UPDATE: Consumer credit law reform - what do you need to do?

As mentioned in previous issues of Financial Services Quarterly, the Credit Contracts and Consumer Finance Act 2003 was enacted on 13 October 2003. The provisions of the Act relating to buy-back transactions involving land are already in force. The remaining parts of the Act will come into force on 1 April 2005. The Act applies, in general, to credit contracts entered into with natural persons primarily for personal, domestic or household purposes.

Under the Act, "credit contract" means a contract under which credit is or may be provided. The definition of "credit contract" in the Act is wider than the definition of "credit contract" in the Credit Contracts Act 1981. In particular, an interest component is not needed under the new Act.

In relation to credit contracts entered into up to 31 March 2005, creditors may elect that the new Act applies to such credit contracts going forward. Therefore, creditors should now start to think about whether they want to have the new Act apply to any such contracts or to continue to have the Credit Contracts Act 1981 and/or the Hire Purchase Act 1971 apply to such contracts.

Factors that creditors should take into account include the costs involved (which may be high up front) and the remaining terms of such contracts. If some of these contracts are long term contracts (for example, residential home loans and mortgages), it may be appropriate to elect to have the new Act apply, as it may not be ideal to have two separate regimes applying after 1 April 2005.

We will provide guidance about what you should be doing in relation to the Act (and when you should be doing it) to ensure you are prepared for the commencement of the new Act on 1 April 2005 in subsequent issues of Financial Services Quarterly.

Enquiries and information

For more information on any of the cases, articles and features in Financial Services Quarterly, please email Rachel Gowing or call on 64 9 916 8825.