The regulation of consumer lending in Australia has undergone significant reform since 2007. It has seen the introduction of a national regime to regulate the provision of consumer credit and a shift away from a consumer protection framework anchored in disclosure and conduct obligations to a more interventionist approach targeting specific credit lending practices and credit product features. At the same time, reforms are being introduced to improve the efficiency and level of competition in consumer lending, with a goal of driving better pricing, enhanced access to finance and new products and services.
The introduction of the national regime, which was agreed to by the Council of Australian Governments (COAG) in 2008, was designed to ensure that consumers were better protected in their dealings with credit products and credit providers and to extinguish the gaps and conflicts which existed under the state and territory regimes.
To make the transition to a national regime as smooth as possible, it was introduced in two phases:
• phase one introduced a Commonwealth statutory framework for the regulation of lenders and brokers through the National Consumer Credit Protection Act 2009 (NCCP Act); and
• phase two primarily targeted the regulation of specific classes of credit products.
Subsequent to this, specific reforms have been made to the NCCP Act, including in relation to credit cards and small amount credit contracts (SACCs). Reforms have also been introduced outside of the NCCP Act, but which nevertheless impact on consumer lending, for example, legislation which voids unfair contract terms in standard form consumer contracts and the proposed power for the Australian Securities and Investments Commission (ASIC) to intervene in respect of products that risk consumer harm.
While the key reforms to consumer lending since 2007 have occurred through legislation, reforms have also occurred through legislative instruments and regulatory guidance issued by ASIC and the Australian Prudential Regulation Authority (APRA).
In addition to these reforms, which focus on credit provision and credit products, reforms have also been introduced which impact how consumers engage with credit services and products. These include the raising of professional standards for financial advisers and the establishment of the Australian Financial Complaints Authority. Reforms have also been introduced to promote competition, for example, removing restrictions on the use of the term ‘bank’. These reforms have not been included in this information note.