Senator Nick Sherry, Minister for Superannuation and Corporate Law, has today released the draft National Consumer Credit Protection Bill 2009, which will deliver on the Rudd Government's commitment to modernise Australia's financial services sector by establishing a world-leading consumer protection-focused national credit licensing regime.
"This is a modern national licensing regime fit for the 21st century. Compared to other key OECD economies, these laws are at a world-leading standard."
"This Bill creates the Australian Credit License (ACL). After a registration phase, coverage of the ACL regime will commence on 1 January, 2010, will be Australia-wide and will include all parts of the credit industry."
"ACL holders will all be required to meet minimum entry standards before they can offer products and services to consumers," said Minister Sherry.
All banks, credit unions, finance companies and other lenders, known in the Bill as credit providers, and all credit advisers and mortgage and credit brokers, known as credit service providers will be required to hold an ACL.
The ACL regime will be supervised by the Australian Securities and Investment Commission (ASIC) and will replace a patchwork of inconsistent and often incomplete regulatory regimes that currently exist across different states and territories. ASIC will receive $66 million and its powers will be considerably bolstered to enforce the regime.
"Currently only one state has a licensing regime, but once credit providers and advisers are licensed across the whole country, they will have to meet continuing standards of conduct, higher than any that exist at the State and Territory level."
"Consumers will be consistently protected across Australia as a person who loses their licence or registration will be excluded Australia-wide. At present, there is nothing to prevent a person continuing to operate simply by moving to a different State or Territory, a situation that undermines consumer confidence and is completely unacceptable."
"Providers or advisers who break the rules face tough penalties, including hefty fines, a loss of licence and even jail time."
"ASIC will be given the power to promptly cancel or suspend a licence or ban people from engaging in credit activities, where it is necessary to protect consumers from the risk of financial harm and to maintain the integrity of the credit market."
"Questionable operators on the margins who cannot meet these new national standards will not be allowed to engage in credit activities and will be forced to exit the industry. This stands to assist the very good reputation of those mainstream lenders and brokers who comply with the law," Minister Sherry said.
Uniform national licensing will also lead to a major reduction in red-tape for credit-related businesses as all regulation will moves to one jurisdiction.
"Licensing will also reduce the industry compliance burden – as industry will now be required to comply with a single set of laws, instead of multiple State and Territory regimes."
In recognition of the differing levels of current regulatory oversight of certain credit providers, authorised deposit-taking institutions will be streamlined into holding an ACL.
Further details of the national consumer credit package, including the full text of the Bills and details about how to make a submission on the Exposure Draft legislation can be found at www.treasury.gov.au/consumercredit.
Further Details of Australian Credit License (ACL) Regime
The Australian Credit License (ACL) regime is to be established by National Consumer Credit Protection Bill 2009 and associated legislation and regulations.
A person or entity will need an ACL where they engage in any of the following credit activities:
- lending money or collecting money due under a credit contract,
- acting as a broker or intermediary (such as an aggregator or mortgage manager),
- providing assistance to a consumer about a specific credit product.
All holders of an ACL will be required to meet new obligations immediately on becoming licensed. For example, they will be required to be properly trained and ensure representatives are adequately supervised. They must also deal with conflicts of interest so clients are not disadvantaged where such conflict exists.
To make the transition as smooth as possible with minimal disruption in the market, licensing will be implemented in two phases. Anyone who engages in credit activities will need to register online with ASIC between 1 November 2009 and 31 December 2009.
On becoming registered, a person must meet a range of obligations – they will be required to act efficiently, honestly and fairly, to comply with the law, including responsible lending conduct obligations and to become a member of an ASIC-approved External Dispute Resolution (or EDR) Scheme.
They will then have six months to apply for an Australian Credit Licence, between 1 January 2010 and 30 June 2010. To qualify for an Australian Credit Licence, applicants must demonstrate to ASIC that they have the necessary organisational capacity, competencies and skills.
The national credit laws will also include enhanced ASIC enforcement powers to support consumer protections in several key ways. This includes:
- criminal penalties for licensee misconduct with possible imprisonment for up to 5 years for those who lend contrary to the responsible lending requirements,
- civil penalties for licensee misconduct to enable ASIC to impose heavy fines of up to $220,000 for an individual and $1.1 million for a corporation,
- infringement notices (or fines) to enable ASIC to quickly act to penalise certain breaches of the law; and
- consumer remedies, which will enable consumers to seek redress for their loss and damage as a result of misconduct by a licensee, or when their credit is provided unlawfully.