40Default interest charges

1. A consumer credit contract must not provide that an annual interest rate applicable under the contract to any part of the unpaid balance will differ according to whether the debtor has breached the contract.

2. However, a consumer credit contract may provide for a differential rate if the higher rate is imposed only—

3. in the event of a default in payment, in respect of the amount of the default, and while the default continues; or
4. in the event of the debtor causing the credit limit under the contract to be exceeded and while the credit limit is exceeded.

5. Subsection (2B) applies if—

6. there has been a default in payment under a consumer credit contract; and
7. the consumer credit contract provides that an amount payable under the contract becomes payable (or may be called up as becoming payable) earlier than would be the case if there had not been a default; and
8. the consumer credit contract is not an on demand facility.

9. The higher rate referred to in subsection (2) may not be imposed on any amount that becomes payable earlier as referred to in subsection (2A).

10. In subsection (2A)(c), an on demand facility means a credit contract under which—

11. the total unpaid balance is repayable at any time on demand by the creditor; and
12. there is no agreement, arrangement, or understanding between the creditor and the debtor that repayment will only be demanded on the occurrence or non‑occurrence of a particular event.

13. This section does not limit Part 5 or any other rule of law that limits the amount of a default interest charge that may be imposed.