Legislation

The National Consumer Credit Protection Reform Package

National Consumer Credit Protection Amendment Act 2010

The National Consumer Credit Protection Amendment Act 2010  was passed by Parliament on 25 February 2010.  It makes amendments to the National Consumer Credit Protection Act 2009 (Credit Act) to recognise certain variations to the scope of the amendment power which some States wish to make in their referral bills; and to enable a State to adopt the National Credit legislation and refer an agreed amendment power.  These amendments will enable effective referrals of State power to be made either with or without any such variation.  The scope and effectiveness of the national credit protection regime will neither be affected by any such variation nor by whether States refer power or adopt the National Credit legislation.

Passage of Bills

The National Consumer Credit Protection Reform Package (Reform Package) was introduced into Parliament on 25 June 2009.  It was past with a number of parliamentary amendments to both the National Consumer Credit Protection Bill 2009 and the National Consumer Credit Protection (Transitional and Consequential Provisions) Bill 2009 on 23 November 2009.

Royal Assent

The National Consumer Credit Protection (Fees) Act 2009 received Royal Assent on 16 November 2009 and the National Consumer Credit Protection Act 2009 and National Consumer Credit Protection (Transitional and Consequential Provisions) Act 2009 received Royal Assent on 15 December 2009.

Content of the Reform Package

This Reform Package delivers on the first phase of the Council of Australian Governments' agreements of 2008 for the Commonwealth to assume responsibility for the regulation of consumer credit.

Phase One of the Reform Package includes:

  • a comprehensive licensing regime for all providers of consumer credit and services;
  • responsible lending conduct requirements on licensees – not to provide credit products and services that are unsuitable for the consumer's needs and that the consumer does not have the capacity to repay;
  • improved sanctions and enhanced enforcement powers for the regulator, the Australian Securities and Investments Commission (ASIC);
  • expanded consumer protection through court arrangements, remedies for consumers and penalties for misconduct; and
  • an expanded scope for the National Credit Code to include credit provided to purchase, renovate, improve or refinance a residential investment property.

The national regime largely replicates the State-based Uniform Consumer Credit Code  as the National Credit Code.   To assist readers in comparing the National Credit Code contained in the National Consumer Credit Protection Bill 2009 to the State-based Uniform Consumer Credit Code, a comparison table has been provided.

The National Consumer Credit Reform Package

Proclamation of the National Consumer Credit Protection Act 2009

The National Consumer Credit Protection Act 2009 – Proclamation fixes 1 April 2010 as the date of commencement of section 3 to 337 and Schedule 1 of the National Consumer Credit Protection Act 2009.

Parliamentary Amendments

On 17 September 2009, the Minister for Financial Services, Superannuation and Corporate Law, Chris Bowen MP announced a number of enhancements to the Reform Package which were moved by a number of parliamentary amendments to both the Credit and Transitional Bills in the Senate. These include changes to:

  • deferred commencement of the Reform Package;
  • certain definitions;
  • provisions that bind the Crown;
  • provisions to incorporate the revised implementation timetable;
  • exemptions and defences available for registration and licensing;
  • the reviewability of Australian Securities and Investments Commission decisions by the Administrative Appeals Tribunal;
  • adjustments to exemptions to licensing, responsible lending conduct obligations and the National Credit Code;
  • remove the statutory ability of credit providers to rely on preliminary assessments;
  • clarify of the operation of certain remedy provisions;
  • allow regulations to be made in relation to interest for credit provided for investment in residential property;
  • require credit providers to give reasons when not agreeing to hardship variations and stays of enforcement; and
  • correct minor technical and grammatical errors.

Regulations

Regulations supporting the Reform Package were made on 10 March 2010.

Margin loans, trustee companies and debentures

The Corporations Legislation Amendment (Financial Services Modernisation) Act 2009 received Royal Assent on 6 November 2009 and will commence upon Proclamation, which is currently being drafted.

As a result, providers of margin loans and associated advice will be required to be licensed, be members of an external dispute resolution scheme and comply with disclosure and notification requirements. Margin lenders will also be under the obligation to comply with responsible lending requirements.

A one year transitional period is being provided before the legislation becomes fully effective. This is to provide time for industry to prepare for the impact of the new responsible lending and other requirements, and also for ASIC to license all margin lenders and advisers.

Miscellaneous