Written byThe National Credit Code is the federal rulebook for how consumer loans, leases and credit cards are documented, priced and enforced, found in Schedule 1 of the NCCP Act.
Also known as: NCC, the Credit Code, National Consumer Credit Code, Schedule 1 NCCP
Key points
- It applies to credit for personal, domestic or household purposes, or to buy or renovate residential investment property; business-purpose credit is outside it.
- It sets what a credit contract must disclose, requires a comparison rate in advertising, and limits some fees and charges.
- It gives borrowers the right to ask for a hardship variation and requires a formal notice before a lender enforces a default.
- The responsible lending obligations live in the NCCP Act itself, not the Code; the Code is the contract-level rulebook, enforced by ASIC.
What the Code covers
The Code replaced the old state-based Uniform Consumer Credit Code when the national regime began in 2010. It applies when four things line up: the borrower is an individual or a strata corporation, the lender is in the business of providing credit, a charge is made for the credit, and the money is wholly or mostly for personal, domestic or household use, or to buy or renovate a residential investment property. Meet all four and the loan is regulated credit.
Credit cards, personal loans, car loans, home loans, consumer leases and small and medium amount credit contracts all fall inside. Very short-term credit, insurance paid by instalments, staff loans and a few other categories are carved out.
What it requires of lenders
Before a regulated contract is signed the lender must give a pre-contractual statement and an information statement setting out the borrower's rights. The contract itself must state the amount, the rate and how it is calculated, all fees, the repayments and the security taken. Advertising a rate means showing a comparison rate. Statements of account follow on a set cycle.
The Code also governs what happens when things go wrong. A borrower can ask for a hardship variation and the lender must respond within a set time. Before enforcing a default the lender must send a default notice and allow a minimum period to catch up. Repossessing a mortgaged car or goods without a court order is restricted once most of the loan has been paid, and unjust contracts can be reopened by a court or AFCA.
Regulated versus unregulated credit
Most business finance sits outside the Code. A chattel mortgage on a work ute, equipment finance or a business loan is usually an unregulated agreement, and lenders confirm that with a business purpose declaration signed by the borrower. Outside the Code the lender still needs to act fairly, but the disclosure, hardship and default-notice rules do not apply, which is partly why business finance settles faster.
The declaration has to be true. A broker or lender who has a car financed as a business asset when it is plainly for private use is exposed under the NCCP Act, and ASIC has pursued exactly that. Where the purpose cannot be shown to be business, the loan is treated as regulated.
Example
A carpenter in Warrnambool finances a dual-cab ute that he uses mostly for work. He signs a business purpose declaration, the lender writes it as a chattel mortgage, and the contract sits outside the National Credit Code. The same month his partner takes out a car loan for the family SUV. Hers is regulated: the advertised rate came with a comparison rate, the contract arrived with an information statement about her rights, and if she ever struggles with repayments she can ask for a hardship variation and must receive a default notice before the lender acts.
Not to be confused with
- NCCP Act
- the NCCP Act is the whole law, including licensing and responsible lending, while the Code is its Schedule 1
- Unregulated agreement
- an unregulated agreement is business-purpose credit that the Code does not cover
Frequently asked questions
Is a business loan covered by the National Credit Code?
Generally no. The Code applies only where the credit is wholly or predominantly for personal, domestic or household purposes, or for residential investment property. A loan for business purposes, confirmed by a business purpose declaration, is outside it. Those loans are still subject to general law and the unfair contract terms rules, but not the Code's disclosure and hardship regime.
What is the difference between the NCCP Act and the National Credit Code?
The NCCP Act is the full piece of legislation: it licenses lenders and brokers, imposes responsible lending obligations and gives ASIC its powers. The National Credit Code is Schedule 1 of that Act and deals with the credit contract itself: what it must say, what can be charged, and how hardship, default and enforcement must be handled.
What rights does the Code give me if I can't make repayments?
You can apply to the lender for a hardship variation, such as a pause or reduced payments, and it must consider the request and respond within a set period. If you default the lender must send a default notice and allow time to catch up before acting, and disputes can go to AFCA. These rights apply only to regulated credit.
Does the Code apply to car loans?
It applies to a car loan taken out mainly for private use, whether the car is new or used, and to consumer leases of vehicles. It does not apply to a car financed mainly for business use under a business purpose declaration, such as a chattel mortgage on a work vehicle. The purpose, not the type of vehicle, decides it.
What is a business purpose declaration?
A signed statement that the credit is wholly or predominantly for business or investment purposes other than residential property. It lets the lender treat the loan as outside the National Credit Code. A lender or broker who accepts a declaration they have reason to doubt cannot rely on it, and the loan may be treated as regulated after all.
Related terms
NCCP Act
The NCCP Act is Australia's National Consumer Credit Protection Act 2009, the law that licenses credit providers and brokers and sets responsible lending and disclosure rules for consumer credit.
Read definitionConsumer credit
Consumer credit is a loan, credit card, consumer lease or other credit provided mainly for personal, household or domestic purposes and regulated by the National Credit Code.
Read definitionComparison rate
A comparison rate is a single annual percentage that combines a loan's interest rate with most upfront and ongoing fees to show its ongoing cost more clearly.
Read definitionHardship
Financial hardship is when a change in your circumstances, such as job loss or illness, means you cannot meet your loan, credit or bill repayments on time.
Read definitionDefault
A default is a borrower's failure to meet the terms of a credit contract, usually by missing repayments, which lets the lender demand the balance and enforce its security.
Read definitionUnregulated agreement
An unregulated agreement is a loan or other credit arrangement that sits outside the NCCP Act, usually because the credit is wholly or mainly for business purposes.
Read definitionGo deeper
Sources
This article is general information only and is not financial advice.