One of the biggest purchases that you’ll probably make will be to buy a car. Many Australian take out car loans to cover part of all of the cost of their car. Having a car loan means having the responsibility to stay on top of loan repayments during the term of the loan.
Car loans are covered under Australia’s credit laws that afford consumers a number of rights and protections. It’s important to understand your consumer rights so that you can deal with your credit loan more confidently, especially if you run into any disputes with your car loan provider or if you face financial hardship in the future.
Australian laws relevant to car loans
The most important law in Australia that helps protect you with your car loan is the National Consumer Credit Protection Act 2009 (the NCCP Act). The NCCP Act is important because it requires that car loan providers are:
- Licensed to give car loans
- Members of an approved External Dispute Resolution (EDR) scheme
- Following responsible lending practices
Car loan providers must act responsibly
Australian credit laws protect you by requiring car loan providers to lend responsibly. This means that they must give you important information about your car loan. For example, all car loan providers need to give you a Credit Guide. This Credit Guide must:
- Be in writing,
- Show the car loan provider’s licence number, name and contact details, and
- Explain the steps for how you can complain or raise a dispute with the provider.
If the car loan provider fails to give you a Credit Guide, then you have the right to ask for one. On the other hand, if the Credit Guide is unclear, then you should ask for a clearer explanation of its contents.
Also, the law requires that car loan providers lend responsibly by stopping them from getting into unsuitable car loan contracts that may be damaging to your financial situation. This means that car loan providers shouldn’t go ahead with car loans if they know that it would cause hardship. It also means that providers shouldn’t force you into a car loan contract when they know that it would go against your goals and needs.
You have the right to say no to a given car loan provider, especially if they are forcing you or harassing you into a contract that you know would be bad for you. It’s advised that you shop around and check the fees and rates of different car loan providers before you finally settle on one.
Car loan providers must tell you required information
When you choose a car loan provider and you sign a contract with them, make sure that you read the fine print and check that the contract has all the details that are necessary by law. Car loan providers must tell you certain information, and they must be clearly mentioned in the contract. There are actually several required pieces of information, but some of the most important items include:
- The total amount of the car loan,
- The interest rate and how it will apply,
- The amount of the repayments and how it is calculated, and
- The frequency of the repayments and when they’re due.
What to do if you can’t pay your car loan?
Car loans can take several years to pay off, and during that time, you may find yourself in an unexpected situation where you’re having trouble repaying the loan amounts. It’s hard to predict a change in your future circumstances, and that’s why financial hardship is the most common problem affecting borrowers under their car loans.
Australian credit laws give you the following rights if you find yourself in financial hardship:
- You have the right to apply for financial hardship to your car loan provider.
- If approved, you will be given a special arrangement for your car loan repayments.
- The car loan provider must reply in writing within 21 days from the date of your hardship application, and they need to say whether they agree to the change or not.
- You can apply to External Dispute Resolution if the car loan provider does not agree with your financial hardship application.
- You also have the right to go to court if you are unsuccessful with EDR.
Dealing with disputes about your car loan
If you find yourself in a dispute with your car loan provider, then the following organisations could help with your dispute:
1. External Dispute Resolution (EDR)
External dispute resolution is a free, independent service that can resolve disputes with your car loan provider. All car loan providers must be members of an EDR. There are two EDR services that are relevant to car loans. They are the Financial Ombudsman Service (FOS) and the Credit Ombudsman Service Ltd (COSL).
2. Australian Securities and Investments Commission (ASIC)
If your complaint against a car loan provider is serious, or it affects many other Australian borrowers too, then you can make a complaint to ASIC.