Inquiry into further regulation of consumer credit

The Senate Economics References Committee inquiry into credit and financial services targeted at Australians at risk of financial hardship has concluded its public hearings. Background.

The Committee is expected to report by 22 February 2019.

Submissions were received from small amount lenders, consumer lease providers, ‘buy now, pay later’ providers and debt management firms as well as industry associations, consumer advocates and AFCA, AFSA, ASIC and Treasury.

The hearings focussed on the limits of current regulation, particularly in respect of products not reviewed by the Financial Services Royal Commission.

ASIC’s submission supported the following reforms:
(a) The enactment of the reforms to the laws applying to small amount credit contracts in the Exposure Draft of the National Consumer Credit Protection Amendment (Small Amount Credit Contract and Consumer Lease Reforms) Bill 2017.
(b) The extension of the proposed product intervention regime in the Treasury Laws Amendment (Design and Distribution Obligations and Product Intervention Powers) Bill 2018 to all financial products regulated by the Australian Securities and Investments Commission Act 2001 (ASIC Act).
(c) The extension of the proposed design and distribution obligations regime to credit contracts and consumer leases regulated by the ASIC Act as well as to short-term credit (loans for 62 days or less where the credit fees and charges do not exceed 5% of the amount of credit) which is currently exempt from the National Credit Act as a result of the operation of section 6(1) of the National Credit Code.

ASIC argued that there are significant risks to consumers from some credit products that are only regulated by the ASIC Act (but not the National Credit Act) as providers can seek to exploit gaps in regulatory coverage.

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