133Prohibition on entering, or increasing the credit limit of, unsuitable credit contracts

133  Prohibition on entering, or increasing the credit limit of, unsuitable credit contracts Prohibition on entering etc. unsuitable contracts  (a) enter a credit contract with a consumer who will be the debtor under the contract; or  (b) increase the credit limit of a credit contract with a consumer who is the debtor under the contract; if the contract is unsuitable for the consumer under subsection (2). When the contract is unsuitable  (2) The contract is unsuitable for the consumer if, at the time it is entered or the credit limit is increased:  (a) it is likely that the consumer will be unable to comply with the consumer’s financial obligations under the contract, or could only comply with substantial hardship; or  (b) the contract does not meet the consumer’s requirements or objectives; or  (c) if the regulations prescribe circumstances in which a credit contract is unsuitable—those circumstances apply to the contract.  (3) For the purposes of paragraph (2)(a), it is presumed that, if the consumer could only comply with the consumer’s financial obligations under the contract by selling the consumer’s principal place of residence, the consumer could only comply with those obligations with substantial hardship, unless the contrary is proved.  (3AA) For the purposes of paragraph (2)(a), a consumer is taken to be able to comply with the consumer’s financial obligations under a contract only with substantial hardship if:  (b) the consumer could not comply with an obligation to repay an amount equal to the credit limit of the contract within the period determined by ASIC under section 160F.  (4) For the purposes of determining under subsection (2) whether the contract will be unsuitable, only information that satisfies both of the following paragraphs is to be taken into account:  (a) the information is about the consumer’s financial situation, requirements or objectives, or any other matter prescribed by the regulations under paragraph 130(1)(d) or (e);  (b) at the time the contract is entered or the credit limit is increased:  (ii) the licensee would have had reason to believe that the information was true if the licensee had made the inquiries or verification under section 130.  (5) The regulations may prescribe particular situations in which a credit contract is taken not to be unsuitable for a consumer, despite subsection (2). Note: Sections 178 and 179 provide for remedies for anyone who suffers, or is likely to suffer, loss or damage because of a breach of this section. For example, if a consumer makes an unsuitable credit contract with a licensee, rather than making a not unsuitable credit contract for a reverse mortgage, a person who suffered, or is likely to suffer, loss as a result may be able to get court orders under section 178 or 179 to put the person in a position like the one they would have been in had the consumer entered into the contract for the reverse mortgage. Part 3‑2A—Licensees that are credit providers under credit contracts: additional rules relating to standard home loans 133A  Guide to this Part This Part has rules that apply to licensees that are credit providers under standard home loans. It applies in addition to the general rules in Part 3‑2. Division 2 imposes requirements aimed at ensuring a consumer can obtain a Key Facts Sheet for a standard home loan. Division 2—Key Facts Sheets for standard home loans 133AA  What is a standard home loan?  (1) A standard home loan of a licensee is a standard form of credit contract under which the licensee provides credit:  (a) to purchase residential property; or  (b) to refinance credit that has been provided wholly or predominantly to purchase residential property.  (2) The regulations may make provisions that apply to determining, for the purpose of subsection (1), whether a credit contract is a standard form of credit contract. 133AB  What is a Key Facts Sheet for a standard home loan?  (1) A Key Facts Sheet for a standard home loan is a document:  (a) that contains the information relating to the standard home loan that is required by the regulations; and  (b) that complies with any other requirements prescribed by the regulations.  (2) Without limiting paragraph (1)(a), regulations made for the purpose of that paragraph:  (a) may require a Key Facts Sheet for a standard home loan to contain information:  (i) that is specific to the consumer by whom the Key Facts Sheet is to be generated under section 133AC or to whom it is to be provided under section 133AD; and  (ii) that relates to the cost or implications of the loan for the consumer; and  (b) may require information contained in a Key Facts Sheet for a standard home loan to be based on either or both of the following:  (i) information provided by the consumer;  (ii) particular assumptions. 133AC  Credit provider’s website to provide capacity to generate Key Facts Sheet  (1) This section applies if a licensee has a website that can be used by a consumer to apply for, or make an inquiry about, one or more standard home loans of the licensee.  (2) The licensee must ensure that the website satisfies all of the following paragraphs:  (a) the website tells the consumer that the consumer may use the website to generate a Key Facts Sheet for the standard home loan, or for each of the standard home loans;  (i) tells the consumer what information the consumer will need to enter in order to generate the Key Facts Sheet or Sheets; and  (ii) provides the consumer with instructions on how to generate the Key Facts Sheet or Sheets;  (c) if the consumer enters the information and follows those instructions, the consumer can use the website to generate the Key Facts Sheet or Sheets, containing up‑to‑date information, in a form that can be printed;  (d) the website complies with any other requirements prescribed by the regulations. 133AD  Credit provider to provide Key Facts Sheet in other situations  (a) either:  (i) a consumer makes a request to a licensee (otherwise than by using a website of the licensee) to be provided with a Key Facts Sheet for one or more standard home loans of the licensee that are specified in the request; or  (ii) the regulations require a consumer, in circumstances prescribed by the regulations, to be provided with a Key Facts Sheet for one or more standard home loans of a licensee; and  (b) the consumer has given the licensee the consumer’s name, and the contact details required by the regulations.  (2) The licensee must, in accordance with any requirements prescribed by the regulations:  (a) provide the consumer with a Key Facts Sheet containing up‑to‑date information for the standard home loan, or for each of the standard home loans; and  (b) provide the consumer with any other information relating to other standard home loans of the licensee that is required by the regulations. Note: Subsection 133AE(4) and section 133AF provide defences to liability under this subsection. Note: Subsection 133AE(4) and section 133AF provide defences to liability under this subsection. 133AE  What if more information is needed from the consumer?  (a) a licensee is required by section 133AD to provide a consumer with a Key Facts Sheet for a standard home loan; but  (b) the licensee does not have all the information from the consumer that the licensee needs in order to be able to prepare the Key Facts Sheet.  (2) The licensee must, in accordance with any requirements prescribed by the regulations, tell the consumer what information the licensee needs in order to be able to prepare the Key Facts Sheet. Defence for subsections 133AD(2) and (3)  (4) For the purposes of applying subsections 133AD(2) and (3) to a failure by a licensee to provide a Key Facts Sheet to a consumer, it is a defence if:  (a) the licensee has, in accordance with subsection (2) of this section, told the consumer what information the licensee needs in order to be able to prepare the Key Facts Sheet; and  (b) the consumer has not provided that information to the licensee. Note: For the purpose of subsection 133AD(3), a defendant bears an evidential burden in relation to the matter in this subsection (see subsection 13.3(3) of the Criminal Code). 133AF  Defences to obligation to provide a Key Facts Sheet  (1) For the purpose of applying subsection 133AD(2) or (3) to a failure by a licensee to provide a consumer with a Key Facts Sheet (the new Key Facts Sheet) for a standard home loan, it is a defence if:  (a) the following conditions are satisfied:  (i) the licensee has previously provided the consumer with a Key Facts Sheet (the previous Key Facts Sheet) for the standard home loan;  (ii) the new Key Facts Sheet would be the same (except for its date) as the previous Key Facts Sheet; or  (b) the licensee reasonably believes that:  (i) another person has previously provided the consumer with a Key Facts Sheet (the previous Key Facts Sheet) for the standard home loan; and  (ii) the new Key Facts Sheet would be the same (except for its date) as the previous Key Facts Sheet; or  (c) the licensee reasonably believes that the consumer would not be eligible for the standard home loan; or  (d) under regulations made for the purpose of subsection (2), the licensee is not required to provide the consumer with the new Key Facts Sheet. Note: For the purpose of subsection 133AD(3), a defendant bears an evidential burden in relation to the matters in this subsection (see subsection 13.3(3) of the Criminal Code).  (2) The regulations may prescribe circumstances in which a licensee is not required to provide a consumer with a Key Facts Sheet for a standard home loan. Part 3‑2B—Licensees that are credit providers under credit contracts: additional rules relating to credit card contracts 133B  Guide to this Part This Part has rules that apply to licensees that are credit providers under credit card contracts. It applies in addition to the general rules in Part 3‑2. Division 2 defines key concepts used in this Part (including credit card contract and credit card). Division 3 imposes requirements aimed at ensuring a consumer obtains a Key Facts Sheet before entering into a credit card contract. Division 4 imposes restrictions on a licensee making offers etc. to increase the credit limit of a credit card contract, and imposes requirements aimed at ensuring the consumer can reduce the credit limit of a credit card contract. Division 5 provides for consumers to be notified if a credit card is used in excess of its credit limit, and restricts the charging of fees etc. for use of a credit card in excess of its credit limit. Division 6 imposes requirements relating to the order of application of payments made under credit card contracts. Generally, a payment must be applied against higher interest rate debts first. Division 7 imposes requirements relating to application of interest charges under credit card contracts. Division 8 imposes requirements aimed at ensuring the consumer can terminate a credit card contract. Division 2—Credit card contracts and related concepts 133BA  Meaning of credit card contract etc. Meaning of credit card contract  (1) A credit card contract is a continuing credit contract under which credit is ordinarily obtained only by the use of a credit card. Meaning of credit card  (2) A credit card is:  (a) a card of a kind commonly known as a credit card; or  (b) a card of a kind that persons carrying on business commonly issue to their customers, or prospective customers, for use in obtaining goods or services from those persons on credit; or  (c) anything else that may be used as a card referred to in paragraph (a) or (b). Meaning of linked to a credit card contract  (3) A credit card is linked to a credit card contract if:  (a) the credit card is issued under or in relation to the contract; and  (b) the credit card can be used to obtain credit under the contract as referred to in subsection (1). Meaning of use of a credit card  (4) A reference to the use of a credit card to obtain cash, goods or services includes a reference to the use or provision of the number of the credit card to obtain cash, goods or services. Articles that can be used as credit cards and in other ways  (5) If a credit card can also be used in other ways (for example, as a debit card, or to access other accounts):  (a) the article is a credit card (despite the fact that it can also be used in those other ways); but  (b) the provisions of this Act that are expressed to apply in relation to credit cards do not apply to the article in so far as it can be used in those other ways. Division 3—Key Facts Sheets for credit card contract 133BB  What is a Key Facts Sheet for a credit card contract?   A Key Facts Sheet for a credit card contract is a document:  (a) that contains the information relating to the contract that is required by the regulations; and  (b) that complies with any other requirements prescribed by the regulations. 133BC  Application form for credit card contract to include up‑to‑date Key Facts Sheet  (1) If a licensee makes available to consumers an application form that can be used to apply for a credit card contract under which the licensee would be the credit provider, the licensee must ensure that the application form includes a Key Facts Sheet for the contract that contains up‑to‑date information. Circumstances in which application form may, for limited period, include out‑of‑date Key Facts Sheet  (3) The regulations may prescribe circumstances in which a licensee may, for a period prescribed by the regulations, make available an application form that includes a Key Facts Sheet containing information that has ceased to be up‑to‑date. Note: If a consumer applies using such an application form, the consumer must be given the up‑to‑date information: see paragraph 133BD(1)(b).  (4) If a licensee makes available an application form that includes a Key Facts Sheet containing information that has ceased to be up‑to‑date, it is a defence for the purposes of subsections (1) and (2) if the application form was made available as permitted by regulations made for the purpose of subsection (3). Note: For the purpose of subsection (2), a defendant bears an evidential burden in relation to the matter in this subsection (see subsection 13.3(3) of the Criminal Code). 133BD  Credit provider not to enter into credit card contract unless Key Facts Sheet has been provided etc.  (1) If a consumer applies to a licensee for a credit card contract under which the licensee would be the credit provider, the licensee must not enter into, or offer to enter into, the contract unless:  (a) the application is made using an application form that includes a Key Facts Sheet for the contract that contains up‑to‑date information; or  (b) the following conditions are satisfied:  (i) the application is made using an application form that includes a Key Facts Sheet for the contract that contains information that has ceased to be up‑to‑date;  (ii) the consumer has been provided with the up‑to‑date information in accordance with any requirements prescribed by the regulations; or  (c) the consumer has otherwise been provided with a Key Facts Sheet for the contract that contains up‑to‑date information in accordance with any requirements prescribed by the regulations. Division 4—Offers etc. to increase, and entitlement to reduce, credit limit of credit card contract 133BE  Credit provider not to offer etc. to increase credit limit of credit card contract  (1) A licensee who is the credit provider under a credit card contract must not make a credit limit increase invitation in relation to the contract. Note: For other provisions that must be complied with in relation to increasing credit limits, see: (a) Divisions 3 and 4 of Part 3‑2; and (b) subsection 67(4) and section 67AA of the National Credit Code. Meaning of credit limit increase invitation  (5) A licensee makes a credit limit increase invitation, in relation to a credit card contract, if:  (a) the licensee gives any form of communication that relates to the contract to the consumer who is the debtor under the contract; and  (b) one or more of the following conditions is satisfied in relation to the communication:  (i) the communication offers to increase the credit limit of the contract;  (ii) the communication invites the consumer to apply for an increase of the credit limit of the contract;  (iii) the licensee gave the communication to the consumer for the purpose (or for purposes including the purpose) of encouraging the consumer to consider applying for an increase of the credit limit of the contract.  (6) The regulations may make provisions that apply to determining whether a communication is covered by the definition in subsection (5). 133BF  Credit provider not to enter into credit card contract unless it allows credit limit to be reduced  (1) A licensee must not enter into, or offer to enter into, a credit card contract under which the licensee would be the credit provider, if the consumer who would be the debtor under the contract would not have a credit limit reduction entitlement under the contract. Meaning of credit limit reduction entitlement  (3) A consumer who is the debtor under a credit card contract has a credit limit reduction entitlement under the contract if:  (a) for a contract that does not provide for a minimum credit limit—the consumer is entitled under the contract to reduce the credit limit of the contract to any amount (including nil); or  (b) for a contract that provides for a minimum credit limit—the consumer is entitled under the contract to reduce the credit limit of the contract to any amount that equals, or exceeds, the minimum credit limit. 133BFA  Credit provider to provide online capacity to request reduction of credit limit  (1) This section applies if a consumer who is the debtor under a credit card contract has a credit limit reduction entitlement under the contract on a day (the online reduction day).  (2) The licensee who is the credit provider under the credit card contract must establish and maintain a website that satisfies all of the following paragraphs:  (a) the website tells the consumer that the consumer may use the website to request a reduction in the consumer’s credit limit;  (i) tells the consumer what information the consumer will need to enter in order to request a reduction in the consumer’s credit limit; and  (ii) provides the consumer with instructions on how to request a reduction in the consumer’s credit limit;  (c) if the consumer enters the information and follows those instructions, the consumer can use the website to request a reduction in the consumer’s credit limit;  (d) the website is available on the online reduction day.  (3) For the purposes of subsection (2), it is a defence if the website is reasonably unavailable on the online reduction day. 133BFB  Credit provider not to suggest the consumer not reduce the credit limit  (a) a consumer who is the debtor under a credit card contract has a credit limit reduction entitlement under the contract; and  (b) the consumer has requested to exercise the entitlement by reducing the credit limit of the contract.  (2) The licensee who is the credit provider under the credit card contract must not do any of the following:  (a) suggest that the consumer apply for an increase to the credit limit of the contract;  (b) suggest that the consumer not reduce the credit limit of the contract;  (c) if the consumer’s request is to reduce the credit limit of the contract by a specified amount—suggest that the consumer instead reduce the credit limit by a smaller amount. 133BFC  Credit provider to give effect to request to reduce credit limit  (a) a consumer who is the debtor under a credit card contract has a credit limit reduction entitlement under the contract; and  (b) the consumer has requested to exercise the entitlement by reducing the credit limit of the contract.  (2) The licensee who is the credit provider under the credit card contract must take reasonable steps to ensure that the request is given effect to as soon as practicable. Division 5—Use of credit card in excess of credit limit 133BH  Credit provider to notify consumer of use of credit card in excess of credit limit Regulations may require licensee to notify consumer of use of credit card in excess of credit limit  (1) The regulations may require a licensee who is the credit provider under a credit card contract to notify the consumer who is the debtor under the contract if the licensee becomes aware that the debtor has used a credit card that is linked to the contract to obtain cash, goods or services in excess of the credit limit for the contract.  (2) Without limiting subsection (1), regulations made for the purpose of that subsection may deal with:  (a) how and when the licensee must notify the consumer; and  (b) the matters that must be included in the notification. Requirement to comply with the regulations  (3) A licensee must comply with regulations made for the purpose of subsection (1). 133BI  Credit provider not to impose fees etc. because credit card used in excess of credit limit  (1) If a credit card is used to obtain cash, goods or services in excess of the credit limit for the credit card contract, the licensee who is the credit provider under the contract must not, because the credit limit was exceeded, impose any liability to pay fees or charges, or a higher rate of interest, on the consumer who is the debtor under the contract unless:  (a) the licensee has, in accordance with this section, obtained express consent from the consumer covering the imposition of the fees or charges, or the higher rate of interest; and  (b) the consent has not been withdrawn; and  (c) any other requirements prescribed by the regulations are complied with. Note 1: The consent must be express, and cannot be implied from the actions of the consumer or from other circumstances. Note 2: The licensee must keep records of consents and withdrawals: see section 133BJ.  (2) The consumer may consent to the licensee imposing a liability to pay fees or charges, or a higher rate of interest, if the credit card is used to obtain cash, goods or services in excess of the credit limit.  (3) Before obtaining the consumer’s consent, the licensee must, in accordance with the regulations, inform the consumer of any matters prescribed by the regulations.  (4) The consent may be obtained before or after the credit card contract is entered into, but it does not cover any fees, charges or interest imposed before the consent is obtained.  (5) The consumer may withdraw the consent at any time.  (6) The regulations may prescribe requirements to be complied with in relation to giving consent under subsection (2), or withdrawing consent under subsection (5).  (7) For the purpose of subsection 23(1) of the National Credit Code (and the other provisions of the Code that refer to, or apply in relation to, that subsection):  (a) a liability to pay a fee or charge that is imposed contrary to subsection (1) of this section is taken to be a credit fee or charge that is prohibited by the Code; and  (b) a liability to pay interest that is imposed contrary to subsection (1) of this section is taken to be an interest charge under the credit card contract exceeding the amount that may be charged consistently with the Code. Note: For the civil and criminal consequences of contravening subsection 23(1) of the National Credit Code, see subsections 23(2) to (4), section 24, and Part 6, of the Code. 133BJ  Records of consents and withdrawals to be kept  (1) A licensee must, in accordance with the requirements prescribed by the regulations, keep a record of:  (a) consents the licensee obtains under section 133BI; and  (b) withdrawals of such consents. Division 6—Order of application of payments made under credit card contracts 133BO  Credit provider to apply payments in accordance with this Division  (1) If a payment (the relevant payment) is made under a credit card contract:  (a) by or on behalf of the consumer who is the debtor under the contract; and  (b) to the licensee who is the credit provider under the contract; the licensee must apply the payment in accordance with this Division (despite any provision to the contrary in the contract, any other contract or instrument or any other law).  (2) To avoid doubt, an amount:  (a) that is credited to the consumer’s account by the licensee; and  (b) that is, or is in the nature of:  (i) a total or partial refund in relation to a transaction entered into using the credit card; or  (ii) a total or partial reversal of such a transaction; is not a payment to which subsection (1) applies. 133BP  Agreement to apply payment against particular amount owed  (1) This section applies if, at the time when the licensee applies the relevant payment, the following conditions are satisfied:  (a) the consumer has requested the licensee to apply certain payments made under the credit card contract against a particular amount:  (i) owed by the consumer to the licensee under the contract; and  (ii) in relation to which any other requirements prescribed by the regulations are satisfied;  (b) the licensee has agreed to the request;  (c) the relevant payment is a payment to which the request relates;  (d) neither the request, nor the agreement to the request, has been withdrawn in accordance with this section.  (2) The licensee must apply the relevant payment against the amount referred to in paragraph (1)(a) in accordance with the request.  (3) The consumer may withdraw the request at any time.  (4) The licensee may withdraw the agreement to the request, but only if the consumer has consented to the withdrawal.  (5) The regulations may prescribe requirements to be complied with in relation to any of the following:  (a) making a request under paragraph (1)(a);  (b) agreeing to a request under paragraph (1)(b);  (c) withdrawing a request under subsection (3);  (d) withdrawing agreement to a request under subsection (4);  (e) consenting under subsection (4) to the withdrawal of agreement to a request. 133BQ  Application of payment against last statement balance, with higher interest debts to be discharged first  (1) Subject to subsection (2), the licensee must apply the relevant payment (or any part of the relevant payment remaining after complying with section 133BP) against so much as remains owing of the closing balance shown in the last statement of account for the credit card contract that the licensee gave the consumer before the relevant payment was made.  (2) If different annual percentage rates apply to different parts of that closing balance, the licensee must apply the relevant payment (or any remaining part of the payment) first to the part of that balance to which the highest rate applies, next to the part of that balance to which the next highest rate applies, and so on. 133BR  Application of any remaining part of the relevant payment   The licensee must apply any part of the relevant payment remaining after complying with sections 133BP and 133BQ in accordance with the terms of the credit card contract. Division 7—Calculation of interest under credit card contracts 133BS  Credit provider not to impose retrospective interest charges  (1) A licensee who is the credit card provider under a credit card contract must not, in relation to a statement period covered by a statement of account, impose on the consumer who is the debtor under the contract a liability to pay a rate of interest if the rate of interest would:  (a) be applied to the balance, or a part of the balance, of the credit card contract on a day in the statement period; and  (b) be applied because of facts or circumstances coming into existence after that day; and  (c) be higher than the rate of interest (including nil) that would have been applied to that balance, or that part of the balance, on that day if those facts and circumstances had not come into existence. Division 8—Ending credit card contracts 133BT  Credit provider not to enter into credit card contract unless it allows for termination of contracts  (1) A licensee must not enter into, or offer to enter into, a credit card contract under which the licensee would be the credit provider, if the consumer who would be the debtor under the contract would not have a credit card termination entitlement under the contract. Meaning of credit card termination entitlement  (3) A consumer who is the debtor under a credit card contract has a credit card termination entitlement under the contract if the consumer is entitled, under the contract, to terminate the credit card contract. 133BU  Credit provider to provide online capacity to request termination of credit card contract  (1) This section applies if a consumer who is the debtor under a credit card contract has a credit card termination entitlement under the contract on a day (the online termination day).  (2) The licensee who is the credit provider under the credit card contract must establish and maintain a website that satisfies all of the following paragraphs:  (a) the website tells the consumer that the consumer may use the website to request to terminate the credit card contract;  (i) tells the consumer what information the consumer will need to enter in order to request to terminate the credit card contract; and  (ii) provides the consumer with instructions on how to request to terminate the credit card contract;  (c) if the consumer enters the information and follows those instructions, the consumer can use the website to request to terminate the credit card contract;  (d) the website is available on the online termination day.  (3) For the purposes of subsection (2), it is a defence if the website is reasonably unavailable on the online termination day. 133BV  Credit provider not to suggest the consumer not terminate the credit card contract  (a) a consumer who is the debtor under a credit card contract has a credit card termination entitlement under the contract; and  (b) the consumer has requested to terminate the credit card contract.  (2) The licensee who is the credit provider under the credit card contract must not suggest that the consumer remain in the credit card contract. 133BW  Credit provider to give effect to request to terminate credit card contract  (a) a consumer who is the debtor under a credit card contract has a credit card termination entitlement under the contract; and  (b) the consumer has requested to terminate the consumer’s credit card contract.  (2) The licensee who is the credit provider under the credit card contract must take reasonable steps to ensure that the request is given effect to as soon as practicable. Part 3‑2BA—Licensees that are credit providers under credit contracts: additional rules relating to low cost credit contracts 133BX  Guide to this Part This Part has rules that apply to certain licensees who are, or are to be, credit providers under certain low cost credit contracts. It applies in addition to the general rules in Part 3‑2, and modifies some of those rules.