A new ASIC class order (15/130) has been made, extending an exemption which relieves a credit provider from complying with section 73 of the National Credit Code (NCC) in relation to a hardship variation, provided that the variation is a ‘simple arrangement’.
The exemption will remain in place until 1 March 2016. Further industry consultation about whether the exemption should be made permanent is expected.
The concept of a simple arrangement was introduced by ASIC class order 14/41. A simple arrangement means “…an agreement that defers or reduces the obligations of a debtor for a period of no more than 90 days.”
Usually, when a credit provider agrees to vary the obligations of a borrower under a credit contract, section 73 of the NCC requires the credit provider to give to the debtor (and any guarantor) a written notice setting out the particulars of the change in the terms of the credit contract, within 30 days of the arrangement.
The class order means that credit providers who agree to vary the obligations of a borrower under a credit contract for less than 90 days need not give any written notice.
For example, if a credit provider comes to an arrangement with the borrower over the telephone that the borrower need not make the next two monthly repayments on the grounds of hardship, the credit provider will not need to send a written confirmation of the details of the change to the borrower.
However, the credit provider should ensure in these cases that the borrower understands his or her obligations, and that the credit provider makes an electronic or written record of the arrangement.
In our experience many credit providers still send written confirmation of short term variations to ensure that both parties have clear evidence of the terms of the arrangement in the event of a complaint by the borrower.