Australia: National Consumer Credit Protection Act Passed!

The Senate passed the National Consumer Credit Protection Act and a number of associated Bills on Monday 26 October 2009. Industry now has sufficient certainty to start planning with confidence for the staged implementation.

Key information

For the timetable for implementation, click here.

Don't panic (thanks Douglas Adams)

There is still plenty of time to get organised to ensure full compliance. The MFAA and ASIC will be providing significant support material to assist businesses to register and subsequently obtain licenses.

In addition, the Gadens Lawyers' NCCP Compliance Manual Program will provide support to lenders and larger broking groups who face greater compliance challenges.

Hints

• take care to ensure you identify each legal entity which undertakes credit activities (ie lending, broking, or other credit activities). Registration is free, so err on the side of registering too many entities (but you will need the entity to be a member of an external dispute resolution (EDR) scheme). Remember, if you fail to register by 30 June 2010, the business will be unable to undertake credit activities until it is licensed
• the prohibition on making unsuitable loans applies to all brokers (including mortgage managers) from 1 July 2010. However, lenders who are Authorised Deposit-taking Institutions (ADIs) or registered finance companies (RFCs) (i.e. companies registered under the Financial Sector (Collection of Data) Act) have until 1 January 2011 before these provisions apply. The MFAA and Gadens are working to seek an exemption to postpone the start date for large non‑bank lenders until 1 January 2011 so that there is a level playing field with ADIs. If you think you are affected, contact us now
• many non-bank lenders have overlooked registering under the Financial Sector (Collection of Data) Act. To find out more details click here. APRA has indicated that non-bank lenders who have overlooked registration should be able to register without penalty so long as they act promptly. You should contact us to arrange registration
• a key issue being debated in the broking world is whether brokers will be individually licensed or be the credit representatives of an aggregator or large broking business. There is no need to make an immediate decision. All individual businesses should register in order to keep your options open when making your final decision. One factor to consider in making this decision is that if an aggregator appoints a credit representative, the aggregator's Credit Guide will need to be handed over, and this will probably require disclosure of commission at the aggregator level
• the NCCP provisions regarding credit guides (documents which will take the place of finance broking contracts) don't commence until 1 January 2011. It is likely that those States that require FBCs (NSW, ACT, Victoria and WA) will continue that requirement until the NCCP provisions commence
• the National Credit Code (NCC), which replaces the UCCC, commences on 1 July 2010. The key changes are that loans to purchase residential real estate investments or to refinance those loans will be regulated, and there some changes to default notices increasing the involvement of EDR schemes.

What are my initial obligations as a registered person?

In order to be registered you need to be a member of an EDR scheme. The requirements are to:

• conduct business efficiently, honestly, and fairly
• comply with any conditions imposed on the registration
• comply with all credit legislation
• take reasonable steps to ensure its representatives (this includes employees as well as credit representatives) comply with all credit legislation
• ensure clients are not disadvantaged by any conflict of interest of the person or its representatives
• comply with any other obligations prescribed by the regulations (none yet).

For more information, please contact:

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.