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Friday, April 18, 2008
Instalment Contracts and the Uniform Consumer Credit CodeThe Justice Legislation Amendment Bill 2008 (pdf) has been introduced into the Queensland Parliament to amend the Consumer Credit Code (the Code) to ensure particular contracts for the sale of land or goods by instalments (known as ‘terms sale of land contracts’, ‘conditional sale agreements’ and ‘tiny terms contracts’) are credit contracts under the Code. A terms sale of land (a sale on ‘vendor’s terms’ or a ‘wrap loan’) is a sale of land under which the purchase price is payable by instalments. The vendor lets the purchaser into possession but retains title until conveyance following the final payment. A conditional sale agreement (or ‘Romalpa agreement’) is a sale of goods under which the purchase price is payable by instalments. The seller delivers the goods to the buyer but retains title until the final payment. Tiny terms contracts are contracts where the cost of credit is incorporated into the cash price and the transaction is represented as a sale of goods by instalment (without any credit charges). Technical amendments have also been drafted to capture contracts containing instalment payments that exceed the cash price of the goods, which are related to the contract for the actual sale of the goods. Once the amendments are passed by the Queensland Parliament, industry will be provided with at least 6 months before they are commenced.
Consumer credit interest rate cap for QueenslandThe Consumer Credit (Queensland) and Other Acts Amendment Bill 2008 (pdf) has been introduced into Queensland Parliament. The Biil, if passed, will introduce the concept of a maximum annual percentage rate for consumer credit contracts. In calculating the rate, fees and charges will be taken into account. The Regulations are expected to prescribe a 48 per cent per annum annual percentage rate cap on consumer loans. It is also expected that credit fees or charges arising from the establishment or maintenance of a temporary credit facility by an ADI will not be included in the calculation. There are currently no caps on interest rates in Queensland and lenders can charge high interest rates, fees and charges on loans. Victoria, New South Wales and the Australian Capital Territory currently have interest rate caps to control the cost of consumer credit. Credit providers who charge above the legislated maximum will be required to pay back any amount over the cap and will face civil penalties of up to $500,000 for breaching the Consumer Credit Code. They will also face criminal penalties of $10,000 for individuals and $50,000 for corporations. The cap will apply to new loans made after the Act commences as well as to existing credit contracts which are extended or under which interest rates are increased or new fees or charges imposed after the Act commences.
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