Chapter 14 - Consumer credit law. At the end of this chapter you should understand: the background to the development of the National Credit Code, the types of credit contract regulated by the National Credit Code, the types of credit excluded from the operation of the National Credit Code, the key requirements that must be disclosed under a consumer credit contract,...
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Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Fundamentals of Business Law 4e by Barron & Fletcher Slides prepared by Kay Fanning Copyright © 2000 McGraw-Hill Australia Consumer credit law Chapter 14 Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Fundamentals of Business Law 4e by Barron & Fletcher Slides prepared by Kay Fanning Customer Credit Code • Introduced on November 1996 • Developed uniform credit laws in Australia • Includes: All credit providers for provision of credit, wholly or predominantly for personal, household or domestic purposes • Ensures: Obligations and liabilities clearly set out Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Fundamentals of Business Law 4e by Barron & Fletcher Slides prepared by Kay Fanning 14-3 Copyright â 2000 McGraw-Hill Australia Definitions Creditor: Person providing the credit • Debtor: Person receiving the credit Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Fundamentals of Business Law 4e by Barron & Fletcher Slides prepared by Kay Fanning 14-4 Copyright © 2000 McGraw-Hill Australia Credit provider A credit provider is any person who provides credit, where a charge is made for the provision of the credit Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Fundamentals of Business Law 4e by Barron & Fletcher Slides prepared by Kay Fanning 14-5 Copyright © 2000 McGraw-Hill Australia Types of transaction covered by the Code • Transactions where credit provided to individuals wholly or predominantly for personal, household or domestic purposes, i.e not for business or investment purposes Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Fundamentals of Business Law 4e by Barron & Fletcher Slides prepared by Kay Fanning 14-6 Copyright © 2000 McGraw-Hill Australia Types of credit covered by the Code • • • • • • • Continuing credit contracts e.g revolving credit Loan contracts e.g home loans personal loans bank term loans Consumer leases: i.e Hire of goods by a natural person (or strata corporation), where the lessee does not have a right or obligation to purchase the goods Credit sales contracts: i.e Credit is provided to a buyer in the course of a sale of goods or services Mortgages and guarantees: Related transactions providing security for the debt Hire purchase agreements: i.e A sale of goods by instalments, where there is a right or obligation to purchase the goods, with the cash price being less than the ultimate combined amounts paid for the goods) Credit-related insurance contracts: required by the credit provider for the consumer to enter Type of credit not covered by the code: Section7 Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Fundamentals of Business Law 4e by Barron & Fletcher Slides prepared by Kay Fanning 14-7 Copyright © 2000 McGraw-Hill Australia Disclosure requirements (before contract signed) Precontractual statement • Clearly understandable • Conforms to requirements set out in regulation attached to code Information statement • Form - Legal rights and obligations in plain English Written contract • Signed by debtor and credit provider • Information as set out in S15 of Code • Copy of contract (within 14 days) • Form - “Before you sign things you must know” (Penalty for non-compliance: $500 000 plus compensation for any loss suffered by debtor or guarantor) Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Fundamentals of Business Law 4e by Barron & Fletcher Slides prepared by Kay Fanning 14-8 Copyright © 2000 McGraw-Hill Australia Guarantee NOT ENFORCEABLE unless • in writing • signed by guarantor • contains warning to guarantor • guarantor advised to seek legal advice • warned of consequences should debtor fail to pay Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Fundamentals of Business Law 4e by Barron & Fletcher Slides prepared by Kay Fanning 14-9 Copyright © 2000 McGraw-Hill Australia Disclosure requirements (after contract signed) Regular statement of accounts • Continuing credit card contracts - at least every 40 days • Continuing credit contracts - between 40 days to three months • Other credit contracts - at least every six months Changes to the contract • Credit provider has unilateral rights - notified in writing • Credit provider and debtor mutually agree - notified in writing • Contract unjust or causes hardship - may appeal to Credit Tribunal/Court Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Fundamentals of Business Law 4e by Barron & Fletcher Slides prepared by Kay Fanning 14-10 Copyright © 2000 McGraw-Hill Australia Action against defaulting debtor Credit provider makes Default Notice Debtor, guarantor, mortgager 30 days to remedy Pay Mortgage reinstated Not pay Debt > $125 000 Debt < $125 000 Renegotiate Repossession Copyright Mortgage reinstated 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Fundamentals of Business Law 4e by Barron & Fletcher Slides prepared by Kay Fanning 14-11 Copyright © 2000 McGraw-Hill Australia Advertising • Regulated by the Code: • Cost must include: – the annual percentage rate or rates – a statement detailing any fees or charges that may apply Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Fundamentals of Business Law 4e by Barron & Fletcher Slides prepared by Kay Fanning 14-12 Copyright â 2000 McGraw-Hill Australia Linked credit Linked credit provider: Credit provider has a commercial relationship with a supplier of goods and services, to refer the credit provider to the prospective purchasers • Credit provider and supplier jointly liable to debtor for loss or damage, e.g from: - breach of contract - misrepresentation - failure to disclose relevant material under the terms of the contract Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Fundamentals of Business Law 4e by Barron & Fletcher Slides prepared by Kay Fanning 14-13 Copyright © 2000 McGraw-Hill Australia Consumer affairs and fair trading agencies Major functions: • Receive complaints • Take action on behalf of consumers • Investigate matters on behalf of government • Advise government Also: • Carry out research • Provide information to the community • Raise community awareness of Code’s operation • Provide legal representations to consumer Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Fundamentals of Business Law 4e by Barron & Fletcher Slides prepared by Kay Fanning 14-14 Copyright © 2000 McGraw-Hill Australia Penalties for breaching the Code Civil penalties for breach of key requirements: • Up to $500 000 for each separate breach, plus compensation for any loss suffered by debtor or guarantor • Order applied for by - Debtor - Guarantor - Credit provider - Government Consumer Agency Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Fundamentals of Business Law 4e by Barron & Fletcher Slides prepared by Kay Fanning 14-15 Copyright © 2000 McGraw-Hill Australia Penalties for breaching the Code Criminal penalties for breach of key requirements: • Up to $10 000 for each separate breach Application by Government Consumer Agency, Tribunal or Court Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Fundamentals of Business Law 4e by Barron & Fletcher Slides prepared by Kay Fanning 14-16 Copyright © 2000 McGraw-Hill Australia ... provision of the credit Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Fundamentals of Business Law 4e by Barron & Fletcher Slides prepared by Kay Fanning 1 4- 5 Copyright © 2000 McGraw-Hill... Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Fundamentals of Business Law 4e by Barron & Fletcher Slides prepared by Kay Fanning 1 4- 6 Copyright © 2000 McGraw-Hill Australia Types of credit covered... consumer Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Fundamentals of Business Law 4e by Barron & Fletcher Slides prepared by Kay Fanning 1 4- 14 Copyright © 2000 McGraw-Hill Australia Penalties