Among the changes is a new national licensing scheme run by the Australian Securities and Investment Commission (ASIC), which will regulate all vendors who offer retail credit products.

To obtain a license, vendors will need to meet responsible lending criteria which will involve a reasonable assessment of the borrower's capacity to repay the loan. Other licence conditions include minimum standards for resources and ongoing training.

ASIC will be able to cancel the licence of any vendor who does not continue to meet their regulatory obligations. Cancellation of a licence will exclude a vendor from engaging in any consumer credit activities in Australia.

Penalties for breaches of licence conditions include fines of up to $1.1 million for a corporation and up to two years jail for individuals.

Other measures include a dispute resolution scheme which will be freely available for borrowers (similar to existing industry ombudsman schemes).

Financial Services Minister Chris Bowen said the new laws would protect the family home of borrowers who have defaulted on a credit arrangement.

"Additional measures have been included to help protect consumers' family home by requiring more rigorous assessment of any credit offer that will require the consumer to sell their home in order to meet the obligations of that contract,".

The new laws will replace the existing state-based regulations, which has been criticised for inconsistency across the eight states and territories.

Some consumers have voiced concern that the tightening of credit regulations may result in difficulty for struggling families seeking credit.

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