ASIC has released Consultation Paper 330 (CP 330) on the proposed use of its product intervention power in Part 7.9A of the Corporations Act 2001 to address significant detriment that has resulted from, or will or is likely to result from, a class of financial products, namely continuing credit contracts, being made available to retail clients.

ASIC is concerned that the continuing credit products are likely to result in significant detriment due to borrowers incurring a 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.

ASIC’s proposal seeks to impose a cost cap on the total fees that can be charged in relation to continuing credit contracts.

In its consultation paper, ASIC gives the example of two firms currently engaging in the concerning conduct.

Neither company holds an Australian credit licence or is a member of the Australian Financial Complaints Authority (AFCA).

Under the proposal, ASIC would make an industry-wide product intervention order by legislative instrument to prohibit credit providers and their associates (including directors of such entities) from issuing continuing credit contracts in circumstances where total fees exceed the maximum permitted under the continuing credit exemption in section 6(5) of the National Credit Code and regulation 51 of the National Credit Regulations.

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Author: David Jacobson

Principal, Bright Corporate Law

Email: djacobson@brightlaw.com.au

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.

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