ASIC Class Order [CO 13/18]

Overview

The ASIC Class Order [CO 13/18] was enacted in 2013 by the Australian Securities and Investments Commission (ASIC) under the National Consumer Credit Protection Act 2009. This legislative instrument was introduced to address a gap in the application of the National Credit Code (Code) to certain credit arrangements that were not adequately covered by the existing provisions. The specific problem it aimed to address includes the regulation of credit arrangements associated with litigation funding and proof of debt funding, which were not explicitly covered under the Code. By excluding these types of credit arrangements from the Code's application, the legislation aims to provide clarity and ensure appropriate regulation of these financial activities, ultimately contributing to the protection of consumers in the credit market.

Scope and Application

ASIC Class Order [CO 13/18] applies to specific types of credit arrangements as defined under the National Credit Code (NCC). This legislative instrument excludes from the NCC's application two particular types of credit arrangements: litigation funding arrangements and proof of debt funding arrangements. Litigation funding arrangements are those where a party finances legal proceedings brought by or on behalf of another person, while proof of debt funding arrangements involve financing the preparation and lodgment of claims under Division 6 of Part 5.6 of the Corporations Act 2001. The exclusions are effective until 12 July 2019 and can be amended through subordinate instruments as detailed in the compilation notes, which include the amendment history and application provisions. This Class Order, made under subsection 6(17) of the NCC, is part of the broader regulatory framework administered by ASIC to ensure that credit practices comply with national consumer credit protection standards, with specific exceptions noted to cater for unique financial arrangements.

Key Provisions

ASIC Class Order [CO 13/18], which was made under subsection 6(17) of the National Credit Code (the Code), specifically excludes certain types of credit arrangements from the application of the Code. The main operative sections of the Class Order (paragraph 4) detail the types of credit arrangements that are excluded, namely litigation funding arrangements and proof of debt funding arrangements. Litigation funding arrangements (paragraph 4(a)) refer to agreements for participating in, conducting, and funding legal proceedings brought by or on behalf of a person or persons. Proof of debt funding arrangements (paragraph 4(b)) involve proving claims made by a person or persons under Division 6 of Part 5.6 of the Corporations Act 2001, including funding for the preparation and lodgment of proofs. These exclusions are intended to provide flexibility in the financial arrangements related to legal proceedings and claims under the Corporations Act. The obligations and requirements imposed by this Class Order primarily concern the entities and parties involved in the specified funding arrangements. By excluding these arrangements from the application of the Code, the Class Order relieves them from certain regulatory provisions that would otherwise apply to credit providers and consumers under the National Credit Code. This means that parties entering into litigation funding or proof of debt funding arrangements are not subject to the same licensing, disclosure, and other requirements that apply to other credit transactions governed by the Code. However, they must still comply with other relevant laws and regulations that may apply to their specific activities. In terms of potential consequences for breaches of this Class Order, it is important to note that the Class Order itself does not outline specific offences or penalties. Instead, any breach of the Class Order could potentially lead to enforcement actions by ASIC under the National Credit Code or other applicable legislation. These actions could include fines, corrective measures, or other regulatory responses to ensure compliance with the law. The maximum penalties for breaches of the National Credit Code generally depend on the nature and severity of the breach and could include substantial fines for both individuals and corporations. Additionally, ongoing non-compliance could result in further regulatory scrutiny or even criminal charges in more severe cases.