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New Fair Trading Act Mandates Specified Disclosure in Advertisements
The new Fair Trading Act, which comes into force September 1, 1999, continues the requirement for a written statement of disclosure in all consumer loans, but extends those requirements to advertisements and all situations where credit is granted to a consumer whether as a result of a loan, the sale of goods or services, or the leasing of goods.
If the requirements of the Act are breached, other than for "excusable error", the debtor is entitled to a refund of any improperly disclosed charge, as well as statutory damages of at least $500 (or 5% of the maximum credit), and exemplary damages as may be set by a Court.
The "Total Cost of Credit", including all charges over the cash price or deemed cash price, will have to be set out both in any advertisement and in a written statement of disclosure. In addition, the Annual Percentage Rate (APR) calculated as prescribed in the regulations and including all non-interest finance charges, will have to be specified.
Non-residential leases for an indefinite term or a term more than four months will have to include a similar disclosure, and no "residual obligation" will be chargeable to the lessee unless it is specifically described in accordance with the regulations.
Where the credit is subject to a floating interest rate or other terms, which may change, the change will not become effective until an amended statement of disclosure in prescribed form has been delivered to the debtor. Where the credit is revolving, such as in credit cards, the creditor will be required to give monthly statements to the debtor.
It is important for all businesses which grant credit to individuals for personal, household, family or farming purposes to change their practices and adopt new disclosure statements in conformity with the Act and with the proposed regulations as soon as possible, and in any event, no later than September 1, 1999. We would be pleased to assist you in this respect.