Australia: NCCP Regulations Amended
Regulation and Compliance Update

Amendments to the NCCP Regulations deal with reduced fees for single person companies, rules for lenders with run off books, and the exemption for point of sale credit.

Licensing fees

The NCCP (Fees) Amendment Regulations 2010 specifies that a sole trader will only pay $450 per annum for a licence fee instead of the $1,000 previously thought to be the minimum rate for companies. This was always the intention, but confusion arose because there was no definition of sole trader. The fee for sole traders has always been $450.

The amendments introduce the definition that:

Sole Trader means:

a. a natural person; or

b. a person (other than a natural person) that has only one representative that engages in credit activities on its behalf

Generally this will mean a company (whether it has one or more directors) so long as there is only one operative in the company.

Separately, ASIC has clarified that licensees conducting servicing and other intermediary activities which are not directly related to lending or arranging a loan will pay the minimum fee (ie that no higher fee will apply for volume) being $450 for a sole trader and $1,000 for other companies.

Carried over instruments

The regulations follow the arrangements previously announced by the Minister.

Under the regulations, a business lending or managing a book in run off mode has the option of being licensed or electing for the statutory scheme. The business must make its election known to ASIC by 30 June 2010.

It is expected that most businesses in run off mode will elect to take a licence, because the regulation under the statutory scheme differs little from being licensed (except for the saving of licence fees).

Residential investment loans made pursuant to a credit contract dated before 1 July 2010 never become subject to the NCCP regime, and so lenders and servicers of a book containing residential investment loans do not need to adopt either alternative unless they intend to engage in new NCC regulated lending.

A carried over instrument (COS) is a loan which was regulated under the old UCCC made pursuant to a temp credit contract dated before 1 July 2010. It is these lenders that can elect between the two schemes.

In relation to both UCCC and residential investment loans, varying a loan including increasing the principal sum will not make the loan a new NCC loan unless the variation is documented pursuant to a new credit contract.

What should you do now?

1. If you are the lender/lessor or servicer of a run off book, decide whether you will register or opt for the statutory scheme.
2. If you are a sole trader spend $550 on a jolly!

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.