Consent to use restricted expressions - Class consent - providers of purchased payment facilities - Banking Act 1959 (16/11/2005)

Administered by Department of the Treasury

Legislation au F2005L03623 Not in force Legislative Instrument

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EXPLANATORY STATEMENT

Banking Act 1959
Subsection 66(1)(d) and 66(1B)

CONSENT TO USE RESTRICTED EXPRESSIONS ‘PURCHASED PAYMENT FACILITY PROVIDER’ AND ‘PPF PROVIDER’

Issued by the authority of the Australian Prudential Regulation Authority (APRA)

This explanatory statement relates to the instrument made by APRA under paragraph 66(1)(d) and subsection 66(1B) of the Banking Act 1959 (the Act), Consent to use restricted expressions: class consent – providers of purchased payment facilities dated 16 November 2005 (the instrument).

APRA’s power under section 66 of the Act to consent to the use of restricted words and expressions relating to banking

Subsection 66(1) of the Act prohibits anyone who is carrying on a financial business, whether or not in Australia, from assuming or using in Australia a restricted word or expression in relation to that financial business without APRA’s consent.

The expressions ‘purchased payment facility provider’ and ‘PPF provider’ are restricted expressions by virtue of the instrument made by APRA under subsection 66(5) of the Act, Determination of restricted expressions -‘Purchased payment facility provider’ and ‘PPF provider’ dated 16 November 2005 (the Determination).

Subsection 66(1B) of the Act provides that a consent given by APRA for the purposes of subsection 66(1) can be expressed to apply to a particular person or to a class of persons.

Purpose of the instrument

The purpose of this instrument is to give consent to ADIs to use the restricted expressions ‘purchased payment facility provider’ and ‘PPF provider’.

Background

Purchased payment facilities (PPFs) include stored value cards, internet based payment systems and travellers’ cheques.  The legislative framework governing the prudential supervision of PPFs reflects the recommendations of the 1997 Financial System Inquiry (Inquiry).  As part of its response to the Inquiry, the Government enacted the Payment Systems (Regulation) Act 1998 (PSR Act), which charged the Reserve Bank of Australia with responsibility for regulating the payment system, including PPFs and their providers (defined in the PSR Act as holders of stored value). 

The Government subsequently determined that, in the interests of ensuring consistency of regulatory treatment, all PPFs akin to banking business, regardless of whether the provider was an ADI or not, should fall under the requirements of the Act and be prudentially supervised by APRA.  To facilitate this, the definition of banking business was extended by a regulation enacted under the Act in 2000 to include the provision of PPFs.

In November 2005, APRA determined final regulatory arrangements for authorising and supervising a new class of ADIs which operate PPFs (PPF providers).  The new entities will be supervised as a new class of ADI under a new Prudential Standard APS 610 Prudential Requirements for Providers of Purchased Payment Facilities (APS 610).  Institutions already authorised as ADIs under the Act will also be eligible to act as PPF providers without further authorisation.

The new PPF provider model is designed to ensure the safety and integrity of the payments system as well as to provide an appropriate level of protection for the value held in the scheme. 

Unlike ordinary ADIs, PPF providers will only be authorised to provide a PPF.  They will not be authorized to conduct the general business of banking.  PPF providers will not be authorised to accept deposits for the purpose of making advances of money (other than where incidental credit balances resulting from the provision of PPFs result in liabilities that are subject to APRA requirements on investment and liquidity).

Explanation of the instrument

This instrument grants the necessary consent to ADIs to allow them to use the terms ‘purchased payment facility provider’ and ‘PPF provider’.  This facilitates the operation of APS 610 by allowing those institutions which are legally entitled to operate PPFs to identify themselves as PPF providers.  The complementary section 66(5) determination prevents those institutions that are not entitled to operate a PPF using the restricted expressions.  The overall effect of these two instruments will be that only those entities legally entitled to operate a PPF will be entitled to use the restricted expressions.

Consultation

This instrument forms a part of a package of instruments relating to the prudential supervision of PPF providers.  APRA undertook public consultation on its proposed regime for supervision of these institutions between 6 May and 30 June 2005.  The Guidelines for Authorisation of Providers of Purchased Payment Facilities (the Guidelines), released as part of that package, indicated that the terms ‘purchased payment facility provider’ and ‘PPF provider’ would be restricted expressions under the Act.  The Guidelines also indicated that institutions legally entitled to operate a PPF would be able to use the restricted expressions that are the subject of this instrument.  Two submissions were received, neither of which commented on this aspect of the proposal.

In light of this broader consultation process, it was not viewed as necessary to undertake further consultation in relation to this instrument.

 

 

Commencement date

APRA has determined that this instrument will come into effect on the day it is registered on the Federal Register of Legislative of Instruments.

 

 

 

Overview

The Banking Act 1959 was enacted to regulate and supervise banks and authorised deposit-taking institutions (ADIs) in Australia, ensuring financial stability and consumer protection. One of the key issues addressed by the Act is the control over the use of specific terms and expressions by financial institutions to prevent misleading or deceptive conduct. The explanatory statement regarding the instrument made by the Australian Prudential Regulation Authority (APRA) under the Act highlights the need for consent to use restricted expressions such as 'purchased payment facility provider' and 'PPF provider'. This instrument was introduced to address the regulatory requirements for prudential supervision of purchased payment facilities (PPFs) like stored value cards and internet-based payment systems. APRA's role under the Act is to ensure that only authorised institutions can use these restricted terms, thereby maintaining clarity and consistency in the financial sector. The policy objective is to protect the integrity of the payments system and provide adequate safeguards for the value held in these schemes, ensuring that only entities legally entitled to operate PPFs can identify themselves as such.

Scope and Application

The instrument issued by the Australian Prudential Regulation Authority (APRA) under the Banking Act 1959 provides consent for Authorised Deposit-taking Institutions (ADIs) to use the restricted expressions ‘purchased payment facility provider’ and ‘PPF provider’. These expressions are specifically designated as restricted by a separate determination made by APRA, ensuring that their use is regulated. The purpose of this consent is to facilitate the operation of Prudential Standard APS 610, which sets out the prudential requirements for entities that provide purchased payment facilities, such as stored value cards and internet-based payment systems. By granting this consent, APRA ensures that only those ADIs legally entitled to operate such facilities can use these terms, thereby maintaining clarity and regulatory compliance within the financial sector. This legislative measure is part of a broader framework aimed at ensuring the safety and integrity of the payments system and protecting the value held within it.

Key Provisions

The main operative sections of the instrument issued by the Australian Prudential Regulation Authority (APRA) under the Banking Act 1959 allow authorised deposit-taking institutions (ADIs) to use the restricted expressions "purchased payment facility provider" and "PPF provider." This consent is granted by APRA in accordance with subsection 66(1)(d) and subsection 66(1B) of the Act, as explained in the explanatory statement dated 16 November 2005. The instrument specifically addresses the use of these terms to facilitate the operation of Prudential Standard APS 610, which sets out the prudential requirements for providers of purchased payment facilities. These terms enable ADIs that are legally entitled to operate purchased payment facilities (PPFs) to identify themselves as PPF providers. The obligations imposed by this instrument on ADIs include the requirement to obtain APRA’s consent to use the restricted expressions. This consent ensures that only those institutions legally entitled to operate PPFs can use these terms, thereby maintaining clarity and consistency in the financial services market. ADIs must comply with the Prudential Standard APS 610, which includes specific prudential requirements for PPF providers. This includes ensuring the safety and integrity of the payments system and providing appropriate protection for the value held in the scheme. Additionally, PPF providers must adhere to APRA’s requirements on investment and liquidity. Failure to comply with the provisions of the instrument or the Prudential Standard APS 610 may result in civil or criminal consequences. Under subsection 66(1) of the Banking Act 1959, any person carrying on a financial business who uses a restricted expression without APRA’s consent may face penalties. While the explanatory statement does not specify maximum penalties, the Act provides for potential fines and other sanctions for non-compliance. Additionally, institutions that fail to meet the prudential requirements set out in APS 610 may face regulatory action, including the possibility of having their authorisation revoked. This underscores the importance of strict adherence to the regulatory framework governing PPF providers.

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Sourced from the Federal Register of Legislation at 26 August 2026. For the latest information on Australian Government law please go to https://www.legislation.gov.au.