ASIC has released the first package of policy proposals on the implementation of the proposed National Consumer Credit regime.
This first package comprises two documents:
- Consultation Paper 110 General conduct obligations for credit licensees attaching draft Regulatory Guide 104 Licensing: General conduct obligations for AFS and credit licensees;
- Consultation Paper 111 Compensation and financial resources arrangements for credit licensees.
Consultation Paper 110 outlines guidance for credit licensees about ASIC’s expectations for compliance with the general conduct obligations in clause 47(1) of the National Consumer Credit Protection Bill.
The proposed general conduct obligations are outlined in draft Regulatory Guide 104 Licensing: General conduct obligations for AFS and credit licensees (attached to CP 110).
Consultation Paper 111 explains how ASIC proposes to apply compensation and financial resources requirements to credit licensees.
Except where a credit licensee is a body regulated by APRA, the licensee must have adequate resources and have adequate risk management systems. Under the proposals, credit licensees will need to assess their business and form a view, on reasonable grounds, about the amount of financial resources they require to conduct their business in compliance with the National Credit Bill and their licence obligations. ASIC expects licensees to ensure that have sufficient funds to meet their financial obligations as they fall due in the near future (e.g. for at least the next 3 months).
With regard to compensation arrangements, all credit licensees will be required to hold professional indemnity insurance (PI insurance) that reflects the risks in their business. ASIC proposes that some credit licensees (non-lenders) will have to hold PI insurance cover at a set minimum (either $2 million or another amount), depending on the nature of their business.
Submissions on the proposals contained in the consultation papers close on Wednesday 12 August 2009.