The National Consumer Credit Protection Act 2009 (the Act) provides for the licensing of credit activities, the imposition of responsible lending obligations and requirements in relation to credit contracts and consumer leases.
Section 329 of the Act provides that the Governor-General may make regulations prescribing matters required or permitted by the Act to be prescribed, or necessary or convenient to be prescribed, for carrying out or giving effect to the Act.
In April 2020, the National Consumer Credit Protection Amendment (Coronavirus Economic Response Package) Regulations 2020 temporarily exempted certain credit providers from responsible lending obligations under the Act where particular conditions were met (the small business exemption).
This targeted adjustment for a period of six months was intended to support the timely flow of credit to small businesses in light of the rapidly-evolving challenges posed by the coronavirus pandemic. In October 2020, the National Consumer Credit Protection Amendment (Responsible Lending Obligations) Regulations 2020 (the October 2020 Regulations) extended the small business exemption for a further six months.
In September 2020, the Government announced that it would undertake consumer credit reforms aimed at reducing the cost and time that it takes consumers and businesses to access credit so that consumers can continue to spend and business can invest and create jobs. The National Consumer Credit Protection Amendment (Supporting Economic Recovery) Act 2021 (the Amending Act) implements these reforms by establishing a new regulatory framework for the provision of consumer credit.
Schedule 1 to the Amending Act removes existing responsible lending obligations relating to the unsuitability of credit contracts, except in relation to small amount credit contracts (SACCs), SACC-equivalent loans by authorised deposit-taking institutions (ADIs), and consumer leases.
The purpose of the National Consumer Credit Protection Amendment (Small Business Exemption) Regulations 2021 (the Amending Regulations) is to amend the National Consumer Credit Protection Regulations 2010 to align the end of the small business exemption with the Amending Act's removal of responsible lending obligations. This prevents the responsible lending obligations from being reimposed on a portion of credit activity (that has a partial small business purpose) for the period between the expiry date set by the October 2020 Regulations and the commencement of the relevant parts of the Amending Act.
Public consultation on a set of draft regulations including the substance of the Amending Regulations was conducted between 4 November and 20 November 2020, together with an exposure draft of the Amending Bill and the proposed non-ADI credit standards. Fifty-eight submissions were received on the exposure draft package. Feedback from stakeholders predominantly related to the Amending Bill and the non-ADI standards.
Following the consultation period, the relevant provision was redrafted to align with the commencement arrangements for the Amending Bill as introduced to Parliament.
The Act does not specify any conditions that need to be met before the power to make the Amending Regulations is exercised. Details of the Amending Regulations are set out in Attachment A. The Amending Regulations are a legislative instrument for the purposes of the Legislation Act 2003.
The Amending Regulations commence on the day after registration.
A regulation impact statement was prepared for the consumer credit reforms. It is available in Chapter 2 of the explanatory memorandum for the Amending Bill. [1]
A statement of compatibility with human rights is at Attachment B.
ATTACHMENT A
Details of the National Consumer Credit Protection Amendment (Small Business Exemption) Regulations 2021
Section 1 - Name of the Regulations
This section provides that the name of the Regulations is the National Consumer Credit Protection Amendment (Small Business Exemption) Regulations 2021 (the Amending Regulations).
Section 2 - Commencement
The Amending Regulations commence on the day after registration on the Federal Register of Legislation.
Section 3 - Authority
The Regulations are made under the National Consumer Credit Protection Act 2009 (the Act).
Section 4 - Schedule
This section provides that each instrument that is specified in the Schedule to this instrument will be amended or repealed as set out in the applicable items in the Schedules, and any other item in the Schedules to this instrument has effect according to its terms.
Schedule 1 - Amendments
Item 1 alters the end date for the temporary exemption provided for in regulation 28RB of the National Consumer Credit Protection Regulations 2010, relating to the coronavirus economic response. The exemption is from responsible lending obligations under the Act for certain credit providers where particular conditions are met, including that there is a partial small business purpose.
The end date is aligned with the commencement of the new framework for the provision of consumer credit - that is, immediately before Parts 1 and 2 of Schedule 1 to the National Consumer Credit Protection Amendment (Supporting Economic Recovery) Act 2021 (Amending Act) commence.
From the time Parts 1 and 2 of Schedule 1 to the Amending Act commence, the responsible lending obligations are reinstated for credit with a partial small business purpose in relation to SACCs, SACC-equivalent loans by ADIs and consumer leases.
For other types of credit, the alignment made by item 1 prevents the obligations from being temporarily reimposed for credit with a partial small business purpose, ahead of their removal by the Amending Act.
The new non-ADI credit standard will contain an ongoing exemption for non-ADI credit contracts with a partial small business purpose.
ATTACHMENT B
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011
This Legislative Instrument is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
This Legislative Instrument alters the end date for a temporary exemption from responsible lending obligations under the National Consumer Credit Protection Act 2009, relating to the coronavirus economic response and covering credit with a partial small business purpose.
The alteration prevents the responsible lending obligations from being temporarily reimposed on a portion of credit activity (that has a partial small business purpose) ahead of their removal by the National Consumer Credit Protection Amendment (Supporting Economic Recovery) Act 2021.
This Legislative Instrument does not engage any of the applicable rights or freedoms.
This Legislative Instrument is compatible with human rights as it does not raise any human rights issues.