Consumer Credit Legislation Amendment (Enhancements) Act 2012 (130 of 2012)

Schedule 4   Caps on costs etc. for credit contracts

National Consumer Credit Protection Act 2009

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.

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.

32AA Prohibition relating to the annual cost rate of credit contracts - later increases of the annual percentage rate etc.

(1) If:

(a) a credit provider is a party to a credit contract (other than a small amount credit contract or bridging finance contract); and

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

(c) either or both of the following things (the varied matters ) occur after the contract is entered into:

(i) the annual percentage rate under the contract increases;

(ii) an amount referred to in subsection 32B(3) that is prescribed by the regulations increases;

the credit provider contravenes this subsection if the annual cost rate of the contract would have exceeded 48% at the time the contract was entered into if that or those varied matters had been taken into account at that time for the purposes of calculating the annual cost rate of the contract.

(2) A credit provider must not contravene subsection (1).

Criminal penalty: 50 penalty units.

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:

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

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

where:

where:

Aj 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).

Cj 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 Rj .

F is:

(a) if the credit contract is a medium amount credit contract - $400 (or such other amount as is prescribed by the regulations); or

(b) if the credit contract is not a medium amount credit contract and an amount is prescribed by the regulations in relation to the contract - that amount; or

(c) otherwise - $0.

j is the time, measured as a multiple (not necessarily 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.

Rj 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.

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);

(c) any other amount prescribed by the regulations.

(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.

(4A) Despite subsection (3), the regulations may provide that a specified amount, or an amount included in a specified class, is not an amount referred to in paragraph (3)(a) or (b).

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.

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;

(c) if credit is provided in respect of payment by the credit 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.