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 6 - Prohibition on suggesting, or assisting with, unsuitable credit contracts  

SECTION 124   PROHIBITION ON SUGGESTING TO CONSUMERS TO REMAIN IN UNSUITABLE CREDIT CONTRACTS  
Prohibition on suggesting to remain in unsuitable contracts

124(1)    

A licensee must not provide credit assistance to a consumer by suggesting that the consumer remain in a particular credit contract with a particular credit provider if the contract is unsuitable for the consumer under subsection (2).

Civil penalty: 5,000 penalty units.

When the contract is unsuitable

124(2)    
The credit contract is unsuitable for the consumer if, at that time the licensee provides the credit assistance:

(a) the consumer is, or is likely to be, unable to comply with the consumer ' s financial obligations under the contract, or only able to comply with substantial hardship; or

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

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

124(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.

124(3A)    

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 .

Information to be used to determine if contract is unsuitable

124(4)    
For the purposes of determining under subsection (2) whether the contract is 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 the licensee provides the credit assistance:

(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.

Credit contract not unsuitable under regulations

124(5)    
The regulations may prescribe particular situations in which a credit contract is taken not to be unsuitable for a consumer, despite subsection (2).

Offence

124(6)    

A person commits an offence if:

(a) the person is subject to a requirement under subsection (1); and

(b) the person engages in conduct; and

(c) the conduct contravenes the requirement.

Criminal penalty: 2 years imprisonment.

Defence

124(7)    
For the purposes of subsections (1) and (6), it is a defence if:

(a) the licensee suggested that the consumer remain in the credit contract because, after making reasonable inquiries, the licensee reasonably believed that there was no other credit contract that was not unsuitable for the consumer; and

(b) the licensee informed the consumer that there is a procedure under sections 72 and 94 of the National Credit Code for consumers in hardship.

Note: For the purposes of subsection (6), a defendant bears an evidential burden in relation to the matter in subsection (7) (see subsection 13.3(3) of the Criminal Code ).

124(8)    
The regulations may prescribe particular inquiries that must be made, or do not need to be made, for the purposes of paragraph (7)(a).