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Thursday, 22 September 2011
Page: 6933

Financial Services and Superannuation

(Question No. 57)

Senator Johnston asked the Minister representing the Minister for Financial Services and Superannuation, upon notice, on 28 September 2010:

(a) What steps or procedures are banks and lending institutions required to undertake before enforcing their securities; and (b) is there a prescribed level of consultation with the customer.

Senator Sherry: The Minister for Financial Services and Superannuation has provided the following answer to the honourable senator's question:

Lending institutions are required to comply with the Debt collection guideline for collectors and creditors, as published by the Australian Competition and Consumer Commission and the Australian Securities and Investments Commission. This guideline explains how Commonwealth consumer protection laws relevant to debt collection apply. These laws include: Schedule 2, Parts 2-2 and 3-1of the Competition and Consumer Act 2010; and Part 2, Division 2 of the Australian Securities and Investments Commission Act 2001 (ASIC Act).

In addition, the part 5 of the National Credit Code, as part of the National Consumer Credit Protection Act 2009, provides procedures which must be followed prior to the enforcement of credit contracts, mortgages and guarantees, including issuing default notices and providing time for these to be remedied. On 5 August 2011, the Assistant Treasurer released an Exposure Draft of the National Consumer Credit Protection Amendment (Enhancements) Bill 2011. This Bill provides for the enhancement of the National Credit Code, including amending the provisions concerning enforcement of securities to provide that upon default a customer may provide the lending institution with a hardship variation request, which the lending institution must address before proceeding.

The procedure for enforcing a secured debt will also differ depending on the nature of the debtor and the form of secured property.

For land, State and Territory real property laws govern the enforcement of real property mortgages.

If the security sought is against the assets of a company, enforcement will be subject to the requirements imposed upon receivers and controllers by the Corporations Act 2001.

If the security is over personal property, currently, Australia has different laws and registers in each State and Territory which governs processes for enforcement. The Personal Property Securities (PPS) reform, which are contained in the Personal Property Securities Act 2009, brings together the different Commonwealth, State and Territory laws and registers under one national system. Personal Property Securities Service (PPSS) - Insolvency and Trustee Service Australia (ITSA) will assume responsibility for the PPS Register and Customer Contact Centre when the PPS Register commences operation in October 2011.

The steps and procedures followed in enforcing securities will also depend on the terms of the security itself. Many security agreements provide for giving notice or provide other prerequisites for action prior to enforcement.

Legal requirements operate in addition to lending institutions own internal processes which outline the steps and procedures to be followed by their staff prior to enforcing any security.