Key Changes to CCCFA
Significant changes to CCCFA were introduced in stages between 20 December 2019 to 1 December 2021.
The changes were intended to reduce “problem debt”, specifically to try and stop vulnerable consumers getting into debt.
They covered the introduction of penalties for irresponsible lending, interest rate and total cost caps for payday loans, bringing mobile traders into the CCCFA and more notably introducing stricter assessment processes for loan affordability and suitability.
The changes targeted many problem areas including ‘payday loans’, and ‘truck shops’, many of the names that you will see on client’s bank statements. They do not include buy now and pay later schemes at the moment.
Some of the key changes are:
- from 1 December 2021, lenders must now comply with new regulations that set out what they must do when assessing for affordability and suitability. They must also keep records about their process and how they arrived at a decision. They must provide those records to borrowers (or their representatives) upon request, for free within 20 working days.
- for high cost loans (those that charge 50% interest or more pa) the charge rate is capped at .8% per day (its called a charge cap because it covers interest and fees), compound interest is prohibited, default fees should not exceed $30 in total, the total payable cannot exceed double the amount borrowed and repeat borrowing is prohibited in some circumstances. These rules mostly took effect in June 2021 and effectively disabled the high cost lending industry.
- lenders are now prohibited from offering further credit to an applicant who has taken two high-cost loans in the past 90 days.