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Consumer Credit (Queensland) Amendment Bill 2001
CONSUMER CREDIT (QUEENSLAND)
AMENDMENT BILL 2001
EXPLANATORY NOTES
GENERAL OUTLINE
Policy Objectives of the legislation
The intention of the Bill is to extend the operation of the Consumer
Credit Code (the Code), an appendix to the Consumer Credit (Queensland)
Act 1994, to cover short term "pay-day" loans.
"Pay day" loans are short term loans of relatively small amounts of
money offered by some financiers to consumers to be repaid on the
consumer's next pay day. At present, section 7(1) of the Code provides that
the Code does not apply loans of less than 62 days. As pay day loans are
typically for less than 62 days, they are not regulated.
Reasons for the objectives and how they will be achieved
The Code is intended to apply the same sets of rules universally to all
forms of consumer credit, that is credit for personal, domestic or household
purposes. When the Code was introduced in 1994, pay day lending did not
exist in Australia.
The parameters of the Code therefore need to be amended to ensure that
it remains universally applicable to all consumer lenders, including pay day
lenders.
The intention of the amendment is to add two conditions to the 62 day
limit to extend coverage of the Code. The 62 day exemption will remain,
but if the fees and charges for the loan exceed 5% of the amount of the loan
and the interest rate exceeds 24% per annum, then the Code will apply. As
pay day lenders charge far in excess of 5% in fees and 24% interest, they
will be captured by the Code.
Section 7(1) will then provide that the Code applies unless 3 conditions
are satisfied:
1. The loan is for less than 62 days; and
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Consumer Credit (Queensland) Amendment Bill 2001
2. The fees and charges do not exceed 5% of the amount of the
loan; and
3. The interest rate does not exceed 24% per annum.
These 3 conditions are intended to be cumulative all 3 have to be
satisfied to take advantage of the exemption in section 7(1).
Administrative Cost
The Bill will not result in additional costs to government.
Fundamental Legislative Principles
The Bill is consistent with Fundamental Legislative Principles.
Consultation
The Code is national uniform legislation and any amendments to the
Queensland Code automatically amends the legislation in other States and
Territories (except Western Australia, which has enacted alternative
consistent legislation, and Tasmania which adopts the Queensland
Amendment with approval of both Houses of the Tasmanian Parliament).
Consequently, two-thirds majority support from the State and Territory
Ministers for Fair Trading and Consumer Affairs must be obtained prior to
the introduction of any amendments to the Queensland Parliament.
Each of the State and Territory Fair Trading Agencies and Ministers for
Fair Trading and Consumer Affairs has been consulted and each of the
States and Territories has approved the amendments.
A Consultation Draft of the Bill was circulated to key stakeholders,
including consumer groups, mainstream financier industry bodies,
academics, the legal profession and pay day lending organisations.
Organisations consulted included:
Australian Consumers Association
Legal Aid (Queensland)
Consumer Law Centre Victoria
Consumer Credit Legal Centre New South Wales Inc.
Consumer Credit Legal Centre (Victoria) Inc.
Financial Counsellor's Association of Australia
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Consumer Credit (Queensland) Amendment Bill 2001
Financial Counselling Service (Queensland) Inc.
Queensland Consumers Association
Australian Bankers' Association
Credit Union Services Corporation Australia Limited
Australian Finance Conference
Australian Association of Permanent Building Societies
Law Council of Australia
Queensland Law Society
Clayton Utz Solicitors
Griffith University Law School
Monash University Faculty of Law
Australian Money Exchange Pty Ltd
ChequExchange Pty Ltd
Cash Converters
NOTES ON PROVISIONS
Short title
Clause 1 sets out the short title of the Act.
Commencement
Clause 2 provides for the commencement of the Act.
Act and Code amended
Clause 3 provides that the Act amends the Consumer Credit Code, an
appendix to the Consumer Credit (Queensland) Act 1994.
Amendment of s7 (Provisions of credit to which this Code does not
apply)
Clause 4 amends section 7(1) of the Consumer Credit Code.
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Consumer Credit (Queensland) Amendment Bill 2001
Clause 4(1) introduces a new section 7(1) that adds two additional
conditions to the 62 day threshold. The 62 day exemption will remain, but
if the fees and charges for the loan exceed 5% of the amount of the loan or
the interest rate exceeds 24% per annum, then the Code will apply.
Therefore, the Code applies unless 3 conditions are satisfied:
1. The loan is for less than 62 days; and
2. The fees and charges do not exceed 5% of the amount of the
loan; and
3. The interest rate does not exceed 24% per annum.
These 3 conditions are cumulative all 3 have to be satisfied to take
advantage of the exemption in section 7(1).
For the purposes of determining the 24% per annum interest rate
threshold, paragraph (c) permits the use of the provisions of the Code itself
to determine whether a particular transaction exceeds the interest rate
threshold. In particular section 26 of the Code, which provides the manner
in which interest charges are to be calculated, can be used for this purpose.
Clauses 4(2), 4(3) and 4(4) amend section 7(2) of the Code. This is to
overcome an unintended consequence of the amendment to section 7(1). If
a customer of a bank or authorised deposit taking institution overdraws a
cheque or savings account where there is implied agreement or agreement
by conduct to permit the overdrawing, the Code will apply to this situation
if the fee imposed exceeds 5% of the amount overdrawn. The credit
provider in this situation will not have the benefit of the exemption in
section 7(2) or section 7(1) and the Code will apply.
It is not the intention of amendment to apply the Code to this situation.
Consequently, the amendment makes it clear that the Code will only apply
to this situation if there has been express agreement between the parties to
provide credit.
Insertion of new Part 12
Clause 5 inserts a new Part 12 to the Code that provides a transitional
period for the amendment to section 7(1). It provides that the amendments
only apply to contracts entered into after the commencement of the
amendment to section 7(1).
© State of Queensland 2001