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Australian Salary Packaging Industry Association

Australian Salary Packaging Industry Association. National Consumer Credit Act and Financing of Insurance Premiums 6 September 2012. Summary of Presentation. Section 144 of the Code has limited application to credit provided to finance tyre and rim insurance

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Australian Salary Packaging Industry Association

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  1. Australian Salary Packaging Industry Association National Consumer Credit Act and Financing of Insurance Premiums 6 September 2012

  2. Summary of Presentation • Section 144 of the Code has limited application to credit provided to finance tyre and rim insurance • It is only where the factors listed below are present and known to the lender that section 144 will apply and make the credit contract unlawful:- a) the loan is made to finance insurance for a term greater than 1 year; and b) the insurance is over property which is mortgaged to secure repayment of the premium loan • The fact that tyres and rims are on a car that is under a novated lease, in and of itself, is irrelevant to the application of section 144

  3. Outline of Presentation • Setting the scene • Legislative review • Novated leases and tyre and rim insurance • Implications for ASPIA members • Next steps

  4. Section 144 of the CodeFinancing of insurance premiums “A credit provider must not knowingly provide credit to the debtor to pay the premium or finance the premium on insurance taken out by the debtor over mortgaged property for a period of insurance exceeding 1 year, but may provide credit for finance successive premiums for a period of 1 year or less”

  5. Defined Terms • Debtor • Mortgaged Property • Credit Provider • Credit

  6. Section 144(2)(b)OF THE CODE Section 144(2)(b) of the Code “This Code does not apply to insurance over mortgaged property that: • ………. • is insurance over property that is not mortgaged to secure obligations under the credit contract

  7. Section 144(2)(b)OF THE CODE Recast as: The Code applies only to insurance over property that is mortgaged to secure obligations under the credit contract

  8. Personal property securities act 2009 (Cth) “PPSA” • Section 12(1) of the PPSA: • Section 12(2) of the PPSA: “A security interest means an interest in personal property provided for by a transaction that, in substance, secures payment or performance of an obligation (without regard to the form of the transaction or the identity of the person who has title to the property).” For example, a security interest includes an interest in personal property provided by any of the following transactions, if the transaction, in substance, secures payment or performance of an obligation: (a)… (i)a lease of goods • Section 7 of the Code: (1)  This Code applies to a mortgage if:       (a)  it secures obligations under a credit contract or a related guarantee

  9. Does Section 144 Apply? • Does the novated lease package include financing of insurance? • Does the term of insurance extend past 1 year? • Is the payment of the insurance secured by a mortgage over the insured property?

  10. Final Summary – does section 144 apply? Loan made by a credit provider who is aware of: • The loan has been made to a consumer; • The consumer used the loan to buy insurance; • The insurance is for a period of more than one year; • The insurance is over property which is mortgaged to secure the repayment of the loan; and • That mortgage may be a typical chattel mortgage granted by the consumer to the credit provider. Equally that mortgage may be a less obvious mortgage such as a security interest retained by the credit provider/lessor under a novated lease and recognised by the Personal Property Securities Act

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