The Credit Contracts and Consumer Finance Amendment Act 2014 underwent its
final reading this week and is expected to receive royal assent on 4 June 2014.
The Amendment Act introduces significant changes to the Credit Contracts and
Consumer Finance Act 2003 (the CCCFA).
When do the amendments come into force?
The commencement date for these amendments has not yet been announced but all
provisions (as well as the new Responsible Lending Code) must come into force
over the next 12 months. We will keep you updated as information on transitional
periods is announced.
We have set out a summary of the key amendments, and relevant issues for
lenders, in the table below.
Do these amendments overlap with recent changes to the Fair Trading
The recent changes to the FTA, introduced under the Fair Trading Amendment
Act 2013 (see our previous Update) will be implemented
Accordingly, under the FTA, lenders, insurers and suppliers of goods on
credit must ensure that:
by 17 June this year extended warranty agreements and direct sales agreements
have been updated to reflect the new disclosure and cancellation obligations in
the FTA; and
by 17 March next year consumer credit contracts (and any other standard form
consumer contracts) do not include any “unfair contract terms”.
Where to from here?
If your business involves the entry into consumer credit contracts, you will
have to update your practices and processes to comply with the changes to the
CCCFA. To assist you with this process, Bell Gully has established a dedicated
CCCFA Team. Our team will be co-ordinating a programme over the next 12 months
to ensure you are ready when the changes come into force. This will include the
distribution of a compliance checklist to help you determine what you need to
change, seminars and ongoing alerts on the implementation of the key amendments
to the CCCFA, information on transition periods, consultation documents and
guidelines and a detailed analysis of the Responsible Lending Code (probably the
key change to the CCCFA).
|If you would like to enrol for the Bell
Gully CCCFA Compliance Programme (at no charge), please click here.|
CCCFA Amendment Act 2014
|Key Amendments||Relevant issues for
|Security over consumer goods
||Creditors are now prohibited from taking security
over certain essential consumer goods. Such goods include bedding, medical
equipment, identification documents and cooking equipment.|
this does not apply to PMSIs taken in the relevant goods.
|Creditors should review their consumer credit
contracts to ensure they are not taking security over the specified essential
consumer goods (other than as a PMSI). This will relate to contracts which grant
a general security interest over the debtor’s assets. |
also consider updating existing PPSR financing statements (and changing
collateral descriptions going forward), to ensure general descriptions do not
inadvertently cover the specified consumer goods.
Initial disclosure and cancellation statements
|Initial disclosure in relation to consumer credit
contracts, credit related insurance, repayment waivers and extended warranties
must now be made to the debtor before the contract is entered
into (rather than within the 15 day period currently prescribed by the CCCFA).
The period within which a debtor has a right to cancel a consumer credit
contract has been extended from 3 to 5 working days. Further, the CCCFA’s
prescribed cancellation statement has been revoked.
|All creditors should review their disclosure
procedures to ensure the required ‘initial disclosures’ are made at the point of
sale. Sending documentation, after the credit contract is entered into, will no
longer be sufficient.|
Creditors will need to review current cancellation
statements and amend initial disclosure documentation to reflect the 5 day
|Standing disclosure ||A new concept of ‘standing disclosure’ has been
introduced. This requires creditors to display their standard credit contract
terms (including repayment waiver and extended warranty terms) and costs
prominently on their website and in their business premises.||This applies to all credit contracts, not just
consumer credit contracts.|
|Credit card minimum repayment warning
||Credit card providers must provide a prescribed
warning to debtors about minimum repayments.||Credit card providers should update terms and
continuing disclosure statements to incorporate the new prescribed warning to
debtors about minimum repayments.|
|Commission on credit-related insurance
||Commission on credit-related insurance is now
prohibited where: (a) the creditor requires the debtor to obtain insurance from
a particular insurer (or has in place an arrangement to that effect); or (b) the
insurance is financed under the credit contract and the creditor has breached
the lender responsibilities in relation to that credit contract.||Creditors (and insurers that offer credit related
insurance) should review commission arrangements in light of the new
|Changes to fees and charges||Amendments have been introduced which affect the
requirements of the CCCFA relating to fees and charges, such as the definition
of ‘credit fees’ and the calculation for full prepayment of a consumer credit
contract.||All creditors should review fees and charges to
ensure these are still compliant under the new fee regime. |
|Lender responsibility principles
||New ‘lender responsibility principles’ will now
apply to creditors.|
A first draft of the Responsible Lending Code is
expected to be published during June.
|Creditors will have to review their practices to
ensure they comply with the new lender responsibility principles. These
principles are extended to apply to mortgage and security documentation and also
to guarantees and the treatment of guarantors.|
Similar codes are in place
offshore. Lenders should start thinking about how the new responsibility
principles will affect current practice. We will update you on the requirements
of the Responsible Lending Code as this develops.
documentation||All credit contracts must be in ‘plain language’
and expressed in a clear, concise and intelligible manner. ||All creditors should review credit contracts to
ensure they comply with the new plain-English requirements.|
|Prohibition on “drag-net”
clauses||Creditors can no longer use
“drag-net” clauses in their consumer credit contracts to allow the addition of
other consumer goods as security after the agreement has been signed.||This change takes effect immediately. Creditors
may no longer rely on these clauses and must remove them from future contract
This publication is necessarily brief and general in nature. You should seek professional advice before taking any action in relation to the matters dealt with in this publication.