Late yesterday evening Federal Treasury issued an urgent email to interested stakeholders giving clarification as to the boundary, in monetary terms, between Small Amount Credit Contracts (SACCs) and Medium Amount Credit Contracts (MACCs).
A SACC is a credit contract where the “credit limit” is $2,000 or less. Over that amount, the credit contract becomes a MACC.
The issue for stakeholders, has been determining whether the “credit limit” for a SACC, is inclusive or exclusive of the “permitted establishment fee” and the initial first “permitted monthly fee” where those fees are financed. Treasury has now clarified this point in an announcement issued at 7.05 pm on Thursday 6 June 2013 in the following terms:
“…it is understood there are different views on whether the definition of a SACC means that the amount of credit the consumer can receive in hand is $2000, or only a lesser amount (according to whether or not any of the permissible establishment and monthly fees are financed). Given that lenders cannot charge interest on establishment and monthly fees Treasury considers they are not to be treated as part of the amount of credit provided. …Treasury will therefore look to shortly address this issue through regulations to make it clear, in relation to small amount credit contracts, that in all cases the credit limit equates to the adjusted credit amount, so that the adjusted credit amount can be an amount up to $2000. “
Credit providers with small amount credit contracts can now proceed with certainty in planning for commencement of the new laws dealing interest rate caps and other related matters which take effect from 1 July 2013.
However, there is at least one issue that still needs to be clarified by Treasury in relation to the upper monetary limit of a MACC, which is defined as a credit contract where the credit limit is between $2001 and $5000 and where an establishment fee of $400 may be charged.