ASIC Credit (Amendment) Instrument 2018/114

Administered by Department of the Treasury

Legislation au F2018L00175 Not in force Legislative Instrument

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ASIC CREDIT (AMENDMENT) INSTRUMENT 2018/114

EXPLANATORY STATEMENT

Prepared by the Australian Securities and Investments Commission

National Credit Code

The Australian Securities and Investments Commission (ASIC) makes the ASIC Credit (Amendment) Instrument 2018/114 under subsection 203A(3) of the National Credit Code (the Code).

Under subsection 203A(3) ASIC may exempt a class of persons, credit contracts or consumer leases from all or specified provisions of the Code.

 

Under subsection 33(3) of the Acts Interpretation Act 1901, where an Act confers a power to make, grant or issue any instrument (including rules, regulations or by-laws), the power shall be construed as including a power exercisable in the like manner and subject to the like conditions (if any) to repeal, rescind, revoke, amend, or vary any such instrument.

 

  1. Background

 

The Consumer Credit Legislation Amendment (Enhancements) Act 2012 (the Amendment Act) amended the National Consumer Credit Protection Act 2009 (the Credit Act), including the Code, to introduce a number of reforms to the regulation of hardship variations. Where a consumer is experiencing financial difficulties in repaying their loan, a consumer may ask their credit provider to vary or change their loan repayments under the hardship provisions of the Credit Act.

 

The Amendment Act introduced changes to the pre-existing hardship application processes, with the relevant provisions in effect from 1 March 2013.  The procedures for processing hardship variation applications require credit providers and lessors to record any changes to the contract and provide written notice to the debtor or lessee, even where the parties come to an agreement for a simple arrangement (that is, any agreement that defers or reduces the obligations of a debtor or lessee for a period of no more than 90 days). 

 

Contracts that were entered into prior to 1 March 2013 remain subject to the pre-existing hardship variation provisions.  This has the effect of creating two hardship systems.

 

To minimise the administrative burden on industry, the National Consumer Credit Protection Amendment Regulations 2013 (No. 1) (the Amendment Regulations) amended the National Consumer Credit Protection Regulations 2010 (the Principal Credit Regulations). The new regulations 69A and 69B in the Principal Credit Regulations provided transitional exemptions for credit providers and lessors to:

  • record the fact that the credit provider and debtor (or lessor and lessee) have agreed to change the contract (or consumer lease) in a hardship variation; and
  • provide written notice setting out the particulars of any changes in the terms of the contract (or consumer lease) in the case of simple arrangements.

 

The exemptions lasted until 1 March 2014. They were extended for 12 months through ASIC Class Order [CO 14/41] (CO 14/41) and for a further 12 months through ASIC Class Order [CO 15/130] to 1 March 2016. Following this, the exemptions were extended for a further 24 months through ASIC Credit (Amendment) Instrument 2016/62 to 1 March 2018. The exemptions were extended to allow ASIC time to consult with stakeholders to develop a recommendation to Treasury regarding what obligations credit providers and lessors should have to record any contractual changes and provide written notice to debtors and lessors where the parties come to an agreement for a simple arrangement.

 

One key issue that emerged during ASIC's stakeholder consultations was the impact of recent changes to credit reporting under the Privacy Act 1988 (Cth) (Privacy Act), including how hardship arrangements should be reflected in the repayment history information in a consumer’s credit report. This will have significant implications for consumers who have agreed to a hardship arrangement with their credit provider.  ASIC considers that this issue should be settled before ASIC finalises its recommendation to Treasury regarding simple arrangements.  The resolution of this issue may require changes to the Privacy Act.

 

2.      Purpose of the legislative instrument

 

The purpose of this legislative instrument is to extend the relief given by CO 14/41 (which extended the transitional exemptions in regulations 69A and 69B) for a further interim period in order to allow:

  • The issue of the reporting of repayment history information under a hardship arrangement to be resolved;
  • Subject to the outcome of those discussions, ASIC to provide its recommendation to Treasury regarding the transitional exemptions;
  • Treasury to consider ASIC's recommendations and reform the law if and as it considers appropriate; and
  • Credit providers and lessors to update their systems in accordance with any amendments made.

As the issue relating to the reporting of repayment history information may require changes to the Privacy Act, we have extended the interim relief for a period of two years to provide sufficient time.

3.      Operation of the legislative instrument

 

This legislative instrument amends CO 14/41 to extend the relief given by that instrument for two years.  CO 14/41 as amended will provide continued relief from requirements in the Code for a credit provider or lessor to:

  • record the fact that the credit provider and debtor (or lessor and lessee) have agreed to change the contract (or consumer lease) in a hardship variation; and
  • provide written notice setting out the particulars of any changes in the terms of the contract (or consumer lease) in the case of simple arrangements.

 

The relief has effect to 1 March 2020.

 

4.      Consultation

 

Treasury conducted extensive consultation with stakeholders (including ASIC, individual credit providers and industry bodies) as part of the development and implementation of the Amendment Act.  The problems addressed by the Amendment Regulations were identified by industry stakeholders during this consultation process.

 

In 2014 and 2015 ASIC consulted with stakeholders (including industry bodies, individual credit providers and consumer advocates) in relation to the transitional exemptions included in the Amendment Regulations and in relation to the need for guidance on the hardship process outlined in section 72 of the Code.   

 

During 2016 to 2018 ASIC has continued to consult with industry and affected stakeholders in relation to the hardship process and the interaction with credit reporting requirements.  

The Government announced on 2 November 2017 that it would legislate for a mandatory comprehensive credit reporting regime to come into effect by 1 July 2018, requiring the big four banks to participate fully in the credit reporting system. Draft exposure legislation and accompanying explanatory materials, implementing this measure were released for public comment on 8 February 2018.

 

ASIC has also consulted with Treasury on the need to extend further the relief provided by CO 14/41.  Treasury agrees with the need to extend the relief.

 

 


Statement of Compatibility with Human Rights

 

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

 

ASIC Credit (Amendment) Instrument 2018/114

This instrument is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

 

Overview of the legislative instrument

 

This legislative instrument extends until 1 March 2020 the relief provided by ASIC Class Order [CO 14/41] from requirements in the National Credit Code for a credit provider or lessor to:

  • record the fact that the credit provider and debtor (or lessor and lessee) have agreed to change the contract (or consumer lease) in a hardship variation; and
  • provide written notice setting out the particulars of any changes in the terms of the contract (or consumer lease) in the case of simple arrangements.

 

Relief to the same effect was given regulations 69A and 69B of the National Consumer Credit Protection Regulations 2010 until 1 March 2014 and has been since extended through various instruments.

 

Human rights implications

 

This legislative instrument does not engage any of the applicable rights or freedoms.

 

Conclusion

 

This legislative instrument is compatible with human rights as it does not raise any human rights issues.

 

 

 

 

 

 

Overview

The ASIC Credit (Amendment) Instrument 2018/114 was enacted to address the transitional issues arising from the changes to the hardship variation provisions introduced by the Consumer Credit Legislation Amendment (Enhancements) Act 2012. This legislative instrument was made by the Australian Securities and Investments Commission (ASIC) under the National Credit Code, aiming to minimise the administrative burden on credit providers and lessors while providing a temporary relief from certain record-keeping and notification obligations. The policy objective behind this amendment is to allow sufficient time for stakeholders to resolve issues, such as how hardship arrangements should be reported in consumer credit reports, and for Treasury to consider any necessary reforms. The relief extends until 1 March 2020, providing credit providers and lessors with additional time to adapt their systems to any future changes in the law. This extension aims to ensure that consumers experiencing financial difficulties can continue to receive appropriate support without creating unnecessary administrative burdens on credit providers.

Scope and Application

The ASIC Credit (Amendment) Instrument 2018/114 amends the National Credit Code, providing a two-year extension to the transitional relief that was initially introduced to simplify the administrative burden on credit providers and lessors. This instrument applies to credit providers and lessors under the Code, providing them with relief from specific requirements during hardship variations until 1 March 2020. Specifically, it exempts credit providers and lessors from the obligations to record any agreement to change the terms of a contract or consumer lease during hardship variations and to provide written notice of the changes for simple arrangements. This extension is intended to provide sufficient time for ongoing consultations with stakeholders and to resolve the issue of reporting repayment history information under hardship arrangements, which may require amendments to the Privacy Act. The instrument operates across Australia, as it is an amendment to the National Credit Code, which applies nationally. There are no exclusions or exemptions specified in this particular instrument, but it builds upon previous extensions and class orders that have similarly provided relief to credit providers and lessors. The instrument is compatible with human rights, as it does not engage any of the rights or freedoms recognised or declared in the relevant international instruments.

Key Provisions

The ASIC Credit (Amendment) Instrument 2018/114 amends the National Credit Code by extending the relief provided by ASIC Class Order [CO 14/41]. Specifically, section 3 of the instrument extends the exemption for credit providers and lessors from the requirements to record agreements for hardship variations and to provide written notices for simple arrangements until 1 March 2020 (sections 3 and 4). These exemptions were initially set out in regulations 69A and 69B of the National Consumer Credit Protection Regulations 2010 and have been extended several times to allow for consultations and to address issues regarding credit reporting under the Privacy Act 1988 (Cth). The obligations imposed on credit providers and lessors by this instrument are to continue exempting them from the necessity to record agreements made during hardship variations and to provide written notices for simple arrangements, as per section 3 of CO 14/41 as amended. Credit providers and lessors must adhere to the transitional exemptions as extended by this legislative instrument, meaning they are not required to record and notify debtors or lessees of any changes to contracts or leases made under hardship provisions until the specified end date of 1 March 2020. Breach of the provisions in this legislative instrument does not specifically outline new offences or penalties; however, any failure to comply with the National Credit Code, including the transitional exemptions, could potentially lead to enforcement actions by ASIC. The usual penalties for non-compliance with the National Credit Code can include fines and other civil penalties as prescribed by the Code. The specific consequences would depend on the nature and severity of the breach, and ASIC would have the authority to take appropriate action under the National Consumer Credit Protection Act 2009.

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Area of Law
Consumer Law
Instrument
Instrument
Concepts
Definitions & Interpretation
Reporting & Disclosure Obligations
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