Australian PPSR system world-first, but industry urges simplification to drive uptake

|

Sydney, Australia: 3 April 2014 – While Australia’s centralised Personal Property Securities Register (PPSR) has gained world class recognition, simplification of the system would cut costs and reduce uncertainty for large businesses and SMEs who interact with the system, the Veda PPSR Forum heard yesterday.

Industry players told the forum that a scheduled review of the PPSA by the Commonwealth Attorney General's Department this year had the potential to deliver improvements to the system which, while delivering the best aspects of PPSR systems around the world, was overly complex.  

Speaker Gavin McCosker, Chief Operating Officer, Australian Financial Security Authority (AFSA), the government body managing the PPSR, said the creation of the national register was a profound change for the Australian credit industry. Much of the heavy lifting and transitioning was complete.

“Centralising more than 70 Commonwealth, state and territory laws, common laws and rules of equity governing security interests over personal property with PPSR has been worthwhile. We’ve developed a world class register that will grow in importance to mitigate risk and support economic growth.  Most organisations using the register have benefitted from the adjustments and enhancements made over the past 24 months.” he said.

Mr McCosker said interaction with the PPSR was increasing, demonstrated by the growth of registrations of 610,485 from December 2012 to 31 December 2013. The register is also being used as an effective risk management tool, with the number of searches also continuing to grow.

“One of the measures the World Bank uses to evaluate the effectiveness of a secured properties registry is the ratio of searches to registrations.  Australia is one of only a handful of countries that has a positive ratio of new searches to registrations, with more than three searches to one registration.

“AFSA continues to work with business and the community on improving the level of awareness and understanding of thePPSR .”

Bruce Whittaker, Partner in law firm Ashurst, told the Forum the PPSA picked up the best aspects of a range of international systems, but in doing so had created complexity.

“There are 320 pages in the Australian legislation, whereas New Zealand has less than half that. Simplifying the legislation would encourage greater take-up by industry sectors, in particular SMEs who’ve been slower to comply. This would align with the Australian Federal Government’s commitment to deregulate and cut red tape,” Mr Whittaker said.

The process of trying to comply with the detail within the legislation has also brought previously overlooked risks to the fore. And the changes in the rules have resulted in complications for some structured transactions and, in some cases,made financiers reluctant to take on certain risks, he said.

“Organisations are seeking legal advice on whether they’re protected from these risks, but it can be hard to provide clear guidance until some of these scenarios are tested in court. Until more cases go through the legal system, we can’t be sure how a judge might rule.”

Veda, who processes the majority of all PPSR organisation grantor searches, said industry feedback was that more credit managers were appreciating the value of the PPSA. Veda’s 2013 Credit Manager Survey showed 66% of credit managers believed the benefits outweighed the risks of losing ownership and the costs of compliance – this was up from 62% in 2012.

Speaker Carol Chris, General Manager, Commercial & Property Solutions at Veda, said two factors would drive further adoption – firstly, education, and secondly, improving the experience for customers using the PPSR.

“The PPSR changes have impacted daily business processes, documentation, systems and the management of credit risk. We know that uptake has improved: pre-PPSR, 70% of surveyed credit managers used ASIC charges data. This dropped to 11% upon moving to PPSR in 2012, but the 2013 survey showed usage building back up to 41%,” Ms Chris said.

“Through further education, we hope that usage will quickly climb to pre PPSR levels of 70% using the register. I would hope that future Veda Credit Manager Surveys will show close to 100% adoption.”

Veda’s interactive online portal integrated directly into PPSR, works as a gateway for anyone who wants to correctly register, manage, and track their security interests. Veda’s PPSR Multi-Search product allows users to conduct multiple identifier grantor searches, enabling them to find information quickly and accurately.

“For the SME market, without the benefit of extensive legal support, the PPSR can appear complicated when they first consider using it. Veda has endeavoured to make the process of search and registration as simple and streamlined as possible. We see our PPSR Forums as a chance for disparate industries to come together and discuss common issues that impact all participants.”

The Forum, the third of its kind, attracted attendees from a range of industries including legal practitioners, accounting advisers, financial institutions and trade credit providers.