Commonwealth of Australia Explanatory Memoranda Commonwealth of Australia Explanatory Memoranda[Index] [Search] [Download] [Bill] [Help]
2008-2009
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
SENATE
National CONSUMER CREDIT PROTECTION (Transitional and Consequential
Provisions) 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
(Transitional and Consequential Provisions) Bill 2009 5
Do not remove section break.
The following abbreviations and acronyms are used throughout this
supplementary explanatory memorandum.
|Abbreviation |Definition |
|ADI |Authorised Deposit-taking |
| |Institution |
|ASIC |Australian Securities and |
| |Investments Commission |
|ASIC Act |Australian Securities and |
| |Investments Commission Act 2001|
|Chapter 3 start |1 January 2011 (or a later day |
|day |as prescribed in regulations) |
|Commencement |the start of 1 July 2010 (or a |
| |later day as prescribed in |
| |regulations) |
|Code |National Credit Code in |
| |Schedule 1 to the National |
| |Consumer Credit Protection Bill|
| |2009 |
|Corporations Act |Corporations Act 2001 |
|Credit Bill |National Consumer Credit |
| |Protection Bill 2009 |
|Proclamation Date |The date section 3 of the |
| |Credit Bill commences |
|UCCC |Uniform Consumer Credit Code --|
| |Consumer Credit Code and |
| |regulations of the relevant |
| |State or Territory |
|RFC |Registrable Corporation under |
| |section 7 of the Financial |
| |Sector (Collection of Data) Act|
| |2001 |
|Transitional Bill |National Consumer Credit |
| |Protection (Transitional and |
| |Consequential Provisions) |
| |Bill 2009 |
|Transition End Day|30 June 2011 (or a later day as|
| |prescribed in regulations) |
|Transitional |The period starting on the day |
|Period |when section 3 of the Credit |
| |Bill commences (Proclamation |
| |Date) and ending on 30 June |
| |2011 (or a later day as |
| |prescribed by the regulations) |
General outline and financial impact
Amendments to the National Consumer Credit Protection (Transitional and
Consequential Provisions) Bill 2009
The amendments to the National Consumer Credit Protection
(Transitional and Consequential Provisions) Bill 2009 (Transitional
Bill) respond to concerns raised about the National Consumer Credit
Protection Bill 2009 (Credit Bill) and the Transitional Bill, in
particular recommendations of the Senate Economics Legislation
Committee; take into account other developments since introduction;
and make technical corrections. The amendments affect changes to:
. certain definitions;
. provisions that relate to the implementation timetable, so
that:
- changes to the implementation timetable can occur
through regulations to facilitate an orderly transition;
- the commencement and cessation of interrelated
provisions are synchronised; and
- the registration period and the commencement of the
responsible lending conduct requirements and the
National Credit Code (Code) are adjusted;
. exemptions and defences available during the Transitional
Period; and
. the reviewability of Australian Securities and Investments
Commission (ASIC) decisions (including enforcement
decisions) by the Administrative Appeals Tribunal (AAT).
Date of effect: The amendments take effect when the affected
provisions in the Transitional Bill take effect. The dates of
effect of Schedules to the Transitional Bill are linked to the
dates of effect of relevant parts of the Credit Bill.
Financial impact: The amendments do not affect the financial
impact statement included in the explanatory memorandum to the
Transitional Bill.
Compliance cost impact: A compliance cost impact statement is
included in the explanatory memorandum to the Transitional Bill.
Chapter 1
Amendments to the National Consumer Credit Protection (Transitional and
Consequential Provisions) Bill 2009
Implementation timetable
1. The purpose of many of the amendments explained in this
supplementary explanatory memorandum is to effect changes to the
implementation timetable and respond to developments since the
introduction of the Credit Package into Parliament. In particular,
the amendments will result in the application of:
. the registration period between 1 April 2010 and
30 June 2010;
. the Code from 1 July 2010; and
. certain responsible lending conduct obligations to some
market participants from 1 July 2010.
2. Changes to the commencement of obligations under the Credit and
Transitional Bills can be made by regulations.
Application of the Code (amendments 2 to 4 and 7 to 12)
3. Several key concepts are used to achieve the implementation of the
Credit and Transitional Bills.
. Amendment 2 inserts the definition of 'carried over
instrument' into the Dictionary in item 4 in the
Transitional Bill. The term 'carried over instrument'
means an existing contract or other instrument which was
subject to the Uniform Consumer Credit Code (UCCC)
applying in each State and Territory. The term has been
introduced to allow for the transition of existing
contracts and instruments into the Code.
. Amendment 3 inserts the definition 'Chapter 3 start day'
as being the date specified in subitem 19(1) of Schedule 1
to the Transitional Bill.
. Amendment 4 revises the definition of 'commencement' in
the Dictionary in item 4 of the Transitional Bill. The
term will be defined as the start of 1 July 2010, or a
later day prescribed in the regulations, rather than the
day section 3 of the Credit Act commences (Proclamation
Date). The defined term is used in many provisions and,
in most cases, it is appropriate that those provisions
take effect at that later time. Where this is not the
case (for example, because the provision may need to take
effect earlier), those provisions have been redrafted so
that they will not take effect on Commencement.
4. Amendment 7 inserts Division 1A into Schedule 1 of the Transitional
Bill. It provides that the Code applies from Commencement, subject
to the operation of subitem 3(2). [Schedule 1, Part 1, Division
1A, item 2A]
5. Amendment 8 revises Division 2 of Schedule 1 of the Transitional
Bill, which is about the treatment of contracts and other
instruments made before Commencement.
Contracts and instruments made before the commencement of the Code
6. The Code applies to contracts and other instruments made and in
force immediately before its commencement to which the UCCC applied
('carried over instruments'). [Schedule 1, Part 1, Division 2,
subitems 3(1) and (2)]
7. Where the Code does not apply to a contract or instrument that was
made before Commencement, for example because the contract was no
longer in force on Commencement, any continuing claims or actions
would continue to be governed by the UCCC.
8. Certain provisions of the Code will never apply to carried over
instruments for constitutional reasons. These are:
. the extension of the Code to credit provided for the
purpose of investment in residential properties (section
5) [subitem 3(3)];
. amendments to the types of fees and charges that are
included to work out if the fees and charges imposed in
relation short term credit exceeds 5 per cent
(subsection 6(2)) [subitem 3(4)];
. amendments to the presumptions relating to the application
of the Code to credit contracts and consumer leases
(sections 13 and 172) [subitem 3(3)];
. amendments to provisions relating to prohibited securities
(subsections 50(2) to (5) and (8)) [subitem 3(4)]; and
. the increase to the thresholds under which a debtor can
request a hardship variation or stay of enforcement
(subsections 72(5) and 94(4)) [subitems 3(5) and (6)].
9. The relevant provisions of the UCCC continue to apply instead.
[Schedule 1, Division 2, subitems 3(3), (5) and (6)]
10. Amendments 9 to 11 insert the term 'in relation to a carried over
instrument' to provisions which deal with treatment of court
proceedings brought in a court under the UCCC before Commencement
and references to court proceedings and orders in the Code to
ensure that those provisions cover existing contracts.
11. Amendment 12 provides that a contract that is not a carried over
instrument is not subject to the rules in Division 4 which deal
with matters such as: preserving the effect of things done by, or
under the carried over provisions of the UCCC; creating equivalent
rights and liabilities to those that existed under the UCCC; and
how time limits under the UCCC are treated.
Application of the Credit Bill other than the responsible lending conduct
obligations and the Code (amendment 14)
12. Amendment 14 inserts item 17A and revises items 18, 19 and 20 in
Schedule 1 of the Transitional Bill. These provisions clarify some
aspects of the application of the Credit Bill. [Schedule 1,
Division 1, subitems 17A(1) and 18(1)]
13. The effect of these provisions is:
. Other than Chapter 3 and the Code, the Credit Bill applies
from Commencement, including in relation to contracts or
other instruments made after Commencement [subitems
17A(1) and 18(1)].
. In relation to contracts or other instrument made before
Commencement, there is a power to make regulations to
apply the Credit Bill, where a person engages in credit
activities after Commencement in relation to such a
contract or instrument [subitem 18(2)].
- It is proposed to make regulations applying some aspects
of the Credit Bill, including licensing, to this
category of conduct.
. Where proceedings are brought under the Code after
Commencement in relation to contracts or other instruments
made before commencement that are carried over
instruments, Part 4-3 of the Credit Bill applies to those
proceedings [subitem 18(3)].
14. Amendment 14 also clarifies the existing general power in section
329 of the Credit Bill to make regulations.
. It is provided that regulations made under that section
may either apply on the date the Credit Bill commences or
on a later date [subitem 17A(2)].
. It is provided that the power to make regulations under
that section in relation to where court proceedings may be
brought (under both the Credit Bill and the Code), can be
exercised in relation to carried over instruments (as
defined) [subitem 18(4)].
Application of Chapter 3 of the Credit Bill (responsible lending conduct
obligations) (amendments 5, 14 and 41)
15. Amendment 14 also revises item 19 in Schedule 1 of the Transitional
Bill, which relates to the application of the responsible lending
conduct obligations during the Transitional Period.
16. Amendment 5 inserts a definition of 'registrable corporation' which
is broadly equivalent to the term Registered Financial Corporation
(RFC), commonly used by the Australian Prudential Regulation
Authority. This definition has the same meaning as provided by
section 7 of the Financial Sector (Collection of Data) Act 2001.
17. The responsible lending conduct obligations other than the
disclosure requirements (primarily the obligations related to the
unsuitability tests) will now apply to registered persons and
licensees which are not RFCs nor Authorised Deposit-taking
Institutions (ADIs) from Commencement [Schedule 1, subitem 19(2)].
This will primarily apply to smaller lenders and credit assistants,
such as mortgage brokers.
18. This ensures that there is continuity in relation to the regulation
of persons providing credit services who are currently subject to
certain legislative requirements under a State or Territory law
with respect to those activities.
19. All of the responsible lending conduct obligations will commence
for ADIs and RFCs on 1 January 2011 (or a later date as prescribed)
(the Chapter 3 start day). This date has not changed and
recognises the time needed by these entities to adjust their
business and information technology systems. [subitem 19(1)]
20. The responsible lending conduct disclosure requirements
(for example, the provision of the quote, the requirement to
provide copies of assessments on request and credit guides) will
commence on the Chapter 3 start day.
21. Amendment 41 revises item 36 in the Transitional Bill to apply the
responsible lending conduct obligations to registered persons
[subitem 36(1)]. This removes the incentive to delay obtaining a
licence to avoid the responsible lending conduct obligations
applying during the relevant period.
22. The amendment means that both licensees and registered persons are
subject to the responsible lending conduct obligations in
accordance with the new implementation timetable. [subitem 36(2)]
23. The amendment also specifies which provisions in Chapter 3 of the
Credit Bill do not apply to registered persons [subitem 36(3)].
These provisions relate to the need to quote an Australian credit
licence number and provide information about internal dispute
resolution procedures in credit guides.
24. Amendments 14 and 41 also clarify that copies of an assessment made
before the start of the disclosure requirements (1 January 2011) do
not need to be provided to consumers. [subitems 19(3), 19(4)
and 36(4)]
25. Amendment 14 also clarifies that the transitional arrangements
provided for in item 19 are subject to regulations made under
subitem 18(2) in relation to the application of the Credit Bill to
carried over instruments. [subitem 19(5)]
Application of Schedule 2 of the Transitional Bill (registration)
(amendments 14, 16, 17 and 26)
26. Amendment 14 makes consequential changes to item 20 in Schedule 1
of the Transitional Bill, which relates to the application of
Schedule 2 (Registration). It clarifies that the power to make
regulations for the application of Schedule 2 (including the
requirement to be registered) applies in relation to a carried over
instrument (as defined), so that the terminology is consistent with
other provisions of the Bill. [Schedule 1, item 20]
27. Amendment 17 changes the dates in item 3 in Schedule 2 so that the
period to which the prohibition on engaging in credit activities if
not registered or licensed starts on Commencement and ends on
31 December 2010 or a later day prescribed by regulations [Schedule
2, item 3]. Amendment 16 is a related amendment to the division
heading.
28. Amendment 26 changes the period during which an application to be
registered must be lodged to be between 1 April 2010 and
30 June 2010 or other later days as prescribed by regulations.
Application of sections 64 and 65 of the Credit Bill (authorisation of
credit representatives) (amendments 35, 37 to 40)
29. Amendment 37 inserts item 32A which has the purpose of applying
sections 64 and 65 of the Credit Bill to registered persons prior
to the commencement of the substantive obligations in subitem
16(3).
30. This amendment is necessary to enable a registered person, prior to
commencement of those obligations, to authorise credit
representatives to engage in credit activities on its behalf, and
to allow body corporate credit representatives, such as companies,
to sub-authorise to natural persons. It therefore ensures they
will be able to comply with these obligations as soon as they
commence.
31. Amendments 38 to 40 are consequential amendments required to insert
references to the new item 32A into item 33, which deals with the
application of Part 2-3 of the Credit Bill to credit representative
of a registered person during the Transitional Period.
32. Amendment 35 provides for a consequential amendment to item 32.
Item 32 includes a list of items to which Part 4 in Schedule 2 of
the Transitional Bill does not apply. This change is needed as a
result of the insertion of item 32A and amendment to item 39. Part
4 specifies how certain provisions of the Credit Bill apply to
registered persons.
Application of Chapter 7 of the Credit Bill (amendment 42)
33. Amendment 42 introduces a revised version of subitem 39(1) that
clarifies the application of Chapter 7 of the Credit Bill during
the Transitional Period. Chapter 7 deals with regulation-making
powers and other miscellaneous matters.
34. The amendment provides that, during the Transitional Period,
references in Chapter 7 of the Credit Bill to 'this Act' are to be
read as references to 'this Act and the Schedule 2 to the
Transitional Act'. The effect of this is that provisions in
Chapter 7 in relation to licence holders are extended to apply to
registered persons (in Schedule 2 to the Transitional Bill).
35. The amendment applies to all provisions in Chapter 7 except for
sections 327, 339 and 331.
Transfer of information to ASIC (amendment 1)
36. Item 22 of Schedule 1 to the Transitional Bill provides that
regulations may be made for the transfer of information, documents,
assets or liabilities to ASIC from a referring State or a
Territory; or an authority of a referring State or a Territory.
These regulations will enable arrangements for the transfer of
information, documents, assets or liabilities to ASIC from the
State and Territory regulators.
37. Currently, the commencement of item 22 is linked to the
commencement of part of the Credit Bill. In order to give ASIC and
the States and Territories more time to make arrangements for the
transfer of information, documents, assets or liabilities,
amendment 1 provides that item 22 will commence on the date of
Royal Assent of the Transitional Bill, enabling regulations
facilitating the transfer to be made earlier.
ASIC approach (amendment 15)
38. Item 21 of Schedule 1 of the Transitional Bill contains the
power to make regulations about ASIC's approach during the
Transitional Period.
39. Amendment 15 revises the start date of item 21 to be the
Proclamation Date (rather than Commencement) so that regulations
can be made at the earlier time.
Expanded definitions relating to banning (amendments 27, 33 and 34)
40. Paragraphs 12(2)(c), 23(1)(e) and 24(2)(c) in Schedule 2 of the
Transitional Bill (Banning Item Provisions) provide that whether or
not a person has been banned from engaging in a credit activity
under a law of a State or Territory (including by having a State or
Territory credit licence cancelled or suspended) is relevant to
decisions by ASIC whether to grant, suspend or cancel a
registration.
41. Amendments 27, 33 and 34 apply, during the Transitional Period, an
expanded definition of the phrases 'banned from engaging in a
credit activity under a law of a State or Territory' and 'State or
Territory credit licence'. This expanded definition provides that
a reference to a 'credit activity' in the Banning Item Provisions
includes a reference to an activity that would be a credit activity
if the Code had applied from the Proclamation Date of the Credit
Bill.
42. These amendments are predicated on the basis that the Code
commences at a later point in time than the Proclamation Date of
the Credit Bill. During this period a person will not be engaging
in credit activities without the expanded definition.
43. The effect of these amendments is to enable ASIC, when deciding
whether to grant, suspend or cancel a person's registration, to
consider whether that person has been banned from engaging in a
credit activity under a law of a State or Territory,
notwithstanding that the Code has not commenced. Without these
amendments, ASIC would not be able to take such State or Territory
banning orders into consideration until the person was able to
engage in credit activities, which in the absence of these
amendments would require the Code to have commenced.
Linking critical dates (amendments 6, 20, 21, 25, 28 to 31 and 36)
44. A number of the critical dates in the Transitional Bill may be
extended by regulation. These amendments ensure that, where
appropriate, extending some dates will automatically extend related
critical dates. This will provide greater certainty in the
commencement of the provisions and reduce the need for regulations.
45. Amendment 6 inserts the term 'transition end day' into the
Dictionary in item 4; which is a critical date in the registration
requirements and means 30 June 2011, or a later day prescribed by
the regulations.
46. Amendments 21, 25, 29 and 36 replace the end date in items 5, 7, 16
and 32 in Schedule 2 with the Transition End Day.
47. Amendment 21 also amends the start date from which the prohibition
on engaging in certain activities in certain circumstances applies
to be immediately after the end of the period referred to in item
3. Amendment 20 is an amendment to the division heading as a
result of amendment 21.
48. Amendment 29 also changes the start date relating to the obligation
to be a member of an approved external dispute resolution scheme to
be the same time as the start of the period referred to in
subitem 11(2).
49. Amendment 28 inserts item 15A, which is an application provision
setting out critical dates in relation to the obligations of
registered persons. This applies obligations listed in the
Division, other than subitem 16(1), to registered persons from
Commencement to the Transition End Day. Amendment 30 omits subitem
16(2), which is superseded by item 15A.
50. Amendment 31 substitutes item 21 with a new item which has the
effect of cancelling all registrations on the Transition End Day.
Defences (amendments 18, 19, 22 and 24)
51. Items 4 and 6 in Schedule 2 provide that a person must not engage
in credit activities during certain periods if they are not
registered.
52. Amendments 18 and 19, and 22 and 24 amend items 4 and 6
respectively by providing an additional defence to engaging in
credit activities when not registered. The effect of these
amendments is that a person does not commit an offence where they
are a representative of a person and the person is exempt from the
need to be registered.
53. The exemption can arise as a result of an exemption under paragraph
41(1)(a) of Schedule 2, or as a result of a class order exemption
by ASIC under paragraph 41(3)(a) or an exemption by regulation
under paragraph 42(a).
54. 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 person relying on the defence. For
example, that person will be in the best position to prove that
their conduct has been authorised by their principal or that they
have satisfied the conditions imposed on an exemption.
AAT review of ASIC decisions (amendment 42)
55. Amendment 42 inserts subitem 39(2), which provides that section 327
of the Credit Bill applies to decisions made by ASIC under Schedule
2 of the Transitional Bill (other that decisions relating to the
exercise of ASIC exemption and modification powers) during the
Transitional Period.
56. Section 327 of the Credit Bill sets out the regime for the review
of ASIC decisions by the AAT. Amendment 33 to the Credit Bill is
expected to alter the application of section 327, so that ASIC's
compliance and enforcement decisions will not be subject to review
by the AAT. This amendment is explained in the supplementary
explanatory memorandum to the Credit Bill.
57. The effect of amendment 42, in applying the revised section 327 in
subitem 39(2), is that decisions made by ASIC made under Schedule 2
of the Transitional Bill will not be subject to review by the AAT.
58. However, subitem 39(2) does not affect the reviewability
of decisions related to the exercise of ASIC's exemption and
modification powers under subitem 41(3) of Schedule 2 made during
the Transitional Period. Decisions made under subitem 41(3) are
legislative instruments, which are already subject to review by
Parliament under the Legislative Instruments Act 2003.
ASIC exemptions (amendment 43)
59. Amendment 43 modifies ASIC's ability to exempt persons from the
requirement to be registered to engage in credit activities under
paragraph 41(1)(a) in Schedule 2 of the Transitional Bill.
60. As currently drafted, the provisions only allow ASIC to exempt a
single person under each exemption. This restriction limits the
utility of the exemption mechanism in providing relief in
appropriate circumstances.
61. The revised wording will allow ASIC to exempt either a person, or a
person and all their credit representatives. The amendment ensures
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.
62. The revision to item 41 does not affect the status of such
exemptions under the Legislative Instruments Act 2003, as noted in
subitem 41(2) of the Transitional Bill; subitem 41(2) remains
declaratory of the existing position.
Technical amendments (amendments 13, 23 and 32)
63. Amendment 13 corrects a grammatical error by deleting the repeated
word 'that' from item 10 in Schedule 1 of the Transitional Bill.
64. Amendment 23 is a technical amendment that deletes the words 'for
or' from item 6 in Schedule 2 of the Transitional Bill, for
consistency with the Credit Bill.
65. Amendment 32 amends the grounds under item 23 of the Transitional
Bill on which ASIC can suspend or cancel a person's registration 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 the registered person, ASIC may still
suspend or cancel a person's registration.
Do not remove section break.
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