The corporate regulator is “struggling” with its monitoring of non-bank lenders, ASIC commissioner Karen Chester told Senate estimates on Wednesday (2 June), which is limiting its ability to roll out product intervention orders.
Using its partnership with APRA, ASIC is able to leverage data collected from the prudential watchdog across insurance and superannuation.
But the regulator does not have data collection rights across managed investment schemes, funds management and non-bank lenders (including buy now, pay later providers and payday lenders).
“We’re in a world now where you can have a consumer who will – say they’re dealing with CBA, their debt situation may look fine, but you take into account a buy now, pay later lender or a payday lender, consumer leasing of whitegoods... we do not have a cumulative debt story,” Ms Chester told the Senate economics legislation committee.
“And that is fundamental today, for us to understand, where is the tipping point for significant consumer detriment occurring? So, we can achieve the aspirations of the product intervention order.”
The product intervention power legislated in 2019 allows ASIC to step in when it deems a financial or credit product (or class of products) will cause significant consumer harm.
According to Ms Chester, having a greater data capability would allow the regulator to proactively and precisely pursue causes for consumer detriment, including pinpointing driving factors in businesses. It could also dramatically reduce costs, so that ASIC would not be “sopping up the spilt milk after misconduct through enforcement”.
Recently, the body issued notices to fund managers in its “true-to-label” project, where it processed data on misconduct entity by entity. There were resulting regulatory outcomes, including a lawsuit against fund management boutique Mayfair 101, but it was a “hugely resource-intensive task” that was timely and expensive, Ms Chester reported.
ASIC has written to Treasury and alerted Treasurer Josh Frydenberg about the areas where it lacks data collection powers, having first notified the government about the issue five years ago.
But ASIC also reportedly needs funding to build its data capability and infrastructure.
“Base two on the climb to Everest is really making sure that we’ve got the data capabilities and the capex. And I’ve said this before in parliamentary hearings, we’ve decided to reallocate money ourselves to make data a priority and we are doing that, but we are capex poor,” Ms Chester said.
“We have opex [operating expenditure] and we’re not able to change it into capex. In the absence of capex, we cannot become a lean mean data machine. And that’s what we really need to do, to be able to really deliver on what the Parliament expects of us and the Senate expects of us with the new powers that we’ve gratefully received.”
She added that while correspondence with Treasury had been “positive”, the agenda for legislative reform had gone awry through COVID-19.
“We’ve already discussed this at Council of Financial Regulators… and our brethren are very positive and supportive of what we’re trying to achieve here,” Ms Chester said.
“Treasury has been in the discussions we’ve had, Treasurer’s office has been in the discussions we’ve had, but we would like to progress the matter.”
Sarah Simpkins is the news editor across Mortgage Business and The Adviser.
Previously, she reported on banking, financial services and wealth for InvestorDaily and ifa.