The Uniform Consumer Credit Code (the Code) commenced in each Australian State and Territory on 1 November 1996. It applies to consumer credit products including personal loans, continuing credit contracts, housing loans, leases and hire purchase agreements.
In August 1997 the Ministerial Council on Consumer Affairs decided to undertake a Post Implementation Review of the Uniform Consumer Credit Code. The Review, which has now been competed, is stage 1 of a 2 staged review process. Stage 2 will involve a national competition policy review and the stage 1 review will provide data and recommendations which will feed into and inform the stage 2 review. This research comprises a significant component of the stage 1 Review process.
The stage 1 Post Implementation Review has been conducted by a Project Team comprising representatives from each State and Territory and managed by Chris Batt. The Uniform Consumer Credit Code Management Committee was appointed by the Standing Committee on Consumer Affairs (the Standing Committee) to steer the Review. The Project Team prepared an Issues Paper specifying the nature of the Review, which was distributed widely by the Standing Committee to consumer credit market stakeholders in August 1998.
Paragraph 6.5 of the Issues Paper stated that the Standing Committee will commission specific research to provide more detailed information on the following issues:
- the socio-economic and demographic patters of consumer credit usage in the community;
- the factors which contribute to and inform consumer decisions to enter into consumer credit arrangements;
- the factors which determine choices between credit providers and credit products; and
- the manner in which the Code specific disclosure information is being used by consumers.
The Standing Committee commissioned Justin Malbon, a Senior Lecturer at the Law School Griffith University, Brisbane to undertake the research. This report sets out the outcomes of the research.
Contents
Table Of Contents
Preliminary
Chapter 1 Executive Summary
- 1.0 Introduction
1.2 Research Method
1.3 Market Competitiveness
1.4 The Behaviour Of Lower And Higher Income Consumers
1.5 The Use Of Information About Loans
- 1.5.1 Housing And Personal Loans
1.5.2 Credit Cards
1.5.3 Linked Credit
1.6 Conclusion
Chapter 2 Introduction
- 2.0 Background
Chapter 3 Consumer Credit Code
- 3.0 Introduction
3.1 Code Objectives
Chapter 4 ‘Truth In Lending’
- 4.0 What Is ‘Truth In Lending’ And What Is Its Purpose?
4.1 When Is The Market ‘Competitive’?
4.2 The Way The Code Provides For Truth In Lending
Chapter 5 Existing Research
- 5.0 General
5.1 The Avram Research
5.2 The Aba Research
Chapter 6 Research Method
- 6.0 Overview
6.1 Module 1
6.2 Module 2: National Survey Research
6.3 Module 3: Focus Group Research
Chapter 7 A Snapshot Of The Credit Marketplace
- 7.0 Introduction
7.1 Home Loans
7.2 Personal Loans/Car Loans
7.3 Credit Cards
7.4 Interest-Free Loans
7.5 Section 14 Disclosure Statements
7.6 Lenders Avoiding The Code
7.7 Market Segmentation
Chapter 8 Consumer Decisions To Enter Into Consumer Credit Arrangements
- 8.0 Issues
8.1 Perspective Of Credit Providers
8.2 Perspective Of Consumers – National Phone Survey
- 8.2.1 Questions Asked
8.2.2 Factors That Most Influenced Consumers In Choosing To Approach The Lender
8.2.3 Time Taken To Choose The Loan
8.2.4 Things About Loan That Led Consumers To Decide It Was Appropriate
8.2.5 Deciding To Take Out Linked Credit Loans
8.3 Focus Group Responses
- 8.3.1 Consumer Perceptions About Credit
8.3.2 Time Intervals
8.3.3 Advertising
8.4 Conclusions
Chapter 9 Choosing Between Credit Providers And Credit Products
- 9.0 Issues
9.1 Perspective Of Credit Providers
- 9.1.1 How Do Borrowers Choose Between Lenders?
9.2 Perspective Of Consumers – National Phone Survey
- 9.2.1 Questions Asked
9.2.2 Choosing Lenders
9.2.3 Choosing Loan Products
9.2.4 Lender Offering Different Products
9.3 Focus Group Responses
- 9.3.1 Factors That Determine Choices Between Credit Providers And Credit Products
9.4 Conclusions
Chapter 10 How Code Disclosure Requirements Are Used By Consumers
- 10.0 Issues
10.1 Perspective Of Credit Providers
- 10.1.1 Do Borrowers Read And Understand The Pre-Contractual Disclosure Information?
10.1.2 What Impact Has The Code Had In The Marketplace?
10.2 Perspective Of Consumers – National Phone Survey
- 10.2.1 General Observations About Responses
10.2.2 Usefulness Of Information About The Terms Of The Loan
10.2.3 Impact And Use Of The Information Provided To Consumers
10.3 Focus Group Responses
- 10.3.1 Understanding The Information
10.3.2 Timing And Content Of Information Provided
10.3.3 Delivery Of Information
10.3.4 Misunderstandings About Finance
10.4 Conclusions
Chapter 11 Demographic Patterns Of Consumer Credit Usage
- 11.0 Issues
11.1 Perspective Of Credit Providers
- 11.1.1 Do Low Income Borrowers Have Different Needs?
11.2 Perspective Of Consumers – National Phone Survey
11.3 Focus Group Responses
- 11.3.1 Low Income Groups
11.4 Conclusions
Chapter 12 Conclusion
Appendix A Methodology
2. Telephone Survey
- 5.3 Combining Of Questions From Different Types Of Loans
5.4 ‘Don’t Know/Refused’ Categories
5.5 Income Categories
5.6 Interest Rate Categories
Appendix B National Phone Questionnaire
Appendix C List Of Advertisers By Type Of Advertisement By Advertising Medium
Appendix D Notes On Interviews With Credit Providers
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