INCREASED PRE-APPROVAL OBLIGATIONS ON CREDIT LICENSEES

One of the provisions under the Consumer Credit and Corporations Legislation Amendment (Enhancements) Act 2011 introduces amendments to the National Consumer Credit Protection Act 2009 (the Act), which will limit, from 1 March 2013, what a credit licensee can do prior to carrying out a suitability assessment and verification of a potential consumer under sections 129 and 130 of the Act.

Under the current Act, prior to carrying out both a suitability assessment and a verification of a consumer, licensees are prohibited from:

• entering a credit contract;
• increasing the credit limit of an existing credit contract.

After the amendments commence, licensees will now also be prohibited from:

• making unconditional representations to a consumer that the licensee considers that the consumer is eligible to enter a credit contract with the licensee (these representations typically take the form of a ‘finance pre-approval letter’);
• making unconditional representations to a consumer that the licensee considers that the credit limit of a credit contract will be able to be increased.

These amendments will apply equally to consumer credit contracts (such as loans) and consumer leases.