Senate

Revised Explanatory Memorandum

Circulated by the authority of the Minister for Financial Services and Superannuation, the Hon Bill Shorten MP

Chapter 7 - Application provisions

Schedule 6 - Applications provisions

Part 2 - Schedule 1 (enhancements) to the amending Act

7.1 Schedule 6 of the Consumer Credit Legislation Amendment (Enhancements) Bill 2012 (Enhancements Bill) sets out the application provisions in relation to the amendments introduced by the other Schedules.

7.2 Schedule 6 provides that the following amendments in Schedule 1 will only apply to credit contracts, mortgages and guarantees (as relevant) that were entered into on or after the commencement of the amendment:

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changes to clarify the operation of provisions in relation to prohibited fees and charges (section 32 and 40 of the Code as amended) and to specifying that certain transactions will not be new credit contracts (section 40 of the Code as amended);

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changes to the provisions in relation to changes on the grounds of hardship, default notice requirements and postponement requests (sections 72, 73, 74, 88 and 94 of the Code as amended); and

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changes to the effect of hardship notices on enforcement proceedings introduced by section 89A of the Code.

7.3 Schedule 6 provides that the following amendments in Schedule 1 will only apply as follows:

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changes to section 128 of the NCCP Act (as amended) in relation to the liability of linked lessors for representations made by suppliers will only apply to representations made on or after the commencement of the Schedule [Schedule 6, item 4, section 128]; and

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the remedy for unfair or dishonest conduct by providers of credit services introduced in section 180A will only apply in relation to credit services provided on or after the commencement of the Schedule. [Schedule 6, item 4, section 180A]

7.4 Schedule 6 provides that section 124 of the Code (as amended) will apply to applications made on or after the commencement of Part 5 of Schedule 1 (whether the contraventions occurred before, on or after that commencement date). [Schedule 6, item 4, section 124]

7.5 The effect of the amendment to section 124 is not to make a conduct that was previously not a contravention of the Code a contravention. The effect is to increase the remedies available to a consumer from a contravention, and to also allow ASIC to have standing in relation to conduct that is a contravention of the Code (irrespective of whether the contravention has a civil effect or not).

Part 3 - Schedule 2 (reverse mortgages) to the amending Act

7.6 Schedule 6 provides that the following amendments in Schedule 2 will only apply to credit contracts that were entered into on or after the commencement of the Schedule:

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a presumption that under certain circumstances a court must consider orders appropriate if the order will let the plaintiff reside in their residence to prevent or reduce loss or damage suffered or likely to be suffered by the plaintiff vacating the residence (subsection 179(6) and (7)); [Schedule 6, item 4, subsections 179(6) and (7)]

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arrangements relating to the residency protections given to a person nominated by the debtor under a credit contract for a reverse mortgage (subsection 17(15A)); [Schedule 6, item 4, subsection 17(15A)]

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a reverse mortgage must not prohibit an early repayment of an amount that is more than (or at least equal to) the adjusted market value of a reverse mortgaged property (subsection 26(6)); [Schedule 6, item 4, subsection 26(6)]

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purported changes to a credit contract for a reverse mortgage relating to arrangements for nominated residents are void; and

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the requirement for credit providers to keep records of a debtor's nominations that another person be allowed to occupy the reverse mortgaged property.

7.7 Schedule 6 provides that section 18A of the Code will only apply to entry into, and changes to credit contracts on or after the commencement of the Schedule. The effect of section 18A is that credit providers are prohibited from entering into a credit contract for a reverse mortgage that provides a basis for enforcement proceeding in certain events such as the debtor breaching another credit contract with the credit provider. [Schedule 6, item 4, section 18A]

7.8 Schedule 6 provides that paragraphs 33(2)(aa) and (ab) of the Code will only apply to credit contracts entered into, before, on or after commencement of the Schedule. The effects of these paragraphs are that the maximum period for a statement of account for a credit contract for a reverse mortgage is 12 months. [Schedule 6, item 4, section 33]

7.9 Schedule 6 provides that the following amendments in Schedule 2 will only apply to credit contract and mortgages that were entered into before, on or after commencement of the Schedule:

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requirements that apply when a credit provider receives a payment which ends a reverse mortgage;

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circumstances under which a notice is not to be taken as a default notice; and

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notice requirements a credit provider must provider a debtor of a credit contract for a reverse mortgage if the credit provider seeks to enforce the debtor's liability above the value of the reverse mortgaged property.

7.10 Schedule 6 provides that subsections 88(1) and (2) only applies to credit contracts and mortgage entered into before, on or after commencement of the Schedule. These subsections relate to requirements on credit providers before they can begin enforcement proceedings against a debtor in relation to a credit contract or credit contract for a reverse mortgage. [Schedule 6, item 4, subsections 88(1) and (2)]

Part 4 - Schedule 3 (small amount credit contracts) to the amending Act

7.11 Schedule 6 provides that the following amendments to the NCCP Act apply in relation to short-term credit contracts entered into before, on or after commencement of Schedule 3:

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a prohibition on licensees suggesting, or assisting with, credit limit increases under a short-term credit contract (section 124A(1)(b)); and

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a prohibition on licensees increasing the credit limit of a short-term credit contract with a consumer who is the debtor under the contract (section 133CA(1)(b)).

[Schedule 6, item 4, paragraphs 124A(1)(b) and 133CA(1)(b)]

Part 5 - Schedule 4 (caps on costs etc for credit contracts) to the amending Act

7.12 Schedule 6 provides that the following amendments to the NCCP Act apply in relation to small amount credit contracts entered into on or after the commencement of the Schedule:

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a prohibition on providers of a small amount credit contracts from charging fees and charges other than certain prescribed charges (section 31A);

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the prohibition on credit providers from require or accepting payment by the debtor of fees or charge in relation to small amount credit contracts (section 31B);

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limits on the application of amount of credit provided under a small amount credit contract (section 39A);

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limits in the amount that may be recovered if there is a default under a small amount credit contract (section 39B); and

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the regulation-making power that would allow provisions to be introduced directing a credit provider to do specified things, where they are party to a small amount credit contract that is being repaid by a direct debit, and there has been a failure in the direct debit request (and payment has not occurred) (section 39C).

[Schedule 6, item 4, sections 31A, 31B, 39A, 39B and 39C]

7.13 The prohibitions on later increases to the annual percentage rate introduced in section 32AA, and the consequent penalty provisions in paragraphs 111(1)(k) and 111(2)(fb) only apply to credit contracts entered into on or after the commencement of the Schedule (on 1 July 2013). [Schedule 6, item 4, sections 32AA and paragraphs 111(1)(k) and (2)(fb)]

Part 6 - Schedule 5 (consumer leases) to the amending Act

7.14 Schedule 6 provides that subsection 199(2) of the NCCP Act only applies to consumer leases entered on or after commencement of the Schedule. This subsection relates to proceedings which can be dealt with under a small claims procedure. [Schedule 6, item 4, subsection 199(2)]

7.15 Schedule 6 provides that the amendments in relation to Part 11 of the Code apply in relation to consumer leases entered into on or after the commencement of Schedule 5.