NATIONAL CONSUMER CREDIT PROTECTION AMENDMENT REGULATIONS 2010 (NO. 2) (SLI NO 105 OF 2010) EXPLANATORY STATEMENT

NATIONAL CONSUMER CREDIT PROTECTION AMENDMENT REGULATIONS 2010 (NO. 2) (SLI NO 105 OF 2010)

ATTACHMENT

Details of the National Consumer Credit Protection Amendment Regulations 2010 (No. 2)

Chapter 1 Preliminary

Regulation 1 – Name of Regulations

This regulation provides that the name of the Regulations is the National Consumer Credit Protection Amendment Regulations 2010 (No. 2).

Regulation 2 – Commencement

This regulation provides for the Regulations to commence on 24 May 2010.

Regulation 3 – Amendment of National Consumer Credit Protection Regulations 2010

This regulation provides that Schedule 1 amends the Principal Regulations.

Schedule 1 – Amendments

Items 1 to 5 inserts, in subregulation 3(1), definitions of terms used in the regulations. Some of these terms are discussed in more detail in the commentary at the relevant amendment.

Item 1 inserts a definition of authorised contract. This definition will interact with the definition of unsolicited contact in item 5, with the two definitions determining the scope of the exemption from licensing under regulation 23 and regulation 23A (introduced by item 20). The effect of the definition is discussed under items 18 and 19.

Item 1 inserts a definition of carried over instrument, which is discussed at Schedule 2.

Item 2 inserts a definition of credit card that is consistent with the definition in subsection 12DL(5) of the Australian Securities and Investments Commission Act 2001. The definition is relevant to determining whether or not a person can rely on the exemption under regulation 23A.

Item 3 inserts a definition of lawyer for the purposes of regulation 24 of the Principal Regulations. This definition is provided by item 24.

Item 3 also inserts definitions of linked credit provider and linked credit provider or lessor that are relevant to the exemptions in regulation 23A and regulation 23 respectively (for third parties dealing with a credit provider or lessor who is linked).

Item 4 inserts a definition of services. The definition was previously included in regulation 23, and will now apply to both regulation 23 and regulation 23A.

Item 5 inserts a definition of unlicensed carried over instrument lender, which is discussed at Schedule 2.

Item 5 also inserts a definition of unsolicited contact. The definition of unsolicited contact is relevant to determining whether or not a person can rely on the exemptions under regulation 23 and regulation 23A and is discussed under items 18 and 19.

Item 6 amends the existing definition in paragraph 3(2)(c) of the Principal Regulations of when a person is associated with a lessor, following the inclusion of the definition of a linked credit provider or linked lessor in regulation 25B (by item 22).

Item 7 introduces a definition so that a reference to a modified provision of the Credit Act will be to that provision as modified in accordance with Division 2 of Part 2-4 of the Credit Act and Schedule2 of the Regulations.

Item 8 inserts regulation 7A When a licence may be granted – carried over instruments, which adds an additional requirement that ASIC must consider when determining whether to grant a licence to non-Authorised Deposit-taking Institutions (ADIs) under section 37 of the Credit Act. It provides that ASIC must not grant a licence to a credit provider, lessor, mortgagee or beneficiary of a guarantee who intends to enter new contracts after 1 July 2010, unless they elect to apply for a licence to cover activities in relation to both their COIs and new contracts. This means that if a person with COIs intends to offer new contracts after 1 July 2010, they have to apply for a licence which covers all of their contracts uniformly. That is, they can not choose to have the modified regime apply to their COIs and the licensing regime apply to their new contracts. Regulation 25F imposes the same requirement in relation to ADIs.

Item 9 inserts regulation 9A Conditions for unlicensed carried over instrument lender – credit register. Item 2.13 inserts modified section 45 of the Credit Act which requires all UCOILs to meet such conditions in relation to their conduct as are prescribed by regulations. Regulation 9A prescribes conditions in relation to updating credit registers. Specifically, it requires UCOILs to notify ASIC of the following specified matters within 10 business days of their occurrence:

• changes to particulars entered in the credit register for UCOILs (for example, changes in the name or contact details) (subregulation 9A(2));

• changes that amount to a change in control of the UCOIL (subregulations 9A(3) to (5)); and

• for non-Australian Prudential Regulation Authority (APRA) regulated bodies – material adverse changes to financial position (subregulation 9A(6)).

This information will improve ASIC’s ability to effectively carry out its regulatory functions in respect of supervising those persons. It will also ensure that the information on the credit registers is current and reliable.

Item 10 amends Principal regulation 14 to substitute the abbreviated title with the words ‘Chief Executive Officer’.

Item 11 inserts new headings, as Part 2-4 of the Principal Regulations now covers modifications as well as exemptions. The Part is divided into two Divisions, covering the two topics separately. The amendment also creates two subdivisions in Division 1, dividing the exemptions into two categories: Subdivision 1.1 defines the exemption by the persons engaging in credit activities, and Subdivision 1.2 defines the exemption by the type of activities being engaged in (irrespective of the person who is doing it).

Item 12 removes paragraph 20(11)(c) from the Principal Regulations.

Principal subregulation 20(11) provides an exemption from licensing obligations for an organisation that provides services and makes benefits available to its members, and an incidental benefit is that members are eligible to apply to enter into a particular credit contract or consumer lease.

Principal paragraph 20(11)(c) requires the organisation using the exemption to take reasonable steps to provide the licensee or registered person with information relevant to deciding whether or not to enter the credit contract or consumer lease. This requirement is not consistent with industry practice and is not required if the organisation acts as a representative of the licensee or registered person.

Item 13 ensures that organisations using the exemption under subregulation 20(11) do so on behalf of a licensee or registered person under a contract or agreement.

This ensures that the organisation is a representative of the licensee or registered person. As a representative, the licensee or registered person is responsible for the conduct of the organisation under Division 4 of Part 2-3 of the Credit Act.

Item 14 replaces subregulation 23(1), by, in effect, deleting existing paragraph 23(3)(c), consequent to other changes to regulation 23.

Item 15 introduces a specific reference to the supplier at the end of subparagraph 23(3)(a)(i), so that other references to the phrase in regulation 23 refer to that person rather than other persons listed in subparagraph 23(3)(a)(ii) or (iii).

Items 16 and 17 insert subparagraph 23(3)(a)(iii) into the Principal Regulations, expanding the categories of people who are exempt and make a consequential grammatical change to the conjunction at the end of principal subparagraph 23(3)(a)(ii). The effect of the change is discussed in more detail under items 18 and 19.

Items 18 and 19 amend regulation 23 of the Principal Regulations, which exempts providers of point of sale credit services from needing to hold a licence. Item 18 inserts replacement paragraphs 23(3)(b) to (d), and item 19 introduces replacement subregulations 23(4) to (7). The regulation as amended applies:

• to particular persons, as defined in paragraph 23(3)(a), in general terms, where they are acting as a supplier of goods or services in accordance with an arrangement with a credit provider or lessor;

• where they are engaging in specified credit activities, as defined in paragraph 23(3)(b);

• where they are engaging in those credit activities in relation to a person who is a licensed or registered linked credit provider or lessor;

• where the purpose of the credit meets specified criteria, in general terms, that it is used for the purchase of goods or services from the supplier of goods or services; and

• where the consumer is not approached as a result of unsolicited contact.

The changes to the regulation are as follows.

• The categories of persons who are exempt in paragraph 23(3)(a) are expanded (by item 17) to include, in subparagraph 23(3)(a)(iii), persons engaging in a credit activity primarily on the premises of the supplier of goods and services with the agreement of the supplier.

• There is a minor change to the structure of paragraph 23(3)(b) to include subregulation 23(5) that includes definitions of phrases referred to in subparagraphs 23(3)(b)(i) and (v) (relevant credit provider), subparagraphs 23(3)(b)(ii) and (v) (relevant lessor), subparagraph 23(3)(b)(iii) (relevant credit provider) and subparagraph 23(3)(b)(iv) (relevant beneficiary of a guarantee). These provisions do not change the substantive operation of the previous regulation but will clarify that the supplier must be dealing with a person who is:

– either licensed or registered; and

– a linked credit provider or lessor of the supplier.

• Paragraph 23(3)(d) is deleted and replaced with paragraphs 23(3)(d) and (e). The ‘predominant use’ test that applies to all types of regulated contracts under the Principal Regulations are modified to include a separate test in respect of each type of contract: loan contracts (paragraph 23(3)(d)), continuing credit contracts (paragraph 23(3)(e)) and consumer leases (paragraph 23(3)(f)).

Principal subregulations 23(6) and (7) have been deleted but substantially reproduced in amendments to subregulation 3(1) by inserting definitions of authorised contact and unsolicited contact. The definitions clarify the effect of the exemption where a point of sale transaction was the result of either authorised or unsolicited contact.

The definition provides that a point of sale transaction is the result of unsolicited contact and not exempt where it follows from unsolicited contact between a consumer approached from business premises that are not physically separate from premises used by consumers for purposes other than being contacted in relation to the supply of goods or services. This provision is intended to limit the scope of the exemption so it cannot be relied upon where a person is operating from business premises that are not physically separate (including by the absence of a wall) and directly approaching consumers who are passing by on premises, such as passageways or areas used by consumers to walk from one place to another.

An example of this type of business premises is a temporary or open both or stall that has been set up in or around a shopping centre or retail precinct (including, for example, in airports), that allows the supplier to directly approach consumers as they are passing by.

The definitions (inserted by item 1) also clarify the scope of the exemption by specifically providing that contact is authorised where it is the result of:

• posting to, or leaving at a residential address, written promotional material about goods or services,

• contact in relation to the possible return of goods supplied to the consumer or the provision of goods to replace returned goods to the consumer; and

• contact that results from a consumer providing their contact details for the sole purpose of being contacted about the supply of goods or services. The provision has been amended so that contact must occur within three months of the consumer providing their contact details (rather than after a reasonable period). A time period has been quantified so as to provide certainty as to the scope of the exemption.

There are also other minor changes to the structure of Principal regulation 23. The definition of services has been removed from subregulation 23(5), and moved into the modification in regulation 25D (provided for by item 20). The definition of linked credit provider or linked lessor has been removed from subregulation 23(4), and moved into the modification in regulation 25B.

Item 20 inserts regulation 23A Persons exempt from requiring a licence – providers of point of sale credit services for a credit card, which provides an exemption for providers of point of sale credit services in limited circumstances where they are engaging in credit activities. The structure of the regulation is similar to regulation 23 and it applies:

• to particular persons, as defined in paragraph 23A(3)(a), in general terms, where they are acting as a supplier of goods or services in accordance with an arrangement with a credit provider or lessor;

• where they are engaging in specified credit activities, which are restricted to the following activities, either acting on behalf of a credit provider (subregulation 23A(4)) or providing credit services (subregulation 23A(5));

• where they are only engaging in these credit activities in respect of a particular credit product, that is, a continuing credit contract under which a credit card is provided, and that credit card is either branded or co-branded with name or some other characteristic of the supplier of goods or services (or of a related body corporate);

• where the person offering the credit product is both a linked credit provider of the supplier, and either licensed or registered; and

• where the consumer is not approached as a result of unsolicited contact.

The intention is that the exemption operates where a person is being provided with a branded or co-branded credit card and there may be a delay between the consumer entering into the contract, and their first use of the card. In these circumstances the supplier will not be able to rely on the exemption provided in regulation 23 as the initial use of the card may not necessarily be for the supply of goods or services from the supplier.

Item 21 inserts a new heading for Subdivision 1.2, as defining the exemptions in the Subdivision by the type of activities being engaged in (irrespective of the person who is engaging in the activity).

Item 22 clarifies that regulation 24 is being amended in reliance on the exemption and modification powers in paragraphs 110(b) and (c) of Schedule 2 to the Credit Act.

Item 23 amends the exemption from licensing for a person if they are a registered tax agent by updating the reference to refer to the Tax Agent Services Act 2009 which, amongst other things, provides for the registration scheme for tax agents.

Item 24 modifies the definition of the term lawyer for the purposes the exemption from licensing in Principal regulation 24 to align it with the definition of the same term in the Corporations Act 2001, in order to narrow the scope of the exemption to practising solicitors.

Item 25 inserts a new heading Division 2, to clarify that the following regulations modify provisions in the Credit Act.

Item 26 inserts regulations 25B to 25D. These regulations insert modified definitions of terms relevant to the interpretation of regulation 23 (as amended) and regulation 23A. The terms are:

• linked credit provider or linked lessor (regulation 25B);

• linked credit provider (regulation 25C); and

• services (regulation 25D).

The effect of these amendments is technical and:

• changes the location of these definitions (which were previously included in regulation 23); and

• in the case of regulations 25C and 25D extends the application of these definitions to regulation 23A.

Item 26 also inserts regulation 25E Modifications – unlicensed carried over instrument lender, which applies Chapter 2 of the Credit Act as modified by Schedule 2 of the Regulations to UCOILs. Unless otherwise stated, the provisions in Chapter 2 apply to UCOILs unchanged.

Item 26 also inserts regulation 25F Modifications – ADI in relation to carried over instrument. Regulation 25F modifies section 38 of the Credit Act so that:

• if an ADI with COIs who intends to engage in credit activities after 30 June 2010 (continuing lender) chooses to apply for a licence, ASIC must only grant the licence if the ADI applies in relation both their COIs and new contracts. That is, the ADI cannot choose to have the modified regime apply to their COIs and the licensing regime apply to their new contracts only;

• if an ADI with COIs who does not intend to engage in credit activities after 30 June 2010 (closed book) chooses to apply for a licence (rather than be regulated under the modified regime) ASIC must grant them a licence to engage in credit activities in relation to their COI only; or

• if an ADI has no COIs (new entrant) ASIC must grant the licence if the ADI applies to engage in credit activities.

In each case the ADI must make a statement (in the approved form) that they will comply with their obligations as a licensee.

Item 27 inserts regulation 30A Credit Register – unlicensed carried over instrument lender, which sets out the details regarding UCOILs that ASIC is required to include in the credit register for UCOILs for the purposes of section 213 of the Credit Act. Under subregulation 30A(2), ASIC has discretion to publish an alternative address on the register if ASIC determines that publishing the lender’s residential address on the register would put the personal safety of the lender or their family at risk.

Item 28 modifies the circumstances in which a lender is exempted from the need to comply with the Code in relation to the calculation of interest on credit contracts relating to residential investment properties. The item amends Principal subregulation 78(3) so that the credit provider, on refinance of a loan in relation to a residential investment properties, only has to comply with the Code where the property, at the time of the refinance, is being used predominantly for personal, domestic or household purposes (for example, the lender has moved into the property and now lives there). A lender will continue to be exempt from the Code where the property is, for example, being used for commercial purposes rather than personal use.

Item 29 omits Principal regulation 101, which allows a comparison rate schedule to include a statement as to the frequency of repayments used to calculate the comparison rate contained in the schedule. However, the requirement to provide schedules has not been retained and subsequently the regulation will be removed.

Item 30 amends Form 1 in the Principal Regulations to correct an incorrect reference to the Credit Act. The reference in paragraph 4 in Form 1 to section 208 of the Credit Act will be amended to section 295.

Item 31 substitutes a replacement Form 12 in the Principal Regulations. This new Form 12 is similar to the existing Form 12 but allows credit providers to have a standard method of providing information regarding the hardship threshold to consumers which will not change over time. It also provides for minor typographical enhancements.

Item 32 inserts Schedule 2, which modifies Chapter 2 of the Credit Act in order to apply it to UCOILs without infringing the Constitution.

Schedule 2 – Modifications – carried over instruments

Items 2.1 to 2.5 insert various definitions:

• Carried over instrument (COI) has the meaning given by section 4 of the Transitional Act; and

• Prescribed unlicensed carried over instrument lender means an unlicensed carried over instrument lender (UCOIL) who:

– has a prescribed state or territory order in force against them;

– has a banning or disqualification order under Division 8 of Part 7.6 of the Corporations Act 2001 force against them;

– has had a judgement entered against them as a result of a civil action taken by an agency of a State or Territory government under the UCCC within the last 10 years;

– is banned from engaging in a credit activity under a law of a State or Territory or the Credit Act;

– is disqualified from managing a corporation under Part 2D.6 of the Corporations Act 2001;

– has been convicted of a serious fraud within the last 10 years;

– is incapable of managing his or her affairs because of physical or mental incapacity;

– is not a trustee of a trust and is insolvent;

– is or has been registered to engage in credit activities under the Transitional Act and whose registration was suspended or cancelled involuntarily;

– is or has been the holder of an Australian credit licence (ACL) and whose ACL is suspended or was cancelled involuntarily; or

– is or has been the holder of an Australian financial services licence and whose licence is suspended or was cancelled involuntarily.

Where the UCOIL is a body corporate, partnership or trust these conditions will apply to each director or secretary of the body corporate; each partner of the partnership or each trustee of the trust.

• Registered person has the meaning given by section 4 of the Transitional Act.

• Unlicensed carried over instrument lender (UCOIL) means a credit provider or lessor who has been the credit provider or lessor in relation to a COI since 1 July 2010 and is not a licensee or registered person or exempt from the Act (including by regulation).

The effect of the definition is that a person to whom a COI has been assigned after 1 July 2010 cannot be a UCOIL and will be required to hold an ACL.

Item 2.6 substitutes a modified heading for Chapter 2 of the Credit Act to reflect that the modified regime for COIs applies to unlicensed credit providers and lessors.

Items 2.7 to 2.10 omits Part 2-1 of the Credit Act, so that:

• the prohibition against engaging in credit activities without a licence in section 29 does not apply in relation to credit activities undertaken by UCOIL in relation to their COI in the modified regime;

• the prohibitions in sections 30, 32 and 33 already apply to unlicensed persons and do not need to be restated;and

• the prohibition against engaging in credit activities with another person who would contravene section 29 in modified section 31 applies. For example, a UCOIL must not assign a loan to an unlicensed or unregistered person after 1 July 2010.

Item 2.11 substitutes a modified heading for Part 2-2 of the Credit Act to reflect that the obligations apply to UCOILs.

Item 2.12 omits Divisions 1 to 3 of Part 2-2 of the Credit Act, which provide the mechanics for applying for, and granting, an ACL. These provisions are not relevant to UCOILs.

Item 2.13 substitutes a modified version of section 45 of the Credit Act to allow conditions to be prescribed in the Regulations.

Item 2.14 omits section 46 of the Credit Act, which dictates special procedures for imposing licence conditions on APRA-regulated bodies. These provisions are not relevant to UCOILs.

Items 2.15 and 2.16 substitute modified headings for Division 5 of Part 2-2 and section 47 of the Credit Act to reflect the scope of the regime being implemented by the regulations.

Item 2.17 substitutes a modified version of subsection 47(1) of the Credit Act to impose general conduct obligations on UCOILs. UCOILs are be required to:

• act efficiently, honestly, and fairly;

• have in place adequate arrangements to ensure consumers are not disadvantaged by any conflicts of interest;

• ensure its representatives are adequately trained to engage in credit activities in respect of COIs;

• maintain competence to engage in credit activities in respect of COIs;

• have an internal dispute resolution system in place;

• where the lender is not an EDR member ‑ keep registers of complaints, requests for hardship variations and stays of enforcement;

• have adequate arrangements and systems in place to ensure compliance with its obligations, and document these to ensure compliance; and

• unless APRA-regulated – have adequate resources and risk management.

Similar general conduct obligations, other than the need to keep registers of complaints and requests for hardship variations and stays of enforcement, apply to ACL holders.

Item 2.18 amends the paragraphs referred to in subsection 47(2), to ensure that the scalability concept applies to the appropriate obligations. That is, the way in which lenders may comply with these obligations is flexible (for example, some could be legitimately achieved through outsourcing functions to third parties), and the adequacy of such arrangements will be determined with reference to the nature, scale and complexity of the COI lender’s business.

Commentary on the general conduct obligations for licensees and how the assessment of whether compliance is adequate can be found at paragraphs 2.105 to 2.133 in the Consolidated Explanatory Memorandum to the Credit Bill and at paragraphs 205.19 to 205.22 in ASIC’s Regulatory Guide 205 Credit licensing: General conduct obligations. This commentary may also provide guidance to UCOILs.

Item 2.19 omits subsection 47(3) of the Credit Act, which refers to regulations made in relation to internal dispute resolution requirements.

Item 2.20 serves the dual purpose of exempting UCOILs from having to meet the requirements for compensation arrangements applicable to licensees in section 48 of the Credit Act and inserting the standards for internal dispute resolution applicable to UCOILs. The relevant standards are contained in Australian Standard AS ISO 10002-2006 Customer satisfaction - Guidelines for complaints handling in organisations published by SAI Global Limited on 5 April 2006.

Item 2.21 substitutes a modified heading for section 49 of the Credit Act to reflect the scope of the regime being implemented by the Regulations.

Items 2.22 and 2.24 replace the various references to licensee in section 49 of the Credit Act with references to UCOIL. Section 49 obliges UCOILs to provide statements and audit reports if directed by ASIC. Commentary on these obligations can be found at paragraphs 2.134 to 2.139 in the Consolidated Explanatory Memorandum to the Credit Bill.

Item 2.23 inserts subsection 49(3A) into the Credit Act to impose an additional requirement on UCOILs who are not members of an EDR scheme. This category of UCOILs will be required to provide ASIC with an audit report attesting to their compliance with the disclosure requirements in section 17 and/or 174 of the Code (formerly sections 15 and 152 of the UCCC). Failure to comply is a civil offence with a maximum penalty of 2,000 penalty units.

Item 2.25 sets the due date for the audit report as 31 December 2010, or later as extended by ASIC in writing.

Item 2.26 substitutes a modified version of section 50, which requires UCOILs to provide information about the register of complaints and the registers of requests for hardship variations and stays of enforcement as requested by ASIC. Failure to comply with this requirement may attract a maximum civil penalty of 2,000 units.

Item 2.27 removes the obligation to cite the ACL number in certain circumstances under section 52 (as this is not relevant to UCOILs). It also inserts an additional obligation on UCOILs who are not EDR members to notify ASIC of a significant contravention, or likely significant contravention, of specified provisions of the Credit Act as soon as possible and not later than 10 business days of becoming aware of it. The term ‘significant’ is not defined in the credit legislation. Whether a contravention (or likely contravention) is significant or not will depend on the individual circumstances. The nature, scale and complexity of a UCOIL’s credit activities might also affect whether a particular breach is significant or not. Failure to comply with this provision may carry a civil or criminal penalty and may be treated as a strict liability offence.

Items 2.28, 2.31 and 2.34 modify section 53 so that it requires UCOILs to lodge an annual compliance certificate by 15 August each year starting in 2011. Where the UCOIL is a body corporate, the annual compliance certificate must be signed by the Chief Executive Officer (CEO), or if there is no CEO, the responsible person with authority for compliance. Where the UCOIL is an ADI, the CEO or a fit and proper person under Prudential Standard APS 520 must sign the annual compliance certificate.

Items 2.29, 2.30, 2.32 and 2.33 replace the various references to licensee in section 53 of the Credit Act with references to UCOIL. Commentary on these provisions can be found at paragraphs 2.144 to 2.146 in the Consolidated Explanatory Memorandum to the Credit Bill.

Item 2.35 omits Division 6 of Part 2-2 of the Credit Act. Division 6 deals with the circumstances in which an ACL can be suspended, cancelled or varied and is not relevant for UCOILs.

Item 2.36 substitutes a modified heading for Part 2-3 of the Credit Act as UCOILs cannot appoint credit representatives.

Item 2.37 omits Divisions 1 and 2 of Part 2-3 of the Credit Act. Division 2 deals with the authorisation of credit representatives. These provisions are not relevant for UCOILs as they cannot appoint credit representatives.

Item 2.38 replaces the various references to licensee in section 73 of the Credit Act with references to UCOIL. Modified section 73 allows ASIC to give UCOILs information about their representatives and gives qualified privilege to persons who use the information appropriately. Commentary on this provision can be found at paragraphs 2.182 to 2.187 in the Consolidated Explanatory Memorandum to the Credit Bill.

Item 2.39 substitutes a modified heading for Division 4 of Part 2-3 of the Credit Act and inserts modified sections 74 to 76.

Modified section 74 requires a prescribed UCOIL to appoint a licensee (or registered person during the transitional period) to engage in credit activities beyond being the lender or lessor of record in relation to COIs on their behalf from 1 July 2010. That is, they must undertake their activities such as collecting payments or responding to requests for hardship variations through another person rather than having direct contact with the consumer.

Modified section 75 requires a prescribed UCOIL to notify ASIC of their status, and the name and contact details of the appointee, within 15 business days. Failure to comply with this provision may carry a civil or criminal penalty and may be treated as a strict liability offence.

Modified section 76 requires the licensee (or registered person) to notify ASIC of their appointment within 15 business days. Failure to comply with this provision may carry a civil or criminal penalty and may be treated as a strict liability offence.

Items 2.40 to 2.45 replace the various references to licensee in sections 87, 88, 90 to 92 and 94 to 96 of the Credit Act with references to UCOIL. These sections relate to financial records. Commentary on these provisions can be found at paragraphs 2.218 to 2.223 in the Consolidated Explanatory Memorandum to the Credit Bill.

Item 2.46 omits Division 3 of Part 2-5 of the Credit Act. Division 3 deals with trust accounts of credit services licensees. These provisions are not relevant to UCOILs.

Item 2.47 substitutes a modified subsection 102(1) to omit reference to audits of trust accounts of credit service licensees as they are not relevant to UCOILs. Commentary on these provisions can be found at paragraphs 2.234 to 2.243 in the Consolidated Explanatory Memorandum to the Credit Bill.

Items 2.48 to 2.53 replace the various references to licensee in sections 102 to 105 of the Credit Act with references to UCOIL. These sections relate to auditors.

Item 2.54 inserts sections 106A and 106B of the Credit Act, which set out conditions of eligibility to be auditor. Failure to comply with this provision may carry a civil or criminal penalty and may be treated as a strict liability offence.

Item 2.55 omits Part 2-6 from modified Chapter 2 of the Credit Act. However, ASIC can still use Part 2-6 of the Credit Act to further exempt or modify provisions in modified Chapter 2 if necessary.

Commonwealth Numbered Regulations - Explanatory Statements