ASIC has published Consultation Paper 371 Product intervention orders: Short term credit facilities and continuing credit contracts (CP 371) seeking feedback on proposals to extend both product intervention orders. Background.
UPDATE 5 January 2024: ASIC has extended its product intervention orders made in relation to short term credit and continuing credit contracts so that the orders remain in force until they are revoked or they sunset on 1 October 2032.
The current product intervention orders came into effect on Friday 15 July 2022. They prohibit the provision of short term credit and continuing credit contracts, which involve unreasonably high fees charged to retail clients. These fees exceed the cost caps imposed by the National Credit Code.
If not extended, the short term credit and continuing credit contracts product intervention orders will expire on 15 January 2024.
ASIC proposes to extend both product intervention orders before they expire on 15 January 2024 so that they will remain in force until they are revoked or sunset on 1 October 2032.
ASIC believes that the current orders have been effective in reducing the risk of significant detriment to retail clients resulting from the issuing of these products in conjunction with high cost services.
ASIC says it will continue to monitor the short term credit and continuing credit contracts markets and will take regulatory action as appropriate.
Under the short term credit exemption in s6(1) of the National Credit Code, the National Credit Code and the National Credit Act do not apply to credit if:
(a) under the contract, the provision of credit is limited to a total period that does not exceed 62 days; and
(b) the maximum amount of credit fees and charges that may be imposed or provided for does not exceed 5% of the amount of credit; and
(c) the maximum amount of interest charges that may be imposed or provided for does not exceed an amount (calculated as if the National Credit Code applied to the contract) equal to the amount payable if the annual percentage rate were 24% per annum.
Under s6(5) of the National Credit Code, the National Credit Code and the National Credit Act do not apply to the provision of credit under a continuing credit contract, if the only charge that is or may be made for providing the credit is a periodic or other fixed charge that does not vary according to the amount of credit provided.
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Author: David Jacobson
Principal, Bright Corporate Law
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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.
