ATTACHMENT

Details of the National Consumer Credit Protection Amendment Regulation 2012 (No. 1)

Section 1 - Name of Regulations

This regulation provides that the name of the Regulation is the National Consumer Credit Protection Amendment Regulation 2012 (No. 1).

Section 2 - Commencement

The Regulations commence on the day after they are registered for sections 1 to 3 and Schedule 1, and on the commencement of the National Consumer Credit Protection Amendment Regulations 2011 (No. 6) for section 4 and Schedule 2.

Section 3 - Amendment of National Consumer Credit Protection Regulations 2010

This regulation provides that Schedule 1 amends the National Consumer Credit Protection Regulations 2010 (the Principal Regulations).

Section 4 - Amendment of National Consumer Credit Protection Regulations 2010

This regulation provides that Schedule 2 amends the National Consumer Credit Protection Regulations 2010.

Schedule 1 - Amendments commencing on day after registration

Items 1 and 4 make a minor stylistic change to the box headed 'Estimated cost of this home loan' in a home loan Key Facts Sheet.  This highlights to consumers the amount that they have to pay back on the home loan for every dollar borrowed, allowing them to make a more informed decision about their home loan.  Item 4 amends the visual representation of this amendment in the Model of the home loan Key Facts Sheet in the Principal Regulations. 

Item 2 inserts regulation 49A, which gives home loan providers up until 1 October 2012 to modify their systems to transition to the revised obligations introduced by these regulations. The regulation allows a document to be taken as compliant with Schedule 5 if it complies with the requirements for a Key Fact Sheet set out in Schedule 5 as in force immediately before the commencement of Schedule 1 of these regulations.

Item 3 amends the box entitled Description of this home loan in a home loan Key Facts Sheet in Schedule 5, Part 1 of the Principal Regulations.  The change allows the producer of the home loan Key Facts Sheet to account for loans that may transition to a fixed, variable or a discount interest rate at the conclusion of the initial interest rate period.  This means home loan providers will be required to describe future changes to the interest rate during the life of the contract more accurately.

Items 5 and 7 insert note 16A for the term 'valuation fees' in the box located under the Estimated cost of this home loan table.  The note instructs the home loan provider to omit the phrase 'valuation fees' where it is not relevant to a particular home loan.  These include circumstances where:

•                 a credit provider charges a valuation fee in all cases; and

•                 the amount of the valuation fee is included in the amount for establishment fees mentioned in the Key Facts Sheet. 

Item 6 makes a minor change to the box entitled What happens at the end of the fixed rate period?  It introduces an additional paragraph that informs the consumer that when the fixed rate period ends, the rate will convert to a variable interest rate and tells them how much their current monthly repayment would change if interest rates do not change.  This will allow consumers to make a more informed decision about their home loan.

Item 8 substitutes a new note 18 to Paragraph 2.1 in Part 2 of Schedule 5.  Note 18 refers to a paragraph in the box entitled What happens if interest rates increase? The revised note allows the home loan provider to omit the paragraph if the information is not relevant or applicable to that type of loan.  For example if the interest rate will be fixed for the entire term, or if the loan is a variable rate loan for which a fixed interest rate component is not available at the conclusion of the initial fixed rate period. 

Schedule 2 - Amendments commencing on the commencement of the National Consumer Credit Protection Amendment Regulations 2011 (No. 6)

Item 1 inserts regulation 25M, which delays the commencement of the requirement in section 133BD of the Credit Act.  Section 133BD which requires credit card providers to provide consumers with a credit card Key Facts Sheet before they enter (or offer to enter) into a contract.  Credit card providers do not need to provide consumers with a credit card Key Facts Sheet if they provide the credit card to the consumer prior to 1 July 2012.  This gives credit card providers time to transition to the requirement to provide consumers with a Key Facts Sheet.  This gives industry certainty as to when they need to comply.

For the purposes of regulation 25M and existing regulation 25K, 'provides' is taken to mean when a credit card or document is dispatched by lenders, as opposed to when it is received by consumers. (for example, the date the credit card was posted rather than when it was received by the consumer).

Item 2 inserts regulation 28LFB, which provides that if a credit card provider makes available an application form in electronic form it can fulfil the requirement to provide a credit card Key Facts Sheet under section 133BD of the Credit Act by including a hyperlink to the credit card Key Facts Sheet.  This regulation makes it simpler for credit card providers to comply with the requirement to provide a Key Facts Sheet in cases where they offer online application forms.

Item 3 omits the word 'only' from paragraph 28LI(1)(a).  Under section 133BF of the Credit Act, a credit card provider must gain the express consent of a consumer to be able to send them credit limit increase invitations.  The request for consent from the credit provider must be by way of written communication.  Paragraph 28LI(1)(a) of the Principal Regulations currently requires the written communication to only contain the request for consent in relation to whether or not to receive credit limitations.  Item 3 removes this limitation so that the credit card provider can seek consent to other matters.

Item 4 inserts a new subsection into paragraph 28LI(1)(a), which allows the credit card provider to request consent to other matters when they request the consumer's permission to send credit limit increase invitations.  However, each matter must be consented to separately. The consent can be included in a document that may be soliciting consents of the consumer to other matters, but cannot, for example, be bundled with a consent to enable the credit provider to access a credit report.

Item 5 inserts a paragraph that specifies the consent that the licensee seeks under paragraph (1)(a) must only relate to the receipt of credit limit increase invitations. 

Items 6 and 7 modify regulation 28LJ, which provides that where a consumer has exceeded their credit card limit, the credit card provider must take reasonable steps to notify the consumer of that matter no later than two business days after becoming aware of the use of the card in excess of the limit.  For the purposes of this regulation 'notify' is taken to mean that steps have been taken to notify the consumer, not necessarily that the consumer has received the notification within the time period.  Item 7 omits a consequential reference caused by the amendment.

Existing regulation 25M allows an exemption from the requirement to allocate repayments to higher interest balances first where there is an agreement to apply the payment against a particular amount owed.  For the purposes of regulation 25M, the credit provider should respond to such a request within a reasonable period.  Therefore no amendment has been made.

Item 8 inserts Regulation 49B, which introduces transitional arrangements for the amendments introduced in Schedule 2 of this Regulation.  The person will be taken to comply with the law as amended by these Regulations if they complied with the requirements as in force immediately before the commencement of Schedule 2 of this Regulation.

Item 9 modifies subsection 79B(1), to exempt credit card providers from the requirement to provide a credit card Minimum Repayment Warning if the outstanding balance on the statement is $50 or less, there is no outstanding balance, or where account holder makes regular repayment under a special arrangement (such as under a hardship arrangement).  It also clarifies that the requirement to provide the Minimum Repayment Warning applies only to a statement of account for a credit card contract (and therefore not to other statements of accounts such as debit card accounts).

Item 10 modifies column 3 in the table in subregulation 79B(2) to clarify wording in the Minimum Repayment Warning.

Item 11 inserts a note after subregulation 79B(3), which specifies that a licensee may choose whether or not to provide the item for [repayment 2] in the Minimum Repayment Warning if the time to pay off the closing balance, making only the minimum payment each month, is two years or less.

Item 12 removes two definitions from subregulation 79B(7).  The definitions of 'penalty interest' and 'late fee' are no longer required following changes to the content of the Minimum Repayment Warning.

Item 13 and 14 modify the box entitled Description of credit card in a credit card Key Facts Sheet.  The text in the final panel of the box must now inform consumers that they can only be charged a fee for exceeding their credit limit if they separately agree to being charged that fee.  The lender may elect to disclose a phone number.  This provides consumers with further information, allowing them to make a more informed decision about their credit card.

Item 14 inserts the notes that correspond to the additional notes introduced by item 13.  Note 4 specifies that the sentence may be omitted if it is not relevant or applicable to the credit card contract.  This information would not be relevant for example, if a credit card provider did not charge customers a fee for exceeding their credit limit.  Note 5 gives the credit card provider the choice of providing a web address, a phone number or both. 

 

 

Statement of Compatibility with Human Rights

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

 

National Consumer Credit Protection Amendment Regulation 2012 (No. 1)

 

This Legislative Instrument is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

 

 

Overview of the Legislative Instrument

The Regulation amends the National Consumer Credit Protection Regulations 2010 (Principal Credit Regulations) to support the reforms introduced by the Credit Cards Act.

 

Human rights implications

This Legislative Instrument does not engage any of the applicable rights or freedoms.

 

Conclusion

This Legislative Instrument is compatible with human rights as it does not raise any human rights issues.