Bill Facilities Now Regulated By The UCCC

New Regulations have been passed bringing the use of bill facilities, such as bills of exchange or promissory notes, within the Uniform Consumer Credit Code (UCCC) where the credit is provided wholly or predominantly for "personal, domestic or household purposes".

Until now, the UCCC has not applied to the provision of credit arising out of a bill facility. This has allowed fringe lenders to provide loans to consumers and avoid the application of the UCCC. Under these arrangements, borrowers have obtained credit by selling a bill or note.

The Explanatory Notes to the Consumer Credit (Bill Facilities) Amendment Regulation (Regulations) state that the exemption of the application of the UCCC to bill facilities "has led to a clear conflict with the UCCC's policy objectives of ensuring credit laws apply equally to all forms of consumer lending and to all credit providers". In states where maximum interest rate caps apply (such as NSW, Victoria and the ACT), fringe lenders have been able to avoid the interest rate caps by lending under bill facility structures. In addition, the adoption of these structures has allowed lenders to avoid the UCCC's "protective provisions in respect of debt collection practices, including the requisite notice periods and rights in relation to repossession".

The new Regulations provide that the UCCC now applies to the provision of credit arising out of a bill facility unless the credit is provided by an authorised deposit-taking institution (ADI). The Explanatory Notes state that ADIs have been exempted from the new arrangements to allow these institutions to continue to provide credit via promissory notes to high net worth individuals for domestic purposes.

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