Which product intervention orders are proposed to be extended?
On 13 July 2022, ASIC made two product intervention orders:
The orders target two lending models deployed previously by Cigno Australia Pty Ltd (Cigno Australia) and its associates.
Broadly, the two orders prohibit the provision of short term credit and continuing credit contracts that involve charging retail clients unreasonably high fees, in excess of the cost caps in the relevant exemptions in subsections 6(1) and 6(5) of the National Credit Code (Code).
For a detailed overview of the two existing product intervention orders see: Targeting predatory lending: Two new product intervention orders now in force
Proposed length of extension
Subject to the outcome of the consultation, and subject to obtaining Ministerial approval, ASIC proposes to extend both product intervention orders until they are revoked or they sunset on 1 October 2032.
Rationale for the proposed extension
ASIC considers that the proposed extension is warranted because it:
- considers that the orders are operating effectively in reducing the risk of ‘significant detriment to retail clients caused by both the short term credit and continuing credit contracts markets’.
- has observed no unintended or negative consequences of the orders on either the market or on retail clients
- considers that there is a risk that if not extended, entities may resume or start issuing short term credit facilities or continuing credit contracts of the type targeted by the existing product intervention orders.
ASIC also submits that extending the orders until 1 October 2032 (or until they are revoked) is preferable to extending them for a shorter period because a shorter extension necessitate further consultation(s) to consider whether the orders should be extended (incurring unnecessary costs to ASIC and stakeholders).
Timing
As flagged, the due date for submissions is 5pm on 31 August 2023.
ASIC will need written Ministerial approval if it determines that the orders should be extended. ASIC envisages applying the Minister for approval in October.
A strategic priority for ASIC
‘Protecting financial vulnerable consumers impacted by predatory lending practices or high cost credit’ is one of ASIC’s enforcement priorities for 2023.
Announcing the consultation, ASIC underlined its intention to continue to ‘monitor the short term credit and continuing credit contracts markets and will take regulatory action as appropriate’.
Limits on ASIC’s power
Though the proposed extension in this case is likely to be uncontroversial, the length of the proposed extension raises some interesting questions including:
- the length of time it is appropriate for an order to be in place before further consultation is required
- at what point the controls imposed by the regulator should become permanent. Should it become a matter for parliament after an order has been in place for a certain period?
[Sources: ASIC media release 10/08/2023; ASIC Consultation Paper 371 Product Intervention Orders: Short Term credit facilities and continuing credit contracts August 2023]
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