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Legislative Assembly for the ACT: 2002 Week 3 Hansard (6 March) . . Page.. 594 ..

Fair Trading Amendment Bill 2002

Mr Tucker , pursuant to notice, presented the bill and its explanatory memorandum.

Title read by Clerk.

MS TUCKER (10.33): I move:

That this bill be agreed to in principle.

Mr Speaker, this amending bill would compel credit providers to conduct an adequate assessment, prior to approving credit contracts and credit limit increases, to determine whether a debtor has the capacity to repay additional amounts of credit, without serious hardship.

The bill would do this by creating a new section 28A in the Fair Trading Act 1992. These provisions are based, in part, on the uniform national consumer credit code-the code. Specifically, the intent of this amendment is drawn from section 70, which provides that credit contracts may be reopened by a court if the credit provider failed to take a number of steps before activating a contract.

These steps include undertaking reasonable inquiries as to the debtor's capacity to repay, on the terms provided, without incurring substantial hardship. A prudent and diligent credit provider would therefore ensure that any credit contract they are a party to is made on the basis of due assessment of the debtor's capacity to repay, without substantial hardship.

Some credit providers, in competition for credit contracts, presently mail out to their customers pre-approved offers to extend credit card limits. These are sometimes in the vicinity of three times the existing limit. In many cases, for the new credit limit to apply, the debtor only has to sign the form and return it. No additional creditworthiness assessment is carried out.

These mail-outs are generated on the basis of marketing susceptibility, rather than capacity to pay. As a result, some people have signed up for debts that they are unlikely to be able to pay.

It is true that, in these cases, the people signing up for extra credit have agreed to something they cannot meet. However, we have, in our legislation, already agreed that it is unjust and unfair for a bank or creditor to be party to an agreement when they have not adequately assessed it. This places the duty of care on the lender in any credit contract-let alone the unsolicited nature of these offers and the marketing pressure to induce people to take up more credit.

Moreover, there is general agreement that this is a problem requiring some solution. I am aware of one case where a couple, already experiencing problems paying their mortgage, requested a hardship variation to their loan repayments for several months. The bank rejected their request. The couple subsequently received an unsolicited offer to increase the limit of the credit card they had with the bank from $1,000 to $7,000. Believing it to

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