Credit not covered by the NCC

Contributed by Elizabeth Samra, Consumer Law Centre of the ACT and current to May 2018

The Credit Law does not apply to the following types of arrangements:

• Business loans or loans mainly for business purposes;
• Investment loans for the purchase of investments other than residential real estate (e.g, shares or investment in commercial property);
• Short–term credit under 62 days where the fees and charges are not more than 5% of the amount of credit and the maximum interest charges are 24% p.a (s 6(1) NCC). Fees and charges include:
  • a fee or charge payable by the debtor to any person for an introduction to the credit provider;
  • a fee or charge payable by the debtor to any person for any service if the person has been introduced to the debtor by the credit provider; and
  • a fee or charge payable by the debtor to the credit provider for any other service related to the provision of credit (s 6(2) NCC);
  • Credit without express prior arrangement. For example, when a cheque account becomes overdrawn but there is no expressly agreed overdraft facility (s 6(4) NCC);
  • Continuing credit contracts, such as credit cards, where the only charge is fixed or periodic and does not vary according to the amount of credit provided (s 6(5) NCC);
  • Joint credit and debt facilities (s 6(6) NCC);
  • Insurance premiums paid by instalments (s 6(8) NCC);
  • Pawnbrokers (except ss 76–81 of the NCC apply, which relate to a Court reopening unjust transactions) (s 6(9) NCC);
  • Trustees of Estates (NCC s6(10));
  • Employee loans (s 6(11) NCC) and consumer leases that are employment related such as car loans as a fringe benefit (see s 171(2) NCC);
  • Margin loans (s 6(12) NCC);
  • A consumer lease with a fixed period of four months or less, or to a lease for an indefinite period (s 171(1) NCC)

In circumstances where the credit law does not apply, debtors can still attempt to negotiate with the credit provider, request financial hardship if the credit provider is a member of external dispute resolution or rely on a code of practice if the credit provider has subscribed to it.

Prohibited credit

From 1 March 2013, short-term credit contracts are banned under section 133CA of the NCCP Act. A short-term credit contract is one with a credit limit of $2,000 or less and a term of 15 days or less (s 5 NCCP Act).