Question

Tita and his boyfriend Sandro Battuta were looking for new furniture on March 15 2020. They found a beautiful white sofa at a famed furniture shop, Altisimmo. Its price: $10,000. Sandro loved it right away. Tita was less enthusiastic. The price was high. Sandro persuaded her by insisting that he could enter into a consumer credit contract. On March 17 2020, Sandro went to his bank, RBC, with Tita who is also an RBC customer. Christian, a customer service representative who was on his first day, orally explained the general details of the contract to Sandro. Sandro signed the contract. The annual interest rate was 25%. Five days later, on March 20, Tita received an envelope from RBC in her mailbox with a letter addressed to her She was surprised to find a copy of the terms of a consumer credit contract for $10,000 enclosed. She was not interested, so she did not pay attention to the document: it was Sandro’s contract. The country entered into a lockdown on March 23 due to Covid-19 and on April 10 banks lowered their interest rates. Tita found on the internet that Scotiabank’s annual rate for consumer credit

contracts was 20%. She was disappointed and told Sandro about their bad luck. She also showed him the mail she had got from RBC. Sandro is sure he does not need to worry about RBC and that he can take advantage of Scotiabank’s better interest rate. Explain why, based on the Credit Contracts and Consumer Finance Act.

Answer 1

The CCCFA covers a range of transactions where money is loaned for personal use, including:

• Consumer credit contracts — a contract where a borrower is given credit for personal use, eg through a mortgage, credit card, arranged overdraft, personal or cash loan, or pawnbroking pledge
• Consumer leases — a lease contract where someone is leasing goods for personal use and either has an option to purchase the leased goods, or the term of the lease is over one year
• Buy-back transactions — where a homeowner transfers their home (or an interest in their home) to a transferee, who typically pays their debts or gives them money. The former homeowner (the occupier) has the right to continue living in the home and to buy it back at some time in the future.

The Act covers all other credit transactions, including business transactions, by protecting borrowers from oppressive behaviour by lenders.

The Act applies to people or businesses who:

• provide credit, including insurance companies, finance or mortgage brokers, and paid advisers
• lease out goods
• operate or promote buy-back schemes.

AfterPay, PartPay and other "buy now, pay later" credit contracts are not currently covered by the CCCFA.

When the CCCFA doesn't apply

Credit contracts not covered by the CCCFA

A contract is not a consumer credit contract when:

• the credit is for commercial or investment purposes — lenders may get a declaration from customers that the credit is for business or investment
• the total amount to be paid is due within two months and the debt equals the sale price of the products or services
• a borrower goes into overdraft without the lender’s prior agreement
• the borrower is acting as a trustee of a family trust
• it is a student loan under the Student Loan Scheme.

If a lender uses another reason to say the CCCFA does not apply, this might be a breach of the Fair Trading Act.