CONSUMER CREDIT LEGISLATION AMENDMENT (ENHANCEMENTS) BILL 2012

i Consumer Credit and Corporations Legislation Amendment (Enhancements) Bill 2011

No. , 2011

Contents

1 Short

title

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2 Commencement

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3 Schedule(s)

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Schedule 1--Enhancements

Part 1--Protection of debtor in cases of hardship

National Consumer Credit Protection Act 2009

Part 2--Remedies for unfair or dishonest conduct by credit

service providers

National Consumer Credit Protection Act 2009

Part 3--Representations about eligibility to enter credit

contracts, consumer leases etc. without assessing

unsuitability

National Consumer Credit Protection Act 2009

Part 4--Prohibition on certain representations and other

matters

National Consumer Credit Protection Act 2009

Part 5--Civil remedies for contravention of the National Credit

Code

National Consumer Credit Protection Act 2009

Part 6--Miscellaneous amendments

National Consumer Credit Protection Act 2009

Part 7--Technical corrections

National Consumer Credit Protection Act 2009

Schedule 2--Reverse mortgages

Part 1--Definitions

Division 1--Definition of reverse mortgage

National Consumer Credit Protection Act 2009

Division 2--Other definitions

National Consumer Credit Protection Act 2009

Consumer Credit and Corporations Legislation Amendment (Enhancements) Bill 2011 No.

, 2011 ii

Part 2--Provisions applying to licensees

National Consumer Credit Protection Act 2009

Part 3--Provisions applying to credit providers generally

National Consumer Credit Protection Act 2009

Schedule 3--Small amount credit contracts

National Consumer Credit Protection Act 2009

Schedule 4--Caps on costs etc. for credit contracts

National Consumer Credit Protection Act 2009

Schedule 5--Consumer leases

National Consumer Credit Protection Act 2009

Schedule 6--Application provisions

National Consumer Credit Protection (Transitional and

Consequential Provisions) Act 2009

Schedule 7--Voting at AGMs of public companies

102

Corporations Act 2001

102

Consumer Credit and Corporations Legislation Amendment (Enhancements) Bill 2011 No.

, 2011 1

A Bill for an Act to amend the law relating to

consumer credit and corporations, and for related

purposes

The Parliament of Australia enacts:

1 Short title

This Act may be cited as the Consumer Credit and Corporations

Legislation Amendment (Enhancements) Act 2011.

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.

2 Consumer Credit and Corporations Legislation Amendment (Enhancements) Bill 2011

No. , 2011

Commencement information

Column 1

Column 2

Column 3

Provision(s)

Commencement

Date/Details

1. Sections 1 to 3

and anything in

this Act not

elsewhere covered

by this table

The day this Act receives the Royal Assent.

2. Schedules 1, 2

and 3

Immediately after the commencement of

Part 2 of Schedule 1 to the National

Consumer Credit Protection Amendment

(Home Loans and Credit Cards) Act 2011.

1 July 2012

3. Schedule 4

1 January 2013.

1 January 2013

4. Schedules 5

and 6

Immediately after the commencement of

Schedule 2 to the National Consumer Credit

Protection Amendment (Home Loans and

Credit Cards) Act 2011.

1 July 2012

5. Schedule 7

The day after 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 Schedule(s)

Each Act 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.

Enhancements Schedule 1

Protection of debtor in cases of hardship Part 1

Consumer Credit and Corporations Legislation Amendment (Enhancements) Bill 2011 No.

, 2011 3

Schedule 1--Enhancements

Part 1--Protection of debtor in cases of hardship

National Consumer Credit Protection Act 2009

1 Section 72 of the National Credit Code

Repeal the section, substitute:

72 Changes on grounds of hardship

Hardship notice

(1) If a debtor considers that he or she is or will be unable to meet his

or her obligations under a credit contract, the debtor may give the

credit provider notice (a hardship notice), orally or in writing, of

the debtor's inability to meet the obligations.

Credit provider's notice in response to hardship notice

(2) Within 21 days after the day of receiving the debtor's hardship

notice, the credit provider must give the debtor:

(a) if the credit provider agrees to negotiate a change to the

credit contract--notice, in the form prescribed by the

regulations, that the credit provider agrees to negotiate; or

(b) if the credit provider does not agree to negotiate a change to

the credit contract--a written notice that states:

(i) that the credit provider does not agree to negotiate; and

(ii) the reasons for not agreeing to negotiate; and

(iii) the name of the approved external dispute resolution

scheme of which the credit provider is a member; and

(iv) the debtor's rights under that scheme.

Criminal penalty:

30 penalty units.

Note:

If a debtor has given a credit provider a hardship notice, there may be

extra requirements that the credit provider must comply with before

beginning enforcement proceedings--see section 89A.

Schedule 1 Enhancements

Part 1 Protection of debtor in cases of hardship

4 Consumer Credit and Corporations Legislation Amendment (Enhancements) Bill 2011

No. , 2011

(3) A credit provider that has given notice under paragraph (2)(a) may,

within 21 days after the day of giving that notice, give a notice

under paragraph (2)(b).

(4) Subsection (2) is an offence of strict liability.

Note:

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

2 Subsection 73(1) of the National Credit Code

Omit "on any such application", substitute "to change the credit

contract as a result of a hardship notice by the debtor".

3 Subsection 74(1) of the National Credit Code

Omit "in accordance with the application", substitute "as a result of a

hardship notice by the debtor".

4 Subsection 74(2) of the National Credit Code

Repeal the subsection, substitute:

(2) The court may, after allowing the applicant, the credit provider and

any guarantor a reasonable opportunity to be heard:

(a) by order change the credit contract (but not so as to reduce

the amount ultimately payable by the debtor to the credit

provider under the contract), and make such other orders as it

thinks fit; or

(b) refuse to change the credit contract.

5 Subparagraphs 88(3)(f)(i) and (ii) of the National Credit

Code

Repeal the subparagraphs, substitute:

(i) give a hardship notice under section 72; or

(ii) give a postponement request under section 94; or

6 After section 89 of the National Credit Code

Insert:

89A Effect of hardship notices on enforcement

(1) This section applies if:

(a) a credit provider is required to give a default notice under

section 88 before beginning enforcement proceedings; and

Enhancements Schedule 1

Protection of debtor in cases of hardship Part 1

Consumer Credit and Corporations Legislation Amendment (Enhancements) Bill 2011 No.

, 2011 5

(b) before or after the credit provider gives the default notice, the

debtor gives the credit provider a hardship notice (the current

hardship notice) under section 72; and

(c)

either:

(i) in the 4 months before the day the current hardship

notice is given, the debtor had not given the credit

provider another hardship notice; or

(ii) in that 4-month period, the debtor had given the credit

provider one or more other hardship notices, but the

credit provider reasonably believes that the basis on

which the current hardship notice was given is

materially different from the bases on which the other

hardship notices were given.

(2) The credit provider must not begin enforcement proceedings

against the debtor unless:

(a) the credit provider has given the debtor a notice under

paragraph 72(2)(b), in response to the current hardship

notice, stating that the credit provider does not agree to

negotiate a change to the credit contract; and

(b) the period of 14 days, starting on the day the lessor gives the

notice under paragraph 72(2)(b), has expired.

Criminal penalty:

50 penalty units.

Note:

The credit provider must allow the debtor at least 30 days from the

date of the default notice to remedy the default--see section 88. The

14-day period in subsection (2) may end before, at the same time as,

or after the end of the period for remedying the default specified in the

default notice.

(3) However, the credit provider may take possession of mortgaged

goods if the credit provider reasonably believes that:

(a) the debtor or mortgagor has removed or disposed of the

mortgaged goods, or intends to remove or dispose of them,

without the credit provider's permission; or

(b) urgent action is necessary to protect the goods.

(4) Subsection (2) is an offence of strict liability.

Note:

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

7 Subsection 94(1) of the National Credit Code

Repeal the subsection, substitute:

Schedule 1 Enhancements

Part 1 Protection of debtor in cases of hardship

6 Consumer Credit and Corporations Legislation Amendment (Enhancements) Bill 2011

No. , 2011

Postponement request

(1) A debtor, mortgagor or guarantor who has been given a default

notice under section 88 or a demand for payment under section 90

may, at any time before the end of the period specified in the notice

or demand, request (a postponement request), orally or in writing,

that the credit provider negotiate a postponement of:

(a) the enforcement proceedings; or

(b) any action taken under such proceedings; or

8 Subsection 94(2) of the National Credit Code

Omit "makes the request", substitute "gives the postponement request".

9 Subsections 94(3) and (4) of the National Credit Code

Repeal the subsections, substitute:

Enforcement proceedings

(3) If the debtor, mortgagor or guarantor gives the postponement

request, the credit provider must not begin enforcement

proceedings unless:

(a) the credit provider has given the debtor, mortgagor or

guarantor a notice under subsection (2) in response to the

postponement request; and

(b) the period of 14 days, starting on the day the credit provider

gives the notice under subsection (2), has expired.

Criminal penalty:

50 penalty units.

Note:

The credit provider must allow the debtor or mortgagor at least 30

days from the date of the default notice to remedy the default--see

section 88. The 14-day period in subsection (3) may end before, at the

same time as, or after the end of the period for remedying the default

specified in the default notice.

(4) However, the credit provider may take possession of mortgaged

goods if the credit provider reasonably believes that:

(a) the debtor or mortgagor has removed or disposed of the

mortgaged goods, or intends to remove or dispose of them,

without the credit provider's permission; or

(b) urgent action is necessary to protect the goods.

Schedule 1 Enhancements

Part 2 Remedies for unfair or dishonest conduct by credit service providers

8 Consumer Credit and Corporations Legislation Amendment (Enhancements) Bill 2011

No. , 2011

Part 2--Remedies for unfair or dishonest conduct by

credit service providers

National Consumer Credit Protection Act 2009

10 After section 180

Insert:

180A Orders to remedy unfair or dishonest conduct by credit

service providers

(1) The court may make one or more of the orders described in

subsection (2) if the court is satisfied that:

(a) a person (the defendant) provided a credit service to a

consumer (the plaintiff); and

(b) the defendant engaged in conduct that:

(i) was connected with the provision of the service; and

(ii) was unfair or dishonest; and

(i) the plaintiff entered a credit contract, consumer lease,

mortgage or guarantee that the plaintiff would not have

entered apart from the conduct;

(ii) the plaintiff entered a credit contract, consumer lease,

mortgage or guarantee whose terms were different from

a credit contract, consumer lease, mortgage or guarantee

the plaintiff would have entered apart from the conduct;

(iii) the plaintiff became liable to pay fees, costs or charges

to the defendant or someone else.

(2) The orders are as follows:

(a) an order that the defendant take, or refrain from taking,

specified action;

(b) an order that the defendant pay the plaintiff a specified

amount;

plaintiff to the defendant;

(d) any other order the court considers appropriate to:

(i) redress the unfairness or dishonesty; or

Enhancements Schedule 1

Remedies for unfair or dishonest conduct by credit service providers Part 2

Consumer Credit and Corporations Legislation Amendment (Enhancements) Bill 2011 No.

, 2011 9

(ii) prevent the defendant from profiting from the plaintiff

by engaging in the conduct;

except an order that affects a credit contract, consumer lease,

mortgage or guarantee to which the conduct related.

Determining whether conduct was unfair or dishonest

(3) In determining whether conduct was unfair or dishonest, the court:

(a) must have regard to the extent (if any) to which one or more

of the circumstances described in subsection (4) existed; and

(b) must consider it more likely that the conduct was unfair or

dishonest the more any of those circumstances existed and

the more any of them affected the plaintiff's interests.

This does not limit the matters to which the court may have regard.

(4) The circumstances are as follows:

(a) the plaintiff was at a special disadvantage in dealing with the

defendant in relation to the transaction involving:

(i) the conduct; and

(ii) a credit contract, consumer lease, mortgage or guarantee

to which the conduct related; and

(iii) any other contract requiring the plaintiff to make

payments for the purposes of which it is reasonable to

expect the plaintiff would or did enter such a credit

contract, consumer lease, mortgage or guarantee;

(b) the plaintiff was a member of a class whose members were

more likely than people who were not members of the class

to be at such a disadvantage;

paragraph (b)--a reasonable person would consider that the

conduct was directed at that class;

(d) the plaintiff was unable, or considered himself or herself

unable, to make:

(i) a credit contract with a credit provider other than the

credit provider to which the conduct related; or

(ii) a consumer lease with a lessor other than the lessor to

which the conduct related; or

(iii) a mortgage with a mortgagee other than the mortgagee

to which the conduct related; or

Schedule 1 Enhancements

Part 2 Remedies for unfair or dishonest conduct by credit service providers

10 Consumer Credit and Corporations Legislation Amendment (Enhancements) Bill 2011

No. , 2011

(iv) a guarantee with a beneficiary other than the beneficiary

to which the conduct related;

(e) the conduct involved a technique that:

(i) should not in good conscience have been used; or

(ii) manipulated the plaintiff;

(f) the defendant could determine or significantly influence the

terms of a contract covered by subparagraph (a)(ii) or (iii);

(g) the terms of the transaction described in paragraph (a) were

less favourable to the plaintiff than the terms of a comparable

transaction.

When order may be made

(5) The court may make the order only if:

(a) the plaintiff or ASIC (on behalf of the plaintiff) applies for an

order under this section; and

(b) the application is made within 6 years of the day the

defendant first started engaging in the conduct.

Applications for order

(6) For the purposes of paragraph (5)(a), ASIC may make an

application on behalf of the plaintiff, but only if the plaintiff has

given consent in writing before the application is made.

Recovery of amount as a debt

(7) If the court makes an order that the defendant pay an amount

specified in the order to the plaintiff, the plaintiff may recover the

amount as a debt due to the plaintiff.

When this section does not apply

(8) This section does not apply to the provision of credit assistance by

a person who is (or after the provision of the assistance becomes):

(a) a credit provider under the credit contract to which the

assistance relates; or

(b) a lessor under the consumer lease to which the assistance

relates; or

contract to which the assistance relates; or

Schedule 1 Enhancements

Part 3 Representations about eligibility to enter credit contracts, consumer leases etc.

without assessing unsuitability

12 Consumer Credit and Corporations Legislation Amendment (Enhancements) Bill 2011

No. , 2011

Part 3--Representations about eligibility to enter

credit contracts, consumer leases etc.

without assessing unsuitability

National Consumer Credit Protection Act 2009

12 Section 125 (paragraph relating to Division 3)

Omit "entering or increasing the credit limit of a credit contract",

substitute "doing particular things (such as entering a credit contract)".

13 Division 3 of Part 3-2 (heading)

Repeal the heading, substitute:

Division 3--Obligation to assess unsuitability

14 Section 128 (heading)

Repeal the heading, substitute:

128 Obligation to assess unsuitability

15 After paragraph 128(a)

Insert:

(aa) represent to a consumer that the licensee considers that the

consumer is eligible to enter a credit contract with the

licensee; or

16 After paragraph 128(b)

Insert:

; or (ba) represent to a consumer that the licensee considers that the

credit limit of credit contract between the consumer and the

licensee will be able to be increased;

17 Section 148 (paragraph relating to Division 3)

Omit "entering a consumer lease", substitute "doing particular things

(such as entering a consumer lease)".

18 Division 3 of Part 3-4 (heading)

Repeal the heading, substitute:

Enhancements Schedule 1

Representations about eligibility to enter credit contracts, consumer leases etc. without

assessing unsuitability Part 3

Consumer Credit and Corporations Legislation Amendment (Enhancements) Bill 2011 No.

, 2011 13

Division 3--Obligation to assess unsuitability

19 Section 151

Repeal the section, substitute:

151 Obligation to assess unsuitability

A licensee must not:

(a) enter a consumer lease with a consumer who will be the

lessee under the lease; or

(b) represent to a consumer that the licensee considers that the

consumer is eligible to enter a consumer lease with the

licensee;

on a day (the lease day) unless the licensee has, within 90 days (or

other period prescribed by the regulations) before the lease day:

(i) is in accordance with section 152; and

(ii) covers a period in which the lease day occurs; and

(d) made the inquiries and verification in accordance with

section 130.

Civil penalty:

2,000 penalty units.

20 Section 152

Omit "paragraph 151(a)", substitute "paragraph 151(c)".

21 Subsection 153(1)

Omit "paragraph 151(b)", substitute "paragraph 151(d)".

Schedule 1 Enhancements

Part 4 Prohibition on certain representations and other matters

14 Consumer Credit and Corporations Legislation Amendment (Enhancements) Bill 2011

No. , 2011

Part 4--Prohibition on certain representations and

other matters

National Consumer Credit Protection Act 2009

22 Section 27 (paragraph relating to Division 3)

Omit ", charging fees for unlicensed conduct, and giving misleading

information", substitute ", and charging fees for unlicensed conduct".

23 Division 3 of Part 2-1 (heading)

Repeal the heading, substitute:

Division 3--Other prohibitions relating to the requirement

to be licensed

24 Section 33

Repeal the section.

25 After Part 3-6

Insert:

Part 3-6A--Miscellaneous rules

Division 1--Introduction

160A Guide to this Part

This Part has a number of miscellaneous rules that require

responsible lending conduct when engaging in credit activities or

particular types of credit activities. Some of these rules apply to a

person even if the person is not required to be licensed.

Division 2 prohibits licensees from making particular

representations when providing a credit service to a consumer.

Enhancements Schedule 1

Prohibition on certain representations and other matters Part 4

Consumer Credit and Corporations Legislation Amendment (Enhancements) Bill 2011 No.

, 2011 15

Division 3 prohibits a person (whether licensed or not) from giving

false or misleading information in the course of engaging in a

credit activity.

Division 2--Representations

160B "Independent", "impartial" or "unbiased" etc.

(1) A licensee must not, in providing or offering to provide a credit

service to a consumer, use any of the following terms (either alone

or in combination with other words or letters) in a representation to

the consumer about the licensee, the service or the licensee's

actions in providing the service:

(a) the word "independent";

(b) the word "impartial";

(d) another term (whether or not in English) that is of similar

import to a word mentioned in paragraph (a), (b) or (c).

Civil penalty:

2,000 penalty units.

Defences

(2) For the purposes of subsection (1), it is a defence if:

(a) the licensee does not receive any of the following:

(i) commissions (apart from commissions that are rebated

in full to the licensee's clients);

(ii) other gifts or benefits from a credit provider or a lessor

that may reasonably be expected to influence the

licensee; and

(b) in providing a credit service, the licensee operates free from

direct or indirect restrictions relating to the credit contracts

and consumer leases to which the service relates (except

restrictions imposed on the licensee by this Act or by an

Australian credit licence); and

any conflicts of interest that might:

(i) arise from the licensee's associations or relationships

with credit providers and lessors; and

Schedule 1 Enhancements

Part 4 Prohibition on certain representations and other matters

16 Consumer Credit and Corporations Legislation Amendment (Enhancements) Bill 2011

No. , 2011

(ii) reasonably be expected to influence the licensee in

providing the service; and

(d) neither of the following persons receives any commission,

gift, or benefit, covered by paragraph (a):

(i) the licensee's employer (if any);

(ii) any other person prescribed (whether by reference to a

class of person or otherwise) by the regulations.

(3) For the purposes of subsection (1), it is a defence if the

representation uses any of the terms in the negative (for example, a

representation that the licensee is not independent).

160C "Financial counsellor" etc.

(1) A licensee must not, in providing or offering to provide a credit

service to a consumer, use any of the following terms (either alone

or in combination with other words or letters) in a representation to

the consumer about the licensee, the service or the licensee's

actions in providing the service:

(a) the phrase "financial counsellor";

(b) the phrase "financial counselling";

(i) is of similar import to a phrase mentioned in

paragraph (a) or (b); and

(ii) is prescribed by the regulations.

Civil penalty:

2,000 penalty units.

Defences

(2) For the purposes of subsection (1), it is a defence if regulations

made for the purposes of paragraph 110(a) exempt the licensee

from section 29 in relation to a credit activity because the licensee

engages in the activity as part of a financial counselling service.

(3) For the purposes of subsection (1), it is a defence if:

(a) the licensee is providing, or offering to provide, the credit

service on behalf of another person (the principal); and

(b) the licensee is a representative of the principal; and

exempt the principal from section 29 in relation to a credit

Enhancements Schedule 1

Prohibition on certain representations and other matters Part 4

Consumer Credit and Corporations Legislation Amendment (Enhancements) Bill 2011 No.

, 2011 17

activity because the principal engages in the activity as part

of a financial counselling service; and

(d) the licensee's actions in providing or offering to provide the

credit service are within the authority of the principal.

(4) For the purposes of subsection (1), it is a defence if the

representation uses any of the terms in the negative (for example, a

representation that the licensee is not a financial counsellor).

Division 3--Giving misleading information

160D Prohibition on giving misleading information etc.

Prohibition on giving misleading information etc.

(1) A person (the giver) must not, in the course of engaging in a credit

activity, give information or a document to another person if the

giver knows, or is reckless as to whether, the information or

document is:

(a) false in a material particular; or

(b)

materially

misleading.

Civil penalty:

2,000 penalty units.

Offence

(2) A person commits an offence if:

(a) the person gives information or a document to another

person; and

(b) the person does so in the course of engaging in a credit

activity; and

or materially misleading.

Criminal penalty:

100 penalty units, or 2 years imprisonment, or

both.

Schedule 1 Enhancements

Part 5 Civil remedies for contravention of the National Credit Code

18 Consumer Credit and Corporations Legislation Amendment (Enhancements) Bill 2011

No. , 2011

Part 5--Civil remedies for contravention of the

National Credit Code

National Consumer Credit Protection Act 2009

26 Section 124 of the National Credit Code (heading)

Repeal the heading, substitute:

124 Civil effect of contraventions

27 Subsection 124(1) of the National Credit Code

Omit "(other than one for which a civil effect is specifically provided by

Division 1 or by any other provision of this Code)".

28 Subsection 124(2) of the National Credit Code

Repeal the subsection, substitute:

(2) An application for the exercise of the court's powers under this

section may be made by:

(a) a person affected by the contravention; or

(b) ASIC on behalf of a person affected by the contravention, if

the person has consented in writing to ASIC making the

application; or

Enhancements Schedule 1

Miscellaneous amendments Part 6

Consumer Credit and Corporations Legislation Amendment (Enhancements) Bill 2011 No.

, 2011 19

Part 6--Miscellaneous amendments

National Consumer Credit Protection Act 2009

29 Subsection 19(1) of the National Credit Code

Omit "a contract document", substitute "a new contract document".

30 Section 32 of the National Credit Code

Repeal the section, substitute:

32 Fees or charges in relation to third parties

When this section applies

(1) This section applies if a fee or charge is payable by a debtor to the

credit provider for an amount (the third party amount) payable or

paid by the credit provider to another person, body or agency.

Third party amount ascertainable at time of debtor payment

(2) If, when the fee or charge is paid by the debtor to the credit

provider, the third party amount is ascertainable, then the amount

of the fee or charge must not exceed the third party amount.

Third party amount not ascertainable at time of debtor payment

(3)

If:

(a) when the fee or charge is paid by the debtor to the credit

provider, the third party amount is not ascertainable; and

(b) after the fee or charge is paid, the credit provider ascertains

the third party amount; and

charge paid;

then the credit provider must refund or credit the difference to the

debtor.

Determining third party amount

(4) The third party amount is to be determined by:

(a) taking into account any discount, rebate or other allowance

that is received or receivable by the credit provider or a

Schedule 1 Enhancements

Part 6 Miscellaneous amendments

20 Consumer Credit and Corporations Legislation Amendment (Enhancements) Bill 2011

No. , 2011

related body corporate (within the meaning of the

Corporations Act 2001); and

(b) disregarding any rebate on tax payable by the credit provider

or a related body corporate (within the meaning of that Act).

31 Paragraph 36(1)(c) of the National Credit Code

Repeal the paragraph, substitute:

due;

32 Paragraph 36(1)(d) of the National Credit Code

Omit "became due", substitute "becomes due".

33 Subsection 38(4) of the National Credit Code

Omit "of receiving the statement of account in which the amount, or

part of that amount, was first shown", substitute "after the day the

debtor receives the statement of account in which the amount, or part of

that amount, is first shown".

34 Subsection 38(5) of the National Credit Code

Omit "after the end of the contract", substitute "after the day the

contract ends".

35 Subsection 38(6) of the National Credit Code

Omit "at least 30 days have elapsed from the time the written

explanation or advice as to agreement was given", substitute "the period

of 30 days, starting on the day the credit provider gives the written

explanation or advice as to agreement, has expired".

36 At the end of subsection 38(6) of the National Credit Code

Add:

Criminal penalty:

50 penalty units.

37 Subsection 38(9) of the National Credit Code

Omit "Subsection (8) is an offence", substitute "Subsections (6) and (8)

are offences".

38 Division 6 of Part 2 of the National Credit Code

Enhancements Schedule 1

Miscellaneous amendments Part 6

Consumer Credit and Corporations Legislation Amendment (Enhancements) Bill 2011 No.

, 2011 21

Repeal the Division, substitute:

Division 6--Certain transactions not to be treated as new

contracts

40 Changes etc. under contracts

If:

(a)

there

is:

(i) a change to an existing credit contract that results in

further credit being provided; or

(ii) a deferral or waiver of an amount under an existing

credit contract; or

(iii) a postponement relating to an existing credit contract;

and

(b) the change, deferral, waiver or postponement is made in

accordance with this Code or the existing credit contract;

then the change, deferral, waiver or postponement is not to be

treated as creating a new credit contract for the purposes of this

Code.

39 Subsection 71(1) of the National Credit Code

Omit "under a credit contract", substitute "under an existing credit

contract".

40 Subsection 83(1) of the National Credit Code (penalty)

Repeal the penalty.

41 Subsection 83(3) of the National Credit Code

Omit "after the request", substitute "after the day the request".

42 Subsection 83(5) of the National Credit Code

Repeal the subsection (not including the note), substitute:

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

43 Subsection 87(2) of the National Credit Code

Omit "direct debit default notice under this section within 10 business

days", substitute "notice, complying with this section, within 14 days".

Schedule 1 Enhancements

Part 6 Miscellaneous amendments

22 Consumer Credit and Corporations Legislation Amendment (Enhancements) Bill 2011

No. , 2011

44 Subsection 87(3) of the National Credit Code

Omit "direct debit default".

45 Paragraphs 88(5)(a) and (d) of the National Credit Code

Omit "believes on reasonable grounds", substitute "reasonably

believes".

46 Subsection 88(6) of the National Credit Code

Omit "believes on reasonable grounds", substitute "reasonably

believes".

47 Subsection 89(1) of the National Credit Code

After "a default notice", insert "under section 88".

48 Paragraphs 93(1)(c), (2)(a) and (2)(d) of the National Credit

Code

Omit "believes on reasonable grounds", substitute "reasonably

believes".

49 Subsection 95(1) of the National Credit Code

Omit "The default notice or demand for payment", substitute "A default

notice under section 88 or a demand for payment under section 90".

50 Subsection 98(1) of the National Credit Code

Omit "within 7 days", substitute ", within 7 days after the day the notice

is given to the mortgagor,".

51 Section 206 of the National Credit Code

Repeal the section.

Enhancements Schedule 1

Technical corrections Part 7

Consumer Credit and Corporations Legislation Amendment (Enhancements) Bill 2011 No.

, 2011 23

Part 7--Technical corrections

National Consumer Credit Protection Act 2009

52 Section 129

Omit "128(1)(c)", substitute "128(c)".

Note:

This item fixes an incorrect cross-reference.

53 Subsection 130(1)

Omit "128(1)(d)", substitute "128(d)".

Note:

This item fixes an incorrect cross-reference.

54 Paragraph 181(b)

After "order under", insert "section".

55 Subparagraph 88(3)(g)(i) of the National Credit Code

Omit "or", substitute "and".

56 Subsection 127(2) of the National Credit Code

Omit "tied continuing credit contract", substitute "tied continuing

credit contract".

57 Section 129 of the National Credit Code (heading)

Repeal the heading, substitute:

129 Right to damages under sale contract against both supplier and

linked credit provider

Note:

This item removes a reference to a repealed provision.

58 Section 130 of the National Credit Code (heading)

Repeal the heading, substitute:

130 Limits on debtor's right of action against linked credit provider

Note:

This item removes a reference to a repealed provision.

59 Section 131 of the National Credit Code (heading)

Repeal the heading, substitute:

Schedule 1 Enhancements

Part 7 Technical corrections

24 Consumer Credit and Corporations Legislation Amendment (Enhancements) Bill 2011

No. , 2011

131 Liability of supplier to linked credit provider

Note:

This item removes a reference to a repealed provision.

60 Section 132 of the National Credit Code (heading)

Repeal the heading, substitute:

132 Interest may be awarded

Note:

This item removes a reference to a repealed provision.

61 Section 133 of the National Credit Code (heading)

Repeal the heading, substitute:

133 Subrogation of credit provider

Note:

This item removes a reference to a repealed provision.

62 Subsection 204(1) of the National Credit Code (definition

of approved external dispute resolution scheme)

After "has", insert "the".

Reverse mortgages Schedule 2

Definitions Part 1

Consumer Credit and Corporations Legislation Amendment (Enhancements) Bill 2011 No.

, 2011 25

Schedule 2--Reverse mortgages

Part 1--Definitions

Division 1--Definition of reverse mortgage

National Consumer Credit Protection Act 2009

1 Subsection 5(1)

Insert:

reverse mortgage has the same meaning as in section 13A of the

National Credit Code.

2 At the end of Part 1 of the National Credit Code

Add:

13A Reverse mortgages

(1) For the purposes of this Code, an arrangement is a reverse

mortgage if the arrangement involves a credit contract, except a

bridging finance contract, and a mortgage over a dwelling or land

securing a debtor's obligations under the contract and either:

(a) the conditions in subsections (2) and (3) are met; or

(b) the arrangement is of a kind declared by ASIC under

subsection (4) and is made on or after the commencement of

that declaration.

Conditions

(2) The first condition is that the debtor's total liability under the credit

contract or mortgage may exceed (to a limited or unlimited extent)

the maximum amount of credit that may be provided under the

contract without the debtor being obliged to reduce that liability to

less than that maximum amount.

Note:

The debtor's total liability can exceed the maximum amount of credit

because interest and some other fees and charges are not included in

an amount of credit: see subsection 3(2).

Schedule 2 Reverse mortgages

Part 1 Definitions

26 Consumer Credit and Corporations Legislation Amendment (Enhancements) Bill 2011

No. , 2011

(3) The second condition is that, if the regulations prescribe any

prerequisites for the arrangement to be a reverse mortgage, those

prerequisites are met.

Declarations by ASIC

(4) ASIC may by legislative instrument declare specified kinds of

arrangements involving a credit contract and a mortgage over a

dwelling or land securing a debtor's obligations under the contract

to be reverse mortgages.

3 Subsection 204(1) of the National Credit Code

Insert:

reverse mortgage: see section 13A.

Division 2--Other definitions

National Consumer Credit Protection Act 2009

4 Subsection 5(1)

Insert:

reverse mortgage information statement means a document

relating to reverse mortgages that complies with the regulations.

5 Subsection 204(1) of the National Credit Code

Insert:

bridging finance contract: a credit contract is a bridging finance

contract if:

(a) when the contract is made, the debtor:

(i) reasonably expects to receive a lump sum before the

term of the contract ends; and

(ii) intends to discharge the debtor's obligations under the

contract so far as possible with that sum; and

(b) the conditions (if any) prescribed by the regulations are met.

6 Subsection 204(1) of the National Credit Code

Insert:

Reverse mortgages Schedule 2

Definitions Part 1

Consumer Credit and Corporations Legislation Amendment (Enhancements) Bill 2011 No.

, 2011 27

engage in conduct means:

(a) do an act; or

(b) omit to perform an act.

7 Subsection 204(1) of the National Credit Code

Insert:

practising lawyer means a person who is admitted to the legal

profession by a federal court or a Supreme Court of a State or

Territory and holds a practising certificate (however described)

entitling the person to practise that profession.

8 Subsection 204(1) of the National Credit Code

Insert:

reverse mortgaged property, in relation to a credit contract for a

reverse mortgage, means a dwelling or land that has been

mortgaged to secure a debtor's obligations under the contract.

Schedule 2 Reverse mortgages

Part 2 Provisions applying to licensees

28 Consumer Credit and Corporations Legislation Amendment (Enhancements) Bill 2011

No. , 2011

Part 2--Provisions applying to licensees

National Consumer Credit Protection Act 2009

9 At the end of section 133

Add:

Note:

Sections 178 and 179 provide for remedies for anyone who suffers, or

is likely to suffer, loss or damage because of a breach of this section.

For example, if a consumer makes an unsuitable credit contract with a

licensee, rather than making a not unsuitable credit contract for a

reverse mortgage, a person who suffered, or is likely to suffer, loss as

a result may be able to get court orders under section 178 or 179 to put

the person in a position like the one they would have been in had the

consumer entered into the contract for the reverse mortgage.

10 Before Part 3-3

Insert:

Part 3-2D--Licensees and reverse mortgages

133DA Guide to this Part

This Part has rules that apply to licensees that provide credit

services or are credit providers.

Before providing credit assistance, or entering into a credit

contract, for a reverse mortgage, licensees must provide projections

of the debtor's equity in the property that may be covered by the

reverse mortgage.

Licensees must also make reverse mortgage information statements

available on their websites and on request.

Licensees must not inaccurately use terms like "reverse mortgage"

in making representations about credit contracts and mortgages.

Reverse mortgages Schedule 2

Provisions applying to licensees Part 2

Consumer Credit and Corporations Legislation Amendment (Enhancements) Bill 2011 No.

, 2011 29

133DB Giving projections of equity before providing credit

assistance or entering credit contract

Requirement to give projections

(1) Before a licensee makes a preliminary assessment for the purposes

of paragraph 115(1)(c) or (2)(a), or an assessment for the purposes

of paragraph 128(c), in connection with a credit contract with a

consumer for a reverse mortgage, the licensee must:

(a) show the consumer in person projections that:

(i) relate to the value of the dwelling or land that may

become reverse mortgaged property, and the consumer's

indebtedness, over time if the consumer were to enter

into a contract for a reverse mortgage; and

(ii) are made in accordance with the regulations by using a

website approved by ASIC; and

(b) give the consumer a printed copy of the projections; and

reverse mortgages and are prescribed by the regulations; and

(d) give the consumer a reverse mortgage information statement.

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:

50 penalty units.

Defences for not giving projections

(3) For the purposes of paragraphs (1)(a) and (b), and of subsection (2)

so far as it relates to either of those paragraphs, it is a defence if the

licensee reasonably believes that:

(a) another person has:

(i) shown the consumer in person projections described in

paragraph (1)(a); and

Schedule 2 Reverse mortgages

Part 2 Provisions applying to licensees

30 Consumer Credit and Corporations Legislation Amendment (Enhancements) Bill 2011

No. , 2011

(ii) given the consumer a printed copy of the projections;

and

(b) the projections are the same, or substantially the same, as

those paragraph (1)(a) requires the licensee to show the

consumer.

Note:

For the purposes of subsection (2), a defendant bears an evidential

burden in relation to the matter in subsection (3) (see subsection

13.3(3) of the Criminal Code).

(4) For the purposes of paragraphs (1)(a) and (b), and of subsection (2)

so far as it relates to either of those paragraphs, it is a defence if the

circumstances prescribed by the regulations exist.

Note:

For the purposes of subsection (2), a defendant bears an evidential

burden in relation to the matter in subsection (4) (see subsection

13.3(3) of the Criminal Code).

Defence for not giving reverse mortgage information statement

(5) For the purposes of paragraph (1)(d), and of subsection (2) so far

as it relates to that paragraph, it is a defence if the licensee

reasonably believes that another person has given the consumer a

reverse mortgage information statement in the last 90 days.

Note:

For the purposes of subsection (2), a defendant bears an evidential

burden in relation to the matter in subsection (5) (see subsection

13.3(3) of the Criminal Code).

133DC Making reverse mortgage information statement available

on website of credit provider or credit assistance provider

When this section applies

(1) This section applies if a licensee:

(a)

is:

(i) a person who provides, or holds himself or herself out

as able to provide, credit assistance relating to credit

contracts for reverse mortgages; or

(ii) a credit provider under one or more credit contracts for

a reverse mortgages; and

(b) has a website that provides information about such contracts.

Reverse mortgages Schedule 2

Provisions applying to licensees Part 2

Consumer Credit and Corporations Legislation Amendment (Enhancements) Bill 2011 No.

, 2011 31

Requirement

(2) The licensee must make available through the website a reverse

mortgage information statement.

Civil penalty:

2,000 penalty units.

Offence

(3) A person commits an offence if:

(a) the person is subject to a requirement under subsection (2);

and

(b) the person engages in conduct; and

Criminal penalty:

50 penalty units.

133DD Making reverse mortgage information statement available in

other situations

When this section applies

(1) This section applies if:

(a) a licensee is:

(i) a person who provides, or holds himself or herself out

as able to provide, credit assistance relating to credit

contracts for reverse mortgages; or

(ii) a credit provider under one or more credit contracts for

reverse mortgages; and

(b)

either:

(i) a consumer asks the licensee (otherwise than by using a

website of the licensee) for a reverse mortgage

information statement; or

(ii) the regulations require a consumer, in circumstances

prescribed by the regulations, to be given a reverse

mortgage information statement; and

the contact details required by the regulations.

Schedule 2 Reverse mortgages

Part 2 Provisions applying to licensees

32 Consumer Credit and Corporations Legislation Amendment (Enhancements) Bill 2011

No. , 2011

Requirement

(2) The licensee must, in accordance with any requirements prescribed

by the regulations, give the consumer a reverse mortgage

information statement.

Civil penalty:

2,000 penalty units.

Offence

(3) A person commits an offence if:

(a) the person is subject to a requirement under subsection (2);

and

(b) the person engages in conduct; and

Criminal penalty:

50 penalty units.

Defences

(4) For the purposes of subsections (2) and (3), it is a defence if:

(a) the licensee has given the consumer, or reasonably believes

that someone else has given the consumer, a reverse

mortgage information statement; or

(b)

the

licensee:

(i) is a credit provider under one or more credit contracts

for reverse mortgages; and

(ii) reasonably believes that the consumer would not be

eligible to make a credit contract with the licensee for a

reverse mortgage; or

circumstances in which the licensee is not required to give

the consumer a reverse mortgage information statement.

Note:

For the purposes of subsection (3), a defendant bears an evidential

burden in relation to the matter in subsection (4) (see subsection

13.3(3) of the Criminal Code).

Reverse mortgages Schedule 2

Provisions applying to licensees Part 2

Consumer Credit and Corporations Legislation Amendment (Enhancements) Bill 2011 No.

, 2011 33

133DE Representations that use the term "reverse mortgage" etc.

Credit service providers

(1) A licensee must not, in providing or offering to provide a credit

service to a consumer, use either of the following terms (either

alone or in combination with other words or letters) in a

representation to the consumer about an actual or proposed credit

contract or mortgage:

(a) the phrase "reverse mortgage";

(b) another term (whether or not in English) of similar import to

the phrase "reverse mortgage".

Civil penalty:

2,000 penalty units.

Credit providers

(2) A licensee that is a credit provider must not use either of the

following terms (either alone or in combination with other words

or letters) in a representation to a consumer about an actual or

proposed credit contract or mortgage:

(a) the phrase "reverse mortgage";

(b) another term (whether or not in English) of similar import to

the phrase "reverse mortgage".

Civil penalty:

2,000 penalty units.

Defence

(3) For the purposes of subsections (1) and (2), it is a defence if:

(a) the representation truly represents that a credit contract:

(i) is or will be a credit contract for a reverse mortgage; or

(ii) is not or will not be a credit contract for a reverse

mortgage; or

(b) the representation truly represents that a mortgage:

(i) is or will be part of a reverse mortgage; or

(ii) is not or will not be part of a reverse mortgage.

11 At the end of section 179

Add:

Schedule 2 Reverse mortgages

Part 2 Provisions applying to licensees

34 Consumer Credit and Corporations Legislation Amendment (Enhancements) Bill 2011

No. , 2011

Presumption in favour of certain orders

(6) Subsection (7) applies if:

(a) the defendant is a credit provider who has contravened

section 133 by entering into, or increasing the credit limit of,

a credit contract (the illegal contract) that is not a credit

contract for a reverse mortgage; and

(b) the debtor's obligations under the illegal contract are secured

by a mortgage over the debtor's principal place of residence;

and

an assessment needed to be made to comply with section 128

in relation to the illegal contract:

(i) there was a credit provider (whether the defendant or

not) offering credit through a reverse mortgage (whether

or not the credit provider actually made such an offer to

the debtor); and

(ii) the debtor would have been eligible to enter into a credit

contract for the reverse mortgage; and

(iii) the credit contract for the reverse mortgage would not

have been unsuitable for the debtor under section 133;

and

(d) the plaintiff, or ASIC on behalf of the plaintiff, applies for an

order under this section to let the plaintiff reside in the place

to prevent or reduce loss or damage suffered or likely to be

suffered by the plaintiff vacating the place.

(7) The court must consider the order appropriate to prevent or reduce

the loss or damage and make the order unless the court is satisfied

that the order would adversely affect a person other than the debtor

and the defendant.

Reverse mortgages Schedule 2

Provisions applying to credit providers generally Part 3

Consumer Credit and Corporations Legislation Amendment (Enhancements) Bill 2011 No.

, 2011 35

Part 3--Provisions applying to credit providers

generally

National Consumer Credit Protection Act 2009

12 After subsection 17(15) of the National Credit Code

Insert:

Provisions for person other than debtor to occupy reverse

mortgaged property

(15A) If the credit contract for a reverse mortgage is to make provision

for a person other than the debtor to occupy the reverse mortgaged

property, the contract document must contain provisions that have

the following effect (whether or not the document also contains

other provisions relating to such occupation by such a person):

(a) the debtor may at any time (before, when or after the contract

is made):

(i) nominate to the credit provider a person who is to be

allowed to occupy the property (whether alone or with

other persons); and

(ii) revoke such a nomination by notice given to the credit

provider;

(b) while a nomination described in paragraph (a) is in force, the

nominated person has the same rights (against the credit

provider) to occupy the property as the debtor has or would

have apart from the death of the debtor or vacation of the

property by the debtor.

Note:

Other provisions contained in the contract document may, for

example, limit the kinds of persons whom the debtor may nominate to

the credit provider as persons who are to be allowed to occupy the

property.

13 After section 18 of the National Credit Code

Insert:

Schedule 2 Reverse mortgages

Part 3 Provisions applying to credit providers generally

36 Consumer Credit and Corporations Legislation Amendment (Enhancements) Bill 2011

No. , 2011

18A Provisions that must not be included in credit contract for

reverse mortgage

(1) A credit provider must not enter into a credit contract for a reverse

mortgage that provides a basis for beginning enforcement

proceedings relating to the contract for an event described in

subsection (3).

(2) A credit provider must not agree to change, or unilaterally change,

a credit contract for a reverse mortgage so that it provides a basis

for beginning enforcement proceedings relating to the contract for

an event described in subsection (3).

(3) For the purposes of subsections (1) and (2), the events are as

follows:

(a) the debtor failing to inform the credit provider that another

person occupies the reverse mortgaged property;

(b) the debtor failing to give the credit provider evidence that the

debtor, or another person nominated by the debtor to the

credit provider, occupies or occupied the reverse mortgaged

property;

unoccupied while it is the debtor's principal place of

residence;

(d) the debtor failing to pay a cost to a person other than the

credit provider;

(e) the debtor failing to comply with a provision of the credit

contract if the contract does not make it clear how the debtor

is to comply with the provision;

(f) the debtor breaching another credit contract with the credit

provider;

(g) an event that involves an act or omission by the debtor and is

prescribed by the regulations.

18B Disclosure if credit contract for reverse mortgage does not

protect tenancy of person other than debtor

(1) This section applies if a proposed credit contract for a reverse

mortgage does not include a provision (a tenancy protection

provision) for a person other than the debtor to have a right against

the credit provider to occupy the reverse mortgaged property.

Reverse mortgages Schedule 2

Provisions applying to credit providers generally Part 3

Consumer Credit and Corporations Legislation Amendment (Enhancements) Bill 2011 No.

, 2011 37

(2) A person must not provide a credit service relating to the contract

unless the person has told the debtor, in writing in the form (if any)

prescribed by the regulations, that the contract does not include a

tenancy protection provision.

Criminal penalty:

50 penalty units.

(3) Subsection (2) does not apply if the person is or will be the credit

provider under the contract.

(4) The credit provider must not enter into the contract unless the

credit provider has told the debtor, in writing in the form (if any)

prescribed by the regulations, that the contract does not include a

tenancy protection provision.

Criminal penalty:

50 penalty units.

(5) An offence against subsection (2) or (4) is an offence of strict

liability.

Note:

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

18C Independent legal advice before entry into credit contract for

reverse mortgage

(1) The regulations may regulate or prohibit the entry by a credit

provider into a credit contract for a reverse mortgage if the debtor

has not obtained legal advice, in accordance with the regulations,

about the contract or reverse mortgage.

(2) The regulations may provide for offences and civil penalties for

contraventions of regulations made for the purposes of

subsection (1).

(3) The penalties for offences described in subsection (2) must not be

more than 50 penalty units for an individual or 250 penalty units

for a body corporate.

(4) The civil penalties described in subsection (2) must not be more

than 500 penalty units for an individual or 2,500 penalty units for a

body corporate.

14 At the end of section 22 of the National Credit Code

Add:

Schedule 2 Reverse mortgages

Part 3 Provisions applying to credit providers generally

38 Consumer Credit and Corporations Legislation Amendment (Enhancements) Bill 2011

No. , 2011

(3) Subsection (1) does not apply to a contravention of a requirement

of section 18B.

15 At the end of section 26 of the National Credit Code

Add:

(6) A credit contract for a reverse mortgage may not prohibit an early

payment that:

(a) is made in the circumstances described in paragraph

86A(1)(a); and

(b) is of the amount described in paragraph 86A(1)(b).

16 After paragraph 33(2)(a) of the National Credit Code

Insert:

(aa) in the case of a continuing credit contract for a reverse

mortgage--12 months; or

17 After paragraph 33(2)(b) of the National Credit Code

Insert:

(ba) in the case of a reverse mortgage not involving a continuing

credit contract--12 months; or

18 After section 67 of the National Credit Code

Insert:

67A Changes to tenancy protection in credit contracts for reverse

mortgages

A purported change to a credit contract for a reverse mortgage that

makes provision for a person other than the debtor to occupy the

reverse mortgaged property is void so far as the change purports to:

(a) remove a provision required by subsection 17(15A) to be

contained in the contract document; or

(b) vary the contract so as to limit:

(i) the ability of the debtor to nominate to the credit

provider a person who is to be allowed to occupy the

reverse mortgaged property (whether alone or with other

persons); or

Reverse mortgages Schedule 2

Provisions applying to credit providers generally Part 3

Consumer Credit and Corporations Legislation Amendment (Enhancements) Bill 2011 No.

, 2011 39

(ii) the rights of a person nominated by the debtor to the

credit provider to occupy the property.

19 Division 1 of Part 5 of the National Credit Code (heading)

Repeal the heading, substitute:

Division 1--Ending of credit contract by debtor etc.

Subdivision A--Paying out contract etc.

20 After section 86 of the National Credit Code

Insert:

Subdivision B--Ending of reverse mortgage by credit provider

receiving value of reverse mortgaged property

86A Application of this Subdivision

(1) This Subdivision applies in relation to a credit contract for a

reverse mortgage and a mortgage securing the debtor's obligations

under the contract if:

(a) the debtor's accrued liability (whether or not due and

payable) under the contract is more than the amount (the

adjusted market value) worked out under subsection (2) for

the reverse mortgaged property; and

(b) the credit provider receives an amount at least equal to the

adjusted market value for the reverse mortgaged property

either:

(i) as a payment accepted from the debtor under the credit

contract; or

(ii) as proceeds of the sale by the credit provider of the

reverse mortgaged property.

(2) The adjusted market value for the reverse mortgaged property is

the amount worked out by:

(a) working out the market value of the property in accordance

with the regulations (if any); and

(b) adjusting that value in accordance with the regulations (if

any).

Schedule 2 Reverse mortgages

Part 3 Provisions applying to credit providers generally

40 Consumer Credit and Corporations Legislation Amendment (Enhancements) Bill 2011

No. , 2011

Regulations for the purposes of paragraph (b) may prescribe

different adjustments to be made in different circumstances.

86B Discharge of debtor's obligations under credit contract and

discharge of mortgage

(1) The debtor's obligations under the credit contract are discharged

by force of this subsection.

(2) The mortgage securing those obligations is discharged by force of

this subsection.

Note:

This section does not apply in some cases: see section 86E.

86C Credit provider must pay debtor excess of receipt over adjusted

market value for reverse mortgaged property

If the amount received by the credit provider exceeds the adjusted

market value for the reverse mortgaged property, the credit

provider must pay the excess to the debtor.

Note 1:

If the credit provider contravenes this requirement, the court may

order the credit provider to compensate anyone affected by the

contravention: see section 124.

Note 2:

This section does not apply in some cases: see section 86E.

86D Credit provider must not demand or accept further payments

(1) The credit provider must not:

(a) purport to require payment under the credit contract; or

(b) accept a payment purportedly under the credit contract.

Note 1:

If the credit provider contravenes this requirement, the court may

order the credit provider to compensate anyone affected by the

contravention: see section 124.

Note 2:

This section does not apply in some cases: see section 86E.

(2) To avoid doubt, subsection (1) does not apply to the payment (if

any) that is described in subparagraph 86A(1)(b)(i) and caused this

Subdivision to apply.

86E Cases in which sections 86B, 86C and 86D do not apply

Sections 86B, 86C and 86D do not apply if:

Reverse mortgages Schedule 2

Provisions applying to credit providers generally Part 3

Consumer Credit and Corporations Legislation Amendment (Enhancements) Bill 2011 No.

, 2011 41

(a) the market value of the reverse mortgaged property was

reduced by deliberate damage to the property caused by the

debtor or a person who occupied the property with the

debtor's consent; or

(b) the debtor engaged in fraud, or made a misrepresentation,

relating to the reverse mortgage before, at or after the time

the credit contract was made; or

86F Relationship between this Subdivision and other provisions

This Subdivision does not limit any of the other provisions of this

Division.

Subdivision C--Notice of first direct debit default

21 Subsections 88(1) and (2) of the National Credit Code

Repeal the subsections, substitute:

Enforcement of credit contract

(1) A credit provider must not begin enforcement proceedings against

a debtor in relation to a credit contract unless:

(a) the debtor is in default under the credit contract; and

(b) the credit provider has given the debtor, and any guarantor, a

default notice, complying with this section, allowing the

debtor a period of at least 30 days from the date of the notice

to remedy the default; and

(d) if the credit contract is for a reverse mortgage, the credit

provider has spoken to one of the following persons by

telephone or in person in that period and has thus both

confirmed that the debtor received the default notice and

informed the person of the consequences of failure to remedy

the default, or has made reasonable efforts to do so:

(i)

the

debtor;

(ii) a practising lawyer representing the debtor;

(iii) a person with a power of attorney relating to the

debtor's financial affairs.

Schedule 2 Reverse mortgages

Part 3 Provisions applying to credit providers generally

42 Consumer Credit and Corporations Legislation Amendment (Enhancements) Bill 2011

No. , 2011

Criminal penalty:

50 penalty units.

Note:

If a debtor or guarantor has given a credit provider a hardship notice

or a postponement request there may be extra requirements that the

credit provider must comply with before beginning enforcement

proceedings: see sections 89A and 94.

Enforcement of mortgage

(2) A credit provider must not begin enforcement proceedings against

a mortgagor to recover payment of money due or take possession

of, sell, appoint a receiver for or foreclose in relation to property

subject to a mortgage, unless:

(a) the mortgagor is in default under the mortgage; and

(b) the credit provider has given the mortgagor a default notice,

complying with this section, allowing the mortgagor a period

of at least 30 days from the date of the notice to remedy the

default; and

(d) if the mortgage secures an obligation under a credit contract

for a reverse mortgage, the credit provider has spoken to one

of the following persons by telephone or in person in that

period and has thus both confirmed that the mortgagor

received the default notice and informed the person of the

consequences of failure to remedy the default, or has made

reasonable efforts to do so:

(i)

the

mortgagor;

(ii) a practising lawyer representing the mortgagor;

(iii) a person with a power of attorney relating to the

mortgagor's financial affairs.

Criminal penalty:

50 penalty units.

Note:

If a mortgagor has given a credit provider a postponement request

there may be extra requirements that the credit provider must comply

with before beginning enforcement proceedings: see section 94.

22 After subsection 88(7) of the National Credit Code

Insert:

Some defaults are not a basis for a default notice

(7A) So far as a notice purporting to be a default notice relates to an

alleged default under a credit contract for a reverse mortgage that

Reverse mortgages Schedule 2

Provisions applying to credit providers generally Part 3

Consumer Credit and Corporations Legislation Amendment (Enhancements) Bill 2011 No.

, 2011 43

is an event described in subsection 18A(3), the notice is not a

default notice for the purposes of any of the following provisions:

(a) subsections (1) and (2) of this section;

(b)

section

93.

Note:

This has the effect that:

(a) if the credit provider begins enforcement proceedings relating to

the alleged default the credit provider will contravene

subsection (1) or (2) of this section (unless subsection (5) of this

section applies); and

(b) section 93 will affect the operation of an acceleration clause on

the basis of the alleged default.

(7B) To avoid doubt, subsection (7A) does not affect the status of the

notice as a default notice for the purposes of section 89, 94 or 95.

23 At the end of Division 2 of Part 5 of the National Credit

Code

Add:

93A Extra requirements for enforcing reverse mortgage if debtor's

liability exceeded value of reverse mortgaged property

(1) This section applies in relation to a credit contract for a reverse

mortgage and a mortgage securing the debtor's obligations under

the contract if:

(a) Subdivision B of Division 1 applies in relation to the contract

and the mortgage (see section 86A); and

(b) just before the amount was received by the credit provider as

described in paragraph 86A(1)(b), the debtor's accrued

liability described in paragraph 86A(1)(a) exceeded that

amount; and

sections 86B, 86C and 86D do not apply).

(2) If section 88 requires the credit provider to give the debtor or

mortgagor a default notice before beginning enforcement

proceedings to recover any of the excess, the credit provider must

not begin them unless:

(a) the default notice given to the debtor or mortgagor specifies:

(i) the amount received by the credit provider; and

Schedule 2 Reverse mortgages

Part 3 Provisions applying to credit providers generally

44 Consumer Credit and Corporations Legislation Amendment (Enhancements) Bill 2011

No. , 2011

(ii) the debtor's accrued liability just before that amount

was received; and

(iii) the conditions in section 86E that are met; and

(b) if the credit provider knows of a practising lawyer acting for

the debtor or mortgagor and the credit provider gave the

debtor or mortgagor the default notice by means other than

giving it to the lawyer--the credit provider has given the

lawyer a copy of the default notice at the same time as, or as

soon as practicable after, giving the debtor or mortgagor the

notice.

Criminal penalty:

50 penalty units.

24 After paragraph 111(1)(h) of the National Credit Code

Insert:

(ha)

subsection

17(15A);

25 After paragraph 111(2)(e) of the National Credit Code

Insert:

(ea)

subsection

17(15A);

26 After section 185 of the National Credit Code

Insert:

185A Records of nominations of persons to occupy reverse

mortgaged properties

(1) A credit provider under a credit contract for a reverse mortgage

that provides for the debtor to nominate to the credit provider a

person who is to be allowed to occupy the reverse mortgaged

property, and to revoke such a nomination, must keep in

accordance with the regulations a record of any such nominations

and revocations.

(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

Schedule 3 Small amount credit contracts

46 Consumer Credit and Corporations Legislation Amendment (Enhancements) Bill 2011

No. , 2011

Schedule 3--Small amount credit contracts

National Consumer Credit Protection Act 2009

1 Subsection 5(1)

Insert:

small amount credit contract: a credit contract is a small amount

credit contract if:

(a) the contract is not a continuing credit contract; and

(b) the credit provider under the contract is not an ADI; and

a mortgage; and

(d) the credit limit of the contract is $2,000 (or such other

amount as is prescribed by the regulations) or less; and

(e) the term of the contract is 2 years (or such other number of

years as is prescribed by the regulations) or less; and

(f) the contract meets any other requirements prescribed by the

regulations.

2 At the end of section 111

Add:

Division 7 imposes requirements in relation to the website of a

licensee who provides credit assistance in relation to small amount

credit contracts. It also restricts a licensee from providing credit

assistance to a consumer who is a debtor under a small amount

credit contract.

3 At the end of Part 3-1

Add:

Small amount credit contracts Schedule 3

Consumer Credit and Corporations Legislation Amendment (Enhancements) Bill 2011 No.

, 2011 47

Division 7--Small amount credit contracts

124A Licensee's website must comply with requirements prescribed

by the regulations

Requirement

(1) If a licensee has a website that represents that the licensee

provides, or is able to provide, credit assistance to consumers in

relation to small amount credit contracts, the licensee must ensure

that the website complies with the requirements prescribed by the

regulations.

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:

50 penalty units.

124B Prohibition on suggesting, or assisting with, small amount

credit contracts

Prohibition

(1) A licensee must not provide credit assistance to a consumer by

suggesting that the consumer apply, or assisting the consumer to

apply, for a small amount credit contract with a particular credit

provider if the licensee knows, or is reckless as to whether, the

consumer is a debtor under another small amount credit contract.

Civil penalty:

2,000 penalty units.

Offence

(2) A licensee commits an offence if:

Schedule 3 Small amount credit contracts

48 Consumer Credit and Corporations Legislation Amendment (Enhancements) Bill 2011

No. , 2011

(a) the licensee provides credit assistance to a consumer by

suggesting that the consumer apply, or assisting the consumer

to apply, for a small amount credit contract with a particular

credit provider; and

(b) the consumer is a debtor under another small amount credit

contract.

Criminal penalty:

50 penalty units.

(3) For the purposes of subsections (1) and (2), it is a defence if the

licensee reasonably believes that the consumer is not a debtor

under another small amount credit contract.

Note:

For the purposes of subsection (2), a defendant bears an evidential

burden in relation to the matter in subsection (3) (see subsection

13.3(3) of the Criminal Code).

124C Prohibition on suggesting, or assisting with, credit limit

increases

Prohibition

(1) A licensee must not provide credit assistance to a consumer who is

a debtor under a small amount credit contract by suggesting that

the consumer apply, or assisting the consumer to apply, for an

increase to the credit limit of the contract.

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:

50 penalty units.

4 After Part 3-2B

Insert:

Small amount credit contracts Schedule 3

Consumer Credit and Corporations Legislation Amendment (Enhancements) Bill 2011 No.

, 2011 49

Part 3-2C--Licensees that are credit providers

under credit contracts: additional rules

relating to small amount credit contracts

Division 1--Introduction

133C Guide to this Part

This Part has rules that apply to licensees that are credit providers

under small amount credit contracts. It applies in addition to the

general rules in Part 3-2.

Division 2 imposes requirements in relation to the websites of

credit providers. It also restricts credit providers from entering into,

or increasing the credit limit of, small amount credit contracts.

Division 2--Small amount credit contracts

133CA Credit provider's website must comply with requirements

prescribed by the regulations

Requirement

(1) If a licensee has a website that can be used by a consumer to apply

for, or make an inquiry about, a small amount credit contract under

which the licensee would be the credit provider, the licensee must

ensure that the website complies with the requirements prescribed

by the regulations.

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

Schedule 3 Small amount credit contracts

50 Consumer Credit and Corporations Legislation Amendment (Enhancements) Bill 2011

No. , 2011

Criminal penalty:

50 penalty units.

133CB Credit providers must not enter into small amount credit

contracts in certain circumstances

Prohibition

(1) A licensee must not enter into, or offer to enter into, a small

amount credit contract with a consumer who will be a debtor under

the contract if the licensee knows, or is reckless as to whether, the

consumer is a debtor under another small amount credit contract.

Civil penalty:

2,000 penalty units.

Offence

(2) A licensee commits an offence if:

(a) the licensee enters into, or offers to enter into, a small amount

credit contract with a consumer; and

(b) the consumer is, or will be, a debtor under that contract; and

contract.

Criminal penalty:

50 penalty units.

(3) For the purposes of subsections (1) and (2), it is a defence if the

licensee reasonably believes that the consumer is not a debtor

under another small amount credit contract.

Note:

For the purposes of subsection (2), a defendant bears an evidential

burden in relation to the matter in subsection (3) (see subsection

13.3(3) of the Criminal Code).

133CC Credit providers must not refinance credit provided under

small amount credit contracts

Prohibition

(1) A licensee must not enter into, or offer to enter into, a small

amount credit contract with a consumer who will be a debtor under

the contract if some or all of the credit provided under the contract

is to refinance some or all of the credit provided to the consumer

under another small amount credit contract.

Small amount credit contracts Schedule 3

Consumer Credit and Corporations Legislation Amendment (Enhancements) Bill 2011 No.

, 2011 51

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:

50 penalty units.

(3) For the purposes of subsections (1) and (2), it is a defence if the

licensee reasonably believes that none of the credit provided under

the small amount contract is to refinance any of the credit provided

to the consumer under another small amount credit contract.

Note:

For the purposes of subsection (2), a defendant bears an evidential

burden in relation to the matter in subsection (3) (see subsection

13.3(3) of the Criminal Code).

133CD Credit providers must not increase the credit limit of small

amount credit contracts

Prohibition

(1) A licensee who is a credit provider under a small amount credit

contract must not increase the credit limit of the contract.

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:

50 penalty units.

5 Paragraph 180(1)(b)

Repeal the paragraph, substitute:

Schedule 3 Small amount credit contracts

52 Consumer Credit and Corporations Legislation Amendment (Enhancements) Bill 2011

No. , 2011

(b) the engaging in the activity contravenes any of the following:

(i) section 29 (which requires the holding of a licence);

(ii) section 124B or 124C (which deal with credit assistance

in relation to small amount credit contracts);

(iii) section 133CB, 133CC or 133CD (which deal with

entering into small amount credit contracts etc.);

Caps on costs etc. for credit contracts Schedule 4

Consumer Credit and Corporations Legislation Amendment (Enhancements) Bill 2011 No.

, 2011 53

Schedule 4--Caps on costs etc. for credit

contracts

National Consumer Credit Protection Act 2009

1 Subsections 17(4) to (6) of the National Credit Code

Omit "The contract", substitute "In the case of a credit contract other

than a small amount credit contract, the contract".

2 Section 23 of the National Credit Code (heading)

Repeal the heading, substitute:

23 Prohibited monetary obligations--general

3 Subsection 23(1) of the National Credit Code

After "credit contract", insert "(other than a small amount credit

contract)".

4 After section 23 of the National Credit Code

Insert:

23A Prohibited monetary obligations--small amount credit

contracts

(1) A small amount credit contract must not impose a monetary

liability on the debtor:

(a) in respect of an interest charge (including a default rate of

interest) under the contract; or

(b) in respect of a fee or charge prohibited by this Code; or

amount that may be charged consistently with this Code.

(2) If a provision of a small amount credit contract imposes a

monetary liability prohibited by subsection (1) then:

(a) each provision (the void provisions) of the contract that

imposes a monetary liability of a kind referred to in that

subsection (whether or not the liability is imposed

Schedule 4 Caps on costs etc. for credit contracts

54 Consumer Credit and Corporations Legislation Amendment (Enhancements) Bill 2011

No. , 2011

consistently with this Code) is void to the extent that the

provision relates to the liability; and

(b) 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.

5 Section 24 of the National Credit Code (heading)

Repeal the heading, substitute:

24 Offences related to prohibited monetary obligations--credit

providers

6 After subsection 24(1) of the National Credit Code

Insert:

(1A) A credit provider must not:

(a) enter into a small amount credit contract on terms imposing a

monetary liability prohibited by subsection 23A(1); or

(b) require or accept payment of an amount in respect of a

monetary liability that cannot be imposed consistently with

this Code.

Criminal penalty:

100 penalty units.

7 Subsection 24(2) of the National Credit Code

Omit "Subsection (1) is an offence", substitute "Subsections (1) and

(1A) are offences".

8 After section 24 of the National Credit Code

Insert:

24A Offences related to prohibited monetary obligations--credit

assistance providers

(1) A person must not provide credit assistance to a consumer by:

(a) suggesting that the consumer apply for a particular small

amount credit contract with a particular credit provider; or

(b) assisting the consumer to apply for a particular small amount

credit contract with a particular credit provider;

Caps on costs etc. for credit contracts Schedule 4

Consumer Credit and Corporations Legislation Amendment (Enhancements) Bill 2011 No.

, 2011 55

if the person knows, or is reckless as to whether, the contract will

contravene subsection 23A(1).

Criminal penalty:

50 penalty units.

(2) If a person provides credit assistance to a consumer that is

prohibited by subsection (1):

(a) the consumer is not liable (and is taken never to have been

liable) to pay any fees or charges to the person in relation to:

(i) the credit assistance; or

(ii) any other services provided by the person in connection

with the credit assistance; and

(b) the consumer may recover as a debt due to the consumer the

amount of any such fees or charges paid by the consumer to

the person.

9 After section 27 of the National Credit Code

Insert:

27A Application of this Division

This Division does not apply to a small amount credit contract.

10 Section 31 of the National Credit Code

Before "The regulations", insert "(1)".

11 At the end of section 31 of the National Credit Code

Add:

(2) Subsection (1) does not apply to a small amount credit contract.

12 After section 31 of the National Credit Code

Insert:

31A Restrictions on fees and charges for small amount credit

contracts

(1) A small amount credit contract must not impose or provide for fees

and charges if the fees and charges are not of the following kind:

(a) a fee or charge (a permitted establishment fee) that reflects

the credit provider's reasonable costs of determining the

Schedule 4 Caps on costs etc. for credit contracts

56 Consumer Credit and Corporations Legislation Amendment (Enhancements) Bill 2011

No. , 2011

application for credit and the initial administrative costs of

providing the credit under the contract;

(b) a fee or charge (a permitted monthly fee) that is payable on a

monthly basis starting on the day the contract is entered into;

payment under the contract;

(d) a government fee, charge or duty payable in relation to the

contract.

Note:

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.

Maximum amount of permitted establishment fee

(2) The amount of a permitted establishment fee that may be imposed

or provided for under a small amount credit contract must not

exceed 10% of the adjusted credit amount in relation to the

contract.

Maximum amount of permitted monthly fee

(3) The amount of a permitted monthly fee that may be imposed or

provided for under a small amount credit contract must not exceed

2% of the adjusted credit amount in relation to the contract.

13 After Division 4 of Part 2 of the National Credit Code

Insert:

Division 4A--Annual cost rate of certain credit contracts

32A Prohibitions relating to credit contracts if the annual cost rate

exceeds 48%

Entering into a credit contract

(1) A credit provider must not enter into a credit contract if the annual

cost rate of the contract exceeds 48%.

Criminal penalty:

50 penalty units.

Caps on costs etc. for credit contracts Schedule 4

Consumer Credit and Corporations Legislation Amendment (Enhancements) Bill 2011 No.

, 2011 57

Provision of credit assistance

(2) A person must not provide credit assistance to a consumer by

suggesting that the consumer apply, or assisting the consumer to

apply, for a particular credit contract with a particular credit

provider if the person knows, or is reckless as to whether, the

annual cost rate of the contract exceeds 48%.

Criminal penalty:

50 penalty units.

(3) If a person provides credit assistance to a consumer that is

prohibited by subsection (2):

(a) the consumer is not liable (and is taken never to have been

liable) to pay any fees or charges to the person in relation to:

(i) the credit assistance; or

(ii) any other services provided by the person in connection

with the credit assistance; and

(b) the consumer may recover as a debt due to the consumer the

amount of any such fees or charges paid by the consumer to

the person.

Application

(4) This section does not apply if:

(a) the credit provider is an ADI; or

(b) the credit contract is a small amount credit contract or

bridging finance contract.

32B Calculation of annual cost rate

(1) The annual cost rate of a credit contract must be calculated as a

nominal rate per annum, together with the compounding frequency,

using the formula:

100%

�

where:

n is the number of repayments per annum to be made under the

credit contract (annualised if the term of the contract is less than 12

months), except that:

(a) if repayments are to be made weekly--n is 52.18; and

(b) if repayments are to be made fortnightly--n is 26.09; and

Schedule 4 Caps on costs etc. for credit contracts

58 Consumer Credit and Corporations Legislation Amendment (Enhancements) Bill 2011

No. , 2011

between repayments--n is to be derived from the interval

selected for the purposes of the definition of j in

subsection (2).

r is the solution of the equation specified in subsection (2).

(2) The equation for the purposes of the definition of r in

subsection (1) is:

( )

j = 0

where:

is the amount of credit to be provided under the credit contract

at time j (the value of j for the provision of the first amount of

credit is taken to be zero).

is the credit cost amount (if any) for the credit contract that is

payable by the debtor at time j in addition to the repayments R

j is the time, measured as a multiple (not necessary integral) of:

(a) if the credit contract does not provide for a constant interval

between contractual repayments--an interval of any kind

selected by the credit provider as the unit of time; or

(b) otherwise--the interval between contractual repayments that

will have elapsed since the first amount of credit is provided

under the credit contract.

is the repayment to be made at time j.

t is the time, measured as a multiple of the interval between

contractual repayments (or other interval so selected), that will

elapse between:

(a) the time when the first amount of credit is provided under the

credit contract; and

(b) the time when the last repayment is to be made under the

contract.

Caps on costs etc. for credit contracts Schedule 4

Consumer Credit and Corporations Legislation Amendment (Enhancements) Bill 2011 No.

, 2011 59

Credit cost amount

(3)

The

credit cost amount for the credit contract is the sum of the

following amounts if they are ascertainable:

(a) the amount of credit fees and charges payable in relation to

the contract;

(b) the amount of a fee or charge payable by the debtor (whether

or not payable under the contract) to:

(i) any person (whether or not associated with the credit

provider) for an introduction to the credit provider; or

(ii) any person (whether or not associated with the credit

provider) for any service if the person has been

introduced to the debtor by the credit provider; or

(iii) the credit provider for any service relating to the

provision of credit, other than a service referred to in

subparagraph (ii);

(4) For the purposes of subsection (3), the amounts referred to in that

subsection:

(a) include an amount that is payable even if the credit is not

provided; but

(b) do not include an amount of a government fee, charge or duty

payable in relation to the credit contract.

Tolerances and assumptions etc.

(5) The annual cost rate must be correct to at least the nearest one

hundredth of 1% per annum.

(6) In calculating the annual cost rate, reasonable approximations may

be made if it would be impractical or unreasonably onerous to

make a precise calculation.

Example: If repayments are to be made on a fixed day each month, it may be

assumed that repayments will be made on that day each month even

though the credit contract provides for payment on the preceding or

succeeding business day when the due date is not a business day.

(7) The tolerances and assumptions under sections 180 to 182 apply to

the calculation of the annual cost rate

Schedule 4 Caps on costs etc. for credit contracts

60 Consumer Credit and Corporations Legislation Amendment (Enhancements) Bill 2011

No. , 2011

Continuing credit contracts

(8) If the credit contract is a continuing credit contract, the following

assumptions also apply to the calculation of the annual cost rate of

the contract:

(a) that the debtor has drawn down the maximum amount of

credit that the credit provider has agreed to provide under the

contract;

(b) that the debtor will pay the minimum repayments specified in

the contract;

provider to a third person in relation to goods or services or

cash supplied by that third person to the debtor from time to

time--that the debtor will not be supplied with any further

goods or services or cash;

(d) if credit is provided in respect of cash supplied by the credit

provider to the debtor from time to time--that the debtor will

not be supplied with any further cash.

14 Subsection 34(6) of the National Credit Code

Omit "A statement", substitute "In the case of a credit contract other

than a small amount credit contract, a statement".

15 After Division 5 of Part 2 of the National Credit Code

Insert:

Division 5A--Additional rules relating to small amount

credit contracts

39A Limit on the application of amount of credit provided under a

small amount credit contract

(1) No part of the amount of credit provided under a small amount

credit contract may be applied to pay an amount (the prohibited

credit amount) to:

(a) the credit provider; or

(b) a person prescribed by the regulations.

(2) Subsection (1) does not apply to:

Caps on costs etc. for credit contracts Schedule 4

Consumer Credit and Corporations Legislation Amendment (Enhancements) Bill 2011 No.

, 2011 61

(a) an amount of a permitted establishment fee, or a permitted

monthly fee, payable in relation to the small amount credit

contract; or

(b) an amount of a government fee, charge or duty payable in

relation to the small amount credit contract; or

(3) If subsection (1) is contravened in relation to a small amount credit

contract:

(a) the debtor is not liable (and is taken never to have been

liable) to repay the prohibited credit amount to the credit

provider; and

(b) the debtor may recover as a debt due to the debtor any

amount paid to the credit provider to the extent that it relates

to the prohibited credit amount.

39B Limit on amount that may be recovered if there is default under

a small amount credit contract

(1) If there is a default in payment under a small amount credit

contract, the maximum amount that may be recovered (whether by

repayments under the contract or otherwise) by the credit provider

in relation to the contract must not exceed an amount that is twice

the adjusted credit amount in relation to the contract.

(2) Any provision of the small amount credit contract that confers a

greater right is void to the extent that it does so. If an amount is in

fact recovered in excess of this limitation, it may be recovered

back.

(3) This section does not apply to enforcement expenses.

16 At the end of subsection 111(1) of the National Credit

Code

Add:

; (j) subsection 32A(1).

17 After paragraph 111(2)(f) of the National Credit Code

Insert:

(fa)

subsection

32A(1);

Schedule 4 Caps on costs etc. for credit contracts

62 Consumer Credit and Corporations Legislation Amendment (Enhancements) Bill 2011

No. , 2011

18 Subsection 114(1) of the National Credit Code

After "order", insert "in relation to a credit contract other than a small

amount credit contract".

19 After subsection 114(1) of the National Credit Code

Insert:

(1A) On application being made by a debtor or a guarantor for an order

in relation to a small amount credit contract, the maximum penalty

that may be imposed by the court for a contravention of a key

requirement is an amount not exceeding the sum of the following

amounts:

(a) the amount of the permitted establishment fee payable in

relation to the contract;

(b) the total amount of the permitted monthly fees payable in

relation to the contract based on the term of the contract

when it was made.

20 Subsection 204(1) of the National Credit Code

Insert:

adjusted credit amount, in relation to a small amount credit

contract, means the first amount of credit that is, or is to be,

provided under the contract but does not include:

(a) the amount of a permitted establishment fee, or a permitted

monthly fee, payable in relation to the contract; and

(b) if subsection 39A(1) is contravened in relation to the

contract--the prohibited credit amount; and

21 Subsection 204(1) of the National Credit Code

Insert:

annual cost rate of a credit contract means the annual cost rate of

the contract calculated in accordance with section 32B.

22 Subsection 204(1) of the National Credit Code

Insert:

credit cost amount: see subsection 32B(3).

Caps on costs etc. for credit contracts Schedule 4

Consumer Credit and Corporations Legislation Amendment (Enhancements) Bill 2011 No.

, 2011 63

23 Subsection 204(1) of the National Credit Code

Insert:

permitted establishment fee: see paragraph 31A(1)(a).

24 Subsection 204(1) of the National Credit Code

Insert:

permitted monthly fee: see paragraph 31A(1)(b).

25 Subsection 204(1) of the National Credit Code

Insert:

prohibited credit amount: see subsection 39A(1).

26 Subsection 204(1) of the National Credit Code

Insert:

small amount credit contract has the same meaning as in section 5

of the National Credit Act.

Schedule 5 Consumer leases

64 Consumer Credit and Corporations Legislation Amendment (Enhancements) Bill 2011

No. , 2011

Schedule 5--Consumer leases

National Consumer Credit Protection Act 2009

1 Subsection 5(1) (definition of lessor)

Omit "means the lessor under a consumer lease", substitute "has the

same meaning as in section 204 of the National Credit Code".

2 Subsection 5(1) (definition of value of a credit contract,

mortgage, guarantee or consumer lease)

Repeal the definition.

3 Subsection 5(1)

Insert:

value of a credit contract, mortgage, guarantee or consumer lease:

see section 199.

4 Paragraph 147(7)(b)

Omit "sections 72 and 94", substitute "sections 177B and 179H".

5 Subsection 147(7) (note 1)

Omit "Note 1", substitute "Note".

6 Subsection 147(7) (note 2)

Repeal the note.

7 Subsection 199(2) (table items 2, 3, 6, 7, 9 and 12)

Omit ", guarantee or consumer lease", substitute "or guarantee".

8 Subsection 199(2) (at the end of the table)

Add:

Section 175F of the National Credit

Code

the value of the consumer lease to

which the order relates is not more

than:

(a) $40,000; or

(b) if a higher amount is prescribed

by the regulations--that higher

Consumer leases Schedule 5

Consumer Credit and Corporations Legislation Amendment (Enhancements) Bill 2011 No.

, 2011 65

amount.

Subsection 175G(6) of the National

Credit Code

the value of the consumer lease to

which the order relates is not more

than:

(a) $40,000; or

(b) if a higher amount is prescribed

by the regulations--that higher

amount.

Section 177D of the National Credit

Code

not applicable.

Section 177E of the National Credit

Code

not applicable.

Section 177F of the National Credit

Code

the value of the consumer lease to

which the order relates is not more

than:

(a) $40,000; or

(b) if a higher amount is prescribed

by the regulations--that higher

amount.

Section 179K of the National Credit

Code

not applicable.

Section 179Q of the National Credit

Code

the value of the consumer lease to

which the order relates is not more

than:

(a) $40,000; or

(b) if a higher amount is prescribed

by the regulations--that higher

amount.

Subsection 179R(3) of the National

Credit Code

the order is for an amount that is not

more than:

(a) $40,000; or

(b) if a higher amount is prescribed

by the regulations--that higher

amount.

9 Subsection 199(3)

Omit "of a credit contract, mortgage, guarantee or consumer lease",

substitute "of a credit contract, mortgage, guarantee or consumer lease".

10 Paragraph 200(1)(b)

Schedule 5 Consumer leases

66 Consumer Credit and Corporations Legislation Amendment (Enhancements) Bill 2011

No. , 2011

Omit "or 96", substitute ", 96, 177D or 179K".

11 Subsection 76(8) of the National Credit Code

Repeal the subsection.

12 Subsection 87(6) of the National Credit Code

Repeal the subsection.

13 Section 92 of the National Credit Code

Repeal the section.

14 Subsection 173(1) of the National Credit Code

Repeal the subsection, substitute:

(1) A consumer lease must be in the form of a written lease document:

(a) signed by the lessor and the lessee; and

(b) containing the information required by this Division.

(1A) Subject to subsection (2), a consumer lease may consist of one or

Commonwealth of Australia Bills

CONSUMER CREDIT LEGISLATION AMENDMENT (ENHANCEMENTS) BILL 2012