Electronic Communications Where Consumer Credit Involved – Potential Reforms

Electronic Communications Where Consumer Credit Involved – Potential Reforms

Some of the restrictions on communicating electronically where consumer credit is involved may soon be lifted.

ASIC recently wrote to major industry bodies and key stakeholders seeking their views on amending the Electronic Transactions Regulations 2000 (Cth) (ETA Regulations) to make it easier to communicate electronically for consumer credit transactions. This is all part of a review by the Commonwealth Attorney-General’s Department of the Electronic Transactions Act 1999 (Cth) (ETA). 

The history of the current restrictions

In 2010 the Commonwealth took over regulation of consumer credit from the states and territories. This was accomplished by the states and territories transferring their powers in relation to consumer credit to the Commonwealth under various ‘Transfer of Powers’ acts.  The result was the National Consumer Credit Protection Act 2009 (Cth) (NCCP Act) and the National Credit Code.  Electronic communications in regard to consumer credit then became subject to the Electronic Transactions Act 1999 (Cth) (ETA). When this happened the Commonwealth was faced with how to deal with electronic communications in connection with credit regulated by the NCCP Act. Previously this issue had been dealt with under the electronic transactions acts in force in the various states and territories. The Commonwealth decided to do two things:

  1. it prohibited certain documents and communications from taking place electronically ( the prohibitions)
  2. additional disclosure requirements were imposed before a consumer was regarded as having provided the necessary consent to electronic communications (the enhanced consent requirements).

These changes were implemented by amendments to the ETA Regulations which took effect when the NCCP Act came into operation, namely 1 July 2010. 

Impact of recent changes at Australia Post

The recent changes by Australia Post to their service standards and the extension of standard delivery times for ordinary mail to up to six business days underlines the need to review and amend these regulations. The changes at Australia Post calls into question why electronic communications should be restricted. Many of the restrictions on communicating electronically are to our mind anachronistic. While they may have been appropriate at the time they were introduced they have now passed their ‘shelf life’ and need to be re-examined.

What changes are being considered?

The changes being considered are:

  • remove some of the prohibitions
  • remove the enhanced consent requirements.

The details – remove some of the prohibitions

ASIC is recommending that some of the current prohibitions on electronic communications be removed and is consulting with industry concerning the fate of the other prohibitions. (a) ASIC is currently proposing to remove the following prohibitions on communicating electronically:

  • guarantor receiving a guarantee electronically
  • providing copy documents to guarantors
  • extension of guarantee to future credit contracts – giving a copy of contract
  • request to enter residential property to take possession of goods.  

The above are all instances where either only a copy of a document is being provided or the consumer has to respond positively to a request before a credit provider can take the action requested.  (b) ASIC is consulting as to whether certain other current restrictions ought to be removed, including the giving of:

  • default notices prior to enforcement action
  • notices following repossession
  • demands to linked credit providers and suppliers to satisfy judgments
  • notice of repossession of goods under consumer leases
  • other matters relating to payment of duties.

The details – remove the enhanced consent requirements

Specifically, the proposal is to remove the whole of the enhanced consent requirements currently contained in Part 3 of the regulations. An example of one of the current requirements in relation to ‘giving’ documents electronically to a debtor, mortgagor or guarantor is set out at regulation 10(1):

Manner of giving notice or other document 

  1. A debtor, mortgagor or guarantor may consent to the giving of documents by electronic communication only after being told that, if written consent is given:

(a) paper documents may no longer be given   (b) electronic communications must be regularly checked for documents  (c) consent to the giving of documents by electronic communication may be withdrawn at any time.

Removal of the enhanced consent requirements would be welcomed and would simplify the drafting of consent provisions especially where intended to be used for both credit products and deposit products.

The future – ‘opt in’ versus ‘opt-out’

This reform will no doubt play out over the next year.  What is not clear is whether ASIC proposes to tackle the thorny issue of whether consent to receive electronic communications in relation to consumer credit should be an ‘opt-in’ process or ‘opt-out’ process. Very recently (29 March 2016) the ePayments Code has been amended to remove the requirement for ‘users to positively agree to electronic communications’.  A further note will be published in relation to these regulations.  Industry participants generally would love to have the ‘opt-out’ regime extended to consumer credit, which would effectively enable them to bypass the postal system which is becoming more expensive and where delivery times and frequency of delivery are becoming areas of concern.