Treasury Laws Amendment (Design and Distribution Obligations and Product Intervention Powers) Act 2019 (50 of 2019)

Schedule 2   Amendments relating to product intervention orders

Part 1   Main amendments

National Consumer Credit Protection Act 2009

13   After Part 6-7

Insert:

Part 6-7A - Product intervention orders

Division 1 - Introduction

301A Guide to this Part

This Part aims to reduce the risk that credit contracts, mortgages, guarantees or consumer leases (credit products) or proposed credit products result in significant detriment for consumers.

Division 2 provides ASIC with powers that it can use proactively to reduce the risk of significant detriment to consumers resulting from credit products.

Division 2 - Product intervention orders

301B Definitions

In this Part:

credit product has the meaning given by paragraph 301D(1)(a).

product intervention order means an order made under subsection 301D(1) or (3).

301C Application of product intervention orders

(1) A product intervention order does not apply to a credit product entered into by a person if the person entered into the product before the order comes into force.

(2) A product intervention order does not apply to a person:

(a) in the person's capacity as a consumer; or

(b) who is in a class of persons specified in regulations made for the purposes of this paragraph.

(3) The regulations may provide that this Part does not apply to a credit product specified in the regulations.

Note: In a prosecution for an offence, the defendant bears an evidential burden in relation to the matters in this section (see subsection 13.3(3) of the Criminal Code).

301D ASIC may make product intervention orders

Making product intervention orders

(1) Subject to subsection (5), if ASIC is satisfied that:

(a) a person is engaging, or is likely to engage, in credit activity in relation to a credit contract, mortgage, guarantee or consumer lease ( credit product ) or a proposed credit product; and

(b) the credit product has resulted in, or will or is likely to result in, significant detriment to consumers;

ASIC may, in accordance with this Part, order that a specified person must not engage in specified conduct in relation to the product, either entirely or except in accordance with conditions specified in the order.

Note 1: Section 301E specifies matters to be taken into account in considering whether a credit product has resulted in, or will or is likely to result in, significant detriment to consumers.

Note 2: Section 301N also provides that product intervention orders may include requirements for notifying consumers.

(2) An order under subsection (1) is not a legislative instrument.

(3) Subject to subsection (5), if ASIC is satisfied that:

(a) a person is engaging, or is likely to engage, in credit activity in relation to a class of credit products or proposed credit products; and

(b) the class of products has resulted in, or will or is likely to result in, significant detriment to consumers;

ASIC may, in accordance with this Part and by legislative instrument, order that a person must not engage in specified conduct in relation to the class of products and consumers, either entirely or except in accordance with conditions specified in the order.

Note 1: Section 301E specifies matters to be taken into account in considering whether a credit product has resulted in, or will or is likely to result in, significant detriment to consumers.

Note 2: Section 301N also provides that product intervention orders may include requirements for notifying consumers.

Restrictions on product intervention orders

(4) A product intervention order must not specify any of the following for subsection (1) or (3):

(a) a condition that a person satisfy a standard of training, or meet a professional standard, other than a standard prescribed for the person by or under this Act;

(b) a condition that a person who is not required to hold an Australian credit licence become a member of an external dispute resolution scheme;

(c) a condition related to a person's remuneration, other than a condition related to so much of the person's remuneration as is conditional on the achievement of objectives directly related to the credit product.

(5) Conduct covered by a product intervention order must be limited to conduct in relation to a consumer.

301E Significant detriment to consumers

(1) In considering whether a credit product has resulted in, or will or is likely to result in, significant detriment to consumers for the purposes of this Part, the following must be taken into account:

(a) the nature and extent of the detriment;

(b) without limiting paragraph (a), the actual or potential financial loss to consumers resulting from the product;

(c) the impact that the detriment has had, or will or is likely to have, on consumers;

(d) any other matter prescribed by regulations made for the purposes of this paragraph.

(2) Subsection (1) does not limit the matters to be taken into account in considering whether a credit product has resulted in, or will or is likely to result in, significant detriment to consumers for the purposes of this Part.

(3) A credit product may result in significant detriment to consumers even if a person has complied with the disclosure requirements in the National Credit Code in relation to the product.

301F ASIC to consult before making product intervention orders

(1) ASIC must not make a product intervention order unless ASIC has:

(a) consulted persons who are reasonably likely to be affected by the proposed order; and

(b) if the proposed order will apply to a body that is regulated by APRA - consulted APRA; and

(c) complied with any other requirements as to consultation prescribed by regulations made for the purposes of this paragraph.

(2) Without limiting paragraph (1)(a), ASIC is taken to comply with that paragraph if ASIC, on its website:

(a) makes the proposed order, or a description of the content of the proposed order, available; and

(b) invites the public to comment on the proposed order.

(3) A failure to comply with subsection (1) does not invalidate a product intervention order.

(4) Section 17 of the Legislation Act 2003 (rule-makers should consult before making legislative instruments) does not apply to the making of a product intervention order.

301G Commencement and duration of product intervention orders

Commencement of product intervention orders

(1) A product intervention order comes into force:

(a) for an order that is a legislative instrument - on the day after the instrument is registered under the Legislation Act 2003; or

(b) otherwise - on the day after the notice under subsection 301L(3) in relation to the order is published;

or a later day specified in the order.

Duration of product intervention orders

(2) A product intervention order remains in force for:

(a) 18 months, or any shorter period specified by the regulations; or

(b) any shorter period specified in the order.

However, if a court makes an order staying or otherwise affecting the operation or enforcement of a product intervention order, then, in determining when the period referred to in paragraph (a) or (b) ends, disregard the period during which the court's order has that effect.

(3) Subsection (2) does not apply to a product intervention order if a declaration under section 301H (which relates to extensions of product intervention orders) is in force in relation to the order.

(4) Subsection (2) does not prevent the revocation of a product intervention order.

Repeal of product intervention orders

(5) A product intervention order that is a legislative instrument that ceases to be in force is repealed by force of this subsection.

301H Extension of product intervention orders

(1) ASIC may, in accordance with an approval under subsection (4), by legislative instrument, declare that a product intervention order that is in force:

(a) remains in force until it is revoked; or

(b) remains in force for a specified period, unless it is revoked earlier.

Note: A declaration under this subsection has the effect of overriding any provisions in a product intervention order about the duration of the order: see subsection 301G(3).

(2) ASIC may make more than one declaration under subsection (1) in relation to a product intervention order that is in force.

Approval of Minister

(3) ASIC may, at any time before the order ceases to be in force, give the Minister a report on whether the declaration should be made.

(4) After considering the report, the Minister may give an approval in writing for the purposes of subsection (1).

301J Amendment of product intervention orders

(1) Subject to this section, ASIC may, in writing, amend a product intervention order that is in force.

Requirements before amending product intervention orders

(2) If a declaration under section 301H is in force in relation to a product intervention order, ASIC must not amend the order without the Minister's approval, given after considering a report from ASIC on whether the amendment should be made.

(3) ASIC may, at any time before the order ceases to be in force, give the Minister a report on whether the amendment should be made.

Amendments of product intervention orders

(4) An amendment of a product intervention order must not be such that the order remains in force for a period longer than the maximum period determined for the order in accordance with subsection 301G(2) or 301H(1).

(5) An amendment of a product intervention order comes into force:

(a) for an amendment of an order that is a legislative instrument - on the day after the amendment is registered under the Legislation Act 2003; or

(b) otherwise - on the day after the day on which the notice under subsection 301L(6) in relation to the amendment is published;

or a later day specified in the amendment.

Amendments of orders that are legislative instruments

(6) An amendment of a product intervention order that is a legislative instrument must be by legislative instrument.

301K Revocation of product intervention orders

(1) Subject to this section, ASIC may, in writing, revoke a product intervention order.

Requirements for revocation of product intervention orders

(2) If a declaration under section 301H is in force in relation to a product intervention order, ASIC must not revoke the order without the Minister's approval, given after considering a report from ASIC on whether the order should be revoked.

(3) ASIC may, at any time before the order ceases to be in force, give the Minister a report on whether the order should be revoked.

Revocation of orders that are legislative instruments

(4) A revocation of a product intervention order that is a legislative instrument must be by legislative instrument.

301L ASIC to issue public notice of product intervention orders

Product intervention orders

(1) ASIC must serve a copy of a product intervention order that is not a legislative instrument on any person to whom ASIC considers the order applies. Failure to comply with this subsection does not invalidate the order.

(2) ASIC must publish each product intervention order, as in force for the time being, on its website.

Note: The Legislation Act 2003 requires legislative instruments to be registered on the Federal Register of Legislation and provides for compilations of legislative instruments.

(3) ASIC must also publish on its website, with the product intervention order, a notice that:

(a) describes the significant detriment to consumers that has resulted from, or will or is likely to result from, the credit product or class of credit products to which the order relates, and sets out why the order is an appropriate way of reducing the detriment; and

(b) describes the consultation that ASIC undertook in relation to the order; and

(c) if the order comes into force after it is published - specifies the day it comes into force.

(4) ASIC must publish on its website, with the product intervention order, each declaration under section 301H (which relates to extensions of product intervention orders) that relates to the order.

Amendments of product intervention orders

(5) ASIC must serve a copy of the instrument amending a product intervention order that is not a legislative instrument on any person to whom ASIC considers the order applies. Failure to comply with this subsection does not invalidate the order.

(6) ASIC must publish on its website, with the product intervention order, each amendment of the product intervention order.

(7) ASIC must also publish on its website, with the amendment, a notice that:

(a) sets out why the amendment is appropriate; and

(b) describes the consultation that ASIC undertook in relation to the amendment; and

(c) if the day the amendment is to take effect is later than the day after the day of publication of the amendment - specifies the day the amendment is to take effect.

Revocation of product intervention orders

(8) If a product intervention order is revoked, ASIC must publish notice of the revocation on its website.

301M Remaking product intervention orders

If a product intervention order ceases to be in force or is revoked, ASIC must not remake the order, or make an order in substantially the same terms, unless:

(a) ASIC is satisfied the circumstances have materially changed since the order was made; or

(b) the Minister approves, in writing, the remaking or making of the order.

301N Product intervention orders may require notification

A product intervention order in relation to a credit product may:

(a) require that a specified person who has engaged in a credit activity in relation to the product in respect of a consumer take reasonable steps to notify the consumer:

(i) of the terms of the order; and

(ii) of any other matter specified in regulations made for the purposes of this subparagraph; and

(b) specify requirements in relation to giving those notifications (including requirements as to the periods within which to give those notifications).

301P Enforcement of product intervention orders

(1) A person must not engage in conduct contrary to a product intervention order that is in force in relation to the person.

Civil penalty: 200 penalty units.

(2) A person must not engage in conduct contrary to a product intervention order.

Criminal penalty: 200 penalty units, or imprisonment for 5 years, or both.

(3) A person who is required by a product intervention order to take reasonable steps to notify a consumer must comply with the requirement.

Civil penalty: 200 penalty units.

Note: For this requirement, see section 301N.

(4) A person who is required by a product intervention order to take reasonable steps to notify a consumer must comply with the requirement.

Criminal penalty: 200 penalty units, or imprisonment for 5 years, or both.

Note: For this requirement, see section 301N.

(5) Subsections (1), (2), (3) and (4) do not apply if:

(a) the product intervention order is not a legislative instrument; and

(b) the person was not aware, and could not reasonably have been aware, of the order.

(6) If a product intervention order has been served on a person, the person must take all reasonable steps to ensure that other persons who engage in conduct to which the order applies are aware of the order.

Civil penalty: 200 penalty units.

(7) If a product intervention order has been served on a person, the person must take all reasonable steps as soon as practicable to ensure that other persons who engage in conduct to which the order applies are aware of the order.

Criminal penalty: 200 penalty units, or imprisonment for 5 years, or both.