Do you need default notice forms which comply with the new National Credit Code? And with all State and Territory legislation which applies to real estate mortgages?

Langes+ can supply template forms for use in relation to unsecured loans, goods mortgage secured loans, guaranteed loans, and real estate mortgage secured loans in every State and Territory, as well as a guide which explains how to complete them and serve them. For an annual fee we will update them if the relevant laws change.

Langes+ can also issue default notices for you. We can give you the option of giving us instructions on-line if you want it, and give you access to on-line reports which are customised to suit your needs. We’d be happy to discuss your particular requirements, the options and the costs.

Please contact Shannon Adams (08 8168 9601) or Joshua Annese (08 8168 9604) to discuss a package which suits you.

The Super System Review Panel delivered its final report to the Government on 30 June 2010.

The Government will consider the report and will make its own decision concerning the timing of its release and the response to the recommendations made in the report.

A recent speech by the Review Chair, Jeremy Cooper, outlined the history of the review and the principles that guided it.

Mr Cooper indicated that most of the solutions that the Review will recommend are governance-oriented with quantifiable financial benefits.

Assistant Treasurer, Senator Nick Sherry, has released a consultation paper on reforms to the goods and services tax (GST) financial supply provisions.

The consultation paper provides further information on the following changes announced in the 2010-11 Budget:

• increasing the financial acquisitions threshold (FAT) input tax credit test from $50,000 to $150,000;
• make hire purchase fully taxable;
• allow full input tax credits upfront for small businesses accounting on a cash basis when they enter into hire purchase;
• excluding bank deposit accounts from the current special rules for borrowings;
• expanding the range of expenses qualifying for a reduced input tax credit (RITC); and
• clarifying the language and relationship between the concepts of guarantees and indemnities.

The changes will apply from 1 July 2012.

The AUSTRAC typologies and case studies report 2010 has been published.

It includes 31 case studies illustrating how legitimate Australian banking, gambling and remittance services have been misused to commit money laundering and other serious offences. It also lists indicators of potential money laundering/terrorism financing activity.

The report has sections on terrorism financing, current and emerging threats, and suspicious matter reports.

It is a useful training tool.

The analysis of case studies found that money laundering and fraud were equally prevalent, and represented the two most commonly occurring offence types. Fraud and money laundering combined constituted more than half (52 per cent) of all the offences identified in the case studies. The next most commonly identified offences were the importation of drugs (13 per cent), drug trafficking (8 per cent), structuring of financial transactions (8 per cent) and tax evasion (6 per cent).

The three most common types of designated services used to launder the proceeds of crime were account and deposit-taking services (used in 39 per cent of case studies), remittance services (14 per cent) and electronic funds transfers (12 per cent).

Under section 88(3) of the National Credit Code a default notice must specify the information prescribed by the regulations about the debtor’s right to request changes on the grounds of hardship (under section 72) or the postponement of enforcement proceedings (under section 94).

The debtor’s rights under section 72 and section 94 do not apply to a credit contract made on or after 1 July 2010 in respect of which the maximum amount of credit that is or may be provided is more than $500,000.

For contracts made before 1 July 2010 the hardship threshold is a floating threshold based on the Australian Bureau of Statistics (ABS) index of the cost of new houses in New South Wales plus 10%. The figure is published on the ASIC website here.

Even if a debtor’s credit amount exceeds the threshold, a credit provider might still agree to vary the contract terms if the debtor is having difficulty making repayments.

APRA has written to trustees of APRA-regulated super funds offering “good practice guidance” on the labelling of investment options offered by superannuation funds.

To avoid confusion on the part of fund members by the use of “labels” such as “balanced”, “conservative” or “growth” and to help properly compare investment performance, APRA has suggested, pending more detailed guidance, that investment strategies be described by clearly stating what the expected frequency of negative returns of that strategy is over a 20 year period.

APRA is not, currently, suggesting guidance on the risk level appropriate for labels such as “conservative”, “balanced” or “growth” but it says that it expects trustees to “have access to robust data, systems and processes which substantiate the decisions to categorise investment strategies”.

APRA has also indicated that it is envisaged that Regulatory Guidance will be issued by ASIC in the first year of transition to the shorter PDS requirements under the Corporations Amendment Regulations 2010 No. 5.

If you have a servicing agreement with a securitisation funder, and are, or have registered as, a credit licensee, Regulation 9A of the National Consumer Credit Protection Amendment Regulations 2010 (No. 3) adds the following notification obligations to your other statutory licence conditions:

1. if the servicing agreement was made before 1 July 2010 you must notify ASIC within 30 business days after 1 July 2010;
2. if the servicing agreement was entered into on or after 1 July 2010, you must notify ASIC no later than 20 business days after the servicing agreement was entered into;
3. You must notify ASIC within 15 business days after you cease to be a party to a servicing agreement;
4. You must notify ASIC within 15 business days of any action taken by a natural person in a position to control or influence the
securtisation funder that has or may have the effect of directing you to act inconsistently with your licence obligations, or the credit legislation generally.

If you are part of a securtisation program and are unsure whether you must be licensed or how to deal with your past loans under the National Credit Act, contact Langes+.

ASIC has released Consultation Paper 135 Mortgage early exit fees: Unconscionable fees and unfair contract terms (CP 135) which contains its proposed guidance for compliance with provisions in the National Credit Code and Australian Securities and Investment Commission Act 2001 (ASIC Act) that apply to setting the price of and explaining mortgage early exit fees.

Under the National Credit Code (Schedule 1 of the NCCP Act, sections 78 and 79), early exit fees which are unconscionable can be annulled or reduced by a court. Under the Australian Consumer Law, which amended the ASIC Act, an unfair term requiring an early exit fee to be paid can be declared void (Section 12BF). ASIC also has a number of new enforcement powers under the new consumer law provisions in the ASIC Act.

ASIC considers that a contractual term providing for an early exit fee which is unconscionable under the Code is likely to also be unfair under the ASIC Act. However, its opinion is that it does not necessarily follow that a fee that is not unconscionable will be fair for the purposes of the ASIC Act, as the relevant tests under the Code and ASIC Act are different.

Both provisions commence on 1 July 2010 and will be administered by ASIC.

The National Credit Code provisions in respect of unconscionable fees are unchanged from the Uniform Consumer Credit Code and will therefore apply to pre-1 July 2010 home mortgage contracts as well as new home loans and residential investment loans made on or after 1 July 2010.

The ASIC Act provisions will apply to contracts entered or renewed on or after 1 July 2010 as well as terms in contracts varied on or after 1 July 2010.

Once the laws commence, if a borrower thinks that an early exit fee they have been charged is unconscionable or unfair, they can:

• complain to their lender and, if needed, take the dispute to the lender’s External Dispute Resolution Scheme;
• complain to ASIC; and/or
• challenge the fee in court proceedings.

The Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010 has been passed by Parliament.

The Bill represents stage 2 of amendments to the Trade Practices Act 1974 (TP Act) as part of a plan to create a single national consumer law for Australia, including a national product safety law. Part 1 will start on 1 July 2010.

The Bill changes the name of the TP Act to the “Competition and Consumer Act 2010″.

The Bill’s changes include:

• incorporating the fair trading and consumer protection provisions of the TP Act into the ACL, including unfair contract terms and provisions implementing enhanced enforcement powers, penalties and redress options;
• creating a national legislative scheme for consumer product safety, to replace the existing Commonwealth, State and Territory regulatory schemes;
• creating a national legislative scheme for statutory consumer guarantees, to replace the existing Commonwealth and State and Territory legislation concerning implied conditions and warranties in consumer transactions; and
• augmenting the fair trading and consumer protection provisions of the TP Act with changes drawn from existing provisions of the consumer laws of the States and Territories.

Government amendments in the Senate included:

• returning the definition of a ‘consumer’ (which applies to provisions of the ACL dealing with consumer guarantees,
  unsolicited consumer agreements, lay-by sales, the provision of itemised bills, continuing credit contracts and linked credit
  contracts) to apply to any person that purchases goods and services below $40,000 in value;
• as a consequence of the aforementioned amendment, allow suppliers and manufacturers to limit their liability in respect of goods not ordinarily acquired for personal, domestic or household use or consumption that fail to meet the standards
  required by consumer guarantees (in line with existing sections 68A and 74L of the TP Act);
• clarifying that a consumer may choose to terminate a contract for the supply of services that are connected to goods that have been rejected;
• clarifying that the obligation upon a supplier to refund monies in respect of services when connected goods have been rejected extends only to services that have not yet been consumed;
• clarifying that the scope of the definition of an ‘unsolicited consumer agreement’ includes situations where a consumer provides contact information to a supplier for purposes other than soliciting goods or services (such as entering a
  competition) or where a consumer contacts a supplier in response to a failed attempt by a supplier to contact them (missed call marketing); and
• clarifying that a supplier is entitled to recover certain amounts from a consumer if an unsolicited consumer agreement is terminated.

The Insurance Contracts Amendment Bill 2010 was introduced into the Senate on 24 June 2010.

Parliament will next sit on 24 August.

Background: unfair terms in insurance contracts