The regulations may provide that section 25 or 26 applies in relation to a provision of credit covered by subparagraph 5(1)(b)(ii) or (iii) as if specified provisions were omitted, modified or varied as specified in the regulations.
Division 3—Interest charges
27 Definitions relating to interest
(1) In this Code:
annual percentage rate under a credit contract means a rate specified in the contract as an annual percentage rate.
daily percentage rate means the rate determined by dividing the annual percentage rate by 365.
default rate means a higher annual percentage rate permitted by section 30.
unpaid balance under a credit contract at any time means the difference between all amounts credited and all amounts debited to the debtor under the contract at that time.
unpaid daily balance for a day under a credit contract means the unpaid balance under the contract at the end of that day.
(2) A credit contract may specify, for the purposes of payments or any other purposes under the contract, when a day ends. Different times of the day may be specified for different purposes.
27A Application of this Division
This Division does not apply to a small amount credit contract.
28 Limit on interest charges
(1) The maximum amount of an interest charge that may be imposed or provided for under a credit contract is:
(a) where only one annual percentage rate applies to the unpaid balances under the contract—the amount determined by applying the daily percentage rate to the unpaid daily balances; or
(b) in any other case—the sum of each of the amounts determined by applying each daily percentage rate to that part of the unpaid daily balances to which it applies under the contract.
(2) However, an interest charge under a credit contract for a month, a quarter or half a year may be determined by applying the annual percentage rate or rates, divided by 12 (for a month), by 4 (for a quarter) or by 2 (for half a year), to the whole or that part of the average unpaid daily balances to which it applies. The regulations may provide for the calculation of unpaid daily balances in these circumstances.
(3) This section does not prevent the imposition of a default rate of interest permitted by section 30.
29 Early debit or payment of interest charges prohibited
(1) A credit provider must not, at any time before the end of a day to which an interest charge applies, require payment of or debit the interest charge.
(2) A credit contract may provide for an interest charge to become payable or be debited at any time after the day to which it applies.
(3) The regulations may provide that subsection (1) does not apply to the first payment of interest charges under a credit contract.
(4) This section does not apply to the debit of an interest charge under a credit contract before the end of the period to which the charge applies if:
(a) the charge is debited on the last day of the period; and
(b) the amount debited is not treated by the credit provider as part of the unpaid daily balance for that day for the purpose of calculating interest charges under the contract.
30 Default interest
(1) A credit contract may not provide that an annual percentage rate applicable under a credit contract to any part of the unpaid balance will differ according to whether the debtor is in default under the contract.
(2) However, a credit contract may provide for such a differential rate if the higher rate is imposed only in the event of default in payment, in respect of the amount in default and while the default continues.
30A Regulations about residential investment property
The regulations may provide that this Division applies in relation to a provision of credit covered by subparagraph 5(1)(b)(ii) or (iii) as if specified provisions were omitted, modified or varied as specified in the regulations.
30B Regulations about credit card contracts
(1) The regulations may make provision in relation to any of the following matters relating to interest charges under credit card contracts:
(a) the day from which a daily percentage rate may be applied, and the balance (or the part of a balance) to which it may be applied;
(b) how matters relating to interest charges may be described in:
(i) credit card contracts; and
(ii) other documents or advertisements published or broadcast by or on behalf of licensees who are credit providers under credit card contracts.
(2) Regulations made for the purpose of subsection (1) may:
(a) provide for offences against the regulations; and
(b) provide for civil penalties for contraventions of the regulations.
(3) The penalties for offences referred to in paragraph (2)(a) must not be more than 50 penalty units for an individual or 500 penalty units for a body corporate.
(4) The civil penalty for a contravention of a regulation made for the purposes of subsection (1) by an individual is 5,000 penalty units. However, section 167B of the National Credit Act applies in the same way as it would apply if the regulation contravened were a civil penalty provision under that Act.
(5) This Division has effect subject to regulations made for the purpose of subsection (1).
Division 4—Fees and charges
31 Prohibited credit fees or charges
(1) The regulations may specify credit fees or charges or classes of credit fees or charges that are prohibited for the purposes of this Code.
(2) Subsection (1) does not apply to a small amount credit contract.
31A Restrictions on fees and charges for small amount credit contracts
(1) A small amount credit contract must not impose or provide for fees and charges if the fees and charges are not of the following kind:
(a) a permitted establishment fee;
(b) a fee or charge (a permitted monthly fee) that is payable on a monthly basis starting on the day the contract is entered into;
(c) a fee or charge that is payable in the event of a default in payment under the contract;
(d) a government fee, charge or duty payable in relation to the contract.
Note: See section 39B for the maximum amount that may be recovered by the credit provider if there is a default in payment under the contract.
(1A) Despite subsection (1), a small amount credit contract must not impose or provide for a permitted establishment fee if any of the amount of credit to be provided under the contract is to refinance any of the amount of credit provided to the debtor under another small amount credit contract.
Permitted establishment fee
(2) A permitted establishment fee is a fee or charge the amount of which must not exceed 20% of the adjusted credit amount in relation to the small amount credit contract.
Maximum amount of permitted monthly fee
(3) The amount of a permitted monthly fee that may be imposed or provided for under a small amount credit contract must not exceed 4% of the adjusted credit amount in relation to the contract.
31B Credit provider or prescribed person must not require or accept payment of a fee or charge in relation to a small amount credit contract etc.
(1) A credit provider, or a person prescribed by the regulations, must not require or accept payment by the debtor of a fee or charge in relation to:
(a) a small amount credit contract; or
(b) the provision of the amount of credit under a small amount credit contract; or
(c) a thing that is connected with a small amount credit contract or the provision of the amount of credit under such a contract.
Criminal penalty: 100 penalty units.
(2) Subsection (1) does not apply if the fee or charge is:
(a) a fee or charge that may be imposed or provided for by the small amount credit contract under section 31A; or
(b) a fee or charge prescribed by the regulations.
(3) If a credit provider or person contravenes subsection (1):
(a) the debtor is not liable (and is taken never to have been liable) to make the payment to the credit provider or person; and
(b) the debtor may recover as a debt due to the debtor the amount of any payment made by the debtor to the credit provider or person.
31C Prohibition on unexpired monthly fees in relation to small amount credit contracts
Requirement
(1) A credit provider must not require or accept payment by the debtor under a small amount credit contract of an unexpired monthly fee.
Note: A penalty may be imposed for contravention of a key requirement in this subsection: see Part 6.
(2) An unexpired monthly fee in relation to a small amount credit contract is each permitted monthly fee that is in respect of a month that commences after the date on which the contract is paid out.
(3) If a credit provider contravenes subsection (1) in relation to a small amount credit contract:
(a) the debtor is not liable (and is taken never to have been liable) to make the payment of the unexpired monthly fee to the credit provider; and
(b) the debtor may recover as a debt due to the debtor the amount of any payment of the unexpired monthly fee made by the debtor to the credit provider.
Offence
(4) A person commits an offence if:
(a) the person is subject to a requirement under subsection (1); and
(b) the person engages in conduct; and
(c) the conduct contravenes the requirement.
Criminal penalty: 100 penalty units.
Strict liability offence
(5) A person commits an offence if:
(a) the person is subject to a requirement under subsection (1); and
(b) the person engages in conduct; and
(c) the conduct contravenes the requirement.
Criminal penalty: 10 penalty units.
(6) Subsection (5) is an offence of strict liability.
32 Fees or charges in relation to third parties
When this section applies
(1) This section applies if a fee or charge is payable by a debtor to the credit provider for an amount (the third party amount) payable or paid by the credit provider to another person, body or agency.
Third party amount ascertainable at time of debtor payment
(2) If, when the fee or charge is paid by the debtor to the credit provider, the third party amount is ascertainable, then the amount of the fee or charge must not exceed the third party amount.
Third party amount not ascertainable at time of debtor payment
(3) If:
(a) when the fee or charge is paid by the debtor to the credit provider, the third party amount is not ascertainable; and
(b) after the fee or charge is paid, the credit provider ascertains the third party amount; and
(c) the third party amount is less than the amount of the fee or charge paid;
then the credit provider must refund or credit the difference to the debtor.
Determining third party amount
(4) The third party amount is to be determined by:
(a) taking into account any discount, rebate or other allowance that is received or receivable by the credit provider or a related body corporate (within the meaning of the Corporations Act 2001); and
(b) disregarding any rebate on tax payable by the credit provider or a related body corporate (within the meaning of that Act).
Division 4A—Annual cost rate of certain credit contracts
32A Prohibitions relating to credit contracts if the annual cost rate exceeds 48%
Entering into a credit contract
(1) A credit provider must not enter into a credit contract if the annual cost rate of the contract exceeds 48%.
Criminal penalty: 50 penalty units.
Provision of credit assistance
(2) A person must not provide credit assistance to a consumer by suggesting that the consumer apply, or assisting the consumer to apply, for a particular credit contract with a particular credit provider if the person knows, or is reckless as to whether, the annual cost rate of the contract exceeds 48%.
Criminal penalty: 50 penalty units.
(3) If a person provides credit assistance to a consumer that is prohibited by subsection (2):
(a) the consumer is not liable (and is taken never to have been liable) to pay any fees or charges to the person in relation to:
(i) the credit assistance; or
(ii) any other services provided by the person in connection with the credit assistance; and
(b) the consumer may recover as a debt due to the consumer the amount of any such fees or charges paid by the consumer to the person.
Application
(4) This section does not apply if:
(a) the credit provider is an ADI; or
(b) the credit contract is a low cost credit contract, small amount credit contract or bridging finance contract.
32AA Prohibition relating to the annual cost rate of credit contracts—later increases of the annual percentage rate etc.
(1) If:
(a) a credit provider is a party to a credit contract (other than a small amount credit contract or bridging finance contract); and
(b) the credit provider is not an ADI; and
(c) either or both of the following things (the varied matters) occur after the contract is entered into:
(i) the annual percentage rate under the contract increases;
(ii) an amount referred to in subsection 32B(3) that is prescribed by the regulations increases;
the credit provider contravenes this subsection if the annual cost rate of the contract would have exceeded 48% at the time the contract was entered into if that or those varied matters had been taken into account at that time for the purposes of calculating the annual cost rate of the contract.
(2) A credit provider must not contravene subsection (1).
Criminal penalty: 50 penalty units.
32B Calculation of annual cost rate
(1) The annual cost rate of a credit contract must be calculated as a nominal rate per annum, together with the compounding frequency, using the formula:
Start formula n times r times 100% end formula
where:
n is the number of repayments per annum to be made under the credit contract (annualised if the term of the contract is less than 12 months), except that:
(a) if repayments are to be made weekly—n is 52.18; and
(b) if repayments are to be made fortnightly—n is 26.09; and
(c) if the contract does not provide for a constant interval between repayments—n is to be derived from the interval selected for the purposes of the definition of j in subsection (2).
r is the solution of the equation specified in subsection (2).
(2) The equation for the purposes of the definition of r in subsection (1) is:
Start formula sigma-summation underscript j equals 0 overscript t endscripts start fraction A start subscript j end subscript over open bracket 1 plus r close bracket start superscript j end superscript end fraction equals sigma-summation underscript j equals 0 overscript t endscripts start fraction R start subscript j end subscript plus C start subscript j end subscript over open bracket 1 plus r close bracket start superscript j end superscript end fraction minus F end formula
where:
Aj is the amount of credit to be provided under the credit contract at time j (the value of j for the provision of the first amount of credit is taken to be zero).
Cj is the credit cost amount (if any) for the credit contract that is payable by the debtor at time j in addition to the repayments Rj.
F is:
(a) if the credit contract is a medium amount credit contract—$400 (or such other amount as is prescribed by the regulations); or
(b) if the credit contract is not a medium amount credit contract and an amount is prescribed by the regulations in relation to the contract—that amount; or
(c) otherwise—$0.
j is the time, measured as a multiple (not necessarily integral) of:
(a) if the credit contract does not provide for a constant interval between contractual repayments—an interval of any kind selected by the credit provider as the unit of time; or
(b) otherwise—the interval between contractual repayments that will have elapsed since the first amount of credit is provided under the credit contract.
Rj is the repayment to be made at time j.
t is the time, measured as a multiple of the interval between contractual repayments (or other interval so selected), that will elapse between:
(a) the time when the first amount of credit is provided under the credit contract; and
(b) the time when the last repayment is to be made under the contract.
Credit cost amount
(3) The credit cost amount for the credit contract is the sum of the following amounts if they are ascertainable:
(a) the amount of credit fees and charges payable in relation to the contract;
(b) the amount of a fee or charge payable by the debtor (whether or not payable under the contract) to:
(i) any person (whether or not associated with the credit provider) for an introduction to the credit provider; or
(ii) any person (whether or not associated with the credit provider) for any service if the person has been introduced to the debtor by the credit provider; or
(iii) the credit provider for any service relating to the provision of credit, other than a service referred to in subparagraph (ii);
(c) any other amount prescribed by the regulations.
(4) For the purposes of subsection (3), the amounts referred to in that subsection:
(a) include an amount that is payable even if the credit is not provided; but
(b) do not include an amount of a government fee, charge or duty payable in relation to the credit contract.
(4A) Despite subsection (3), the regulations may provide that a specified amount, or an amount included in a specified class, is not an amount referred to in paragraph (3)(a) or (b).
Tolerances and assumptions etc.
(5) The annual cost rate must be correct to at least the nearest one hundredth of 1% per annum.
(6) In calculating the annual cost rate, reasonable approximations may be made if it would be impractical or unreasonably onerous to make a precise calculation.
Example: If repayments are to be made on a fixed day each month, it may be assumed that repayments will be made on that day each month even though the credit contract provides for payment on the preceding or succeeding business day when the due date is not a business day.
(7) The tolerances and assumptions under sections 180 to 182 apply to the calculation of the annual cost rate.