The Minister for Financial Services, Superannuation and Corporate Law, Chris Bowen, has released the latest draft Regulations and explanatory material for the National Consumer Credit Protection Package for further public consultation. The measures, first announced earlier this year, are being introduced to replace the present state-based system of consumer credit protection, which operates inconsistently across the eight jurisdictions. They will make it less likely that families who can’t meet their debts will lose their homes and give ASIC greater regulatory power in the consumer credit sector.

ASIC has also released a second consultation paper on its proposals for compensation and professional indemnity (PI) insurance arrangements for credit licensees. This is part of the consultation process relating to the new National Consumer Credit regime which will see ASIC have powers to cancel broker licenses. Cancellation of a license may occur because of a failure to: heed responsible lending guidelines, meet training requirements, have adequate financial and staff resources, meet enhanced standards of conduct, and/or be part of a dispute resolution scheme which borrowers can use without cost.

Mr Bowen advised that the purpose of further public consultation is to extend a final opportunity for comment on the full suite of regulations following two previous rounds of consultations. In response to public comment on those previous consultations, some important changes and enhancements have been necessary to the regulations.

The key elements include:

* regulations to accommodate different practices in the way interest may be calculated or charged by lenders in respect of the provision of credit for residential investment property;
* extending the period for which credit assessments can be relied on to 120 days where the credit is to be provided for the purchase of a residential property and is to be secured by a mortgage over the proposed property;
* the application of licensing and the responsible lending conduct obligations to pre?existing contracts; and
* a new method of calculating licensing fees and charges that is intended to address industry concerns about the employee based method of calculating fees.

These regulations will be available for public comment between 20 November 2009 and 11 December 2009.

The package of regulations and related explanatory material can be found and downloaded at www.treasury.gov.au/consumercredit.