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A consultation has launched on proposed changes to ASIC’s industry-wide product intervention order for continuing credit contracts, which now excludes some products.
The proposal comes following a consultation released by the Australian Securities and Investments Commission (ASIC) in July, in which it detailed its proposal to use its product intervention power to address concerns identified in the continuing credit industry.
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This largely relates to facilities in which multiple advances of credit are contemplated and the amount of available credit ordinarily increases as the amount of credit is reduced.
At that time, ASIC had proposed to make an industry-wide product intervention order to address concerns of “ongoing significant detriment” in relation to continuing credit contracts, which it said often involved “unreasonably high costs” and risks of these products being issued to “vulnerable clients, including many who are already in financial difficulty”.
ASIC has now said that following receipt of more than 900 submissions to the consultation, it had identified that there were some “potential unintended consequences” that may arise from the proposed product intervention order.
Specifically, the financial services regulator noted that the order would capture certain subclasses of continuing credit contracts that were not being issued to retail clients in the way described in the consultation paper.
To address these potential unintended consequences, ASIC has made some changes to the draft intervention order to exclude some subclasses of continuing credit contracts. These exclusions are for:
- Buy now, pay later arrangements; and
- Fees charged by licensed providers of non-cash payment facilities.
“We propose to insert these exclusions on the basis that the significant detriment described in CP 330, does not, on the evidence currently available, arise from these products,” ASIC said.
Stakeholders can respond to the amended product intervention order by 5pm on 24 November 2020.
Cigno appeal to take place next week
The regulator has also confirmed that its ongoing legal battle with short-term lender Cigno will continue next week.
After ASIC made a product intervention order in September 2019 banning a short-term credit model used by Cigno, the lender took the regulator to court.
While Cigno applied for a judicial review to quash the order, this was dismissed by the Federal Court in April 2020. However, a hearing was applied for in May.
It is this appeal that will be heard before the Full Federal Court next Thursday (19 November), ASIC outlined.
[Related: Court backs ASIC’s ban on short-term lending model]
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