Implications of New National Consumer Credit Regime on your business who needs to apply for an Australian Credit licence? are there any other options? what needs to be done to apply for an Australian Credit licence? Daniels Bengtsson Pty Limited what industries do you, the participants, represent? Daniels Bengtsson Pty Limited Commonwealth take over of consumer credit replacing State & Territory regimes National Consumer Credit Protection Act , called the Credit Act comprehensive licensing regime for all businesses engaged in credit activities ASIC the single, national regulator Daniels Bengtsson Pty Limited persons engaging in credit activities – initial registration with ASIC subsequent grant of Australian Credit licence entry standards for registration & licensing registered persons and licensees to meet ongoing standards of conduct gives ASIC the power to suspend or cancel a licence or registration, or to ban an individual from engaging in credit activities Daniels Bengtsson Pty Limited main group affected industry participants – detailed under ‘credit activities’ main impact – those who only conduct business in States or Territories where there is currently no licensing or registration scheme costs – one-off - applying for a licence complying with ongoing licence obligations Daniels Bengtsson Pty Limited pre 1 July 2010 credit activities register between 1 April & 30 June licence between 1 July & 31 December post 1 July credit activities licence before you start engaging in the credit activity Daniels Bengtsson Pty Limited pre 1 July 2010 credit activities register between 1 April & 30 June licence between 1 July & 31 December post 1 July credit activities licence before you start engaging in the credit activity Daniels Bengtsson Pty Limited a person continuing to engage in credit activities from 1 July 2010 without being registered X cease engaging in credit activities until the credit provider obtains an ACL a registered credit provider continuing credit activities from 1 January 2011 without being licensed X cease engaging in credit activities until the credit provider obtains an ACL Daniels Bengtsson Pty Limited must not carry on credit activities unless – the credit activity is authorised – in the person’s Australian Credit Licence in transitional registration before licensing an individual is – a credit representative of a licensee/registered person a director or employee of a licensee/registered person activity or person exempt under the regs Daniels Bengtsson Pty Limited credit providers under credit contracts performing obligations, or exercising rights, of a credit provider under a credit contract providers of consumer leases performing obligations or exercising rights in respect of credit contracts or mortgages & guarantees in relation to credit contracts Daniels Bengtsson Pty Limited ‘credit activities’ involves credit contracts, leases, mortgages and guarantees where the National Credit Code applies to the provision of the credit Daniels Bengtsson Pty Limited debtor a natural person or strata corporation credit provided wholly or predominantly for personal, domestic or household purposes to purchase, renovate or improve residential property for investment to refinance credit provided in relation to above Daniels Bengtsson Pty Limited goods are hired wholly or predominantly for personal, domestic or household purposes a charge is or may be made for the hiring of the goods & the charge, together with any other amount payable under the consumer lease, exceeds the cash price of the goods. Daniels Bengtsson Pty Limited continue to be a credit provider or lessor for as long as you continue to be a party to the contract – collecting money due enforcing contracts obligation to stay licensed continues for the life of the contract implication for businesses that go into ‘run off’ ie no new lending after 1 July Daniels Bengtsson Pty Limited assignees of credit providers, lessors. mortgagees or beneficiaries of guarantees must be licensed because they – collect money enforce contracts, mortgages or guarantees Daniels Bengtsson Pty Limited persons providing credit service – finance brokers and other intermediaries where they have a role in securing credit for a consumer persons who assist consumers in relation to a particular credit contract with a particular credit provider Daniels Bengtsson Pty Limited apply for a provision of credit in respect of a particular credit contract with a particular credit you suggest that the consumer … apply for an increase to the credit limit of a particular credit contract with a particular credit provider remain in their current credit contract or lease Daniels Bengtsson Pty Limited you assist the consumer to … apply for a provision of credit in respect of a particular credit contract with a particular credit apply for an increase to the credit limit of a particular credit contract with a particular credit provider Daniels Bengtsson Pty Limited you are providing credit assistance regardless of whether you are dealing directly with the consumer or with the consumer’s agent for example, you are assisting an elderly parent to apply for a credit contract, but are dealing with their children [Explanatory Memorandum §1.24] Daniels Bengtsson Pty Limited it is enough to suggest entry into a credit contract or lease applying for a credit limit staying in a particular credit contract without actually arranging the contract assistance is less than ‘arranging’ Daniels Bengtsson Pty Limited regulates every person who may be an intermediary between consumer & credit provider ‘Innovations in credit product design and delivery now mean that a consumer may pass through a number of hands between the first person they deal with and the lender, and may be uncertain as to the roles or functions of all these different parties. It is intended that the licensing requirements will apply to all these persons.’ Daniels Bengtsson Pty Limited very wide – does not require conduct in relation to a particular credit contract or credit provider does not require direct or indirect contact with the consumer for example, acting as an intermediary by preparing or passing on information but with the object, wholly or partly, of securing the provision of credit or a lease [Explanatory Memorandum §1.29] Daniels Bengtsson Pty Limited A person will commit an offence where – they hold out that they are authorised they hold out or advertise that they can engage in credit activities they demand or receive a fee from a consumer in relation to a credit activity, when they are unlicensed in relation to that credit activity Daniels Bengtsson Pty Limited licensee cannot conduct business with another person who is engaging in a credit activity but not licensed to do so – essential licensees understand who they are doing business with – what is their status – licensed or exempt under the regulations civil penalty – 2,000 penalty units criminal penalty – 200 penalty units + 2 years imprisonment Daniels Bengtsson Pty Limited conducting business with 3rd parties – can you list some of the 3rd parties you deal with when you are engaging in credit activities? Daniels Bengtsson Pty Limited the regulations deal with exemptions in 3 ways by exempting persons when engaging in certain credit activities by exempting certain credit activities by exempting activities Daniels Bengtsson Pty Limited Bankruptcy Act 1966 official receiver or trustee, registered debt agreement administrator receiver, receiver and manager, provisional liquidator, or liquidator a State or Territory Public Trustee administrator of a body corporate deceased’s personal representative deceased licensee’s personal representative but only for 6 months a public or local government body or authority, constituted under Commonwealth, State or Territory legislation Daniels Bengtsson Pty Limited State-based registrations under – the Finance Brokers Control Act 1975 (WA the Credit (Administration) Act 1984 (WA) the Consumer Credit (Administration) Act 1996 (ACT) financial counselling service body providing benefits to members charities providing credit services to low income people Daniels Bengtsson Pty Limited lawyers tax agents but note excluded from exemption – activity of tax agent providing a consumer with a certificate or assessment as to whether the consumer can meet their financial obligations under the contract: Reg 24(5) performers of some statutory obligations – Privacy Act 1988 Anti-Money Laundering and Counter-Terrorism Financing Act 2006 Daniels Bengtsson Pty Limited a related body corporate of a licensee on behalf of that licensee only because its employees and directors are engaging in credit activities on behalf of the licensee the credit activities are not being a credit provider under a credit contract being in the business of providing consumer credit being a lessor under a consumer lease being in the business of providing consumer leases Daniels Bengtsson Pty Limited only when acting for a licensee to demand and receive payments from borrowers or guarantors under credit contracts or consumer leases to enforce rights in relation to taking possession of property secured by a mortgage, or goods hired under a consumer lease only if – licensed under State/Territory legislation only if authorised in writing by a licensee to engage in the activity only until 10 March 2011 Daniels Bengtsson Pty Limited the activities are – acting for a licensee who is a – credit provider lessor mortgagee person who is the beneficiary of a guarantee selling, storing or transporting property of a debtor, lessor, mortgagor or guarantor giving or sending statutory notices or documents to a debtor, lessee, mortgagor or guarantor or guarantor Daniels Bengtsson Pty Limited the credit provider a linked credit provider linked credit provider is a licensee the consumer enters into the contract wholly or predominantly for the purposes of payment for the goods of services supplied by the supplier does not apply to land Daniels Bengtsson Pty Limited example – Milo runs a retail business by arrangement with a licence, brochures inviting consumers to apply for a particular credit card are made available to Milo’s customers the licensee has prepared the Milo refers customer’s inquiries to a phone number in the brochure. Milo’s conduct is exempt if – consumers are advised of the licensee’s’ licence number a reasonable person would assume that the licensee (eg Amex, Visa, Mastercard) was the lender in respect of the credit card Daniels Bengtsson Pty Limited example – Milo supplies goods through a website which advertises a link to a credit cards provider Milo has specified the form and content of the advertisement the advertisement includes a statement that inquiries should be addressed to the credit cards provider with contact details Milo’s conduct is exempt if – consumers are advised of the licensee’s’ licence number a reasonable person would assume that the licensee (eg Amex, Visa, Mastercard) was the lender in respect of the credit card Daniels Bengtsson Pty Limited inquirer wants information about – the cost, or an estimate of the likely cost, of a credit contract or a consumer lease terms and conditions of a credit contract or a consumer lease activity exempt if – provider has information about a number of licensees but gives the inquirer information about only one licensee Daniels Bengtsson Pty Limited the activity is done in the course of work of a kind ordinarily done by clerks or cashiers Daniels Bengtsson Pty Limited the persons acts as an intermediary by giving the consumer contact information about a licensee or their representative the person must disclose if they may receive a payment or potential financial benefit similar to the FSR ‘clerks & cashiers’ exemption Daniels Bengtsson Pty Limited ASIC must grant licence to a Credit Union licensed credit activities must match as closely as possible what the Credit Union applied for ASIC will issue Australian credit licence numbers Daniels Bengtsson Pty Limited commences 1 November 2011 regulations will specify the circumstances when you must cite the Australian credit licence number will be the same number as a Credit Union’s Australian Financial Services licence number eg Australian Financial Services & Credit Licence No 1234567 Daniels Bengtsson Pty Limited alternative to licensing ensure that your business model is appropriate ensure that you address the risk of cancellation of the arrangement by the authorising licensee Daniels Bengtsson Pty Limited Transitioning to the New Risk Management Standard – AS/NZS ISO 31000:2009 (1 Day) Introduction to Risk Management – AS/NZS IOS 31000:2009 (1 Day) Integrated Risk & Compliance Management (2 Days) Interactive Electronic Version – visit www.saiglobal.com/training Request Hard Copy by emailing us at firstname.lastname@example.org Or Request an in-house quote for training at your premises, by emailing email@example.com or via the ‘Request a Quote’ link on our website For any further questions you may have please email us at firstname.lastname@example.org or call us on 1300 727 444.