contracts and prohibits a licensee from entering into, or offering to enter into, small amount credit contracts in certain circumstances. It also prohibits a licensee from making unsolicited small amount credit contract invitations. It also provides that the consumer is not liable to pay certain fees and charges under small amount credit contracts in certain circumstances.

17 Section 133CB (heading)

Repeal the heading, substitute:

133CB Licensee who makes representations in relation to small amount credit contracts must provide information etc.

18 Subsection 133CB(1)

Repeal the subsection, substitute:

(1) If a licensee represents that the licensee enters into, or is able to enter into, small amount credit contracts with consumers under which the licensee would be the credit provider, the licensee must provide information in accordance with any instrument made pursuant to subsection (1A).

Civil penalty: 2,000 penalty units.

(1A) ASIC may by legislative instrument, determine:

(a) the information that must be provided by a licensee; and

(b) how the information is to be provided; and

19 Subsection 133CC(1)

Repeal the subsection, substitute:

(1) A licensee must not enter into, or offer to enter into, a small amount credit contract with a consumer who will be the debtor under the contract if the repayments that would be required under the contract would not meet the requirements prescribed by the regulations.

Civil penalty: 2,000 penalty units.

Note: For example, the regulations may provide that the amount of a repayment must not exceed a specified percentage of the consumer’s income.

20 At the end of section 133CC

Add:

Civil effect

(3) If a licensee enters into a small amount credit contract in contravention of subsection (1) then:

(a) each provision (the void provisions) of the small amount credit contract that imposes a monetary liability to pay a fee or charge of the kind described in paragraph 31A(1)(a) or (b) of the National Credit Code (whether or not that liability is imposed consistently with the National Credit Code) is void to the extent that the provision relates to the liability;

(b) the debtor may recover as a debt due to the debtor any amount paid to the licensee under the void provisions to the extent that the amount relates to the liability.

21 After section 133CC

Insert:

133CD Licensee must not require or accept payment in relation to a small amount credit contract etc.

(1) A licensee, or a person prescribed by the regulations, must not require or accept payment by the debtor of a repayment under a small amount credit contract.

Criminal penalty: 100 penalty units.

(2) Subsection (1) does not apply to the extent that the repayment does not exceed the amount which meets the requirements prescribed by the regulations for the purposes of section 133CC.

Civil effect

(3) If a licensee or a person contravenes subsection (1):

(a) the debtor is not liable (and is taken never to have been liable) to make the payment to the licensee or person; and

(b) the debtor may recover as a debt due to the debtor the amount of any payment made by the debtor to the credit provider or person.

133CE Licensee must not enter into a small amount credit contract if repayments are not equal

(1) A licensee must not enter into, or offer to enter into, a small amount credit contract with a consumer who will be the debtor under the contract under which any of the following applies:

(a) repayments required under the contract are not equal;

(b) the interval between the date on which credit is first provided under the contract and the first payment date is longer than the interval between payment dates;

Civil penalty: 2,000 penalty units.

(2) For the purposes of paragraph (1)(a), repayments required under a small amount credit contract will be equal if:

(a) each repayment is of the same amount; or

(b) each repayment except the last repayment is of the same amount and the difference between the amount of the last repayment and each other repayment is not more than 5% less than the amount of each other repayment; or

(3) A payment date is the date on or by which a repayment is required to be made under the contract.

(4) For the purposes of paragraph (1)(c), if a small amount credit contract provides that:

(a) repayments are required to be made on a fixed day of each week, fortnight or month; and

(b) f that fixed day falls on a day that is not a business day, the repayment is required on the immediately preceding or succeeding business day;

the intervals between payment dates will be equal.

(5) ASIC may, by legislative instrument, determine conditions for the purpose of paragraph (2)(c).

Strict liability offence

(6) A person commits an offence if:

(a) the person is subject to a requirement under subsection (1); and

(b) the person engages in conduct; and

Criminal penalty: 100 penalty units.

Note: For strict liability, see section 6.1 of the Criminal Code.

(7) Subsection (6) is an offence of strict liability.

Note: For strict liability, see section 6.1 of the Criminal Code.

22 At the end of Division 2 of Part 3‑2C

Add:

133CF Licensee not to make unsolicited small amount credit contract invitations

Requirement

(1) A licensee must not make an unsolicited small amount credit contract invitation.

Civil penalty: 2,000 penalty units.

Offence

(2) A person commits an offence if:

(a) the person is subject to a requirement under subsection (1); and

(b) the person engages in conduct; and

Criminal penalty: 100 penalty units.

Strict liability offence

(3) A person commits an offence if:

(a) the person is subject to a requirement under subsection (1); and

(b) the person engages in conduct; and

Criminal penalty: 10 penalty units.

(4) Subsection (3) is an offence of strict liability.

Note: For strict liability, see section 6.1 of the Criminal Code.

Meaning of unsolicited small amount credit contract invitation

(5) A licensee makes an unsolicited small amount credit contract invitation if:

(a) the licensee makes any form of communication to a consumer who:

(i) is a debtor under a small amount credit contract with the licensee as credit provider; or

(iii) was a debtor under a small amount credit contract with the licensee as credit provider at any time in the 2 year period before the time the communication is made; or

(iii) a person that the licensee knows:

(A) is a debtor under a small amount credit contract with another credit provider; or

(b) was a debtor under a small amount credit contract with another credit provider at any time in the 2 year period before the time the communication is made; and

(b) one or more of the following conditions is satisfied in relation to the communication:

(i) the communication offers to enter into a small amount credit contract with the consumer; or

(iii) the communication invites the consumer to apply for a small amount credit contract; or

(6) The regulations may make provisions that apply to determining whether a communication is covered by the definition in subsection (5).

133CG Loss of charges

(1) This section applies to a small amount credit contract which:

(a) was entered between a consumer who is the debtor under the contract and a licensee in the following circumstances:

(i) before the contract was entered into, the licensee had made an unsolicited small amount credit contract invitation to the consumer in contravention of section 133CF; and

(ii) a reasonable person would conclude that the consumer entered into that contract as a result of that invitation; or

(b) was entered between a consumer who is the debtor under the contract and a licensee in the following circumstances:

(i) the licensee knew that:

(A) a licensee had made a third party unsolicited small amount credit contract invitation in contravention of section 124C; or

(B) an unsolicited invitation by another person had been made to that consumer; and

(ii) a reasonable person would conclude the consumer entered into that contract as a result of that unsolicited invitation by another person.

(2) Each provision (the void provisions) of a contract to which this section applies that imposes a monetary liability to pay a fee or charge of the kind described in paragraph 31A(1)(a) or (b) of the National Credit Code (whether or not the liability is imposed consistently with the National Credit Code) is void to the extent that the provision relates to the liability.

(3) The debtor may recover as a debt due to the debtor any amount paid to the credit provider under the void provisions to the extent that the amount relates to the liability.

23 Section 134 (paragraph relating to Division 4)

Repeal the paragraph, substitute:

Division 4 requires a licensee, before providing credit assistance to a consumer in relation to a consumer lease, to make a preliminary assessment as to whether the lease will be unsuitable for the consumer. To do this, the licensee must make inquiries and verifications about the consumer’s requirements, objectives and financial situation. It also imposes requirements in relation to recording the preliminary assessment that a consumer lease is not unsuitable. The licensee must give the consumer a copy of the assessment if requested.

24 At the end of section 134

Add:

Division 7 imposes requirements on a licensee who makes representations about providing credit assistance in relation to consumer leases for household goods.

25 After section 139

Insert:

139A Recording the preliminary assessment for a consumer lease for household goods

(1) The licensee must:

(a) record in writing the preliminary assessment made for the purposes of paragraph 138(1)(c) or paragraph 138(2)(a) that a consumer lease for household goods is not unsuitable at the time the assessment is made; and

(b) comply with any requirements for that written assessment determined by ASIC under subsection (2).

Civil penalty: 2,000 penalty units.

(2) ASIC may, by legislative instrument, determine the form and content of the written assessment for the purposes of subsection (1).

Strict liability offence

(3) A person commits an offence if:

(a) the person is subject to a requirement under subsection (1); and

(b) the person engages in conduct; and

Criminal penalty: 50 penalty units.

(4) Subsection (3) is an offence of strict liability.

Note: For strict liability, see section 6.1 of the Criminal Code.

26 After subsection 140(1)

Insert:

(1A) If:

(a) the goods to be hired under the lease are household goods; and

(b) the consumer holds (whether alone or jointly with another person) an account with an ADI into which income payable to the consumer is credited;

the licensee must, in verifying the consumer’s financial situation for the purposes of paragraph 138(1)(d), obtain and consider account statements that cover at least the immediately preceding period of 90 days.

(1B) Subsection (1A) does not limit paragraph (1)(c) of this section.

27 After subsection 143(1)

Insert:

(1A) Without limiting the provisions of this Act, the requirement to give a written copy of the assessment in paragraph (1) may be met in accordance with the Electronic Transactions Act 1999.

28 At the end of Part 3‑3

Add:

Division 7—Special rules for consumer leases for household goods

147A Licensee who makes representations about credit assistance in relation to consumer leases for household goods must provide information etc.

Requirement

(1) If a licensee represents that the licensee provides, or is able to provide, credit assistance to consumers in relation to consumer leases for household goods, the licensee must provide information in accordance with any instrument made pursuant to subsection (2).

Civil penalty: 2,000 penalty units.

(2) ASIC may, by legislative instrument, determine:

(a) the information that must be provided by a licensee; and

(b) how the information is to be provided; and

Offence

(3) A person commits an offence if:

(a) the person is subject to a requirement under subsection (1); and

(b) the person engages in conduct; and

Criminal penalty: 50 penalty units.

29 Section 148 (paragraph relating to Division 3)

Repeal the paragraph, substitute:

Division 3 requires a licensee, before doing particular things (such as entering into a consumer lease), to make an assessment as to whether the lease is not unsuitable. To do this, the licensee must make inquiries and verifications about the consumer’s requirements, objectives and financial situation. It also imposes requirements in relation to recording an assessment that a consumer lease is not unsuitable. The licensee must give the consumer a copy of the assessment if requested.

30 At the end of section 148

Add:

Division 5 prohibits a licensee from entering into, or offering to enter into, a consumer lease for household goods in certain circumstances. It also imposes requirements on a licensee who makes representations about consumer leases for household goods.

31 After section 152

Insert:

152A Recording the assessment for a consumer lease for household goods

(1) The licensee must:

(a) record in writing the assessment made for the purposes of paragraph 151(c) that a consumer lease for household goods is not unsuitable at the time the assessment is made; and

(b) comply with any requirements for that written assessment determined by ASIC under subparagraph (2).

Civil penalty: 2,000 penalty units.

(2) ASIC may, by legislative instrument, determine the form and content of the written assessment for the purposes of subsection (1) above.

Strict liability offence

(3) A person commits an offence if:

(a) the person is subject to a requirement under subsection (1); and

(b) the person engages in conduct; and

Criminal penalty: 50 penalty units.

(4) Subsection (3) is an offence of strict liability.

Note: For strict liability, see section 6.1 of the Criminal Code.

32 After subsection 153(1)

Insert:

(1A) If:

(a) the goods to be hired under the lease are household goods; and

(b) the consumer holds (whether alone or jointly with another person) an account with an ADI into which income payable to the consumer is credited;

the licensee must, in verifying the consumer’s financial situation for the purposes of paragraph 151(d), obtain and consider account statements that cover at least the immediately preceding period of 90 days.

(1B) Subsection (1A) does not limit paragraph (1)(c).

33 After subsection 155(2)

Insert:

34 At the end of Part 3‑4

Add:

Division 5—Consumer leases for household goods

156A Licensee must not enter into a consumer lease for household goods if the payments do not meet the prescribed requirements

Requirement

(1) A licensee must not enter into, or offer to enter into, a consumer lease for household goods with a consumer who will be the lessee under the lease if the amount that would be required to be paid under the lease by the lessee would not meet the requirements prescribed by the regulations.

Civil penalty: 2,000 penalty units.

Note: For example, the regulations may provide that the amount of a payment must not exceed a specified percentage of the lessee’s income.

Offence

(2) A person commits an offence if:

(a) the person is subject to a requirement under subsection (1); and

(b) the person engages in conduct; and

Criminal penalty: 50 penalty units.

Civil effect

(3) If a lessor enters into a consumer lease in contravention of subsection (1) then:

(a) each provision (the void provisions) of the consumer lease that imposes a monetary liability on the lessee in excess of the base price of the goods hired under the lease (whether or not that liability is imposed consistently with the National Credit Code) is void to the extent that the provision relates to the liability;

(b) the lessee may recover as a debt due to the lessee any amount paid to the lessor under the void provisions to the extent that the amount relates to the liability.

156B Lessor or prescribed person must not require or accept payments in relation to a consumer lease etc.

(1) A lessor, or a person prescribed by the regulations, must not require or accept payment by the lessee of an amount under a consumer lease.

Criminal penalty: 100 penalty units.

(2) Subsection (1) does not apply to the extent that the amount does not exceed the amount which meets the requirements prescribed by the regulations for the purposes of section 156A.

Civil effect

(3) If a lessor or a person contravenes subsection (1):

(a) the lessee is not liable (and is taken never to have been liable) to make the payment to the lessor or person; and

(b) the lessee may recover as a debt due to the lessee the amount of any payment made by the lessee to the lessor or person.

156C Licensee who makes representations about consumer leases for household goods must provide information etc.

Requirement

(1) If a licensee represents that the licensee enters into, or is able to enter into, consumer leases for household goods with consumers under which the licensee would be the lessor, the licensee must provide information in accordance with any instrument made pursuant to subsection (2).

Civil penalty: 2,000 penalty units.

(2) ASIC may, by legislative instrument, determine:

(a) the information that must be provided by a licensee; and

(b) how the information is to be provided; and

Offence

(3) A person commits an offence if:

(a) the person is subject to a requirement under subsection (1); and

(b) the person engages in conduct; and

Criminal penalty: 50 penalty units.

35 At the end of section 160A

Add:

Division 5 contains restrictions in relation to the use and disclosure of account statements and information contained in account statements.

36 At the end of Part 3‑6A

Add:

Division 5—Use or disclosure of account statements

160F Application of this Division

(1) This Division applies to a licensee who has received an account statement from a consumer in connection with:

(a) a proposed small amount credit contract; or

(b) a proposed consumer lease for household goods; or

(d) a consumer lease for household goods.

(2) This Division also applies to a person who has received an account statement from a person described in subsection (1).

160G Permitted use and disclosure of account statements

A person to whom this Division applies may use or disclose an account statement or information contained in an account statement if:

(a) the use or disclosure is necessary for the person to comply with their obligations under this Act or the National Credit Code; or

(b) the use or disclosure is required or authorised by or under an Australian law or a court or tribunal order; or

160H Prohibited use of account statements

(1) A person to whom this Division applies must not use or disclose an account statement or information contained in an account statement unless the use or disclosure is permitted under section 160G.

Civil penalty: 2,000 penalty units.

Offence

(2) A person commits an offence if:

(a) the person is a person to whom this Division applies; and

(b) the person uses or discloses an account statement or information contained in an account statement; and

Criminal penalty: 100 penalty units.

Strict liability offence

(3) A person commits an offence if:

(a) the person is a person to whom this Division applies; and

(b) the person uses or discloses an account statement or information contained in an account statement; and

Criminal penalty: 10 penalty units.

(4) Subsection (3) is an offence of strict liability.

Note: For strict liability, see section 6.1 of the Criminal Code.

37 Section 323 (after the first paragraph)

Insert:

Division 1A has rules that prohibit schemes that are designed to avoid the application of this Act.

38 After Division 1 of Part 7‑1

Insert:

Division 1A—Avoidance schemes

323A Prohibition on avoidance in relation to small amount credit contracts and consumer leases

Prohibition on avoidance

(1) A person must not (either alone or with others) enter into, or carry out (to any extent), a scheme if it is reasonable to conclude that a purpose of the person doing so is to prevent a contract (the contrived contract) covered by the following paragraphs from being a small amount credit contract or a consumer lease:

(a) the contract is between a consumer and either the person or someone else who is or was connected with the person;

(b) the contract is connected with the scheme.

Civil penalty: 2,000 penalty units.

Meaning of scheme

(2) A scheme is:

(a) any agreement, arrangement, understanding, promise or undertaking, whether express or implied; or

(b) any scheme, plan, proposal, action, course of action or course of conduct, whether unilateral or otherwise.

Whether it is reasonable to draw conclusion as to purpose

(3) For the purpose of determining whether it is reasonable to draw a conclusion described in subsection (1):

(a) regard must be had to the extent to which the circumstances described in subsection (4) exist; and

(b) the more any of those circumstances exist, the more it is reasonable to draw that conclusion.

This does not limit the matters to which regard may be had in making the determination.

(4) The circumstances are as follows:

(a) the contrived contract or the scheme has a similar effect, operation or structure to a small amount credit contract or consumer lease but the contrived contract is not a small amount credit contract or consumer lease because of the artificiality or complexity of the contrived contract or scheme or because of one or more of the following:

(i) there are more parties to the contrived contract or scheme than is necessary for the provision of credit, or hire of goods, to the consumer;

(ii) there are more elements of the scheme than are necessary for the provision of credit to the consumer under a small amount credit contract or for the hire of goods to the consumer under a consumer lease;

(iii) the contrived contract deals with fewer transactions than are reasonable, but the scheme deals with at least as many transactions as are reasonable, for the provision of credit to the consumer under a small amount credit contract or for the hire of goods to the consumer under a consumer lease;

(b) the consumer has been or is to be charged in connection with the contrived contract an amount (however described) that, if the contrived contract were a small amount credit contract or consumer lease:

(i) would be a fee, charge or liability whose imposition is prohibited by section 23A or 31A of the National Credit Code; or

(ii) the consumer would not be liable to pay because of the operation of section 175AB or 175AC of the National Credit Code;

(i) repayments that, if the contrived contract was a small amount credit contract and another party to that contract had been a licensee, the consumer could not have been required to pay under the contract because of the operation of section 133CC, 133CD or 133CE; or

(ii) amounts that, if the contrived contract was a consumer lease and another party to that contract was a licensee, the consumer could not have lawfully been required to pay because of the operation of section 156A or 156B of the Act;

(d) if:

(i) the contrived contract was a small amount credit contract or a consumer lease; or

(ii) the scheme had resulted in the entry into a small amount credit contract or consumer lease with a consumer or the making of an offer to a consumer to enter into a small amount credit contract or a consumer lease;

the person or someone else connected to the person would, if they had been a licensee, have contravened any of the provisions in Parts 3‑2C, 3‑3, or 3‑4;

(e) both of the following apply in relation to the consumer’s financial obligations under the contrived contract or under any aspect of the scheme:

(i) the person or someone else connected with the person has secured or will secure the performance of those obligations by taking an interest in the consumer’s principal place of residence, a motor vehicle of the consumer or goods of the consumer that are essential household property for the purposes of section 50 of the National Credit Code (the mortgaged property);

(ii) it is reasonable to assume that the person took the security because:

(A) the consumer would likely only be able to comply with their financial obligations under the contract by selling the mortgaged property; or

(B) the person did not make reasonable inquiries into whether the consumer would only be able to comply with their financial obligations under the contract (or under another aspect of the scheme) by selling the mortgaged property;

(f) the person, or someone who is or was connected with the person:

(i) represents to any consumer that the person or someone who is or was connected with the person could provide credit or finance (however described) or hire goods to a consumer where, if the consumer entered into a small amount credit contract or consumer lease whose terms comply with this Act, that contract would likely be unsuitable for that consumer for the reason described in paragraphs 123(2)(a), 133(2)(a), 146(2)(a) or 156(2)(a); or

(ii) represents that the person or someone who is connected with the person would provide credit or finance (however described) or hire goods where a reasonable person would conclude that the representation is directed to a class of consumers whose members are more likely than people who are not members of the class to, if they entered into a small amount credit contract or a consumer lease whose terms comply with this Act, have entered into a small amount credit contract or consumer lease that would likely be unsuitable for the reason described in paragraphs 123(2)(a), 133(2)(a), 146(2)(a) or 156(2)(a);

(g) one or more suggestions are or were made to the consumer that the consumer give, in connection with the scheme or the contrived contract, information that:

(i) is not true, or does not accurately reflect the consumer’s intention, when the information is, or is to be, given; and

(ii) relates to a matter relevant to determining whether the contrived contract is a small amount credit contract or consumer lease;

(h) all of the following apply:

(i) before the scheme is carried out, the person, or someone who is or was connected with the person, carried on a business of providing credit or hiring goods to consumers in a different way (the old way);

(ii) there has been a change in the law relating to the providing of credit, or hiring of goods, to consumers since the business was carried on in the old way;

(iii) had whoever carried on the business continued to do so in the old way, he or she would, because of the change in the law, have been subject to obligations to which he or she was not subject when carrying on the business in the old way;

(i) the scheme is or has been advertised or promoted to consumers in a manner:

(i) that a reasonable person would conclude was likely to give consumers the impression that the scheme would likely result in an offer to enter into, or entry into, a small amount credit contract or consumer lease; or

(ii) that indicates that consumers will be provided with access to a small amount credit contract or consumer lease; and

that is inconsistent with the legal operation or effect of the scheme;

(j) the person, or someone who is connected with the person, has advertised or promoted the scheme in circumstances where they do not offer small amount credit contracts or consumer leases in the ordinary course of business;

(k) the person, or one or more others who are or were connected with the person, are or were inappropriate persons as defined in regulation 3 of the National Consumer Credit Protection Regulations 2010.

Offence

(5) A person commits an offence if:

(a) the person is subject to a requirement under subsection (1); and

(b) the person engages in conduct; and

Criminal penalty: 120 penalty units, or two years imprisonment, or both.

Presumption of avoidance for certain schemes

(6) For the purposes of subsection (1) (but not for the purposes of subsection (5)), if:

(a) the person engages in conduct of the kind referred to in paragraph (1)(a) or (b) in relation to a scheme; and

(b) the scheme is of a kind prescribed by the regulations or determined by ASIC under subsection (8);

then it is presumed that it would be reasonable to conclude that the purpose, or one of the purposes, of the person engaging in that conduct was to prevent a contract from being a small amount credit contract or a consumer lease.

(7) Subsection (6) does not apply if the person proves that, having regard to the matters referred to in subsection (4), it would not be reasonable to conclude that the purpose, or one of the purposes, of the person engaging in that conduct was to prevent the contract being a small amount consumer contract or consumer lease.

(8) ASIC may, by legislative instrument, determine a scheme for the purposes of subsection (6).

Exceptions

(9) This section is subject to section 323B (Schemes and conduct that are not prohibited).

Note: Section 179 provides for remedies for persons who suffer loss or damage as a result of a contravention of this section.

323B Schemes and conduct that are not prohibited

(1) Subsection 323A(1) does not apply to a scheme which is connected with a contract that:

(a) is a contract for the provision of credit to which the National Credit Code would apply apart from section 6, 203A or 203B of the National Credit Code; or

(b) would be a consumer lease apart from section 171, 203A or 203B of the National Credit Code.

(2) Subsection 323A(1) does not apply to conduct by a person if:

(a) the person is exempt from subsection 29(1) under section 109 or regulations made for the purposes of section 110; or

(b) both the following apply:

(i) the conduct would be a credit activity if a contract connected with the scheme were a small amount credit contract or a consumer lease;

(ii) credit activity of that kind is exempt from subsection 29(1) under section 109 or regulations made for the purposes of section 110.

323C Further prohibition on avoidance in relation to small amount consumer contracts and consumer leases

Prohibition on avoidance

(1) A person must not (either alone or with others) enter into, or carry out (to any extent), a scheme if it is reasonable to conclude that a purpose of the person doing so is to avoid the application of a provision of this Act that would apply in respect of:

(a) a consumer lease but not a credit contract; or

(b) a small amount credit contract but not:

(i) a consumer lease; or

(ii) a credit contract that is not a small amount credit contract;

in relation to:

(d) any other person (a connected person) who has, or has had, any connection (whether of a business, family or other nature) with the person.

Civil penalty: 2,000 penalty units.

Meaning of scheme

(2) A scheme is:

(a) any agreement, arrangement, understanding, promise or undertaking, whether express or implied; or

(b) any scheme, plan, proposal, action, course of action or course of conduct, whether unilateral or otherwise.

Whether it is reasonable to draw conclusion as to purpose

(3) For the purpose of determining whether it is reasonable to draw a conclusion described in subsection (1):

(a) regard must be had to the extent to which the circumstances described in subsection (4) exist; and

(b) the more any of those circumstances exist, the more it is reasonable to draw that conclusion.

This does not limit the matters to which regard may be had in making the determination.

(4) The circumstances are as follows:

(a) each of the following apply:

(i) the person, or a connected person, has a practice of changing or otherwise altering the operation or effect of a credit contract or consumer lease after, or at the time, it has been entered into; and

(ii) the effect of the change or alteration is disadvantageous to the consumer who is a debtor under the credit contract or the lessee under a consumer lease because it results in the avoidance of provisions of the Act that would otherwise have applied for the benefit of the consumer had they entered into a small amount credit contract or consumer lease; and

(iii) the person, or a connected person, has made the change or alteration:

(A) unilaterally; or

(B) without reference to, or consideration of, the consumer’s financial situation;

(b) the circumstances prescribed by the regulations.

(5) A person commits an offence if:

(a) the person is subject to a requirement under subsection (1); and

(b) the person engages in conduct; and

Criminal penalty: 120 penalty units, or two years imprisonment, or both.

Presumption of avoidance for certain schemes

(6) For the purposes of subsection (1) (but not for the purposes of subsection (5)), if:

(a) the person engages in conduct of the kind referred to in paragraph (1)(a) or (b) in relation to a scheme; and

(b) the scheme is of a kind prescribed by the regulations or determined by ASIC under subsection (8);

then it is presumed that it would be reasonable to conclude that the purpose, or one of the purposes, of the person engaging in that conduct was to avoid the application of a provision of this Act.

(8) ASIC may, by legislative instrument, determine a scheme for the purposes of subsection (6).

323D Exemption by ASIC

(1) ASIC may, by legislative instrument, exempt a scheme, or class of schemes, from all or specified provisions of sections 323A and 323C.

(2) An exemption may apply subject to any specific conditions imposed by ASIC.

39 Section 335A

Repeal the section.

40 At the end of subsection 23A(1) of the National Credit Code

Add:

Note: A penalty may be imposed for contravention of a key requirement in this subsection, but only at the time the credit contract is entered into: see Part 6.

41 At the end of subsection 31A(1) of the National Credit Code

Repeal the note, substitute:

Note 1: See section 39B for the maximum amount that may be recovered by the credit provider if there is a default in payment under the contract.

Note 2: A penalty may be imposed for contravention of a key requirement in this subsection: see Part 6.

42 After section 31B of the National Credit Code

Insert:

31C Prohibition on unexpired permitted monthly fees

(1) A credit provider must not charge or require the payment of an unexpired permitted monthly fee if:

(a) the debtor pays out a small amount credit contract or a small amount credit contract is otherwise discharged; and

(b) the date of the pay out or discharge is before the day on which the contract would have been paid out had the debtor paid all repayments required by the contract at the times required by the contract.

Civil penalty: 2,000 penalty units

(2) If a credit provider contravenes subsection (1):

(a) the debtor is not liable (and is taken never to have been liable) to make the payment to the credit provider or person; and

(b) the credit provider must refund any unexpired permitted monthly fee paid by the debtor to the credit provider as soon as practicable; and

(c) the debtor may recover as a debt due to the debtor the amount of any payment made by the debtor to the credit provider which has not been refunded in accordance with paragraph (b).

Strict liability offence

(3) A person commits an offence if:

(a) the person is subject to a requirement under subsection (1); and

(b) the person engages in conduct; and

Criminal penalty: 100 penalty units.

(4) Subsection (3) is an offence of strict liability.

Note: For strict liability, see section 6.1 of the Criminal Code.

43 Subsection 72(3) (paragraph (a) of the note) of the National Credit Code

After “such as”, insert “family violence,”.

44 Subsection 82(2) of the National Credit Code

After “continuing credit contract”, insert “or small amount credit contract”.

45 At the end of section 82 of the National Credit Code

Add:

(3) The amount required to pay out a small amount credit contract is the total of the following amounts:

(a) the amount of credit;

(b) all fees and charges payable by the debtor to the credit provider up to the date of termination excluding any unexpired permitted monthly fee;

less any payments made under the contract and any rebate of premium under section 148.

46 After paragraph 111(1)(i) of the National Credit Code

Insert:

(ia) subsection 23A(1)—but only at the time the credit contract is entered into;

(ib) subsection 31A(1);

47 After subsection 111(1) of the National Credit Code

Insert:

(1A) For the purposes of this Division, a key requirement in connection with a consumer lease for household goods is any one of the requirements of this Code contained in the following provisions:

(a) subsection 174(1A);

(b) subsection 175AA(1).

48 After subsection 114(1A) of the National Credit Code

Insert:

(1B) On application being made by a lessee for an order in relation to a consumer lease, the maximum penalty that may be imposed by the court for a contravention of a key requirement is an amount not exceeding the difference between the total amount payable by the lessee under the consumer lease and the base price.

49 At the end of section 114 of the National Credit Code

Add:

(4) For the purposes of subsection (1B), the amount payable under a consumer lease to the extent it relates to amounts payable in the future is to be calculated on the assumptions in sections 180 and 182.

50 Subsection 171(1) of the National Credit Code (heading)

Omit “or indefinite leases”.

51 Subsection 171(1) of the National Credit Code

Omit all the words after “or less”.

52 After subsection 171(1) of the National Credit Code

Insert:

Leases for an indefinite period

(1A) This Part does not apply to a consumer lease for an indefinite period unless:

(a) the lessor is a constitutional corporation; or

(b) the lease was entered into in the course of constitutional trade and commerce; or

(c) the lease was entered into using postal, telegraphic, telephonic, and other like services (within the meaning of paragraph 51(v) of the Constitution).

53 After section 172 of the National Credit Code

Insert:

172A Using postal, telegraphic, telephonic and other like services to enter into a consumer lease for an indefinite period

A lessor must not use postal, telegraphic, telephonic, and other like services (within the meaning of paragraph 51(v) of the Constitution) to enter into a consumer lease for an indefinite period unless the lessor is a constitutional corporation.

54 Before subsection 174(1) of the National Credit Code

Insert:

Requirements for all consumer leases

55 After subsection 174(1) of the National Credit Code

Insert:

Requirements for consumer leases for household goods

(1A) A consumer lease for household goods must disclose, in accordance with any instrument made pursuant to subsection (1B):

(a) the base price of the goods hired under the consumer lease; and

(b) the difference between the base price of the goods hired under the consumer lease and the total amount payable by the lessee under the lease;

Note: A penalty may be imposed for contravention of a key requirement in this subsection: see Part 6.

(1B) ASIC may, by legislative instrument, determine for the purposes of subsection (1A):

(a) further information that must be disclosed in the consumer lease; and

(b) the form of the disclosure.

56 Before subsection 174(3) of the National Credit Code

Insert:

Offence

57 At the end of section 174 of the National Credit Code

Add:

Additional requirements for consumer leases for household goods

(5) Before entering into a consumer lease for household goods, a lessor must provide information in accordance with any instrument made pursuant to subsection (6).

(6) ASIC may, by legislative instrument, determine for the purposes of subsection (5):

(a) the information that must be provided; and

(b) how the information is to be provided; and

58 After section 175A of the National Credit Code

Insert:

175AA Cap on fees and charges for consumer leases

(1) A lessor must not enter into a consumer lease if the sum of the following two amounts is more than the permitted cap:

(a) the total amount payable by the lessee under the consumer lease including all applicable taxes; and

(b) any add on fees payable by the lessee.

Civil penalty: 2,000 penalty units.

Note: A penalty may be imposed for contravention of a key requirement in this subsection. See Part 6.

(2) For the purposes of subsection (1), the following amounts are not included in the total amount payable by the lessee under the consumer lease:

(a) a permitted delivery fee; or

(b) a permitted installation fee; or

(c) enforcement expenses of an amount not exceeding the amount which could be recovered by the lessor pursuant to 179R(1).

(3) The permitted cap is the sum of the following amounts:

(a) the base price of the goods hired under the consumer lease; and

(b) the amount worked out by:

(i) in the case of a consumer lease for a fixed term, multiplying the base price of the goods hired under the consumer lease by 0.04 for each whole month of the consumer lease to a maximum of 48 months; and

(ii) in the case of a consumer lease for an indefinite period, multiplying the base price of the goods hired under the consumer lease by 1.92.

(4) An add‑on fee is any fee or charge that:

(a) either:

(i) the lessee is liable to pay to the lessor; or

(ii) the lessee is liable to pay to another person under an agreement facilitated by or on behalf of the lessee; and

(b) relates to a service or product which either:

(i) facilitates or complements the lessee’s use of the goods hired under the consumer lease; or

(ii) is marketed by the lessor or another person as being necessary or desirable to complement the lessee’s use of the goods hired under the consumer lease.

(5) For goods that are new, the base price of the goods is:

(a) where the recommended retail price of the goods is known at the time the consumer lease is entered into, the lesser of the following amounts:

(i) the recommended retail price (excluding any amount on account of any goods and services tax) at the time the consumer lease is entered into;

(ii) the agreed purchase price; or

(b) where the recommended retail price of the goods is not known at the time the consumer lease is entered into, the lesser of the following amounts:

(i) the market value of the goods at the time that the consumer lease is entered into (excluding any amount on account of any goods and services tax);

(ii) the agreed purchase price.

(6) For goods that are not new, the base price of the goods is the lesser of the agreed purchase price and:

(a) where the date of manufacture and the recommended retail price of the goods at the date of manufacture is known at the time the consumer lease is entered into, the recommended retail price for the goods (excluding any amount on account of any goods and services tax) at the date of manufacture depreciated by 10% for each year or part of a year between the date of manufacture and the date that the consumer lease is entered into to a maximum depreciation of 30%; or

(b) in any other case, the market value of the goods at the time the consumer lease is entered into (excluding any amount on account of any goods and services tax).

(7) An agreed purchase price is the amount for the goods to be hired under the consumer lease that is agreed, before or at the time the consumer lease is entered into, by the lessee and any one of the following:

(i) the lessor;

(ii) the seller of the goods; or

(iii) another person who facilitates the entry into the consumer lease.

(8) A fee or charge is a permitted delivery fee if it:

(a) is for the delivery to the lessee of the goods hired under the consumer lease; and

(b) is limited to the reasonable cost of delivery of the goods to the lessee.

(9) ASIC may, by legislative instrument, declare that specified fees which relate to installation of particular kinds of goods are permitted installation fees.

175AB Other consequences of imposing fees or charges above the permitted cap

Offence

(1) A person commits an offence if:

(a) the person is subject to a requirement under subsection 175AA(1); and

(b) the person engages in conduct; and

Criminal penalty: 100 penalty units.

Civil effect

(2) If a lessor enters into a consumer lease in contravention of subsection 175AA(1):

(a) each provision (the void provisions) of the consumer lease that imposes a monetary liability on the lessee in excess of the base price of the goods hired under the lease (whether or not the liability is imposed consistently with this Code) is void to the extent that the provision relates to the liability; and

(b) the lessee may recover as a debt due to the lessee any amount paid to the lessor under the void provisions to the extent that the amount relates to the liability.

175AC Lessor or prescribed person must not require or accept payment in relation to consumer lease etc.

(1) A lessor, or a person prescribed by the regulations, must not require or accept payment in relation to a consumer lease by the lessee of an amount described in paragraph 175AA(1)(a) or (b) that exceeds the permitted cap in relation to that consumer lease.

Criminal penalty: 100 penalty units.

(2) If a lessor or person contravenes subsection (1):

(a) the lessee is not liable (and is taken never to have been liable) to make the payment to the lessor or person; and

(b) the lessee may recover as a debt due to the lessee the amount of any payment made by the lessee to the lessor or person.

59 Subsection 177B(3) (paragraph (a) of the note) of the National Credit Code

After “such as”, insert “family violence,”.

60 Subsection 179(1) of the National Credit Code

Omit “before the end of a consumer lease”.

61 Subsection 179(2) of the National Credit Code

Omit “before the end of its fixed term”.

62 At the end of Division 10 of Part 11 of the National Credit Code

Add:

179VA Canvassing of consumer leases at home

Requirement

(1) A lessor or a person who provides credit assistance must not visit a place of residence for the purpose of inducing a person who resides there to apply for or obtain a consumer lease for household goods, except by prior arrangement by the lessor or person who provides credit assistance with a person who resides there.

Civil penalty: 2,000 penalty units.

Offence

(2) A person commits an offence if:

(a) the person is subject to a requirement under subsection (1); and

(b) the person engages in conduct; and

Criminal penalty: 100 penalty units.

Strict liability offence

(3) A person commits an offence if:

(a) the person is subject to a requirement under subsection (1); and

(b) the person engages in conduct; and

Criminal penalty: 10 penalty units.

(4) Subsection (3) is an offence of strict liability.

Note: For strict liability, see section 6.1 of the Criminal Code.

Division 10A—Loss of Charges

179VB Loss of charges

(1) This section applies to a consumer lease which:

(a) was entered into between a lessee and a lessor in the following circumstances:

(i) before the consumer lease was entered into, the lessor had visited the lessee’s place of residence in contravention of section 179VA; and

(ii) a reasonable person would conclude the consumer entered into the consumer lease as a result of that visit; or

(b) was entered into between a lessee and a lessor in the following circumstances:

(i) the lessor knew that:

(A) a person who provides credit assistance had visited the lessee’s place of residence in contravention of section 179VA; or

(B) an unsolicited visit by another person had been made to that consumer; and

(ii) a reasonable person would conclude the consumer entered into that consumer lease as a result of that visit.

(2) Each provision (the void provisions) of a consumer lease to which this section applies that imposes a monetary liability on the lessee in excess of the base price of the goods hired under the consumer lease (whether or not the liability is imposed consistently with this Code) is void to the extent that the provision relates to the liability.

(3) The lessee may recover as a debt due to the lessee any amount paid to the lessor under the void provisions to the extent that the amount relates to the liability.

63 Subsection 179W(1) of the National Credit Code

Before “Part 12”, insert “Part 6 (relating to penalties for defaults) (excluding subsections 111(1), 111(2), 114(1) and 114(1A)), “.

64 Subsection 204(1) of the National Credit Code

Insert:

base price: see subsections 175AA(5) and 175AA(6).

constitutional corporation means a corporation to which paragraph 51(xx) of the Constitution applies.

constitutional trade and commerce means trade and commerce:

(a) between Australia and places outside Australia; or

(b) between the States; or

(d) between 2 Territories; or

(e) within a Territory.

consumer lease for household goods means a consumer lease where any of the goods hired under the lease are household goods.

credit assistance has the same meaning as in section 8 of the National Credit Act.

household goods means goods of a kind ordinarily acquired for domestic or household use but does not include motor vehicles.

permitted cap: see subsection 175AA(3).

65 Subsection 204(1) of the National Credit Code (definition of market value)

After “credit contract”, insert “or consumer lease”.

66 Subsection 204(1) of the National Credit Code

Insert:

unexpired permitted monthly fee is, in respect of a small amount credit contract, each permitted monthly fee that is in respect of a month that commences after the date of pay out or other discharge of that contract.

unsolicited visit by another person means a visit to a person by another person (the second person) that the second person would have been prohibited from making under section 179VA had the second person been a lessor or a person who provides credit assistance.

Federal Register of Legislation - Australian Government

Primary content

National Consumer Credit Protection Amendment (Small Amount Credit Contract and Consumer Lease Reforms) Bill 2018