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June 30, 2010

National Credit Code Default Notice Templates and Guide available

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.

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Posted 30th June 2010 by David Jacobson in legislation

Consumer credit hardship threshold

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.

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Posted 30th June 2010 by David Jacobson in legislation

June 28, 2010

Notification obligations of securitised loans servicers

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+.

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Posted 28th June 2010 by David Jacobson in licensing

Carried over instrument lenders

Credit providers that do not write new business regulated by the National Credit Code after 30 June 2010 do not need to get an Australian Credit Licence under the National Consumer Credit Protection Act 2009 (Cth) (the National Credit Act), but only if they comply with special provisions in the National Consumer Credit Protection Regulations 2010 (NCCPR). These unlicensed credit providers are referred to in NCCPR as "unlicensed carried over instrument lenders" (UCOI Lenders).

What's a "carried over instrument"?

The term "carried over instrument" refers to existing regulated loans. They are called "carried over" because they become regulated by the National Credit Code and cease to be regulated under the Uniform Consumer Credit Code, with effect from 1 July 2010.

Background

In early drafts of the NCCPR, UCOI Lenders were exempt from the requirement to be licensed. When the regulations were issued on 10 March 2010, however, this exemption was not included. Based on the March regulations, UCOI Lenders would need to get an Australian Credit Licence.

But the government then decided that full regulation was not necessary for these lenders, because they would not be writing any new business. Amendments to NCCPR to cover UCOI Lenders were introduced on 20 May 2010. A new Schedule 2 was inserted into NCCPR. Schedule 2 modifies the application of the National Credit Act to UCOI Lenders. Some refinements were made to these changes in regulations made on 15 June 2010.

What general obligations apply to a UCOI Lender?

UCOI Lenders must comply with many of the obligations that also apply to Australian Credit Licensees. A UCOI Lender must do all the following in relation to its carried over instruments:

  • do all things necessary to ensure that the credit activities engaged in are engaged in efficiently, honestly and fairly;
  • have in place adequate arrangements to ensure that its clients are not disadvantaged by any conflict of interest that may arise wholly or partly in relation to credit activities engaged in by it or its representatives;
  • ensure that its representatives are adequately trained and competent to engage in credit activities;
  • maintain its competence to engage in credit activities;
  • unless the UCOI Lender is regulated by APRA, have adequate resources (including financial, technological and human resources) available so it can engage in credit activities, and to carry out supervisory arrangements, and also have adequate risk management systems; and
  • have an internal dispute resolution procedure.

These are all obligations that also apply to Australian Credit Licensees.

UCOI Lenders must also have adequate arrangements and systems to ensure compliance with the above obligations, and a written plan documenting those arrangements and systems.

Other requirements

Unlike Australian Credit Licensees, UCOI Lenders are not required to be members of an ASIC approved external dispute resolution scheme. But if a UCOI Lender is not a member of an approved external dispute resolution scheme, it has to keep registers of:

  • complaints in relation to carried over instruments;
  • applications by a debtor for changes to the terms a credit contract under the hardship provisions of the National Credit Code; and
  • requests to negotiate a postponement of enforcement proceedings in relation to the credit contract, mortgage or guarantee under the National Credit Code.

In addition, a UCOI Lender that is not a member of an approved external dispute resolution scheme must:

  • Compliance report: provide to ASIC an audit report by 31 December 2010, prepared by a suitably qualified person, about whether the UCOI Lender has complied with the requirements of the National Credit Code concerning the content of its credit contract documents or consumer lease documents; and
  • Breach reporting: when it becomes aware of an actual or likely significant contravention of the National Credit Act, the Transitional Act or the ASIC Act, give ASIC a written report on the matter as soon as practicable, and in any case no later than 10 business days after becoming aware of the contravention or likely contravention. (This requirement is similar to the breach reporting obligations of Australian Financial Services Licensees.)

All UCOI Lenders must lodge an annual compliance certificate with ASIC, just as an Australian Credit Licensee must do. The first certificate is due by 15 August 2011. They must also keep financial records and trust accounts in the same way as Australian Credit Licensees.

Do UCOI Lenders need to register?

Persons engaged in credit activities are required to register with ASIC by 30 June 2010. UCOI Lenders are not exempt from this requirement, and so must register with ASIC by that date.

Dealing with unlicensed persons, and credit representatives

Like licensees, UCOI Lenders must not engage in a credit activity or conduct business with another person who is not licensed or a registered person.

UCOI Lenders will be able to appoint third parties as their credit representatives, and will need to notify ASIC of the appointment of new credit representatives and the revocation of such appointments.

Prescribed UCOI Lenders

A prescribed UCOI Lender is someone who is the subject of certain orders or judgments or disqualifications specified in NCCPR that would in essence make that lender a person not fit to be a UCOI Lender.

From 1 July 2010, such prescribed UCOI Lenders must not engage in a credit activity in relation to a carried over instrument if the lender is engaging in the credit activity as the credit provider under a credit contract, or the lessor under a consumer lease. They must instead appoint a licensee or registered person as the lender's representative to engage in the credit activity.

The prescribed UCOI Lender and the appointed licensee or registered person must notify ASIC of the appointment within 15 business days. If the appointment ends, the prescribed UCOI Lender must find and appoint a replacement within 15 business days.

Credit register and notifications

ASIC must include details of each UCOI Lender in a credit register for UCOI Lenders.

UCOI Lenders must notify ASIC of:

  • a change in a matter in the credit register that is not a direct consequence of an act by ASIC (within 10 business days);
  • any change in control of the lender (within 10 business days); and
  • if the UCOI Lender is not regulated by APRA, when an event occurs that may make a material adverse change to the financial position of the UCOI Lender (as soon as practicable, and in any case not later than 3 business days).

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Posted 28th June 2010 by Patrick Dwyer in legislation

June 27, 2010

ASIC updates credit regulatory guides

ASIC has released further updated versions of its package of National Consumer Credit regulatory guides, incorporating references to regulations made in recent months.

ASIC's Pro Forma 224 Australian credit licence conditions have also been amended.

ASIC has also provided a useful reference list of amending regulations issued since December 2009 leading up to commencemnent of the new scheme on 1 July 2010.

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Posted 27th June 2010 by David Jacobson in legislation, licensing

June 23, 2010

New credit licensing exemptions for referrers and temporary employees

The Minister for Financial Services, Superannuation and Corporate Law, Chris Bowen MP has announced proposed amendments to the National Consumer Credit Protection Regulations 2010 and the National Consumer Credit Protection (Transitional and Consequential Provisions) Regulations 2010 in July 2010 with respect to the exemption of the referral of customers to lenders and brokers from the requirement to hold an Australian credit licence (ACL) and for contractors or employment agencies providing temporary credit services staff to be licensed.

ASIC has agreed not to take action against people and entities covered by the policy changes announced by the Minister, for failure to be registered in the short period up until the changes are implemented by Regulation.

Referral arrangements

To be eligible for the proposed referrer exemption, businesses who pass on consumers' details (referrers) to licensees [or their credit representatives] will need to:

•from 1 July 2010:

  • only engage in credit activities as a referrer incidentally to another business they are carrying on;
  • only engage in credit activities as a representative of the licensee or registered person they are referring the customer to;
  • not have been banned from engaging in credit activities under State, Territory or Commonwealth law;
  • not charge a fee to the consumer for the referral;
  • only inform the consumer that the licensee or registered person is able to provide a particular credit activity or class of credit activities, not any particular product;
  • inform the consumer of commissions or other benefits they receive; and
  • obtain the consent of the consumer to pass their name, contact details and the purpose for which the credit is sought to the licensee or registered person.

The following additional requirements need to be in place by the end of the 3 month transitional period so that businesses using the proposed upstream referrer exemption will need to:

•from 1 October 2010:

  • pass on a consumer's contact details within 5 business days; and
  • not conduct their business from temporary or non-standard business premises (such as a stall in a shopping centre); and
  • have in place an agreement with the licensee or registered person (in which the referrer acknowledges and agrees to the limitations on the information they can provide to a consumer and the need to obtain their consent to having their details passed on).

In addition, a licensee or registered person who makes contact with a consumer as a result of a referral must,

•from 1 October 2010:

  • do so within 10 business days;
  • inform the consumer that they have obtained the consumer's contact details from the referrer;
  • explain the financial benefits, if any, the referrer may receive for the referral; and
  • specifically ask the consumer whether they are happy to continue with the conversation.

Temporary employees

Temporary employees engaged by ACL holders or their credit representatives will be allowed to be treated as employees of the ACL holder. This will ensure that contractors or employment agencies will not need to be licensed if their employees engage in credit activities, provided that these persons are largely supervised and managed in the same way as the employees of the licensee.

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Posted 23rd June 2010 by David Jacobson in licensing

Credit registrations exceed 13,000

ASIC has announced that since 1 April 2010 it has registered over 13,000 applicants to engage in credit activities after 30 June.

Registration will close on 30 June 2010.

If you are not registered with ASIC by 1 July 2010, you must stop engaging in credit activities until you either become registered or have an Australian Credit Licence.

To ensure you are dealing with a registered person, you can search the Credit Register.

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Posted 23rd June 2010 by David Jacobson in licensing

June 21, 2010

More National Consumer Credit forms changes

The latest amendments to the National Credit Regulations include some minor changes to the forms you must use under the National Credit Code.

The National Consumer Credit Protection Amendment Regulations No. 3 issued on 15 June 2010 include the following forms changes:

  • Form 9 (this is the information statement that must be given to guarantors). The amendments vary paragraph 3 of the statement by including after "the signed guarantee" the words "(if you do not already have a copy of the guarantee)".
  • Form 10 (this is the statement that must be given to the mortgagor after mortgaged goods have been surrendered). The amendments correct an error in the regulations which formerly had a space for the date appearing twice at the beginning of the form.  The first reference to a date should be deleted.
  • Form 12 (this is the default notice wording). The amendments correct an error in the third bullet point of the wording (which starts with: "you entered into your contract").  Under that bullet point there are 2 sub-paragraphs. The second sub-paragraph repeated the words "you entered into your contract". The repeated words have now been deleted in the updated form.

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Posted 21st June 2010 by Patrick Dwyer in legislation

Direct Debit Default Notices under the National Credit Code – update

Abacus, the industry body for the Australian mutual financial services sector, has advised us that after a period of communications with Commonwealth Treasury and ASIC it has now been informed that:

  • It was not the Government’s intention that the direct debit notice provisions of the NCC would apply where the debtor has authorised another financial institution to send payments to the credit provider. It was only intended that they would apply where the debtor has authorised the credit provider to access their payments from an account with another financial institution.
  • The provisions were not intended to apply to payments sourced from another account the debtor holds with the credit provider (eg by periodic payment authority). Only payments processed through BECS are potentially caught.
  • ASIC proposes to administer the provisions consistently with what the Government intended, and ASIC may issue an information sheet on this topic in due course.

Abacus has now issued a Compliance Note to its members on this topic.

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Posted 21st June 2010 by David Jacobson in legislation

June 20, 2010

More National Consumer Credit Protection Amendment Regulations

The Minister for Financial Services, Superannuation and Corporate Law has announced the making of further regulations finetuning the new scheme:

The Amendment Regulations include:

  • Exemption for special purpose funding entities
  • Arrangements for unlicensed lenders and lessors with carried over instruments
  • form changes
  • indexation for fees.

Further regulations are proposed to be issued in June and July to cover the following matters:

  • an additional exemption for referrers where they pass on a consumer's contact details directly to a licensee or registered person;
  • clarification of the treatment of locums and temporary employees;
  • transitional arrangements for residential investment property loans; and
  • minor technical amendments.

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Posted 20th June 2010 by David Jacobson in legislation, licensing
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