Pnina Hagege
Legal Studies
29 May 2017
Consumer Law
Identify and investigate credit and it'''s involvement in the protection of consumers and evaluate the effectiveness of legal and non-legal responses to these issues.
A credit transaction is one in which a consumer acquires a good or service immediately, but agrees to pay for it in the future. It is becoming increasingly pertinent to monitor due to it'''s growing dominance as a payment method in the 21st century. Due to the convenient nature of credit, Australia is rapidly becoming a '''cashless society''', and whilst using credit as a means of purchasing goods and services has allowed for convenience and ease, it has also allowed for unscrupulous credit lenders to threaten the protection of consumers. The core issue of credit in Australia consumer law is the unequal bargaining power between the individual consumer and the large corporate lending institution.
Legislative recognition of consumer protection in credit transactions was fundamentally state-based: the governing of credit relations was predominantly through the Credit Act 1995 (NSW), whereby the basic terms and conditions set out under credit agreements and the general law of contract. However, these regulatory mechanisms highlighted the domestic inconsistency and legal disparity for credit transactions, and the Council of Australian Governments in 2008, establishied the importance of transferring consumer regulation powers from the States and Territories to the Commonwealth. Thus, the nationally standardised statute of the National Credit Code Protection Act 2009 (Cth) (NCCPA) introduced a reformed package, establishing a uniformed approach to the regulation and protection of credit transactions '''to significantly improve the effectiveness of consumer protection and reduce the cost of doing so across eight different jurisdictions.''' (Hon Chris Bowen MP, Minister for Financial Services, Superannuation and Corporate Law, Green Paper 2010 Treasury). The National Credit Code aims to promote responsible, honest and fair lending between consumer and credit transactions, and elicits functions such as The National Credit Code Toolkit, an easily accessible, national online resource that explicitly outlines the regulations and provisions for consumers, presented in a clear and understandable manner. While the NCC effectiveness resides in its imposition of national licensing of credit related services, enhanced enforcement by regulatory consumer watch-dogs – such as ASIC to ensure competency, and the emphasis on industry-funded EDR (External Dispute Resolution) processes that promote cost-effective, dispute resolution – there remains consistent criticism under s 172(2) of the NCC, providing businesses an 'escape mechanism' to avoid civil litigation under the meagre protection of 'business purposes.' Thus, in the businesses ability to declare their sale of credit loans and leases under this legal technicality attributes to the much wider issue in the relation of credit, thus being, the ability for business industries and corporations to avoid civil and criminal sanctions following their abuses of power against the vulnerable credit participants.
A prevalent concern surrounding credit is that there are potentially inadequate procedures of redress available for consumers, and barriers preventing consumers from pursuing redress. Redress can be obtained in the form of repair, replacement or refund through '''self – help''', or undertaking litigative assistance. However, government bodies such as the ACCC the '''consumer watchdogs''' and ASIC aims to assist consumers in compensation disputes. Credit complaints are additionally supported through statutory law and common law, most commonly recognised through the Competition and Consumer Act 2010 (Cth) and the National Consumer Credit Protection Act 2009 (Cth). This form of legal response protects consumers as it provides them with a comprehensible '''variation of repayments when consumers experience temporary hardship''' under law. State government organisations are effective in assisting redress through educating the public about their consumer rights through online resources available to all, and investigating serious complaints. Such organisations include the NSW Fair Trading, ASIC and the Financial Ombudsman Service. ASIC is the Australia Security and Investment Cooperation that coordinates investigations to protect consumers. Their investigation in May of 2017 led to Westpac'''s full refund of $20m to credit card customers after it failed to properly inform credit card consumers of additional fees when making overseas transactions. This directly contradicted the Competition and Consumer Act 2010 (Cth) and Fair Trading Act 1987 (NSW), stating '''deliberately misleading or deceiving consumers is prohibited'''. This investigation initiated due to a customer complaint about unexplained fees, displaying the power of consumers, in conjunction with government organisations, to pursue redress through government organisations. Without these corporations to assist in pursuing redress for credit related issues, the procedures for consumers are immensely limited. However, the law is limited in its capacity to overrule large businesses.'' The Commonwealth Bank (CBA) v Parker'''s in May of 2017 involved a dispute over an inability to repay credit due to an alleged forgery of contracts by the CBA. Though the court battle is yet to conclude, the couple state '''We are financially ruined''' (SMH) with credit fees totalling to $4 million. Whilst the Parkers are pursuing redress, the inherent intimidation of large corporations as such, can deter customers from filing credit complaints as victims can be both vulnerable and comparatively powerless. In situations where cases aren't assisted through State or Federal Government organisations. Consumers of whom are vulnerable – due to age, lack of education or minimal access to resources – may have inadequate procedures of redress for credit available, and thus depend on non-government organisations to assist them in pursuing justice in credit disputes. NGO'''s also work in tandem with individuals and organisations to ensure protection of consumers when using credit, specifically in the realm of unfair credit terms. The Consumer Action Law Centre assists consumers in ensuring their credit contract terms are transparent and fair, and there are a myriad of online resources that assist this such as the ACCC. NGO'''s such as the Financial Rights Legal Centre (NSW)'' and the Redfern Legal can intervene have a particular focus on the issues that effect the economically disadvantaged consumers, reducing their vulnerability in credit violations. However, the drastic legal aid budget cut of 30% expected to place in July, further limits the access to legal advice and assistance involving cases such as credit issues.Whilst protective legislation is both standardised and comprehensible, and state organisations/NGO'''s have majorly assisted in preventing consumer hardships due to credit, without these organisations procedures of redress can be both intimidating and discouraging when opposing large corporations.''
In Australia, the nationally standardised legislation that outlines the penalties for credit violations has been considered preventative in protecting consumers as punishments are arguably '''too soft''' (Spectator News March 2017). Credit and its involvement in protecting consumers is threatened as there is a lack of general deterrence for criminals as punishment for credit violations have been criticised as inadequate. Under the Australian Securities and Investments Commission Act 2001 (Cth), and to the National Consumer Credit Protection Act 2009 (Cth), it states that civil penalties cannot exceed $500,000 and penalties for business cannot go beyond $1.1million. The ability to incarcerate individuals for credit crimes is immensely limited as punishments are capped by two years. Federal organisations such as ASIC and ACCC are dually limited in their mechanism to prevent credit crimes as their enforcement powers, as set out in the Australian Securities and Investment Commission Act 2001 (Cth), the Corporations Act 2001 (Cth) , it states the ASIC levy fines can be a maximum of $220,000 for individuals and $1.1million for corporations, less than government civil penalties. Consequently, proceeding to claim damages, injections and specific performances can seem pointless to consumers as the punishments for most large businesses are minimal in comparison to their profitability. ASIC chairman states "Often [internationally] the penalty is you get to disgorge your financial gain and in fact the concept in many jurisdictions is triple damages,''' in reference to the former chairman of Tasmanian timber company, John Gay, will not be made to hand back the almost $1 million he made from credit obstructions. (ABC.news). Rather, Gay was fined $50,000. The ASIC chairman continued to state "Frankly, if in fact you are considering whether to break the law and it's a risk/reward decision, many people weigh up what the penalty will be or may be versus the gains to be obtained'''. Thus, the inadequate punitive measures allow credit crimes to increase as there is an immense lack of general deterrence, posing the need for criminal sanctions on misconduct for credit transactions.
As consumers of the 21st century, the ever-development technological marketplace has enabled the credit-paying customer to fall prey to rogue online traders, sophisticated scam artists and new retail practices that fall short of the ACL protections. . Online contracts are, by nature, unclear in their contract terms, and to agree to the contract a customer is not obliged to read the terms, but rather the one click is a formal and legal agreement. The ACL is comparatively powerless to the capabilities of technological advancement, as despite reformed Legislation such as the Competition and Consumer Act 2010 (Cth), victims of credit scamming is growing. Credit technology has allowed for a myriad of online scammers to benefit, as evident in the online credit scam explosion, targeting Australians that are '''Less tech-savvy''' as they '''think it may be real''' (NEWS.com). More than $250,000 was stolen through credit payments, the main victim being an elderly man losing $3000'' last month after a caller with a foreign accent claimed his anti-virus program needed updating. The ACCC has urged consumers to be wary of '''dodgy operators masquerading as legitimate online retailers, after receiving 1025 reports already in 2017''' (NEWS.com). Such non-government organisations extrapolate online issues on media outlets such as Four Corners to promote awareness of potential online violations through credit card payments. Technology security advancements are limited even for large corporations such as Target. Target has agreed to pay $US18.5''million ($24.8m) to resolve an investigation by state prosecutors into its massive 2013 hack, a deal that represents the largest multi-state data breach settlement in history. Online hackers used the credit card details on the Target database to steal millions of dollars. The way in which credit technology has enabled for more crimes to occur is represented in media and NGO'''s to warn consumers of the dangers of the payment method. These mechanisms are necessary as the difficulty of legislation in combatting against technology, as it is ever-increasing and far-expanding in this globalized, e-commerce market place. Through non-governmental agencies and media outlets, such as CHOICE, Four Corners and government websites , credit scamming is purported into the realm of the public, providing the vulnerable consumer with information/awareness/knowledge of such conduct.credit scamming is purported into the realm of the public, providing the vulnerable consumer with information/awareness/knowledge of such conduct. However, legislation fails to keep up with credit advancement, and thus consumer protection is remains at risk.