From July 2021, changes to comprehensive credit report legislation come into effect. 

Consumers will have greater access to their credit information.  Lenders will be restricted in disclosing financial hardship information in certain circumstances.

Buy Now Pay Later (BNPL) schemes are relatively new in the retail credit space but are making their significant presence felt in the supply market for retail credit – and also for unwary consumers.

In short, BNPL provides immediate credit for retail purchases, allowing the consumer to defer immediate payment to (usually) four subsequent fortnightly payments.  The attraction of the system is that there is no extra cost to the consumer – the credit is funded by the retailer paying a merchant fee and by fees being payable to the BNPL provider on late payments.

Readers will no doubt have heard of ‘Chapter 11’ being talked about in the context of changing Australia’s insolvency laws.  What is being referred to are the 95 provisions of the US Bankruptcy Code 1978 which are considered the most liberal and debtor-friendly.

They certainly place great emphasis on corporate rescuing but from a different angle to our own experience in Part 5.3A of the Corporations Act which has been our corporate rescue legislation since 1993.  Chapter 11 is used as a model for insolvency law reforms in several other countries and more so since governments have needed to respond to COVID-19.

What does it mean for you/your business?

Mandatory Comprehensive Credit Reporting (“CCR”) came into effect on 1 July 2018, which required the big four banks to fully participate in the credit reporting systems.

It is often important in corporate insolvency to consider the enforcement of director personal guarantees and the rights of creditors.

It is commonplace for directors of a company, particularly in the SME sector, to give a personal guarantee to persuade banks and other financial institutions to lend money to the company.

The Federal Government’s new ‘Small Business Restructuring’ and ‘Simplified Liquidation’ processes for companies commenced on 1 January 2021.

For further details, see: New insolvency processes The New Debt Restructuring Procedure – A Case Study

Legislation has recently been introduced into Parliament for the new debt restructuring process.  The new process, which is only available for companies with debts less than $1 million, is intended to commence from 1 January 2021.

The new process will involve a “small business restructuring practitioner”, who must be a Registered Liquidator, helping the business prepare the plan, certify the plan to creditors and oversee disbursements once the plan is in place.

When exercising their commercial judgment during the COVID-19 pandemic, Registered Trustees in Bankruptcy walk a fine line between fairness to bankrupt individuals and maximising returns to creditors.

The economic turbulence triggered by the COVID-19 pandemic has caused our Government to put buffers in place to delay the potential onset of bankruptcy.