27/04/2009 - 14:03

Sherry gets tough with credit laws

27/04/2009 - 14:03

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Australia's consumer credit laws are set for an overhaul with the federal government today releasing draft legislation that looks to slash red tape for business and impose tougher penalties for irresponsible lending.

Sherry gets tough with credit laws

Australia's consumer credit laws are set for an overhaul with the federal government today releasing draft legislation that intends to slash red tape for business and impose tougher penalties for irresponsible lending.

The draft legislation will replace inconsistent state and territory laws and substantially reduce the amount of credit legislation into one comprehensive regime, Superannuation and Corporate Law Minister Nick Sherry said.

"This package of reforms will significantly benefit industry by reducing duplication and cross-jurisdictional red tape across the states and territories," he said.

"Over 2,500 pages of law has been cut down and streamlined to one national regime - this will greatly reinforce a truly national consumer credit market, whilst reducing the compliance burden and boosting consumer protection."

"It replaces eight sets of regulation, including a range of consumer credit-related laws that are inconsistent between different States and Territories, on issues such as the regulation of lenders and brokers."

The legislation will establish a national Australian Credit License (ACL) regime that will require mortgage brokers to be license and impose tough responsible lending obligations on both lenders and brokers.

The ACL regime will be supervised by the Australian Securities and Investments Commission, which will be given $66 million to enforce the regime.

"ASIC will be given the power to promptly cancel or suspend a licence or ban people from engaging in credit activities, where it is necessary to protect consumers from the risk of financial harm and to maintain the integrity of the credit market," Minister Sherry said.

"Questionable operators on the margins who cannot meet these new national standards will not be allowed to engage in credit activities and will be forced to exit the industry. This stands to assist the very good reputation of those mainstream lenders and brokers who comply with the law."

He added the changeover to the new regime will take place in two stages, starting with registration and then licensing.

Business will be able to register with ASIC online from November 1 this year, should the legislation be passed in parliament.

 

The announcement is below:

 

Senator Nick Sherry, Minister for Superannuation and Corporate Law, has today released the draft National Consumer Credit Protection Bill 2009, which will deliver on the Rudd Government's commitment to modernise Australia's financial services sector by establishing a world-leading consumer protection-focused national credit licensing regime.

"This is a modern national licensing regime fit for the 21st century. Compared to other key OECD economies, these laws are at a world-leading standard."

"This Bill creates the Australian Credit License (ACL). After a registration phase, coverage of the ACL regime will commence on 1 January, 2010, will be Australia-wide and will include all parts of the credit industry."

"ACL holders will all be required to meet minimum entry standards before they can offer products and services to consumers," said Minister Sherry.

All banks, credit unions, finance companies and other lenders, known in the Bill as credit providers, and all credit advisers and mortgage and credit brokers, known as credit service providers will be required to hold an ACL.

The ACL regime will be supervised by the Australian Securities and Investment Commission (ASIC) and will replace a patchwork of inconsistent and often incomplete regulatory regimes that currently exist across different states and territories. ASIC will receive $66 million and its powers will be considerably bolstered to enforce the regime.

"Currently only one state has a licensing regime, but once credit providers and advisers are licensed across the whole country, they will have to meet continuing standards of conduct, higher than any that exist at the State and Territory level."

"Consumers will be consistently protected across Australia as a person who loses their licence or registration will be excluded Australia-wide. At present, there is nothing to prevent a person continuing to operate simply by moving to a different State or Territory, a situation that undermines consumer confidence and is completely unacceptable."

"Providers or advisers who break the rules face tough penalties, including hefty fines, a loss of licence and even jail time."

"ASIC will be given the power to promptly cancel or suspend a licence or ban people from engaging in credit activities, where it is necessary to protect consumers from the risk of financial harm and to maintain the integrity of the credit market."

"Questionable operators on the margins who cannot meet these new national standards will not be allowed to engage in credit activities and will be forced to exit the industry. This stands to assist the very good reputation of those mainstream lenders and brokers who comply with the law," Minister Sherry said.

Uniform national licensing will also lead to a major reduction in red-tape for credit-related businesses as all regulation will moves to one jurisdiction.

"Licensing will also reduce the industry compliance burden - as industry will now be required to comply with a single set of laws, instead of multiple State and Territory regimes."

In recognition of the differing levels of current regulatory oversight of certain credit providers, authorised deposit-taking institutions will be streamlined into holding an ACL.

Further details of the national consumer credit package, including the full text of the Bills and details about how to make a submission on the Exposure Draft legislation can be found at www.treasury.gov.au/consumercredit.

 

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