In a recent speech, ASIC Commissioner Sean Hughes made observations on early credit card and buy now, pay later Target Market Determinations (TMD’s) as required by Part 7.8A of the Corporations Act (Design and distribution requirements relating to financial products for retail clients).
Observations on early credit card TMDs
Hughes commented that some TMDs have not met ASIC’s expectations, particularly around the level of product specificity and corresponding review triggers. He said that determinations that rely on consumer preference or intended use of the product are unlikely to result in compliance with the appropriateness requirements, as this is not consistent with the purpose of the provisions to shift onus for appropriate product design and distribution to the issuer.
Review triggers should reflect the target market, be product specific, and take into account risks to appropriate consumer outcomes. For example:
- where a credit card has an annual fee, ASIC would expect there to be review metrics associated with low utilisation, and
- where a balance could be held at a high interest rate, ASIC expects to see persistent debt review metrics.
Observations on early BNPL TMDs
Hughes said that some TMDs are too broadly worded and are not tailored to the specific offering and its key attributes. For example: a broad consumer objective or preference alone, such as ‘the consumer is seeking to split their repayments’, is unlikely to be sufficient to define the target market.
In relation to the review triggers, ASIC envisages engaging with some providers to better understand the underlying metrics that would prompt a review. In the example of BNPL: an increase in revenue received from late payment fees.
He emphasised that a TMD based only on a broad objective or preference is unlikely to contain sufficient information. It is important that issuers ensure their target markets are sufficiently detailed, having regard to the key features and attributes of their products.
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Author: David Jacobson
Principal, Bright Corporate Law
About David Jacobson
The information contained in this article is not legal advice. It is not to be relied upon as a full statement of the law. You should seek professional advice for your specific needs and circumstances before acting or relying on any of the content.