National Consumer Credit Protection Act 2009

CHAPTER 3 - RESPONSIBLE LENDING CONDUCT  

PART 3-1 - LICENSEES THAT PROVIDE CREDIT ASSISTANCE IN RELATION TO CREDIT CONTRACTS  

Division 4 - Obligations of credit assistance providers before providing credit assistance for credit contracts  

SECTION 118   WHEN THE CREDIT CONTRACT MUST BE ASSESSED AS UNSUITABLE - ENTERING CONTRACT OR INCREASING THE CREDIT LIMIT  
Requirement to assess the contract as unsuitable

118(1)    

For a preliminary assessment under subsection 116(1) about entering a credit contract or increasing a credit limit of a credit contract, the licensee must assess that the contract will be unsuitable for the consumer if the contract will be unsuitable for the consumer under subsection (2) .

Civil penalty: 5,000 penalty units.

Note:

Even if the contract will not be unsuitable for the consumer under subsection (2) , the licensee may still assess that the contract will be unsuitable for other reasons.

Particular circumstances when the contract will be unsuitable

118(2)    
The contract will be unsuitable for the consumer if, at the time of the preliminary assessment, it is likely that:

(a)    the consumer will be unable to comply with the consumer ' s financial obligations under the contract, or could only comply with substantial hardship, or

(b)    the contract will not meet the consumer ' s requirements or objectives; or

(c)    if the regulations prescribe circumstances in which a credit contract is unsuitable - those circumstances will apply to the contract;

if the contract is entered in the period proposed for it to be entered or the credit limit is increased in the period proposed for it to be increased.

118(3)    
For the purposes of paragraph (2)(a) , it is presumed that, if the consumer could only comply with the consumer ' s financial obligations under the contract by selling the consumer ' s principal place of residence, the consumer could only comply with those obligations with substantial hardship, unless the contrary is proved.

118(3AA)    

For the purposes of paragraph (2)(a) , a consumer is taken to be able to comply with the consumer ' s financial obligations under a contract only with substantial hardship if:

(a)    the contract is a credit card contract; and

(b)    the consumer could not comply with an obligation to repay an amount equal to the credit limit of the contract within the period determined by ASIC under section 160F .

118(3A)    
(Repealed by No 87 of 2022)

Information to be used to determine if contract will be unsuitable

118(4)    
For the purposes of determining under subsection (2) whether the contract will be unsuitable, only information that satisfies both of the following paragraphs is to be taken into account:

(a)    the information is about the consumer ' s financial situation, requirements or objectives, or any other matter prescribed by the regulations under paragraph 117(1)(d) or (e) ;

(b)    at the time of the preliminary assessment:

(i) the licensee had reason to believe that the information was true; or

(ii) the licensee would have had reason to believe that the information was true if the licensee had made the inquiries or verification under section 117 .