ASIC has released Report 348 Response to submissions on CP 190 Small business lending complaints: Update to RG 139 (REP 348) and an updated Regulatory Guide 139 refining the rules for access to external dispute resolution (EDR) schemes for small business borrowers.
The changes follow a detailed review of the existing EDR access arrangements in situations where the lender has already commenced legal proceedings. (Background).
ASIC has updated RG 139 so an EDR scheme’s debt recovery legal proceedings jurisdiction does not need to handle small business credit disputes when the credit limit of the small business credit contract (the subject of the dispute) exceeds $2 million.
When determining whether the $2 million limit has been reached, the scheme must apply the limit to the credit contract, the subject of the small business credit dispute. This means that where a small business has linked credit contracts, the $2 million limit must be applied to the credit contract the subject of the dispute.
Small business borrowers will continue to be able to take disputes with their lender to the lender’s EDR scheme.
Even where the lender has already commenced court proceedings against them, if the credit contract is $2 million or less, the small business borrower will continue to be able to take the matter to the EDR scheme.
EDR schemes will need to update their Terms of Reference or Rules, and scheme processes to implement this change by no later than 1 January 2014.
ASIC intends to review the operation of the $2 million limit in two years time.