ASIC Credit (Amendment) Instrument 2022/81

Administered by Department of the Treasury

Legislation au F2022L00175 Not in force Legislative Instrument

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Explanatory Statement

 

ASIC Credit (Amendment) Instrument 2022/81

This is the Explanatory Statement for ASIC Credit (Amendment) Instrument 2022/81 (legislative instrument).

The Explanatory Statement is approved by the Australian Securities and Investments Commission (ASIC).

Summary

1. The legislative instrument extends the relief provided by ASIC Class Order [CO 14/41] for simple arrangements following a hardship notice to 1 April 2024.

2. Simple arrangements are agreements that defer or reduce the obligations of debtors and lessees for a period of no more than 90 days. Where simple arrangements are agreed, [CO 14/41] exempts credit providers and lessors from the requirements in the National Credit Code (the Code) to give debtors and lessees notices recording the agreement and setting out the particulars of the change in the terms of the credit contract or consumer lease.

Purpose of the instrument

3. ASIC makes the legislative instrument to extend the relief given by [CO 14/41] until 1 April 2024. This period will provide the Government with the necessary time to consider legislative amendments to the relevant provisions in s72(4)(a), 73(1), 177B(4)(a) and 177C(1) of the Code and for Parliament to make appropriate amendments.

4. Relief to the same effect was originally provided by regulations 69A and 69B of the National Consumer Credit Protection Regulations 2010 (the Regulations) until 1 March 2014. Relief has been extended through the operation of [CO 14/41]; most recently by the ASIC Credit (Amendment) Instrument 2020/148 made on 24 February 2020.

Consultation

5. On 8 December 2021, ASIC published a consultation paper seeking feedback from interested stakeholders on whether ASIC should:

(a) extend [CO 14/41] until 1 April 2024, without significant changes, if it continues to be a useful part of the regulatory framework; or

(b) allow [CO 14/41] to expire on 1 March 2022 if it no longer serves a regulatory purpose.

6.  ASIC received six submissions from industry bodies and consumer organisations. Submissions from industry bodies indicated that certain industry participants continue to rely on [CO 14/41] in how they administer their financial hardship arrangements. The submission from consumer organisations indicated the view that the class order should be allowed to expire.

7.  On the basis of this consultation, ASIC has formed the view that [CO 14/41] remains a useful part of the regulatory framework and extending [CO 14/41] until 1 April 2024 is appropriate.

Operation of the instrument

8. This legislative instrument amends [CO 14/41] to extend the relief given by that instrument until 1 April 2024. [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 to the terms of the contract (or consumer lease)

in the case of simple arrangements.  

Legislative instrument and primary legislation 

9. It may be appropriate for the relief extended by this instrument to be implemented through permanent modifications to the requirements of the Code. Extending the instrument for a further two-year period will provide the Government with the necessary time to consider the merits of modifications to the requirements of the Code before the relief expires.

Legislative authority

10.         ASIC makes this legislative instrument under subsection 203A(3) of 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.

11.         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.

12.         The instrument is a disallowable legislative instrument.

Statement of Compatibility with Human Rights 

13. The Explanatory Statement for a disallowable legislative instrument must contain a Statement of Compatibility with Human Rights under subsection 9(1) of the Human Rights (Parliamentary Scrutiny) Act 2011. A Statement of Compatibility with Human Rights is in the Attachment.


Attachment

Statement of Compatibility with Human Rights

 

This Statement of Compatibility with Human Rights is prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.  

 

ASIC Credit (Amendment) Instrument 2022/81

Overview

1. This legislative instrument extends until 1 April 2024 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 to the terms of the contract (or consumer lease)

in the case of simple arrangements.

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

Assessment of human rights implications

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

Conclusion

4. 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

The ASIC Credit (Amendment) Instrument 2022/81 was enacted to extend the relief provided by ASIC Class Order [CO 14/41] for simple arrangements following a hardship notice, until 1 April 2024. Simple arrangements refer to agreements that defer or reduce the obligations of debtors and lessees for up to 90 days. The Australian Securities and Investments Commission (ASIC) introduced this amendment to provide the government with time to consider legislative amendments to the relevant provisions in the National Credit Code, specifically sections 72(4)(a), 73(1), 177B(4)(a), and 177C(1). This legislative instrument aims to ensure that credit providers and lessors remain exempt from the requirements to give debtors and lessees notices recording the agreement and setting out the particulars of the change in the terms of the credit contract or consumer lease. ASIC consulted with industry bodies and consumer organisations before making this decision, and the feedback indicated that the class order should be extended as it continues to be a useful part of the regulatory framework.

Scope and Application

The ASIC Credit (Amendment) Instrument 2022/81 extends the relief provided by ASIC Class Order [CO 14/41] for simple arrangements following a hardship notice until 1 April 2024. Simple arrangements refer to agreements that defer or reduce the obligations of debtors and lessees for a period of no more than 90 days. This relief exempts credit providers and lessors from the requirements under the National Credit Code to give debtors and lessees notices recording the agreement and setting out the particulars of the change in the terms of the credit contract or consumer lease. This legislative instrument applies to credit providers and lessors across Australia, providing them with a temporary exemption from certain regulatory requirements within the National Credit Code. The extension of relief is intended to provide the government and Parliament with additional time to consider and potentially implement legislative amendments to the relevant provisions of the Code. While the instrument itself does not specify any exclusions or thresholds, the application of relief under [CO 14/41] is contingent on the agreement of simple arrangements following a hardship notice. The instrument operates under the legislative authority provided by subsection 203A(3) of the National Credit Code and is a disallowable legislative instrument.

Key Provisions

The ASIC Credit (Amendment) Instrument 2022/81 (the Instrument) extends the relief provided by ASIC Class Order [CO 14/41] until 1 April 2024 (section 1). This relief exempts credit providers and lessors from certain requirements under the National Credit Code (the Code) when they enter into simple arrangements with debtors and lessees (section 1). Simple arrangements are those that defer or reduce the obligations of debtors and lessees for a period of no more than 90 days (section 1). These exemptions include not recording 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 not providing written notice setting out the particulars of any changes to the terms of the contract (or consumer lease) (section 8). The Instrument imposes obligations on credit providers and lessors to continue complying with [CO 14/41] until 1 April 2024 (section 8). Credit providers and lessors must ensure that any simple arrangements entered into during this period do not require them to record the agreement or provide written notice of the changes, as stipulated by the Code. This ongoing exemption allows these parties to manage financial hardship arrangements without the administrative burden of meeting the specific Code requirements for these particular agreements. Breaches of the provisions in the Code are subject to penalties as outlined in the relevant sections of the Code, although the specific penalties are not detailed in the Instrument. However, the relief provided by [CO 14/41] is intended to prevent any enforcement actions against credit providers and lessors for not complying with the recording and notification requirements during the specified period. The relief does not, however, protect against other potential breaches of the Code or related laws. The Instrument is made under the authority of subsection 203A(3) of the Code, which allows ASIC to exempt certain classes of persons or contracts from the provisions of the Code (section 10). Additionally, the power to make, grant, or issue instruments under the Acts Interpretation Act 1901 includes the power to repeal, rescind, revoke, amend, or vary such instruments (section 11). The Instrument is a disallowable legislative instrument, meaning it can be subject to disallowance by either House of Parliament (section 12). Finally, the Statement of Compatibility with Human Rights confirms that the Instrument does not engage any of the applicable rights or freedoms and 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 (section 3 and 4).

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