As we roll into the Christmas holiday period of peak spending and credit card debt, Victoria’s consumer credit market will see new protective measures come into effect.

The aim of Victoria’s credit regulatory scheme is to balance the interests of the credit industry with those of consumers, but it is not an easy task. Public access to credit, usually through credit cards, is a significant driver of demand for consumer goods, which in turn fuels economic activity and growth in other industries. But mounting demand can translate to soaring credit card debt, which in Australia has reached more than $36.6 billion. Add to that the continuing rise in interest rates and we are left with many Australians struggling to manage their finances.

This growing concern over credit and debt has prompted the state government’s amenable response to the Report of the Consumer Credit Review (the Report) and its 38 recommendations made earlier this year. The credit review itself, conducted during 2005, was initiated by the Bracks Government as part of their social action campaign: A Fairer Victoria. Their response to the corresponding Report adopts an extensive range of measures to encourage affordable credit, while preventing predatory finance practices.

Among these measures are bans on pre-approved credit card limits, which have not been voluntarily selected by the customer. There are also plans for a state-wide network of No Interest Loan Schemes, an improved registration system for providers and a com­mit­ment to remove unfair contract terms. Further, the Consumer Credit Code, which prohibits credit providers from accepting household goods as security for consumer credit, is now likely to be amended.

But while the consumers are being looked after, how does the credit industry fair?

• The issue of unreasonable fees and charges is to be considered in a national context, with the government working in consultation with the Ministerial Council on Consumer Affairs (MCCA) to develop a regulatory impact statement on the matter;
• The inclusion of warnings about the dangers of only making minimal repayments is being considered as a requirement on all credit card statements;
• The existing prohibition on unsolicited credit cards in the Fair Trading Act will be expanded to include unsolicited credit limit increases;
• The MCCA has been encouraged to enhance protection for debtors who are con­sidering reverse mortgages by forcing credit providers to present a ‘no negative equity guarantee’ along with a comprehen­sive information statement on reverse mortgages.

These are just some of the obligations likely to be applied to credit providers under the Report’s recommendations. However, considering most of the major credit providers are national, Victorian legislation will need to be remedied alongside national laws in order to be effective. Amendments to the Consumer Credit Code must be considered in a context that transcends state borders and minimises conflict with other jurisdictions.

In the meantime, consumers must remind them­selves of the trips and traps of credit con­sumption, particularly in this season of high spend. While Consumer Affairs Victoria (CAV) provides useful information about credit and debt, the Consumer Credit Legal Service (CCLS), a joint initiative between CAV and Victoria Legal Aid, is a valuable resource for those with legal problems in this area.

More information

From the LIV Bookshop
Law Handbook 2007, Fitzroy Legal Service, $95.
The new Annotated Consumer Credit Code and Regulations will be available mid 2007.

Useful web links

Information on handling credit and debt can be found at www.consumer.vic.gov.au.
Legal advice can be sourced from www.ccls.org.au