It is timely to remind clients of the full scope of the amendments to the National Credit Code and the National Credit Act which will take effect from 1 March 2013.

The structure of this email alert is to provide an overview, with separate links through to other documents that give further details of the changes, depending on which particular area is of concern to you.


Consumer Credit Legislation Amendment (Enhancements) Act 2012 (Cth).

National Consumer Credit Protection Amendment Regulation 2012 (No. 3) (Cth).

National Consumer Credit Protection Amendment Regulation 2012 (No. 4) (Cth).

In this checklist we refer to the:

  • National Credit Act as the NCA.
  • National Credit Code as the NCC.
  • Regulations made under the National Consumer Credit Protection Act 2009 as the Regulations.

Staged Commencement

Some of the provisions of the legislation will take effect from 1 March 2013, while others take effect from 1 July 2013.

Scope of this Checklist

This checklist only covers those changes which take effect on 1 March 2013 and does not include those changes which take effect later. A separate checklist will be issued in due course covering the other changes.

Further Amending Regulations Proposed

On 24 January 2013, Treasury foreshadowed that certain further changes would be made to hardship procedures prior to commencement of the legislation.

In addition, some of the new statutory forms required to be used, in particular those relating to Dishonor of "Direct Debit Authority" and "Notice Before Action" had to be finalised. Importantly, Treasury has indicated that especially in relation to use of new Statutory Forms, transitional arrangements would be needed. In an email to stakeholders from Treasury on Wednesday 13 February 2013 the new forms were released and the position with regard to transitional arrangements was clarified. These matters will be embodied in further regulations to be made, presumably before 1 March 2013. See our commentary under " Changes to hardship polices and procedures".

Structure of this Checklist

We highlight each of the major areas of change and provide a summary of each area and then provide links to separate notes providing further details.


1. Changes to Hardship Policies and Procedures

See our article on Changes to Hardship Polices and Procedures.

2. Change in Procedures Where a Request for Postponement of Enforcement Action is Made.

A request for postponement is made after a section 88 notice has been issued or a demand for payment has been made from a guarantor under section 90 of the NCC.

Not only must a credit provider respond to a request for postponement of enforcement action within the 21 day period, but if the request is declined the credit provider must allow a further period of 14 days before commencing enforcement proceedings and alert the borrower to the borrower's options to refer the matter to External Dispute Resolution.

Refer to section 94 of the NCC.

3. New Remedies for Dishonest Conduct by Credit Service Providers.

Where a person enters into a credit contract, lease or mortgage, but would not have done so had it not been for the unfair or dishonest conduct by the credit service provider, the person now has an option to apply to Court to have the situation remedied.

Refer section 180A of the NCC and section 180A(2) of the NCA in relation to the type of Orders a Court can make if satisfied there has been unfair or dishonest conduct on the part of the credit service provider.

4. Slight Changes made to Responsible Lending Obligations in connection with Loan Assessment Procedures.

A credit provider must not enter into a loan contract unless it has made a credit assessment.

The legislation has been amended to not only prohibit a credit provider from entering into a loan contract before the credit assessment has been conducted, but also prevents the credit provider from making an "unconditional representation the consumer is eligible to have the loan or enter into the lease".

Corresponding changes have been made to the preliminary assessment procedures for lessors.

Refer to the following provisions:

  • Credit providers – sections 128(aa) and 128(ba)
  • Credit assistants – section 151

While we don't regard the changes as significant, a review of procedures and policies in this regard is indicated.

5. Restrictions on Use of the Words "independent", "impartial" and "unbiased"

The words "independent", "impartial" and "unbiased" may only be used by the holder of an Australian Credit Licence where the licensee does not receive any commissions (unless rebated in full), other gifts or benefits from lenders or lessors (subject to conditions), is not subject to any restraint on product offering and is not subject to any conflict of interest.

Note also ASIC's view that the expression "independently owned" and other similar expressions are also subject to the same type of restrictions, because they contain a derivation of the word "independent". See section 160B(1)(d).

Refer section 160B of the NCA.

6. Restriction on Use of Words "financial counsellor" and "financial counseling"

Restrictions are now imposed on use of the abovementioned words or similar words by the holder of an Australian Credit Licence unless the credit activity is part of a financial counseling service, as principal or agent. This is to overcome the practice where the business of selling loans was "dressed up" as providing "financial counseling".

Refer section 160C of the NCA.

7. Prohibition on Giving False or Misleading Information or Documents to Consumer

This is self-evident. Refer to section 160D of the NCA.

8. New Forms and Procedures Dealing with Employee Wage Deductions

Making loan repayments by way of an employee wage deduction is an important tool used by some credit providers to reduce the likelihood of defaults.

Where a credit provider or lessor intends to ask a borrower/lessee?s employer to deduct repayments from wages, the employer must be given a prescribed form signed by the debtor/ lessee.

See the prescribed form at Schedule 10 of the regulations.

Refer section 160E of the NCA and Regulation 28XXE.

There is provision in section 160E(3) for the credit provider/lessor to give a notice to the borrower/ lessee after a default has occurred, but no form has yet been prescribed.

9. Powers of Court Enhanced

Currently a Court is only able to order restitution or a compensation payment in situations where there was no civil penalty. This restriction will be abolished.

Additionally, not only the debtor, but also ASIC may apply to the Court.

Refer sections 124(1) and (2) of the NCC.

10. Provisions Dealing with Fees and Charges in Relation to Third Parties have been Tightened.

Section 32 of the NCC has been amended to make it clear that where a credit provider passes on a fee payable to a third party to the debtor, the credit provider cannot ask the debtor to pay more than the actual fee charged by the third party. The amendments are technical, but are designed to close loop holes. Importantly, if the fee or charge is unascertainable at the time it is passed onto the debtor, but when it becomes known, is less than expected, the credit provider must refund the overpayment to the debtor. See section 32(3) of the NCC.

Generally, refer section 32 of NCC.

11. Technical Charges to Timing in Relation to Statements of Account and Disputed Accounts

See sections 36 and 38 of the NCC. The changes are not significant but may warrant some wording changes to loan contracts.

12. Giving Direct Debit Default Notice - Timing

Now a Direct Debt Default Notice (Form 12) must be given within 14 days, not the 10 business days previously.

Refer section 87(2) of the NCC.

13. Direct Debit Notice – New Form - Loans

A new form has now been finalised for use on all loan contracts entered into from 1 March 2013.

See Form 11A.

Note transitional provisions will apply until 1 June 2013 during which time credit providers may use the existing Form 11 or the new Form 11A.

Note the dispensation given to credit providers to allow them to use the new Form 11A on both existing and new loan contracts (subject to possible amendment in relation to monetary limit on hardship applications).

See section on " Hardship Polices and Procedures" for further details.

14. New Statutory Form to Accompany Default Notices

When a debtor defaults under a loan contract the credit provider will normally issue a Notice under section 88 of the NCC informing the debtor that unless the arrears are cured the credit provider intends to take enforcement action and may accelerate the debt.

A Form 12 Notice must accompany the section 88 Notice.

On loan contracts entered into post 1 March 2013 a Form 12A Notice must be used instead of the old Form 12 Notice.

The new Form 12A Notice has now been finalised. See Form 12A.

Transitional provisions will apply. It is proposed that transitional provisions will apply until 1 June 2013 allowing a credit provider to use either the old Form 12 or the new Form 12A during that period. Note however that there are proposals to amend the Form 12 document to delete reference to the fact that EDR procedures do not apply where the amount of credit exceeds $500,000.

See section on " Hardship polices and procedures" for further details.

15. New Lease Default Forms

As part of the enhancement process, default notices are introduced for consumer lease transactions, similar to those used for credit contracts where there is a direct dishonor default or a notice of default under the lease needs to be issued. These will be Forms 18 and 18A respectively. Refer to Form 18 and Form 18A.

16. Micro Lending Reforms

See our article on Micro Lending Reforms.

17. Consumer Leases

See our article on Consumer Leases.

18. Reverse Mortgages

See our article on Reverse Mortgages.

Changes to Hardship Policies and Procedures

The grounds upon which a hardship application may be made have been expanded and the procedures for dealing with a hardship application will now be more formalized, including detailed procedures for situations where further information is required, with more emphasis upon alerting borrowers to the option of External Dispute Resolution.

Refer to the flowchart prepared by National Finance Services Federation kindly used with their permission.

  1. Despite the change it is interesting to see there is still reference to grounds of hardship. Section 72 of the NCC has been amended to expand the grounds upon which a person may apply to a credit provider to have their contract varied on the grounds of hardship. Previously a hardship application could only be made under section 72 if the reason for the inability to meet the obligations under the contract were because of "illness", "unemployment" or "other reasonable cause". Now all the debtor needs do is state that they will be unable to meet their obligations under the credit contract.
  2. $500,000 cap on hardship applications abolished. The $500,000 cap (currently in s72(5) of the NCC) in relation to hardship applications will be removed by the Enhancements Act. That means for loan contracts made from 1 March 2013, a borrower will be able to apply for hardship even if the loan exceeds $500,000.
  3. Additionally, there is now no necessity for a debtor to expect to be able to discharge the loan if the loan if the terms have changed before they can make application for variation to the Credit Contract on the grounds of hardship.
  4. The application for hardship may be made orally or in writing.
  5. If the hardship notice provides sufficient information for the credit provider to make a decision about the request, the decision must be made within 21 days and notice given to the debtor (verbally or in writing).
  6. If the hardship notice given by the debtor does not provide sufficient information for the credit provider to make a decision, then within 21 days the credit provider must request the debtor provide further information. The request for information may be given orally or in writing.
  7. There is an obligation imposed upon a debtor to provide any further information requested within 21 days of the request.
  8. Where the debtor provides the information requested then the credit provider must make a decision on the matter within 21 days of receipt of that further information.
  9. If the debtor does not provide the information then the credit provider must make a decision within 28 days of the date the credit provider requested the further information.
  10. Whatever the outcome of the application, the credit provider must give notice of its decision to the debtor."
  11. If the credit provider does not agree to the change then the credit provider must give notice accordingly and that notice must contain the information set out in section 72(4(b) of the NCC. No form of Notice has yet been prescribed.
  12. If the debtor is not satisfied with the outcome of the application, they can apply to Court for relief or apply to an EDR Scheme.
  13. While a credit provider may issue a default notice after outcome of hardship application, the credit provider can not do so until 14 days after the Refusal Notice is given. Some safeguards are inserted to cover the situation where multiple hardship applications are received designed to delay enforcement. See section 89A of the NCC.

Note that in email to Stakeholders on 13 February 2013 Treasury advised its position on transitional arrangement in the following terms:

Treasury has recently become aware about possible issues arising from the interaction between oral arrangements and the changes to information that can be included on credit reports, including a capacity to list missed payments from the date they are overdue (unlike the current requirements).

In view of these constraints Treasury considers that:

Further consultation is required to ensure any modifications to the hardship requirements do not have any unintended consequences.

As a result it is appropriate to provide transitional relief by regulations from some of the requirements during the period from 1 March 2013 to 1 August 2013, to allow consultation to take place.

Treasury will therefore seek regulations to allow:

Credit providers and lessors to be exempt from the requirement to give notice (oral or written) when they agree to a change, whether under the existing requirements (in current subsection 72(3)) or under the new requirements new paragraph 72(4)(a) for credit providers, and from new paragraph 177B(4)(a) for lessors.

Where the change is a simple arrangement credit providers and lessors are also exempt from the requirement to give written notice under subsection 73(1) and subsection 177C(1).

A simple arrangement is defined as an agreement that defers or reduces the obligations of a consumer for a maximum period of 90 days.

These changes are intended to allow credit providers to continue to apply existing practices after 1 March 2013.

As previously advised Treasury also intends to seek regulations to also allow a transitional period in which credit providers can use the existing Forms 11 and 12. In summary, during the period between 1 March 2013 and 1 June 2013:

Credit providers would be able to use either Form 11 or Form 11A in relation to all credit contracts (whether entered into before or on or after 1 March 2013).

Credit providers would be able to use either Form 12 or Form 12A in relation to all credit contracts (whether entered into before or on or after 1 March 2013).

Micro Lending Reforms

The following provisions only apply in relation to short term credit contracts and small amount credit contracts where the credit provider is not an Authorised Deposit Taking Institution.

16.1 Short Term Credit Contracts (STCC) are Banned

STCC is a contract where the term is 15 days or less and the amount of credit is $2000 or less. Refer to section 5(1) of NCA.

These type of contracts will be banned as from 1 March 2013. However, note that this ban does not apply where the contract is a continuing credit contract, nor does it apply where the credit provider is an Authorised Deposit Taking Institution. Refer sections 124A and 133CA of NCA.

16.2 Restrictions on Small Amount Credit Contracts

Detailed advice needs to be sought by those clients involved in the business of small amount credit contracts. The following parts of this checklist are only intended to give a brief overview.

A Small Amount Credit Contract (SACC) is an unsecured loan contract where the amount of credit is $2000 or less, the loan is unsecured, and the term of the contract is at least 16 days but not longer than one year. Note that if the contract is a continuing credit contract or the credit provider is an Authorised Deposit Taking Institution, then these provisions do not apply and the contract is not an SACC for the purposes of the legislation. Refer section 5 (1) of NCA.

In summary, the new rules that apply to regulate SACC?s are:

16.2.1 Examine Bank Statements for period of 90 days prior to credit assessment as part of the assessment process.

In addition to normal responsible lending obligations a credit provider and credit assistant must obtain and examine 90 days of recent bank statements for all accounts into which income is paid whether those accounts are solely in the name of the debtor or jointly with another person. See sections 117(1A) and 130(1A) of the NCA.

16.2.2 Loan unsuitable where there has been default under another SACC with a 90 day period prior to credit assessment for loan

Where the Consumer is a debtor under another SACC and in default under that contract there is a presumption that to enter into a new contract would be unsuitable for the debtor. See sections 118(3A) and 131(3A) of the NCA.

16.2.3 Restriction on multiple SACC's – Presumption of unsuitability where debtor has had 2 or more SACC's in the 90 day period before conducting a credit assessment for the loan or the making the loan itself.

This is a second presumption. Where, in the 90 day period before the credit assessment is made, or the credit assistance is given or the loan is made, the debtor had two or more other SACC's that the new third contract will be presumed to be "unsuitable".

That does not mean the credit provider cannot enter into the new SACC, merely that the onus is placed upon the credit provider to prove that the debtor will not suffer substantial hardship by entering into the new SACC.

Refer sections 118(3A), 123(3A), 131(3A) and 133(BA) of the NCA.

16.2.4 Protective Earnings Amount – Repayments not to exceed 20% of social security payments where debtor receives more than half their income from that source.

Where a consumer receives at least 50% of their gross income as payments under the Social Security Act 1991 then repayments under the SACC (together with repayments under all other SACCs) must not exceed 20% of the consumer's gross income. See section 133CC of the NCA and Regulation 28S.

It is worth noting that the regulation goes into considerable detail as to how the 20% is to be calculated. Note that there is also a reminder to credit providers that their normal responsible lending obligations still apply. In other words, the 20% figure does not absolve a credit provider from making normal enquiries as part of its credit assessment process.
There is concern about how the 20% figure is to be calculated in practice and representations have been made in this regard.

16.2.5 Warning Signs and Notices at Premises, on website and when contact made by telephone.

Where a credit provider's business involves making SACC, then the credit provider is required to use warning signs and information statements:

  • At their offices (Schedule 7); and
  • On their website (Schedule 9 notice, with Schedule 8).

Refer to the warning signs and information statements as reproduced in the regulation.

There is also an additional requirement to provide a form of wording when communicating with a consumer by telephone. Refer section 124(BA) (credit assistants) and section 124(BA) (credit providers) of the NCA.

Refer regulation 28XXA (premises) and section 28XXB (website).

Refer section 133CB for credit providers and section 124B for credit assistants of the NCA

16.3 Independent Review of operation.

There is an interesting insertion of section 335A of the NCA.

That new section provides that as soon as practicable after 1 July 2015 the Minister must cause an independent review of how the micro lending reforms are working.

ASIC has recently issued a discussion paper suggesting that a database be created to record small account credit contracts written in order to assist in undertaking that review.

See consultation paper 198 –Review of the effectiveness of an online database for small amount lenders.

Note that ASIC is seeking feedback on:

  • Whether it should be mandatory for credit licensees to register all small amount loans in a database and to make an enquiry from the database before entering into a new small amount loan;
  • If such a database is in place, what information should be recorded in it and made available to a small lender on enquiry; and
  • Are there any other regulatory requirements that the database could be used to test proposed loan contracts against.

Comments close on 21 February 2013.

Consumer Leases

The Enhancements Act introduces further provisions dealing with consumer leases, consistent with the approach of government to enhance the regulation of consumer leasing and achieve convergence (where possible) with the requirements of credit contracts.

A summary of the new provisions in relation to consumer leasing illustrates how convergence is occurring.

  • The regulations may permit leases to be made in a way that does not involve a written document (section 173A of the NCC).
  • How consumer lease documents may be altered after signature (section 174A of the NCC).
  • The regulations may prescribe fees and charges that are prohibited in relation to consumer leases (section 175A of the NCC).
  • Overcharging of fees and charges payable to third parties prohibited (section 175B of the NCC).
  • Obligation to give statements of account (section 175C of the NCC).
  • The regulations may prescribe information to be contained in statements of account (section 175D of the NCC). [See Regulation 105A].
  • The lessor is required to give a statement of the amount owing and other matters (section 175E of the NCC). See Regulation 105B for contents for statement.
  • The Court may order that a lessor give a statement of account (section 175F of the NCC).
  • The procedures that are to be followed where a lessee disputes a liability under a lease (section 175G of the NCC).
  • Requirement to give an end of lease statement (not later than 90 days before the end of the lease) (section 175H of the NCC). See Regulation 105C for contents of statement and Regulation 105D.
  • Certain transactions under a lease arrangement are not to be treated as new consumer leases (section 175J of the NCC).
  • How to make changes to the lease by agreement (section 177A of the NCC). See also Regulation 105E for contents of notice of change.
  • Requests can be made for changes to the lease arrangement on the grounds of hardship (sections 177B – 177E of the NCC).
  • The Court has jurisdiction to re-open unjust transactions involving leases (section 177F –177K of the NCC).
  • What happens when a consumer lease is terminated before the goods have been provided (section 178A of the NCC).
  • Obligation imposed upon a lessor to specify a payout figure and requirement to provide information concerning lessee rights upon termination (section 179A of the NCC). See Regulation 105G for details of information required.
  • A Court may determine an amount payable on termination of a lease if the lessor does not provide a statement (section 179B of the NCC).
  • Requirement for a lessor to give a one off notice the first time a direct debit default occurs (section 179C of the NCC). Note exemption from requirement set out at Regulation 105H and Regulation 105J for contents of notice.
  • Requirements to be met before lessor can enforce a consumer lease against defaulting a lessee (section 179D of the NCC).
  • Statutory right for a lessee to remedy defaults before the default notice expires (section 179E of the NCC).
  • Restrictions and right to enforce where hardship notices have been given (section 179F of the NCC).
  • Requirements to be met before a lessor can enforce an acceleration clause (section 179G of the NCC). See also Regulation 105L regarding consents to enter residential property to take possession of goods.
  • Right given to lessee to apply for postponement of enforcement proceedings (sections 179H – 179L of the NCC).
  • Procedures specified where enforcement steps taken by lessor in relation to goods hired under consumer lease (sections 179N – 179Q of the NCC).
  • The lessor may only recover reasonable enforcement expenses (section 179R of the NCC).
  • Creation of a new division dealing with linked lessors and tied consumer leases, similar to the linked credit contract provisions (section 179S – 179T of the NCC).
  • General prohibitions about lessor making false and misleading representations or engaging in harassment (section 179U and 179V of the NCC).
  • Generally making certain other code provisions apply to consumer leases (sections 179W of the NCC).

Reverse Mortgages

Further provisions become operational on 1 March 2013, which complement other provisions dealing with reverse mortgages which came into effect on assent of the Enhancements Act on 18 September 2012.

18.1 Borrower to be Given Projections and Information

Under the amendments the holder of an Australian Credit Licence must, before providing credit assistance or entering into a credit contract for a reverse mortgage, provide projections of the borrower's projected equity in the property. How the licensee does so is to be prescribed by the Regulations. The projections are to be calculated using an ASIC approved website.

The licensee must also:

  • give the borrower a printed copy of the projections;
  • tell the borrower certain things (to be prescribed);
  • give the consumer a reverse mortgage information statement (to be prescribed);
  • display the Information Statement on its website if the licensee has one; and
  • not state, advertise or represent that the licensee is providing a reverse mortgage unless the product offered falls within the definition of reverse mortgage' in the legislation.

See sections 133DA – 133DE of the NCA.

Note also certain consequential amendments to section 179 of the NCA dealing with presumptions in favour of certain orders to be made by a Court.

18.2 Extra Steps Required When Enforcing a Reverse Mortgage Credit Contract

When a default notice is issued under section 88 of the NCC 30 days is allowed to cure the arrears/default. If the arrears/default is not cured within the 30 day period the credit provider may take enforcement proceedings.

Under a normal credit contract all a credit provider is required to do is issue the notice and wait for the time to elapse.

However, where the credit contract involves a reverse mortgage an additional obligation is imposed upon the credit provider, namely to speak to the borrower, a lawyer representing the borrower or a person holding Power of Attorney for the borrower, and

  • confirm the borrower has received the default notice; and
  • inform the person about the consequences of failing to remedy the default.

Reasonable efforts on the credit provider's part to do so are sufficient.

It is envisaged that the contact with the borrower or representative will be after expiry of the default notice.

Similar provisions apply to enforcement of mortgages.

See substitute sections 88(1) and (2) of the NCC.

18.3 Extra Obligations Imposed Upon a Credit Provider before Enforcing a Reverse Mortgage if the Borrower's Liability Exceeds the Value of the Reverse Mortgaged Property.

See also Regulation 84A as to how to determine the market value of a reverse mortgaged property.

18.4 Presumption that Standard Home Loan Unsuitable Where a Reverse Mortgage Product is Available.

The thrust of this new section is that where a borrower, who would otherwise be suitable for a reverse mortgage type of arrangement, is put into a standard credit contract, then if, during the credit assessment period there was a reverse mortgage product available, it is presumed that the standard loan product offered to the borrower will be unsuitable. There is technical wording around this amendment that warrants further consideration.

See section 179(6) and (7) of the NCA.

18.5 Tenancy Protection Provisions in Reverse Mortgages – Provision for a Person other than the Borrower to Occupy the Reverse Mortgaged Property.

Often with older Australian couples, the house will be in only one name, usually the name of the husband. In those circumstances it is important for the wife to have protected tenancy rights.

Where the credit contract for a reverse mortgage makes provision for another person to also occupy the reverse mortgaged property, then the contract provisions must allow for the borrower to give a nomination to the credit provider nominating the other occupant as an occupant of the property. If the nomination is made by the borrower, then the other person has the same rights, as against the credit provider, to occupy the property as the borrower has, apart from circumstances in which the borrower dies or vacates the property.

See section 17(15A) of the NCC.

18.6 Warning to be Given to Borrower if Credit Contract for Reverse Mortgage Does Not Contain a "Tenancy Protection Provision".

While it is not mandatory for credit contracts for reverse mortgaged properties to have a protected tenancy provision allowing a person other than the borrower equal rights to reside in the property, the absence of such a provision from the credit contract must be brought to the attention of the borrower.

In the absence of a credit contract containing a tenancy protection provision, the credit provider must tell the borrower in writing in a prescribed form (if any) that the credit contract does not include such a provision. If the credit provider does not so inform the borrower, then the credit provider is prohibited from entering into the credit contract.

See section 18B of the NCC.

18.7 The Regulations May Prescribe that Independent Legal Advice be Given to a Borrower Before Entry into a Credit Contract for a Reverse Mortgage.

This is in any event common practice.

No regulations have been prescribed yet, but there is power for the regulations to specify the form of legal advice.

See section 18C of the NCC.

18.8 Certain Provisions Must Not be Included in Credit Contracts for Reverse Mortgages.

The legislation now prohibits the credit provider from having certain terms in its credit contract for a reverse mortgage which allow it to bring enforcement proceedings based on those terms.

Note that the following terms are not prohibited per se, merely that the credit provider cannot rely on their breach to found an enforcement action.

The following are the provisions which will offend against the legislation. Where the debtor fails:

  • to inform the credit provider that another person is living in the property;
  • to give evidence as to who is living in the property;
  • to remain in occupation of the property while it is the borrower's principal place of residence;
  • to pay rates and taxes within three years of their due date;
  • to comply with a provision of the credit contract if the provision is confusing or unclear.

In addition, default clauses in credit contracts for reverse mortgages are out. Note other provisions may be prescribed by the regulations.

See section 18A of NCC.

18.9 Changes to Tenancy Protection in Credit Contracts for Reverse Mortgages Which Remove Borrower's Right to Nominate Another Occupant are Prohibited.

Refer section 67A of NCC.

18.10 A Credit Provider that Receives More than the Adjusted Market Value of a Reverse Mortgaged Property either from the Borrower or by way of Proceeds on Sale of that Property, Must Refund the Balance to the Borrower.

Adjusted market value is calculated in accordance with the regulations (yet to be prescribed).

Refer section 86A – 86F of the NCC.

18.11 Extra Requirements Imposed for Enforcing Reverse Mortgage if Borrower's Liability Exceeds the Value of the Reverse Mortgaged Property.

Basically a credit provider is only able to recover more than the adjusted value of the property from a borrower in circumstances where the borrower engaged in fraud, or made a misrepresentation relating to the reverse mortgage before, at or after the credit contract was entered into, or circumstances prescribed by the regulations exist (none prescribed yet).

Where a credit provider attempts to claim the excess from a borrower, then the credit provider needs to give a copy of the default notice to the borrowers lawyer as well as to the borrower.

Refer section 93A of the NCC.

18.12 Credit Provider to Keep Records of Nominations of Persons Entitled to Occupy Reverse Mortgaged Properties.

Refer to section 185A of the NCC.

Note that regulations may be prescribed as to the form of record keeping (none prescribed yet).

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.