Terms of reference – Review of certain provisions of the National Consumer Credit Protection Act 2009 (Review of the small amount credit contract laws)

Purpose of the review

The review is required to examine and report on the effectiveness of the law relating to small amount credit contracts (SACCs) in accordance with section 335A of the National Consumer Credit Protection Act 2009 (the Credit Act).

It is a statutory requirement to conduct the review as soon as practicable after 1 July 2015.

Now is also an appropriate time to consider the law applying to consumer leases which are regulated under Part 11 of the National Credit Code because they serve a similar market to small amount credit contracts.

Terms of reference

  1. The review will make recommendations about the effectiveness of, and where necessary recommend changes to, the following:

    1.1  the requirement to obtain and consider a consumer's bank account statements in subsections 117(1A) and 130(1A) of the Credit Act;

    1.2  the rebuttable presumption that a loan is unsuitable where the consumer is in default under another SACC or has held two other SACCs in the past 90 days in subsections 118(3A), 123(3A), 131(3A) and 133(3A) of the Credit Act;

    1.3  the prohibitions on entering into, or increasing the credit limit of, a loan contract that has a term of 15 days or less with a consumer, and on suggesting or assisting a consumer to do so in sections 124A, 133C and 133CA of the Credit Act;

    1.4  the requirement to display a warning statement about the alternatives available to SACCs in sections 124B, 133C and 133CB of the Credit Act;

    1.5  the cap on fees and charges (including the maximum of a 20 per cent establishment fee and of a monthly 4 per cent fee) in sections 23A, 31A, 31B and 39A of the National Credit Code;

    1.6  the requirement that consumers who default under a SACC must not be charged an amount that exceeds twice the amount of the relevant loan in section 39B of the National Credit Code; and

    1.7  the power to introduce specific protections for particular groups of consumers in sections 133C and 133CC of the Credit Act and the protections for consumers who receive 50 per cent or more of their income under the Social Security Act 1991 in regulation 28S of the National Consumer Credit Protection Regulations 2010.

  2. The review will make recommendations on:

    2.1  whether a national database of SACCs should be established and if so, by whom and how it should be funded; and

    2.2  whether any additional provisions relating to SACCs should be included in the Credit Act, the accompanying regulations, or the National Credit Code.

  3. The review will make recommendations on whether any of the provisions which apply to SACCs should be extended to regulated consumer leases.
  4. The review will make recommendations that take into account:
    • competition;
    • fairness;
    • innovation;
    • efficiency;
    • access to finance;
    • regulatory compliance costs; and
    • consumer protection.
  5. In examining the issues set out above, the review should also consider whether the laws relating to SACCs and regulated consumer leases are appropriate for the current economic climate and whether they will continue to meet Australia's evolving needs.
  6. The review should conduct consultations with stakeholders, and hold public meetings where appropriate.
  7. The review will not recommend the establishment of an additional body or the establishment of a further review(s).
  8. The review will not recommend changes to any area of the law that the Commonwealth does not have the direct power to regulate.

The review will provide the Assistant Treasurer with a written report by the end of 2015.