If you lie awake at night dreaming of the NCCP Act, you’ll love this article.
EDR or IDR
EDR schemes report that they receive many calls from customers who really want to talk to their financier. However, because the EDR details are bolded so prominently in so many documents, the customer rustling around for a phone number often picks the EDR’s number.
Members can be charged a fee as a result of this enquiry.
Action: Review your correspondence and notices to ensure that your contact details and your IDR details are given equal prominence as your EDR details.
Retention of loan files
Aggregator members may hold their own ACL or may be appointed as credit representatives of the aggregator. A credit representative is the agent of a licensee and the licensee is fully responsible for the conduct of the credit rep. ASIC Report 330 recommends that licensees should have a full copy of the loan file on their system for deals written by their credit reps.
As aggregators are underwriting the performance to the lenders of all members, whether those members are ACL holders or credit reps, best practice would be to hold the loan files for all members.
What’s a SACC?
SACCs (Small Amount Credit Contracts) are unsecured loans of $2,000 or less, for less for terms of at least 16 days but not more than one year. There are special rules regarding SACCs, including special requirements for Centrelink customers, specific responsible lending processes (review ADI statements for the last 90 days), and fees are charged instead of interest.
Short term loans for 15 days or less are prohibited, something to keep in the back of the mind in case you decide to do a short bridging loan.
Loans by ADIs and continuing credit contracts are excluded from both the SACC special rules and the short term loan prohibition.
Appointing credit representatives
When licensees appointed authorised representatives under their AFSL, there is generally no obligation to authorise intermediaries between the authorised rep and the financier (for example the company that the authorised rep works for).
The ACL regime is different. In order to capture aggregators and servicers and other people in the credit chain, the NCCP Act captures all intermediaries. Intermediaries need to be licensed or be appointed as a credit representative.
So if Joe contracts in the name of Joe Pty Limited, both Joe Pty Limited and Joe need to be appointed as credit representatives.
The appointment needs to spell out what credit activities credit reps are authorised to undertake. It is insufficient to merely state that Joe is appointed as a credit rep.
Creating a reverse mortgage by mistake
Section 179(7) of the NCCP Act provides that if a lender provides an unsuitable loan when a reverse mortgage would have been suitable (irrespective of whether that lender has a reverse mortgage in its portfolio), then the borrower can approach the court for orders to remain in possession of their home, possibly until death.
Extra care needs to be taken in relation to borrowers over, say, 55 so as not to fall foul of this provision. It is important to note that the provision is only triggered if an unsuitable loan is made.
Privacy Act amendments