The National Consumer Credit Protection Reform Package (NCCP Package) was referred to the Senate Economics Legislation Committee on 25 June 2009 for inquiry. The Committee's inquiry report was released on 7 September 2009.
The NCCP Package comprises the National Consumer Credit Protection Bill 2009 (NCCP Bill), the National Consumer Credit Protection (Fees) Bill 2009 and the National Consumer Protection (Transitional and Consequential Provision) Bill 2009.
The inquiry report also referred to the Corporations Legislation Amendment (Financial Services Modernisation) Bill 2009, an independent bill that contains a number of new strategies for regulation of margin lending, trustee corporations and promissory notes.
Under the NCCP Bill, the current state/territory based Uniform Consumer Credit Code will be replaced with the National Consumer Credit Code (NCCC).
Government's proposed timeline for implementing the NCCP Package:
1 Nov 2009
Credit providers and credit assistants to be registered with ASIC
1 Jan to 30 June 2010
Credit providers and credit assistants to be issued with an Australian Credit Licence (ACL)
1 Jan 2010
Main suite of changes – including increased hardship threshold commences for licensees other than banks and Australian finance companies
1 July 2010
Some of the new responsible lending obligations and other improvements commence
1 Jan 2011
Full range of responsible lending obligations commence for all licensees (including banks and Australian finance companies)
Key recommendations made by the Senate Committee include:
- All three bills in the NCCP Package be passed before 1 November 2009
- Initial implementation of reforms to be deferred from 1 January to 1 July 2010
- Responsible lending provisions should still operate from 1 January 2011
- The credit provider of a credit contract with a mortgage over residential property should only be required to re-assess suitability (where the assessment has not taken place within 90 days of the contract being written as required by section 128 of the NCCP Bill) if the credit provider has reason to believe that the situation of the consumer has changed such that the credit contract may no longer be suitable
- The exemption under section 130(3) for credit providers not to re-verify information provided by a broker for suitability be omitted.
The 12 Recommendations By The Senate Committee In Its Inquiry Report Are As Follows:
The Committee recommends that at least the three bills of the NCCP Package be passed, subject to the Committee's recommendations, before 1 November 2009 to facilitate the necessary referrals by state parliaments.
The Committee recommends that implementation of the reforms due to begin on 1 January 2010 be deferred to 1 July 2010 to allow sufficient time for industry to prepare and ensure state parliaments are able to facilitate the necessary referrals. However the responsible lending provisions due to start on 1 January 2011 should still operate from this date.
The Committee recommends that state parliaments ensure their own 'turn off dates' are legislated for so that consumers are not left without protection before the national scheme is in place.
The Committee recommends that ASIC consider a form of streamlined process for holders of an Australian Financial Licence when they apply for an Australian Credit Licence.
The Committee recommends that section 128 of the NCCP Bill be amended so that, where the credit contract involves a mortgage over a residential property, the credit provider should only be required to re-assess the suitability of the credit contract if:
- an assessment has not taken place within 90 days of the contract being written, and
- the credit provider has reason to believe that the situation of the consumer has changed such that the credit contract may no longer be suitable.
The Committee recommends that subsection 130(3) be omitted.
(Subsection 130(3) of the NCCP Bill states that if a preliminary assessment has been made by a credit assistant (such as a mortgage broker) in the preceding 90 days and the credit contract is found to be not unsuitable, the credit provider is not required to verify the consumer's financial situation).
The Committee recommends that the Government undertake further consultation to determine whether the definition of "credit assistance" in section 8 of the NCCP Bill is sufficient to prevent persons benefiting from referring a consumer to a person who engages in credit activity avoiding responsibility under the responsible lending obligations.
The Committee recommends that Part 4-2 of the NCCP Bill be amended to allow consumers to seek remedies and compensation for loss suffered as a result of a contravention of any responsible lending provision, regardless of whether a civil penalty is declared or a breach of a civil penalty is found to have occurred.
The Committee recommends that the Government investigate means to ensure that the national legislation does not inadvertently reduce the current access of any consumer to low-cost tribunals.
The Committee recommends that the increased hardship threshold ($500,000) should apply to all applications for a variation of the terms of a credit contract on the grounds of hardship (made under section 72 of the NCCC) regardless of when the credit contract commenced.
The Committee recommends that, in the event that a hardship application is rejected by a credit provider, the lender be required to provide, in writing, the reason(s) for the rejection.
The Committee recommends that the Corporations Legislation Amendment (Financial Services Modernisation) Bill 2009 be passed.
A copy of the Senate Committee's inquiry report can be accessed from the Senate's website.
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