28 Apr 2009
Draft National Consumer Credit reforms released
by Steven Klimt, Narelle Smythe, Randal Dennings
Senator the Hon Nick Sherry, Minister for Superannuation and Corporate Law has released the draft National Consumer Credit Reform legislative package for public exposure.
As foreshadowed in the Consumer Credit Implementation Plan endorsed by COAG in October 2008, this first phase will see the:
- enactment of the Uniform Consumer Credit Code (UCCC) as Commonwealth law
- introduction of a national licensing regime covering all credit providers and brokers and intermediaries, through issuance of Australian Credit Licenses (ACLs)
- introduction of a two-step process to licensing the consumer credit industry which will involve ACL holders having to observe a number of general conduct and competency requirements
- Australian Securities and Investments Commission (ASIC) gaining enhanced powers as regulator of the national regime
- extension of specific responsible lending requirement to protect consumers from being offered loans that are clearly unsuitable for them or they cannot afford to repay; and
- extension of the scope of credit contracts covered by the UCCC to contracts where the credit is provided to purchase, renovate or improve the value of a residential investment property.
At first glance, a key issue will be the broad scope of persons intended to be captured within the licensing regime as engaging in a credit activity. These include intermediaries and situations such as:
- finance brokers where, after recommending a particular credit contract, they proceed to arrange the credit with the credit provider
- aggregators, in acting as a conduit between an individual broker and a credit provider
- mortgage managers, where they are involved in arranging the credit (in addition to managing the credit once it has been provided); and
- persons who refer the consumer to another person, where this is done for the purpose of securing credit (including where the referrer does not need to be contemplating a particular credit contract with a particular credit provider or a particular lease with a particular lessor).
Given this definition, the proposed licensing regime is likely to require caution on those persons who are casually involved in the credit industry.
It is also notable for industry that the Bill contemplates that credit service providers will be required to have membership of an ASIC approved EDR Scheme in order to obtain a licence to provide credit or credit services.
The closing date for submissions on this exposure draft is close of business on Friday, 22 May 2009.
Our more detailed analysis of the draft legislative package will follow shortly.