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 Act

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.

Responsible lending

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 300 630.

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.

Credit cards

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 issuer.

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 long)
  • 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 repayments.

If you only make the minimum repayment each month, you will pay more interest and it will take you longer to pay off your balance.

Work out how much interest you can save when you pay your card off faster.

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 three years
  • 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.

Reverse mortgages

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 calculator.

Work out how much your debt and equity will be in the future. 

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 movements.

You must be given a printed copy of these projections to take with you.

See reverse 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 amount)
  • A monthly account keeping fee (of not more than 4% of the loan amount)
  • 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).

See small 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 other loans

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 limited to:

  • a one-off fee of $400
  • a maximum annual interest rate of 48%, including all other fees and charges.

See personal loans and car loans for more details.

Fee limits on all other loans, including continuing credit contracts

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 provider

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.

Related links

Last updated: 06 Mar 2019