As a guide, the Consumer Credit Code will apply if:

• There is a loan ("deferred debt")
• The lender is in the business of providing loans
• A charge is made for providing the credit (e.g. interest or fees)
• The loan is predominantly for personal, domestic or household purposes
• The debtor is a natural person ordinarily resident in Australia
• The loan contract was signed on or after 1/11/96. The exception is credit cards (and other continuing credit contracts) where the contract may have been signed at any time (even prior to 1/11/96).

Examples of loans that the Consumer Credit Code would usually apply to are:

• car loans
• personal loans
• home loans
• consumer leases
• credit cards

Examples of loans that the Consumer Credit Code would not apply to are:

• Short term loans with interest of less than 5% of the loan amount
• Insurance premium by instalments
• Investment loans
• Business leases
• Business loans
• Pawnbroking loans (although unjust transactions and unconscionable interest and charges provisions of the code apply)
• Staff loans
• Overdrafts that have not been arranged in advance with the financial institution (personal or business)
• Bill facilities
• Charge cards (e.g. when the entire balance must be paid every month)

What if the loan is partly for personal purposes and partly for business purposes?

The act says that credit is for a personal purpose if:

• More than half the credit (amount borrowed) is intended to be used for a personal purpose; or
• The goods or services obtained with the credit are to be used for personal purposes most (that is more than they are to be used for business or investment purposes)

Therefore a loan for a vehicle which is used five days per week for business purposes and for personal purposes on the weekend only is not likely to be covered, but would be covered if the business only needed the car two days per week and it was driven for personal purposes the rest of the time. Similarly, a loan for $400,000 that was used largely to buy a house but included a small amount of working capital for a small business would be covered by the Consumer Credit Code.

What if the borrower has signed a business purposes declaration?

It is not uncommon for credit providers and their agents to ask borrowers to sign a "business/investment purposes declaration" to clarify that the Consumer Credit Code does not apply. Such a declaration will be accepted as proof that the Code does not apply UNLESS the credit provider (or any other relevant person who obtained the declaration from the debtor) knew, or had reason to believe, that the credit was in fact for personal purposes (or largely personal purposes). "Any other relevant person" includes among others car dealers and finance brokers.

If you are unsure about whether the Consumer Credit Code applies you can ring Consumer Credit Legal Centre on 1800 808 488.