Tim Gough, ASIC - Examining financial hardship provisions in the National Credit Code
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Tim Gough, ASIC - Examining financial hardship provisions in the National Credit Code

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Tim Gough, Acting Senior Executive Leader, Deposit Takers, Credit and Insurers, ASIC delivered this presentation at the inaugural Financial Hardship Forum. The Forum convenes the banking and credit ...

Tim Gough, Acting Senior Executive Leader, Deposit Takers, Credit and Insurers, ASIC delivered this presentation at the inaugural Financial Hardship Forum. The Forum convenes the banking and credit sector, plus regulatory, compliance and resolution agencies, to address changes in financial circumstances for consumers and businesses.

For more information, please visit http://www.informa.com.au/finhardship

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    Tim Gough, ASIC - Examining financial hardship provisions in the National Credit Code Tim Gough, ASIC - Examining financial hardship provisions in the National Credit Code Presentation Transcript

    • A presentation to Financial Hardship Forum Tim Gough, ASIC 19 March 2014
    • 2 Overview Defining financial hardship - what, why? Responding to hardship – who, how or why? The law • The importance of a statutory right • Pulling the trigger • Simple arrangements • Process, not outcome • Regulatory guidance Credit reporting
    • What is hardship? “A reasonable inability to meet existing payment obligations” Generally speaking, look for: • A subsequent change in circumstances • A willingness to make payments Failure to lend responsibly may result in financial hardship, but this is not the hardship that s.72 seeks to address, nor should it attract a “hardship” response. 3
    • Not defined by outcome May be short, medium or long-term May be capable of easy resolution, or may be intractable (unrecoverable) May be uncertain – known and unknown unknowns It’s all hardship – what you can and might do in response is a different, and secondary, question. 4
    • Responding to hardship One size does not fit all Who is involved? What is involved? • Secured or unsecured • Current, overdue, accelerated, sold What is the aim? • Rehabilitation • Assessment and review • Managing a long term situation • Dealing with an intractable situation 5
    • The importance of a statutory right Payment default is inconvenient, and finding and implementing a fix can be time (and resource) consuming Contrast with often highly-automated application and approval processes We have seen evidence of a reluctance to do any more than is absolutely required Recent changes clearly designed to avoid the need for the magic word 6
    • Pulling the trigger “the debtor may give... notice, orally or in writing” • This is not a hair trigger • “Notice” connotes something formal and deliberate “of the debtor’s inability to meet [payment] obligations” • “Inability” suggests some significant impairment • Consider in the context of the timing elements of the hardship provisions 7
    • Simple arrangements ASIC has been asked to consult and recommend an appropriate position • The law applies regardless of the length of any agreed arrangement • The Regulations amend the law for “simple arrangements” – 90 days or less We have consulted • What is an appropriate timeframe? • Are there additional issues for debt purchasers? 8
    • A possible solution Once we clarify the trigger: • It won’t be longer than 90 days • Written confirmation after 30 days For assigned (and accelerated?) debt: • Re-define “notice” to require a more definitive proposal from the debtor Ultimately a question for Treasury/Gvt 9
    • Regulatory guidance In addition to our work on simple arrangements, we think there is scope to provide regulatory guidance on key issues: • when is “notice” provided/what is it? • process where there are joint debtors involved • guarantors No direct guidance about outcomes, although the debt collection guide has some relevance, particularly in the context of intractable hardship. 10
    • Credit reporting There are obvious interactions between hardship and the new CR regime, and with that some uncertainty The OAIC, not ASIC, is the regulator responsible for administering this regime. We don’t have the answers! 11
    • Questions? Thank you 12