Relaxation of “responsible lending” requirements for small business customers
The National Consumer Credit Protection Amendment (Coronavirus Economic Response Package) Regulations 2020 (Regulations) commenced on 3 April 2020.
The Regulations, enacted in response to the difficulties faced by small businesses as a result of COVID-19, provide an exemption from certain responsible lending obligations under the National Consumer Credit Protection Act 2009 (Cth) (Act) in relation to existing small business customers for a period of six months from the commencement of the Regulations (Exemption Period).
In general terms, the exemptions apply to conduct by an Australian Credit Licence-holder or other relevant person during the Exemption Period in relation to the provision of credit, or the hire of goods under a consumer lease, to an existing customer where the credit or goods are to be used partly for the purposes of a small business.
The provisions of the Act which are the subject of the exemption generally do not apply to lending or hire arrangements which are wholly or predominantly for business purposes. The intention of the Regulations appears to be to temporarily soften the regulatory requirements associated with lending to small businesses by exempting arrangements which are entered into only “partly” for the purposes of a small business, assisting small businesses to access credit (which may be essential to their ongoing operation) in circumstances where future prospects and cashflow are uncertain and there may otherwise be difficulties in satisfying responsible lending requirements.
A business with fewer than 100 employees, or revenue for the previous financial year of $5,000,000 or less (or for the current year, if the business was not carried on in the previous financial year).
The exemptions provided for under the Regulations generally apply where there was an arrangement for the provision of credit or the hire of goods in force between the credit provider or lessor and the customer at any time in the previous 12 months (from the date on which the relevant conduct requiring the exemption occurs).
HopgoodGanim’s Banking & Finance team are able to assist credit providers and lessors in ensuring that their documentation and processes comply with the requirements of the Act, and in considering how the Regulations affect those requirements in the context of their business.