ASIC today released a consultation paper to assist it report to Government on whether amendments to the Consumer Credit Legislation Amendment (Enhancements) Act 2012 (Enhancements Act) are necessary.
The paper seeks comment on whether an online database or similar system would be of assistance in determining whether consumers applying for a small amount loan have outstanding small amount debts and whether the contracts offered by the credit licensee are consistent with regulations.
The consultation is part of a review being conducted in response to a request from the Hon Bill Shorten MP, Minister for Financial Services and Superannuation.
Consultation Paper 198 Review of the effectiveness of an online database for small amount lenders (CP 198) seeks feedback on:
• whether it should be mandatory for credit licensees to register all small amount loans in a database and to make an inquiry from the database before entering into a new small amount loan
• if a database of small amount loans is in place in Australia, what information should be recorded in it and made available to a small amount lender on enquiry, and
• whether there are other regulatory requirements that the database could be usefully and practically used to test proposed loan contracts against.
Comments close 21 February 2013.
ASIC will report to Government later this year.
The Enhancements Act contains provisions (among others) on small amount credit contracts – that is, loans that are for $2,000 or less, and are for a term of between 16 days and one year. These provisions start from March 2013, with a further tranche to take effect from July 2013.
Last year Mr Shorten requested ASIC review the provisions addressing:
• the effectiveness or otherwise of an online database or similar system that would assist providers of small amount credit contracts to determine whether consumers applying for such loans have any outstanding small amount debts, and whether the contracts offered by the provider are consistent with regulations
• the existence of any limitations in the provisions applying to small amount credit contracts in the Enhancements Act which would prevent ASIC from taking court action against small amount lenders, or severely restrict our capacity to do so (including the inability to obtain evidence, either documentary or from debtors, to establish the requirements necessary to prove an offence), and
• any recommendations for amendments to the Enhancements Act arising from ASIC’s review of the matters listed above.
CP 198 relates only to the effectiveness or otherwise of an online database or similar system.