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How you are protected

Consumer credit laws are scheduled to transfer to the Commonwealth on 1 January 2010. For more information, visit the Australian Securities and Investments Commission website.

The Consumer Credit Code gives consumers certain protections when they enter into regulated credit contracts, such as loans or credit for personal, household and domestic purposes.

There is 48 per cent interest rate cap on loans to protect consumers getting new loans. See payday lending.

However, the cap may not apply to alternative loan products or loan-like products, including pawnbroker transactions.

We encourage all consumers considering a loan to investigate the arrangement carefully. Compare products that other lenders offer to ensure you won’t be paying excessive fees and charges.

Protection under the Consumer Credit Code

Under the Code:

a 48 per cent cap now applies to all new consumer credit contracts, including interest, fees and charges
lenders must clearly disclose all loan costs, including all fees and a total figure
lenders must express the interest rate on any loan or lease as an annual rate
anyone enforcing credit contracts upon default must comply with Code regulations. For example, lenders must issue notices to borrowers before starting any enforcement action. The notice must describe the amount in default and how to remedy the situation. The lender must give the borrower 30 days to do so
the credit contract must clearly state the person or business providing the credit
any contracts that a court has determined as ‘unfair’ can be reopened. In doing this, courts can consider the relative bargaining power of parties, unreasonably difficult conditions of contracts, age, physical or mental condition/capacity of the borrower and any unfair pressure exerted
contract terms can be altered to include remedies for borrowers experiencing financial hardship
the lender must provide a statement of account upon request or at regular intervals that shows all account transactions, including interest and fee debits
a lender must give the borrower a payout figure upon request
lenders must make comparison rates available to enable consumers to compare loan costs
if a lender overcharges a borrower (e.g. interest or fees), a court can order them to repay it
lenders are liable for fines if they fail to comply with the Code.

Pawnbroker transactions

There is no limit on the amount of fees and interest that pawnbrokers can charge for their loan-type arrangements. However, you may apply to a court to make orders about these loans if you think the transaction was unjust or the interest or fees charged are unconscionable.

There are no enforceable hardship provisions to protect consumers from pawnbrokers' charges like those provided in the Consumer Credit Code.

Last reviewed 03/09/2009