40Avoidance purposes relating to contracts

#### 40 Avoidance purposes relating to contracts (1) This regulation is made for the purposes of paragraph 323B(1)(c) of the Act. Provision of credit to which the Code does not apply (2) In determining, for the purposes of section 323A of the Act, whether it would be reasonable to conclude that a purpose of a person entering into or carrying out (to any extent) a scheme was an avoidance purpose relating to a contract, regard must be had to whether the provision of any credit under the scheme or contract is not, or would not be, a provision of credit to which the Code applies because of the operation of: (a) paragraph 5(1)(c) of the Code (which is about whether a charge is or may be made for providing the credit); or (b) subsection 6(1) of the Code (which is about short term credit); or (c) subsection 6(5) of the Code (which is about credit for which only an account charge is payable). Provision of credit or financial accommodation—costs and complexity (3) When having regard to a matter referred to in subparagraph 323B(1)(a)(i) or (ii) of the Act in relation to a scheme or contract, regard must be had to whether the scheme or contract does, or may do, any of the following: (a) requires a consumer to pay a fee or charge that could not have been imposed on the consumer under, or in relation to, a small amount credit contract; (b) in relation to a person that has provided, or is to provide, credit or financial accommodation to a consumer under the scheme or contract (the principal scheme or principal contract)—gives the person a right, if the consumer is in default in payment of an amount under the principal scheme or principal contract, to recover from the consumer an amount greater than the amount the person could have recovered in accordance with section 39B of the Code if: (i) the person had been a credit provider under a small amount credit contract with the consumer; and (ii) any credit or financial accommodation that has been, or is to be, provided to the consumer by the person under the principal scheme or principal contract had been, or was to be, provided to the consumer as credit under that small amount credit contract; and (iii) the consumer had been in default in payment of an amount under that small amount credit contract; (c) in relation to a person who has not provided, and will not provide, credit or financial accommodation to a consumer under the scheme or contract—gives the person a right to recover an amount if the consumer is in default in payment of an amount under the scheme or contract; (d) requires a consumer to pay a fee or charge that a reasonable person would think is disproportionate in light of the amount of credit, or the extent of the financial accommodation, provided to the consumer under the scheme or contract; (e) requires a consumer to pay a fee or charge that a reasonable person would regard as high; (f) requires a consumer to pay a fee or charge (the nominated fee or charge), where it is reasonably likely that the consumer will, as a result of that requirement, become liable under the scheme or contract to pay one or more further fees or charges (other than interest fees or charges) in addition to the nominated fee or charge; (g) requires a consumer to pay fees or charges to 2 or more persons. (4) When having regard to a matter referred to in subparagraph 323B(1)(a)(i) or (ii) of the Act in relation to a scheme, regard must also be had to the following matters: (a) whether the scheme involves, or relates to, 2 or more contracts; (b) whether the scheme involves, or relates to, 2 or more contracts entered into at different times; (c) whether the scheme involves, or relates to, a contract between a consumer and 2 or more other persons; (d) whether the scheme involves, or relates to, separate contracts between a consumer and each of 2 or more other persons. Dispute resolution (5) In determining, for the purposes of section 323A of the Act, whether it would be reasonable to conclude that a purpose of a person entering into or carrying out (to any extent) a scheme was an avoidance purpose relating to a contract, regard must be had to the following matters: (a) whether the scheme or contract provides for an internal dispute procedure that satisfies the standards and requirements made or approved by ASIC for the purposes of subparagraph 47(1)(h)(i) of the Act; (b) whether the scheme or contract provides for an independent external dispute resolution procedure; (c) whether the person is a member of the AFCA scheme.