Implications of New National Consumer Credit Regime on your business.

Implications of New National Consumer Credit Regime on your business

who needs to apply for an Australian Credit licence?

are there any other options? what needs to be done to apply for an

Australian Credit licence?

Daniels Bengtsson Pty Limited

what industries do you, the participants, represent?


Commonwealth take over of consumer credit replacing State & Territory regimes National Consumer Credit Protection Act , called

the Credit Act

comprehensive licensing regime for all businesses engaged in credit activities

ASIC the single, national regulator


persons engaging in credit activities – initial registration with ASIC subsequent grant of Australian Credit licence

entry standards for registration & licensing registered persons and licensees to meet

ongoing standards of conduct gives ASIC the power to suspend or cancel

a licence or registration, or to ban an individual from engaging in credit activities


main group affected industry participants – detailed under ‘credit

activities’

main impact – those who only conduct business in States or

Territories where there is currently no licensing or registration scheme

costs – one-off - applying for a licence complying with ongoing licence obligations


pre 1 July 2010 credit activities

register between 1 April & 30 June

licence between 1 July & 31 December

post 1 July credit activities licence before you start engaging

in the credit activity


pre 1 July 2010 credit activities

register between 1 April & 30 June

licence between 1 July & 31 December

post 1 July credit activities licence before you start

engaging in the credit activity


a person continuing to engage in credit activities from 1 July 2010 without being registered

X cease engaging in credit activities until the credit provider obtains an ACL

a registered credit provider continuing credit activities from 1 January 2011 without being licensed

X cease engaging in credit activities until the credit provider obtains an ACL


must not carry on credit activities unless – the credit activity is authorised –

in the person’s Australian Credit Licence

in transitional registration before licensing

an individual is – a credit representative of a licensee/registered

person

a director or employee of a licensee/registered person

activity or person exempt under the regs


credit providers under credit contracts performing obligations, or exercising rights,

of a credit provider under a credit contract

providers of consumer leases

performing obligations or exercising rights in respect of credit contracts or mortgages & guarantees in relation to credit contracts


‘credit activities’ involves credit contracts, leases, mortgages and guarantees where the National Credit Code applies to the provision of the credit


debtor a natural person or strata corporation

credit provided wholly or predominantly for personal, domestic or household purposes to purchase, renovate or improve residential

property for investment to refinance credit provided in relation to above


goods are hired wholly or predominantly for personal, domestic or household purposes

a charge is or may be made for the hiring of the goods & the charge, together with any other amount payable under the consumer lease, exceeds the cash price of the goods.


continue to be a credit provider or lessor for as long as you continue to be a party to the contract – collecting money due enforcing contracts

obligation to stay licensed continues for the life of the contract implication for businesses that go into ‘run off’

ie no new lending after 1 July


assignees of credit providers, lessors. mortgagees or beneficiaries of guarantees must be licensed because they – collect money enforce contracts, mortgages or guarantees


persons providing credit service – finance brokers and other intermediaries where

they have a role in securing credit for a consumer

persons who assist consumers in relation to a particular credit contract with a particular credit provider


you suggest that the consumer …

apply for a provision of credit in respect of a particular credit contract with a particular credit

apply for an increase to the credit limit of a particular credit contract with a particular credit provider

remain in their current credit contract or lease


you assist the consumer to …

apply for a provision of credit in respect of a particular credit contract with a particular credit

apply for an increase to the credit limit of a particular credit contract with a particular credit provider


you are providing credit assistance regardless of whether you are dealing directly with the consumer or with the consumer’s agent for example, you are assisting an elderly parent

to apply for a credit contract, but are dealing with their children [Explanatory Memorandum §1.24]


it is enough to suggest - entry into a credit contract or lease applying for a credit limit staying in a particular credit contract

without actually arranging the contract assistance is less than ‘arranging’


regulates every person who may be an intermediary between consumer & credit provider

‘Innovations in credit product design and delivery now mean that a consumer may pass through a number of hands between the first person they deal with and the lender, and may be uncertain as to the roles or functions of all these different parties. It is intended that the licensing requirements will apply to all these persons.’


very wide – does not require conduct in relation to a

particular credit contract or credit provider does not require direct or indirect contact with

the consumer for example, acting as an intermediary by

preparing or passing on information but with the object, wholly or partly, of securing the provision of credit or a lease [Explanatory Memorandum §1.29]


A person will commit an offence where – they hold out that they are authorised they hold out or advertise that they can engage

in credit activities they demand or receive a fee from a consumer

in relation to a credit activity, when they are unlicensed in relation to that credit activity


licensee cannot conduct business with another person who is engaging in a credit activity but not licensed to do so – civil penalty – 2,000

penalty units criminal penalty –

200 penalty units + 2 years imprisonment

essential licensees understand who they are doing business with – what is their status –

licensed or exempt under the regulations


conducting business with 3rd parties –

can you list some of the 3rd parties you deal with when you are engaging in credit activities?


the regulations deal with exemptions in 3 ways - by exempting persons when engaging in certain

credit activities by exempting certain credit activities by exempting activities


Bankruptcy Act 1966 official receiver or trustee, registered debt agreement administrator

receiver, receiver and manager, provisional liquidator, or liquidator

a State or Territory Public Trustee

administrator of a body corporate

deceased’s personal representative

deceased licensee’s personal representative but only for 6 months

a public or local government body or authority, constituted under Commonwealth, State or Territory legislation


State-based registrations under –

the Finance Brokers Control Act 1975 (WA

the Credit (Administration) Act 1984 (WA)

the Consumer Credit (Administration) Act 1996 (ACT)

financial counselling service

body providing benefits to members

charities providing credit services to low income people


lawyers tax agents but note - excluded from exemption

–

activity of tax agent providing a consumer with a certificate or assessment as to whether the consumer can meet their financial obligations under the contract: Reg 24(5)

performers of some statutory obligations – Privacy Act 1988 Anti-Money

Laundering and Counter-Terrorism Financing Act 2006


a related body corporate of a licensee on behalf of that licensee only because its employees and directors are

engaging in credit activities on behalf of the licensee

the credit activities are not - being a credit provider under a credit contract

being in the business of providing consumer credit

being a lessor under a consumer lease

being in the business of providing consumer leases


only when acting for a licensee -

to demand and receive payments from borrowers or guarantors under credit contracts or consumer leases

to enforce rights in relation to taking possession of property secured by a mortgage, or goods hired under a consumer lease

only if – licensed under

State/Territory legislation only if authorised in

writing by a licensee to engage in the activity

only until 10 March 2011


acting for a licensee who is a –

credit provider lessor mortgagee person who is the

beneficiary of a guarantee

the activities are – selling, storing or

transporting property of a debtor, lessor, mortgagor or guarantor

giving or sending statutory notices or documents to a debtor, lessee, mortgagor or guarantor or guarantor


the credit provider a linked credit provider

linked credit provider is a licensee

the consumer enters into the contract wholly or predominantly for the purposes of payment for the goods of services supplied by the supplier

does not apply to land


example – Milo runs a retail business by arrangement with a

licence, brochures inviting consumers to apply for a particular credit card are made available to Milo’s customers

the licensee has prepared the

Milo refers customer’s inquiries to a phone number in the brochure.

Milo’s conduct is exempt if –

consumers are advised of the licensee’s’ licence number

a reasonable person would assume that the licensee (eg Amex, Visa, Mastercard) was the lender in respect of the credit card


example – Milo supplies goods

through a website which advertises a link to a credit cards provider

Milo has specified the form and content of the advertisement

the advertisement includes a statement that inquiries should be addressed to the credit cards provider with contact details

Milo’s conduct is exempt if –

consumers are advised of the licensee’s’ licence number

a reasonable person would assume that the licensee (eg Amex, Visa, Mastercard) was the lender in respect of the credit card


inquirer wants information about –

the cost, or an estimate of the likely cost, of a credit contract or a consumer lease

terms and conditions of a credit contract or a consumer lease

activity exempt if – provider has information

about a number of licensees but gives the inquirer information about only one licensee


the activity is done in the course of work of a kind ordinarily done by clerks or cashiers


the persons acts as an intermediary by giving the consumer contact information about a licensee or their representative

the person must disclose if they may receive a payment or potential financial benefit similar to the FSR ‘clerks & cashiers’ exemption


ASIC must grant licence to a Credit Union licensed credit activities must match as

closely as possible what the Credit Union applied for

ASIC will issue Australian credit licence numbers


commences 1 November 2011

regulations will specify the circumstances when you must cite the Australian credit licence number

will be the same number as a Credit Union’s Australian Financial Services licence number eg Australian Financial Services & Credit Licence

No 1234567


alternative to licensing ensure that your business model is

appropriate ensure that you address the risk of

cancellation of the arrangement by the authorising licensee


SAI Global’s Upcoming Risk Programs

Transitioning to the New Risk Management Standard – AS/NZS ISO 31000:2009 (1 Day)

Introduction to Risk Management – AS/NZS IOS 31000:2009 (1 Day)

Integrated Risk & Compliance Management (2 Days)

Access SAI Global’s Latest Training Calendar

Interactive Electronic Version – visit www.saiglobal.com/training

Request Hard Copy by emailing us at [email protected]

Or Request an in-house quote for training at

your premises, by emailing [email protected] or via the ‘Request a Quote’ link on our website

Further Questions? For any further questions you may have

please email us at [email protected] or call us on 1300 727 444.

Implications of New National Consumer Credit Regime on your business.

Documents

credit activities licence

credit providers

credit representative

credit activities asic

respect of credit contracts

national credit code

credit activities main

strata corporation credit