January next year (2019) is a milestone date for the Personal Property Securities (“PPS”) Act as there’ll be 7 years of registrations on the PPS Register. It may be one that affects you because every business that made 7 year registrations (and according to AFSA figures, this is the most common registration period) will see them start to expire from 30 January 2019 onwards. If you don’t renew before the registration lapses, though, you’ll end up having no security on the goods and that could end up costing you.
I’d set a reminder note for yesterday to write this but co-incidentally, the latest issue of the AICM Credit Journal also contained an article on this subject, so others are also thinking along the same lines.
Why tell you this now? Well, I can’t see any of you wanting to review your PPS registrations in either December when you’ll be busy and then looking forward to your holiday break or in January when you return. That means you should start having a look at your current registrations between now and the end of November and seeing which ones might need to be renewed.
Note whilst you may not be able to repossess a security because of s.91 of the National Credit Code (“the Code”) (which generally prohibits you from repossessing goods where the amount currently owed is less than 25% of amount of credit provided, though there are exceptions to this), renewing the security registration is probably going to be a good idea. This is because it still allows you to retain some control should the borrower decide to dispose of the goods, particularly for serial-numbered goods like motor vehicles, and a current PPS registration will stop most buyers in their tracks when they want to sell.
A lapsed finance certificate means you have absolutely no priority over the security so it may mean you miss out on what’s still owing. Importantly, if the borrower were to then try to sell it on without telling you, whilst you can always repossess under s.91(2)(b) of the Code as that’s one of the exceptions if you haven’t renewed the registration, you might end up in a fight with whoever now has priority over it. You’ll have lost yours, and there’s no guarantee you won’t end up with a legal battle on your hands. Renewing will make repossession much easier, lower your stress level and, very possibly reduce your legal bill.
Equifax stated that based on Assurance Reviews by EDX between 2012-2018, “more than 80% of businesses that have registered on the PPSR are making serious errors which may limit or invalidate their interests in the property in question should the debtor become insolvent. There is no benefit to renewing an invalid PPS registration. In light of this, businesses should use the renewal process as the time to correct their registrations. Even if everything was correct at the time of registration, factors such as your customer details, or the way you described your goods, may have changed in the interim, which means the registration needs updating.”
So, what do you need to do?
1: Review current PPSR registrations
Look at your current PPSR registrations and check the expiry dates to find which ones need some action. You might find you have some that will expire in January 2019.
2. Identify which ones need renewing
Once you’ve worked out which customers you still have a security interest with, check to see if they will need renewing. Hopefully, you’ll have discharged any that needed it when the contract was paid out but we suggest you check anyway to see if you’ve missed any. Discharge them asap.
3. Verify your client’s details
Verify that your current PPSR registrations show your client’s correct ACN / ABN, company name and current address details. Equifax recommended you update where necessary if ANY of their details have changed.
4. Renewal method
You should now know which ones you might need to extend but you could also extend this and check all of them as well. That way, you won’t have to do it later. If they are just simple renewals, you can do them yourself but if there are some corrections to be made or they are complicated, we suggest you seek advice from your lawyer or Compliance Manager on the best method to renew these.
Aside from your time, renewing the financing certificates isn’t going to be free. Fortuitously, the PPSR fees have just been reduced (well, slightly). In most cases, your loan contract will allow you to pass on the cost to your client so remember to process journals for them as you renew but check you can before doing so.
6. Get on with it
Renew as early as possible rather than leaving it to the last minute. You won’t want to come back from your Christmas/New Year holiday and start this process, particularly if there’s a few to do. Equifax have suggested you allow “at least one month before the expiration date to renew” but I’m suggesting more.
7. Ongoing review
If you haven’t implemented a financing certificate renewal process to make sure you’re always on top of your PPS registrations, this would be a great time to think about doing so. Perhaps in the New Year?