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July 29, 2011

Credit disclosure documents exemption to be extended again

It is expected that the National Consumer Credit Protection Amendment Regulations 2011 (No. 4) will be made today, extending the exemption from the obligation by a credit licensee or a credit representative to provide credit disclosure documents (credit guide, credit proposal disclosure document and quote for providing credit assistance) in Regulation 28N (5) from 1 August 2011 to 1 October 2011.

The Regulations are also expected to provide further guidance about what must be included in credit guides of credit assistance providers, mortgage managers and product designers and credit representatives (especially commissions, fees and charges) and clarify other disclosure obligations under the National Credit Act.

The scope of exemptions from providing disclosure documents for franchisees, debt collectors and intermediaries will be clarified.

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Posted 29th July 2011 by David Jacobson in legislation

July 22, 2011

Who has credit licenses?

ASIC has announced that by 30 June 2011 it had licensed 6081 businesses.

ASIC has analysed licensees by industry type here: licensees range from property developers and sellers to aggregators to brokers. Mortgage brokers are the biggest category with 4560.

ASIC has a national program to identify unregistered and unlicensed credit activity. As part of this campaign, ASIC reviewed 5000 advertisements in print, online, and on radio and TV, to identify traders who were advertising that they provided credit, but who were not registered, authorised or licensed to do so.

Its current enforcement focus is on responsible lending in the home loan and payday lending markets, consumer leases for white goods and other domestic goods, and debt reduction and consolidation schemes.

Search the ASIC Credit licensee register

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Posted 22nd July 2011 by David Jacobson in licensing

July 18, 2011

When credit licensee responsible managers cannot be indemnified

Compliance with the Australian Securities and Investments Commission Act (ASIC Act) is a core credit licence obligation under Section 47(1)(d) of the NCCP Act.

Not only does non-compliance with the ASIC Act put the credit licence at risk but it exposes responsible managers to liability to pay a pecuniary penalty under section 12GBA of the ASIC Act (the consumer protection offence provisions) and disqualification from managing corporations under section 12GLD, depending on the circumstances.

Section 12GBD of the ASIC Act makes it an offence for a company to indemnify a liability to pay a pecuniary penalty under section 12GBA or legal costs incurred in defending or resisting proceedings in which the person is found to have such a liability, except in relation to misleading or deceptive conduct under Section 12DA.

Any attempt to do so is void (section 12GBD(4) ASIC Act).

This means that a company cannot indemnify its directors and officers (including responsible managers) for pecuniary penalties and legal costs if they are found personally liable for contraventions of the majority of the financial service consumer protection provisions in the ASIC Act, including unconscionable conduct, false or misleading representations, bait advertising, referral selling, harassment and coercion and unsolicited credit cards and debit cards.

Whether any directors' and officers' liability insurance in place for the benefit of directors and officers (including responsible managers) will be effective in these circumstances will depend on the policy wording.

If you are a responsible manager of a credit licensee you should read our article on what to look for in directors' and officers' liability insurance.

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Posted 18th July 2011 by David Jacobson in licensing

July 8, 2011

Updated National Credit Regulations

ComLaw has published a consolidated National Consumer Credit Protection Regulations 2010 (incorporating amendments up to 1 July 2011 including National Consumer Credit Protection Amendment Regulations 2011 (No.2) and National Consumer Credit Protection Amendment Regulations 2011 (No.3)).

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Posted 8th July 2011 by David Jacobson in legislation

July 6, 2011

COSL’s position on staying default judgments

The Credit Ombudsman Service Limited (COSL) has published a Position Statement describing how it deals with complaints when a borrower seeks a stay of the lender’s execution of default judgment orders relating to a loan which is secured by residential property.

While it cannot interfere with or overturn default judgment orders, COSL may determine that execution of the orders may be stayed where the borrower:

(a) can demonstrate that it is likely they can sell the security property themselves within a reasonable time;
(b) can establish that they expect, in the very near future, to be able to refinance the loan which is the subject of the default judgment;
(c) can show that they are suffering from personal (as distinct from financial) hardship1 and need a reasonable time to organise their affairs ; or
(d) has reasonable grounds to apply to have the default judgment set aside altogether, for example:
(i) the orders made in the judgment appear to be irregular, or
(ii) the judgment was obtained in contravention of a legal requirement, or
(iii) there is a substantive defence available to the lender’s claim, and the borrower can show that they will apply to set the default judgment aside, but needs more time to prepare their case.

However, COSL will not order a lender to:
(a) take action which would require the lender to act in any way contrary to an order made by the Court, unless there are reasonable grounds for expecting that the lender could successfully apply to the Court requesting the Court to vary its orders to permit the lender to comply with our order;
(b) suspend the sale of the security property to a third party once the lender has entered into a binding contract for the sale of the property.

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Posted 6th July 2011 by David Jacobson in responsible lending

July 5, 2011

Home Loans and Credit Cards Bill passed

The National Consumer Credit Protection Amendment (Home Loans and Credit Cards) Bill 2011 has been passed, with amendments, by both Houses and is awaiting Royal Assent. [UPDATE: Royal Assent given on 25 July 2011]

The changes will be made by making additional rules that apply to credit licensees that are credit providers under credit card contracts and standard home loans.

The key facts sheet requirement for standard home loans will now commence on 1 January 2012 and the credit card provisions will commence on 1 July 2012.

Credit card changes
The changes will:

•insert new restrictions on a licensee approving the use of a credit card in excess of the credit limit for the credit card contract.
•require credit card providers to allocate repayments to higher interest debts first.
•prohibit a licensee making a credit limit increase invitation unless expressly consented to by the consumer, subject to a transitional provision.
•require a consumer is provided with, or given access to, a Key Facts Sheet before entering into a credit card contract. If a consumer applies to a licensee for a credit card contract under which the licensee would be the credit provider, the licensee must not enter into, or offer to enter into, the contract unless the application is made using an application form that includes a Key Facts Sheet for the contract that contains up-to-date information. But entry by a licensee into a contract without an up-to-date Credit Card Key Facts Sheet having been provided to the borrower will not be a strict liability offence.

Lenders will be permitted to seek and obtain consents from consumers to receive credit limit increase invitations prior to 1 July 2012 so they can rely on those consents for the purpose of making an unsolicited credit limit offer after commencement.

The consumer may withdraw the consent at any time.

A licensee must keep a record of consents the licensee obtains and withdrawals of such consents.

The Bill provides for Regulations to require a licensee who is the credit provider under a credit card contract to notify the consumer who is the debtor under the contract if the licensee becomes aware that the debtor has used a credit card that is linked to the contract to obtain cash, goods or services in excess of the credit limit for the contract.

If a credit card is used to obtain cash, goods or services in excess of the credit limit for the credit card contract, the licensee who is the credit provider under the contract is prohibited from imposing any liability to pay fees or charges, or a higher rate of interest, on the consumer who is the debtor under the contract because the credit limit was exceeded unless:
(a) the licensee has obtained express consent from the consumer covering the imposition of the fees or charges, or the higher rate of interest; and
(b) the consent has not been withdrawn.

Standard Home Loans
A standard home loan of a licensee is a standard form of credit contract under which the licensee provides credit to purchase residential property or to refinance credit that has been provided wholly or predominantly to purchase residential property.

It will be mandatory for standard home loan borrowers to be provided with, or given access to, a Key Facts Sheet whether the application is made on a website or otherwise.

It will not be a strict liability offence if a licensee does not have a website that allows a consumer to generate a Home Loan Key Facts Sheet.

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Posted 5th July 2011 by David Jacobson in legislation