Consumer Credit Legislation Amendment (Enhancements) Act 2012

The Consumer Credit Legislation Amendment (Enhancements) Act 2012 is an amending Act. Its job was to change existing Commonwealth consumer credit and consumer protection laws rather than create a completely separate regime. The main amendments sit in the National Consumer Credit Protection Act 2009 and the National Credit Code, with additional changes for reverse mortgages, short-term and small amount credit contracts, caps on costs for credit contracts, consumer leases, transitional provisions and lay-by agreements.

That matters for businesses because compliance cannot be worked out by reading this Act in isolation. A lender, broker, lessor or retailer needs to read the amended provisions in the underlying legislation and then map those rules to its product, sales process, hardship handling, enforcement steps and marketing. The Act is broad in subject matter, but each schedule targets a different practical issue.

The Act is aimed at businesses involved in consumer credit and related services. The text expressly deals with credit providers, licensees providing credit services, lessors under consumer leases, and other persons engaging in particular credit activities. Some of the miscellaneous rules apply even if the person is not required to be licensed.

In practice, the businesses most likely to be affected are those dealing with individuals as consumers, especially where the product is a regulated credit contract, a consumer lease, a reverse mortgage, a small amount credit contract or another product specifically addressed by the amended law. The Act also reaches conduct around representations, information given in the course of credit activity, and some employer deduction notice requirements.

Businesses are usually outside the main focus of this Act where they are dealing only with lending that is not regulated as consumer credit under the amended framework. But that is a classification question, not something to assume. If your product has mixed personal and business use, or if you distribute rather than originate the product, you should check the underlying legislation carefully before treating yourself as out of scope.

One of the clearest practical reforms is the updated hardship process in the National Credit Code. A debtor who considers that they are or will be unable to meet their obligations under a credit contract may give the credit provider a hardship notice, orally or in writing. The credit provider may, within 21 days after receiving the hardship notice, require specified information that is relevant to deciding whether the debtor cannot meet the obligations or how the contract might be changed.

The credit provider must then give a notice within the period set by the legislation. If the parties agree to change the contract, the notice must record that. If they do not agree, the notice must state that there is no agreement, give reasons, and include the name and contact details of the approved external dispute resolution scheme of which the credit provider is a member, together with the debtor's rights under that scheme.

The Act also affects enforcement timing. Where the conditions in the amended National Credit Code are met, a credit provider must not begin enforcement proceedings after a current hardship notice unless it has given the required refusal notice and 14 days have passed. Similar restrictions apply where a debtor, mortgagor or guarantor gives a postponement request after a default notice or demand for payment. There are limited exceptions allowing possession of mortgaged goods where the provider reasonably believes the goods are being removed or disposed of without permission, or urgent action is needed to protect them.

For businesses, this means hardship handling cannot be treated as an informal customer service issue. It needs a documented workflow with intake, information requests, decision records, timing controls and enforcement holds. If collections staff, external agents and legal teams are not aligned, a business can easily take a step too early.

The Act strengthened the responsible lending framework by expanding the obligation to assess unsuitability. For credit contracts, the amendments stop a licensee from making an unconditional representation to a consumer that the licensee considers the consumer is eligible to enter a credit contract with the licensee, or that the credit limit of a credit contract will be able to be increased, unless the required assessment steps have been taken.

For consumer leases, the amended law similarly prevents a licensee from entering a consumer lease, or making an unconditional representation that the consumer is eligible to enter the lease, unless within 90 days before the lease day, or another period prescribed by regulations, the licensee has made the required assessment and made the inquiries and verification required by the legislation.

This is important for marketing, pre-approval messaging, online funnels and broker scripts. A business may think it is only using sales language, but if the statement is an unconditional representation about eligibility, the law treats it as part of the responsible lending framework. That means compliance is not limited to final approval decisions. It also reaches what is said earlier in the customer journey.

Businesses should review website copy, SMS and email campaigns, call centre scripts, broker templates and automated decision messages. Phrases that suggest guaranteed eligibility, automatic approval or a settled view about a customer's ability to obtain credit or a lease should be checked against the assessment requirements in the amended law.

The Act inserted miscellaneous rules that prohibit certain representations when providing or offering to provide a credit service to a consumer. A licensee must not use terms such as independent, impartial or unbiased, or similar terms, in a representation about the licensee, the service or the licensee's actions in providing the service, unless the statutory defence conditions are met.

Those defence conditions are strict. In broad terms, they deal with commissions, gifts or benefits from credit providers or lessors, restrictions affecting the service, conflicts of interest arising from relationships with credit providers and lessors, and benefits received by the licensee's employer or other prescribed persons. The law also makes clear that using the term in the negative, such as saying the licensee is not independent, can be a defence.

The Act also prohibits use of the phrases financial counsellor and financial counselling, and similar prescribed terms, in representations by a licensee when providing or offering to provide a credit service to a consumer. This means businesses should be careful not to use consumer-trust language that suggests a role or status the law reserves or tightly controls.

For practical compliance, this is a branding and communications issue as much as a legal one. Businesses should check websites, comparison pages, social media bios, brochures, staff email signatures, call scripts and referral partner materials. A single word in a headline can create a problem if it implies independence or counselling status that the business cannot support under the legislation.

The Act added a court power to make orders to remedy unfair or dishonest conduct by credit service providers. The court may make one or more orders if satisfied that a person provided a credit service to a consumer, engaged in conduct connected with that service that was unfair or dishonest, and that the conduct led to one of the listed outcomes. Those outcomes include the consumer entering a credit contract, consumer lease, mortgage or guarantee they would not otherwise have entered, entering on different terms, or becoming liable for fees, costs or charges.

The available orders include requiring the defendant to take or refrain from specified action, pay a specified amount, or recognising that a specified amount is not due or owing. The court may also make any other appropriate order to redress the unfairness or dishonesty or prevent the defendant from profiting from the conduct, except an order affecting the underlying credit contract, consumer lease, mortgage or guarantee itself. An application may be made by the consumer or by ASIC on the consumer's behalf with written consent, and the legislation sets a 6 year period running from when the conduct first started.

The section also lists circumstances the court must consider when deciding whether conduct was unfair or dishonest. These include special disadvantage, targeting of a class more likely to be disadvantaged, inability or perceived inability to obtain an alternative product, manipulative techniques, influence over contract terms and whether the transaction was less favourable than a comparable one.

For businesses, the message is that compliance risk is not limited to black-letter disclosure failures. Sales methods, pressure tactics, channel partner behaviour and treatment of vulnerable consumers can all become central. Internal monitoring should cover not only what documents say, but how the product is sold and to whom.

The Act also contains product-specific reforms that businesses should not overlook. Schedule 2 deals with reverse mortgages, including definitions and provisions applying to licensees and to credit providers generally. Schedule 3 deals with short-term and small amount credit contracts. Schedule 4 deals with caps on costs for credit contracts. Schedule 5 deals with consumer leases. Schedule 7 deals with lay-by agreements and related matters under the Competition and Consumer Act 2010.

Because these schedules amend underlying legislation, the practical question for a business is whether its product falls within the relevant statutory category. If it does, the business should not rely on a generic consumer credit compliance program. It should check the product-specific rules, definitions, pricing settings, disclosure requirements and conduct obligations in the amended law.

This is especially important for businesses with hybrid offerings. For example, a retailer may have a lease-style product, a deferred payment arrangement and a lay-by model operating side by side. Those products may not all be regulated in the same way. The Act's structure shows that Parliament treated these categories separately, so businesses should do the same in their compliance review.

The Act received Royal Assent on 17 September 2012. It commenced in stages. Sections 1 to 3 commenced on Royal Assent. Schedule 1 commenced on 1 March 2013. Parts of Schedule 2 commenced on 18 September 2012 and other parts on 1 March 2013. Schedule 3 commenced on 1 March 2013. Schedule 4 commenced on 1 July 2013. Schedule 5 commenced on 1 March 2013. Schedule 6 commenced on 18 September 2012. Schedule 7 was to commence on a day fixed by Proclamation, but if not commenced within 12 months after Royal Assent, it commenced on 17 September 2013.

When using this page, businesses should remember that this Act amended other legislation as originally enacted. Later amendments may also affect the current position. Before relying on any compliance step, check the current consolidated text of the amended legislation and confirm whether regulations prescribe any different periods or additional detail for your product type.