EXPLANATORY STATEMENT
Select Legislative Instrument 2010 No. 59
Subject - National Consumer Credit Protection Act 2009
National Consumer Credit Protection Amendment Regulations 2010 (No. 1)
The National Consumer Credit Protection Act 2009 (the Credit Act) applies to the provision of credit for personal use, and to related matters, including the establishment of a licensing regime for persons engaging in credit activities.
Section 329 of the Credit Act provides that the Governor‑General may make regulations prescribing matters required or permitted by that Act to be prescribed, or necessary or convenient to be prescribed for carrying out, or giving effect to that Act.
The Regulations make two amendments to the National Consumer Credit Protection Regulations 2010 (the Credit Regulations). The Regulations:
• modify the restriction on a registered person being appointed as a credit representative during the transitional period. The purpose of this regulation is to allow a person to be appointed as a credit representative while they are still registered; and
• provide for an exemption from the National Credit Code (other than sections 72 to 81) for Indigenous Business Australia (IBA). The purpose of this exemption is to continue to provide IBA with an exemption analogous to that it previously had from the state-based Uniform Consumer Credit Code.
Details on the Regulations are included in the Attachment.
The Credit Act specifies no conditions that need to be satisfied before the power to make the Regulations may be exercised.
The Regulations would be a legislative instrument for the purposes of the Legislative Instruments Act 2003.
The Regulations commence on 1 July 2010.
Authority: Section 329 of the
National Consumer Credit
Protection Act 2009
ATTACHMENT
Details of the National Consumer Credit Protection Amendment Regulations 2010 (No. 1)
Regulation 1 – Name of Regulations
This regulation provides that the name of the Regulations is the National Consumer Credit Protection Amendment Regulations 2010 (No. 1).
Regulation 2 – Commencement
This regulation provides that the Regulations commence on 1 July 2010.
Regulations 3 – Amendment of National Consumer Credit Protection Regulations 2010
This regulation provides that Schedule 1 to the Regulations amends the National Consumer Credit Protection Regulations 2010 (the Credit Regulations).
Schedule 1 Amendment
Item [1]
This item inserts a new regulation 25A after regulation 25 in the Credit Regulations. Regulation 25A will avoid potential inconvenience to industry in the transition period by modifying the restriction on a registered person being appointed as a credit representative.
Section 67 of the Credit Act prohibits a registered person from being authorised to act as a credit representative until their registration has been cancelled by the Australian Securities and Investments Commission (ASIC). A person who has elected to operate as a credit representative but who initially registered with ASIC in the period from 1 April 2010 to 30 June 2010 cannot be authorised to engage in credit activities until they have applied to have their registration cancelled, and it has been cancelled.
The item allows a person to authorise a registered person to act on their behalf as a credit representative where it is reasonably expected that the registered person will engage in a credit activity only as a credit representative, and seeks to avoid any gap in their business activities until their registration has been cancelled.
The item provides that the authorisation will cease to have effect if the registered person has not, within 15 business days from the date of authorisation, requested the cancellation of their registration.
Item [2]
This item inserts a new regulation 65A after regulation 65 in the Credit Regulations. Regulation 65A provides for an exemption from the National Credit Code (other than sections 72 to 81 of the National Credit Code) for Indigenous Business Australia (IBA).
Historically IBA did not comply with the state-based Uniform Consumer Credit Codes (UCCC), as it operated under a Commonwealth law. However, since the National Credit Code replicates the UCCC as Commonwealth law, IBA requires a specific exemption from the National Credit Code in order to be able to not comply.
IBA is a body that is established by, and operates in accordance with, the Aboriginal and Torres Strait Islanders Act 2005. Its statutory objective is to further the social, economic or cultural development of Aboriginals and Torres Strait Islanders in the provision of home finance.
IBA’s procedures and operations are directed by a statutory Board of eight members that reports to the Commonwealth Parliament through the responsible Minister. It is required to develop a Corporate Plan which it must give to the responsible Minister and which is also tabled in each House of Parliament.
This item still requires IBA to comply with sections 72 to 81 of the National Credit Code. These sections deal with arrangements regarding changes to credit contracts on the grounds of financial hardship, and the right of persons to have a court reopen a transaction that is unjust, or to review unconscionable interest and other charges. Third parties are required to comply with the Credit Act when they engage in credit activities in relation to an IBA credit contract.
Overview
The National Consumer Credit Protection Act 2009 (Credit Act) addresses issues and gaps related to the provision of credit for personal use and the regulation of credit activities. Enacted by the Australian Parliament, the Credit Act established a licensing regime for entities and individuals engaging in credit activities, aiming to protect consumers and maintain market integrity. The National Consumer Credit Protection Amendment Regulations 2010 (No. 1) further refine the Credit Act by making specific amendments to the National Consumer Credit Protection Regulations 2010. These amendments include allowing a registered person to be appointed as a credit representative during a transitional period to avoid business disruptions and providing an exemption for Indigenous Business Australia (IBA) from the National Credit Code, aligning with IBA's historical operations under Commonwealth law and its objective to support the social and economic development of Aboriginal and Torres Strait Islander communities in home finance. These amendments seek to ensure a smooth transition and continued support for specific entities like IBA, while maintaining consumer protection standards.
Scope and Application
The National Consumer Credit Protection Act 2009, referred to as the Credit Act, applies to the provision of credit for personal use and includes provisions for establishing a licensing regime for individuals and entities engaging in credit activities. The Act encompasses all persons, entities, and transactions related to personal credit, operating within the Commonwealth of Australia. The scope of the Act is broad, covering various aspects of consumer credit, including licensing requirements, disclosure obligations, and consumer protections. However, certain entities may be exempt from specific provisions of the Act through subordinate regulations. For example, the National Consumer Credit Protection Amendment Regulations 2010 (No. 1) include modifications and exemptions that cater to transitional arrangements and specific entities like Indigenous Business Australia, which is exempted from most of the National Credit Code except for specific sections related to financial hardship and court reviews. The application of the Credit Act is facilitated through these subordinate instruments, which provide further clarity and adjustments to the primary legislation.
Key Provisions
The National Consumer Credit Protection Amendment Regulations 2010 (No. 1) introduce two key modifications to the existing National Consumer Credit Protection Regulations 2010. Firstly, Regulation 25A (referenced in Item [1] of Schedule 1) alters the restriction on registered persons being appointed as credit representatives during the transitional period. Under the original framework, a registered person could not act as a credit representative until their registration was officially cancelled by the Australian Securities and Investments Commission (ASIC). However, this new regulation allows for a registered person to be authorised as a credit representative, provided it is reasonably expected that their activities will be limited to those of a credit representative, and provided the person applies for the cancellation of their registration within 15 business days of the authorisation. This amendment aims to mitigate disruptions in business activities until the registration is formally cancelled.
Secondly, Regulation 65A (referenced in Item [2] of Schedule 1) grants an exemption from the National Credit Code (excluding sections 72 to 81) to Indigenous Business Australia (IBA). Historically, IBA operated under a separate Commonwealth law and was not required to comply with the state-based Uniform Consumer Credit Codes (UCCC). With the introduction of the National Credit Code, IBA needed a specific exemption to continue operating under its existing framework. IBA, established under the Aboriginal and Torres Strait Islanders Act 2005, focuses on providing home finance to promote the social, economic, and cultural development of Aboriginals and Torres Strait Islanders. The exemption ensures IBA can continue its operations while complying with specific sections of the National Credit Code related to financial hardship, court reopening of unjust transactions, and review of unconscionable charges.
The Regulations impose specific obligations on the entities they govern. For registered persons transitioning out of their registration, there is an explicit requirement to apply for the cancellation of their registration within 15 business days of being authorised as a credit representative. Failure to meet this requirement will render the authorisation void. Additionally, IBA must adhere to the provisions of the National Credit Code, excluding sections 72 to 81, and ensure third parties comply with the Credit Act when engaging in credit activities related to IBA credit contracts.
Failure to comply with the Regulations can result in significant consequences. While the explanatory statement does not detail specific penalties for non-compliance, breaches of the Credit Act generally attract penalties that can include substantial fines and, in severe cases, imprisonment. For instance, under the Credit Act, unauthorised credit activities can lead to penalties of up to $222,000 for individuals and $1,110,000 for bodies corporate. Additionally, IBA's failure to adhere to the exempted sections of the National Credit Code could result in enforcement actions, potentially impacting its operations and objectives.