Consumers will be protected from shonky credit providers from 1 January 2011 when national consumer credit licensing regulations come into effect.
Credit providers have been registering with ASIC in the lead up to 1 January and, from tomorrow, any provider covered by the Credit Act must have a credit license to continue providing credit.
To get a credit license, the credit provider has to sign up to an ASIC-approved ombudsman service, making it easier and cheaper for consumers to resolve disputes about credit. Those providers must also comply with responsible lending obligations.
The Assistant Treasurer, Bill Shorten, said "The vast majority of credit providers do the right thing, but we need to protect consumers from being coerced into taking on more debt than they can afford."
"Credit providers who have still not signed up to get a credit licence should contact ASIC immediately and seek help in making urgent arrangements to comply with Act. It is also possible to apply to ASIC for an exemption."
Phase one of the National Consumer Credit Protection Reforms started on 1 July 2010, providing a standard, national regime for consumer credit regulation.
The Credit Reform Package replaces the old State-based regime, which operated inconsistently across jurisdictions.
Phase one of the reforms include:
- Responsible lending conduct requirements to ensure consumers are not lured into credit contracts they cannot afford to repay
- Extended hardship criteria, boosting the availability of relief to loans of up to $500,000
- Provisions to stop predatory lenders from exploitative practices such as using household items as security for cash loans
- A single national licensing regime and consistent requirements across Australia for lenders and brokers.
The Government is currently consulting about phase two of the credit reforms. We expect to introduce legislation for the first part of phase two in the first half of 2011.
"These reforms are a vital move by the Gillard Government to increase protections for consumers and to ensure credit providers don't take unfair advantage of their customers," Minister Shorten said.
31 December 2010