Chris Green, ASIC: Key issues report

Presentation to

Annual Credit Law

Conference

Chris Green

October 2013

Credit licensing

June 2011 September 2013

Australian credit

licenses

6,081 5,850

(3,941 key person

condition)

Credit

representatives

24,005 29,274

2

Geographic demographics of

licensees (Sept 2013)

3

1343

2192

1136

307

750

58 43 15 3 0

500

1000

1500

2000

2500

Geographic demographics of

credit reps (Sept 2013)

4

02000400060008000

100007252

8590

5927

1739 2622

338 304 165 2337

Credit licensing – entity type

5

4875

11

132

19

827

Company

Body Corporate

Partnership

Trustee of MultiTrusts

Natural Person

Credit licensees – industry

type

6

0

1000

2000

3000

4000

Agg

regato

r

Assig

nee o

f D

ebts

Bank

Cre

dit U

nio

n/…

Fin

an

ce

Bro

ke

r

Fin

an

cia

l…

LM

I

Lessor

Mort

gage B

roker

Mort

gage M

anager

Oth

er

Lender

Pro

p D

ev/ R

eal…

Responsib

le e

ntity

of…

Securitisation M

anager

Selle

r of good b

y…

Selle

r-re

al pro

p b

y…

Oth

er

135 60 37 104

3231

388 12 173

3673

475 680 99 46 40 112 101 334

Credit licensees – type of

credit

7

0500

10001500200025003000350040004500

Credit licensing – amount of

credit

8

0.00%20.00%40.00%60.00%80.00%

100.00%94.17%

3.17% 1.38% 0.49% 0.20% 0.07% 0.03% 0.48%

Credit licensing –

authorisations

9

724

4605

521

Provide Credit

Other thanCreditProvider/Lessor

All

Thematic Reviews

• Thematic reviews are used as part of our

risk-based surveillance approach

– enables ASIC to gain a broad

understanding of industry practices;

– opportunity to provide some guidance;

– enforcement action is more likely if

guidance is ignored.

10

Consumer Credit Insurance

• Consumer claims handling

experiences

• Key findings

• Consumers who are well informed at

purchase have a better experience in

claims handling

• Process is stressful and costly for

consumers already going through a

difficult time

• Significant room for improvement

11

Responsible lending

• Credit assistance providers,

focusing on ‘low doc’ home loans

(Report 262)

• Mortgage brokers were aware of their

obligations and taking steps to comply

• improvements needed particularly in

recording steps taken to assess

suitability

12

Responsible lending

• Aggregators - focusing on supervision of

representatives (Report 330)

• Improvements in practices have been

made

• Some concerns about how licensees with

a large number of representatives are:

• identifying instances of credit assistance

• accessing records

• reviewing compliance

13

Responsible Lending

• Debt consolidation (Report 358)

– Record keeping

– Aims and objectives of consumers

– Risks and costs of debt consolidation

• Micro – Lending (Report 264)

14

Responsible lending

• Current work

• Credit providers - responsible lending

obligations on loans that are promoted as low

doc

• Small amount credit contract providers

– presumptions of unsuitability

– bank statements

– protected income

15

Current regulatory focus

• Advertising

• Annual Compliance Certificates

• Reviews and consultation

• Fraudulent loan applications

• Avoidance

• Responsible lending

16

Advertising

• ASIC re-issued RG 234 - Advertising

financial products and advice services:

Good practice guidance

– Principles based with examples

– Will assist in steering you away from grey

areas

• Why is advertising important?

• Enhanced powers

– Infringement notices – misleading

representations, Code breaches

– Public warning notices

17

Advertising (contd)

• ASIC’s approach – Proactive

– Transparent

– Important to hold entities responsible for an advertisement to account

• General principles – No intention to mislead required

– Overall impression created when viewing the advertisement for the first time

– Qualifications must be clear and prominent assessed against the strength and prominence of the headline claim

– A misleading impression cannot be cured

18

Annual Compliance

Certificates

• Purpose of the ACC and our reviews

• Surveillance – sample across Australia,

large and small licensees

• Focus:

– Adequate resources

– Supervision of representatives

– Arrangements to comply with credit

legislation – eg responsible lending or

code requirements

19

Reviews and consultation

• Joint review with ACCC of the

Debt Collection Guidelines (RG

96)

• EDR - review of RG 139 post-

commencement access to EDR

• Hardship – Enhancement Act

20

Enforcement & compliance

outcomes

• To 1 July 2013:

– 24 administrative outcomes

(licence cancellations,

suspensions and bannings)

– 2 criminal

– 5 civil

– 5 Enforceable undertakings

21

Enforcement & compliance

outcomes

• Tyre and rim insurance

• Infringement notices

• Responsible lending

– consumer leasing

• Avoidance

• Fraudulent loan applications

22

Looking forward

• Advertising

• Motor vehicle finance

• Credit cards and responsible lending

• Licensee’s supervision of representatives

• Implementing recent regulatory reforms

• Unconscionable conduct and breaches of

responsible lending in vulnerable

communities

23

Questions

?

24