Explanatory Memorandum
(Circulated by authority of the Assistant Treasurer, Minister for Housing and Minister for Homelessness, Social and Community Housing, the Hon Michael Sukkar MP)Chapter 4 - Amendments to product intervention regime
Outline of Chapter and summary of new law
4.1 Schedule 4 to the Bill amends paragraph 1023D(4)(c) of the Corporations Act 2001 and paragraph 301D(4)(c) of the National Consumer Credit Protection Act 2009 to provide that ASIC is not prohibited from making a product intervention order that has conditions relating to fees, charges or other consideration payable by a retail client or consumer in relation to a financial product or a credit product.
Context of amendments
4.2 A product intervention order is an order that is made by ASIC under its product intervention powers to impose conditions, or if necessary, ban potentially harmful financial and credit products where there is a risk of significant detriment to retail clients or consumers.
4.3 Paragraph 1023D(4)(c) of the Corporations Act 2001 and paragraph 301D(4)(c) of the National Consumer Credit Protection Act 2009 contain a prohibition that prevents ASIC from making a product intervention order with a condition relating to a person's remuneration.
4.4 The prohibition was only intended to limit ASIC's ability to make a product intervention order relating to remuneration of individuals who are employees or agents of a financial product provider or a credit product provider (such as wages). However, the prohibition may inadvertently capture remuneration received by a financial product provider or a credit product provider or their associates from a retail client or consumer, given the potential for a broad interpretation of 'a person's remuneration' in the provision. If this were the interpretation, ASIC would be unable to make a product intervention order to regulate fees, charges or other consideration paid by a retail client or consumer to these entities for the provision of a financial product or a credit product.
4.5 Removing the ambiguity and ensuring that ASIC has the ability to intervene in relation to the costs of a financial and credit product (such as administrative fees, interest charges, surcharges, or default fees) paid by a retail client or consumer, through the use of a product intervention order, is critical for retail client and consumer protection against significant detriment.
4.6 Therefore, amendments are required to exclude fees, charges or other consideration paid or payable as remuneration by retail clients or consumers from the prohibition.
Comparison of key features of new law and current law
| New law | Current law |
| A further exception to the prohibition is provided to allow ASIC to make a product intervention order with conditions relating to fees, charges or other consideration paid or payable as remuneration by a retail client or consumer to a person in relation to a financial product or credit product. | ASIC is prohibited from making a product intervention order that has conditions relating 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 financial product or credit product. |
Detailed explanation of new law
4.7 Currently, paragraph 1023D(4)(c) of the Corporations Act 2001 provides that a product intervention order must not specify 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 financial product.
4.8 This is amended to provide another exception to the prohibition so that ASIC is not prevented from making a product intervention order that has a condition relating to fees and charges or other consideration paid, or payable, as remuneration to a person (such as the financial product provider or its associate) by a retail client in relation to a financial product. [Schedule 4, item 1, paragraph 1023D(4)(c) of the Corporations Act 2001]
4.9 A similar amendment has been made to paragraph 301D(4)(c) of the National Consumer Credit Protection Act 2009 to exclude a product intervention order with conditions relating to fees and charges or other consideration paid to a person (such as the credit product provider or its associate) by a consumer from the prohibition. [Schedule 4, item 2, paragraph 301D(4)(c) of the National Consumer Credit Protection Act 2009]
4.10 For example, the amended provision would confirm that ASIC could make a product intervention order with a condition that prohibits certain default fees from being charged in relation to a particular class of consumer leases, in circumstances where ASIC considered these fees and charges resulted in, or were likely to result in, significant detriment to consumers.
4.11 These amendments are made to limit the scope of the prohibition to ensure that the product intervention regime can operate as intended.
Application and transitional provisions
4.12 Schedule 4 to the Bill commence the day after Royal Assent.