National Consumer Credit Protection Amendment (Small Business Exemption) Regulations 2021

Administered by Department of the Treasury

Legislation au F2021L00404 Regulations Not in force Legislative Instrument

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EXPLANATORY STATEMENT

Issued by authority of the Treasurer

National Consumer Credit Protection Act 2009

National Consumer Credit Protection Amendment (Small Business Exemption) Regulations 2021

The National Consumer Credit Protection Act 2009 (the Act) provides for the licensing of credit activities, the imposition of responsible lending obligations and requirements in relation to credit contracts and consumer leases.

Section 329 of the Act provides that the Governor-General may make regulations prescribing matters required or permitted by the Act to be prescribed, or necessary or convenient to be prescribed, for carrying out or giving effect to the Act.

In April 2020, the National Consumer Credit Protection Amendment (Coronavirus Economic Response Package) Regulations 2020 temporarily exempted certain credit providers from responsible lending obligations under the Act where particular conditions were met (the small business exemption).

This targeted adjustment for a period of six months was intended to support the timely flow of credit to small businesses in light of the rapidly-evolving challenges posed by the coronavirus pandemic. In October 2020, the National Consumer Credit Protection Amendment (Responsible Lending Obligations) Regulations 2020 (the October 2020 Regulations) extended the small business exemption for a further six months.

In September 2020, the Government announced that it would undertake consumer credit reforms aimed at reducing the cost and time that it takes consumers and businesses to access credit so that consumers can continue to spend and business can invest and create jobs. The National Consumer Credit Protection Amendment (Supporting Economic Recovery) Act 2021 (the Amending Act) implements these reforms by establishing a new regulatory framework for the provision of consumer credit.

Schedule 1 to the Amending Act removes existing responsible lending obligations relating to the unsuitability of credit contracts, except in relation to small amount credit contracts (SACCs), SACC‑equivalent loans by authorised deposit-taking institutions (ADIs), and consumer leases.

The purpose of the National Consumer Credit Protection Amendment (Small Business Exemption) Regulations 2021 (the Amending Regulations) is to amend the National Consumer Credit Protection Regulations 2010 to align the end of the small business exemption with the Amending Act’s removal of responsible lending obligations. This prevents the responsible lending obligations from being reimposed on a portion of credit activity (that has a partial small business purpose) for the period between the expiry date set by the October 2020 Regulations and the commencement of the relevant parts of the Amending Act. 

Public consultation on a set of draft regulations including the substance of the Amending Regulations was conducted between 4 November and 20 November 2020, together with an exposure draft of the Amending Bill and the proposed non‑ADI credit standards. Fifty-eight submissions were received on the exposure draft package. Feedback from stakeholders predominantly related to the Amending Bill and the non-ADI standards.

Following the consultation period, the relevant provision was redrafted to align with the commencement arrangements for the Amending Bill as introduced to Parliament.

The Act does not specify any conditions that need to be met before the power to make the Amending Regulations is exercised. Details of the Amending Regulations are set out in Attachment A. The Amending Regulations are a legislative instrument for the purposes of the Legislation Act 2003.

The Amending Regulations commence on the day after registration.

A regulation impact statement was prepared for the consumer credit reforms. It is available in Chapter 2 of the explanatory memorandum for the Amending Bill.[1]

A statement of compatibility with human rights is at Attachment B.

 

ATTACHMENT A

Details of the National Consumer Credit Protection Amendment (Small Business Exemption) Regulations 2021  

Section 1 – Name of the Regulations

This section provides that the name of the Regulations is the National Consumer Credit Protection Amendment (Small Business Exemption) Regulations 2021 (the Amending Regulations).

Section 2 – Commencement

The Amending Regulations commence on the day after registration on the Federal Register of Legislation.

Section 3 – Authority

The Regulations are made under the National Consumer Credit Protection Act 2009 (the Act).

Section 4 – Schedule

This section provides that each instrument that is specified in the Schedule to this instrument will be amended or repealed as set out in the applicable items in the Schedules, and any other item in the Schedules to this instrument has effect according to its terms.

Schedule 1 – Amendments

Item 1 alters the end date for the temporary exemption provided for in regulation 28RB of the National Consumer Credit Protection Regulations 2010, relating to the coronavirus economic response. The exemption is from responsible lending obligations under the Act for certain credit providers where particular conditions are met, including that there is a partial small business purpose.

The end date is aligned with the commencement of the new framework for the provision of consumer credit – that is, immediately before Parts 1 and 2 of Schedule 1 to the National Consumer Credit Protection Amendment (Supporting Economic Recovery) Act 2021 (Amending Act) commence.

From the time Parts 1 and 2 of Schedule 1 to the Amending Act commence, the responsible lending obligations are reinstated for credit with a partial small business purpose in relation to SACCs, SACC‑equivalent loans by ADIs and consumer leases.

For other types of credit, the alignment made by item 1 prevents the obligations from being temporarily reimposed for credit with a partial small business purpose, ahead of their removal by the Amending Act.

The new non‑ADI credit standard will contain an ongoing exemption for non-ADI credit contracts with a partial small business purpose.

ATTACHMENT B

Statement of Compatibility with Human Rights

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

National Consumer Credit Protection Amendment (Small Business Exemption) Regulations 2021

This Legislative 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 alters the end date for a temporary exemption from responsible lending obligations under the National Consumer Credit Protection Act 2009, relating to the coronavirus economic response and covering credit with a partial small business purpose.   

The alteration prevents the responsible lending obligations from being temporarily reimposed on a portion of credit activity (that has a partial small business purpose) ahead of their removal by the National Consumer Credit Protection Amendment (Supporting Economic Recovery) Act 2021. 

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.

 

[1] Available at https://parlinfo.aph.gov.au/parlInfo/download/legislation/ems/r6656_ems_18ac500b-30e6-4744-91ae-49af99d536e0/upload_pdf/JC000728.pdf;fileType=application%2Fpdf

Overview

The National Consumer Credit Protection Amendment (Small Business Exemption) Regulations 2021 were enacted to address a gap created by the interplay between the temporary exemption from responsible lending obligations for certain credit providers under the National Consumer Credit Protection Act 2009, introduced by the National Consumer Credit Protection Amendment (Coronavirus Economic Response Package) Regulations 2020, and the legislative reforms implemented by the National Consumer Credit Protection Amendment (Supporting Economic Recovery) Act 2021. These Regulations were made under the authority of the Treasurer, in accordance with section 329 of the Act, which allows for the creation of regulations necessary to implement the Act's provisions. The policy objective of these Regulations was to prevent the responsible lending obligations from being temporarily reimposed on credit with a partial small business purpose, ensuring a smooth transition to the new regulatory framework established by the Amending Act. This transitional measure was crucial to maintain the flow of credit to small businesses while ensuring compliance with the reformed legislative standards.

Scope and Application

The National Consumer Credit Protection Act 2009 (the Act) applies to credit activities, credit providers, and credit contracts, establishing a framework for licensing and imposing responsible lending obligations. The Act aims to ensure that credit is provided in a manner that is fair and responsible, thereby protecting consumers from unfair or irresponsible lending practices. The scope of the Act includes all credit providers who offer credit contracts or consumer leases, regardless of their size or the nature of their business. The Act has a national jurisdictional reach, applying across Australia under the Commonwealth. The Act is implemented through subordinate legislation, such as the National Consumer Credit Protection Regulations 2010, which provides detailed rules and requirements necessary for the effective operation of the Act. The Act also includes provisions for exemptions and exclusions, particularly in response to extraordinary circumstances such as the COVID-19 pandemic, as evidenced by the National Consumer Credit Protection Amendment (Coronavirus Economic Response Package) Regulations 2020 and subsequent amendments. These regulations temporarily exempted certain credit providers from responsible lending obligations to facilitate the flow of credit to small businesses.

Key Provisions

The National Consumer Credit Protection Amendment (Small Business Exemption) Regulations 2021 (the "Amending Regulations") modify the National Consumer Credit Protection Regulations 2010 to align the end of the temporary exemption from responsible lending obligations with the introduction of a new regulatory framework for consumer credit, as set out in the National Consumer Credit Protection Amendment (Supporting Economic Recovery) Act 2021 (the "Amending Act"). The temporary exemption, introduced by the National Consumer Credit Protection Amendment (Coronavirus Economic Response Package) Regulations 2020, had initially provided relief from certain responsible lending obligations for credit providers under specific conditions, such as credit intended for small businesses during the COVID-19 pandemic. The Amending Regulations now ensure that this exemption ends at the same time as the commencement of the new credit framework, thus preventing a temporary reimposition of these obligations on credit with a partial small business purpose before their eventual removal by the Amending Act. The Amending Regulations impose several obligations on credit providers and other entities governed by the National Consumer Credit Protection Act 2009 (the "Act"). Primarily, they require credit providers to ensure that the end date for the temporary exemption from responsible lending obligations is adhered to. Specifically, they must cease to rely on the exemption from responsible lending obligations immediately before the commencement of Parts 1 and 2 of Schedule 1 to the Amending Act. This necessitates that credit providers align their practices with the new regulatory framework and ensure compliance with any reinstated responsible lending obligations for small amount credit contracts (SACCs), SACC-equivalent loans by authorised deposit-taking institutions (ADIs), and consumer leases. Credit providers must also be aware of and comply with any ongoing exemptions for non-ADI credit contracts with a partial small business purpose that will be contained in the new non-ADI credit standard. Failure to comply with the provisions of the Amending Regulations may result in civil or criminal consequences. While the Amending Regulations themselves do not stipulate specific penalties, the broader provisions of the Act and related regulations could impose penalties for non-compliance. For instance, under the Act, contraventions of responsible lending obligations or other credit-related requirements may attract financial penalties or, in serious cases, criminal penalties. The exact penalties depend on the nature and severity of the breach, with potential fines and imprisonment for more severe violations. Credit providers are thus advised to ensure strict adherence to the timelines and conditions specified in the Amending Regulations to avoid any potential legal repercussions.

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Consumer Law
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Sourced from the Federal Register of Legislation at 26 August 2026. For the latest information on Australian Government law please go to https://www.legislation.gov.au.