Small amount loans and payday lending Accessing a client s rights. Presented by Paul Holmes Senior lawyer, Civil Justice Services

Transcription

1 Small amount loans and payday lending Accessing a client s rights Presented by Paul Holmes Senior lawyer, Civil Justice Services

2 GoToWebinar housekeeping This webinar is being recorded and will be published on our Information for community workers and carers page on Legal Aid Queensland s website Raise your hand

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5 GoToWebinar housekeeping: hold questions for the end 10:00 10:35 presentation 10:35 11:00 Q&A Questions 1. Wait until the presenter calls for questions 2. Submit questions and comments using the Questions panel Tips: Make sure your question relates to today s webinar Ask general questions only (do not mention names or ask questions about real clients) If your question was not answered please your question to webinars@legalaid.qld.gov.au

6 Poll #1 What area do you work in? South East Queensland Far North Queensland Regional Queensland Outside of Queensland.

7 Poll #2 I would rate my knowledge of Legal Aid Queensland as: High - I know a lot about Legal Aid Queensland Good - I have some knowledge of Legal Aid Queensland Limited - I know a little about Legal Aid Queensland None - I have no knowledge of Legal Aid Queensland Not in QLD - I know of Legal Aid within my own State. Note: if you do not live in Queensland please select two options when appropriate ie Good and Not in QLD.

8 Presenter Legal Aid Queensland Paul Holmes, Senior Lawyer, Civil Justice Services

9 Outline 1. Types of loans that are regulated 2. Responsible lending 3. Reasonable inquiries about financial situation 4. Requirements to assess a consumer s needs and objectives 5. Special rules that apply to small amount credit contracts (SACCs) 6. Hardship variations on smaller loans

10 Outline (contd) 7. Resolutions if a lender has not met its legal obligations 8. Consumer leases 9. Pawn brokers 10. Getting advice and assistance from Legal Aid Queensland

11 Overview National legislation that regulates payday lenders: National Consumer Credit Protection Act National Credit Code. The only place there may be a difference in the law that applies across Australia is if a payday lender was to take a client to court to try and recover the money that is owed to them. The reason for this is that this enforcement action is often attempted in state courts. The legislation applying to this will differ between states.

12 1. Types of loans that are regulated 1) Payday loans 2) Small amount credit contracts (SACC) 3) Medium amount credit contracts (MACC) 4) Loans above $5000 or for terms longer than two years.

13 2. Responsible lending Lenders must not enter consumers into unsuitable loans. Lenders are required to assess whether a loan is suitable for a consumer by: a) making reasonable inquiries about the consumer s financial situation b) making reasonable inquiries about the consumer s requirements and objectives in seeking a loan c) taking reasonable steps to verify the consumer s financial situation.

14 2. Responsible lending (contd) A loan will be unsuitable if: a) the consumer cannot meet their financial obligations under contract or cannot meet them without substantial financial hardship b) the loan does not meet the consumer s objectives and requirements. Consumer may also be able to argue that the contract is unjust.

15 3. Reasonable inquiries about financial situation A credit provider/lender is required to: make reasonable inquiries about a consumer s financial situation take reasonable steps to verify the consumer s financial situation. Can a lender meet its obligations by: a) assessing income using a benchmark? b) allocating a percentage of a consumer s income to basic expenses without looking at their actual expenses? c) looking at a consumer s actual income and expenses?

16 Poll #3 During your practice have you heard of a payday lender: Using a benchmark to assess a client s expenses Using a % of a client s income to assess a person s expenses Both of the above None of the above.

17 4. Requirements to assess a consumer s requirements and objectives A lender is required to make reasonable inquiries about the consumer s requirements and objectives. What does that mean for our client s individual circumstances? What are our client s needs and objectives? Can it or should it override other considerations when examining whether a loan should be granted?

18 5. Special rules that apply to SACCs Total repayments of small amount loans cannot exceed 20 percent of the consumer s income if Centrelink payments are at least 50 percent of their total income. Requirements to obtain and review three months of customer s bank statements. Rebuttable presumption that obtaining a third SACC at the same time will be unsuitable. Presumption a further SACC loan will be unsuitable when a consumer is in default on an existing SACC. No security can be taken for a SACC (eg on a car).

19 6. Hardship variations on smaller loans It is important to remember that even if a lender has not breached any of its legal obligations in assessing a loan, a client is still entitled to apply for a hardship variation if they are in financial hardship. Hardship variations under the law are directed at shorter term changes in circumstances. However, there is nothing in the law that prevents you or a client having a discussion with a lender where they experience a longer term, often more permanent change in circumstances.

20 7. Resolutions if a lender has not met its legal obligations What resolution can you ask a lender for if it has not met its legal obligations? Can you ask for what is still owing on the loan to be waived? Can you ask for interest, fees and charges to be waived and/or stopped? Can a resolution incorporate a request for hardship?

21 8. Consumer leases Consumer leases are currently regulated by Part 11 of the National Credit Code (NCC). Consumer leases are regulated differently to how small amount loans are regulated. A review of small amount credit contracts was recently undertaken by the government: It recommended consumer leases be regulated in a similar way to SACCs. There is no indication whether the recommendations in the review will lead to changes in the existing legislation.

22 Poll #4 Did you know consumer leases are regulated differently to how small amount loans are regulated? Yes No.

23 9. Pawn brokers Are not regulated by the national credit law. Are regulated in Queensland by the Second Hand Dealers and Pawnbrokers Act 2003 (Qld). Have no legislative obligations to consider hardship on a pawned good. What happens if a client does not redeem the pawn or make the payments due to the pawnbroker or second hand dealer?

24 10. Legal Aid Queensland can provide free legal help to clients with credit and debt issues Legal Aid Queensland s Consumer Protection Unit can provide help to clients experiencing credit and debt issues. Community workers are also welcome to contact the lawyers in the Consumer Protection Unit directly by phone or for advice, or to confirm if it is appropriate to refer a client.

25 Where to get legal help

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