Financial Sector Reform Act 2022 (87 of 2022)

Schedule 4   Consumer credit reforms

Part 4   Avoidance

National Consumer Credit Protection Act 2009

62   After Division 1 of Part 7-1

Insert:

Division 1A - Avoidance schemes

323A Schemes for avoidance purposes

General prohibition

(1) A person must not, either alone or with others, engage in any of the following conduct:

(a) enter into a scheme;

(b) begin to carry out a scheme;

(c) carry out a scheme;

if, having regard to any matters as required under subsection 323B(1) or (3), it would be reasonable to conclude that the purpose, or one of the purposes, of the person engaging in that conduct was an avoidance purpose.

Civil penalty: 5,000 penalty units.

What is an avoidance purpose ?

(2) Each of the following is an avoidance purpose :

(a) to prevent a contract from being a small amount credit contract or a consumer lease;

(b) to cause a contract to cease to be a small amount credit contract or a consumer lease;

(c) to avoid the application of a provision of this Act to a small amount credit contract or a consumer lease;

(d) to avoid the application of a provision of this Act to a contract that has ceased to be a small amount credit contract or a consumer lease;

(e) to avoid the application of a product intervention order made under Part 6-7A.

Constitutional corporations

(3) A constitutional corporation must not, either alone or with other persons, engage in any of the following conduct:

(a) enter into a scheme;

(b) begin to carry out a scheme;

(c) carry out a scheme;

if, having regard to any matters as required under subsection 323B(1) or (3), it would be reasonable to conclude that the purpose, or one of the purposes, of the constitutional corporation engaging in that conduct was an avoidance purpose.

Civil penalty: 5,000 penalty units.

Constitutional trade and commerce

(4) A person must not in the course of constitutional trade and commerce, either alone or with others, engage in any of the following conduct:

(a) enter into a scheme;

(b) begin to carry out a scheme;

(c) carry out a scheme;

if, having regard to any matters as required under subsection 323B(1) or (3), it would be reasonable to conclude that the purpose, or one of the purposes, of the person engaging in that conduct was an avoidance purpose.

Civil penalty: 5,000 penalty units.

Use of communications service

(5) A person must not use postal, telegraphic, telephonic or other like services (within the meaning of paragraph 51(v) of the Constitution), either alone or with other persons, in order to engage in any of the following conduct:

(a) enter into a scheme;

(b) begin to carry out a scheme;

(c) carry out a scheme;

if, having regard to any matters as required under subsection 323B(1) or (3), it would be reasonable to conclude that the purpose, or one of the purposes, of the person engaging in that conduct was an avoidance purpose.

Civil penalty: 5,000 penalty units.

Prohibitions independent of each other

(6) To avoid doubt, subsections (1), (3), (4) and (5) are independent from and do not limit each other.

Note: However, a person can be ordered to pay a pecuniary penalty under only one of those subsections in relation to the same conduct: see section 175.

Offence

(7) A person commits an offence if:

(a) the person is subject to a requirement under subsection (1), (3), (4) or (5); and

(b) the person engages in conduct; and

(c) the conduct contravenes the requirement.

Criminal penalty: 100 penalty units.

323B Whether it is reasonable to draw conclusion as to purpose

Avoidance purposes relating to contracts

(1) Regard must be had to the following matters in determining, for the purposes of section 323A, whether it would be reasonable to conclude that a purpose of a person (the first person ) entering into or carrying out (to any extent) a scheme was an avoidance purpose relating to a contract:

(a) whether the scheme or the contract was, is or would be:

(i) a means of providing a consumer with credit in a manner more complex, or more costly to the consumer, than a small amount credit contract would have been; or

(ii) a means of providing a consumer with financial accommodation equivalent to providing the consumer with credit in a manner more complex, or more costly to the consumer, than a small amount credit contract would have been; or

(iii) a means of enabling a consumer to have the use of goods in a manner more complex, or more costly to the consumer, than a consumer lease would have been;

(b) whether representations were made (by the first person or anyone else, and whether in an advertisement or otherwise) about the scheme or the contract, or about schemes or contracts of that kind, that:

(i) were similar to representations made (by the first person or anyone else, and whether in an advertisement or otherwise) about small amount credit contracts or consumer leases; or

(ii) were made to persons in a group similar to a group of persons to whom representations about small amount credit contracts or consumer leases were made (by the first person or anyone else, and whether in an advertisement or otherwise);

(c) any matters prescribed by the regulations.

(2) Subsection (1) does not limit the matters to which regard may be had in making a determination described in that subsection.

Avoidance purposes relating to product intervention orders

(3) In determining, for the purposes of section 323A, whether it would be reasonable to conclude that a purpose of a person entering into or carrying out (to any extent) a scheme was a purpose referred to in paragraph 323A(2)(e), regard must be had to any matters prescribed by the regulations.

(4) Subsection (3) does not limit the matters to which regard may be had in making a determination described in that subsection.

323C Presumption of avoidance for certain schemes in civil cases

(1) For the purposes of subsection 323A(1), (3), (4) or (5), it is reasonable to conclude that a person entered into or carried out a scheme for an avoidance purpose if:

(a) the scheme is of a kind prescribed by the regulations; or

(b) the scheme is of a kind determined by ASIC under subsection (3).

(2) A conclusion that this section provides for has effect except so far as the contrary is proved by the person, having regard to any matters as required under subsection 323B(1) or (3).

(3) ASIC may, by legislative instrument, determine a scheme, or a class of schemes, for the purposes of this section.

(4) This section does not have effect for the purposes of subsection 323A(7).

323D Exemption by ASIC

(1) ASIC may, by legislative instrument, exempt a scheme, or class of schemes, from all or specified provisions of section 323A.

(2) An exemption may apply subject to any specific conditions imposed by ASIC.