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August 28, 2012

ASIC to identify unlicensed credit providers

ASIC announced that it will conduct a surveillance campaign between September and December 2012 designed to identify entities engaging in consumer credit activities without a licence.

The campaign is designed to identify businesses which applied for an Australian credit licence, but withdrew their application, or had it refused.

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Posted 28th August 2012 by David Jacobson in licensing

August 21, 2012

Credit card key fact sheet transitional regulation

The National Consumer Credit Protection Amendment Regulation 2012 (No. 2) was registered on 20 August 2012.

This regulation amends the National Consumer Credit Protection Regulations 2010 to provide a transitional arrangement in relation to credit card application forms which credit card providers have provided to consumers before the commencement of the requirement on 1 July 2012 that such application forms include a credit card Key Fact Sheet.

The amendment to the Principal Regulations allows Australian credit licensees who are credit card providers to accept credit card application forms they have provided to consumers prior to 1 July 2012 which did not include a credit card Key Fact Sheet (KFS).

It also covers the circumstance where the application was accepted and the consumer received the credit card before 1 July 2012 but does not use it until after 1 July (i.e. the contract is entered into with the consumer’s first use of the card).

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Posted 21st August 2012 by David Jacobson in legislation

August 20, 2012

Consumer Credit Legislation Amendment (Enhancements) Bill 2012 passed

The Consumer Credit Legislation Amendment (Enhancements) Bill 2012 has been passed by both Houses of Parliament and is awaiting Royal Assent.

The provisions will commence as follows:

•The provisions relating to hardship, unfair or dishonest conduct of credit providers, representations about unsuitability assessments, new provisions for giving authorisation for deductions by employers of debtors and other “enhancements” will commence on 1 March 2013.
•The provisions relating to reverse mortgages will mainly commence on 1 March 2013.
•The provisions relating to short-term and small amount credit contracts will commence on 1 March 2013.
•The provisions relating to caps on costs and interest rates on other contracts will still commence on 1 July 2013.
•The provisions relating to consumer leases will commence on 1 March 2013.
•The provisions relating to lay-by agreements will commence on a date to be fixed, nolater than 12 months after Royal Assent.

See also

Short-term credit contracts

Draft credit enhancement regulations: small amounts and consumer leases

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Posted 20th August 2012 by David Jacobson in legislation

GE Money changes unclear advertising: use of “from”

ASIC has announced that GE Money has changed its online advertising of personal loans and debt consolidation following ASIC concerns that the advertising was potentially misleading.

The advertisements stated that consumers could borrow 'from $3,000' with an interest rate 'from 13.99% p.a.' However, the fine print disclosed that only loans over $20,000 were eligible for an interest rate starting from 13.99% p.a. For loans of $3,000, interest rates started at 15.79%, and could be much higher.

ASIC was concerned that the advertising was potentially misleading because the claim in the body of the advertisement created the impression that an interest rate of 13.99% was potentially available on a $3,000 personal loan. ASIC's view was that the disclosure in the fine print was insufficiently prominent to qualify that impression.

ASIC recently issued Consultation Paper 178 Advertising credit products and credit services: Additional good practice guidance (CP 178).

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Posted 20th August 2012 by David Jacobson in legislation, responsible lending

ASIC acts on payday loan advertising: failure to disclose interest rates

ASIC has announced that Cash Today Pty Ltd has changed the advertising of its low value short-term loans on its website following ASIC concerns about its failure to disclose interest rates appropriately.

Cash Today’s website advertised the regular repayment amounts on loans, in some cases without disclosing what interest rate would apply. In other cases, while rates were disclosed, they were not expressed as annual percentage rates, as required by Section 150 of the National Credit Code.

If an interest rate is disclosed, then a comparison rate is also required.

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Posted 20th August 2012 by David Jacobson in legislation, responsible lending

Updated NCCP Act published

Comlaw has published a consolidated National Consumer Credit Protection Act 2009 up to 1 July 2012 including the amendments made by the National Consumer Credit Protection Amendment (Home Loans and Credit Cards) Act 2011

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Posted 20th August 2012 by David Jacobson in legislation

August 12, 2012

Regulatory reporting of loans where hardship concessions are granted

The Australian Prudential Regulation Authority (APRA) has issued guidance to all authorised-deposit taking institutions on the appropriate regulatory reporting methodology for loans where hardship concessions have been granted.

Whilst APRA acknowledges ADI's grant hardship variations to credit contracts for borrowers experiencing temporary financial difficulty, such as a reduction in the interest rate or payment, lengthening of loan maturity, or full or partial deferral (capitalisation) of interest for a temporary period, APRA has reminded ADIs of the appropriate regulatory reporting treatment and the supporting APRA statistical returns for consumer loans (residential mortgages, credit cards and other personal loans) that are granted hardship concessions.

APRA also expects ADIs to monitor trends in requests for, and approvals of, hardship concessions and to conduct regular assessment of the default and loss characteristics of these loans.

APRA expects ADIs to monitor key metrics such as: number, dollar amount and reasons for new requests for hardship concessions, by product type; number, dollar amount and types of new and outstanding hardship concessions granted; and cure rates, provisions and ultimate loss rates on hardship concession loans.

ADIs are expected to adopt loan-loss provisioning methodologies for loans granted hardship concessions that recognise the higher risk status of these loans and the increased likelihood that they may result in losses for the ADI.

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Posted 12th August 2012 by David Jacobson in legislation, responsible lending

August 10, 2012

Draft credit enhancement regulations: small amounts and consumer leases

Treasury has released two sets of draft Regulations supporting the operation of the Consumer Credit Legislation Amendment (Enhancements) Bill 2012, Small Amount Lending and Consumer Leases.

Treasury has also provided a brief commentary on the small amount lending regulations together with a series of specific questions for stakeholders.

In relation to small amount credit contracts and the proposed caps on costs the provisions include regulations specifying:

  • requirements for a warning sign for licensees’ premises and websites;
  • the circumstances in which credit providers can continue to seek payments through a direct debit request (where they have not received payment as a result of the request);
  • a proposed ‘Protected Income Amount’ where the borrower is Centrelink-dependent; and
  • requirements to address potential avoidance of the caps on costs.

With consumer leases, the proposed regulations provide for:

  • a range of disclosure requirements relating to consumer leases for the hiring of goods including annual statements; and
  • a form to be signed where lessors seek the consent of a lessee to enter their residence to take possession of goods.

The Consumer Credit Legislation Amendment (Enhancements) Bill 2012 has passed the House of Representatives and is scheduled to be debated in the Senate in the Spring 2012 sittings.

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Posted 10th August 2012 by David Jacobson in legislation

Final Reminder: Responsible Managers Seminars

Our next Responsible Manager seminars will be held later this month.

The seminars will specifically discuss advertising issues, preparing for an ASIC compliance audit, the proposed enhancements and the credit card changes.

Key Information
* Cost: $385 (incl GST) per person
* CPD points: 3 points
* Time: 9am – 12:30 noon (registration 8:30am)
* Location: Brisbane, Sydney, Melbourne, Adelaide
* Designed for: Responsible Managers who wish to stay up to date with all the relevant finance industry regulatory news

When and where
Brisbane: Tuesday 21 August 2012
Sydney: Wednesday 22 August 2012
Melbourne: Tuesday 28 August 2012
Adelaide: Wednesday 29 August 2012

Register online now
Brisbane
Sydney
Melbourne
Adelaide

For more information contact David Jacobson.

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Posted 10th August 2012 by David Jacobson in seminar

August 3, 2012

Obligations of licensees to act honestly and fairly

ASIC has explained the reasons for its recent decision to cancel both the Australian financial services (AFS) licence and Australian credit licence of Morrison Carr Financial Services and permanently ban the sole director of Morrison Carr, Mr Dennis Cardakaris from providing financial services and engaging in credit activities.

The decision to cancel Morrison Carr’s licenses and permanently ban Mr Cardakaris followed a surveillance of the business commencing in October 2011.

ASIC was concerned Mr Cardakaris was not of good fame and character given evidence he provided false information to its insurer and took steps to avoid client claims.

Specifically, ASIC said it took this action on the grounds that:

  • Morrison Carr did not have in place adequate compensation arrangements;
  • Mr Cardakaris was not of good fame and character or a fit and proper person to engage in credit activities in that he provided false information in relation to an application for professional indemnity insurance and arranged for the transfer of business from a previous AFS licence, Morrison Carr Australia and in doing so, affected the ability of claimants of the previous licensee to pursue their claims;
  • ASIC has reason to believe that Mr Cardakaris will not comply with financial services laws; and
  • Mr Cardakaris has been involved in the contravention of credit legislation and ASIC has reason to believe that he is likely to contravene credit legislation.

Mr Cardakaris has the right to seek a review in the AAT of ASIC’s decision to permanently ban him from providing financial services and engaging in credit activities.

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Posted 3rd August 2012 by David Jacobson in licensing