Consumer credit and guarantees

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    The National Consumer Credit Protection Act and the National Credit Code protect consumers into credit contracts.

    These laws outline strict licensing and conduct requirements for credit providers and their representatives.

    Under the National Credit Code, credit providers must be licensed and must only lend money responsibly. Brokers and credit assistance providers must also be licensed and are subject to similar standards.

    You should get advice before entering into a credit contract or agreeing to become a guarantor of a credit contract. If you want to cancel or withdraw from a credit contract or a guarantee, get legal advice.

    If you owe money and you can’t afford to make repayments, you may be eligible to receive financial hardship assistance. You should see a financial counsellor and get legal advice.

    Consumer lending

    What is a credit contract?

    A credit contract is a contract to borrow money that is paid back over time with an extra charge (eg interest or fees). Examples of credit contracts include:

    • contracts for credit cards
    • personal loans
    • car loans
    • home loans.

    Credit contracts must be in writing.

    The National Credit Code

    The National Credit Code applies to credit contracts that were entered into on or after 1 July 2010 and where all of the following apply:

    • the debtor (person or organisation who owes money) is an individual or a strata corporation
    • the credit is wholly or primarily being used:
      • for personal, domestic or household purposes, or
      • to purchase, renovate or refinance residential investment property
    • a charge is made for providing the credit (eg interest or fees)
    • the lender is in the business of providing credit.

    If you’re unsure about whether your lender has complied with the National Credit Code, get legal advice.

    Responsible lending requirements

    Under the National Consumer Credit laws, anyone wanting to lend you money must be registered or licensed and must only lend you money responsibly. This means they can’t lend you money if they think you can't pay it back.

    There are special requirements for products, such as loans under $2000, loans between $2000 and $5000, consumer leases and guarantees.

    Before entering into a credit contract, the credit provider must:

    • make reasonable inquiries about why you want to borrow the money
    • make reasonable inquiries about your financial situation
    • take reasonable steps to verify your financial situation
    • assess whether you can meet the financial obligations of the credit contract (and whether it will meet your needs)
    • determine that the credit contract is ‘not unsuitable’ for you .

    The credit provider must give you a copy of the assessment (if requested).

    It’s against the law for the credit provider to lend you money if they think the credit contract isn’t suitable for you.

    You should get legal advice if you think your credit provider hasn’t complied with the responsible lending requirements.

    Disclosure obligations

    Before you sign the credit contract, the credit provider must give you a credit guide. This must be in writing and should contain information about:

    • any fees you might need to pay
    • the credit provider’s obligations
    • the complaints dispute resolution process.

    You should make sure you read the full credit contract, and consider the information carefully before committing to or agreeing to sign the contract.

    Secured credit contracts

    Credit providers may need you to provide security before agreeing to lend you money. This makes it easier for them to get their money back if you stop making payments.

    For example, if you borrow money to buy a house and you sign a mortgage to the bank or another financial institution, then your house is the security.

    Creditors can register their security interest in your property with the:

    Contact the Department of Resources (for land assets) or search the Personal Property Security Register (for other assets) to find out if someone has registered a security interest over your property.

    If you sign something giving the creditor access to something for security (eg your house), and then you don't pay, the creditor can eventually take and sell this security (eg your house). But before they can do this, they must go through certain legal procedures (eg giving you notice and a period to pay).

    If you don't give something for security, then the creditor must get a court order saying you owe the money. The order can then be enforced.

    You have rights under the National Credit Code if you're in financial hardship and struggling to repay your loans. If you owe money and can’t afford to repay, you should see a financial counsellor and get legal advice.

    If you give the creditor security (eg your house) and they sell the security, and it doesn't get enough to cover the debt (and you still owe money), then the creditor can get a court order for the rest of the money.

    Credit defaults

    If you take out a loan and fail to make payments on time, the credit provider may list a default on your credit report for the unpaid amount. Defaults can affect your ability to borrow money for up to 7 years.

    The credit provider can only list a default against you if they've met their legal requirements, including, giving you a default notice. If you think a default has been listed against you, get a copy of your credit report. If you're in this situation, get legal advice.

    Withdrawing from a credit contract

    You can withdraw from a credit contract by giving written notice at any time before the credit is first provided under the contract. You should get legal advice.

    Unfair terms in consumer credit contracts

    A credit provider can’t put an unfair term into a credit contract. The National Credit Code also allows for unjust contracts to be changed. Get legal advice if you think there’s an unfair term in your credit contract.

    You can also make a complaint directly to the credit provider, but if you can’t resolve your complaint then the Australian Financial Complaints Authority (AFCA) may be able to help.

    You may need to go to court if your complaint still isn't resolved. Court applications about unfair contract terms or unjust contracts can be complex. Get legal advice.

    What if my lender tells me my credit does not fall under the National Credit Code?

    Not all credit contracts are regulated by the National Credit Code. If you are struggling to pay a Buy Now Pay Later product, a wage advance product or any product where your creditor says the credit is not caught by the National Credit Code then you should get legal advice and approach your creditor for help.


    What is a guarantee?

    A guarantee is a legally binding promise made by one person ensuring that another person carries out their legal responsibilities. This is different from consumer guarantees for goods that are sold (ie warranties).

    Credit providers may need a guarantee before agreeing to lend money. This reduces their risk of the loan not being repaid.

    Risks of being a guarantor

    A person who makes a guarantee is known as the guarantor and will be legally responsible for paying the loan if the person who owes money (debtor) refuses to or can't repay the debt.

    If the person who owes money doesn’t pay, then the creditor can pursue you (the guarantor) for the debt. You could end up in financial hardship, be made bankrupt or forced to sell your assets to pay the debt.

    If the person who owes money doesn’t make their payments, and you don’t meet any demand for payment, this could be included as a default on your credit report. If you and the person owing money can’t pay the debt, then you could both end up with a bad credit rating, making it harder for you to borrow money in the future.

    You should think about the possible consequences very carefully before agreeing to become a guarantor.

    Recovering money paid as a guarantor

    You’re entitled to recover any money paid as guarantor from the person who owes money. However, as they often have very little money, this may not be possible.

    You’re also entitled to any securities held by the creditor if it is a secured debt. Get legal advice.

    Requirements of guarantees under the National Credit Code

    Additional requirements must be met for guarantees entered in credit contracts regulated by the National Credit Code.

    A guarantee won’t be enforceable unless it’s in writing and signed by the guarantor.

    Before you sign the guarantee, the credit provider must give you a copy of the credit contract and a document explaining your rights and responsibilities as a guarantor. If they don't give you a copy of the credit contract, the guarantee won’t be enforceable.

    Within 14 days of signing the guarantee, the credit provider must give you:

    • a copy of the signed guarantee (if they haven’t already)
    • a copy of the credit contract or proposed credit contract (if they haven’t already).

    Part 7 of the Banking Code of Practice also sets out requirements that banks need to follow when you are looking at signing a guarantee.

    Withdrawing from the guarantee

    You can give written notice to withdraw from the guarantee at any time before the credit is first provided under the credit contract.

    In limited situations you may be able to withdraw the guarantee after the credit is first provided under the credit contract. You may be able to limit the amount of money you are liable for by withdrawing a guarantee from further advances. You should get legal advice.

    Credit reporting

    Accessing your credit report

    If you’ve ever applied for credit, then you will have a credit history or credit report.

    A credit report has information about your credit history including:

    • any credit obligations
    • any court judgments against you
    • loan defaults
    • whether you have defaulted on a loan
    • repayment history and
    • whether you are or have been bankrupt.

    Credit providers, such as lenders or utility providers (phone, electricity, gas, water etc) can access your credit report and use it to decide if they’ll give you a loan or provide a service.

    Several credit reporting agencies in Australia collect your credit information. These include:

    You may have credit reports with more than one of these credit agencies.

    You can ask to access your credit report from any of the major credit reporting agencies. You can access your free credit report once a year.

    You can also get a free credit report if you have applied for credit and been refused in the past 3 months. The credit reporting agency must give you a copy of your report within 10 days of your request.

    See Credit reporting for more information.

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    Do I need legal advice?

    You may need legal advice if you:

    • think your credit provider has not complied with responsible lending requirements
    • think there's an unfair contract term in your consumer credit contract
    • want to withdraw from a credit contract
    • want to recover money paid as a guarantor from the person who owes money (debtor)
    • want to withdraw a guarantee.

    How to get legal advice

    We may give general legal advice about consumer credit contracts and disputes with financial service providers in Queensland.

    We can’t give advice on business debts or disputes about business partnerships, or legal advice about debt related court proceedings outside of Queensland.

    The following services may also be able to give legal advice.

    Caxton Legal Centre Consumer Law Service gives free specialist legal advice to people with consumer and consumer credit legal problems, including loans, bankruptcy, debt collection, mortgage brokers and financial advisors.

    Central Queensland Community Legal Centre gives free legal advice about consumer matters.

    Cairns Community Legal Centre—Consumer Law Service gives legal help in the areas of consumer credit matters, consumer product disputes, consumer service disputes, consumer debt matters, bankruptcy and other consumer law matters for socially and financially disadvantaged members of the community.

    LawRight Self Representation Service (Federal) gives legal advice and help to people involved in civil proceedings in the Federal Circuit and Family Court of Australia or Federal Court of Australia for matters involving bankruptcy and consumer law. They may be able to help with drafting documents and correspondence relating to your legal matter. They don’t provide representation.

    LawRight Self Representation Service (Courts) gives legal advice and help to people involved in civil proceedings before the Brisbane District Court, Brisbane Supreme Court and Queensland Court of Appeal. They may also be able to help with drafting documents and correspondence relating to your legal matter. They don’t provide legal representation.

    LawRight Self Representation Service (QCAT) gives free legal advice and help to people at the Queensland Civil and Administrative Tribunal. The service may help with drafting documents and correspondence relating to your legal matter. They don’t provide legal representation

    LawRight Mental Health Law Clinic gives legal advice on civil law issues arising as a result of a person's mental health problem, including credit and debit law issues.

    Students Legal Service—University of Queensland (UQ) gives free legal advice to UQ students, including advice about consumer matters and responding to letters of demand.

    Community legal centres give legal advice on a range of topics. Contact them to find out if they can help with your matter.

    National Legal Aid can refer you to another Legal Aid commission if your debt or court proceedings are in another state.

    Queensland Law Society can refer you to a specialist private lawyer for advice or representation.

    Who else can help?

    These organisations may also be able to help. They don’t give legal advice.

    Australian Financial Complaints Authority (AFCA) is an independent dispute resolution service for unresolved complaints about financial products and services.

    The Australian Competition and Consumer Commission (ACCC) has information about making a complaint, resolving a consumer problem, consumer guarantees, warranties and refunds, unfair sales methods, and regulations for products and services.

    ASIC's MoneySmart website has information about how ASIC may be able to help with disputes about financial products and services.

    The MoneySmart website gives independent guidance for consumers making decisions about their personal finances, including information about:

    The Australian Financial Security Authority (AFSA) has information about bankruptcy, including how to go bankrupt, making a person bankrupt, what debts are covered, and consequences of bankruptcy.

    Office of Fair Trading (OFT) gives information and help to the public on a wide range of consumer related issues, including:

    The Office of the Australian Information Commissionerhandles complaints about misusing personal information and inaccurate credit reports.

    Queensland Civil and Administrative Tribunal (QCAT) can hear:

    From 1 September 2019, if you matter relates to a defective motor vehicle, you should try and first resolve your dispute with the other party before asking the QCAT to hear your dispute. You may being a claim in QCAT up to the value of $100,000.

    The following Australian credit reporting agencies can give you a free copy of your credit history:

    Disclaimer: This content is for general purposes only and not legal advice. If you have a legal problem, please contact us or speak to a lawyer. View our full disclaimer.

    Last updated 22 November 2022