ASIC has made a Class Order [CO 13/818] at the request of Treasury to provide interim relief which reflects intended changes to the National Credit Act requirements for small amount credit contracts (SACCs) pending the making of regulations, nowithstanding changes to the Credit Act and Code which commenced on 1 July 2013.
Change to the definition of SACCs
The credit limit of $2000 for a SACC will be modified to include contracts with a credit limit of “more than $2,000 because of fees or charges included in the amount of credit provided under the contract”.
This will permit credit contracts where the amount of credit that is received ‘in hand’ by the consumer is $2000 or less to be treated as SACCs, rather than as medium amount credit contracts (MACCs), notwithstanding that the credit contract also finances the upfront fees and charges associated with the credit contract. This will enable those contracts to comply with the cost caps and additional provisions for SACCs rather than the cost caps for MACCs.
Direct debit processing fees or charges
A direct debit processing fee or charge is added to the existing list of permitted fees or charges for SACCs provided it meets the following conditions:
(a) the fee or charge is charged to the debtor by a person other than the credit provider under a written agreement between the debtor and the person;
(b) the fee or charge is for processing payments of amounts due under the contract that is charged or calculated on the same basis as for persons who are not debtors under a small amount credit contract (or a contract that is treated as a SACC under the class order);
(c) the amount of the fee or charge has been clearly disclosed to the debtor in writing.
Background
A small amount credit contract (SACC) is a credit contract under which, in general terms, the amount of the loan is $2000 or less, and the term is 16 days to one year. Only the following prescribed fees or charges can be charged on these loans:
a) a monthly fee – 4% of the amount lent;
b) an establishment fee – 20% of the amount lent;
c) Government fees or charges;
d) enforcement expenses;
e) default fees (the lender cannot recover more than 200% of the amount lent).
A medium amount credit contract (MACC) is a credit contract under which, in general terms, the loan is from $2001 to $5000 and the term is 16 days to 2 years. MACCs have a cap determined by an annual cost rate (interest plus fees and charges) which must not exceed 48 per cent, with the formula allowing for an additional $400 fee to be charged. Other credit contracts (e.g. where the loan is for more than $5000) have a cap where the annual cost rate must not exceed 48 per cent.
