Lenders with carried over instruments

This is Information Sheet 110 (INFO 110). It outlines the requirements of lenders with carried over instruments (COI lenders) under the credit regime.

• Key obligations of unlicensed carried over instrument lenders
• Carried over instrument lenders who fail to meet certain probity requirements
• Forms to use for notifying ASIC

Who is a lender with carried over instruments?

A lender with carried over instruments is a credit provider or lessor who has not offered – nor been assigned – any new credit contracts since 30 June 2010, but continues to collect under pre-existing contracts.

Key obligations of unlicensed carried over instrument lenders

Lenders with carried over instruments must either:

• apply for a credit licence, or
• tell us that they will be acting as an unlicensed carried over instrument lender using the approved form

Obligations of unlicensed COI lenders who are not in an EDR scheme

Additional record-keeping and notification requirements apply to unlicensed carried over instrument lenders who do not elect to join an external dispute resolution (EDR) scheme including:

• keeping registers of complaints and requests for hardship variations and stays of enforcement for the carried over instruments (s47(1)(f)), and
• notifying us of significant contraventions or likely contraventions (s52).

For more information on the obligations of unlicensed carried over instrument lenders see reg 25E and Schedule 2 of the National Credit Regulations 2010 . This schedule applies the provisions in the National Credit Act to unlicensed carried over instrument lenders with some modifications.

Carried over instrument lenders who fail to meet certain probity requirements

Unlicensed carried over instrument lenders who fail to meet certain probity requirements are known as ‘prescribed unlicensed carried over instrument lenders’ and have restrictions placed on their conduct in relation to carried over instruments.

For example, if a carried over instrument lender, or an officeholder of the lender, is a person who is disqualified from managing a corporation, or who was convicted serious fraud in the last 10 years, the lender will be a prescribed unlicensed carried over instrument lender.

List of probity requirements

For a full list of the probity requirements see the definition of ‘prescribed unlicensed carried over instrument lender’ in Schedule 2 to the National Credit Regulations 2010. A list of the probity requirements is also set out in Form COI1.

Prescribed unlicensed COI lenders who wish to engage in credit activities

If you are a prescribed unlicensed carried over instrument lender, you must appoint a credit licensee as your representative to engage in the credit activity on your behalf. You may continue to receive amounts owing to you, but you cannot actively engage in credit activities in relation to the carried over instrument (for example, contacting the consumer to collect debts).

If you are a prescribed unlicensed carried over instrument lender (at time of first notifying ASIC or because of an event occurring after that notification) you need to notify ASIC using Form COI1. In the form, you must include information about:

• the probity requirements you have not met
• the licensee you have as your representative.

The licensee you appoint as your representative will also need to notify ASIC in a separate form (Form COI3) that they have been appointed.

Forms to use for notifying ASIC

Form COI1 Notice of carried over instruments

Form COI2 Change of details for unlicensed carried over instrument lender and prescribed unlicensed carried over instrument lender

Form COI3 Notice of acting for a prescribed unlicensed carried over instrument lender

Form COI4 Unlicensed carried over instrument lender annual compliance certificate

Important notice

Please note that this information sheet is a summary giving you basic information about a particular topic. It does not cover the whole of the relevant law regarding that topic, and it is not a substitute for professional advice. We encourage you to seek your own professional advice to find out how the applicable laws apply to you, as it is your responsibility to determine your obligations.

You should also note that because this information sheet avoids legal language wherever possible, it might include some generalisations about the application of the law. Some provisions of the law referred to have exceptions or important qualifications. In most cases, your particular circumstances must be taken into account when determining how the law applies to you.