Written byThe 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.
Also known as: NCCP, National Consumer Credit Protection Act 2009, National Credit Act, NCCP regime
Key points
- It incorporates the National Credit Code and is administered by ASIC, whose Regulatory Guide 209 explains responsible lending.
- Anyone engaging in credit activities needs an Australian credit licence or must act as a representative of a licensee.
- It covers consumer loans, mortgages, credit cards, personal loans and many consumer leases; purely commercial finance and most commercial loans fall outside it.
- Breaches can lead to enforceable undertakings, infringement notices, civil penalties, licence cancellation, banning orders and criminal prosecution.
Who and what the NCCP Act covers
The Act applies to anyone engaging in regulated credit activities: credit providers that enter into consumer credit contracts or consumer leases, credit assistance providers such as brokers who help consumers apply for credit or suggest products, and lessors whose leases are caught by the Code. Guarantors to consumer credit contracts are also protected.
Credit is regulated when it is provided wholly or predominantly for personal, domestic or household purposes, or to buy, renovate or improve residential property for investment, which is why an investment home loan is regulated even though the purpose is not household spending. That captures home loans, car loans, credit cards, personal loans and many leases. Purely commercial finance, lending for business purposes and certain short-term or exempt products sit outside the regime, which is why most equipment and asset finance for business use is written as an unregulated agreement. Three questions settle it: is this a consumer credit contract or consumer lease, is someone providing credit assistance, and does the provider need a licence?
Key obligations under the Act
Licensing: credit activities require a credit licence unless an exemption applies, and the licence sets out what the holder may do. Responsible lending: providers and brokers must not enter into or suggest unsuitable credit, following the inquiry, verification and assessment steps in ASIC's RG 209. Disclosure: lenders give clear pre-contract disclosure of the terms, the annual percentage rate and the fees under the National Credit Code, and any advertisement that quotes a rate for fixed-term consumer credit must also show a comparison rate.
The Act also regulates the form of credit contracts, early repayment, default and enforcement, and insurance sold with credit; requires records of inquiries, verification and decisions; requires staff and credit representatives to be trained and supervised; restricts conflicted remuneration and commissions; and requires licensees to run internal dispute resolution and belong to an external scheme (AFCA).
Responsible lending in practice
RG 209 describes three steps. Inquire: ask open and specific questions about income, employment, living expenses, existing debts, dependants and goals. Verify: obtain documents that reasonably confirm income and expenses, such as pay slips and bank statements, with checks proportionate to the size and risk of the loan. Assess: decide whether the product meets the consumer's needs and objectives and whether they can repay over the life of the contract without substantial hardship. Credit assessed as unsuitable must not proceed, and the file note recording why the outcome is not unsuitable is the product of that assessment.
A broker recommending a vehicle loan, for example, verifies income, checks expenses, tests suitability against the customer's objectives and either records why the loan fits or declines to proceed. A contemporaneous file of questions asked, documents obtained and the analysis is the best protection against enforcement action.
Not to be confused with
- Australian credit licence (ACL)
- the Australian credit licence is the authorisation issued under the NCCP Act; the Act is the law that requires it and sets the conduct rules
- Responsible lending obligations
- responsible lending obligations are one part of the NCCP Act; the Act also covers licensing, disclosure, contracts and dispute resolution
- Unregulated agreement
- an unregulated agreement is finance that falls outside the NCCP Act, typically business or commercial lending
Frequently asked questions
Do all loans fall under the NCCP Act?
No. The Act covers consumer credit contracts and many consumer leases. Loans predominantly for business purposes, purely commercial finance and certain exempt products fall outside it, which is why most equipment finance for a business is unregulated. The purpose of the loan and who the borrower is decide the answer.
When do responsible lending obligations apply?
Whenever a credit provider or credit assistance provider engages in a credit activity involving consumer credit or a consumer lease. That means before entering into, varying or suggesting a regulated contract, the lender or broker must make reasonable inquiries, verify the information and assess that the credit is not unsuitable for that consumer.
Can a broker be personally liable for NCCP breaches?
Yes. Brokers and authorised credit representatives can face enforcement action for misconduct, including fines, banning orders and licence action, although the licensee retains ultimate responsibility for its representatives. Keeping a documented file of inquiries, verification and suitability reasoning on every deal is the practical protection.
How long should lenders and brokers keep NCCP records?
Retention periods are set in the regulations and ASIC guidance. In practice, keeping complete files of inquiries, verification documents, the suitability assessment and correspondence for several years is standard, so the licensee can show ASIC or AFCA what was asked, what was checked and why the decision was made.
What can I do if a lender breached the NCCP Act?
Contact the provider first and use its internal dispute resolution, keeping copies of everything. If that fails, lodge a complaint with AFCA, which handles credit and responsible lending disputes. Report systemic or serious conduct to ASIC, and get legal advice early for complex matters such as guarantor disputes or repossession.
Related terms
Australian credit licence (ACL)
An Australian credit licence (ACL) is the authorisation from ASIC that a business needs to provide consumer credit or credit assistance under the National Consumer Credit Protection Act.
Read definitionResponsible lending obligations
Responsible lending obligations are duties under the NCCP Act that require lenders and brokers to inquire into and verify a consumer's finances and not provide or suggest unsuitable 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 definitionASIC
ASIC is the Australian Securities and Investments Commission, the regulator for companies, markets, financial services and consumer credit, which licenses providers, keeps public registers and enforces conduct laws.
Read definitionCredit guide
A credit guide is a prescribed disclosure document that a broker or credit licensee must give a consumer before providing credit assistance, covering licence details, remuneration and complaints handling.
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.