The Consumer Credit Code

Information about the Consumer Credit Code and home loans

The Consumer Credit Code requires that lenders give you information to help you make good credit choices.

Once you have selected a lender, you may be given a finance contract to sign. Make sure you read, understand and accept the terms of the contract before you sign it. Obtain legal advice from a lawyer if you are at all unsure.

Remember, the law in Western Australia does not require that credit contracts contain a cooling off period. If the credit contract does not include a cooling off period, you cannot get out of a credit contract because you have changed your mind.

Most loan contracts for residential homes will be covered by the Consumer Credit Code. We’ll call it the Code for short. Some information about how the Code protects you before and after signing a credit contract is provided.

Information

Before you sign a credit contract, the Code requires that lenders give you the following information to help you make good credit choices.

You must be told about fees and charges, if these are known before the contract is signed.
The contract should set out how the interest charges are calculated and how often these charges are made.
The contract may allow for changes to be made to the interest rate and credit fees and charges.
If the contract allows for new charges to be made, the contract should specify how you would be notified of any changes or new charges.
If mortgage insurance is required under the contract, you must be told the name of the mortgage insurer and the amount payable, or how the insurance is calculated.

Information about fees and charges will be contained in a Precontractual Statement. You should also receive an Information Statement outlining your rights and obligations. These statements may be given to you separately or included with the credit contract. Read through these statements before you consider signing a credit contract.

The comparison rate

A comparison rate is a figure that gives you a better idea about how much you are really paying for credit and allows you to compare the cost of credit for loan products from different lenders.

Comparison rates apply a standard formula that uses the fees, charges and annual interest rate applying to a loan product (using specific loan amounts and loan periods) to obtain a single percentage figure.

The Code now requires lenders to supply their own list of comparison rates to consumers with applications for credit.

However, it is recommended that you treat the comparison rate as a guide only, particularly if you are choosing a loan with optional features that attract fees. The comparison rate does not take into account government charges, mortgage insurance, or fees that cannot be determined at the start of a loan. You should also note that the comparison rate does not apply to credit cards and may not apply to home equity loans.

More information

For more information about comparison rates contact Consumer Protection on 1300 30 40 54 and ask for our free brochures, Interest Rates: Comparison Rates Decoded and Comparison Rates - FAQs.