Introduction to the application of banking and other legislation in guarantees

In the context of guarantees, there are many banking and other legislation that may be relevant to legal practitioners. These include the National Consumer Credit Protection Act 2009 (Cth), the Personal Property Securities Act 2009 (Cth), the Privacy Act 1988 (Cth) and the unfair contract terms legislation.

This subtopic considers the relevance of these legislation when legal practitioners draft, review or negotiate guarantees or advise clients regarding guarantees.

National Consumer Credit Protection Act

The National Credit Code (NCC) is in sch 1 of the National Consumer Credit Protection Act 2009 (Cth). The NCC creates additional requirements for guarantees that are entered into in relation to a credit contract regulated by the NCC. The guarantee will not be enforceable unless these requirements are complied with.

This guidance note provides an overview of the regulation of consumer credit, then explains the specific NCC requirements regarding guarantees, and the rights and protections to the guarantor under the NCC. Importantly, this guidance note explains how “unjust” guarantees can be cancelled by a court.

See National Consumer Credit Protection Act.

Personal Property Securities Act

Australia’s personal property securities (PPS) reform has resulted in the replacement, or significant modification, of over 80 different federal, state and territory laws by way of the introduction of the Personal Property Securities Act 2009 (Cth) (PPS Act). This guidance note provides an overview of the PPS legal framework, then considers guarantees in the context of the PPS regime. It answers the question “is there a requirement to register guarantees on the PPS Register?”, and explains how a guarantee document may contain a security interest. This guidance note contains examples of PPS Act related definitions and provisions for guarantees to aid legal practitioners’ understanding of the various PPS concepts.

See Personal Property Securities Act.

Privacy Act

The Privacy Act 1988 (Cth) (Privacy Act) regulates the handling of personal information about individuals, including natural person guarantors. Personal information includes:

• • sensitive information; and
• • credit information.

This guidance note explains what is personal information, sensitive information and credit information of guarantors. It also explains (among other things) how banks and financial institutions’ may comply with the Privacy Act, the role of the Office of the Australian Information Commissioner in ensuring Privacy Act compliance, and the interaction between the Code of Banking Practice and the Privacy Act.

This guidance note contains examples of wording that relates to individual guarantors in privacy consents, and identifies useful resources for legal practitioners regarding the Privacy Act.

See Privacy Act.

Unfair contract terms

The Australian Consumer Law (ACL) is in sch 2 of the Competition and Consumer Act 2010 (Cth). Part 2–3 of the ACL is titled “unfair contract terms”, and this part forms Australia’s unfair contract terms regime. This guidance note provides an overview of the unfair contract terms regime, and explains key legal concepts, including the meaning of “standard form contract” and what is “unfair” (and examples are provided).

Currently there is very little legal commentary or guidance from regulators regarding the application of the unfair contract terms legislation to guarantees. This guidance note outlines some matters regarding guarantees in the context of the unfair contract terms regime that legal practitioners should consider.

See Unfair contract terms.