Non-bank lenders – Know your disclosure obligations to APRA

Introduction

As of 5 March 2018, the Financial Sector (Collection of Data) Act 2001 (Cth) (the Act) was amended to widen the coverage of data collection in respect of non-bank lenders. Now, all non-bank lenders that have either $50 million or more in assets that consist of debts or have loaned $50 million or more in the previous financial year are caught by the Act and must register with the Australian Prudential Regulation Authority (APRA) and disclose certain information about its money lending business. If caught, a non-bank lender has 60 days to comply with the registration and disclosure requirements. Failure to comply with the Act may lead to substantial penalties.

APRA and the Law

APRA is the Australian federal government regulatory body responsible for overseeing banks, credit unions, insurance companies, superannuation funds and other bodies with the purpose of promoting financial stability. As part of APRA’s oversight role, APRA maintains a registry of certain moneylending corporations (registrable corporations) and collects data on these corporations. All registrable corporations must register with APRA, disclose to APRA certain information about its money lending business and keep APRA updated of all changes to the corporation under the Act.

Does my company need to register?

On and from 5 March 2018, the Act defines registrable corporations to include corporations that satisfy the following criteria:

1. the corporation engages in the provision of finance in the course of carrying on business in Australia; and
2. the corporation either:
   • has more than $50 million in assets that consist of debts due to the corporation from transactions entered into in the course of the provision of finance by the corporation; or
   • has advanced more than $50 million of loans during the previous financial year and these loans resulted from the carrying out, whether directly or indirectly, the activities of the corporation; and
3. the corporation is not an ADI for the purposes of the Banking Act 1959 (Cth) (i.e. not a bank).

The expression “debts due” is defined in the Act to include a debt even if the time for payment has not arrived.

When working out if a corporation (test corporation) has more than $50 million in assets that consists of debts or has advanced more than $50 million of loans, all corporations related to the test corporation (as determined under the Corporations Act 2001 (Cth)) are treated as part of the test corporation.

A corporation must within 60 days after becoming a registrable corporation register with APRA and disclose to APRA the required disclosures. If a corporation was already a registrable corporation at 5 March 2018, it must register with APRA and disclose to APRA the required disclosures on or before 4 May 2018.

What must my company disclose?

Section 9(5) of the Act requires the disclosure of the following information:

1. the name, the place and date of incorporation and the address of the registered office of the corporation;
2. the name, and the address of the registered office, of every corporation that is related to the corporation;
3. the particulars of the principal methods by which the corporation ordinarily borrows moneys;
4. a copy of the last audited balance-sheet of the corporation. But, a statement showing the assets and liabilities in Australia of the corporation will be accepted if:
   • if there is no such balance-sheet, a statement showing the assets and liabilities in Australia of the corporation; or
   • the balance-sheet includes both assets and liabilities in Australia and assets and liabilities outside Australia but does not show the assets and liabilities in Australia separately from the assets and liabilities outside Australia.

Once a corporation is registered, section 9(6) of the Act requires the corporation to update APRA of any of the following changes within 60 days of the change:

1. a change in its name or the address of its registered office;
2. a change in the principal methods by which it ordinarily borrows moneys or in the principal kinds of finance it ordinarily provides;
3. a corporation that was related to it ceases to be so related; or
4. a corporation becomes related to it.

Under the Act, a corporation (first corporation) is “related” to another corporation (principal corporation) if:

1. the first corporation is related to the principal corporation if they would be related as determined under the Corporations Act 2001 (Cth); and
2. either:
   • (if the principal corporation engages in a business of selling goods by retail) the first corporation engages in the provision of finance in the course of carrying on a business in Australia of selling goods by retail; or
   • (if the principal corporation does not engage in a business of selling goods by retail) the first corporation’s sole or principal business in Australia is the borrowing of money and the provision of finance and the debts due to the first corporation from the provision of finance consist of more than 50% of its assets in Australia.

As previously mentioned, the expression “debts due” includes a debt even if the time for payment has not arrived.

The expression “provision of finance” is defined under the Act to include lending money; carrying out activities that result in the funding or originating of loans or other financing; acquisition of debts due to another person; and supplying goods by way of hire-purchase.

What if my company doesn’t comply?

For each day that a corporation fails to comply with the obligations to:

1. register with APRA and disclose the required information within the allocated time, the corporation is liable for a daily penalty of up to 50 penalty units; and
2. update APRA within the allocated time, the corporation is liable for a daily penalty of up to 10 penalty units.

Each penalty unit is $210 as at the date of this article and is subject to yearly indexation.

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Liability limited by a scheme approved under Professional Standards Legislation.
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