Unit 5: National Credit Code

Question 1

What Act governs the National Credit Code (NCC)?

Answer 1

The National Consumer Credit Protection Act 2009 (NCCP)

Question 2

Who enforces compliance with the NCCP?

Answer 2

ASIC

Question 3

What must anyone who wants to engage in credit activities be? (includes advisers, lenders, lessors, and brokers)?

Answer 3

Either be an Australian Credit Licensee (obtaining an ACL from ASIC),

OR

Be a representative of someone who is licensed. This means they come under the umbrella of an ACL holder as an Authorised Credit Representative or employee.

Question 4

What is the NCC designed to do?

Answer 4

Protect consumers and ensure ethic and professional standards in the finance industry.

Question 5

Who may the NCC be applicable to?

Answer 5

1. Banks
2. Credit Unions
3. Finance companies
4. Credit assistance providers (e.g., mortgage and finance brokers)

Question 6

As a general rule, what type of home and personal loan types are regulated under the NCCP?

Answer 6

Almost all of them

Question 7

What are the 5 conditions for the NCCP being applicable to a credit contract?

Answer 7

1. Entered after 1 July 2010
2. Lender is in the business of providing credit.
3. A charge is made for providing credit.
4. The debtor is a person (not company)
5. The credit is provided for personal or home purposes.

Question 8

What are 5 kinds of loans (not exhaustive list) not regulated under the NCCP?

Answer 8

1. Loans in the name of a company
2. Loans used mainly to invest in commercial property, shares, or a business.
3. Staff loans
4. Loans between friends and family
5. Low cost, short term credit (less than 62 days)

Question 9

What is the key intent of the NCCP?

Answer 9

To ensure credit licensees do not enter into credit contracts with unsuitable customers, or suggest or assist with this

Question 10

When a credit provider assesses a loan application, what are their two key obligations they should consider to ensure they are only approving suitable loans, and are able to defend their decisions?

Answer 10

1. To act efficiently, honestly, and fairly (putting borrower’s needs above their own commercial interest).
2. Not have any conflict of interest that could affect a borrower negatively.

Question 11

What is the gist of compliance required under ASIC Regulatory Guide 209?

Answer 11

Make reasonable effort to understand and assess a customer’s situation.

Question 12

Do you need to be able to provide a customer with a written copy of your preliminary lending assessment if requested?

Answer 12

Yes

Question 13

What 3 checks are required to understand if a loan is ‘not suitable’ for a customer?

Answer 13

1. Can the customer repay without financial hardship?
2. Does the loan meet customer needs and objectives?
3. Are there any other circumstances applicable that would make the loan unsuitable?

Question 14

What are four primary disclosure documents that must be provided to loan customers?

Answer 14

1. Credit guide
2. Quote
3. Proposal document
4. Written assessment

Question 15

In what 3 scenarios is it not required for credit providers to provide a written assessment to a customer?

Answer 15

1. Credit contract not entered into.
2. Credit limit not increased.
3. You do not provide credit assistance.

Question 16

Under the NCCP Act, a loan will be assessed as being “not unsuitable” if it meets what two statements?

Answer 16

1. Meets customers needs an objectives.
2. Customer has capacity to repay the loan without undue substantial hardship.