National Consumer Credit Protection Act (to April 2010)

National Consumer
Credit Protection Act
Car Dealership Exemption?
(20 April 2010)

For more information, contact Angelo Sirianni on 03 9851 6500 or email angelosirianni@colledges.com.au Founding member of
www.colledges.com.au

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.



• “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.



• 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.



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


National Consumer
Let’s be prepared:
ASIC Requirements



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)


National Consumer
Registration


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.


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)


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)


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.

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

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


National Consumer
Application for Licence


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.



• 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.


• 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.


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).



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.


National Consumer Credit
Protection Act

Where is it at?
(22 February 2010)


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



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)



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


FOR ACCOUNTANTS, COLLEDGE’S AUTOMOTIVE ACCOUNTANTS
BY ACCOUNTANTS NETWORK FORUM

Protection Bill

Update
(15/10/09)


National Consumer Credit Protection Bill
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.



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:
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.


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


Protection 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.php
The National Consumer Credit Protection Bill 2009,
http://www.treasury.gov.au/consumercredit/content/downloads/Consumer_Credit_Brochure.pdf
Article: 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:
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



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)

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