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January 23, 2012

Case note: Tonto Home Loans v Tavares -liability of lender for fraudulent introducer

There are an increasing number of legal actions relating to enforcement of loans where the conduct of intermediaries (eg brokers, loan originators and managers), who have been interposed between the lender and borrower, is relevant.

In Tonto Home Loans Australia Pty Ltd v Tavares [2011] NSWCA 389 (heard together with FirstMac Ltd v Di Benedetto; FirstMac Ltd v O'Donnell) the Supreme Court of New South Wales Court of Appeal held that although a broker (Streetwise Loans) was not the agent of Tonto Home Loans Australia Pty Ltd in one case and Permanent Trustee Company Ltd, in two other cases, the circumstances in each case lead to the conclusion the loan contracts were unjust under the Contracts Review Act 1980 (NSW). Tavares and Di Benedetto were relieved of all liability under their loans and the O'Donnells were given 75% relief.

UPDATE 22 June 2012: Special leave application to appeal to High Court by Tonto and FirstMac refused with costs

No finding was made of unconscionability.

ASIC intervened in the trial and was a respondent in each appeal.

The 3 cases related to investments in Streetwise Properties by borrowers introduced by Streetwise Loans who were introducers for Tonto Home Loans. Judge Allsop described the matter as one "where a lender uses contracted so-called "mortgage originators" which in turn use their own networks of so-called "sub-introducers" to find and bring forward potential borrowers and one of those sub-introducers engages in deceptive, indeed dishonest, conduct that leads to the borrowers borrowing funds from the lender and providing mortgage securities in return. In each case, the borrowers, after a body of conduct directed towards them involving a mixture of falsehoods and pressure and their own imprudence, entered the borrowing arrangements and provided the funds obtained to a company associated with the sub-introducer, which funds were ultimately lost."

Streetwise's director was subsequently found guilty of fraud.
(more...)

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Posted 23rd January 2012 by David Jacobson in responsible lending

January 16, 2012

CBA changes comparison rates

ASIC has announced that the Commonwealth Bank of Australia (CBA) has agreed to change advertised comparison rates for its Wealth Package loans in response to ASIC concerns the comparison rates used in ads were incorrect and potentially misleading.

ASIC was concerned CBA’s home loan ads promoting its Wealth Package loans did not include the Wealth Package $350 annual fee in the advertised comparison rate.

Section 166 of the National Credit Code and Regulation 100 require the comparison rate to include each fee or charge (if any) payable by the debtor at the time each repayment is made, being a credit fee or charge (other than a government fee, charge or duty) that is ascertainable when the comparison rate is disclosed (whether or not the credit fee or charge is payable if the credit is not provided).

A fee or charge is not ascertainable and need not be included in the calculation if their imposition or amount is dependent on events that may or may not happen.

The Home Loan Key Facts Sheets personalised comparison rate is based on the normal comparison rate calculation except for the loan amount and term nominated by the consumer and any other information required by a lender.

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Posted 16th January 2012 by David Jacobson in legislation

Updated NCCP Act and Regulations

Comlaw has published an updated National Credit Act and Regulations (as at 1 January 2012).

The National Consumer Credit Protection Act 2009 incorporates the home loan key facts sheet provisions of the National Consumer Credit Protection Amendment (Home Loans and Credit Cards) Act 2011 but not the credit card provisions.

The National Consumer Credit Protection Regulations 2010 includes the National Consumer Credit Protection Amendment Regulations 2011 (No. 5) (the home loan key facts sheet regulations) but not the National Consumer Credit Protection Amendment Regulations 2011 (No. 6) (for credit cards).

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Posted 16th January 2012 by David Jacobson in legislation

January 12, 2012

Reminder: Responsible Manager seminars February 2012

Our Responsible Manager seminars will be held in Brisbane, Sydney, Melbourne and Adelaide in February.

Topics have been selected for their relevance for Responsible Managers. It is a practical guide to the most recent changes and topical issues affecting financial services and credit licensees, including latest cases, legislation, regulatory developments and other tips on how to prove compliance to ASIC.

Attendance will count towards CPD points.

More information and to register

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Posted 12th January 2012 by David Jacobson in licensing

January 9, 2012

Price signalling and credit

Compliance with other relevant laws is a core credit licence obligation under Section 47(1)(d) of the NCCP Act.

From 6 June 2012 ADI's which do not comply with the new price signalling laws in the Competition and Consumer Act in relation to their credit activities will not only risk a fine of up to $10 million but also breach their credit licence.

The new laws prohibit anti-competitive price signalling and other information disclosures in activities undertaken by an Authorised Deposit-taking Institution when taking deposits, (otherwise than as part-payment for identified goods or services) and lending money.

The Competition and Consumer Amendment Act (No. 1) 2011 prohibits both the private disclosure of pricing information between competitors and disclosures which take place in the public domain and/or are related to information other than pricing information if they were made with the purpose of substantially lessening competition.

Exemptions include:

•Disclosures in the ordinary course of business (eg advertising)
•Discussions between credit providers and credit service providers and for insolvency purposes

But pricing discussions between competitors in relation to interest rates and fees and charges will be regulated. More

What other laws are relevant to compliance with your credit licence conditions?
• ASIC Act;
• Banking Act;
• AML/CTF Act;
• Privacy Act (credit reporting provisions).

In respect of the Privacy Act, it is worth noting the recent case of Q and Financial Institition [2011] AICmrCN 11 relating to the improper disclosure of a borrower's personal information.

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Posted 9th January 2012 by admin in licensing