CREDIT (COMMONWEALTH POWERS) BILL

Introduction and First Reading

Received from the Legislative Council and read a first time.

Second Reading

The Hon. J.R. RAU (Enfield—Attorney-General, Minister for Justice, Minister for Tourism) (16:43): I move:

That this bill be now read a second time.

I seek leave to have the second reading explanation inserted in Hansard without my reading it.

Leave granted.

Background

In April 2008 the Productivity Commission released a report on Australia's consumer law framework. One of the recommendations of the report was the transfer of responsibility for the regulation of consumer credit to the Commonwealth Government, to be administered by a single regulator—the Australian Securities and Investments Commission (ASIC).

This recommendation was made on the basis of identified shortcomings in the State-based Uniform Consumer Credit Code (UCCC) regulatory regime. The Productivity Commission identified the existence of legislative gaps and jurisdictional variations which represented an increased cost to business. Moreover, given the involvement of multiple regulators, the Commission noted the existing regime experienced some difficulty in efficiently responding to changes in financial services industry practice.

On 3 July 2008, in response to the Productivity Commission report, COAG agreed the Commonwealth would assume responsibility for the regulation of mortgage broking, margin lending and non-deposit lending institutions, as well as the remaining areas of consumer credit.

An intergovernmental agreement supporting the implementation of the new national regime—the National Credit Law Agreement 2009—was signed at the COAG meeting of 7 December 2009. This agreement represents a significant step towards COAG’s efforts to deliver a seamless national economy. Not only will this national credit regime provide clarity for business, but it will also provide increased consumer protections operating consistently across Australia.

The new national credit regime, starting on 1 July 2010, will enact a new National Consumer Credit Code based on the current UCCC as a law of the Commonwealth. The UCCC provides a number of consumer protections through disclosure requirements on credit contracts, and regulating the methods for calculating and advertising interest rates, fees and charges. It also provides powers for Courts to vary terms of unjust consumer contracts.

The National credit regime, reflected in the two Commonwealth Acts: the National Consumer Credit Protection Act 2009 and the National Consumer Credit Protection (Transitional and Consequential Provisions) Act 2009, will go further than the UCCC by closing a number of loopholes and extending its application to residential investment properties, thereby further protecting consumers.

Developed in conjunction with State and Territory representatives, including South Australia, the National Consumer Credit Protection Act 2009 will introduce a national licensing scheme for those engaged in credit activities. This national licensing scheme will require credit providers, finance brokers and others who provide credit assistance or act as intermediaries in these functions to be fit and proper persons to engage in credit activities.

The new licensing regime will require license holders to be members of an external dispute resolution scheme, approved by ASIC. This will ensure that, where consumers are involved in a dispute with a license holder, the consumer will not have to immediately resort to legal action, but will be able to access an effective and low-cost dispute resolution service.

One of the most important inclusions in the national credit law is a new responsible lending conduct regime. In essence, these requirements, to be phased in from 1 July 2010 and fully functional on 1 January 2011, will ensure that Australian Credit Licensees assess the suitability of a credit product in terms of the consumer’s financial circumstances and objectives and will be prohibited from suggesting unsuitable credit contracts to consumers. These requirements will be further bolstered by improving the disclosure regime relating to fees and commissions associated with credit contracts.

Overview of Bill

I now turn to the specific purpose of the South Australian Credit (Commonwealth Powers) Bill 2010.

The object of this Bill is to adopt the National Consumer Credit Protection Act 2009 of the Commonwealth, as amended at the time of adoption by the National Consumer CreditProtection Amendment Act 2010 of the Commonwealth, to adopt the National Consumer Credit Protection (Transitional and Consequential Provisions) Act 2009 of the Commonwealth, and to refer certain matters relating to credit and consumer leases to the Parliament of the Commonwealth.

The proposed Act will form part of the new national credit protection regime being established under Commonwealth law. It is to be enacted for the purposes of section 51(xxxvii) of the Constitution of the Commonwealth, which enables State Parliaments to refer matters to the Commonwealth Parliament, or to adopt Commonwealth laws that have been enacted pursuant to such referrals. In essence, the Bill provides the Commonwealth with the necessary Constitutional power it requires for the implementation and operation of the national credit regime.

The reference to support the enactment of the initial Commonwealth legislation was provided by Tasmania by the enactment of the Credit (Commonwealth Powers) Act 2009 of that State, which commenced on 17 November 2009.

In view of the enactment of the Commonwealth laws, the remaining States, including South Australia, decided to adopt the Commonwealth laws under section 51(xxxvii) of the Constitution. The adopted laws are the National Consumer Credit Protection Act 2009 of the Commonwealth (as amended at the time of the adoption by the National Consumer Credit Protection Amendment Act 2010 of the Commonwealth) and the National Consumer Credit Protection (Transitional and Consequential Provisions) Act 2009 of the Commonwealth.

The Credit (Commonwealth Powers) Bill 2010 also provides for the referral of certain matters relating to credit to the Commonwealth Parliament in order to support future amendments to the National Consumer Credit Protection Act 2009 of the Commonwealth and the National Consumer Credit Protection (Transitional and Consequential Provisions) Act 2009 of the Commonwealth (an amendment reference).

Since the enactment of the initial Tasmanian legislation, the Commonwealth and the States have also agreed on certain exclusions (or 'carve outs') to the amendment reference. These carve outs are reflected in this Bill. They have also been recognised under the National Consumer Credit Protection Act 2009 of the Commonwealth through amendments made to that Act by the National Consumer Credit Protection Amendment Act 2010 of the Commonwealth.

These carve outs, which are also reflected in the National Credit Law Agreement 2009, ensure that the Commonwealth cannot override State legislative authority in respect of State taxes, the recording of estates and interests in land, the priority of interests in real property, and State laws relating to State statutory rights. To further protect State legislative autonomy, and while such action would not be taken lightly, the Bill also includes a provision which allows termination of the adoption or the amendment reference.

The significance of this Bill and the implementation of the national credit regime should not be understated. In a climate of global financial instability, these measures, while striking an appropriate balance between the rights and obligations of consumers and business, further enhance the integrity of the Australian financial services sector.

I commend the Bill to Members.

Explanation of Clauses

1—Short title

This clause sets out the name (also called the short title) of the proposed Act.

2—Commencement

This clause provides for the commencement of the measure.

3—Definitions

This clause defines certain words and expressions used in the proposed Act. The definitions reflect the fact that there is to be an adoption of the Commonwealth laws together with the conferral of an amendment reference.

It is also necessary to distinguish for the purposes of the measure between:

the National Credit legislation, which means—

(a) the National Consumer Credit Protection Act 2009 of the Commonwealth; and

(b) the National Consumer Credit Protection (Transitional and Consequential Provisions) Act 2009 of the Commonwealth, as in force from time to time; and

the relevant version of the National Credit legislation, which means—

(a) the National Consumer Credit Protection Act 2009 of the Commonwealth as originally enacted, and as later amended by the National Consumer Credit Protection Amendment Act 2010 of the Commonwealth; and

(b) the National Consumer Credit Protection (Transitional and Consequential Provisions) Act 2009 of the Commonwealth.

4—Adoption of National Credit legislation

This clause deals with the adoption, under section 51(xxxvii) of the Commonwealth Constitution, of the relevant version of the National Credit legislation.

5—Termination of adoption

This clause allows the Governor to fix a day as the day on which the adoption is to terminate.

6—Reference of matters

This clause refers to the Commonwealth Parliament the matters of amending the National Credit legislation (the amendment reference).

The amendment reference will enable the Commonwealth to make express amendments to its National Credit legislation about the provisions of credit to which the National Credit Code applies and about consumer leases to which Part 11 of that Code applies. The National Credit Code is set out in Schedule 1 of the National Consumer Credit Protection Act 2009 of the Commonwealth.

7—Matters excluded from reference

This clause provides for the exclusion from the amendment reference of certain matters relating to the imposition of State taxes, the system for recording of estates or interests in land, the priority of estates or interests in real property and State statutory rights.

8—Termination of reference

This clause allows the Governor to fix a day as the day on which the amendment reference is to terminate.

9—Amendment of Commonwealth law

This clause makes it clear that the National Credit legislation may be amended on account of any reference or adoption, or by Commonwealth laws or instruments enacted or made on the basis of powers vested in the Commonwealth apart from any reference or adoption.

10—Effect of termination of amendment reference before termination of adoption of Commonwealth Acts

This clause makes it clear that the separate termination of the period of the amendment reference does not affect laws already in place. Accordingly, the amendment reference continues to have effect to support those laws unless the adoption is also terminated.

Standing Orders Suspension

The Hon. J.R. RAU (Enfield—Attorney-General, Minister for Justice, Minister for Tourism) (16:44): I move:

That standing orders be so far suspended as to enable this bill to pass through all stages without delay.

The SPEAKER: I have counted the house and, as an absolute majority of members is not present, ring the bells.

An absolute majority of the whole number of members being present:

Motion carried.

Second Reading

Ms CHAPMAN (Bragg) (16:47): I indicate that the opposition will support the Credit (Commonwealth Powers) Bill 2010. The Hon. Michelle Lensink, the shadow minister for consumer affairs—

Members interjecting:

The SPEAKER: Order! It is very difficult to hear the member for Bragg. Could we please cut the noise down.

Ms CHAPMAN: —and member of another place, has fully briefed the Liberal opposition with respect to this matter, and we have agreed to her advice. I note, in the material that has now been tabled from the minister, that his advice to the house is consistent with what we are informed. In short, the Credit (Commonwealth Powers) Bill essentially adopts national credit legislation, specifies a number of exclusions and follows an agreement reached at a Council of Australian Governments, which had met, I think, in 2009 and executed an agreement that incorporates a recommendation of the Productivity Commission as published in April 2008. In short, it was considered that a national credit regime should prevail and be implemented on the basis that it would provide some clarity for business and increase consumer protection operations across Australia.

South Australia and its parliament can be proud that we have been a leader, as in many other areas of jurisdiction in this parliament. We were a leader in the establishment of consumer protection law in the 1970s, including the early consumer credit act that passed in the 1970s, in recognition of, firstly, the importance to protect individual consumers against what was becoming a growing corporate divide, a power imbalance, I think, if I can describe it as that, between the operators of business and the single, uninformed and often uneducated consumer.

As a parliament, the obligations that were really pioneered in this chamber were ones that recognised the need to protect the individual consumer and to require the parties supplying products and services to provide various sets of information to the consumer to enable them to make a wise choice in the selection of the services or products.

In addition, we pioneered consumer credit legislation. I can recall those early acts of this parliament under which, really for the first time, financial institutions were obliged to require the execution of credit documents as we moved from mortgage documents to the sort of rental payments required under a rental purchase agreement. It required such things as a full disclosure of not only the interest rate being charged but the amount that had to be repaid over the term of the debt, so that the prospective consumer of this credit opportunity fully knew what they were getting into, and that was quite pioneering in its time.

It was a far cry, I must say, from some of the financial documents that South Australians, particularly women, were required to sign up to if they wanted to join usually in those days with a father or husband to obtain credit. I can recall, even at a time when I was still at school, that women, if they were to join with their husband in obtaining a loan from a bank, had an obligation to identify what arrangements they had for having children in the future, what contraception arrangements had been put in place, in order to give some measure of satisfaction to the financial institution as to their ability to comply, for example, with the mortgage payment conditions.

It was absolutely obscene, and they are standards that would never be tolerated today. However, we have to remember that that was in the late 1960s and early 1970s, and that was a time when female public servants were required to retire upon their marriage, as was the case in other areas of industry, such as air hostesses, as they were known in those days. So, times have certainly changed. We should be proud as a state parliament of the pioneering work we contributed to in those early days.

One of the people who was very conscientious about that advance of legislation was the successor to the lady in the Versace blue up here, Mrs Joyce Steele, and that is the Hon. David Tonkin, who later became a premier of this state and succeeded Mrs Joyce Steele as the member for Burnside, as it was then, to become the member for Bragg, and I pay tribute to them both.

The other point I want to make in supporting the government in the passage of this bill is that, if I may say so, this is the way to do things properly. During the course of this week, we have debated a whole new model in respect of the proposed registration for health practitioners at a national level—and it is a dog's breakfast. The debate on that legislation is continuing, so I will not distract myself by getting into the detail of that measure, but it is a shocking mess and it should never be replicated in an attempt to impose on this parliament a model of a transfer of its legitimate responsibility and right to determine its own future—referring, in that case, to the disciplining and registration of health professionals.

This bill is a good example, whereby the governments around Australia have got together and agreed with the Productivity Commission about the importance of, in this case, attempting to clarify the situation for business, and so on, and also protecting consumers through the existence of a national body. There have been a number of pieces of legislation since the mid-1990s to effect some of that.

This transfers a power to the commonwealth, which is one of the more common models of achieving a national system, but leaves with it the capacity for the representation of states, through their senators particularly, to have a say about how that legislation grows. It is a good model and I would encourage the government to go back, as it has on this occasion, to something that is well structured and well tested. It retains the capacity for South Australia to have a significant role in the growth of that legislation in the past and repeal it if necessary, not the alternative which was dished up to us in another form earlier in this week.

Lessons can be learned from this and I thank the government for following a good model in this circumstance, and it has the opposition's support.

The Hon. J.R. RAU: I am particularly grateful for the honourable member for Bragg's contribution and assistance today with the passage of this bill. I think there is much sense in the remarks she made about the way we should go about things. Perhaps in some cases things are not done quite as well as they appear to have been done in this case. So, again, I thank the honourable member for Bragg for her assistance and cooperation, I thank the opposition for their assistance in relation to this matter, and I commend the matter to the house.

Bill read a second time and taken through its remaining stages.