Following a period of public consultation, the Bills which make up the Federal Government's National Consumer Credit Protection Reform Package (the Bills) were introduced into the House of Representatives in June this year by the Minister for Financial Services, Superannuation and Corporate Law, Chris Bowen.
Exposure drafts of National Consumer Credit Protection Reform regulations were released by the Government this month and ASIC has recently issued a number of Consultation Papers concerning the detailed obligations of Australian Credit Licensees.
The Bills have undergone some significant change since the Government released its exposure draft of the National Consumer Credit Protection Bill earlier this year and some of the key changes are discussed below.
While the Bills have been introduced into Parliament, public consultation in relation to the regime continues, with exposure drafts of National Consumer Credit Protection Reform regulations being released on 14 August and ASIC issuing a number of Consultation Papers concerning the detailed obligations of Australian Credit Licensees.
The Bills are intended to be operational by 1 November this year and will introduce:
- a national consumer credit code (Credit Code) to replace the existing State based Uniform Consumer Credit Codes
- a national consumer credit licensing regime (Licensing Regime) for credit providers (eg lenders) and credit service providers (eg finance brokers, advisers and other intermediaries).
We have previously provided a Legal Update in relation to the Licensing Regime.
Changes to the Licensing Regime following the consultation period
Some of the key changes to the Licensing Regime since the Government released its exposure draft of the National Consumer Credit Protection Bill earlier this year are as follows:
- Responsible Lending Obligations, which require an assessment of whether a credit contract is "unsuitable" for a consumer before credit or credit services are provided, will be introduced on a staggered timetable. The Responsible Lending Obligations will commence:
- on 1 January 2010 for finance brokers, and lenders who are not ADIs or Registered Finance Companies
- on 1 January 2011 for ADIs and Registered Finance Companies.
This move recognises the greater compliance burden faced by large lenders and may also have been motivated by a perception that small lenders and finance brokers present relatively greater risks to consumers.
- Retailers who provide credit assistance services (eg by suggesting that a consumer obtain credit to fund a purchase or assisting them to do so) at the point of sale, through an arrangement with a lender, will be exempt from the requirement to be licensed and from complying with the Responsible Lending Obligations.
This exemption, which is contained in the recently released draft regulations, comes in the wake of numerous submissions from retailers of electrical goods, car dealers and other retailers. The Government has said that it will review this exemption in 12 months.
- In relation to the Responsible Lending Obligations, a credit contract will be presumed to be "unsuitable" if the consumer would only be likely to be able to meet the repayment obligations by selling their principal place of residence.
The Government is seeking submissions on the recently released draft regulations by 9 September this year.
In addition to providing the exemption for certain point of sale retailers (discussed above), the draft regulations deal with a number of more detailed issues around the Licensing Regime. In particular, the regulations:
- provide a 12 month exemption from the Licensing Regime for debt collectors who are licensed under state or territory law
- exclude certain "retailers", such as door to door salespeople, from the point of sale retailer exemption, so that they will be forced to comply with the Licensing Regime
- prescribe the content for various declarations and notices required under the Licensing Regime and the Credit Code.
It is expected that further regulations, dealing with transitional and timing issues, will be released later this month.
ASIC Consultation Papers
In July, ASIC released a number of Consultation Papers in relation to the detailed requirements on licensees under the Licensing Regime.
The Consultation Papers, copies of which are available at ASIC's Consumer Credit website, contain the following key proposals.
|Consultation Paper||Key features||Deadline for submissions|
|110||General conduct obligations for credit licensees||ASIC's guidance on the general conduct obligations on credit licensees will be closely based on those imposed on AFS licensees and will be provided through an updated Regulatory Guide 104 (RG104). RG104 currently only deals with the general conduct obligations on AFS licensees.||Closed|
|111||Compensation and financial resources arrangements for credit licensees||ASIC proposes to allow licensees to "self-assess" whether they have adequate financial resources.||Closed|
|112||Dispute resolution requirements for consumer credit and margin lending||Other than transitional issues, ASIC has proposed that the dispute resolution requirements be closely based on those imposed on AFS licensees.||11 September 2009|
|113||Competence and training for credit licensees||In relation to the competence and training
requirements for licensees, ASIC proposes that licensees be
required to have a number of "key people".
"Key people" will generally be required to have two years of relevant experience and hold:
|26 August 2009|
ASIC intends to release its Regulatory Guides in relation to the Licensing Regime in November 2009.
The 1 January 2010 deadline for registration with ASIC under the Licensing Regime is fast approaching and participants in the consumer credit industry should ensure that they have an appreciation of whether, and if so, how the Credit Code and Licensing Regime will impact their business. Middletons is able assist at any stage in the registration and licensing process.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.