Law in place giving clarity to lending

A new law was enacted and passed to allow registrations for loan interests and personal properties security for competing creditors, says retired law professor Paul Von.
Von explained the new act at the Personal Property Security Act conference in Port Moresby yesterday. The conference was attended by magistrates and judges to review the law.
Von said the Personal Property Security Act (PPSA) was a system based on laws in Australia, New Zealand, the United States and Canada.
He said the law had been operating for a number of years in those countries.
“It provides certainty and clarity to personal property security interests,” Von said.
“The law will provide banks and financers with more certainty about what they can lend money against, and consequently will free up for people who don’t have necessary assets and real property,” he said
That would allow the banks and financers to have personal property security and enable lending that way, he said.
Von said this meant banks and the financers in PNG would be able to lend money with less concern, less uncertainty and less costs which should bring down the cost for lending and consequently borrowing.
“The implementation would be straight forward initially but experience overseas has shown that legal and accounting practitioners were often unaware of the requirements of the legislation, so consequently there were problems that could arise and the judiciary would have to deal with those conflicts,” he said.
“It was often simple things such as names going out incorrectly, or if there is a case where someone might not have registered.”
Von said the types of properties that would be eligible were movable properties or for a consumer, it could be something like a car.
“It’s very wide ranging and it can include broadly as, for example, equipment for the mining sector,” he said
“So if somebody is operating on a mine they might want to raise money against their machinery or something similar.
“The law has been in effect since May last year, but just like in Australia a lot of people were unaware of it, and that’s where the problems actually arise because if they were aware, they would know that they would have to register in their interests.
“There are some people who might want to borrow money, and they might not have real estates. But if they do have things that are of value which are personal property, such as goods, with this, the banks and the people who want to lend money will have more certainty that they have assets which can secure the loans.”
Von said in Australia, it used to be that you would buy a car and after a few months you’ll find out there’s a charge against it.
“So one of the great benefits for the average person was that they knew that they could buy things. They could do a search on the registry and see that the property was actually without any charges against it so it clears title to it.