Victorian Government supports changes to the Consumer Credit Code

The Victorian Government has now released its response to the Report of the Consumer Credit Review, and its 38 recommendations. This response has national significance and influence since Victoria currently holds the chair of the Uniform Credit Code Management Committee, and the report and response canvass consumer credit issues that other jurisdictions have isolated as being potentially problematic.

The Government's response

In its response, the Victorian Government supported a number of the recommendations and said that it would work through the Ministerial Council on Consumer Affairs ("MCCA") to:

• develop a national solution to the problem of inappropriately high credit fees and charges affecting vulnerable and disadvantaged consumers;
• amend the Consumer Credit Code ("the Code") to prohibit credit providers from accepting household goods as security for consumer credit, unless the credit funded the purchase of those goods;
• bring consumer credit provided by the use of promissory notes (and other bill facilities) within Code;
• remove the conclusive presumption accorded to "business purpose declarations" by section 11(2) of the Code;
• determine whether credit providers should be obliged to consider the impact on borrowers when they increase credit limits;
• amend the Code to oblige credit providers, when making provisional offers to increase credit limits on credit cards, to give consumers information on minimum repayment amounts and the time it will take to repay credit limits;
• consider changes to the Code that will result in "simpler and more useful" pre-contractual disclosure about credit limits;
• amend the Code to require standard warnings on all credit card statements about the dangers of only making minimum repayments;
• enhance protection for consumers who are considering, or who have entered into, reverse mortgages;
• amend the Code to give government consumer agencies the power to bring proceedings to reopen unjust transactions (under section 70 of the Code) or to review unconscionable interest or other charges (section 72);
• assess the effectiveness of current consumer remedies under the Code;
• amend the Code to enable interim orders to be made in Code proceedings prohibiting the payment of money or the transfer of other property; and
• review the level of penalties under the Code.

Other matters

In its response, the Government also supported a number of amendments to Victorian legislation, such as the Fair Trading Act 1999. For example, the Government has agreed to amend the relevant legislation to allow the Director of Consumer Affairs Victoria to institute and defend actions under the Code on behalf of consumers.

It seems likely that the MCCA will act on at least some of the recommendations the Victorian Government will put before it, because they deal with issues on which the MCCA has previously expressed concern. For example, at the latest MCCA meeting held on 15 September 2006, the Ministers restated their concern regarding the granting of excessive credit to vulnerable consumers and called for options for dealing with this issue to be developed.

Consideration of the recommendations by the MCCA is likely to take some time, because, as the Government's response foreshadows, it will involve the preparation of regulatory impact assessment material. We will keep you informed of any future developments.