Starting July 1, an all-embracing national consumer code is set to take effect which would throw a blanket of protection on unsuspecting individuals from greedy banks and predatory lenders, effectively easing out existing complex state and territory laws.

Minister of Corporate Law Chris Bowen said that the new code would be an effective national regime as compared to the old practice where "credit has been regulated on a state and territory basis for as long as the federation has existed, and that is not sustainable in the current modern environment."

Mr Bowen added that under the new laws, there would be a responsible lending provision and lenders are tasked to adopt reasonable steps that would ensure people would have the capacity to repay incurred debts.

He said that the new laws were specifically intended to "rein in pay-day lenders and the 'fringe' elements of the lending industry, as well as to pressure the mainstream banks and financial institutions to ease up on harsh exit fees for consumers who want to switch their mortgage."

Mr Bowen said that it would now be illegal for contracts to carry unfair terms and under the new law, the Australian Securities and Investments Commission (ASIC) has been empowered to take action and strike out an unconscionable contract term as he noted that the agency "has released some guidance as to how they'll administer that in relation to unfair exit fees from mortgages."

ASIC said that it is set to hold talks with the lending industry in order to determine whether a fee becomes too high and unfair though the agency is in agreement with Mr Bowen that changes to be brought by the new law would allow customers for a more affordable switch of mortgage lenders and subsequently encourage greater competition.

The new laws are also aimed to regulate credit card offers to individuals without the capability to finance extra debt by prohibiting banks from sending unsolicited offers in the post.