Upcoming Mallesons seminarsCredit providers, lessors and any person that performs the obligations or exercises the rights of a credit provider or lessor (including debt collectors and assignees). Any person that provides credit assistance or acts as an intermediary between a credit provider or lessor and a consumer (including finance brokers and retailers that offer third party in-store finance).
What do you need to do?Consider how the draft legislation will impact your business and whether to make a submission by Friday 22 May 2009.
Kate Jackson-Maynes
Senior Associate
Katherine Forrest
Partner
T +61 3 9643 4129
Ros Grady
Partner
Release of National Consumer Credit Protection Bill 2009 - 30 April 2009- submissions due in four weeks
A public exposure draft of the National Consumer Credit Protection Bill 2009 was released on 27 April 2009. The Bill implements phase 1 of the Government’s Action Plan for single, standard, national regulation of consumer credit. The Bill will have a significant impact on any person involved in the origination, management and enforcement of both consumer credit and credit provided to purchase, renovate or improve residential property for investment purposes. The key features of the Bill include the establishment of a national licensing regime and the creation of responsible lending obligations. Submissions on the Bill are due by Friday, 22 May 2009.
Key features of the Bill
The Bill will have a significant impact on any person involved in the origination, management and enforcement of consumer credit.
The key features of the Bill are:
The establishment of a national Australian credit licence regime
An Australian credit licence must be held by any person that engages in any (very broadly defined) credit activity including:
- providers of Consumer Credit Code regulated credit or leases and any person that performs the obligations or exercises the rights of a credit provider or lessor (including debt collectors and assignees)
- mortgagees under Consumer Credit Code regulated mortgages and any person that performs the obligations or exercises the rights of a mortgagee
- beneficiaries under Consumer Credit Code regulated guarantees and any person that performs the obligations or exercises the rights of a beneficiary, and
- any person that provides credit assistance or acts as an intermediary between a credit provider or lessor and a consumer (including finance brokers and retailers that offer third party in-store finance).
Holders of an Australian credit licence will be subject to a broad range of general obligations (similar to the obligations imposed on an Australian financial services licensee) including obligations to:
- do all things necessary to ensure that credit activities are engaged in efficiently, honesty and fairly;
- have in place adequate arrangements to ensure clients of the licensee are not disadvantaged by any conflict of interest that might arise wholly or partly in relation to credit activities engaged in by the licensee
- ensure that representatives are adequately trained and are competent, and
- report significant breaches of the licensee’s obligations to ASIC.
There is no relief from these general obligations for existing Australian financial services licensees.
The creation of responsible lending obligations
Generally, the responsible lending obligations apply if an Australian credit licensee (or its representatives):
- suggest that a consumer apply for, or assist a consumer to apply for, credit under a particular credit contract with a particular credit provider
- enter into a credit contract with a consumer, or
- increase the credit limit under a credit contract or suggests that a consumer apply for, or assisting a consumer to apply for, an increase to the credit limit under a particular credit contract with a particular credit provider.
The key features of the responsible lending obligation include obligations to:
- provide a credit guide containing information about the licensee and its obligations
- give a binding quote (if the licensee is providing credit assistance), and
- assess whether the credit contract is unsuitable for the consumer. A credit contract is unsuitable if it is likely that the consumer will be unable to comply with their financial obligations under the contract, or could only comply with substantial hardship or the contract does not meet the consumer’s requirements or objectives (or in other prescribed circumstances).
The extension of the Consumer Credit Code to investment credit and increase in hardship thresholds
The Bill incorporates the existing Consumer Credit Code into the new Act with a number of amendments.
The most significant of these are:
- the extension of the Consumer Credit Code to credit provided wholly or predominantly to purchase, renovate or improve residential property for investment purposes; and
- increased thresholds under which consumers can request a change to certain terms of their credit contract on the grounds of hardship. The hardship provisions now apply if the maximum amount of credit provided under the credit contract is under $500,000.
The appointment of ASIC as the sole regulator with enhanced enforcement powers
Transitional provisions
The National Consumer Credit Protection (Transitional and Consequential Provisions) Bill 2009 proposes a two-stage transition process of registration followed by a licence:
What next?
Comments in response to the Bill are sought by Friday, 22 May 2009. We can assist you in considering the impact of the Bill on your business and in preparing your submissions in response to the draft legislation. We have extensive experience in this area.
Click here to view the draft of the National Consumer Credit Protection Bill 2009.
Click here to view the Government’s Action Plan for single, standard, national regulation of consumer credit announced on 2 October 2008.
Click here to read our client alert from 3 October 2008.