Currently, credit providers and lessors are required under the National Credit Act to provide pre-contractual disclosure of key terms of the proposed contract. This can be combined with the contract document itself and most often is.
Treasury is conducting a review of these requirements and has recently issued a discussion paper. The closing date for submissions is Monday 13 May 2013.
When the discussion paper was released by Federal Treasury in April 2013, it was heralded as a move towards simplifying disclosure in the pre-contractual and contractual process. However, our reading of the proposals contained in the Treasury discussion paper indicates otherwise.
The Treasury proposals are based on the recommendations made in the Uniquest report released in March 2010 entitled “Simplification of Disclosure Regulation for Consumer Credit Code: Empirical Research and Redesign – Final Report”.
Basically what the report recommended was that pre-contractual disclosures be simplified and be made earlier in the loan application process.
As it has turned out, the introduction of key facts sheets for certain standard loan products has already gone a long way towards implementing the recommendations of the Uniquest report. The current Treasury proposals are to:
- Introduce financial summary tables for most loan and leasing products, including:
- home loans
- credit cards, including store cards
- personal loans, including car loans
- reverse mortgages
- consumer leases
The format would be similar to the key facts sheets already introduced.
2. Potentially remove the statutory information notice (Form 5) now issued with the loan contract documents.
3. Consider enhancing disclosures in loan contract documents, in particular with regard to:
- lenders mortgage insurance, and
- commissions.
4. Require pre-contractual disclosure to be given, where practical, at an earlier point in time than is currently the case.
5. Introduce a standard information statement about lenders mortgage insurance (LMI).
This is how the loan process might look for lenders under the current Treasury way of thinking. Documents likely to be disbanded are denoted thus “document disbanded“.
- Credit guide
Key facts sheet for some loan products? (unclear as to whether will still be required)- Financial table summary for all loans (new requirement)
- Contract stage
4.1 pre-contractual disclosure document (no longer required)
4.2 statutory notice (Form 5) (not required)
4.3 contract document
If any changes are made to the disclosure regime then Treasury’s current view is a minimum period of 12 months should be allowed to implement the changes.
We intend making a submission to Federal Treasury on this issue.
