Legislative Council Fifty-Second Parliament, First Session (52-1) 52 1 Parliament of South Australia Legislative Council published Bills Credit (Commonwealth Powers) Bill CREDIT (COMMONWEALTH POWERS) BILL Introduction and First Reading Introduction and First Reading The Hon. G.E. GAGO Legislative Council Minister for State/Local Government Relations Minister for the Status of Women Minister for Consumer Affairs Minister for Government Enterprises Minister for the City of Adelaide The Hon. G.E. GAGO (Minister for State/Local Government Relations, Minister for the Status of Women, Minister for Consumer Affairs, Minister for Government Enterprises, Minister for the City of Adelaide) (15:46): Obtained leave and introduced a bill for an act to adopt the National Consumer Credit Protection Act 2009 of the commonwealth (as amended) and to the National Consumer Credit Protection (Transitional and Consequential Provisions) Act 2009 of the commonwealth, and to refer certain matters relating to the provision of credit and certain other financial transactions to the Parliament of the Commonwealth, for the purposes of section 51(xxxvii) of the Constitution of the Commonwealth. Read a first time. Second Reading Second Reading The Hon. G.E. GAGO Legislative Council Minister for State/Local Government Relations Minister for the Status of Women Minister for Consumer Affairs Minister for Government Enterprises Minister for the City of Adelaide The Hon. G.E. GAGO (Minister for State/Local Government Relations, Minister for the Status of Women, Minister for Consumer Affairs, Minister for Government Enterprises, Minister for the City of Adelaide) (15:47): I move: That this bill be now read a second time. 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 that the commonwealth would assume responsibility for the regulation of mortgage brokering, 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 licence holders to be members of an external dispute resolution scheme approved by ASIC. This will ensure that, when consumers are involved in a dispute with a licence holder, the consumer will not have immediately to 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. I now turn to the specific purpose of the South Australian Credit (Commonwealth Powers) Bill 2010. The object of the 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 Credit Protection 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 underestimated. 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. I seek leave to have the remainder of the second reading explanation inserted in Hansard without my reading it. Leave granted. Explanation of Clauses 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. Debate adjourned on motion of Hon. S.G. Wade.