Commonwealth Numbered Acts Commonwealth Numbered ActsDivision 1--Definition of reverse mortgage
National Consumer Credit Protection Act 2009
1 Subsection 5(1)
Insert:
"reverse mortgage" has the same meaning as in section 13A of the National Credit Code.
2 At the end of Part 1 of the National Credit Code
Add:
(1) For the purposes of this Code, an arrangement is a reverse mortgage if the arrangement involves a credit contract, except a bridging finance contract, and a mortgage over a dwelling or land securing a debtor's obligations under the contract and either:
(a) the conditions in subsections (2) and (3) are met; or
(b) the arrangement is of a kind declared by ASIC under subsection (4) and is made on or after the commencement of that declaration.
Conditions
(2) The first condition is that the debtor's total liability under the credit contract or mortgage may exceed (to a limited or unlimited extent) the maximum amount of credit that may be provided under the contract without the debtor being obliged to reduce that liability to or below that maximum amount.
Note: The debtor's total liability can exceed the maximum amount of credit because interest and some other fees and charges are not included in an amount of credit: see subsection 3(2).
(3) The second condition is that, if the regulations prescribe any prerequisites for the arrangement to be a reverse mortgage, those prerequisites are met.
Declarations by ASIC
(4) ASIC may by legislative instrument declare specified kinds of arrangements involving a credit contract and a mortgage over a dwelling or land securing a debtor's obligations under the contract to be reverse mortgages.
3 Subsection 204(1) of the National Credit Code
Insert:
"reverse mortgage" : see section 13A.
National Consumer Credit Protection Act 2009
4 Subsection 5(1)
Insert:
"reverse mortgage information statement" means a document relating to reverse mortgages that complies with the regulations.
5 Subsection 204(1) of the National Credit Code
Insert:
"bridging finance contract" : a credit contract is a bridging finance contract if:
(a) when the contract is made, the debtor:
(i) reasonably expects to receive a lump sum before the term of the contract ends; and
(ii) intends to discharge the debtor's obligations under the contract so far as possible with that sum; and
(aa) the term of the contract is 2 years or less; and
(b) the conditions (if any) prescribed by the regulations are met.
6 Subsection 204(1) of the National Credit Code
Insert:
"engage in conduct" means:
(a) do an act; or
(b) omit to perform an act.
7 Subsection 204(1) of the National Credit Code
Insert:
"practising lawyer" means a person who is admitted to the legal profession by a federal court or a Supreme Court of a State or Territory and holds a practising certificate (however described) entitling the person to practise that profession.
8 Subsection 204(1) of the National Credit Code
Insert:
"reverse mortgaged property" , in relation to a credit contract for a reverse mortgage, means a dwelling or land that has been mortgaged to secure a debtor's obligations under the contract.
Part 2 -- Provisions applying to licensees
National Consumer Credit Protection Act 2009
9 At the end of section 133
Add:
Note: Sections 178 and 179 provide for remedies for anyone who suffers, or is likely to suffer, loss or damage because of a breach of this section. For example, if a consumer makes an unsuitable credit contract with a licensee, rather than making a not unsuitable credit contract for a reverse mortgage, a person who suffered, or is likely to suffer, loss as a result may be able to get court orders under section 178 or 179 to put the person in a position like the one they would have been in had the consumer entered into the contract for the reverse mortgage.
10 Before Part 3-3
Insert:
Part 3-2D -- Licensees and reverse mortgages
This Part has rules that apply to licensees that provide credit services or are credit providers.
Before providing credit assistance, or entering into a credit contract, for a reverse mortgage, licensees must provide projections of the debtor's equity in the property that may be covered by the reverse mortgage.
Licensees must also make reverse mortgage information statements available on their websites and on request.
Licensees must not inaccurately use terms like "reverse mortgage" in making representations about credit contracts and mortgages.
133DB Giving projections of equity before providing credit assistance or entering credit contract
Requirement to give projections
(1) Before a licensee makes a preliminary assessment for the purposes of paragraph 115(1)(c) or (2)(a), or an assessment for the purposes of paragraph 128(c), in connection with a credit contract with a consumer for a reverse mortgage, the licensee must:
(a) show the consumer in person, or give the consumer in a way prescribed by the regulations, projections that:
(i) relate to the value of the dwelling or land that may become reverse mortgaged property, and the consumer's indebtedness, over time if the consumer were to enter into a contract for a reverse mortgage; and
(ii) are made in accordance with the regulations by using a website approved by ASIC; and
(b) give the consumer a printed copy of the projections; and
(c) tell the consumer in person the things (if any) that relate to reverse mortgages and are prescribed by the regulations; and
(d) give the consumer a reverse mortgage information statement.
Civil penalty: 2,000 penalty units.
Offence
(2) A person commits an offence if:
(a) the person is subject to a requirement under subsection (1); and
(b) the person engages in conduct; and
(c) the person's conduct breaches the requirement.
Criminal penalty: 50 penalty units.
Defences for not giving projections
(3) For the purposes of paragraphs (1)(a) and (b), and of subsection (2) so far as it relates to either of those paragraphs, it is a defence if the licensee reasonably believes that:
(a) another person has:
(i) shown the consumer in person projections described in paragraph (1)(a); and
(ii) given the consumer a printed copy of the projections; and
(b) the projections are the same, or substantially the same, as those paragraph (1)(a) requires the licensee to show the consumer.
Note: For the purposes of subsection (2), a defendant bears an evidential burden in relation to the matter in subsection (3) (see subsection 13.3(3) of the Criminal Code ).
(4) For the purposes of paragraphs (1)(a) and (b), and of subsection (2) so far as it relates to either of those paragraphs, it is a defence if the circumstances prescribed by the regulations exist.
Note: For the purposes of subsection (2), a defendant bears an evidential burden in relation to the matter in subsection (4) (see subsection 13.3(3) of the Criminal Code ).
Defence for not giving reverse mortgage information statement
(5) For the purposes of paragraph (1)(d), and of subsection (2) so far as it relates to that paragraph, it is a defence if the licensee reasonably believes that another person has given the consumer a reverse mortgage information statement in the last 90 days.
Note: For the purposes of subsection (2), a defendant bears an evidential burden in relation to the matter in subsection (5) (see subsection 13.3(3) of the Criminal Code ).
When this section applies
(1) This section applies if a licensee:
(a) is:
(i) a person who provides, or holds himself or herself out as able to provide, credit assistance relating to credit contracts for reverse mortgages; or
(ii) a credit provider under one or more credit contracts for a reverse mortgages; and
(b) has a website that provides information about such contracts.
Requirement
(2) The licensee must make available through the website a reverse mortgage information statement.
Civil penalty: 2,000 penalty units.
Offence
(3) A person commits an offence if:
(a) the person is subject to a requirement under subsection (2); and
(b) the person engages in conduct; and
(c) the person's conduct breaches the requirement.
Criminal penalty: 50 penalty units.
133DD Making reverse mortgage information statement available in other situations
When this section applies
(1) This section applies if:
(a) a licensee is:
(i) a person who provides, or holds himself or herself out as able to provide, credit assistance relating to credit contracts for reverse mortgages; or
(ii) a credit provider under one or more credit contracts for reverse mortgages; and
(b) either:
(i) a consumer asks the licensee (otherwise than by using a website of the licensee) for a reverse mortgage information statement; or
(ii) the regulations require a consumer, in circumstances prescribed by the regulations, to be given a reverse mortgage information statement; and
(c) the consumer gives the licensee the consumer's name, and the contact details required by the regulations.
Requirement
(2) The licensee must, in accordance with any requirements prescribed by the regulations, give the consumer a reverse mortgage information statement.
Civil penalty: 2,000 penalty units.
Offence
(3) A person commits an offence if:
(a) the person is subject to a requirement under subsection (2); and
(b) the person engages in conduct; and
(c) the conduct contravenes the requirement.
Criminal penalty: 50 penalty units.
Defences
(4) For the purposes of subsections (2) and (3), it is a defence if:
(a) the licensee has given the consumer, or reasonably believes that someone else has given the consumer, a reverse mortgage information statement; or
(b) the licensee:
(i) is a credit provider under one or more credit contracts for reverse mortgages; and
(ii) reasonably believes that the consumer would not be eligible to make a credit contract with the licensee for a reverse mortgage; or
(c) there exist circumstances prescribed by regulations as circumstances in which the licensee is not required to give the consumer a reverse mortgage information statement.
Note: For the purposes of subsection (3), a defendant bears an evidential burden in relation to the matter in subsection (4) (see subsection 13.3(3) of the Criminal Code ).
133DE Representations that use the term "reverse mortgage" etc.
Credit service providers
(1) A licensee must not, in providing or offering to provide a credit service to a consumer, use either of the following terms (either alone or in combination with other words or letters) in a representation to the consumer about an actual or proposed credit contract or mortgage:
(a) the phrase "reverse mortgage";
(b) another term (whether or not in English) of similar import to the phrase "reverse mortgage".
Civil penalty: 2,000 penalty units.
Credit providers
(2) A licensee that is a credit provider must not use either of the following terms (either alone or in combination with other words or letters) in a representation to a consumer about an actual or proposed credit contract or mortgage:
(a) the phrase "reverse mortgage";
(b) another term (whether or not in English) of similar import to the phrase "reverse mortgage".
Civil penalty: 2,000 penalty units.
Defence
(3) For the purposes of subsections (1) and (2), it is a defence if:
(a) the representation truly represents that a credit contract:
(i) is or will be a credit contract for a reverse mortgage; or
(ii) is not or will not be a credit contract for a reverse mortgage; or
(b) the representation truly represents that a mortgage:
(i) is or will be part of a reverse mortgage; or
(ii) is not or will not be part of a reverse mortgage.
11 At the end of section 179
Add:
Presumption in favour of certain orders
(6) Subsection (7) applies if:
(a) the defendant is a credit provider who has contravened section 133 by entering into, or increasing the credit limit of, a credit contract (the illegal contract ) that is not a credit contract for a reverse mortgage; and
(b) the debtor's obligations under the illegal contract are secured by a mortgage over the debtor's principal place of residence; and
(c) the court is satisfied that, at any time in the period in which an assessment needed to be made to comply with section 128 in relation to the illegal contract:
(i) there was a credit provider (whether the defendant or not) offering credit through a reverse mortgage (whether or not the credit provider actually made such an offer to the debtor); and
(ii) the debtor would have been eligible to enter into a credit contract for the reverse mortgage; and
(iii) the credit contract for the reverse mortgage would not have been unsuitable for the debtor under section 133; and
(d) the plaintiff, or ASIC on behalf of the plaintiff, applies for an order under this section to let the plaintiff reside in the place to prevent or reduce loss or damage suffered or likely to be suffered by the plaintiff vacating the place.
(7) The court must consider the order appropriate to prevent or reduce the loss or damage and make the order unless the court is satisfied that the order would adversely affect a person other than the debtor and the defendant.
Part 3 -- Provisions applying to credit providers generally
National Consumer Credit Protection Act 2009
12 After subsection 17(15) of the National Credit Code
Insert:
Provisions for person other than debtor to occupy reverse mortgaged property
(15A) If the credit contract for a reverse mortgage is to make provision for a person other than the debtor to occupy the reverse mortgaged property, the contract document must contain provisions that have the following effect (whether or not the document also contains other provisions relating to such occupation by such a person):
(a) the debtor may at any time (before, when or after the contract is made):
(i) nominate to the credit provider a person who is to be allowed to occupy the property (whether alone or with other persons); and
(ii) revoke such a nomination by notice given to the credit provider;
(b) while a nomination described in paragraph (a) is in force, the nominated person has the same rights (against the credit provider) to occupy the property as the debtor has or would have apart from the death of the debtor or vacation of the property by the debtor.
Note: Other provisions contained in the contract document may, for example, limit the kinds of persons whom the debtor may nominate to the credit provider as persons who are to be allowed to occupy the property.
13 After section 18 of the National Credit Code
Insert:
18A Provisions that must not be included in credit contract for reverse mortgage
(1) A credit provider must not enter into a credit contract for a reverse mortgage that provides a basis for beginning enforcement proceedings relating to the contract for an event described in subsection (3).
(2) A credit provider must not agree to change, or unilaterally change, a credit contract for a reverse mortgage so that it provides a basis for beginning enforcement proceedings relating to the contract for an event described in subsection (3).
(3) For the purposes of subsections (1) and (2), the events are as follows:
(a) the debtor failing to inform the credit provider that another person occupies the reverse mortgaged property;
(b) the debtor failing, when the debtor occupies the reverse mortgaged property, to give the credit provider evidence that the debtor, or another person nominated by the debtor to the credit provider, occupies or occupied the reverse mortgaged property;
(c) the debtor leaving the reverse mortgaged property unoccupied while it is the debtor's principal place of residence;
(d) the debtor failing to pay a cost to a person other than the credit provider within 3 years after the payment became due;
(e) the debtor failing to comply with a provision of the credit contract if the contract does not make it clear how the debtor is to comply with the provision;
(f) the debtor breaching another credit contract with the credit provider;
(g) an event that involves an act or omission by the debtor and is prescribed by the regulations.
(1) This section applies if a proposed credit contract for a reverse mortgage does not include a provision (a tenancy protection provision ) for a person other than the debtor to have a right against the credit provider to occupy the reverse mortgaged property.
(2) A person must not provide a credit service relating to the contract unless the person has told the debtor, in writing in the form (if any) prescribed by the regulations, that the contract does not include a tenancy protection provision.
Criminal penalty: 50 penalty units.
(3) Subsection (2) does not apply if the person is or will be the credit provider under the contract.
(4) The credit provider must not enter into the contract unless the credit provider has told the debtor, in writing in the form (if any) prescribed by the regulations, that the contract does not include a tenancy protection provision.
Criminal penalty: 50 penalty units.
(5) An offence against subsection (2) or (4) is an offence of strict liability.
Note: For strict liability, see section 6.1 of the Criminal Code .
18C Independent legal advice before entry into credit contract for reverse mortgage
(1) The regulations may regulate or prohibit the entry by a credit provider into a credit contract for a reverse mortgage if the debtor has not obtained legal advice, in accordance with the regulations, about the contract or reverse mortgage.
(2) The regulations may provide for offences and civil penalties for contraventions of regulations made for the purposes of subsection (1).
(3) The penalties for offences described in subsection (2) must not be more than 50 penalty units for an individual or 250 penalty units for a body corporate.
(4) The civil penalties described in subsection (2) must not be more than 500 penalty units for an individual or 2,500 penalty units for a body corporate.
14 At the end of section 22 of the National Credit Code
Add:
(3) Subsection (1) does not apply to a contravention of a requirement of section 18B.
15 At the end of section 26 of the National Credit Code
Add:
(6) A credit contract for a reverse mortgage may not prohibit an early payment that:
(a) is made in the circumstances described in paragraph 86A(1)(a); and
(b) is of the amount described in paragraph 86A(1)(b).
16 After paragraph 33(2)(a) of the National Credit Code
Insert:
(aa) in the case of a continuing credit contract for a reverse mortgage--12 months; or
17 After paragraph 33(2)(b) of the National Credit Code
Insert:
(ba) in the case of a reverse mortgage not involving a continuing credit contract--12 months; or
18 After section 67 of the National Credit Code
Insert:
67A Changes to tenancy protection in credit contracts for reverse mortgages
A purported change to a credit contract for a reverse mortgage that makes provision for a person other than the debtor to occupy the reverse mortgaged property is void so far as the change purports to:
(a) remove a provision required by subsection 17(15A) to be contained in the contract document; or
(b) vary the contract so as to limit:
(i) the ability of the debtor to nominate to the credit provider a person who is to be allowed to occupy the reverse mortgaged property (whether alone or with other persons); or
(ii) the rights of a person nominated by the debtor to the credit provider to occupy the property.
19 Division 1 of Part 5 of the National Credit Code (heading)
Repeal the heading, substitute:
Division 1 -- Ending of credit contract by debtor etc.
Subdivision A -- Paying out contract etc.
20 After section 86 of the National Credit Code
Insert:
86A Application of this Subdivision
(1) This Subdivision applies in relation to a credit contract for a reverse mortgage and a mortgage securing the debtor's obligations under the contract if:
(a) the debtor's accrued liability (whether or not due and payable) under the contract is more than the amount (the adjusted market value ) worked out under subsection (2) for the reverse mortgaged property; and
(b) the credit provider receives an amount at least equal to the adjusted market value for the reverse mortgaged property either:
(i) as a payment accepted from the debtor under the credit contract; or
(ii) as proceeds of the sale by the credit provider of the reverse mortgaged property.
(2) The adjusted market value for the reverse mortgaged property is the amount worked out by:
(a) working out the market value of the property in accordance with the regulations (if any); and
(b) adjusting that value in accordance with the regulations (if any).
Regulations for the purposes of paragraph (b) may prescribe different adjustments to be made in different circumstances.
86B Discharge of debtor's obligations under credit contract and discharge of mortgage
(1) The debtor's obligations under the credit contract are discharged by force of this subsection.
(2) The mortgage securing those obligations is discharged by force of this subsection.
Note: This section does not apply in some cases: see section 86E.
If the amount received by the credit provider exceeds the adjusted market value for the reverse mortgaged property, the credit provider must pay the excess to the debtor.
Note 1: If the credit provider contravenes this requirement, the court may order the credit provider to compensate anyone affected by the contravention: see section 124.
Note 2: This section does not apply in some cases: see section 86E.
86D Credit provider must not demand or accept further payments
(1) The credit provider must not:
(a) purport to require payment under the credit contract; or
(b) accept a payment purportedly under the credit contract.
Note 1: If the credit provider contravenes this requirement, the court may order the credit provider to compensate anyone affected by the contravention: see section 124.
Note 2: This section does not apply in some cases: see section 86E.
(2) To avoid doubt, subsection (1) does not apply to the payment (if any) that is described in subparagraph 86A(1)(b)(i) and caused this Subdivision to apply.
86E Cases in which sections 86B, 86C and 86D do not apply
Sections 86B, 86C and 86D do not apply if:
(b) the debtor engaged in fraud, or made a misrepresentation, relating to the reverse mortgage before, at or after the time the credit contract was made; or
(c) circumstances prescribed by the regulations exist.
86F Relationship between this Subdivision and other provisions
This Subdivision does not limit any of the other provisions of this Division.
Subdivision C -- Notice of first direct debit default
21 Subsections 88(1) and (2) of the National Credit Code
Repeal the subsections, substitute:
Enforcement of credit contract
(1) A credit provider must not begin enforcement proceedings against a debtor in relation to a credit contract unless:
(a) the debtor is in default under the credit contract; and
(b) the credit provider has given the debtor, and any guarantor, a default notice, complying with this section, allowing the debtor a period of at least 30 days from the date of the notice to remedy the default; and
(c) the default has not been remedied within that period; and
(d) if the credit contract is for a reverse mortgage, the credit provider has spoken to one of the following persons by telephone or in person in that period and has thus both confirmed that the debtor received the default notice and informed the person of the consequences of failure to remedy the default, or has made reasonable efforts to do so:
(i) the debtor;
(ii) a practising lawyer representing the debtor;
(iii) a person with a power of attorney relating to the debtor's financial affairs.
Criminal penalty: 50 penalty units.
Note: If a debtor or guarantor has given a credit provider a hardship notice or a postponement request there may be extra requirements that the credit provider must comply with before beginning enforcement proceedings: see sections 89A and 94.
Enforcement of mortgage
(2) A credit provider must not begin enforcement proceedings against a mortgagor to recover payment of money due or take possession of, sell, appoint a receiver for or foreclose in relation to property subject to a mortgage, unless:
(a) the mortgagor is in default under the mortgage; and
(b) the credit provider has given the mortgagor a default notice, complying with this section, allowing the mortgagor a period of at least 30 days from the date of the notice to remedy the default; and
(c) the default has not been remedied within that period.
(d) if the mortgage secures an obligation under a credit contract for a reverse mortgage, the credit provider has spoken to one of the following persons by telephone or in person in that period and has thus both confirmed that the mortgagor received the default notice and informed the person of the consequences of failure to remedy the default, or has made reasonable efforts to do so:
(i) the mortgagor;
(ii) a practising lawyer representing the mortgagor;
(iii) a person with a power of attorney relating to the mortgagor's financial affairs.
Criminal penalty: 50 penalty units.
Note: If a mortgagor has given a credit provider a postponement request there may be extra requirements that the credit provider must comply with before beginning enforcement proceedings: see section 94.
22 After subsection 88(7) of the National Credit Code
Insert:
Some defaults are not a basis for a default notice
(7A) So far as a notice purporting to be a default notice relates to an alleged default under a credit contract for a reverse mortgage that is an event described in subsection 18A(3), the notice is not a default notice for the purposes of any of the following provisions:
(a) subsections (1) and (2) of this section;
(b) section 93.
Note: This has the effect that:
(a) if the credit provider begins enforcement proceedings relating to the alleged default the credit provider will contravene subsection (1) or (2) of this section (unless subsection (5) of this section applies); and
(b) section 93 will affect the operation of an acceleration clause on the basis of the alleged default.
(7B) To avoid doubt, subsection (7A) does not affect the status of the notice as a default notice for the purposes of section 89, 94 or 95.
23 At the end of Division 2 of Part 5 of the National Credit Code
Add:
(1) This section applies in relation to a credit contract for a reverse mortgage and a mortgage securing the debtor's obligations under the contract if:
(a) Subdivision B of Division 1 applies in relation to the contract and the mortgage (see section 86A); and
(b) just before the amount was received by the credit provider as described in paragraph 86A(1)(b), the debtor's accrued liability described in paragraph 86A(1)(a) exceeded that amount; and
(c) one or more of the conditions in section 86E are met (so that sections 86B, 86C and 86D do not apply).
(2) If section 88 requires the credit provider to give the debtor or mortgagor a default notice before beginning enforcement proceedings to recover any of the excess, the credit provider must not begin them unless:
(a) the default notice given to the debtor or mortgagor specifies:
(i) the amount received by the credit provider; and
(ii) the debtor's accrued liability just before that amount was received; and
(iii) the conditions in section 86E that are met; and
(b) if the credit provider knows of a practising lawyer acting for the debtor or mortgagor and the credit provider gave the debtor or mortgagor the default notice by means other than giving it to the lawyer--the credit provider has given the lawyer a copy of the default notice at the same time as, or as soon as practicable after, giving the debtor or mortgagor the notice.
Criminal penalty: 50 penalty units.
24 After paragraph 111(1)(h) of the National Credit Code
Insert:
(ha) subsection 17(15A);
25 After paragraph 111(2)(e) of the National Credit Code
Insert:
(ea) subsection 17(15A);
26 After section 185 of the National Credit Code
Insert:
185A Records of nominations of persons to occupy reverse mortgaged properties
(1) A credit provider under a credit contract for a reverse mortgage that provides for the debtor to nominate to the credit provider a person who is to be allowed to occupy the reverse mortgaged property, and to revoke such a nomination, must keep in accordance with the regulations a record of any such nominations and revocations.
(2) A person commits an offence if:
(a) the person is subject to a requirement under subsection (1); and
(b) the person engages in conduct; and
(c) the person's conduct contravenes the requirement.
Criminal penalty: 50 penalty units.