ASIC Fines for Prohibited Securities
Recently, ASIC has successfully fined a Credit Provider $5500 for using Prohibited Securities as security in a Credit Contract. ASIC has a very dim view of this illegal practice and have acted swiftly to take action if they find any Lender has been using prohibited securities, banned since 1 July 2010.
Prohibited Securities, as defined by National Consumer Credit Protection Act 2009 include, but are not necessarily limited to:
- An employee’s remuneration or employment or benefits under a superannuation scheme unless the regulation permit it
- Essential Household property (as prescribed by regulations) unless: a) The mortgagee supplied the goods to the mortgagor as part of a business carried on by the mortgagor (but not where the goods were supplied for the purposes of supply); or B) The mortgagee is a linked credit provider of the person who supplied the goods to the mortgagor
- Goods that are property used by the mortgagor in earning income by personal exertion if the goods do not have a total value greater than the relevant limit
- An obligation under a credit contract cannot be secured by a cheque (or bill of exchange or promissory note) endorsed or issued by the debtor or guarantor.