Upcoming Mallesons seminarsAll brokers of consumer credit, and consumer credit lenders (other than ADIs and RFCs) will be affected by "responsible lending" requirements one year earlier than expected. All credit industry participants may be affected by the licensing exemptions and the other timetable changes
What do you need to do?All credit industry participants should assess the effect of the timetable changes and the licensing exemptions. Brokers and non-ADI or RFC credit providers must implement "responsible lending" procedures by 1 January 2010. They may need to make significant changes to procedures and documents
James Moore
Special Counsel
Andrea Beatty
Partner
Katherine Forrest
Partner
Melbourne
Katherine Forrest
Perth
Nicholas Creed
Brisbane
Aaron Bourke
Canberra
Stephen Jaggers
The Government has announced an accelerated timetable for “responsible lending” requirements. From January 2010 - in less than four months - these will affect finance brokers, and lenders other than authorised deposit-taking institutions and registered financial corporations. Responsible lending obligations will affect other lenders from January 2011, in line with the previously announced timetable. Also, the extension of the Code to residential investment lending will be delayed to July 2010. In a further development affecting all credit providers, draft regulations have been released. These include key exemptions from the licensing provisions.
Accelerated commencement of responsible lending requirements
Our 25 June Alert discusses key features of the proposed National Consumer Credit Protection legislation. This legislation is proposed to implement a credit licensing and responsible lending regime, and to re-enact the Consumer Credit Code as national legislation, with some changes to its coverage.
Under today’s ministerial press release, the responsible lending requirements relating to loan suitability apply to brokers and to some lenders with effect from January 2010.
The accelerated commencement will affect consumer lenders other than:
- authorised deposit-taking institutions under the Banking Act 1959, and
- registered financial corporations under the Financial Sector (Collection of Data) Act 2001.
All lenders should urgently consider whether they will be affected by this accelerated application.
Affected lenders should urgently consider what systems they must put in place to comply with these new obligations from their commencement.
The relevant legislation has not yet passed the Parliament. As at 14 August, ASIC’s announced timetable proposes the release of a regulatory guide to the responsible lending requirements in early 2010, following a consultation paper to be released next month.
Delayed application of changes to CCC provisions including investment lending
The proposed National Credit Code makes a small number of changes to the provisions of the existing Consumer Credit Code.
(These cover matters including the form of default notices, changes to business purpose declarations, and the extension of the Code to some investment lending.)
The Minister has announced that these changes will be delayed six months, to commence on 1 July 2010.
Release of draft regulations
14 August also saw the release of exposure drafts of regulations to support the National Consumer Credit Protection legislation.
The regulations include a number of exemptions from the credit licensing provisions. These include the exemption of retailers at point-of-sale and some limited referral activities.
Organisations that are affected by the National Consumer Credit Protection proposals should review these Regulations and determine how they may be affected.