s 133DA the guide
The Act’s own summary
Part 3-2D of the National Consumer Credit Protection Act opens with a short guide to itself. It is the plainest statement of what a reverse mortgage lender owes before any contract exists:
“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.”
National Consumer Credit Protection Act 2009, section 133DASo the duties below reach a licensee that provides credit assistance on a reverse mortgage, as well as the credit provider that enters into the contract.
s 133DB before assessing
Before the assessment
Section 133DB sets out what a licensee must do before it makes the assessment the Act requires of it, “in connection with a credit contract with a consumer for a reverse mortgage”. In the order the section gives them, the licensee must:
Show or give the projections
Show the consumer in person, or give them in a way the regulations prescribe, projections of the home’s value and the consumer’s debt over time, made by using a website approved by ASIC.
Give a printed copy
“give the consumer a printed copy of the projections”.
Tell the consumer in person
“tell the consumer in person the things (if any) that relate to reverse mortgages and are prescribed by the regulations”. The projections may be shown or given; this step is to be done in person.
Give the information statement
“give the consumer a reverse mortgage information statement.”
One defence goes with the last step. For the information statement, “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.”
ss 133DC, 133DD
Three places the statement must be found
Before the assessment
Given to the consumer as one of the four steps in section 133DB.
On the website
Section 133DC applies to a licensee that provides, or holds itself out as able to provide, credit assistance on reverse mortgage contracts, or is a credit provider under one or more of them, and has a website that gives information about such contracts. That licensee “must make available through the website a reverse mortgage information statement.”
On request
Section 133DD applies to a licensee who provides, or holds itself out as able to provide, credit assistance for reverse mortgages, or who is a credit provider under them, when a consumer either asks it for a statement other than through its website or is one the regulations require to be given a statement, and the consumer gives it their name and the contact details the regulations require. Where the section applies, the licensee must give them one, in line with any requirements the regulations prescribe. The section also sets out defences: among them, that the licensee has already given the consumer a statement or reasonably believes someone else has, or that a credit provider reasonably believes the consumer would not be eligible for one of its reverse mortgages.
Between them, the three sections put the statement on the website of a licensee that has one about these contracts, within reach on request, and in the consumer’s hands before the assessment.
s 133DE the name
The name itself
Section 133DE covers representations a licensee makes about an actual or proposed credit contract or mortgage, and names the terms it governs: the phrase “reverse mortgage”, and “another term (whether or not in English) of similar import”. The Act’s guide to the Part sums the rule up: licensees must not use terms like these inaccurately.
The National Credit Code gives “reverse mortgage” its own legal meaning in section 13A, and ASIC may by legislative instrument declare other kinds of arrangement, involving a credit contract and a mortgage over a dwelling or land, to be reverse mortgages.
Code s 18C legal advice
Legal advice before signing
Section 18C of the National Credit Code is headed “Independent legal advice before entry into credit contract for reverse mortgage”. Its first subsection gives the regulations the power to act:
“(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.”
National Credit Code, section 18C(1)The rule, where the regulations make one, is about the credit provider’s entry into the contract, and the section lets the regulations provide for offences and civil penalties. Offences under those regulations may carry no more than 50 penalty units for an individual or 500 for a body corporate. The civil penalty for an individual is 5,000 penalty units, and the Code adds: “However, section 167B of the National Credit Act applies in the same way as it would apply if the regulation contravened were a civil penalty provision under that Act.”
Moneysmart speaks about advice in its own terms: it says its reverse mortgage calculator’s results are not advice about a financial product, and suggests considering advice from an independent professional before deciding on a reverse mortgage.