NATIONAL CONSUMER CREDIT PROTECTION BILL 2009 Explanatory Memorandum
NATIONAL CONSUMER CREDIT PROTECTION BILL 2009
2008-2009
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
SENATE
National Consumer Credit Protection Bill 2009
SUPPLEMENTARY EXPLANATORY MEMORANDUM
Amendments to be moved on Behalf of the Government
(Circulated by the authority of the
Minister for Human Services
Minister for Financial Services, Superannuation and Corporate Law
the Hon Chris Bowen, MP)
Table of contents
Glossary 1
General outline and financial impact 3
Chapter 1 Amendments to the National Consumer Credit Protection Bill 2009
5
Do not remove section break.
The following abbreviations and acronyms are used throughout this
supplementary explanatory memorandum.
|Abbreviation |Definition |
|AAT |Administrative Appeals Tribunal |
|ASIC |Australian Securities and |
| |Investments Commission |
|ASIC Act |Australian Securities and |
| |Investments Commission Act 2001 |
|Code |National Credit Code in Schedule 1|
| |to the National Consumer Credit |
| |Protection Bill 2009 |
|Corporations |Corporations Act 2001 |
|Act | |
|Credit Bill |National Consumer Credit |
| |Protection Bill 2009 |
|Referral Bill |State Bill referring powers over |
| |credit matters to the Commonwealth|
| |pursuant to section 51 (xxxvii) of|
| |the Constitution |
|Transitional |National Consumer Credit |
|Bill |Protection (Transitional and |
| |Consequential Provisions) Bill |
| |2009 |
General outline and financial impact
Amendments to the National Consumer Credit Protection Bill 2009
The amendments to the National Consumer Credit Protection Bill 2009
(Credit Bill) respond to concerns raised about the Credit Bill, in
particular recommendations of the Senate Economics Legislation
Committee; take into account other developments since introduction;
and make technical corrections. The amendments include:
. changes to certain definitions;
. changes to provisions that bind the Crown;
. an additional defence to the offence of engaging in a
credit activity without a licence;
. adjustments to exemptions from licensing, responsible
lending conduct obligations and the National Credit Code
(Code);
. changes to the ability of credit providers to rely on
preliminary assessments;
. confirmation of the reviewability of decisions made by the
Australian Securities and Investments Commission (ASIC)
(including enforcement decisions) by the Administrative
Appeals Tribunal (AAT);
. clarification of the operation of certain remedy
provisions;
. enabling forms issued by ASIC to be prescribed in
regulations;
. powers to make regulations in relation to interest for
credit provided for investment in residential property;
. requiring credit providers to give reasons when not
agreeing to hardship variations and stays of enforcement;
and
. certain minor technical amendments.
Date of effect: The amendments take effect when the affected
provisions in the Credit Bill take effect. Those dates are
specified in the explanatory memorandum to the Credit Bill.
Financial impact: The amendments do not affect the financial
impact statements included in the explanatory memorandum to the
Credit Bill.
Compliance cost impact: A regulatory impact statement is included
in the explanatory memorandum to the Credit Bill.
Chapter 1
Amendments to the National Consumer Credit Protection Bill 2009
State reference (amendments 1 to 3 and 11 to 14)
1. Since the introduction of the Credit Bill, the form of the
anticipated reference of legislative powers from States to the
Commonwealth, relating to the provision of credit and in accordance
with section 51 (xxxvii) of the Constitution, has altered. The
amendments relating to the State reference respond to this
development.
2. Amendment 1 inserts the definition of 'initial National Credit
Code' which is part of the definition of the term 'referred credit
matter' in section 20 of the Credit Bill.
3. Amendments 2 and 3 replace the term 'referred credit matters' with
'referred credit matter', and amendment 14 inserts a revised
definition of that term, to ensure consistency with the form of the
anticipated State Bill to refer legislative powers regarding credit
to the Commonwealth (Referral Bill). It is expected that each
State will enact a Referral Bill. It is possible that in one or
more States, this may follow the original enactment of the Credit
Bill and National Consumer Credit Protection (Transitional and
Consequential Provisions) Bill 2009 (Transitional Bill).
4. Amendment 13 omits the term 'Trade Practices Act'. This definition
is no longer necessary as amendment 11 removes that term from the
scope of laws to which express amendments can be made under the
Referral Bill. Amendment 12 revises the definition of the term
'express amendment' given the Trade Practices Act 1974 is no longer
referred to.
Binding Crown (amendment 15)
5. Amendment 15 changes the application of the Credit Bill to the
Crown, and allows for the application of the Credit Bill (except
for the Code) to the Crown to be able to be determined by
regulation.
6. It is expressly provided that the Code binds the Crown in each of
its capacities [subsection 22(3)]. This maintains consistency with
the way in which the Uniform Consumer Credit Codes in force as
State or Territory law currently apply to the Crown.
7. The Crown is expressly stated not to be otherwise bound by the
Credit Bill or the Transitional Bill. [subsection 22(1)]
8. However, the Bill allows for this position to be varied by
regulations, so that these Bills, or specified provisions, may bind
the Crown either in right of the Commonwealth or in all of its
other capacities [subsection 22(2)]. It is considered preferable
to allow for this by regulation rather than in the Act itself, as
this gives greater flexibility in adapting the law so that the
Crown is bound in appropriate circumstances.
9. The amendment retains the provision specifically providing that
nothing in the Credit Bill or the Transitional Bill renders the
Crown liable to be prosecuted for an offence or to a pecuniary
penalty. [subsection 22(4)]
Defences (amendments 16 and 17)
10. Section 29 of the Credit Bill provides that a person commits an
offence when they engage in credit activities without a licence.
11. Amendments 16 and 17 insert an additional defence against that
offence for representatives of persons who are exempt from
requiring a licence where they are acting within authority.
12. Such an exemption could be granted by ASIC under
paragraph 109(1)(a), or as a result of a class order exemption by
ASIC under paragraph 109(3)(a), or an exemption by regulation under
paragraph 110(a).
13. This defence places the onus of proof on the defendant. The reason
for this approach is that a defence of this type may raise complex
factual matters that cannot be readily established by ASIC, but
will be within the knowledge of the relevant employee or director.
For example, that person will be in the best position to prove that
their conduct has been authorised by their principal.
Implementation timetable (amendment 18)
14. Amendment 18 relates to the deferral of the implementation
timetable. Specifically, this amendments defers the day a person
may apply for a licence to 1 July 2010, or later day prescribed by
the regulations.
ASIC exemptions (amendments 22 and 25)
15. Amendments 22 and 25 modify ASIC's ability to exempt people from
the need to be licensed to engage in credit activities under
paragraph 109(1)(a), or from the responsible lending conduct
obligations under paragraph 163(1)(a).
16. As currently worded the provisions only allow ASIC to exempt a
single person. This restriction limits the utility of the
exemption mechanism in providing relief in appropriate
circumstances.
17. The revised wording will allow ASIC to exempt either a person, or a
person and all their credit representatives. The effect of the
amendment is that ASIC does not need to exempt each credit
representative individually, where they are engaging in credit
activities on behalf of a principal who has been exempted.
18. These revisions do not affect the status of these exemptions under
the Legislative Instruments Act 2003, as noted in subsections
109(2) and 163(2). That is, these sections remain merely
declaratory of the existing position.
Responsible lending conduct (amendments 23 and 24)
19. Amendments 23 and 24 remove subsections 130(3) and 153(3) of the
Credit Bill, which excuse credit providers and lessors from having
to verify information where a preliminary assessment has been made
that assesses the contract, or lease, as not being unsuitable and
had been undertaken within the previous 90 days.
20. Removing these reliance provisions responds to concerns that they
could be deliberately misused.
Remedies (amendments 26 to 28)
21. Amendments 26 to 28 insert notes to sections 178, 179 and 180 of
the Credit Bill to clarify that the general remedy provisions can
be used to obtain redress for loss or damage as a result of a
contravention of a civil penalty, regardless of whether a
declaration of contravention of a civil penalty has been made under
section 166 of the Credit Bill.
22. This addresses concerns that the remedy provisions suggest that a
declaration of contravention has to be made by the court (following
an application to the Court from ASIC under section 166) before a
consumer compensation order can be made or sought.
23. Applicants seeking a general remedy will still have to prove a
nexus between the contravention and any loss and damage that
resulted from it.
24. This is consistent with the operation of similar provisions in the
Corporations Act (sections 1317H, 1317HA and 1325) on which the
general remedy provisions were modelled.
Prescribed forms (amendments 29 and 32)
25. Sections 253 and 284 of the Credit Bill allow ASIC to issue a
written notice to require a person to provide reasonable assistance
and appear at an examination, or a written summons to require a
person to attend a hearing respectively.
26. Amendments 29 and 32 correct a drafting error to provide that these
documents must be issued by ASIC in the form prescribed by the
regulations, rather than as approved by ASIC.
27. These amendments will ensure the Credit Bill takes an approach
consistent with the Australian Securities and Investments
Commission Act 2001 (ASIC Act) in regard to documents issued by
ASIC.
Technical amendments (amendments 4 to 10, 19 to 21, 30, 31, 37 and 44 to
47)
28. Amendments 4 to 9, 20 and 21 omit the words 'for or' from various
provisions in the Credit Bill to maintain consistency throughout
the Credit Bill when a person acts on behalf of another person.
29. Amendment 10 makes a technical amendment to subsection 19(3) of the
Credit Bill by omitting the phrase 'making laws' and substituting
'the making of laws' so that it uses the same phrase in the
Referral Bill and subsection 19(4) of the Credit Bill.
30. Amendment 19 amends the grounds on which ASIC can suspend or cancel
a licence under section 54 of the Credit Bill to include instances
where a person does not engage in credit activities, as well as
ceases to engage, in credit activities. This drafting alteration
ensures that, if no credit activities have ever been engaged in by
a licensee, ASIC may still suspend or cancel the licence.
31. Amendments 30 and 31 correct cross references in Chapter 6 of the
Credit Bill. Specifically, the note in subsection 274(4) should
refer to section 290, instead of section 63, and subsection 274(5)
should refer to an offence under subsection 290(2), instead of
subsection 63(3).
32. Amendment 37 inserts the subheading 'Definitions' into section 6 of
the Code.
33. Amendments 44 to 47 remove the word 'civil' from the headings and
titles in Part 6 of the Code so that the headings provide an
accurate description of the provisions. In addition, this will
minimise the potential for confusion about a consumer's access to
remedies provided in Chapter 4 of the Credit Bill.
AAT review of ASIC decisions (amendment 33)
34. Section 327 of the Credit Bill currently provides for a review by
the AAT of a decision made by ASIC, other than in relation to a
decision made by ASIC dealing with approved codes of conduct or a
decision to make a determination under subsection 328(3).
Amendment 33 extends the list of ASIC decisions which are excluded
from review by the AAT.
35. The effect of amendment 33 is that ASIC's compliance and
enforcement decisions (including decisions made in relation to
infringement notices) will not be subject to review by the AAT.
This approach is consistent with the ASIC Act which effectively
excludes the large majority of ASIC decisions made under that Act
from AAT review.
36. The amendment also excludes from AAT review all ASIC decisions made
by legislative instrument, which are already subject to
Parliamentary review under the Legislative Instruments Act 2003.
Exemptions from the National Credit Code (amendments 34 to 36 and 48 to 51)
37. Amendments 34 to 36 and 48 to 51 amend the circumstances in which
persons providing credit or consumer leases can be exempted from
the Code.
38. Subsections 6(13), (14) and (17) of the Code allow for exemptions
from either the Code in its entirety or only specified or limited
provisions. Amendments 34 to 36 delete the phrase 'all or any
provisions of' from these subsections. The effect of this change
is that these subsections can now only be used to create exemptions
from the Code in full (whether by regulation or by ASIC, in
relation to either a specific credit contract or a specific class
of credit contracts)
39. Amendments 48 to 50 have an identical operation in respect of the
power to exempt consumer leases from the Code under
subsections 171(3), (4) and (6).
40. Amendment 51 introduces two new provisions into the Code:
. section 203A - exemptions by ASIC; and
. section 203B - exemptions by the regulations.
Exemptions by ASIC
41. Subsection 203A(1) enables ASIC to exempt, from any or all of the
provisions of the Code, a specific person, contract, mortgage,
guarantee or consumer lease.
42. It is expressly stated that such an exemption is not a legislative
instrument under the Legislative Instruments Act 2003. This
statement is declaratory of the existing position.
43. Subsection 203A(3) enables ASIC to exempt, from any or all of the
provisions of the Code, a class of persons, contracts, mortgages,
guarantees or consumer leases.
44. Subsection 203A(4) enables exemptions to be made either
unconditionally or subject to specified conditions. A person who
is exempt subject to conditions must comply with the specified
conditions, and, should they fail to do so, ASIC can apply for a
court order to require compliance.
Exemptions by the regulations
45. Section 203B enables regulations to be made to exempt, from any or
all of the provisions of the Code, a person, contract, mortgage,
guarantee or consumer lease, with these defined either individually
or as a class.
Residential investment property interest (amendments 38 and 39)
46. Sections 25 and 26 (in Division 2) and Division 3 of the Code
contain requirements in relation to the way in which lenders
advance capital without deducting amounts for interest (other than
for the first interest payment), attribute repayments made by the
borrower and calculate interest.
47. Following the extension of the application of the Code, these
requirements, unless modified, will apply where the credit is
provided for persons investing in residential properties.
Amendments 38 and 39 provide a power to make regulations to modify
the application of these provisions in relation to credit provided
for residential properties. Modifications may be necessary to
accommodate lending and taxation arrangements commonly associated
with investment in residential property in Australia.
Giving reasons for refusal (amendments 40 to 43)
48. Sections 72 and 94 of the Code give consumers with credit contracts
under which the maximum amount of credit that may be provided is
not more than $500,000 (or a higher amount as prescribed in the
regulations) the right to request a hardship variation or stay of
enforcement.
49. Amendments 40 to 43 amend those provisions so that, when a credit
provider does not agree to an application for a hardship variation
or stay of enforcement, they must give reasons to the consumer as
to why the request was refused.
50. This will provide consumers a basis on which to dispute such a
decision in external dispute resolution or the courts.
Predominantly residential purposes (amendments 52 to 56)
51. Amendments 52 to 56 amend the definition of 'residential property'
in section 204 of the Code to ensure that the Code is only extended
to credit provided to purchase, renovate, improve, or refinance
residential property for investment purposes when this property is
used predominantly for residential purposes.
52. The definition in the Credit Bill captures all properties that have
any residential dwelling affixed, irrespective of whether the
predominant use of the property is for residential purposes. This
could, for example, include farms with a farmhouse or a commercial
building with a caretaker's cottage.
53. The amendments modify the definition of residential property as
land, a lease of land, a licence in relation to land, a share in, a
right to occupy or an equity of redemption in relation to land on
which a dwelling is or will be affixed predominantly for
residential purposes.
