Personal Property Securities Program
Personal Property Securities Program
Cost Recovery Impact Statement
External Consultation Summary
Personal Property Securities Program
Ref / Issue / Proposals / Rationale / AGD Response1 / Allen & Overy
1.1 / We suggest that the responsibility for cost analysis be transferred to another agency to ensure each review is undertaken impartially. / ITSA does not seem like the obvious choice for a PPS cost analysis / The preliminary cost recovery impact statement (CRIS) is being developed jointly by AGD and ITSA, in recognition of the transfer of operational responsibility for the PPS register.
The conduct of the CRIS process by the responsible agency is consistent with the Australian Government Cost Recovery Guidelines.
The Department will remain involved in subsequent CRIS processes as part of its central policy responsibility.
Stakeholder consultation is and will remain a part of the CRIS process to ensure transparency.
The development of the CRIS cost and transaction model was undertaken by an external cost recovery expert.
1.2 / Cost information should be released annually by 30 June - earlier than the publication dates of ITSA’s annual report and PBS. / The inclusion of cost information in ITSA’s annual report is consistent with other cost recovery agencies and the Australian Government Cost Recovery Guidelines.
Providing information by 30 June would place a significant administrative burden upon ITSA/AGD and is not considered feasible.
1.3 / Some of the proposed fees are clearly not nominal. / The Commonwealth Government’s Bills Digest (15 October 2009, no.36, 2009-10) on the PPS Bill 2009 stated that the use of the PPS register will incur “nominal charges” / The proposed fees are to be set to ensure recovery of the full cost of services on a whole-of-life basis, as well as providing pricing incentives to business to maintain the accuracy information on the register.
1.4 / It is recommended that the forecast demand is reviewed to include these types of arrangements which would not have been included in data collected from the states and territories. / It is unclear whether allowance has been made for the many security interests which are not required under current law. This would include:
- Certain finance leases,
- Factoring arrangements,
- Conditional sale agreements,
- Consignments,
- Hire Purchase agreements, and
- Retention of title arrangements.
1.5 / That no fee be applied to transitional registrations. / Under the transitional arrangements, in the case of existing security interests which are not currently on a register, the secured party will need to arrange registration itself. The AGD in its general information document on the PPS register (released in June 2010) stated that a fee will not apply when registering a transitional security interest on the PPS register. It is not clear whether any allowance has been made for this in estimating the demand levels / A fee item “Transitional registrations” will be included in final CRIS.
No fee will be charged for transitional registrations.
The estimated volume of transitional security registrations has been included in the CRIS model.
1.6 / In determining the levels of fees to be charged for a particular PPS register activity, consideration should be given to the requirement of different kinds of financing. / There is no statistical support given for the proposition that higher fees will in fact curb excess demand and therefore fee levels designed for this purpose are questionable.
ASIC imposes a $139 fee to lodge a charge. Late lodging fees of $67 (1 month) and $278 (more than 1 month) apply if lodgement takes place past the prescribed period.
Under the new PPS regime the proposed fee for the online registration of a financing statement for an indefinite period is $130 ($144 through contact centre). / The fee for a registration with a not stated end time is being reviewed as part of finalising the CRIS.
The higher fee for registration with a not stated end time is considered to represent an effective disincentive for long dated or unstated registrations.
2 / Australian Bankers’ Association
2.1 / The fees and charges donot satisfactorily cater for commercial transactions where finance is provided in a continuing credit basis (e.g. overdrafts and credit cards). / While the impact on existing business models is noted, it is considered that business models for commercial transactions involving continuing credit may be tailored to align with desired timeframes and associated fees.
2.2 / It is unclear whether the scale of fees is based on overall cost recovery rather than the basis of individual registrations. / The proposed fees are based on overall cost recovery whilst ensuring that the relativities of individual fees is equitable, simple and consistent with the Government’s policy objectives.
The fee structure for registrations is being reviewed as part of finalising the CRIS.
The higher fee for longer duration registrations is considered to represent an effective disincentive for long dated or unstated registrations.
The lower fee for shorter duration registrations provides an incentive for secured parties to maintain their registrations.
2.3 / It would be of assistance if ITSA could generate a monthly report for each SPG, listing the all charges due to expire over the next 3 months / This would allow the SPG to review the need to renew registrations for a further term whilst also advising the bank’s customers to expect that their account will be charged the fee. / A report of registrations to expire within a defined period for a secured party group will be available for Account Holders to generate within the PPS register. The report is included as part of account user administration functionality.
2.4 / If volumes are understated, can we assume a reduction in fees after 12months.
It is suggested that discussions be held with NZ where they also significantly underestimated volumes. / Victoria REVS advised that their searches alone counted for more than 50% of the Government’s total estimated volume.
NZ feedback that searches increased significantly because of new registrations.
Corporates will be increasing their registrations to cover Retention of Titles, equipment leases etc. / The transactions volume assumptions, including the category splits, are being reviewed in light of stakeholder feedback and the stronger than anticipated performance of the Australian economy.
The Department has consulted with New Zealand and Canadian as part PPS reform including cost recovery.
This consideration included growth in registrations allowing for the idiosyncrasies of the Australian reform and business environment. There remains significant uncertainty regarding the uptake of the PPS system and growth in ‘new areas’ impacted by the reform.
The Department is considering stakeholder feedback on suggested volumes as part of finalising the CRIS.
2.5 / A review of the cost recovery policy should be undertaken after 12 months. / A review of cost recovery arrangements within the first 12 months of operations was noted in the draft CRIS. This is to remain in the final CRIS.
2.6 / Confirmation is requested that the cost of registering a financing statement does come with a verification statement and the $3.70 for a copy of a verification statement means a duplicate of the original. / Yes. A copy of the financing statement is included in the fee for a registration. A separate fee is charged for the issue of a duplicate copy of the original statement. This will be clarified in final CRIS.
3 / Australian Finance Conference
3.1 / The proposed fees and charges are inconsistent with the cost recovery guidelines and the forecast levels of demand underestimate the numbers of transactions that will occur.
The basis of forecasting should be provided to the industry in the interests of transparency. / The forecast volumes do not allow for significant growth.
It is not stated in the CRIS whether any allowance has been made for substantial number of additional registrations and searches that will occur in respect of security interests not currently registrable (e.g. PPS leases and retention of title arrangements) or where it is currently uneconomic under current ASIC/REVS pricing. / The transactions volume assumptions, including the category splits, are being reviewed in light of stakeholder feedback and the stronger than anticipated performance of the Australian economy.
The Department has consulted with New Zealand and Canadian as part the PPS reform including cost recovery.
This consideration included growth in registrations allowing for the idiosyncrasies of the Australian reform and business environment. There remains significant uncertainty regarding the uptake of the PPS system and growth in ‘new areas’ impacted by the reform.
The revised CRIS will provide high level information on the transaction volumes, the source of the transactions estimates and growth model assumptions.
3.2 / The fee for an undefined registration is too high. A penalty of 17 times the base fee is excessive. / The desired objective of avoiding clutter on the register will be avoided due to the nil fee for cancelling a registration, together with the standard requirements of incoming financiers for removal of prior and obsolete registrations from the register. / The fee for a registration with a not stated end time will be reviewed as part of finalising the CRIS.
The higher fee for registration with a not stated end time is considered to represent an effective disincentive for long dated or unstated registrations. This combined with the free discharge of a security interest provide an effective disincentive for long dated or unstated registrations and an incentive to remove discharged registrations
4 / Australian Institute of Credit Management (AICM)
4.1 / The proposed fees for undefined registrations ($130) and for a registration greater than 7 years less than 25 years ($37) will not be well received by prospective users. / AICM member feedback. / The fee structure for registrations is being reviewed as part of finalising the CRIS.
The higher fee for longer duration registrations is considered to represent an effective disincentive for long dated or unstated registrations.
The impact on existing business models is noted, however, it is considered that business models for commercial transactions may be tailored to align with desired timeframes and associated fees.
4.2 / AICM would question the basis on which the number of registrations which will fall into either categories has been calculated (i.e. not stated and 7-25 years).
The AICM would recommend that the fees for registration in these two categories be substantially lower. / Based on figures published by the ABS, the AICM would strongly advocate that the predicted level of demand for these two categories would be significantly higher than predicted. / The transactions volume assumptions, including the category splits, are being reviewed in light of stakeholder feedback and the stronger than anticipated performance of the Australian economy.
There remains significant uncertainty regarding the uptake of the PPS system and growth in ‘new areas’ impacted by the reform.
4.3 / AICM would recommend that should the level of registrations fall below expectations then the fees could be reviewed. / A review of cost recovery arrangements is proposed to be conducted within 12 months of the commencement of operations.
4.4 / AICM believes that the principle that the imposition of fees discourages excess demand is at odds with the legislation. / The more the PPSR is used the greater will be its relevance and reliability. / The higher fee for longer duration registrations is considered to represent an effective disincentive for long dated or unstated registrations rather than a disincentive to register use.
Furthermore, the lower fee for shorter duration registrations provides an incentive for secured parties to maintain their registrations.
4.5 / All fees and charges should be GST free. / It is intended that the fees will be GST free.
4.6 / AICM does not believe that the users of the PPSR could be defined as a narrow group. / The benefits to the Australian economy and community of the PPSR are incalculable. If the proposed fees and charges do not reflect the benefit of PPSR on the total consumer population then there is a serious misunderstanding of the significance of these reforms amongst government decision makers / It is agreed that the economic benefits of the reform are difficult to quantify and the beneficiaries of the economic benefits broad at the highest level.
In the context of specific transactions, however, the beneficiaries represent an identifiable group who can be charged for use of the PPSR. The beneficiaries are the individual(s) or organisation(s) in the security agreement or conducting the search.
5 / Dun and Bradstreet
5.1 / AGD should implement a two tier PPSR pricing model, which provides a lower per unit price for brokers than for parties that utilise the PPSR service directly through the AGD’s web portal. / A lower price will enable brokers to provide services at competitive rates. This will reduce the demand for contact centre services.
This will result in increased pressure on AGD’s systems and require substantial investment in a highly trained customer service team. / A key fees policy is that there will not be fee discounts for specific users, including brokers. Based on the nature of the PPSR cost base, there is no evidence of cost reduction arising from higher individual user transaction volumes. Reducing fees for one particular group of users would increase the fees for others.
5.2 / The registered charges summary which is available under the current system should continue to be available under the new model. / The B2G specifications suggest that the initial summary will not be returned (the initial search notifies the user there are charges on the register for the grantor and the next step in the search process is to extract full details on each registration). There are a number of issues associated with this system:
- Users will be unaware how many records they need to purchase (and hence will not know upfront the cost associated with their search).
- Users will be forced to pay more for searches as each charge must be separately purchased.
It should also be noted that a user may re-access the results of a previous search, including drill down capability, during the defined ‘search access period’, which is currently set at 24 hours.
5.3 / The entire suite of registered charges should be accessible in a single transaction and a standard price is charged for this record regardless of the number of charges listed in the report (consistent with the current system). / As above. / Please refer to the above response.
6 / GE Capital
6.1 / The draft CRIS proposes a fee of $3.70 for amending a financing statement, where a change of details does not impact on the end date.
GE recommends that the changes that are required as a result of limitations with the PPSR design or migration strategy should be at no cost. / GE’s understanding is that all existing Fixed Charges on ASIC’s Register of Company Charges will be migrating to the PPSR as Fixed and Floating charges (All Present and After Acquired Property).
GE believe that unique identifiers, such as VIN No, manufacturer Number associated with the fixed charge will not migrate across to PPSR.
GE is considering amending migrated registrations post the go live in May 2011 such that the registration reflects the correct collateral class under the PPSA and where applicable includes details such as serial no, collateral description etc. / The Department is working with existing register owners to ensure that the migration of existing unique identifiers (e.g. serial numbers) where possible.
Should this not prove possible, the Department is exploring options to support cleansing of existing data pre and post golive. Further advice on data cleansing will be provided to stakeholders separately.
6.2 / GE seeks clarification on what is considered a minor amendment to a financing statement. Specifically:
- Is a change to collateral class considered a minor amendment?
- Is the carving out of goods from a financing statement for collateral class “All Present and After Acquired Property” considered a minor amendment.
The removal of a good(s) from a financing statement for collateral class “All Present and After Acquired Property” is considered to be a change in collateral class to “All Present and After Acquired Property except”. As such, it is considered an amendment, not a minor amendment.
6.3 / No fee should be charged in respect of activity listed under fee items 8.1 and 8.2 because of the limitation in the amendments of SPGs. (reference is probably incorrect and should be 5.1 - establishment of SPG group and 5.2 – Transfer of all registrations to another Secured Party Group). / An SPG cannot be amended once created. The only option is to create a new SPG structure and transfer existing registrations from the first SPG to a newly created one. This is a limitation of the PPSR design. / The final CRIS will clarify that a number of items are to be free:
5.1 – establish a Secured Party group or amend details,
5.2 – transfer all registrations to another Secured Party Group, and
5.3 – change address for service for a Secured Party Group.
6.4 / Please clarify whether the “issue copy” of a verification statement is in fact a reference to ‘re-issue copy” of a verification statement. / A copy of the financing statement is included in the fee for a registration. A separate fee is charged for the issue of a duplicate copy of the original statement. This will be clarified in final CRIS.
6.5 / The volume of registrations and searches is significantly understated. / Once PPSA becomes effective, multiple registrations will be required for the same security agreement in many instances. This is mainly because of certain grantor types, unique nature of contract documentation and certain finance product types. / The transactions volume assumptions, including the category splits, are being reviewed in light of stakeholder feedback and the stronger than anticipated performance of the Australian economy.