National Consumer Credit Protection Act (to April 2010)

National ConsumerCredit Protection Act

Car Dealership Exemption?

(20 April 2010)

For more information, contact Angelo Sirianni on 03 9851 6500 or email [email protected]

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National Consumer Credit Protection Act

Where Dealerships (point-of-sale) currently stand

• Phase 1 of the Act is complete, having passed Australian Parliament and received Royal Assent.

• Within Phase 1, Car Dealerships are exempt (as point-of-sale) from having to:

Register with ASIC; and

Apply for a credit licence; or

Become a representative of a credit licensee.


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• “Phase 2” is now underway.

• Government will review various aspects of the regulations.

• On The Treasury’s agenda is consideration of the point-of-sale exemption.

• Colledge’s was informed by the Consumer Credit Unit in Canberra that the Motor Traders’ Association is on The Treasury’s review board.

Submission due June 2010.


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• Continues to be opposition to dealerships being exempt.

• In ASIC’s recent National Credit Roadshow, dealership exemption was discussed within point-of-sale.

Point-of-sale has such a “broad range of degrees of involvement of people”.

Government needs time to look at the various point-of-sale activities and how they should be regulated.


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Where Dealerships (point-of-sale) stand

But as at today, Dealerships, within point-of-sale, are

exempt from the Credit Act. This is ongoing until the

Government changes the Act.

Source: Consumer Credit Unit, The Treasury, Canberra


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Let’s be prepared:

ASIC Requirements


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ASIC Registration & Application requirements

Registration between 1 April to 30 June 2010

Applications for Australian Credit Licence (ACL) between 1 July to 31 December 2010

(Refer handout from Conference, 22/2/10)


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Registration


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ASIC Registration

• Those wanting to be involved in Credit Activities after 1 July 2010 need to be registered by 30 June 2010.

• Registration is free.

• Being registered, allows you to continue in Credit Activities.

• If you are not registered by ASIC by 30 June 2010, you must cease Credit Activities until registered.

These points exclude those that are exempt in the Act.


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ASIC Registration

Requirements

• Adhere to conduct requirements, such as being honest, fair and responsible lenders.

• Staff training and competency as an organisation.

• Become members of External Dispute Resolution (EDR) body.

Alternative to the courts (less formal)


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ASIC Registration

Responsible lending

1. Make “reasonable enquiries” about the customer’s objectives and requirements;

2. Take “reasonable steps” to ascertain the customer’s financial situation;

3. Assess the customer’s ability to repay the loan without “substantial hardship”; and

4. Do not offer or suggest products that are “unsuitable”.

Source: ASIC National Credit Roadshow (webinar)


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ASIC Registration

Disclosure requirements

Lenders will have to tell customers:

a) How much the broker receives for securing the loan;

b) All costs the consumer will have to pay to the broker, bank and others, and

c) How much money will be left over after these payments have been made.

That is, all customer fees and charges, and your commission for securing the loan.


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ASIC Registration

Registration application requirements

• Being a member of an ASIC approved EDR body.

• Up-to-date company details, e.g. Company Register

• Making statements regarding conduct of directors, company secretaries, partners, trustees

ASIC suggests background checks on people, including if:

- been insolvent or bankrupt

- had serious fraud convictions in past 10 years

- been disqualified from managing a corporation

- had credit registration or financial service licence cancelled


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ASIC Registration

• Not every person requires a licence

• A licensee can act through its employees, directors and related corporations

• One or more third parties can be authorised by a credit provider to act on its behalf = “Credit Representatives”.

The Credit Reps do not need to be individually registered

Licensee must authorise in writing their Credit Rep/s and what credit activities they will be involved in

Credit Reps must join an External Dispute Resolution body


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Application for Licence


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ASIC Licence Application

• Applications for Australian Credit Licence (ACL) start 1 July 2010

• Those who have not applied for ACL by 31 December 2010 must cease credit activities until they have a licence.

• By 30 June 2011, all applications will be processed.

• ACL numbers will be required on all marketing information, i.e. letterhead, website, etc.


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• Licence fees will depend on level of credit activity Range from $1,000 – $21,000

Non-refundable, including if application rejection

• ASIC will ask questions to assess suitability regarding becoming a licensee.

• Comply with the conduct obligations in the Act.


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• Provide details on the directors, secretaries, partners, trustees or senior managers

Need statements from each person that they are “fit and proper” to conduct credit activities under the licence.

• From this group, nominate people as “Responsible Manager/s” who have the expertise to be authorised under the licence.

• “Responsible Managers” have to provide their educational qualifications and experience to support the application.


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To comply with the conduct obligations in the Act, licensees will have:

• and maintain compliance arrangements and systems;

• trained and competent Reps, who are supervised;

• adequate HR, I.T., and financial resources;

• Risk Management systems in place;

• appropriate internal and external dispute resolution systems;

• Policy & Procedures to receive & assess variations in credit contracts;

• arrangements for compensation to customers (should you breach obligations under the Act).


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Due to the level of details within the Act, please note that this presentation is a summary of the requirements for ASIC Registration and Application for a Licence.

We encourage you to download and familiarise yourself with the documentation on ASIC’s website http://www.asic.gov.au/credit.

A great resource within the ASIC website is their Credit Roadshow webinar. We again encourage you to take 60 mins to watch the presentation which was a valuable source for this presentation.


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Where is it at?

(22 February 2010)


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National Consumer Credit Protection

The Facts

• National framework for consumer credit

• Scheduled to commence 1 July 2010

• ASIC is the sole regulator

• Lenders will be required to disclose to consumers:

How much they receive for securing the loan

All costs the consumer will have to pay to the lender, broker, bank and others


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Dealership exemption

• Car Dealerships will be initially exempt from the National Credit Regulations.

Initial 12 month exemption

No further information available

• Colledge’s worked with VACC on Government submission detailing importance of car dealerships remaining exempt. (Handout: Submission letter)


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ASIC Requirements

• 1 April to 30 June 2010: Register with ASIC to be ready by 1 July 2010

• 1 July to 31 December 2010: Applications for the Australian Credit Licence (ACL)

• Become a representative of a registered person or the holder of an ACL


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FOR ACCOUNTANTS,BY ACCOUNTANTS

COLLEDGE’S AUTOMOTIVE ACCOUNTANTS NETWORK FORUM

National Consumer CreditProtection Bill

Update(15/10/09)

Refresher

• “Establish ... a single, standard, national law for the regulation of consumer credit” and better protection for consumers.

(ALP Media Statement, 25 June 2009)

• Aims to eliminate “unscrupulous and incompetent” lenders and increase standards in the (credit) industry.

• For the first time, credit providers will be regulated nationally rather than by differing state requirements.

National Consumer Credit Protection Bill



Refresher (cont)

• Strict and comprehensive licensing conditions.

• ASIC will be the sole regulator of “Australian Credit Licence” applications.

• Stricter penalties for misconduct (for lenders).

• Increased court assistance (for consumers).




Disclosure of Commission

The Bill requires lenders to inform consumers of the full credit proposal disclosure, including:


b) All costs the consumer will have to pay to the broker, bank and others.




Recent developments

• Bill passed House of Reps on 20 August 2009.

• Introduced to Senate 7 September 2009.

• Senate moved start date back 6 months.

• ASIC indicates credit providers will now have the following timeline:

1 April to 30 June 2010 to be registered with ASIC by 1 July 2010, and

Applications for the Australian Credit Licence between 1 July to 31 December 2010.




Current Bill states:

“Exemptions from licensing point of sale retailers, such as car dealerships... where they engage in credit activities by arranging credit or acting as an intermediary through an arrangement with a lender.”

Media release of 14/8/09: National Consumer Credit Protection Package - Draft Regulations

Exemption of “point of sale retailers” has reportedly been proposed so that the Government can understand this market before deciding how to regulate it. (Source ANZ)




Bill open for public consultation

• Colledge’s latest research has found a number of objections to Car Dealerships being exempt from the Bill as part of “point of sale” retailers.

• Published (on internet) letters from:

ANZ, Government & Regulatory Affairs

Indigenous Consumer Assistance Network (ICAN)

Commercial Asset Finance Brokers Association of Australia (CAFBA)




ANZ highlighted the following issues

• Car dealerships are more than referrers of finance.

• Will credit providers be made responsible for the conduct of car dealerships?

• Dealerships can act as a third party finance, therefore acting as a broker.

Will this activity require licensing?




ANZ issues (continued)

• Unlike other point of sale retailers, dealerships can:

Deal with more than 1 finance company.

Do not provide consumers with the advantage of subsidised rates or deferred payments.

Can receive commission/incentives from finance companies.




Issues raised by ICAN

Below issues come from actual cases ICAN provided advice and advocacy on for indigenous people

• Exploited consumers with minimal spoken English.

• Financing consumers who could not afford repayments Borrowers from remote communities with higher

costs of living (up to 20-30% higher).

• Inflating car prices over market value.

• Packaging loans with unnecessary extras such as insurance and warranties.




Issues raised by CAFBA

• Exemption of car dealers provides an unlevel playing field for credit providers and undermines the original intention of the Bill.

• Less protection for customers, namely youth and socially disadvantaged.

• No evidence that car dealers, who offer finance in 10s of thousands, need to be exempt.

• Should consider exempting point of sale financing under a certain $ amount.




Colledge’s will continue to research the Bill and keep you up-to-date on future information.




References

• www.treasury.gov.au/consumercredit/content/default

• National Consumer Credit Protection Package, Draft Regulation: Media Release 14/8/09 by the Hon Chris Bowen MP

• Consumer Credit Reforms, Senate Amendments: Media Release 17/9/09 by the Hon Chris Bowen MP

• Indigenous Consumer Assistance Network Ltd: Submission to Senate Standing Committee on Economics, 17/7/09

• ANZ Government & Regulatory Affairs: Submission to Treasury 9/9/09

• Commercial Asset Finance Brokers Association of Australia Ltd: “A fair and more effective National Consumer Credit Protection Bill”, A submission to the Hon Chris Bowen MP 9/9/09






National Consumer CreditProtection Bill

(28/7/09)

References:National consumer credit protection reform, Media Statement, 25 June 2009, Minister of Financial Services, Superannuation and Corporate Law, Chris Bowen MP http://alp.org.au/media/0609/mscca250.phpThe National Consumer Credit Protection Bill 2009, http://www.treasury.gov.au/consumercredit/content/downloads/Consumer_Credit_Brochure.pdfArticle: Oakes, D. New credit laws to strengthen consumer rights, The Age, 25 June 2009

• Proposed Act to “establish ... a single, standard, national law for the regulation of consumer credit”and better protection for consumers. (ALP Media Statement, 25 June 2009)

• Bill was introduced and read in House of Representatives on 25 June 2009

• Referred to Committee in Senate




• The Bill is ‘Phase 1’ of 2008 agreement with COAG (Council of Australian Governments)

Commonwealth to be responsible for consumer credit regulation.

• Aims to eliminate “unscrupulous and incompetent” lenders and increase standards in the (credit) industry.




• ASIC will be the sole regulator.

• Lenders have until 31 December 2009 to register for a licence.

• Strict and comprehensive licensing conditions.

• Licensees will not be allowed to give credit to consumers who cannot afford repayments.

• Stricter penalties for misconduct (for lenders).

• Increased court assistance (for consumers).




Disclosure of Commission

The Bill requires lenders to inform consumers of the full credit proposal disclosure, including:


b) All costs the consumer will have to pay to the broker, bank and others; and




But, you may not have to panic just yet...




• The initial, proposed legislation was amended on 25 June 2009 after consultation with industries.

• Car dealerships (as ‘point-of-sale’ retailers) “...will be exempt from the requirements that facilitate assistance to consumers. The Government will examine the issues of regulatory oversight within the next 12 months”. (National Consumer Credit Protection Reform: Media Statement, 25 June 2009, Chris Bowen MP)




Colledge’s will keep a close eye on the Bill and will alert you of future information.




National Consumer Credit Protection Act (to April 2010)

Education

Transcript of National Consumer Credit Protection Act (to April 2010)