The Government is consulting on the draft National Consumer Credit Protection Amendment (Small Amount Credit Contracts) Regulation 2014 which is intended to respond to an increase in avoidance activity by which unlicensed credit providers are circumventing the responsible lending obligations, while charging more than is allowed under the cap on costs.

The proposed Regulation:

• clarifies the boundaries between small amount and medium amount credit contracts, to ensure that the small amount lending cap applies to contracts where the consumer receives a maximum amount of $2,000 in their hand, with fees
• confirms that credit providers cannot rely on the exemption for short-term credit in the National Credit Code to remain unlicensed while levying fees and charges in excess of what is allowed under the cap on costs for small amount credit
• addresses avoidance practices where credit providers establish a brokerage arm to their business, in which the broker only arranges credit with the related credit provider, in order to charge brokerage fees that are not included in the calculation of the amount payable under the cap.