Government introduces new consumer credit protections

The Federal Government has introduced the Consumer Credit and Corporations Legislation Amendment (Enhancements) Bill 2011.

The Bill amends the National Consumer Credit Protection Act 2009 to introduce stronger protections for debtors in case of hardship. The Bill also bans the refinancing of short term loans, for the stated purpose of not allowing low income consumers to sink into further debt and compels loaners to disclose other options for prospective debtors, including Centrelink advances and community organisation loans.

In terms of reverse mortgages, the Bill codifies the "no negative equity" policy which till now, has been a matter of industry self regulation. What this means is

if a debtor pays out a contract and the loan amount exceeds the market value of the property the borrower will be able to terminate the contract if the amount being repaid is at least equal to the property’s market value...

(Source: Banking Day)

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