ASIC has released Consultation Paper 330 (CP 330) on the proposed use of its product intervention power to address significant detriment it has identified in the continuing credit industry.
This proposed intervention follows the product intervention order that ASIC made in September 2019, which banned the provision of a class of financial products, namely short term credit products, unless specified conditions were complied with in relation to fees and charges.
In monitoring the effect of the short term credit intervention, ASIC has identified another class of financial products, namely continuing credit products, being issued to borrowers.
ASIC is concerned that the continuing credit products are likely to result in significant detriment due to borrowers incurring very high cost, relative to the loan amount. ASIC is also concerned that continuing credit products are being issued to vulnerable clients, including many who are already in financial difficulty.
While ASIC is aware of two firms currently engaging in the concerning conduct, the proposed product intervention order would apply to any business engaging in the concerning conduct.
Announcing the consultation, ASIC Commissioner Sean Hughes said ‘We have continued to see concerning cases of significant harm affecting vulnerable members of the community through the distribution of continuing credit products.'
‘The product intervention power equips ASIC with the ability to take action where we find significant consumer detriment. Protecting vulnerable consumers remains a high priority for ASIC’, Mr Hughes said.
ASIC seeks the public’s input on the proposed intervention order by Thursday 6 August 2020. Submissions should be sent to: email@example.com.
ASIC encourages affected and interested parties to provide any comment and further information, before ASIC decides whether or not to make the product intervention order.
The product intervention power allows ASIC to intervene where financial and credit products have resulted in, or will or are likely to result in, significant detriment. All intervention orders must be published on ASIC’s website, and a public notice issued.
On 12 September 2019 ASIC made a product intervention order by way of legislative instrument in relation to short term credit: 19-250MR. The order came into force on 14 September 2019. The order followed ASIC’s consultation on the proposed intervention to stop significant consumer harm in short term credit.
A judicial review application was filed on 20 September 2019 in the Federal Court of Australia which sought to quash the short term credit order: 19-264MR. In April 2020 the Federal Court dismissed that application with costs awarded to ASIC: 20-089MR. In May 2020 an appeal was filed with the Federal Court of Australia.