First home buyers, existing property owners and property investors take note: Australia's lending environment is in for a shake up. With bad lending practices at the very heart of America's economic meltdown, it's no surprise that legislators in Australia are taking a long, hard look at our own consumer credit laws.

These are the rules under which providers of consumer credit (including home lenders, mortgage brokers, lease finance providers and other intermediaries) have to operate, and the federal government has decided it's time for a new, uniform national approach.

The government's National Consumer Credit Protection Bill is currently before parliament and is likely to be passed in September, however, the new rules won't come into full effect until 2011.

What's changing?

The new laws will create a single, national regime for regulating consumer credit -that's everything from home and car loans, to credit cards and retail lending.

Until now, consumer credit providers haven't required a license to operate (except in Western Australia). Regulations have applied in states such as New South Wales and Victoria, but there's been no licensing requirement.

If the new laws are passed, the big change will be that licensing becomes mandatory across Australia. Every home lender and mortgage broker will have to obtain a license from the Australian Securities and Investments Commission (ASIC) and they won't be able to operate without one.

License to lend... responsibly

In addition to obtaining a license, credit providers will also need to comply with a new set of ‘responsible lending' requirements to come into force in January 2011.

These include rules aimed at preventing credit providers from offering customers products and services that are ‘unsuitable for their needs' or that they don't have the capacity to repay.

There will be new rules for the disclosure of commissions, for professional indemnity insurance arrangements, and for participation in external dispute resolution programs - all good news for the consumer.

For lenders, the changes may also mean a review of lending practices, with a new emphasis on ensuring that borrowers have a demonstrated ability to repay, rather than simply relying on the assets they can use as security.

Good or bad for home borrowers?

The new laws are a win for borrowers and are likely to improve standards across the credit industry as a whole.

The effects might be negligible for the majority, but the new rules will make it much more difficult for unscrupulous credit providers to operate at the margins.

Consumer credit providers will need to ensure that, when they lend you money, you have the capacity to pay it back. There will be protection through court arrangements, as well as penalties for misconduct. Dispute resolution processes will be free for consumers and providers will also need to supply their credit assessments if asked.

For the first time, the laws will also cover credit extended for the purchase or renovation of investment property, not just loans on your primary residence.

Stay smart

While the new laws mean that credit providers will need to ensure you have the capacity to repay, this doesn't mean you should blindly sign up for a home loan assuming that you can. You should remain as careful as ever about the amount of debt you're taking on and be mindful of your circumstances and how they might change. Use our budget planner and borrowing power calculator to see how changes in your circumstances might affect your ability to repay.

Good news overall

In terms of transparency and accountability, the proposed changes will bring increased protections for consumers, and improvements to lender practices more broadly.

If it works as designed, the legislation will bring uniformity to consumer credit laws across Australia, and introduce a licensing regime with significant penalties for non-compliance. Welcome news for borrowers and the industry as a whole.