National Consumer Credit

Please find below a summary of the key points raised by Senator Nick Sherry today, which provides the latest update for the Commonwealth takeover of credit and finance broking.

Although it is envisaged that legislation will be in place by mid 2009, it is understood there will be a two year transition period.

Phase One

Phase one legislation to be in place by mid 2009. Key elements of the Phase One Action Plan will include:

• enacting the existing State legislation, the Uniform Consumer Credit Code (UCCC), into Commonwealth legislation;

• establishing a national licensing regime to require providers of consumer credit and credit-related brokering services and advice to obtain a licence from ASIC;

• extending the powers of the Australian Securities and Investment Commission (ASIC) to be the sole regulator of the new national credit framework with enhanced enforcement powers;

• requiring licensees to observe a number of general conduct requirements including responsible lending practices;

• requiring mandatory membership of an external dispute resolution (EDR) body by all providers of consumer credit and credit-related brokering services and advice;

• extending the scope of credit products covered by the UCCC to regulate the provision of consumer mortgages over residential investment properties;

• extending the operation of the Corporations Act to regulate margin lending;

• regulation of trustee corporations.

Phase Two

Phase Two legislation to be in place by mid 2010. Key elements of the Phase Two Action Plan will include:

• enhancements to specific conduct obligations to stem unfavourable lending practices, such as a review of credit card limit extension offers, an examination of State approaches to interest rate caps; and other fringe lending issues as they arise;

• regulation of the provision of credit for small businesses;

• regulation of investment loans other than margin loans and mortgages for residential investment properties;

• reform of mandatory comparison rates and default notices;

• enhancements to the regulation and tailored disclosure of reverse mortgages;

• examination of remaining existing State and Territory reform projects.

The Government will conduct continued consultation with industry, the community and the States and Territories to inform the implementation of the action plan.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.