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.