NCCP obligations for debt purchasers and contingent collectors regardless of ACL status Kate Keating CreditWise Pty Ltd

Transcription

1 NCCP obligations for debt purchasers and contingent collectors regardless of ACL status Kate Keating CreditWise Pty Ltd

2 Agenda Application NCCP Regulated Credit Common Misconceptions Code Requirements EDR & Operational Challenges Breaches & Consequences

3 Consumer Credit Debts The NCCPA regulates: consumer and/or personal lending and lending for residential investment purposes Products covered are: Credit cards Personal loans secured and unsecured Home loans Residential investment property Leases It applies to individuals and residential strata corporations

4 Common Misconceptions The Code no longer applies if: Only lenders need to issue: The account is passed for collection The account is sold A default notice has been issued The account is written off The secured goods/property has been repossessed Default notices Hardship variation rejection/acceptance documents Enforcement postponement rejection/acceptance documents Statements of account, post sale and when requested Credit Assessments, if requested The consumer must pay the account in full to redeem repo d goods

5 The Code Under contract law, the Code applies until the debt is: Paid in full A settlement arrangement is finalised Merged with a Judgment Statute barred Debts cannot be collected unless there is a valid contract on foot Writing off is an accounting process, not a contractual one The Code still applies to written off debt

6 The Code Compliance Obligations Debt buyers buy rights & obligations under the contract (s.188(1)) Debtors have the same rights against debt buyers as against the original lender (s.188(2)) Contingent collectors are the lender s agent Conduct is considered to be that of the lender (s.199(1)) Agents can be prosecuted for Code offences, even if the lender is not (s.200)

7 Collections General The Code is very specific about collections processes, documentation and their time frames, especially: Direct Debit Default Notice Default Notice Voluntary Surrender Consent to Enter Premises Repossession & Sale Statement of Sale Proceeds Variations By Agreement & Hardship DB challenge: how to ensure DB s documents, policies & procedures correlate with the purchased contract Ts & Cs? CC challenge: to manage these processes using the lender s docs/policies /procedures or to refer back?

8 NCCP & NCC Obligations NCCP & NCC Refs Documentary Requirements When NCCP s.127 & s150 Credit Guide DBs & ACL holders to provide on first contact with debtors NCCP s.132 & s.156 Credit Assessments To be provided upon request NCC s.185 Contracts - copies To be provided upon request NCC s.33 & s.36 Statements of Account Timing depends on contract & also upon request NCC s.104(3) Sale Proceeds Statements Post sale - asap NCC s.99 & s.100 Consent to Enter Premises Prior to any repo on residential property NCC s.87 Direct Debit Default Notice For 1 st time default on an account if not resolved in 10 business days

9 NCCP & NCC Obligations NCCP & Documentary Requirements When NCC Refs NCC s.88 Default Notice Prior to any enforcement action NCC s.71 Variation by Agreement When Agreement reached within 30 days NCC s.72(3) s.73 Hardship Variation Acceptance When application accepted 2 timings apply 21 days is the shortest, 30 days the longest NCC s.72(3) Hardship Variation Rejection When application rejected 2 timings apply 21 days is the shortest NCC s.94(2) 7 s.95 NCC s.94(2) Enforcement Postponement When application accepted Acceptance within 21 days Enforcement Postponement Rejection When application rejected within 21 days

10 Credit Guides DBs must provide debtors with a Credit Guide All other ACL holders (collectors) must provide debtors with a Credit Guide as soon as practicable after the debt is purchased as soon as practicable after becoming authorised to collect the debt DB challenge: What happens if the debtor s whereabouts is unknown? CC challenge: What happens if the first contact is by phone?

11 Credit Assessments A copy of the written assessment must be given to the customer if requested within 7 years of the date of the credit assistance. The copy must be provided within: 7 (DB=15) business days, if made within 2 years of the assessment or 21 (DB=25) business days, if made between 2 7 years of the assessment NB: The licensee (lender/db) cannot charge for providing the assessment. DB challenge: Who pays for the work involved in arranging this? CC challenge: Who provides it & how is the account managed in the interim?

12 Documents - Copies Debtors can request copies of documents Contracts Statutory Notices Account Statements Timeframes vary for provision DB Challenge: how to manage if docs not provided? CC Challenge: how to provide & who pays the service costs?

13 Consent to Enter Premises No repo can proceed on residential property unless the occupier has signed a Consent to Enter Premises DB Challenge: how to get occupier consent if original lender not referred to in the Consent doc? CC Challenge: how to ensure the document names the lender involved, the ACL number, the goods description and occupier name?

14 Sale Proceeds Statement Debtor must be issued with a Statement of Sale proceeds and itemised costs asap after security is sold DB Challenge: how quickly can tax invoices from various service providers be collated? CC Challenge: who issues and how are details known?

15 Default Notices There are 2 types of default notice: Direct Debit Default Notice (s.87) must be issued the first time a direct debit payment is dishonored on a particular account unless The problem is resolved within 10 business days Default Notice (s.88) all other breaches DB Challenge: how to manage D/D defaults all or? CC Challenge: how to identify accounts on which a D/D default notice has already been issued and if the same account is being used for current payment arrangements

16 Default Notices Not Required Default Notices are not required if: Fraud was involved in obtaining the credit Debtor cannot be found after reasonable attempts Court authorises enforcement proceedings There are reasonable grounds to believe the security has been removed or disposed of (s. 88(5)) DB Challenge: What supporting information is provided when debts are sold? CC Challenge: Do client instructions cover these situations?

17 Variation by Agreement Repayment arrangements are variations by agreement under the contract Variations by Agreement require confirmation in writing within 30 days if agreement is for 90+ days Any agreement to manage arrears brings the account back to current status Any post agreement default starts the default management process again DB & CC Challenge: At what point should a default notice be issued?

18 Hardship Management Any debtor has the right to apply for a hardship variation on the following grounds: financial hardship due to illness; or Unemployment; or other reasonable grounds; and an expectation they will be able to complete the contract if a variation is given Written confirmation of rejection/acceptance must be provided within 21 days of application with accepted changes confirmed within 30 days of agreement Reasons for rejection must be provided DB & CC Challenges: How to decide if hardship does not apply, given debt history would indicate it does? What reasons to give for rejection of the application?

19 Enforcement Postponement Debtors have the right to apply for enforcement postponement in the default notice period Acceptance/rejection must be in writing within 21 days of application Failure to comply with postponement conditions leads straight to enforcement action Rejection reasons must be given DB & CC Challenges: What reasons to give for rejection of the application? What conditions should be set?

20 EDR Challenges All collections action must stop if a debtor lodges any complaint about the contract with an EDR Scheme (not DB/CC specific) No debtor contact, other than to resolve complaint Collections/legal action must stop Unless FOS agrees, lender rights to protect property cannot be exercised DB Challenges: EDR costs versus return on investment? CC Challenges: How to manage the account cost effectively who pays for any EDR involvement?

21 Operational Challenges Documentary Obligations Hardship Rejection Reasons Hardship & Postponement Default Notice management Notices & Timing Written acceptance/rejection processes Information required When application deemed accepted Need to justify conduct When to issue Compliance timeframes Various difficulties in tracking Pricing How to price work, given additional compliance obligations

22 Breaches & Consequences DB & ACL holder Consequences: Loss of licence no further consumer credit purchases Fines up to $1.1 million e.g. failure to give a Credit Guide or Credit Assessment Enforceable undertakings Banned from working in the industry CC Consequences: Banned from working in the industry In accordance with Service Level Agreements Can be held accountable, even if lender is not

23 Compliance Proverb Ideologies may separate us. Business dreams and NCCP anguish bring us together With apologies to Eugene Ionesco

24 CreditWise Pty Ltd Kate Keating Director CreditWise Pty Ltd