The new National Credit Code (“NCC”) came into effect on 1 January 2011, replacing the NSW Credit Code. The NCC is Schedule 1 of the National Consumer Credit Protection Act 2009 (Cth). This means that the Commonwealth, not the State, now has the power to regulate credit and finance broking.
When does the National Credit Code Apply?
The National Credit Code applies to the provision of credit by a financial institution to an individual (or strata corporation), where the credit is provided or intended to be provided wholly or predominantly:
- For personal, domestic or household purposes; or
- To purchase, renovate or improve residential property for investment purposes; or
- To refinance credit that has been provided wholly or predominantly to purchase, renovate or improve residential property for investment purposes.
The National Credit Code does not apply for credit provided wholly or predominantly for business purposes.
What happens when a transaction is unjust?
Section 76 of the National Consumer Credit Protection Act provides the court with the power reopen a transaction that is “unjust”, having regard to the public interest and to all the circumstances of the case. When assessing whether a transaction is “unjust”, the court may take into consideration the following:
- The bargaining power of the parties;
- Whether or not at the time of the transaction being entered into or changed, its provisions were the subject of negotiation;
- Whether or not any of the provisions of the transaction are unreasonably difficult to comply with or not reasonably necessary for the protection of the legitimate interests of a party to the transaction;
- Whether the debt, mortgagor or guarantor was unable to protect their interests because of his or her age or physical or mental condition;
- Whether or not, and if so when, independent legal or other expert advice was undertaken;
- Whether or not the credit provider knew, or could have ascertained by reasonable inquiry at the time, that the debtor could not pay in accordance with its terms, or without substantial hardship;
- Whether the credit provider used unfair pressure, undue influence or unfair tactics on the debtor.
Time Limits
An application under Section 76 must be made not more than 2 years after the relevant credit contract is rescinded, discharged or otherwise comes to an end.
If you have any questions regarding the new National Credit Code, you should contact our Finance Law specialists at Matthews Folbigg
Anna Zdrilic
Director, Finance Group
Phone: 02 9806 7425
Email: annaz@matthewsfolbigg.com.au
Terry Doust
Director, Finance Group
Phone: 02 9806 7420
