ASIC has released a consultation paper, Product Intervention Orders: Short Term Credit and Continuing Credit Contracts, on its proposed use of its product intervention powers to address significant consumer detriment in the short term credit and continuing credit contracts industries. 

Today’s release follows:

• ASIC’s first short term credit product intervention order made on 12 September 2019: 19-250MR. This order expired on 13 March 2021.
• ASIC’s earlier consultation on a proposed continuing credit contract product intervention order through Consultation Paper 330 Using the product intervention power: Continuing credit contracts (CP 330) published on 9 July 2020 and the Addendum to CP 330 published on 10 November 2020.

This consultation continues ASIC’s work to address high cost predatory lending impacting vulnerable consumers.

CP 355 outlines ASIC’s proposal to make product intervention orders which prohibit these products from being provided in circumstances which involve unreasonably high costs, in excess of the cost caps in the relevant exemptions in s6(1) and s6(5) of the National Credit Code.

The consultation process

ASIC invites stakeholder feedback on two proposals:

• Proposal D1 – Make the short term credit product intervention order
• Proposal D2 – Make the continuing credit product intervention order

When providing feedback, please specify which Proposal you are providing feedback for. This will help ASIC consider whether, and if so how, to exercise the product intervention power for each Proposal.

Following this consultation, if ASIC is minded to make the short term credit product intervention order, ASIC will first seek the Minister’s written approval.

All intervention orders subsequently made must be published on ASIC’s website, and a public notice will be issued in relation to the intervention.

Any feedback should be sent by 21 January 2022 to: product.regulation@asic.gov.au.

Download

• Consultation Paper 355: Product Intervention Orders – Short Term Credit and Continuing Credit Contracts
• Attachment 1 – Draft ASIC Corporation (Product Intervention – Short Term Credit) Instrument 2022/XXX
• Attachment 2 – Draft ASIC Corporation (Product Intervention – Continuing Credit Contracts) Instrument 2022/XXX

Background

This consultation follows previous ASIC’s consultations and action in relation to short term credit and continuing credit contracts

In July 2019 ASIC released Consultation Paper 316 on the first proposed use of its product intervention powers in relation to significant detriment identified in the short term credit market: 19-177MR. On 12 September 2019 ASIC made a product intervention order by way of a legislative instrument in relation to short term credit: 19-250MR. The order came into force on 14 September 2019.

A judicial review application was filed on 20 September 2019 in the Federal Court of Australia by Cigno Pty Ltd (Cigno) which sought to quash the short term credit order: 19-264MR. In April 2020 the Federal Court dismissed that application with costs awarded to ASIC: 20-089MR. In May 2020 an appeal was filed by Cigno. On 29 June 2021 the Full Federal Court dismissed the appeal and awarded ASIC costs.

In July 2020, ASIC also released Consultation Paper 330 (CP 330) on the proposed use of its product intervention power to address significant detriment identified in the continuing credit industry (20-159MR). In November 2020, ASIC sought further feedback through Addendum to CP 330, after changes were made to the proposed draft order to provide certain exclusions for buy now pay later arrangements and certain fees charged by licenced providers of non-cash payment facilities (20-274MR).

The short term credit product intervention order lapsed in March 2021. ASIC did not seek to extend it or to continue with ASIC’s proposed use of its product intervention powers in relation to the continuing credit industry because of an ambiguity in the product intervention provisions in the Corporations Act 2001.

On 24 June 2021, the Treasury Laws Amendment (2021 Measures No.4) Act 2021 was passed, removing the ambiguity and ensuring ASIC’s ability to use its product intervention powers to intervene in relation to the costs of a financial and credit product.

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