29 August 2011
Banking Services Alert

MacGillivrays

New Credit Card Restrictions

From July 2012 lenders will need  to comply with strict new guidelines concerning provision of information about key features of credit card products and over limit transactions.

 

These requirements are contained in the National Consumer Credit Protection Amendments (Home Loan and Credit Cards) Act 2011.

 

Federal Treasury is now seeking industry feedback on draft proposed regulations.  These draft regulations will be particularly important in defining the scope and impact of the new legislation.

 

In summary the key changes brought about by the new legislation, in so far as it affects credit card contracts, are:

 

< Include an up-to-date Key Fact Sheet in all credit card application forms.

< Prohibit unsolicited invitations for credit card limit increases without express informed consent first being obtained.

< Restrict fees and charges that may be imposed in an over limit situation.

< Require lenders to notify consumers when credit cards used over limit.

< Introduce the concept of over limit buffers – “Default Buffer” (10%) and “Supplementary Buffer”.

< Require lenders to apply payments received to payoff amounts attracting the highest interest rate first.

< Require records to be kept of any consents or authorities obtained by consumers.

 

Many provisions in the new legislation use the expression “the regulations may prescribe...”.  Accordingly, the regulations (currently in draft form) are of critical importance.

 

The regulations will be specifying a range of matters not currently spelt out in the Act including:

 

< Required format of credit card Key Fact Sheet.

< Meaning of “credit limit increase by invitation”.

< How to obtain consent so a credit limit increase invitation can be made.

< Method by which consent can be given by customer to imposition fees and charges where credit limit exceeded.

< Keeping records of consents.

< Mandatory 48 hour notification to a consumer when credit card used in excess of credit limit.

< The format of mandatory monthly minimum repayment warnings to consumers.

 

All the above matters will be critical issues for lenders.  They will require major changes in systems and procedures in order to comply.  Fortunately, the start date for the new legislation is July 2012, which will hopefully give lenders ample time to change their systems and procedures in order to comply.

 

The further note will be issued once the regulations are in final form.

 

 

Article by Richard Williams, Partner - Banking Services
MacGillivrays Solicitors

 

 

 

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Employment Law Query?  Talk to our employment law expert on 1300 369 581 or garyw@macgillivrays.com.au.

 

 

PLEASE NOTE:  This article is not legal advice and our comments are of a general nature only.  This document is not to be relied on as substitution for proper detailed legal advice.  Liability limited by a scheme approved under professional standards legislation.