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Connexus : Issue 37
The federal government is pushing ahead with reforming national credit laws as part of its policy to promote a more competitive and sustainable banking system. The National Consumer Credit Protection Amendments (Home Loans and Credit Cards) Bill 2011 was introduced into parliament on March 24 after industry was given less than one week to comment on the draft legislation. The bill was passed by Parliament on July 4. The bill amends the National Consumer Credit Protection Act 2009 to: • require credit providers to provide key fact sheets with home loan and credit card contract • restrict credit card issuers in making unsolicited invitations to increase credit card limits • regulate the approval of spending on credit cards above the card holders' limits • prohibit the charging of additional fees or higher interest on over-limit spending on credit cards • specify a payment allocation hierarchy for credit card payments so higher interest rate credit is paid first The House of Representatives Economics Committee held an inquiry into the bill on May 25 as part of the parliamentary process. Abacus argued, in evidence to the committee, that industry be given a minimum of 12 months to implement the required changes (from the time the complete reform package is finalised). The committee tabled its report on 15 June, recommending that home loan key fact sheets commence on 1 January 2012. Abacus sought a longer period before the commencement of the home loan key fact sheets, and is now urging the government to finalise specific details of these sheets, including the template form, without delay. Along with other industry representatives, Abacus is continuing to negotiate with Treasury on the details of the accompanying regulations. Other proposed changes to the bill While the government has ruled out any fundamental changes to the proposed reforms, it has signalled its intentions to introduce some changes to the bill in response to industry concerns. These changes will include the removal of certain strict liability offence provisions. In addition, the government will not proceed with a total ban on credit card over-limit fees, and will reduce the general complexity and prescription of its requirements in this area. Under new arrangements, lenders will be able to charge over-limit fees or a higher interest rate when the borrower exceeds their limit, as long as the borrower's express consent to charging these fees has been obtained in advance. If borrowers refuse to give or withdraw their consent, the lender will have the option of not offering borrowers a credit limit "buffer". Finally, the government will move changes to enable lenders to seek the consent of account holders to receive credit card increase invitations prior to the commencement of the bill's credit card reforms on 1 July 2012. Abacus is continuing to negotiate with Treasury on the home loan key fact sheet details. Related stand alone regulations are yet to be released for industry comment. Abacus will continue to lobby hard to ensure practical changes are made to these details. -- James Aliferis is a senior adviser, policy & public affairs, Abacus Credit reforms gather pace Abacus is continuing to lobby for last-minute amendments to the credit law reforms. By James Aliferis NEWS www.abacus.org.au 11 Connexus Abacus argued, in evidence to the committee, that industry be given a minimum of 12 months to implement the required changes