Consumer credit regulation
National Credit Act
The National Credit Act began on 1 July 2010. Here we explain
how the Act affects providers and consumers of credit in Australia,
how it has been updated and the specific rules that apply to credit
cards, loans and reverse mortgages.
About the National Credit
Credit provider obligations
Anyone who wants to engage in credit activities (including
lenders, lessors and brokers) must be licensed with ASIC or be
a representative of someone who is licensed (that is, they must
either have their own licence or come under the umbrella of another
licensee as an authorised credit representative or employee).
The law also states that credit providers must not enter
into a contract with you that is unsuitable, such as a loan you
can't repay without suffering hardship or a contract that doesn't
meet your requirements and objectives.
By law the credit provider must:
- make reasonable inquiries about your financial situation,
requirements and objectives
- take reasonable steps to verify your financial situation
- decide whether the credit contract you are asking for is 'not
unsuitable' for you.
Credit assistance providers must make a preliminary assessment
and credit providers must make a final assessment that the credit
contract you are applying for is 'not unsuitable' for you before
they offer you credit.
See ASIC credit reform update for the
latest information about credit provider obligations.
Check if a company or individual is licensed
Search ASIC Connect's Professional Registers to
check your credit provider or credit assistance provider is
licensed or you can phone ASIC's Infoline on 1300 300
If you are having problems with your credit provider or credit
assistance provider, you should make a complaint. See how to
complain for more details.
Exemptions to the law
Some businesses that provide credit are currently exempt
from licensing, such as retail stores and car yards. While the
store may be exempt, the actual credit provider must be licensed.
If you are unsure who the credit provider is, ask the salesperson
or broker to point out the name in your credit
contract or rental agreement.
Get a credit guide
Anyone engaging in credit activities (by providing credit or
credit assistance to you) must give you a credit guide and credit
proposal disclosure document with information such as:
- their licence number
- contact details
- fees and charges
- details of your right to complain or a written contact details
to access their External Dispute Resolution Scheme (EDR).
Unless the credit provider has already entered into a written
contract with you setting out the maximum amount you will pay for
their services or they are providing services free of charge, they
must also give you a quote for providing credit assistance.
Read your credit card's key facts sheet
You must be given a 'key facts sheet' when you apply for a
credit card. If you don't receive one, ask your credit card
The facts sheet contains:
- Minimum repayment (or how it will be calculated)
- Interest rate that applies to purchases and cash advances
- Interest rate that applies to balance transfers (and for how
- Promotional interest rate (if any)
- Length of the interest-free period (if any)
- Annual and late payment fees (if any).
Check your minimum monthly repayments
Your monthly credit card statement must tell you how long it
will take to pay off your entire balance by making minimum monthly
If you only make the minimum repayment each month, you will pay
more interest and it will take you longer to pay off your
Work out how much interest you can save when you pay your card
Credit card calculator
Changes to credit cards from January 2019
How you manage your credit card account and credit limits will
change from 1 January 2019.
- Responsible lending: when you apply for a
credit card or a credit limit increase, lenders will assess your
request based on your ability to repay the credit limit within
- Changes to interest calculations: credit
providers cannot impose retrospective interest charges. This
means they can't backdate interest on a balance that has had the
benefit of an interest-free period
- Credit limit reduction and card cancellation:
if you get a credit card after 1 January 2019 your credit card
provider must give you the option of cancelling your card or
reducing your credit limit online.
Credit card limit increases
You can ask your credit card provider to increase your
credit limit at any time, but they can't contact
you in any way to offer to increase your credit limit - even if you
previously opted to receive these offers. This applies to both new
and existing credit cards.
Check the fees for exceeding your credit limit
If you opened your credit card account on or after 1 July 2012,
card issuers must not charge you a fee when your card goes above
the credit limit, without first getting your agreement. You can
withdraw your consent to this at any time.
If you opt out of these over limit arrangements, the card issuer
can still allow you to temporarily exceed your limit, but must not
charge you a fee for doing so.
No negative equity guarantee
On 18 September 2012, the Government introduced statutory
'negative equity protection' on all new reverse mortgage
contracts. This means reverse mortgage providers must guarantee
that when your reverse mortgage contract ends and your home is sold
to repay the loan, you will not have to pay back more than the
value of your home.
Read the information statement
Your credit provider must give you a 'reverse mortgage
information statement', which contains:
- Details about how a reverse mortgage works
- How costs are calculated
- What to consider before taking out a reverse mortgage
- Useful contacts for more information.
Reverse mortgage projections
Your credit provider or credit assistance provider must go
through reverse mortgage projections with you - in person, before
you take out a reverse mortgage - using our reverse mortgage
Work out how much your debt and equity will be in the
Reverse mortgage calculator
These projections will:
- Illustrate the effect a reverse mortgage may have on the equity in your home over time
- Show the potential impact of interest rates and house price
You must be given a printed copy of these projections to take
mortgages and home reversion schemes for more details.
Short term and small amount
loans (including payday loans)
Loans that are banned
Since 1 March 2013, 'short term' loans of $2,000 or less that
you must repay in 15 days or less are prohibited.
Loans that require a warning
Credit providers are required to display a warning that notifies
you of your options before you borrow money when they offer a
'small amount' loan of $2,000 or less that is to be repaid between
16 days and 1 year.
Fee limits on small amount loans ($2,000 or less)
The fees charged on small amount loans are capped (that is,
limited to a maximum amount).
Credit providers can only charge you the following fees:
- A one-off establishment fee (of not more than 20% of the loan
- A monthly account keeping fee (of not more than 4% of the loan
- A government fee or charge
- Default fees or charges (the credit provider cannot collect
more than 200% of the amount loaned if you default - that is, fail
to pay back the loan)
- Enforcement expenses (if you fail to pay back the loan, these
are the costs incurred by the credit provider going to court to
recover the money owed under your credit contract).
amount loans for more details.
Who is exempt?
This cap on fees and ban on short term loans does not apply to
loans offered by Authorised Deposit-taking Institutions (ADIs) such
as banks, building societies and credit unions, or to continuing
credit contracts such as credit cards.
Medium amount loans and all
The fees and charges allowed on loans of more than $2,000 are
capped (that is, limited to a maximum amount).
Fee limits on medium amount loans ($2,001-$5,000)
For 'medium amount' loans which are for amounts between $2,001
and $5,000 to be repaid between 16 days and 2 years, fees are
- a one-off fee of $400
- a maximum annual interest rate of 48%, including all other fees
loans and car
loans for more details.
Fee limits on all other loans, including continuing credit
For all loans of more than $5,000 or with terms longer than 2
years and all continuing credit contracts such as credit cards, the
fees and charges allowable are capped and must not be more than 48%
annually (including any establishment or other fixed fees).
Who is exempt?
ADIs such as banks, building societies and credit unions are
exempt from these fee caps.
Problems with your credit
If you have problems with your credit provider or credit
assistance provider see how to complain for advice on what to
do or call ASIC's Infoline on 1300 300 630.
If your credit provider or credit assistance provider is
breaking any of the above rules you should make a complaint to ASIC.
It is a good idea to keep up to date with
any changes to the National Credit Act so you are aware of the
rules in the market place.
Last updated: 06 Mar 2019