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October 15, 2010

Proposed new regulations will affect responsible lending disclosures

A consultation draft of new regulations under the National Consumer Credit Protection Act released for comment this week proposes rules for:

  • the content of responsible lending disclosure documents; and
  • the way they must be given to consumers.

The documents affected include the credit guide, credit quote and credit proposal disclosure document ("Disclosure Documents").

Disclosure of fees and charges and commissions

The draft regulations contain detailed specifications about how credit assistance providers such as brokers must disclose in their Disclosure Documents the fees and charges payable to them or to the credit provider, and commissions paid to them or paid by them to a third party for the introduction of credit business.

The specifications include a requirement to express the amounts fees and charges and commissions in dollars.

Commission information must be set out in the same manner for each credit provider so that the consumer can compare the commissions.

The type of commission must also be specified. For example, a commission such as an advertising subsidy or attendance at a conference must be described as such.

Some of the information about fees and charges does not need to be included in the credit proposal disclosure document if it has previously been disclosed in the credit quote, if:

  • the quote was given to the consumer no more than 30 days before the credit proposal disclosure document is required to be provided; and
  • the credit proposal disclosure document includes a statement next to the fees and charges that the consumer should refer to the credit quote for more information about the fees and charges.

The proposals in the draft regulations do not affect the content of the credit guide required to be given by credit providers.

As the regulations are only in draft form, credit assistance providers will need to wait until the final form of the regulations before they can complete the design of their Disclosure Documents.

Manner of giving Disclosure Documents

The draft regulations propose that the consumer must be given Disclosure Documents in the following way:

  • given to the consumer personally or to an agent of the consumer (other than an agent who is the licensee); or
  • if the licensee will not have a reasonable opportunity to give the consumer the Disclosure Document personally by the time required under the legislation, and if the consumer agrees, it may be:
    • sent to the consumer including an e-mail address or fax number nominated by the consumer;
    • in the case of the credit guide only, made available on the licensee's website; or
    • otherwise made available to the consumer as agreed between the consumer and the licensee.

The Disclosure Documents must be given in a printed or electronic form that is capable of being retained for future reference, and in a way that it is clear that it is a Disclosure Document, and what type of Disclosure Document it is.

If a Disclosure Document is not given to the consumer personally, at the time when the licensee is required to give it to the consumer, the licensee must also:

  • tell the consumer about the licensee's obligation to give the consumer the Disclosure Document;
  • tell the consumer that the Disclosure Document will be given to him or her in the manner agreed;
  • advise the consumer to read the Disclosure Document;
  • explain the main features of the Disclosure Document; and
  • ask the consumer if he or she has any questions about the Disclosure Document and answer those questions.

This additional information may be given in the same manner in which previous communication with the consumer has been conducted. For example, if the licensee has been communicating by telephone with the consumer, it may give this information by telephone.

Where the Disclosure Document is not given personally to the consumer, the licensee must also be reasonably satisfied that he or she has received the Disclosure Document before engaging in further credit activities in relation to the credit contract. The draft regulations provide that a licensee may be reasonably satisfied that the consumer has received the Disclosure Document (unless the consumer advises the licensee otherwise) if it is properly addressed to the consumer and sent to that address (including electronic address or fax number), or in the case of a credit guide made available on the website, if the consumer has told the licensee that he or she has accessed the credit guide on the website.

If the regulations are made as proposed, licensees will need to consider how they will obtain the consent of the consumer for delivery of Disclosure Documents by means other than giving them personally. For credit providers, the opportunity might arise when the consumer makes an application for credit.

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Posted 15th October 2010 by Patrick Dwyer in responsible lending

October 11, 2010

National Consumer Credit Protection Regulations 2010

ComLaw has published a compilation of the National Consumer Credit Protection Regulations 2010 up to 1 October 2010, taking into account amendments since July 2010.

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Posted 11th October 2010 by David Jacobson in legislation

October 6, 2010

Special purpose and securitisation entity exemption

ASIC Class Order [CO 10/907] declares that the starting date for fund raising special purpose entities and securitisation entities to become members of an approved external dispute resolution scheme, in order to take advantage of the exemption from registration and licensing is 1 January 2011.

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Posted 6th October 2010 by David Jacobson in licensing

October 1, 2010

New credit referrer exemption rules commence

New rules excluding certain referrers who provide details of potential borrowers' details to lenders or brokers from the requirement to be licensed or be appointed as credit representatives (providing certain conditions are met) commence on 1 October 2010.

A licensee will not be breaching the prohibition on dealing with unlicensed persons if the conditions set out in Regulations 25(5) and 9AB are satisfied.

Terms of the exemption

  1. The referrer engages in the credit activity on or after 1 October 2010.
  2. The activity is engaged in under an agreement with the provider which specifies the conduct that the referrer can engage in (namely, conduct to which this exemption applies). The agreement can either be in writing or based on an offer made in writing by the provider and accepted by the referrer.
  3. The referrer informs the consumer that the provider is able to provide a particular credit activity or a class of credit activities.
  4. The referrer gives the provider the consumer's name and contact details within 5 business days after informing the consumer.
  5. The referrer gives the provider a short description of the purpose of the credit or consumer lease (if the referrer knows the purpose).
  6. At the same at the time, the referrer discloses to the consumer any benefits, including commission, that the referrer (or an associate of the referrer) may receive in respect of the activity, or that is attributable to the activity.
  7. The referrer is not banned from engaging in the credit activity.
  8. The referrer does not require the consumer to pay a fee to anyone in relation to the referral.
  9. The consumer has consented to the referrer giving the consumer's name to the provider.
  10. The referrer engages in the activity as a matter incidental to the carrying on of a business that is not principally making contact with persons to give their names or other details to another person.
  11. The referrer does not conduct a business as part of which the referrer contacts persons face-to-face from "non standard business premises."
  12. A licensee who engages in a credit activity because of a referral under this exemption must comply with the following (from 1 October 2010):
    1. The licensee must keep, or have access to, a register of its referrers (the referrers register).
    2. The referrers register must include the referrer's name and contact details, the date and means by which the referrer was advised in writing of the way in which the referrer may engage in credit activities under the agreement (a written agreement between the parties, or an offer in writing accepted by the referrer), and the day on which the referrer first engaged in the referral activity.
    3. The licensee must make the register available to ASIC on request.
    4. The licensee may only contact the consumer within 10 business days after receiving the referral.
    5. If the licensee contacts the consumer in person, the licensee must begin the discussion with the consumer (after the licensee has identified itself) by statements to the following effect:
      • ‘I am contacting you because we have been provided with your contact details by [name of referrer]. Can you confirm that you agreed with [name of referrer] to have us contact you?'
      • if a payment of commission or a financial benefit may be given to the referrer - ‘before we continue, I would like to let you know that if you take up any of our products or services, [name of referrer] may receive the following financial benefits [brief description]
      • ‘are you happy to continue this discussion?'.
    6. If the licensee contacts the consumer by letter or email, the licensee must include, at the start of the letter or email, statements to the effect that the licensee is contacting the consumer as a result of being provided with their contact details by the referrer (identifying the referrer by name), and that the referrer may receive a financial benefit or payment.


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Posted 1st October 2010 by David Jacobson in licensing