Treasury Laws Amendment (Responsible Buy Now Pay Later and Other Measures) Act 2024 (138 of 2024)

Schedule 2   Buy now, pay later

Part 2   Responsible lending conduct

National Consumer Credit Protection Act 2009

14   After Part 3-2B

Insert:

Part 3-2BA - Licensees that are credit providers under credit contracts: additional rules relating to low cost credit contracts

Division 1 - Introduction

133BX Guide to this Part

This Part has rules that apply to certain licensees who are, or are to be, credit providers under certain low cost credit contracts. It applies in addition to the general rules in Part 3-2, and modifies some of those rules.

Division 1 provides that a licensee may elect that this Part apply to the licensee in relation to some or all low cost credit contracts. This Part only applies to a licensee who has made an election, and only applies to such a licensee in relation to low cost credit contracts covered by the election.

Division 2 modifies how some of the general rules in Part 3-2 apply to a licensee who has made an election. These modifications affect the rules that deal with the obligations of the licensee:

(a) to assess whether a low cost credit contract will be unsuitable for a consumer before doing particular things in relation to the contract; and

(b) not to enter, or increase the credit limit of, a low cost credit contract that is unsuitable for a consumer.

Division 3 requires a licensee who has made an election to have a policy (called an unsuitability assessment policy) that sets out how the licensee will comply with the licensee's obligation under Part 3-2 to assess whether a low cost credit contract will be unsuitable for a consumer.

133BXA Scope of this Part

This Part applies if licensee makes election

(1) A licensee may, in writing, elect that this Part apply to the licensee in relation to:

(a) all low cost credit contracts; or

(b) each low cost credit contract in a specified class of low cost credit contracts.

(2) This Part:

(a) applies to a licensee if the licensee has made an election under subsection (1) and the election is in force; and

(b) applies to such a licensee in relation to a credit contract if the credit contract is a low cost credit contract covered by the election.

(3) An election made under subsection (1) remains in force until the licensee revokes the election.

Licensee must keep copy of election and revocation

(4) A licensee who makes an election under subsection (1) must keep a written copy of the election for the period:

(a) starting at the time when licensee makes the election; and

(b) ending 6 years after the day on which the election ceases to be in force.

(5) If a licensee revokes an election made under subsection (1), then the licensee must keep a written copy of the revocation for the period of 6 years after the day on which the licensee revokes the election.

Part 3-2 not otherwise affected

(6) Nothing in this Part affects how Part 3-2 applies to a licensee in relation to a credit contract if the licensee has not made an election under subsection (1) of this section that covers the contract.

Division 2 - Unsuitable low cost credit contracts

133BXB When inquiries etc. must be made

For the purposes of applying section 128 to a licensee in relation to a low cost credit contract:

(a) paragraphs 128(aa) and (ba) are to be disregarded; and

(b) the period for making the assessment mentioned in paragraph 128(c), and the inquiries and verification mentioned in paragraph 128(d), is taken to be the period of 90 days (or other period prescribed by the regulations for the purposes of this paragraph) ending immediately before the licensee starts to do the thing mentioned in paragraph 128(a) or (b) (whichever applies).

133BXC When inquiries etc. are reasonable

(1) This section applies to a licensee who:

(a) enters a low cost credit contract with a consumer who will be the debtor under the contract; or

(b) increases the credit limit of a low cost credit contract with a consumer who is the debtor under the contract.

Note: The licensee must also have elected under subsection 133BXA(1) that this Part apply to the licensee in relation to the low cost credit contract: see subsection 133BXA(2).

Relevant matters

(2) In determining whether the licensee has:

(a) made reasonable inquiries about the consumer's requirements and objectives in relation to the low cost credit contract, as required under paragraph 130(1)(a); and

(b) made reasonable inquiries about the consumer's financial situation, as required under paragraph 130(1)(b); and

(c) taken reasonable steps to verify the consumer's financial situation, as required under paragraph 130(1)(c);

regard mustbe had to the matters covered by subsection (3) of this section, and regard may be had to any other relevant matters.

Note: Regulations made for the purposes of subsection 130(2) may prescribe particular inquiries or steps that must be made or taken, or that do not need to be made or taken, for the purposes of paragraph 130(1)(a), (b) or (c).

(3) The matters covered by this subsection are the following:

(a) the nature of the low cost credit contract (including the terms of the contract and the type and amount of credit provided under the contract);

(b) if there is a target market determination (within the meaning of the Corporations Act 2001) for the low cost credit contract - the nature of the target market for the low cost credit contract, as described in that determination;

(c) whether the consumer is financially vulnerable;

(d) whether the licensee has any procedures in place to reduce the risk of the licensee providing credit to a consumer on terms that are not affordable for the consumer;

(e) whether the licensee has any procedures in place to mitigate the harm that may be caused to a consumer if the licensee provides credit to the consumer on terms that are not affordable for the consumer;

(f) any matters prescribed by the regulations.

Note: The particular things that a licensee must do in order to satisfy the licensee's obligations under paragraphs 130(1)(a) to (c) in relation to low cost credit contracts may vary from case to case, and may be less onerous in some cases than in others, depending on matters such as those covered by this subsection.

133BXD Assessments etc. in relation to larger contracts

(1) This section applies to a licensee who enters a low cost credit contract (the initial contract ) with a consumer whowill be the debtor under the contract.

Entering the initial contract

(2) The licensee may satisfy paragraphs 128(c) and (d) in relation to entering the initial contractby (respectively):

(a) making an assessment that would satisfy paragraph 128(c) in relation to entering a larger contract with the consumer; and

(b) making inquiries and verification that would satisfy paragraph 128(d) in relation to entering the larger contract with the consumer.

Note: For larger contract , see subsection (7).

Subsequent credit increases

(3) Subsection (4) applies if:

(a) the licensee satisfies paragraphs 128(c) and (d) in relation to entering the initial contract by:

(i) making an assessment (the initial assessment )that would satisfy paragraph 128(c) in relation to entering, with the consumer, a larger contract with a particular credit limit (the maximum credit limit ); and

(ii) making inquiries and verification (the initial inquiries and verification )that would satisfy paragraph 128(d) in relation to entering the larger contract with the consumer; and

(b) the initial assessment is an assessment that the larger contract will not be unsuitable for the consumer if the larger contract is entered in the period covered by the initial assessment.

(4) If the licensee subsequently, within the protected period, makes a protected increase to the credit limit of the initial contract, then:

(a) the licensee is taken to satisfy section 128 in relation to the protected increase (regardless of whether the initial assessment, and the initial inquiries and verification, were made within the period that applies in relation to the protected increase under that section); and

(b) the initial assessment is taken to be:

(i) an assessment that covers the protected period;and

(ii) an assessment that the initial contract will not be unsuitable for the consumer if the protected increase is made in the protected period.

Note 1: For protected increase and protected period , see subsection (7).

Note 2: Even if the licensee is taken under this subsection to satisfy section 128 in relation to the protected increase, it is still possible for the licensee to contravene subsection 131(1) or 133(1) in relation to the protected increase.

Exceptions

(5) Subsection (4) does not apply to the licensee in relation to the protected increase if, at the time when the protected increase is made, the licensee has information on the basis of which it would be reasonable to conclude that the credit contract is likely to be unsuitable for the consumer if the protected increase is made.

(6) Despite subsections (3) and (4):

(a) the licensee may, at any time after making the initial assessment and before making the protected increase, make a new assessment in relation to the protected increase for the purposes of paragraph 128(c); and

(b) if the licensee does so, then subsection (4) of this section does not apply to the licensee in relation to the protected increase.

Definitions

(7) In this section:

larger contract means a low cost credit contract that:

(a) has a credit limit that is greater than the credit limit of the initial contract when the initial contract is entered; and

(b) has terms that are otherwise substantially the same as the terms of the initial contract when the initial contract is entered.

protected increase : an increase to the credit limit of the initial contract is a protected increase if:

(a) after the increase, the initial contract has a credit limit that is no greater than the maximum credit limit (within the meaning of subparagraph (3)(a)(i)); and

(b) the terms of the initial contract after the increase are otherwise substantially the same as the terms of the initial contract immediately before the increase.

protected period means whichever of the following is shorter (disregarding paragraph (4)(b)):

(a) the period covered by the initial assessment;

(b) the period of 2 years beginning when the period covered by the initial assessment begins.

133BXE Assessments of low cost credit contracts - presumptions where credit limit of contract not above threshold amount

(1) This section applies when determining, for the purposes of subsection 131(1), whether a low cost credit contract will be unsuitable for a consumer under paragraph 131(2)(b) if the contract is entered, or the credit limit of the contract is increased, in the period covered by the assessment mentioned in subsection 131(1).

Note: This section does not affect whether a low cost credit contract will be unsuitable for a consumer under paragraph 131(2)(a) or (c).

Entering a low cost credit contract

(2) For the purpose of applying subsection 131(1) in relation to a licensee entering a low cost credit contract (the initial contract )with a consumer, if the credit limit of the initial contract, at the time the initial contract is entered, will be less than or equal to the threshold amount, then it is presumed (unless the contrary is proved) that the initial contract will not be unsuitable for the consumer under paragraph 131(2)(b) if the initial contract is entered in the period covered by the assessment.

(3) However, subsection (2) does not apply if:

(a) the licensee satisfies paragraph 128(c) in relation to entering the initial contract by making an assessment that would satisfy that paragraph in relation to entering a larger contract with the consumer (see subsection 133BXD(2)); and

(b) the credit limit of the larger contract is greater than the threshold amount.

Increasing the credit limit of a low cost credit contract

(4) For the purpose of applying subsection 131(1) in relation to an increase (the relevant increase ) made by a licensee to the credit limit of a low cost credit contract(the initial contract )with a consumer, if the credit limit of the initial contract after the increase will be less than or equal to the threshold amount, then it is presumed (unless the contrary is proved) that the initial contract will not be unsuitable for the consumer under paragraph 131(2)(b) if the relevant increase occurs during the period covered by the assessment.

(5) However, subsection (4) does not apply if:

(a) the licensee previously satisfied paragraph 128(c) in relation to entering the initial contract by making an assessment that would have satisfied that paragraph in relation to entering a larger contract with the consumer (see subsection 133BXD(2)); and

(b) the credit limit of the larger contract was greater than the threshold amount; and

(c) because of subsection 133BXD(4), the licensee is not required to make a new assessment in order to satisfy paragraph 128(c) into relation to the relevant increase.

Definitions

(6) In this section:

larger contract means a low cost credit contract that:

(a) has a credit limit that is greater than the credit limit of the initial contract when the initial contract is entered; and

(b) has terms that are otherwise substantially the same as the terms of the initial contract when the initial contract is entered.

threshold amount means:

(a) $2,000, unless paragraph (b) applies; or

(b) if the regulations prescribe another dollar amount (whether larger or smaller) for the purposes of this paragraph - that other dollar amount.

133BXF Prohibition on entering unsuitable low cost credit contracts etc. - presumptions where credit limit of contract not above threshold amount

(1) This section applies when determining, for the purposes of subsection 133(1), whether a low cost credit contract is unsuitable for a consumer under paragraph 133(2)(b).

Note: This section does not affect whether a low cost credit contract is unsuitable for a consumer under paragraph 133(2)(a) or (c).

Entering a low cost credit contract

(2) For the purpose of applying subsection 133(1) in relation to a licensee entering a low cost credit contract with a consumer, if the credit limit of the contract, at the time the contract is entered, is less than or equal to the threshold amount, then it is presumed (unless the contrary is proved) that the contract is not unsuitable for the consumer under paragraph 133(2)(b).

Increasing the credit limit of a low cost credit contract

(3) For the purpose of applying subsection 133(1) in relation to an increase made by a licensee to the credit limit of a low cost credit contractwith a consumer, if the credit limit of the contract after the increase is less than or equal to the threshold amount, then it is presumed (unless the contrary is proved) that the contract is not unsuitable for the consumer under paragraph 133(2)(b).

Definitions

(4) In this section:

threshold amount means:

(a) $2,000, unless paragraph (b) applies; or

(b) if the regulations prescribe another dollar amount (whether larger or smaller) for the purposes of this paragraph - that other dollar amount.

Division 3 - Unsuitability assessment policies

133BXG Licensee must have an unsuitability assessment policy

(1) A licensee must have a written policy (an unsuitability assessment policy ) that sets out how the licensee will comply with sections 128 and 131 (which deal with assessments of unsuitability), as those sections apply in relation to low cost credit contracts.

Unsuitability assessment policy must be effective

(2) The licensee must ensure that the licensee's unsuitability assessment policy is one that, if followed, makes it likely that the licensee will comply with sections 128 and 131, as those sections apply in relation to low cost credit contracts.

Regulations may prescribe further requirements

(3) The licensee must comply with any requirements relating to unsuitability assessment policies prescribed by the regulations for the purposes of this subsection.