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June 29, 2011

ASIC issues first credit licensing infringement notice

ASIC has signalled its intention to enforce the credit licensing requirements by issuing the first credit infringement notice for unlicensed credit activities.

The infringement notice has a penalty of $27,500 and was issued to a Sydney-based mortgage broker.

ASIC alleges the company continued to advertise it provided credit services on its website, despite being notified by ASIC that continued advertising may be in breach of the National Consumer Credit Protection Act 2009, because it was not registered, authorised or licensed to provide credit services.

Section 29 NCCP Act

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Posted 29th June 2011 by David Jacobson in licensing

June 23, 2011

Exit fees ban to start on 1 July

The Opposition's motions in the Senate to disallow the regulations banning exit fees have not been passed.

Regulation 79A of the National Consumer Credit Protection Amendment Regulations 2011 (No. 2) as amended by the National Consumer Credit Protection Amendment Regulations 2011 (No. 3) sets out the prohibition on exit fees effective from 1 July 2011.

A credit fee or charge is prohibited if:
(a) it is provided for in a credit contract entered into on or after 1 July 2011; and
(b) it is to be paid on or in relation to the termination of the credit contract, whether the liability to make the payment is incurred at that time or at an earlier time; and
(c) any of the amount of credit provided under the credit contract is secured over residential property.

Regulation 79A needs to be read together with Regulation 65C which excludes the application of the Code to credit provided for the purpose of investment in residential property if the credit is not provided for the purpose of investment in a single residence and the total amount if the credit provided, or to be provided, is more than $5,000,000. Otherwise the prohibition on exit fees for credit also applies to credit provided for residential investment property.

The prohibited fees are automatically unlawful. Borrowers do not need to make an application to challenge these fees.

What fees are permitted?
The effect of Regulations 79A(2), (3) and (4) is that the prohibition does not apply to the following exit fees (paid on or in relation to the termination of the credit contract, whether the liability to make the payment is incurred at that time or at an earlier time):

  • a break fee that relates to early repayment of a fixed rate component of the loan and only to the part of the credit provider’s loss arising from the early repayment, that is a result of differences in interest rates, provided the fee is not unconscionable under Section 78(4) of the National Credit Code or sections 12CA, 12CB and 12CC of the ASIC Act;
  • a discharge fee which reimburses the credit provider for the reasonable administrative costs of terminating the credit contract. Administrative costs of terminating a credit contract may include, for example, the cost of calculating the payout figure on termination, the cost of processing the termination, the cost of discharging a related mortgage, and third party costs that arise because of the termination. A cost is a reasonable administrative cost only if it does not exceed a reasonable estimate of the average reasonable administrative cost to the credit provider of terminating that class of credit contract;
  • exit fees in a credit contract that is not secured by residential property;
  • exit fees contained in a credit contract secured by residential property that is excluded by Regulation 65C;
  • exit fees such as deferred administration and establishment fees, early repayment fees, and LMI, transfer cost and valuation recoupment fees contained in credit contracts entered prior to 1 July 2011;
  • credit fees or charges incurred before the termination of a credit contract that is terminated before any credit has been provided under the contract.

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Posted 23rd June 2011 by admin in legislation

June 15, 2011

Key Fact Sheet for home loans to be deferred

In accordance with the recommendations of the Advisory Report of the House of Representatives Standing Committee on Economics, the Government has proposed amendments to the National Consumer Credit Protection Amendment (Home Loans and Credit Cards) Bill 2011 in the House of Representatives which defer commencement of the key facts sheet for standard home loans to 1 January 2012.

The amendments also change the provisions in respect of a borrower exceeding their credit limit by removing the buffer mechanism from the Bill, remove the strict liability offences and deal with pre-commencement consents for credit limit increase invitations. The strict liability offences for home loan websites are also removed.

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Posted 15th June 2011 by David Jacobson in legislation, responsible lending

June 8, 2011

ASIC credit licensing update

ASIC has announced that as at 3 June 2011 it has issued 5,994 Australian Credit Licences and 6,066 draft licences. Transitional credit licensing is now over 99.5% complete and concludes on 30 June 2011.

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Posted 8th June 2011 by David Jacobson in licensing

June 1, 2011

NSW maximum APR cap extended

The NSW Credit (Commonwealth Powers) Amendment (Maximum Annual Percentage Rate) Bill 2011 will, if passed, extend the life of NSW's maximum interest rate cap beyond 1 July 2011 to a date fixed by proclamation following agreement between the States and the Commonwealth on a harmonised approach to maximum rates.

NSW currently has an annual interest rate cap of 48 per cent, inclusive of fees and charges and fees paid to third parties such as brokers.

Currently, Victoria, Queensland and the ACT also impose an interest rate cap on regulated consumer credit. There are no caps in Western Australia, Tamania and South Australia.

In Queensland and the ACT the annual cap of 48% is generally calculated inclusive of interest, fees and charges other than government fees, charges and duties (there are some variations between the states).

In Victoria, a cap of 48% is imposed on unsecured credit regulated by the UCCC, and a cap of 30% imposed on secured credit regulated by the UCCC. The caps are imposed on the interest component alone, and the cap is not inclusive of fees and charges.

Background

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Posted 1st June 2011 by David Jacobson in legislation

ASIC’s credit relief decisions

The latest ASIC report on relief decisions gives an indication of the way ASIC approaches relief applications.

It sets out its refusals to grant relief from:

  • the requirement to hold a credit licence to a lenders’ mortgage insurer, in relation to its recovery activities arising from its lenders’ mortgage insurance (LMI) business.
  • the requirement to hold a credit licence to a service provider of the mortgage industry. The services being provided were typical ‘back office’ activities, under an outsourcing arrangement, with limited customer contact, and no discretion to change information or content.
  • compensation arrangements required in order to progress a credit licence application
  • the requirements for exemption as an entity from being deemed a ‘prescribed unlicensed carried over instrument lender’
  • a request to take a no-action position to allow a legal practice to refer clients to a particular credit provider

ASIC discloses that it took a no action position in relation to an entity that engaged in credit activities while unregistered or unlicensed by referring consumers seeking insurance premium funding to a premium funder via its website.

ASIC granted

  • conditional relief to exempt seven life insurance companies from the responsible lending requirements of the National Credit Act for loans on policies provided to life insurance policy holders.
  • an exclusion under s6(14) of the National Credit Code to premium funders so that premium funding loans that meet certain restrictions are not a provision of credit to which the National Credit Code applies.
  • relief to modify s67 of the National Credit Act to reinstate the authorisation of credit representatives, where authorisation had lapsed due to the operation of reg 25A of the National Consumer Credit Protection Regulations 2010 (National Credit Regulations).

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Posted 1st June 2011 by admin in Uncategorized