The default password policy is in effect for every user (even users under creation). A way to test this is to set the Syntax Checking enabled and create a new user.
If you attempt to give it a short password, e.g. "test" it will tell you that the password is too short (or too long).
However, if you navigate to Control Panel -> Password Policies -> Default Password Policy -> Assign Members, it will show that no users are actually assigned to it.