Recent migrants to Australia often find it difficult to obtain traditional loans from banks and other financial institutions because they have no long term employment or credit history in Australia. This makes rmigrants highly susceptible to predatory lending practices.
Predatory lending is unfair, unconscionable, misleading, deceptive, or fraudulent practices in the provision of credit to a consumer. It is often characterised by excessively high interest rates, high repayments, unreasonable loan terms, and unnecessary insurances or personal guarantees.
New Consumer Credit Laws
The Commonwealth government has enacted new Consumer Credit laws to protect vulnerable persons in the marketplace, such as recent migrants.
The key characteristics of the new Consumer Credit laws are:
- All persons involved in the provision of consumer credit must now be licensed by ASIC.
- All persons involved in the credit industry must conduct themselves efficiently, honestly and fairly in their dealings with consumers.
- All persons who offer or assist another person to obtain credit must comply with responsible lending obligations. This requires the person to make reasonable enquiries about their customer’s financial situation and their requirements and objectives. The credit provider must also take reasonable steps to verify the financial situation of the borrower and carry out a suitability assessment on each application.
- Where a person has limited capacity to understand a credit contract there is also an increased onus to ensure the borrower understands the terms of the credit contract.
- Consumers have increased rights and remedies when the credit laws have been breached.
- Unfair contract terms have been abolished.
What can you do?
Be vigilant in your migration practice if approached by someone seeking access to migrant groups.
Ask for a credit provider’s Australian Credit License number, which can be verified on the ASIC website.
Encourage your clients to report any credit related concerns to ASIC on its website or by phoning 1300 300 630.
Report any approaches by non-licensed credit providers to ASIC.
Educate your clients who may be susceptible to predatory lending practices. Brochures on the new credit laws are available by contacting ASIC.
Encourage your client to use ASIC’s MoneySmart website.
Beware that if you refer a client to a credit provider you may also need to be licensed. You should seek legal advice in this regard.
Please note that the above information is provided as a summary only giving you basic information about the new credit regime. It does not cover the whole of the relevant law regarding credit, and it is not a substitute for professional advice.
For further information, please contact ASIC by phone on: 1300 300 630 (international +61 3 5177 3777) or via website: www.asic.gov.au