Australia: Consumer credit disclosure regulations released
Regulation and compliance update

The Regulations specifying how lenders, finance brokers, and mortgage managers will make disclosure have now been released.

The amendments are contained in the National Consumer Credit Protection Amendment Regulations 2011 (No. 4) (Cth) which will amend the National Consumer Credit Protection Regulations 2010 (Cth).

The amendments commence on 1 October 2011 and largely reflect discussions held with Treasury by industry and primarily the MFAA.

The Regulations set out rules for giving three documents:

• credit guide;
• quote;
• credit proposal disclosure document.

The MFAA will soon release a Disclosure Module which provides detailed information about the regulations and provides example documents.  Many businesses will need to amend these example documents to meet their own particular business models.  We invite you to contact Gadens Lawyers now to arrange for your documents to be amended.

Mortgage managers

There are a few 'surprises' in the regulations for mortgage managers and their funders.

Regulation 26B provides that a lender of record for mortgage management programs must include in their credit guide an explanation of the relationship between the lender and the mortgage manager.  This means that credit providers who run a mortgage management program will need two credit guides - one for direct business and one for mortgage management business.  For securitised programs, this credit guide will usually be provided by the servicer.

Regulation 28H(3) provides relief for mortgage managers from disclosing their margin if:

• the mortgage manager has day to day management of the loan; and
• the mortgage manager told the consumer about its management agreement and the mortgage manager is not acting for the consumer in relation to the loan;
• the maximum cost and the interest rate are published on the lender's website.

Problems arise with the website requirement.  If the lender also lends direct to the market, the lender may not want to publicise these rates in competition with their own direct rate.  The publication of two sets of rates could confuse consumers.  Alternatively, if the lender does not lend direct, the lender may have no web site or be an exempt trustee, and so the provision will not have its intended effect.

The MFAA is lobbying for this requirement to be changed so that the rate is published on the manager's website.

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This report does not comprise legal advice and neither Gadens Lawyers nor the authors accept any responsibility for it.