Consumer protection, disclosure and dispute resolution
Domain 6 - Consumer protection, disclosure and dispute resolution
This domain tests the disclosure and redress rules that let borrowers understand and challenge a residential loan.
Core rules
- CCCFA requires initial disclosure before the contract is made, plus variation and continuing disclosure. Key terms include interest, fees, total cost, repayment frequency and cancellation rights.
- Consumers have statutory cancellation rights for consumer credit contracts and can seek hardship variations.
- Lenders must belong to an approved dispute resolution scheme; borrowers can complain without going to court first.
- Fees must be disclosed and must not be unreasonable; oppressive contracts can be challenged.
- Privacy Act 2020 gives access and correction rights over personal information.
Worked example
A lender omits an establishment fee from the initial disclosure but includes it in the loan offer. The borrower signs. The omission is a disclosure issue; the lender should correct it, assess whether the borrower suffered detriment, and follow its error-remediation process. The borrower can complain to the lender, then to the dispute resolution scheme. The adviser should not tell the borrower that signing the offer waives the disclosure requirement.
Traps
- Confusing initial disclosure with continuing disclosure.
- Saying the dispute scheme is a court or that court action is the first step.
- Treating a fee as disclosed because it appears in a later statement.
- Assuming cancellation rights can be contracted out of.
- Ignoring the borrower's right to request a hardship variation.