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Consumer Credit (Queensland) Amendment Bill 2002
CONSUMER CREDIT (QUEENSLAND)
AMENDMENT BILL 2002
EXPLANATORY NOTES
GENERAL OUTLINE
Policy Objectives of the legislation
The objectives of the Bill are to extend the operation of the Consumer
Credit Code ("the Code"), an appendix to the Consumer Credit
(Queensland) Act 1994 to:
(1) require the publishing of mandatory comparison rates for fixed
term consumer credit products; and
(2) to provide a time limitation period for civil penalty applications
under the Code.
The mandatory comparison rate is a method of reducing the total cost of
a loan, including interest and all fees and charges, to a single percentage
rate. This allows for much easier comparison of the overall cost of loan
products by consumers.
The Bill requires credit providers to make available to consumers the
comparison rates applicable to their products in advertising, and in
brochures in a form suitable for viewing in electronic form, for example, on
the Internet. This will provide consumers with an added tool in comparing
the cost of different credit products offered by different credit providers.
The Bill will also effect a further amendment by providing a 6 year time
limitation period for applications to the Court for the imposition of a civil
penalty on credit providers who breach any key requirement imposed by
the Code.
Reasons for the objectives and how they will be achieved
Mandatory Comparison Rates
The Code is an appendix to the Consumer Credit (Queensland) Act
1994, which provides protection to consumers borrowing money for
personal, domestic or household purposes.
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Consumer Credit (Queensland) Amendment Bill 2002
A central feature of the Code is that it requires lenders to fully disclose
important features of the loan prior to the borrower entering into a loan
contract. The types of features include such critical things as the interest
rate and any fees and charges that are payable in connection with the loan.
Since the introduction of the Code in 1996, lenders have introduced a
range of different fees and charges on consumer loan products. The
combination of fees and charges and interest rates has made it increasingly
difficult for consumers to compare the cost of credit between different
lenders and different products.
The main objective of this Bill is to require credit providers to make
available to consumers the comparison rates applicable to their products in
advertising and in brochures or electronic form, such as the Internet. This
will provide consumers with an added tool in comparing the cost of
different credit products offered by different credit providers.
Time Limitation Period
A further objective of the Bill will be to provide a 6 year time limitation
period for commencing civil penalty applications under the Code.
The Code provides that in the event of a credit provider breaching a key
requirement of the Code, the Government Consumer Agency may make
application to the Court seeking the imposition of a civil penalty against the
credit provider in an amount of up to $500,000.
Section 10(5) of the Limitation of Actions Act 1974 (Qld) provides a 2
year time limitation period for the commencement of an action to recover a
penalty or forfeiture or sum by way of a penalty or forfeiture. All States
and Territories have an equivalent provision.
An action by the Government Consumer Agency seeking the imposition
of a civil penalty against a credit provider who breaches the Code is an
action to recover a penalty or forfeiture. Consequently, a 2 year time
limitation period applies with time running from the date of the breach.
This is very limiting considering, for example, a home loan may be for
25 or 30 years. The 2 year time limitation is a major limiting factor on the
ability of Government Consumer Agencies in policing the actions of credit
providers and their compliance with the Code.
The amendment will increase the time limitation period to 6 years. This
is the time limitation period applicable to most other civil actions,
including tort and breach of contract based claims, and the civil penalty
provisions of the Corporations Law.
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Consumer Credit (Queensland) Amendment Bill 2002
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).
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 have been consulted. The necessary
two-thirds majority support of the States and Territories has approved the
amendments.
Two Consultation Drafts of the Bill were circulated to key stakeholders,
including consumer groups, mainstream financier industry bodies, the legal
profession and other lending organisations. Organisations consulted
included:
Australian Competition and Consumer Commission
Australian Bankers' Association
Citibank Ltd
Credit Union Services Corporation (Australia) Ltd
Australian Association of Permanent Building Societies
Mortgage Industry Association of Australia
Australian Finance Conference
Australian Consumers' Association
Consumer Credit Legal Centre (NSW) Inc
Legal Aid Commission (NSW)
Financial Services Consumer Policy Centre (NSW)
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Consumer Credit (Queensland) Amendment Bill 2002
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.
Insertion of new 113A Time Limitation
Clause 4 provides a time period of 6 years during which an application
may be brought for a contravention of a key requirement under Division 1
of Part 6 of the Code.
The 6 year time limitation period runs from the date of the breach and
will apply to applications for a declaration that there has been a
contravention of the Code and the imposition of a civil penalty for a
contravention.
This provision is intended to override the limitation periods provided in
State and Territory limitation of actions legislation that provide that an
action to recover a penalty or forfeiture or sum by way of a penalty or
forfeiture must be commenced within 2 years1.
Amendment of s140 Advertising
Clause 5 amends section 140 of the Code. It facilitates the incorporation
of Division 2, Part 9A and renders inoperative section 140(4), which
1 Specifically, see Limitation Act 1985 (ACT) s 15; Limitation Act 1969 (NSW) s 18;
Limitation of Actions Act (QLD) s 10(5); Limitation Act 1981 (NT) s 16; Limitation
of Actions Act 1936 (SA) s 37; Limitation Act 1974 (Tas) s 4(6); Limitation of
Actions Act 1958 (Vic) s 5(5); Limitation Act 1935 (WA) s 37.
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Consumer Credit (Queensland) Amendment Bill 2002
applied when the use of comparison rates was voluntary as was the case
prior to the introduction of Part 9A.
Clause 6 inserts a new Part 9A to the Code that requires the inclusion of
comparison rates in advertising and to make available comparison rate
schedules for prospective customers.
PART 9A COMPARISON RATES
Division 1--Preliminary
Object of Part
Section 146A identifies the objects of Part 9A and how these objects are
to be achieved.
The objects of Part 9A are to be achieved by assisting consumers to
identify the true cost of credit through the mandatory inclusion of
comparison rates in advertising conducted by credit providers if an interest
rate is advertised and through publishing schedules of comparison rates for
any such credit.
Part not to apply to continuing credit contracts
Section 146B provides that Part 9A does not apply to continuing credit
contracts such as credit cards. Consequently, Part 9A only applies to fixed
term credit contracts.
Definitions
Section 146C provides key definitions used in the Part 9A, including
comparison rate schedule, consumer credit product, credit advertisement,
finance broker and name.
Expiry of Part
Section 146D provides that Part 9A will sunset 3 years after it
commences.
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Consumer Credit (Queensland) Amendment Bill 2002
Division 2--Comparison rate in credit advertising
Comparison rate mandatory in advertisements containing annual
percentage rate
Section 146E provides that the relevant comparison rate must be
included in advertising when the advertisement contains an annual
percentage rate.
Sub-section (2) permits the inclusion of the relevant comparison rate
even if no annual interest rate is included.
The relevant comparison rate
Section 146F defines what the relevant comparison rate is for the
purposes of section 146E. It provides that the relevant comparison rate
which must be included in advertising is the comparison rate calculated for
whichever of the designated amounts and terms which most closely
represents the typical amount of credit and term provided by the credit
provider.
Sub-section (2) provides that the designated amounts and terms are to be
prescribed by regulation.
Sub-section (3) provides that a particular advertisement may state more
than one comparison rate.
Information about comparison rate
Section 146G provides that where a comparison rate must be included in
advertising pursuant to section 146E, certain information needs to be
included in the advertisement. This includes the name of the consumer
credit product, the amount of credit and the term to which each comparison
rate applies.
Sub-section (2) provides that if the comparison rate is calculated for an
amount of credit prescribed by the regulations, the advertisement must
clearly say that the comparison rate is calculated on the basis that security
(by mortgage or guarantee) is taken or state that the calculation is based on
the situation where no security is being taken. Inclusion of the word
"secured" or "unsecured" is sufficient for this purpose.
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Consumer Credit (Queensland) Amendment Bill 2002
Sub-section (3) provides that the advertisement must also say that a
comparison rate schedule is available at the premises of the credit provider,
finance broker or supplier to which the advertisement relates.
Warning about comparison rate
Section 146H requires the inclusion of a warning statement as to the
accuracy of comparison rates in circumstances where a comparison rate
appears in credit advertisement. The warning statement is to be prescribed
by regulation.
Sub-section (2) provides that if a comparison rate schedule consists of
more than 1 document, then a separate warning must be given on all
documents.
Sub-section (3) provides that the warning may state that a given
comparison rate is only accurate for the specified amount of credit and the
specified term.
Other requirements for comparison rate
Section 146I details other requirements that must be complied with when
a comparison rate is used in advertising on television, radio and in
electronic form such as the Internet.
Sub-section (1) requires a comparison rate to be identified as such when
it is used in credit advertising.
Sub-section (2) provides that the comparison rate must not be less
prominent than the annual percentage rate and the amount of any
repayment stated in the advertisement.
Sub-section (3) relates to advertising on television, the Internet and on
any other electronic display medium. If the annual percentage rate is
spoken and does not appear in text on the screen, the comparison rate must
be spoken also. If the annual percentage rate is displayed on the screen in
text, the comparison rate must also be displayed on the screen in text and
may be spoken. If the comparison rate is in spoken form, the warning and
other information may either be in spoken form or displayed on screen in
text. If the comparison rate is displayed on the screen in text, the warning
and other information must also be displayed on the screen in text.
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Consumer Credit (Queensland) Amendment Bill 2002
Division 3--Comparison rate schedules
The comparison rate schedule
Section 146J provides that a comparison rate schedule is a list of
comparison rates for consumer credit products of a credit provider.
When comparison rate schedule to be provided to consumers
Section 146K provides when comparison rate schedules are to be
provided to consumers.
Sub-sections (1) to (3) require a credit provider, finance broker and
linked supplier to display, and have available for collection by members of
the public, copies of the relevant comparison rate schedule. The credit
provider, finance broker or supplier must make available the schedule at
any of their premises where they display, or make available for collection
by members of the public, documents advertising consumer credit products
or at which members of the public may lodge applications for credit in
person.
Sub-section (4) provides that where a credit provider, finance broker or
supplier makes available material advertising consumer credit products on
the Internet or other electronic access system, then the credit provider,
finance broker or supplier must ensure access is available to the relevant
comparison rate by members of the public.
Sub-section (5) provides that a credit provider, finance broker or supplier
must ensure that the relevant comparison rate schedule accompanies any
application for credit that is given to consumers by the credit provider,
finance broker or supplier.
Relevant comparison rate schedule
Section 146L defines what the relevant comparison rate schedule for the
purposes of section 146K are.
In the case of the premises of a credit provider, the relevant schedule is a
schedule of all consumer credit products of the credit provider.
In the case of a finance broker, the schedule is of the consumer credit
products of each credit provider that the finance broker deals with, subject
to sub-section (2), which limits the number to the 6 main credit providers
with whose products the finance broker mainly deals.
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Consumer Credit (Queensland) Amendment Bill 2002
In the case of a supplier, the schedule is of the consumer credit products
of each linked credit provider.
In the case of the Internet or other public electronic system, the relevant
schedule is of the consumer credit product or products offered by each
credit provider concerned.
In the case of an application for credit, the relevant schedule is the
schedule for the consumer credit product or products to which the
application relates.
Comparison rates to be listed in schedule
Section 146M provides which comparison rates are to be listed in the
relevant comparison rate schedule. These rates are those comparison rates
calculated for each of the designated amounts of credit and terms for the
credit product concerned.
Sub-section (2) provides that designated amounts of credit and the terms
are those prescribed by regulation.
Sub-section (3) provides that the comparison rate schedule for any credit
product need not list any amounts that are not generally available in
connection with the product. The schedule must list any amounts that are
generally available in connection with that credit product whether or not it
is generally available on the terms specified or in the amount specified.
Sub-section (4) provides that where a comparison rate is calculated for
an amount of credit prescribed by the regulations, the comparison rate
schedule must state that the comparison rate has been calculated on the
basis of whether security in the form of a mortgage or guarantee will or
will not be taken by the credit provider. The use of the word "secured" or
"unsecured" is sufficient for this purpose.
Sub-section (5) provides that the comparison rate schedule must clearly
state the name of the product, the amount of credit and the term applicable
for each comparison rate and the annual percentage rate for each amount of
credit and term.
Form of comparison rate schedule
Section 146N details the form of the comparison rate schedule. The
schedule is to be in the form of either a printed document or text displayed
on a screen where access is via the Internet or public electronic system.
Comparison rates for different credit products may be shown on a single
schedule.
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Consumer Credit (Queensland) Amendment Bill 2002
Warning about comparison rate schedules
Section 146O requires that whenever a comparison rate schedule is
published it must include a warning as to its accuracy. The warning
statement is to be prescribed by regulation.
Sub-section (2) provides that where a comparison rate schedule
comprises of 2 or more documents, the warning must appear on each of the
documents.
Sub-section (3) provides that if the schedule is displayed in text on a
screen, the regulations may require more than 1 warning to be given.
Other requirements for comparison rate schedules
Section 146P provides a list of other requirements that a comparison rate
schedule must contain. These include a title "comparison rate schedule",
the name of the credit provider providing the credit product and the date of
issue of the schedule.
Sub-section (2) provides that a comparison rate schedule may contain
the name of the finance broker or supplier who displays the schedule and
contact information for the credit provider, finance broker or supplier.
Sub-section (3) provides that a comparison rate schedule is not to
contain any information other than that required or permitted by or under
the Code.
Offences for non-compliance with this Division
Section 146Q provides that where a credit provider, finance broker or
supplier contravenes a requirement of Division 3 in relation to comparison
rate schedules, they are guilty of an offence which attracts a penalty not in
excess of 100 penalty units.
Division 4--Miscellaneous
Calculation of comparison rate
Section 146R provides that the method of calculating comparison rates
may be prescribed in the regulations.
Sub-section (2) provides that in calculating the relevant comparison
rates, credit fees and charges that are not ascertainable need not be included
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Consumer Credit (Queensland) Amendment Bill 2002
in the calculation if their imposition or amount is dependent on events that
may or may not happen. This may be clarified by a regulation.
Compliance grace period following changes in credit, interest or fees
Section 146S provides a 7 day grace period for credit providers to alter
their advertising and comparison rate schedules where there is a change in
the annual percentage rate or any credit fees or charges.
Regulations exemptions and other matters
Section 146T provides that the regulations may make provision for
exempting any class of person or matter from the operation of Part 9A. In
addition, the regulations may make provision for requirements for credit
advertisements containing a comparison rate.
Amendment of Part 12 (Transitional provisions for Consumer Credit
(Queensland) Amendment Act ) 2002
Clause 7 inserts a new Division 2, Part 12 to provide for transitional
provisions for the new section 113A. It provides that section 113A does
not apply to contraventions of key requirements that occurred more than 2
years prior to the commencement of section 113A. This is to prevent any
retrospective operation of section 113A. However, section 113A will apply
to contraventions that occurred within the 2 year period prior to the
commencement of section 113A.
© State of Queensland 2002