What Laws Apply to Australian Car Loans?
At Positive Lending Solutions, we put a lot of thought into protecting our customers through responsible lending practices and making sure that you get the right solution for your situation. Here's a summary of the Australian credit laws behind all the questions we ask when you apply for a car loan:
Australian credit laws for car loans
The key Australian credit laws that apply to car loans are:
- The National Consumer Credit Protection Act 2009 (NCCP)
- The Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF)
The NCCP includes the National Credit Code (NCC) which replaced the state-based consumer credit codes and applies to the conduct of all Australian Credit License holders from 1 July 2010. The Code is administered by ASIC.
Who does the NCCP apply to?
The National Credit Code applies to all credit contracts entered into when the lender provides credit for a cost, to a debtor who is a natural person or strata corporation for the purpose of personal, domestic or household purposes, including car loans. The NCCP also applies to residential property loans.
Low cost, short-term credit with a term less than 62 days, insurance premiums that are paid by instalments, bill facilities and staff loans are not covered under the NCCP.
The AML/CTF Act outlines the requirements for identification of a loan application before credit can be extended, and also the records that need to be kept regarding the transaction. It requires that credit providers be enrolled with AUSTRAC as a Reporting Entity.
What do lenders need to comply with these laws?
Australian credit laws mandate the information that the broker or lender needs to collect to assess your car loan application. The AML/CTF Act outlines the identification process to prevent fraudulent applications, and the NCCP outlines responsible lending practices.
What identification do I need to provide under the AML/CTF Act?
This legislation requires that the broker arranging the finance must collect enough information to be certain that you are the person claimed. The minimum requirements include:
- Full name
- Date of birth
- Full residential address
Your full name and one of either DOB or residential address must be verified using official documents. If there's any uncertainty, you may be asked for additional information.
The legislation for companies, partnerships, associations, government bodies and trusts is similar. You can find the information here if you are interested.
Note that the responsible lending requirements under the NCCP require a high level of care, and there's other information you need to provide to be assessed for a car loan.
Requirements for responsible lending under the NCCP
'Responsible lending' means that the lender has to confirm that the credit you are provided is suitable for your situation.
This means they must assess that:
- You have sufficient financial capacity to repay the loan amount
- Extending the credit would be unlikely to put you into financial hardship in the future
What the lender needs from you:
To make this assessment, the lender will request:
- Bank statements
- Any assets or liabilities you currently have
The lender will also request to check your credit file, and you'll need to sign a privacy consent form to give permission for them to access your credit file.
Information the lender must give you:
Once your application is accepted and an offer is made, the NCCP requires that you be given clear information about the loan and the lender. This includes:
- Credit Guide and Quote
- Specific information about the loan itself, including:
- Total amount of the car loan
- Interest rate and how it applies
- Amount of repayments and how they are calculated
- Frequency of repayments and when they are due
Remember that you're not committed to taking out the loan until you've signed and returned the loan contracts, so if you change your mind up to this point, there's no obligation to proceed.
I can't pay my loan, what should I do?
If you can't meet your car loan repayments, you should contact your lender immediately. Usually, you'll be able to work out a special arrangement for you credit contract until you recover from the financial hardship.
You should put the application in writing, whether that's by email or post, even if you speak to an authorised representative of the loan provider. The lender has 21 days to reply in writing.
The MoneySmart ASIC website details the process to apply for a hardship variation to your car loan, and gives you some sample letters you can use.
You do have a legal obligation to repay your car loan, but by seeking assistance you can come to an arrangement that fits into your unanticipated situation.
What if the lender doesn't agree?
If you are not satisfied with the arrangements offered by the lender, you can seek help from an independent advice service.
To maintain an active credit license, the NCCP requires that lenders and brokerages participate in a mandatory External Dispute Resolution scheme.
An external dispute resolution scheme is a free, independent service that can help you to resolve disputes with your car loan provider. The two relevant for car loans are:
- Financial Ombudsman Service (FOS)
- Credit and Investments Ombudsman(COS)
Get the right car loan the first time
The best outcome for you is to get the right car loan for your financial profile when you first apply, allowing yourself a buffer in case of financial hardship so you will be able to meet your car loan repayments.
Positive Lending Solutions customer service team is committed to ensuring that you are totally comfortable with your loan product. To make sure you've made the right choice, they will help you compare loan products, answer all of your questions, and ensure that the car loan you choose has the features and flexibility you need.