National Consumer Credit Protection Act 2009

SCHEDULE 1 - NATIONAL CREDIT CODE  

Note:

See section 3 of the National Credit Act.

PART 2 - CREDIT CONTRACTS  

Division 4A - Annual cost rate of certain credit contracts  

32B   Calculation of annual cost rate  

32B(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:

n × r × 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

(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).

32B(2)    
The equation for the purposes of the definition of r in subsection (1) is:

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

32B(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.

32B(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.

32B(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.

32B(5)    
The annual cost rate must be correct to at least the nearest one hundredth of 1% per annum.

32B(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.

32B(7)    
The tolerances and assumptions under sections 180 to 182 apply to the calculation of the annual cost rate.

Continuing credit contracts

32B(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.