How are you Protected?

You may have heard the term National Consumer Credit Protection Act mentioned lately. So what exactly is it – and what does it actually mean for borrowers?

The new National Consumer Credit Protection Act (let’s call it the NCCP) is actually the result of comprehensive discussion and negotiation between state and federal governments over several years – finally culminating in bringing together all the different states and territories into one nationally consistent framework to legislate the way in which credit is regulated.

Effective from July 1, this framework clearly lays out the new requirements for all credit providers in relation to how they can deal with a consumer – meaning there’s now a greater level of consumer protection.

So the immediate benefit for borrowers is that the new NCCP will make things simpler for all Australians to know their rights and what they can expect when arranging any form of credit – including their all important mortgage.

More Accountability

For established and reputable members of the industry such as Resi, a welcome part of that new NCCP legislation is a provision which means a lender cannot make a loan unless they have complied with the responsible lending provision.

This new provision means a loan will now have to pass a ‘not unsuitable’ test, which has been designed to eliminate lending practices often performed by fringe lenders or lenders of last resort who provide unsuitable levels of credit to borrowers who are not in a clear position to manage repayments.

In addition to that, new compulsory licensing requirements for all credit providers as part of the NCCP is also set to weed out these same lenders whose behavior has not only unraveled the dreams of borrowers in the past, but also brought a very unnecessary element of disrepute to the industry.

The use of credit is such a regular part of our everyday life that none of us can afford not to familialise ourselves with the new rules and what they mean for us.