The National Consumer Credit Protection Amendment Regulations 2010 (No. 2) implement and clarify the previously announced exemptions.

The Regulations:

• amend various provisions in the National Consumer Credit Protection Regulations 2010 (the Principal Regulations) including the exemptions from licensing for providers of incidental member benefits, tax agents and lawyers, and the exemption in relation to the refinancing of loans for residential investment property;
• provide an exemption from licensing for persons engaging in credit services at the point of sale in relation to a continuing credit contract under which a branded or co-branded credit card will be provided and amending the exemption in the Principal Regulations for point of sale credit services; and
• implement the regime for regulating people with carried over instruments (COIs).
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Posted 1st June 2010 by David Jacobson in legislation, licensing

Your credit guide and financial services guide (FSG) can be combined into a single document if you have an Australian Financial Services Licence (or you are the authorised representative of such a licensee) and you have to give a credit guide as the holder of an Australian Credit Licence (or as a credit representative of such a licensee).  Any statements or information to be included in the credit guide that are identical to statements or information in the FSG do not have to be repeated.

The regulation permitting the combination of the credit guide and FSG into one document is regulation 7.7.08B under the Corporations Act, which was introduced in the Corporations Amendment Regulations 2010 (No.4) made on 6 May 2010 . The regulation commences on 1 January 2011.

ASIC’s updated Regulatory Guide 165 Licensing: Internal and external dispute resolution released on 7 May 2010 tells you what you need to include in your internal dispute resolution (IDR) arrangements if you’re an Australian Credit Licensee or a credit representative.

Here are some of the key points:

• Your IDR procedures have to fit with some of the definitions and principles in the Australian Standard on complaints (AS ISO 10002 -2006) – the definition of “complaint”, and the guiding principles 5.1 (Commitment), 6.4 (Resources), 8.1 (Collection of information) and 8.2 (Analysis and evaluation of complaints).
• The definition of “complaint” in the Australian Standard is: “An expression of dissatisfaction made to an organisation, related to its products or services, or the complaints handling process itself, where a response or resolution is explicitly or implicitly expected.”
• The National Consumer Credit Protection Act talks about “disputes” rather than “complaints”. Where the Act refers to a dispute, ASIC considers this to have the same meaning as complaint.
• Your IDR procedures must also have a system for informing complainants about the availability and accessibility of your external dispute resolution (EDR) scheme.
• Where the complaint or dispute is resolved to the customer’s satisfaction by the end of the next business day, you don’t have to follow the full IDR process (but ASIC encourages you to do so where possible).
• You should immediately acknowledge receipt of complaints or disputes and address them promptly.
• The final IDR response must be provided within a maximum of 45 days.
• This timeframe does not apply in the case of a dispute about a default notice – instead, a 21 day limit applies here.
• While the default notice dispute is being handled at IDR, and for a reasonable time after that (at least 14 days), you must not commence or continue legal proceedings or any other enforcement action, unless the statute of limitations is about to expire.
• You must have a dedicated telephone number and where possible fax number, postal address and email address to accept and handle hardship applications.
• Disputes involving hardship applications or postponement of enforcement proceedings must be treated as urgent matters.
• Under the National Credit Code a credit provider has 21 days to consider a request for hardship relief or postponement of enforcement proceedings. Once these 21 days are up, the IDR stage ends and the customer should be referred to EDR if the matter has not been resolved. Similarly, if the credit provider reaches agreement with the disputant, under the National Credit Code the credit provider is required to confirm this in writing within 30 days. There is no further time under the IDR process for a dispute about this, and the matter should be referred to EDR if it has not been resolved.
• The right to go to EDR and the EDR’s contact details must be included when the disputant is advised in writing of the outcome of the hardship or postponement request, or when the terms of approved hardship or postponement are confirmed in writing to the customer.
• A disputant may lodge their dispute directly with the EDR where the dispute involves a default notice that has been issued after a request for hardship assistance or postponement of enforcement proceedings has been declined.
• IDR procedures must be documented. This must cover procedures and policies, remedies available and internal structures and reporting requirements.
• If you outsource IDR procedures, you’re still responsible for them.
• While you are registered with ASIC but waiting on your Australian Credit Licence (ACL), your existing IDR procedures will be fine if they comply with the requirements set out in the May 2009 version of RG 165.

If you have an Australian Financial Services Licence (AFSL), your work in complying with your Australian Credit Licence (ACL) should be easier. That’s because the obligations under an AFSL and ACL are very similar – almost word for word – although of course they deal with different products and services.

The attached table shows the similarities.

The conflicts of interest obligation is different. Under your ACL, you must have adequate arrangements to ensure that customers are not disadvantaged by conflicts of interest. Under your AFSL, your obligation is to have adequate arrangements to manage conflicts of interest.

There are other obligations under the Corporations Act for AFSLs and the National Consumer Credit Protection Act for ACLs which are different.

In its regulatory guide RG204: Applying for and varying a credit licence, ASIC says it expects that if you are granted an ACL, you will comply with your obligations by maintaining the same types of arrangements in relation to your credit activities as you use for compliance with your AFSL.

The Minister for Financial Services, Superannuation and Corporate Law, Chris Bowen MP has announced details of the proposed regulatory framework for lenders with pre-existing contracts in force when the National Consumer Credit Protection Act commences on 1 July 2010 (“carried over instruments”).

It is proposed that credit providers and lessors who will have carried over instruments be categorised into two groups:

• credit providers and lessors who only have a closed pool of carried over instruments as at 1 July 2010 and will not offer new credit contracts or consumer leases (COI lenders); and
• credit providers and lessors who will continue to offer new credit contracts after 1 July 2010 alongside their existing carried over instruments.

Lenders who intend to continue lending after 1 July 2010 will have to apply for an Australian credit licence (ACL). That licence and the obligations attaching to it will cover both their old and new loans.

Lenders who will not offer new loans or leases after 1 July 2010 but are still continuing to collect payments due under pre-existing contracts will have the option to apply for a licence. However, if they do not have a licence they will need to meet similar statutory requirements instead so that the Australian Securities and Investments Commission can monitor their conduct and compliance with the law.

COI lenders must make a decision about how they intend the credit legislation to apply to them from 1 July 2010.

Option A: They can elect to apply for an ACL, and the provisions in the National Consumer Credit Protection Act will apply to them unmodified.
Option B: If they elect not to apply for an ACL (or have their ACL cancelled by ASIC or voluntarily surrender it) COI lenders will be automatically subject to the statutory scheme.

In summary, lenders with carried over instruments will need to either:

• Register with ASIC between 1 April and 30 June where they intend to apply for an ACL after 1 July 2010 (for Option A); or
• Notify ASIC by 30 June 2010 of their intention not to offer new contracts after 1 July 2010 and not to become registered or licensed, and therefore be regulated under the statutory scheme (for Option B).

The notification process will require COI lenders to provide basic information to ASIC such as name, ABN, business address, number of loans and estimate of when their last contract will be finalised (based on when payments under the contract when due, without making assumptions about early repayments or extensions), and external dispute resolution scheme membership (if any).

Comments on the proposal may be made until Friday, 9 April 2010.

Regulations to give effect to the arrangements for pre-existing contracts are expected to be made in early May 2010.