National credit laws and book up: What you need to know

This is Information Sheet 129 (INFO 129).

Book up is a common practice in many remote and regional communities of Australia. When you offer book up, or run up a tab, you allow your customers to buy goods or services and pay later. If you do this, you are providing a type of consumer credit. Depending on the way your store offers book up, it may be regulated by the National Consumer Credit Protection Act 2009 (National Credit Act) and you may need a credit licence to provide this service.

This page gives you advice to help work out whether the credit laws affect you and, if so, what you need to do.

• National Credit Act – Do I need to be licensed?
• Getting licensed
• Written records and responsible lending
• What if the National Credit Act does not apply to the book up you offer?
• ‘Consumer friendly’ book up

National Credit Act – Do I need to be licensed?

Store owners and other traders offering book up are likely to be affected by the National Credit Act if they charge consumers for the book up (credit). Charges might include interest or credit fees.

For example, the National Credit Act will generally apply if you allow customers to book up the cost of goods or services and:

• the provision of credit exceeds 62 days and a charge is made for providing the credit, or

• the provision of credit does not exceed 62 days but you charge a fee that exceeds 5% of the amount booked up, or charge interest at an annual percentage rate in excess of 24%.

Getting licensed

If you offer book up (credit) that is regulated under the National Credit Act, you must be licensed to undertake such activity or be authorised as a representative of a licensee.

There are penalties under the National Credit Act for businesses that provide regulated credit without the appropriate licence or authorisation.

You can apply online for a credit licence.

Written records and responsible lending

If you offer book up (credit) that is regulated under the National Credit Act, you must give customers certain written records at specific times to ensure they are aware of the terms on which the book up is provided.

This includes written disclosure before the book up (credit) is provided as well as ongoing account statements.

The National Credit Act also has responsible lending provisions, which prohibit businesses from providing credit if the consumer would only be able to repay with substantial hardship.

What if the National Credit Act does not apply to the book up you offer?

If the National Credit Act does not apply to your book up arrangements (for example, because you don’t charge consumers for the service), you still need to be aware of other laws that apply.

One of these laws is the Australian Securities and Investments Commission Act 2001, which covers misleading conduct, unconscionable conduct and unfair contract terms.

Book up is not in itself an unfair practice. This type of short-term credit can help people who have run out of money.

However, unfair conduct can occur where agreements are not set out clearly for consumers to understand or where consumers are exploited.

‘Consumer friendly’ book up

Whether or not the new credit laws apply to your business, a ‘consumer friendly’ book up service:

• gives customers a written agreement that includes terms and conditions and any interest or charges that apply
• doesn’t ask for or keep customers’ PIN numbers (many banking agreements prohibit traders from asking for PINs or requiring them to be disclosed as part of a book up arrangement)
• displays a copy of book up terms and conditions in the shop so customers are fully aware of them
• gives customers receipts and an itemised statement (with dates and prices) of goods or services they have bought, including any fees and charges for the book up
• charges the same price for things regardless of whether they are paid for with cash or book up
• doesn’t require any customer to book up more than they will be able to pay back
• allows book up customers to look at their records at any time
• keeps records of purchases and money owing in a safe, confidential and secure place.

ASIC's publication 'Dealing with book up: Key facts' provides more information about best practice book up. You can access a copy of this publication from our Moneysmart website.

Where can you find more information?

• Go to www.asic.gov.au/credit for more information about book up and the National Credit Act.
• Visit www.moneysmart.gov.au for information about credit, loans and borrowing.
• Call ASIC on 1300 300 630 or ask a question online.

Important notice

Please note that this information sheet is a summary giving you basic information about a particular topic. It does not cover the whole of the relevant law regarding that topic, and it is not a substitute for professional advice. We encourage you to seek your own professional advice to find out how the applicable laws apply to you, as it is your responsibility to determine your obligations.

You should also note that because this information sheet avoids legal language wherever possible, it might include some generalisations about the application of the law. Some provisions of the law referred to have exceptions or important qualifications. In most cases, your particular circumstances must be taken into account when determining how the law applies to you.