ASIC has released Consultation Paper 330 (CP 330) on the proposed use of its product intervention power in Part 7.9A of the Corporations Act 2001 to address significant detriment that has resulted from, or will or is likely to result from, a class of financial products, namely continuing credit contracts, being made available to retail clients.

UPDATE November 2020: ASIC is seeking further feedback on its proposed use of its product intervention powers to address significant detriment in relation to continuing credit contracts. 

ASIC is concerned that the continuing credit products are likely to result in significant detriment due to borrowers incurring a very high cost, relative to the loan amount. ASIC is also concerned that continuing credit products are being issued to vulnerable clients, including many who are already in financial difficulty.

ASIC’s proposal seeks to impose a cost cap on the total fees that can be charged in relation to continuing credit contracts.

In its consultation paper, ASIC gives the example of two firms currently engaging in the concerning conduct.

Neither company holds an Australian credit licence or is a member of the Australian Financial Complaints Authority (AFCA).

Under the proposal, ASIC would make an industry-wide product intervention order by legislative instrument to prohibit credit providers and their associates (including directors of such entities) from issuing continuing credit contracts in circumstances where total fees exceed the maximum permitted under the continuing credit exemption in section 6(5) of the National Credit Code and regulation 51 of the National Credit Regulations.

If you found this article helpful, then subscribe to our news emails to keep up to date and look at our video courses for in-depth training. Use the search box at the top right of this page or the categories list on the right hand side of this page to check for other articles on the same or related matters.

Author: David Jacobson
Principal, Bright Corporate Law
Email:
About David Jacobson
The information contained in this article is not legal advice. It is not to be relied upon as a full statement of the law. You should seek professional advice for your specific needs and circumstances before acting or relying on any of the content.