ABA - Smarter Banking - Online Credit Booklet

Smarter Banking - make credit work for you

Important note - This booklet gives information of a general nature and is not intended to be relied on by readers as advice in any particular matter. Readers should consult their own advisers on how this information may apply to their own circumstances.

Mother, Father and two children in the ski fields

IN AUSTRALIA, A VARIETY OF FINANCIAL INSTITUTIONS AND BUSINESSES CAN PROVIDE CREDIT. SOMETIMES, DECIDING WHICH BUSINESS TO GO TO CAN SEEM AS COMPLICATED AS DECIDING WHICH TYPE OF CREDIT TO CHOOSE. DIFFERENT CREDIT PROVIDERS HAVE THEIR OWN PROS AND CONS, SO IT'S IMPORTANT TO CHOOSE CAREFULLY.

LOOKING AFTER YOUR INTERESTS- THE CONSUMER CREDIT CODE
The Consumer Credit Code (sometimes known as the 'Uniform Consumer Credit Code') is a law governing consumer lending in Australia and is designed to protect the interests of consumers. The Code does not apply to credit for business or investment purposes. In summary, it applies to credit provided wholly or predominantly for personal, domestic or household purposes where you are an individual or a strata corporation.

FIND OUT MORE ABOUT THE CONSUMER CREDIT CODE
You can find out more about the Consumer Credit Code by visiting the Consumer Credit Code website at: www.creditcode.gov.au

The Code covers all major financial institutions and other providers of credit, including:

- banks
- building societies
- credit unions
- finance companies
- friendly societies
- retail stores and other businesses
- government bodies that offer credit
- payday lenders

Credit products covered by the Code include:

- personal loans
- credit cards
- store cards
- overdrafts
- housing loans
- hire of goods
- payday loans

The code also applies to related mortgages and guarantees.

BEFORE YOU SIGN...
In accordance with the Code, the credit provider must provide you with a pre-contractual statement before you offer to enter into a credit contract with them or actually do so (such as by signing the contract or using a credit card). The statement must be in writing and must be easy to understand. It should include:

- the credit provider's name
- amount of credit that is to be provided
- the annual percentage rate(s) (often called the interest rate)
- how interest is calculated and when it is charged
- the total amount of interest if the loan is paid within seven years
- any enforcement expenses that may become payable
- credit fees and charges
- how you will be informed of changes to the contract
- any default rate of interest and how this is calculated
- how often statements will be provided
- commission charges
- whether a mortgage or guarantee applies to the loan
- any related insurance that is financed under the contract

You must also be given an information statement that outlines your rights and obligations under the credit contract. You may get these two types of statements together or separately, but you should receive them (and read them), before you sign a contract or otherwise accept its terms.

READ BEFORE YOU SIGN!
It's your responsibility to read pre-contractual statements and information statements. If there is anything you don't understand, make sure you ask the lender about it before you sign the contract.

Once you sign a credit contract it becomes legally binding - regardless of whether or not you've read it, and regardless of whether or not you understand all of it. So, always read, and ask if necessary, before you sign.

Waiter taking credit card and bill from a restaurant table

AFTER YOU SIGN...
The Code still applies once you've entered into the contract - in fact it applies for the life of the credit contract.

STATEMENTS
Once you have entered into your credit contract, your lender is bound by the Code to provide you with regular account statements that include:

- all credit provided during the statement period
- fees and charges applying in the statement period
- the name of the supplier in any credit card purchases
- interest charges (including when they were charged) and the interest rate
- opening and closing balances for the statement period
- dates on which the statement period begins and ends
- payments and transfers to and from other accounts
- the minimum payment owed and the due date for that payment
- certain insurance payments made, including the name of the insurer and any commission paid
- any corrections to previous accounts

IF YOU'RE EXPERIENCING HARDSHIP...
The Code recognises the importance of protecting consumers and allowing changes to credit contracts, such as loans, in special circumstances. If your circumstances change as a result of job loss, illness, or another reasonable cause but your inability to pay is only temporary, talk to your lender because it may be possible to have your repayments adjusted. Note that hardship variations are not likely to change the interest rate on your loan agreement or reduce the amount you owe. Ultimately, you must still be able to repay the loan, even if it may take longer than the original terms of the loan agreement.

Hardship variations can alter loan agreements by:

- extending the length of the contract or reducing the amount of repayments
- postponing the dates of repayments
- extending the length of the loan and postponing payment during a specified period

WHEN DOESN'T THE CODE APPLY?
The Consumer Credit Code doesn't apply to all consumer credit. For example, the Code does not apply to the following types of credit:

-	credit provided for 62 days or less but only where the maximum credit fees and charges are less than 5% of the amount of credit and the maximum interest charges are not more than 24% per year

-	credit provided without prior agreement (for example, when a cheque account becomes overdrawn and there is no agreed overdraft facility)
-	continuing credit where the only charge that is made for providing the credit is a periodic or other fixed charge that does not vary according to the amount of credit provided

- the debit part of a joint debit and credit facility
- credit arising from bills of exchange or promissory notes
- credit provided by an insurer for the payment of insurance premiums by instalment
- credit provided by either pawnbrokers or by trustees of deceased estates
- employee loans in certain circumstances (some provisions of the Code still apply)

PAWNBROKERS
Pawnbrokers provide money in return for valuable goods which they hold until the loan is repaid. A fee is charged on this type of loan. Pawnbrokers are not covered by the Consumer Credit Code. Instead, they are generally covered by separate legislation in the various states and territories.

Next Table of contents