National Consumer Credit Protection Act 2009

A licensee must not:

enter a credit contract with a consumer who will be the debtor under the contract; or

increase the credit limit of a credit contract with a consumer who is the debtor under the contract;

The contract is unsuitable for the consumer if, at the time it is entered or the credit limit is increased:

it is likely that the consumer will be unable to comply with the consumer’s financial obligations under the contract, or could only comply with substantial hardship; or

the contract does not meet the consumer’s requirements or objectives; or

if the regulations prescribe circumstances in which a credit contract is unsuitable—those circumstances apply to the contract.

For the purposes of paragraph (2)(a), it is presumed that, if the consumer could only comply with the consumer’s financial obligations under the contract by selling the consumer’s principal place of residence, the consumer could only comply with those obligations with substantial hardship, unless the contrary is proved.

For the purposes of paragraph (2)(a), a consumer is taken to be able to comply with the consumer’s financial obligations under a contract only with substantial hardship if:

the contract is a credit card contract; and

the consumer could not comply with an obligation to repay an amount equal to the credit limit of the contract within the period determined by ASIC under section 160F.

For the purposes of determining under subsection (2) whether the contract will be unsuitable, only information that satisfies both of the following paragraphs is to be taken into account:

the information is about the consumer’s financial situation, requirements or objectives, or any other matter prescribed by the regulations under paragraph 130(1)(d) or (e);

at the time the contract is entered or the credit limit is increased:

the licensee had reason to believe that the information was true; or

the licensee would have had reason to believe that the information was true if the licensee had made the inquiries or verification under section 130.

The regulations may prescribe particular situations in which a credit contract is taken not to be unsuitable for a consumer, despite subsection (2).

A person commits an offence if:

the person is subject to a requirement under subsection (1); and

the person engages in conduct; and

the conduct contravenes the requirement.

Sections 178 and 179 provide for remedies for anyone who suffers, or is likely to suffer, loss or damage because of a breach of this section. For example, if a consumer makes an unsuitable credit contract with a licensee, rather than making a not unsuitable credit contract for a reverse mortgage, a person who suffered, or is likely to suffer, loss as a result may be able to get court orders under section 178 or 179 to put the person in a position like the one they would have been in had the consumer entered into the contract for the reverse mortgage.