Australian consumer credit laws

Have you ever been confused when it comes to credit issues or curious about what protections exist when you obtain a credit card or a loan? Australia has a set of consumer credit laws put in place to help prevent you from falling into debt or being taken advantage of by unsavoury lending practices.

Trying to decode laws can be a chore at the best of times, so we've put together this quick guide to help you understand what your rights are when it comes to credit. We also cover where you can lodge a complaint if you've been dealt with unfairly.

What are consumer credit laws?

Consumer credit laws are designed to protect people from predatory lending practices and to ensure that credit is dealt with responsibly, fairly and uniformly across Australia. The National Consumer Credit Protection Act (2009) replaced individual state and territory legislation and appointed the Australian Securities and Investment Commission (ASIC) as the sole regulator for credit law.

It's important to know that consumer credit laws only apply if over 50% of the credit is being used for personal purposes. Business credit is covered by different regulations.

When do consumer credit laws apply?

Consumer credit laws apply to almost any area where the borrowing and lending of money to individuals is involved. It can be split up into a few main regulatory areas:

• Credit provider registration. Anyone who's providing credit, whether they're a bank, broker or private lender, must be licensed or registered by ASIC (Australian Securities and Investments Commission) and is bound by certain laws.
• Credit cards. Regulation involves not only the responsible issuing of credit cards but also how credit limits operate. To see the most recent amendments for credit cards, we have a brief guide here.
• Loans. Heavy regulation was brought in for loans of any form, particularly targeting predatory short-term or "payday" loan providers.
• Mortgages. This area of law specifically concerns "reverse mortgages", where homeowners trade future equity in their home for a loan, essentially using their home as security.

How am I protected by consumer credit laws?

In practice, consumer credit laws exist to protect you. Here are some of the main areas where you can take advantage of these protections:

• Key fact sheets. All financial institutions (such as banks) are required to hand you a key fact sheet with credit card applications. This sheet summarises all the important information about the card, including interest rates, annual fees, credit limits and repayments. It can help you make an informed decision when signing up.
• Eligibility criteria. Lenders must ensure applicants meet certain eligibility requirements before issuing a credit card or loan. This includes making sure the borrower has the ability to actually repay the loan and meets other requirements such as age limits (e.g. you must be at least 18 to get a credit card). This helps prevent predatory lending or sending applicants into unexpected debt.
• Minimum repayment length. When you get a credit card statement, it must state how long it would take you to pay off the balance with minimum repayments only. This can help you plan your finances more easily.
• Credit limits. Maximum credit limits (the amount you can borrow) are restricted to what you can pay off over a 3-year period given your income. It factors in annual fees and interest rates to make it more accurate.
• Decide when to up your credit. Financial institutions can't pester you to raise your credit limit. Instead, you have complete control over when you want to be considered for a credit limit increase.

There are more protections involved in consumer credit laws, but the ones listed above are some of the most important at the consumer end, especially for credit cards. If you're interested in diving into more detail on the credit code, ASIC maintains a comprehensive database of regulatory resources.

What should I do if I have a problem with my bank or credit card company?

If you think your bank or credit card company has failed to follow a regulation, mistakenly issued you a debt or something else, here's what you should do according to ASIC's MoneySmart website:

1. Contact the business. Always contact the business first to explain the problem and see what they can do. If the problem isn't resolved, move to the next step.

2. Write a letter of complaint. A formal complaint should include the following:

• The word "complaint" in the subject line or letter heading.
• Your name, contact details and the date.
• Clear explanation of the problem.
• Copies of relevant documents (e.g. receipts, invoices).

3. Contact an independent body. Where a formal complaint to the business fails, a complaint to an independent body can help. As long as the business hasn't responded to your complaint promptly or satisfactorily, it will hear your complaint for free. The Australian Financial Complaints Authority (AFCA) is the body to contact for bank and financial institution issues.

For customers who are unsure who to contact, you can ring up ASIC's infoline for assistance on 1300 300 630.