EXPLANATORY STATEMENT
Statutory Rules 1984 No. 230
Issued by the authority of the Attorney-General
TRADE PRACTICES (REMOVAL OF EXCEPTIONS)
REGULATIONS (AMENDMENT)
These Regulations, made under subsection 172(1) of the Trade Practices Act 1974, amend the Trade Practices (Removal of Exceptions) Regulations.
Sub-section 172(1) of the Trade Practices Act 1974 (the Act) provides, amongst other things, that the Governor-General may make regulations, not inconsistent with the Act, prescribing matters required or permitted by the Act to be prescribed or which are necessary or convenient to be prescribed for carrying out or giving effect to the Act.
The Regulations amend regulation 3 of the Trade Practices (Removal of Exceptions) Regulations to remove the possibility for States to specifically authorize any prescribed societies to engage in such arrangements. A lending institution engages in tied insurance arrangements if it compels borrowers to take out insurance with nominated insurance companies.
This is a form of “third line forcing” (i.e. supplying goods or services on condition that other goods or services will be acquired from another person) which is prohibited by sub-section 47(6) of the Act. However, paragraph 51(1)(b) of the Act excepts from that prohibition conduct specifically authorized by State Acts or Regulations, unless such State authorization is overridden by Regulation under the Act.
The Trade Practices (Removal of Exceptions) Regulations, when originally made in 1975, overrode State legislation specifically authorizing tied insurance arrangements by building societies, co-operative societies and credit unions. Amendments of the Regulations in 1979 and 1981 had the effect of removing the application of the Regulations to these arrangements in respect of terminating building societies and NSW co-operative housing societies, which meant that State legislation could once again specifically authorize tied insurance arrangements by these societies. The Regulations continued, however, to override any purported specific authorization of tied insurance arrangements by other building societies, co-operative societies and credit unions.
Following numerous consumer complaints (particularly about grossly excessive premiums), continuing consultations have taken place with all State Governments with the aim of amending the Regulations to remove the possibility of States authorizing tied insurance arrangements by the presently excepted building societies.
All States have agreed to the amendment.
The effect of the amending Regulation is to remove the power of the States to specifically authorize any societies engaging in tied insurance arrangements so that all building societies (permanent, terminating, etc.), co-operative societies and credit unions are treated in the same way under the Act.