Consumer protection, disclosure and responsible lending obligations
Domain focus
This domain tests consumer protection mechanics: disclosure timing, content, cancellation, and the responsible-lending duties that sit around a consumer credit contract.
Core rules
- Initial disclosure must be given before the contract is entered into. It must be clear and include key terms: lender identity, interest, fees, total cost, cancellation rights, hardship rights and dispute resolution.
- Continuing disclosure applies when the contract changes, for example a variation, and must be given within the statutory timeframe.
- Cancellation: the borrower generally has three working days after initial disclosure to cancel a consumer credit contract by written notice.
- Responsible lending: the lender must make reasonable enquiries into affordability and suitability, and must not enter a contract that is unsuitable.
- Oppressive contracts: terms or conduct that are oppressive can be challenged.
Worked example
A borrower applies online at 5pm Friday and funds are paid before any disclosure document is sent. Reasoning: initial disclosure must precede entry into the contract, so paying out first breaches the sequencing rule; the cancellation period may not have started properly, and the lender cannot rely on later disclosure to cure the breach.
Traps
- Sending disclosure with the first statement instead of before signing.
- Confusing initial and continuing disclosure.
- Assuming a signed application proves suitability; affordability enquiries still matter.
- Ignoring cancellation rights when calculating early repayment.