LAW3108 Finance Law Module 4
description
Transcript of LAW3108 Finance Law Module 4
![Page 1: LAW3108 Finance Law Module 4](https://reader035.fdocuments.us/reader035/viewer/2022062418/5539ad2e550346e0428b49ae/html5/thumbnails/1.jpg)
LAW3108 Finance Law
Module 4
Debtor and CreditorConsumer Credit
![Page 2: LAW3108 Finance Law Module 4](https://reader035.fdocuments.us/reader035/viewer/2022062418/5539ad2e550346e0428b49ae/html5/thumbnails/2.jpg)
1. Regulation of the Australian Financial System
Financial Institutions Financial Transactions
2. Regulation of FinancialMarkets and Instruments
3. Payments System
Domestic International
4. Debtor and Creditor 5. Legal Aspects of International Trade & Finance
6. Professional Liability
![Page 3: LAW3108 Finance Law Module 4](https://reader035.fdocuments.us/reader035/viewer/2022062418/5539ad2e550346e0428b49ae/html5/thumbnails/3.jpg)
Objectives:Consumer Credit– identify the types of credit which may be made
available to a consumer and the relevant law that regulates the transaction
– decide when the Hire Purchase Act and Consumer Credit Act will apply (Bills of Sale Act is dealt with in securities)
– advise on these Acts’ basic provisions and the consequences of such regulation on factual problems
![Page 4: LAW3108 Finance Law Module 4](https://reader035.fdocuments.us/reader035/viewer/2022062418/5539ad2e550346e0428b49ae/html5/thumbnails/4.jpg)
Lecture Overview
• 1. Types of credit
• 2. Consumer Credit– Hire Purchase Act (HPA)– Consumer Credit Code (CCC)
![Page 5: LAW3108 Finance Law Module 4](https://reader035.fdocuments.us/reader035/viewer/2022062418/5539ad2e550346e0428b49ae/html5/thumbnails/5.jpg)
1. Types of Credit• credit: form of financial accommodation
– compare with ‘loan’
• consumer credit c.f. business credit– transactions in common – specific transactions for consumers or business
eg lay by for consumers c.f. issue of debentures
• unsecured credit c.f. secured credit
![Page 6: LAW3108 Finance Law Module 4](https://reader035.fdocuments.us/reader035/viewer/2022062418/5539ad2e550346e0428b49ae/html5/thumbnails/6.jpg)
1.1 Consumer Credit where creditor has ‘leverage’
• Lay by :– property (& risk) passes to purchaser– possession with vendor until payment
• Hire Purchase :– property with financier - may pass to hirer– letting of goods with option to purchase– s 2 definition HPA - CCC may apply
![Page 7: LAW3108 Finance Law Module 4](https://reader035.fdocuments.us/reader035/viewer/2022062418/5539ad2e550346e0428b49ae/html5/thumbnails/7.jpg)
1.1 Consumer Credit where creditor has ‘leverage’
• Leases :– property with lessor - does not pass to lessee
– if a consumer lease, CCC may apply
• Bailment : – property with bailor (financier)- passes to bailee
(dealer) to permit retail sale
– CCC n/a - business not consumer credit
![Page 8: LAW3108 Finance Law Module 4](https://reader035.fdocuments.us/reader035/viewer/2022062418/5539ad2e550346e0428b49ae/html5/thumbnails/8.jpg)
1.2 Other Consumer Credit: such ‘leverage’ lacking
• Instalment contract– property and possession passes to buyer– alternative: retention of title clause
• Personal Loan - CCC may apply
![Page 9: LAW3108 Finance Law Module 4](https://reader035.fdocuments.us/reader035/viewer/2022062418/5539ad2e550346e0428b49ae/html5/thumbnails/9.jpg)
1.2 Other Consumer Credit: such ‘leverage’ lacking
• Credit Cards - CCC may apply– agreement - issuer and card holder– merchant agreement - (merchant’s bank
responsible for paying merchant)– sale contract - merchant and card holder – merchant’s bank reimbursed by issuer
![Page 10: LAW3108 Finance Law Module 4](https://reader035.fdocuments.us/reader035/viewer/2022062418/5539ad2e550346e0428b49ae/html5/thumbnails/10.jpg)
2. Consumer Credit
• Hire Purchase Act (HPA)
• Consumer Credit Code (CCC)
![Page 11: LAW3108 Finance Law Module 4](https://reader035.fdocuments.us/reader035/viewer/2022062418/5539ad2e550346e0428b49ae/html5/thumbnails/11.jpg)
2.1 Hire Purchase Act
• Hire Purchase Act 1959 (Qld) Maguire
• Turner (452-453) & E & M [117]
2.1.1 HP Agreements: Definition• s 2: letting of goods with option to purchase
• Note relationship HPA / CCC
![Page 12: LAW3108 Finance Law Module 4](https://reader035.fdocuments.us/reader035/viewer/2022062418/5539ad2e550346e0428b49ae/html5/thumbnails/12.jpg)
2.1.2 HP Agreements: Contents
• Formation– s 3(1) Pre-contractual First Schedule written
statement to hirer
• Contents– s 3(2) form and contents– s 4 owner to serve written notice on hirer w/in 21
days – s 5 implied conditions and warranties – s 6 extended liability (dealer) for misrepres’n
![Page 13: LAW3108 Finance Law Module 4](https://reader035.fdocuments.us/reader035/viewer/2022062418/5539ad2e550346e0428b49ae/html5/thumbnails/13.jpg)
2.1.3 HP Agreements: Termination
• Voluntary return– s 12 terminate hiring - not necessarily
obligations of hirer
• Repossession– s 13 Third Schedule notice - usually 7 days– s 13 Fourth Schedule notice (hirer & guarantor)
w/in 30 days– s 14 no disposal by owner for 21 days
![Page 14: LAW3108 Finance Law Module 4](https://reader035.fdocuments.us/reader035/viewer/2022062418/5539ad2e550346e0428b49ae/html5/thumbnails/14.jpg)
2.1.4 HP Agreements: Guarantors & Reopening
• Guarantors– s 18 : liability of guarantor continues regardless
of repossession– s 19 : guarantor not bound in certain cases
unless independently advised
• Reopening– s 28 : power of court to reopen where harsh and
unconscionable transaction
![Page 15: LAW3108 Finance Law Module 4](https://reader035.fdocuments.us/reader035/viewer/2022062418/5539ad2e550346e0428b49ae/html5/thumbnails/15.jpg)
Consumer Credit Legislation• Why legislate?
• “It is only since World War II that intensive marketing has masked the basic truth that it is always cheaper to pay cash.” P Bingham 1991
– Deregulation • proliferation of financial products
• exposed the more vulnerable to manipulation and exploitation
– Compliance culture• lifting corporate veil; stiffer penalties
![Page 16: LAW3108 Finance Law Module 4](https://reader035.fdocuments.us/reader035/viewer/2022062418/5539ad2e550346e0428b49ae/html5/thumbnails/16.jpg)
Consumer Credit Legislation
• How to legislate?– constitutional / political issues
• History of Australian legislation– Money Lenders Acts; Hire Purchase Acts – Rogerson Report 1969 & Molomby Report 1972
– “Uniform” Credit Acts– Consumer Credit Act & Code - 1 Nov 1996
![Page 17: LAW3108 Finance Law Module 4](https://reader035.fdocuments.us/reader035/viewer/2022062418/5539ad2e550346e0428b49ae/html5/thumbnails/17.jpg)
2.2 Consumer Credit Code
Read: Turner, Maguire
• Scope
• Effect • Formation also see industry Codes: EFT code; Codes of
Practice for banks, building societies, credit unions
• Life of the contract
• Enforcement
• Consumer Rights & Remedies
![Page 18: LAW3108 Finance Law Module 4](https://reader035.fdocuments.us/reader035/viewer/2022062418/5539ad2e550346e0428b49ae/html5/thumbnails/18.jpg)
2.2.1 Scope
• s6(1) credit is provided under a contract
• s 6(1)(a) debtor - natural person (or strata corporation)
• s 6(1)(b) purpose - wholly or predominantly personal, domestic or household
• s 6(1)(c) charge is / may be made for providing credit
![Page 19: LAW3108 Finance Law Module 4](https://reader035.fdocuments.us/reader035/viewer/2022062418/5539ad2e550346e0428b49ae/html5/thumbnails/19.jpg)
2.2.1 Scope (cont’d)
• s 6(1)(d) credit provider in the business of providing credit / part of or incidental to other business eg retailer
• s 4 credit provided if contract provides:– payment of a debt owed by the debtor to the
credit provider is deferred; or– the debtor incurs a deferred debt to the credit
provider
![Page 20: LAW3108 Finance Law Module 4](https://reader035.fdocuments.us/reader035/viewer/2022062418/5539ad2e550346e0428b49ae/html5/thumbnails/20.jpg)
2.2.1 Scope (cont’d)
• s 6(5) purpose - personal / domestic / household:– more than half of credit for such purpose– if to obtain goods/services for different
purposes - most used for personal /domestic / household purpose
![Page 21: LAW3108 Finance Law Module 4](https://reader035.fdocuments.us/reader035/viewer/2022062418/5539ad2e550346e0428b49ae/html5/thumbnails/21.jpg)
2.2.1 Scope (cont’d)
• s 11(1) rebuttable presumption that Code applies
• s 11(2)-(4) irrebuttable presumption Code does not apply where debtor declares credit to be applied wholly/predominantly for business/investment purposes
![Page 22: LAW3108 Finance Law Module 4](https://reader035.fdocuments.us/reader035/viewer/2022062418/5539ad2e550346e0428b49ae/html5/thumbnails/22.jpg)
2.2.1 Scope (cont’d)
• s 7 Code not fully applicable to specified transactions including:– short term credit (max of 62 days)– bill facilities– lawful business of pawn broking – employee loans– credit excluded by regulations
![Page 23: LAW3108 Finance Law Module 4](https://reader035.fdocuments.us/reader035/viewer/2022062418/5539ad2e550346e0428b49ae/html5/thumbnails/23.jpg)
2.2.1 Scope (cont’d)
• Related Transactions– s 8 related mortgages
– s 9 related guarantees
– s 132 related insurance contracts: eg• insurance over mortgaged property
• consumer credit insurance
![Page 24: LAW3108 Finance Law Module 4](https://reader035.fdocuments.us/reader035/viewer/2022062418/5539ad2e550346e0428b49ae/html5/thumbnails/24.jpg)
2.2.1 Scope (cont’d)
• Related Transactions (continued)– s 116 related sale contracts (s 115)
• sale of goods / supply of services financed wholly/partly by provision of credit (supplier/linked credit provider)
• liability for suppliers’ misrepresentations
• rights to damages against supplier & linked credit provider
• defences s 119; limits on liability s 120
![Page 25: LAW3108 Finance Law Module 4](https://reader035.fdocuments.us/reader035/viewer/2022062418/5539ad2e550346e0428b49ae/html5/thumbnails/25.jpg)
2.2.1 Scope (cont’d)
• Related Transactions (continued)– s 10 goods leases (hire purchase)
• deemed to be sale of goods by instalments
• mortgage over goods to credit provider
– s 147 consumer leases (no right/obligation to buy)
• s 148 prerequisites & s 149 exclusions (eg employee in connection with employment benefits)
![Page 26: LAW3108 Finance Law Module 4](https://reader035.fdocuments.us/reader035/viewer/2022062418/5539ad2e550346e0428b49ae/html5/thumbnails/26.jpg)
2.2.2 Effect on Formation
• s 14 pre-contractual information and notices to debtor
• s 12 formal requirements for contracts
• s 15 content requirements for contracts
• s 17 alterations – signed/initialled in margin opposite
• s 18 copies to be given (also see s 163)
![Page 27: LAW3108 Finance Law Module 4](https://reader035.fdocuments.us/reader035/viewer/2022062418/5539ad2e550346e0428b49ae/html5/thumbnails/27.jpg)
2.2.2 Formation (cont’d)
• pre-contractual information s 14 & s 15– financial details
• interest rate, loan amount, fees and charges etc
– debtor’s statutory rights and obligations– comparison rate (optional) s 14(3)– in form required by Regulations (Form 2)
![Page 28: LAW3108 Finance Law Module 4](https://reader035.fdocuments.us/reader035/viewer/2022062418/5539ad2e550346e0428b49ae/html5/thumbnails/28.jpg)
2.2.3 Life of the Contract
• s 31 statements of account required
• changes to obligations permitted– ss 58 - 64 unilateral changes – s 65 change by agreement
• s 163 copies or documents and notices required - to debtors and guarantors and mortgagees
![Page 29: LAW3108 Finance Law Module 4](https://reader035.fdocuments.us/reader035/viewer/2022062418/5539ad2e550346e0428b49ae/html5/thumbnails/29.jpg)
2.2.4 Enforcement
• primarily in contract between debtor and credit provider
• Restriction of rights and remedies in enforcement – s 80 against debtor/mortgagor– s 82 against guarantor – s 83 by repossession of mortgaged goods
![Page 30: LAW3108 Finance Law Module 4](https://reader035.fdocuments.us/reader035/viewer/2022062418/5539ad2e550346e0428b49ae/html5/thumbnails/30.jpg)
2.2.5 Consumer Rights & Remedies
• s 70 re-open unjust transactions
• s 72 review unconscionable charges
• variations – negotiated (s 65) or hardship (s 66)
• early termination & payout (s19; s24; s75)
• voluntary return of goods - possible in certain circumstances (s 78)