Personal Loans And The Consumer Credit Code

Introduction of Credit Code

• credit provided predominantly for domestic, personal or household purposes;
• where a charge is made for the credit; and
• Insuring your most valuable asset

  While many people would consider their home or their car to be their most valuable asset, it's your ability to earn an income that is most important in shaping your financial future. Statistically, two thirds of working Australians will suffer an injury or illness that will sideline them for 90 days or more. The majority of these people would not be able to pay their mortgage or meet car finance and other loan commitments without adequate income insurance.

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  credit is provided in the course of a business of providing credit, or incidental to any other business of the credit provider. Definition of credit contract The Consumer Credit Code covers a wide range of credit contracts, which is defined as:
• the payment of a debt owed by one person to another is deferred; or
• one person incurs a deferred debt to another. Different categories of credit under the Consumer Credit Code include:
• instalment contracts;
• consumer leases;
• continuing credit.

The Consumer Credit Code covers credit contracts entered into after November 1, 1996 including:

• all consumer credit e.g. credit cards, housing etc loans that are characterised as being domestic, personal or household - not for business purposes;
• in all Australian jurisdictions;
• where charges are made for the credit;
• where the credit provider does so in the course of business.

Personal, domestic & household purposes

The Consumer Credit Code does not apply for business purposes. 

• more than half the credit is for personal, domestic & household purposes; or
• if the credit is to purchase goods that are to be used for different purposes, then the purpose is mostly for personal, domestic & household purposes.

Goods mortgages

Mortgages are a security over goods (sometimes called "chattels") or real property. 

Applicable credit providers

For a credit contract to be covered by the Consumer Credit Code, the credit provider must supply the credit:

• in the course of a business that provides credit; or
• where it is incidental to any other business of the credit provider.

There is no hard and fast way to determine this, but it can be important where the seller simply allows the buyer to pay for the goods in instalments, or when a family member offers a loan. 

Exclusions from the Consumer Credit Code

This can be complicated, and it is always worth asking whether the contract is covered by the Consumer Credit Code. There are many situations where the Consumer Credit Code will not apply, including:

• short term credit;
• where credit provision occurs without contemplation e.g. a savings account goes into debit;
• within certain limits, where the only charges are periodic or fixed and not changed according to the level of credit that is provided e.g. an annual fee to a credit card provider or a arrangement with a supplier that allows goods to be bought on account and a fixed charge is applied;
• insurance premiums payable on instalment;
• most pawnbroker transactions;
• employee loans.

Credit Code & guarantees

A guarantee must be:

• in writing;
• signed by the guarantor;

A copy of the credit contract must be received by the guarantor. 

Published: Sunday, 1st Aug 2021
Author: Paige Estritori