National Consumer Credit Protection Amendment Regulation 2013 (No. 2)
Select Legislative Instrument No. 85, 2013
I, Quentin Bryce AC CVO, Governor‑General of the Commonwealth of Australia, acting with the advice of the Federal Executive Council, make the following regulation under the National Consumer Credit Protection Act 2009.
Dated 16 May 2013
Quentin Bryce
Governor‑General
By Her Excellency’s Command
William Richard Shorten
Minister for Financial Services and Superannuation
Contents
1............ Name of regulation.............................................................................. 1
2............ Commencement................................................................................... 1
3............ Authority............................................................................................. 1
4............ Schedule(s)......................................................................................... 1
Schedule 1—Amendments commencing day after registration 2
National Consumer Credit Protection Regulations 2010 2
Schedule 2—Amendments commencing 1 June 2013 3
National Consumer Credit Protection Regulations 2010 3
1 Name of regulation
This regulation is the National Consumer Credit Protection Amendment Regulation 2013 (No. 2).
2 Commencement
Each provision of this regulation specified in column 1 of the table commences, or is taken to have commenced, in accordance with column 2 of the table. Any other statement in column 2 has effect according to its terms.
Commencement information
Column 1
Column 2
Column 3
Provision(s)
Commencement
Date/Details
1. Sections 1 to 4 and anything in this regulation not elsewhere covered by this table
The day after this regulation is registered.
2. Schedule 1
The day after this regulation is registered.
3. Schedule 2
1 June 2013.
1 June 2013
3 Authority
This regulation is made under the National Consumer Credit Protection Act 2009.
4 Schedule(s)
Each instrument that is specified in a Schedule to this instrument is amended or repealed as set out in the applicable items in the Schedule concerned, and any other item in a Schedule to this instrument has effect according to its terms.
Schedule 1—Amendments commencing day after registration
National Consumer Credit Protection Regulations 2010
1 At the end of Part 3.5
Add:
28LD Reverse mortgages—projections of home equity
(1) For the purposes of paragraph 133DB(1)(a) of the Act, a projection may be given by the licensee to the consumer in the following way:
(a) by mail;
(b) by email;
(c) by another form of written or electronic communication agreed to by the consumer.
(2) For the purposes of subparagraph 133DB(1)(a)(ii) of the Act, the licensee must make the projections in accordance with any instructions for the making of the projections included on the website approved by ASIC for that subparagraph.
Schedule 2—Amendments commencing 1 June 2013
National Consumer Credit Protection Regulations 2010
1 Before regulation 28J
Insert:
28HA Reverse mortgages—credit assistance providers and credit providers to make reasonable inquiries
(1) This regulation is made for the purposes of the following provisions of the Act:
(a) section 115 (obligations of credit assistance providers before providing credit assistance for credit contracts);
(b) section 128 (obligations of credit providers before entering credit contracts or increasing credit limits).
(2) For the purposes of paragraphs 117(1)(d) and 130(1)(d) of the Act, if the credit to be provided under the credit contract will be used to secure a reverse mortgage over a dwelling or land, the licensee must make reasonable inquiries about the consumer’s requirements and objectives in meeting possible future needs, including:
(a) a possible need for aged care accommodation; and
(b) whether the consumer prefers to leave equity in the dwelling or land to the consumer’s estate.
Note: The licensee’s inquiries about the consumer’s requirements and objectives are not necessarily limited to the matters referred to in paragraphs (2)(a) and (b).
2 After regulation 28LB
Insert:
28LC Reverse mortgages—presumption of unsuitability of credit contract if certain loan to value ratios exist
(1) This regulation:
(a) is made for the purposes of the following provisions of the Act:
(i) paragraph 164(d);
(ii) paragraph 118(2)(c) (when the credit contract must be assessed as unsuitable—entering the contract or increasing the credit limit), as modified by subregulation (2);
(iii) paragraph 123(2)(c) (prohibition on suggesting or assisting consumers to enter, or increase the credit limit under, unsuitable credit contracts), as modified by subregulation (3);
(iv) paragraph 131(2)(c) (when credit contract must be assessed as unsuitable), as modified by subregulation (4);
(v) paragraph 133(2)(c) (prohibition on entering, or increasing the credit limit of, unsuitable credit contracts), as modified by subregulation (5); and
(b) sets out circumstances in which a credit contract is unsuitable.
Modifications of Act
(2) For the purposes of paragraph 164(d) of the Act, the provisions to which Part 3‑7 of the Act applies apply as if paragraph 118(2)(c) of the Act were varied to read:
“(c) if the regulations prescribe circumstances in which a credit contract is:
(i) unsuitable; or
(ii) unsuitable unless the contrary is proved;
those circumstances will apply to the contract;”.
(3) For the purposes of paragraph 164(d) of the Act, the provisions to which Part 3‑7 of the Act applies apply as if paragraph 123(2)(c) of the Act were varied to read:
“(c) if the regulations prescribe circumstances in which a credit contract is:
(i) unsuitable; or
(ii) unsuitable unless the contrary is proved;
those circumstances will apply to the contract;”.
(4) For the purposes of paragraph 164(d) of the Act, the provisions to which Part 3‑7 of the Act applies apply as if paragraph 131(2)(c) of the Act were varied to read:
“(c) if the regulations prescribe circumstances in which a credit contract is:
(i) unsuitable; or
(ii) unsuitable unless the contrary is proved;
those circumstances will apply to the contract;”.
(5) For the purposes of paragraph 164(d) of the Act, the provisions to which Part 3‑7 of the Act applies apply as if paragraph 133(2)(c) of the Act were varied to read:
“(c) if the regulations prescribe circumstances in which a credit contract is:
(i) unsuitable; or
(ii) unsuitable unless the contrary is proved;
those circumstances will apply to the contract;”.
Circumstances
(6) A circumstance in which a credit contract is unsuitable unless the contrary is proved is that:
(a) the credit contract is part of an arrangement that is a reverse mortgage; and
(b) at the time the credit contract is entered into, the youngest borrower under the reverse mortgage is 55 or younger; and
(c) the loan to value ratio of the mortgage is higher than 15%.
(7) A circumstance in which a credit contract is unsuitable unless the contrary is proved is that:
(a) the credit contract is part of an arrangement that is a reverse mortgage; and
(b) at the time the credit contract is entered into, the youngest borrower under the reverse mortgage is older than 55; and
(c) the loan to value ratio of the mortgage is the sum of;
(i) 15%; and
(ii) 1% for each year that the borrower is older than 55.
Note: Examples of unsuitable loan to value ratios are:
(a) if the youngest borrower is 60, a loan to value ratio that exceeds 20% is unsuitable unless the contrary is proved; and
(b) if the youngest borrower is 70, a loan to value ratio that exceeds 30% is unsuitable unless the contrary is proved.
(8) In this regulation:
loan to value ratio, in relation to a reverse mortgage over a reverse mortgaged property, is:
where:
A is the amount of credit owed under the credit contract for the reverse mortgage.
B is the value of the reverse mortgaged property.
3 At the end of Part 3.5
Add:
28LE Reverse mortgage information statement
For the purposes of the definition of reverse mortgage information statement in subsection 5(1) of the Act, Schedule 5A sets out the document.
4 After regulation 74
Insert:
74A Reverse mortgages—disclosure about credit contract not including tenancy protection provision
For the purposes of subsections 18B(2) and (4) of the Code, Form 7A is prescribed.
5 After regulation 110
Insert:
110A Reverse mortgages—manner of keeping nominations or revocations
(1) This regulation is made for the purposes of subsection 185A(1) of the Code.
(2) If a nomination is current, or a revocation is still in effect because a new nomination of a person has not been made, the record of the nomination or revocation must include:
(a) a statement that the nomination or revocation is current; and
(b) the date the nomination or revocation was given.
(3) If a nomination is revoked, or a revocation is no longer in effect because a new nomination of a person has been made, the record of the nomination or revocation must include:
(a) the date the nomination was revoked; or
(b) the date the revocation ceased to have effect because the new nomination was made.
(4) The record of the nomination or revocation must be kept during the period for which the nomination or revocation is in effect.
6 After Form 7 of Schedule 1
Insert:
Form 7A—Disclosure about credit contracts (reverse mortgages)
subsections 18B(2) and (4) of the Code
regulation 74A of the Regulations
The rights of any spouse, partner or other resident in your home will be affected by this reverse mortgage
IMPORTANT
THIS NOTICE INFORMS YOU HOW THIS REVERSE MORTGAGE WILL AFFECT THE RIGHTS OF OTHER PEOPLE LIVING IN YOUR HOME.
When this reverse mortgage needs to be repaid, if another person (including a spouse, partner or other family member) is living in your house THEY WILL HAVE TO MOVE OUT SO YOUR HOUSE CAN BE SOLD.
BEFORE YOU SIGN THE CONTRACT FOR THIS REVERSE MORTGAGE ‑ You should carefully consider whether you want other people to continue living in the house, even if, for example, you move into aged care accommodation. To help you, you may wish to obtain independent legal advice.
If it is important to you that other people who live with you continue to have the right to remain in your home, then you should:
• find a reverse mortgage that provides rights to other residents;
• consider options other than a reverse mortgage.
If you need further information, go to www.moneysmart.gov.au.
MoneySmart shows you how reverse mortgages work.
Or call the Australian Securities and Investment Commission infoline on [provider to insert ASIC number].
The National Information Centre on Retirement Incomes [NICRI] also provides a free independent telephone information service to consumers covering all aspects of reverse mortgages. To speak to an information officer from NICRI call [provider to insert NICRI number].
7 After Schedule 5
Insert:
Schedule 5A—Reverse mortgage information statement
Note: See regulation 28LE.
