Transitional matters in connection with the National Consumer Credit Protection Act 2009 are dealt with in the National Consumer Credit Protection (Transitional and Consequential Provisions) Act 2009 (the Act).
Definitions (Section 4)
carried over instrument means a contract or other instrument that:
(a) was made before commencement;
(b) was in force immediately before commencement; and
(c) the old Credit Code of a referring State or a Territory applied to immediately before commencement.
new Credit Code means Schedule 1 to the National Credit Act and includes:
(a) regulations made under section 329 of the National Credit Act for the purposes of that Schedule; and
(b) instruments made under sub-section 6(14) or (17) of that Schedule (the NCC).
old Credit Code means the following:
(a) For NSW – the Consumer Credit (New South Wales) Code, and the Consumer Credit (New South Wales) Regulations, within the meaning of the Consumer Credit (NSW) Act 1995 of New South Wales as in force from time to time before commencement;
(b) - (h) [Other States]
Outline of Transitional Provisions (NCC, Schedule 1)
Broadly, the Act provides that the NCC does not apply in relation to a contract or other instrument that was made before commencement of the NCC. But, despite the foregoing, the NCC does apply to a carried over instrument (i.e. a contract that was in force and regulated by the old Credit Code immediately prior to commencement of the NCC) subject to the following:
Credit to which the Code applies (Sch 1, s(3))
Section 6 of the old Credit Code applies to a carried over instrument in place of s5 of NCC. The main effect of this substitution is that, for a carried over instrument, the NCC does not apply to credit provided wholly or predominately to purchase, renovate or improve residential property for investment purposes.
Business Purpose Declarations (Sch 1, s(3))
Sections 11 and 150 of the old Credit Code apply to a carried over instrument in place of sections 13 and 172 of the NCC.
The upshot of this is that, if a borrower provided a business purpose declaration in respect to a facility under the old Credit Code, that declaration will remain effective. Accordingly, the facility remains unregulated and the statutory presumptions set out in s11 of the old Credit Code remain effective.
Section 172 relates similarly to business purpose declarations in respect of Goods Leases.
Credit to which the Code does not apply (Sch 1, s(4))
Sub-section 6(2) of the NCC does not apply to a carried over instrument. This sub-section relates to the calculation of fees and charges for the purposes of section 6.
Prohibited Securities (Sch 1, s(4))
Sub-sections 50(2)-(5) and (8) of the NCC do not apply to a carried over instrument.
These sub-sections prohibit certain securities including mortgages over household goods in certain circumstances and goods used by a mortgagor in the production of income by personal exertion.
Hardship Threshold (Sch 1, s(5))
Sections 72 to 75 of the NCC provide for applications to vary contracts on the grounds of hardship. Sub-section 72(5) of the NCC provides that those sections do not apply to a contract in respect to credit of more than $500,000.
The Act provides that sub-section 72(5) of the NCC does not apply in relation to a carried over instrument. Instead, the following provision applies from commencement of the NCC:
“Application
(5) This section and sections 73 to 75 do not apply to a credit contract under which the maximum amount of credit that is or may be provided is more than an amount equal to 110% of the amount of the average loan size for the purchase of new dwellings in New South Wales as set out in the Table of Housing Finance Commitments in the most recent publication entitled Housing Finance, Australia, as published from time to time by the Australian Bureau of Statistics.”
Request to Postpone Enforcement
Sections 94 to 97 of the NCC provide the regime for a borrower to seek a postponement of enforcement proceedings. Sub-section 94(4) of the NCC provides that the sections do not apply to a credit contract in respect to credit exceeding $500,000.
The Act provides that sub-section 94(4) of the NCC does not apply in relation to a carried over instrument. Instead, the following provision applies from commencement of the NCC:
“(4) This Division does not apply to a credit contract under which the maximum amount of credit that is or may be provided is more than an amount equal to 110% of the amount of the average loan size for the purchase of new dwellings in New South Wales as set out in the Table of Housing Finance Commitments in the most recent publication entitled Housing Finance, Australia, as published from time to time by the Australian Bureau of Statistics.”
If you have any further questions, please do not hesitate to contact a member of our Financial Services team:
T: 61 2 8233
Ross Rydge | Senior Associate
T: 61 2 8233 9723
