Disclosure Regulations released

The National Consumer Credit Protection Amendment Regulations 2010 (No. 4) were gazetted on 8 December 2010 and released on Friday afternoon.

In response to industry concerns about the short time to be ready for commencement on 1 January 2011, the regulations contain an exemption until 1 April 2011 from the requirement to provide credit guides, quotes, and credit proposal documents if:

• a licensee provides the borrower details of the licensee's external dispute resolution (EDR) scheme; and
• if a credit assistance (broker) will charge for the services, there is a written agreement specifying the amount and when the borrower must pay.

As a result:

• brokers who are using the MFAA finance broking contract (or a document based on that document) will comply as it discloses EDR details.  However, if the broker is a credit representative, the FBC must show the EDR details for both the licensee and the credit representative.  The MFAA Code of Conduct will continue to require members to provide disclosures as shown in that document until 1 April 2011.
• it is likely many lenders will start using credit guides immediately as they are very simple documents for balance sheet lenders.  They need only show the name, contact details, EDR information, information about loan assessment, and the right to request a copy of the assessment. Credit guides for brokers are more complex and will generally be impractical to draft until the further disclosure regulations are made, hopefully in January, to allow time to prepare for 1 April 2011 start date.

The MFAA and the industry welcome the cooperation of Treasury and Government in working towards a solution which will work well for consumers and industry.

Dealings with previous borrowers and changes to credit guides

The regulations provide that if a credit guide has been provided to a customer within the last 12 months, a second credit guide does not have to be given to the borrower so long as the EDR details provided in the old credit guide have not changed.

If the information in a credit guide changes, the updated information need not be included in the credit guide provided to a borrower so long as the updated information is less than 93 days old and does not relate to a change of EDR scheme details.  This exemption is only relevant to licensees and credit representatives who are giving credit guides and not relying on the exemption from giving a credit guide.

For those who came in late – what disclosures are required?

In summary, unless using the exemption until 1 April 2011:

• lenders and lessors give credit guides (unless exempt in which case the servicer provides the credit guide);
• brokers and mortgage managers give credit guides, quotes, and credit proposal documents.

Copy of credit assessment

The requirement to provide a copy of the credit assessment if requested by the borrower is not subject to the exemption and does commence on 1 January 2011.

Each business will need to devise its own way of providing a copy of the credit assessment to borrowers.

MFAA guidance

The MFAA provides free for members a 'Disclosure Module – Interim' providing more details.  This can be accessed in the members section of the MFAA website.  The Disclosure Module provides an example credit guide for lenders and provides information about how to comply with the requirement to provide a copy of the credit assessment on request.

For more information, please contact:

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.