Bills Digest no. 113 2009–10
National Consumer Credit Protection
Amendment Bill 2010
WARNING:
This Digest was prepared for debate. It reflects the legislation as introduced
and does not canvass subsequent amendments. This Digest does not have
any official legal status. Other sources should be consulted to determine
the subsequent official status of the Bill.
CONTENTS
Passage history
Purpose
Financial implications
Main provisions
Contact officer & copyright details
Passage history
National Consumer Credit Protection
Amendment Bill 2010
Date introduced: 10 February 2010
House: House of Representatives
Portfolio: Treasury
Commencement: On the day of Royal Assent
Links: The relevant links to the Bill, Explanatory Memorandum
and second reading speech can be accessed via BillsNet, which is at http://www.aph.gov.au/bills/. When Bills have been passed they can
be found at ComLaw, which is at http://www.comlaw.gov.au/.
The purpose of the Bill is to make
amendments to the National Consumer Credit Protection Act 2009 (the
National Credit Act) to ensure the constitutional soundness of the referral of
consumer credit powers to the Commonwealth by the States.
The need for the adoption of a national regulatory approach
to important social and economic issues … has wide support in Australia. Such
an approach is considered to offer the best opportunity for producing a fair
and equitable society which can meet the challenges of globalisation.[1]
Prior to 2000, the Commonwealth and the States were able to
achieve uniformity of laws in Australia by the enactment of a ‘template’ (known as a model law, or mirror legislation) by one jurisdiction and its
adoption and application, as amended from time to time, by the other
participating jurisdictions. In most cases, it was the Commonwealth which was
the enacting jurisdiction.[2]
In a few cases, however, a State has provided the model law which the
Commonwealth and other states have adopted.[3]
Another way to achieve uniform legislation involved the
establishment of an administering agency or regulator by one jurisdiction,
allowing the others to confer power on it.[4]
This was known as a ‘bucket’ arrangement.[5]
Such schemes were generally accompanied by an
intergovernmental agreement to:
- identify the manner in which the initial template may be approved
for enactment
- identify the conditions under which it may be amended
- make provision in relation to appointments to the administering
authority or regulator, and
- allocate responsibility for funding.
Unfortunately the schemes ran the risk that the quality of
decision-making was affected by the need to achieve agreement between all, or
at least a majority, of the participants. The decisions concerned extend from
amendment of the legislation to appointments to the regulatory body.[6]
However, the decision of the High Court in Wakim[7] disclosed a limitation on the extent to which complete uniformity could be
achieved by either of these means. The Corporations Law as it existed
in the late 1980s was dealt a blow by this decision as the High Court held that
Federal courts could not exercise state jurisdiction—a core aspect of the
uniform Corporations scheme which was basically a template law model.
Section 51(xxxvii) of the Commonwealth of Australia
Constitution Act (the Constitution) allows the Commonwealth to make laws
with respect to:
matters referred to the Parliament of the Commonwealth by the
Parliament or Parliaments of any State or States, but so that the law shall
extend only to States by whose Parliaments the matter is referred, or which
afterwards adopt the law.
This is known as the ‘referral’ power. Once a reference is
made and a Commonwealth law enacted in accordance with it, the difficulties
associated with ‘template’ and ‘bucket’ arrangements are overcome in many
respects. Nevertheless, there is continuing debate and uncertainty about the
legal operation and effect of the referral power.[8]
The most significant issues are:
- whether a reference can be revoked by a State
- whether a referral deprives a State of the legislative power to
make laws on the same matter—that is, whether the Commonwealth acquires an
exclusive power to make laws on the matter referred, and
- the continuing constitutional status of federal laws made by
reason of a referral if the reference were to be revoked or otherwise expire.[9]
The answers to these vexed questions are beyond the scope of
this Digest. However, it is important to understand that this is the context
in which referrals of power to the Commonwealth by the States occur.
As a way to avoid these problems, section 51(xxxvii) of the
Constitution allows a State or States to adopt a Commonwealth law.[10]
In that case at least one State must have referred a matter to the
Commonwealth. The Commonwealth is then empowered to enact a law about that
matter which will also apply in the referring State. Once that has occurred,
any other State or States can adopt the new Commonwealth law by passing a State
law setting out the extent of the adoption and annexing the relevant
Commonwealth law.
Background to the National Consumer Credit
Protection Bills
In March 2008, the Council of
Australian Governments (COAG) committed to a comprehensive microeconomic reform
program including a regulatory reform agenda to help deliver significant
improvements to Australia’s competition, productivity and international
competitiveness.[11]
As part of these reforms, COAG agreed on 3 July 2008 that
responsibility for the regulation of credit and finance broking should be
transferred from the States and Territories to the Commonwealth. The rationale
for such a measure was described as follows:
National regulation through the Commonwealth of consumer
credit will provide for a consistent regime that extinguishes the gaps and
conflicts that may exist in the current regime. The new regime is anticipated
to introduce licensing, conduct, advice and disclosure requirements that meet
the needs of both consumers and businesses alike.
A seamless national regime will assist in ensuring that
consumers are better protected in their dealings with credit products and
credit providers, including brokers and advisers.[12]
At the COAG meeting of 2 October 2008, it was agreed that
there would be a phased implementation plan. Phase one comprised the transfer from
the states to the Commonwealth of responsibility for trustee companies and
existing key credit regulation, including the Uniform Consumer Credit Code. The
regulation of remaining areas of consumer credit, including pay-day lending,
credit cards, store credit, investment and small business lending, and personal
loans, would comprise phase two.[13]
As a consequence of that agreement, the National Consumer
Credit Protection Bill 2009 and two other consequential Bills were introduced
into the House of Representatives on 25 June 2009.[14]
In the absence of a referral of powers from the States, the
Commonwealth does not have sufficient legislative power to enact a
comprehensive regulatory framework for consumer credit to operate nationally.
That being the case a referral of power is needed. The
reference can be either by ‘subject matter’—for example the reference of the
matter of ‘air transport’ by Queensland to the Commonwealth in 1943 and 1950;
or by ‘text’ so that the power that is referred is confined to the text of a Bill.[15]
According to reports, NSW Attorney-General John Hatzistergos has stated:
… NSW is no longer willing to make subject-matter referrals
of power to the Commonwealth in the face of lopsided federal government power
in the federation … The days of full subject referrals, in the light of
experience, are unlikely to recur.[16]
Already, Tasmania has passed referral legislation.[17]
The reference is confined to the text of the original enactment of the National
Consumer Credit Protection Bill 2009 and the National Consumer Credit
Protection (Transitional and Consequential Provisions) Bill 2009 by the
Commonwealth Parliament and to express amendments to the National Credit
legislation.[18]
The Queensland Government has introduced the relevant bill into its Parliament
but the bill has not yet been passed.[19]
At the time of writing this Digest none of the other States has passed referral
legislation.
The legislation will be underpinned by the National Credit
Law Agreement between the Commonwealth and the States.[20]
The Minister for Financial Services, Superannuation and
Corporate Law, Chris Bowen has stated:
As the Commonwealth's legislative powers alone are not
sufficient to enact a nationally comprehensive consumer credit regulatory
framework the States have agreed to refer their powers to the Commonwealth,
under section 51 of the Constitution, by passing relevant referral legislation
in their respective Parliaments …
In response to state concerns raised in December last year,
the Commonwealth and State Governments agreed to modify the terms of the
amendment power in the Referral Bills (the Bills to be enacted by the States to
refer power to the Commonwealth) to allow certain subject matters (such as
State taxation) to be excluded from the scope of the amendment power.
[This will] enable an effective reference of State power to
be made either with or without exclusions to that power.
The amendments in this Bill will also allow the States to
refer their regulatory powers in relation to consumer credit by ‘adopting’ the
Commonwealth's legislation and referring an amendment power. This will
ensure the constitutional soundness of the referral of consumer credit powers.[21]
The reference in the Minister’s media release to ‘state
concerns’ is a direct reflection of those issues already discussed under the
heading ‘Referral of power by the states’ above.
At the time of writing this Digest, the Bill had not been
referred to any Senate committee for inquiry.
According to the Explanatory Memorandum, the measures in the
Bill will not have a financial impact.[22]
Items 1 and 2 repeal
the definitions of ‘initial National Credit Act’ and ‘initial
Transitional Act’ respectively. The reason for the repeal is that the
Bill will insert a new definition of ‘relevant version of this Act’ and
‘relevant version of the Transitional Act’.
Section 18 of the National Credit Act provides the
constitutional basis for that Act and the National Consumer Credit
Protection (Transitional and Consequential Provisions) Act 2009.[23]
Currently section 18 is limited to referrals only by the States. Items 3–5 amend section 18 so that the application of the Acts is based on either a
reference or adoption by the referring States under section 51(xxxvii) of the
Constitution.
Item 6 repeals and substitutes proposed
subsections 19(1) and 19(2) to provide for an expanded meaning of ‘referring
State’. The Explanatory Memorandum states:
As a result of the agreed changes to the Referral Bill it is
necessary to extend the definition of a ‘referring State’ in the [National] Credit
Act to accommodate those States which intend to use a Referral Bill excluding
those limited subject matters; and to enable a State to adopt the National
Credit legislation and refer an agreed amendment power.[24]
Proposed subsection 19(1) provides that a State is a referring
State if, for the purposes of paragraph 51(xxxvii) of the Constitution,
the Parliament of the State has adopted the National Credit legislation and has
referred an amendment power to the National Credit legislation.
Proposed subsection 19(2) further provides that a
State is a referring State even if the State’s referral law
provides that:
- the reference to the Commonwealth Parliament is to terminate in
particular circumstances, or
- the adoption of the National Credit legislation by that State is
to terminate in particular circumstances.
Under proposed paragraphs 19(2)(c)(i)–(iv), the
reference to the Commonwealth Parliament excludes the following matters:
- the matter of making provision with respect to the imposition or
payment of State taxes, duties, charges or other imposts
- the matter of making provision with respect to the general system
for the recording of estates or interests in land and related information
- the matter of providing for the priority of interests in real
property, or
- the matter of making a law that excludes or limits the operation
of a State law, to the extent that the State law makes provision with respect
to the creation, holding, transfer, assignment, disposal or forfeiture of a
State statutory right.
Item 9 repeals and substitutes subsection 19(5). Proposed
subsection 19(5) sets out the circumstances in which a State ceases to be a referring State where a reference to the Commonwealth Parliament
terminates, or where the adoption of the National Credit legislation terminates.
Items 15, 16 and 19 insert new definitions into
existing subsection 19(8) to make reference to ‘relevant versions of this Act’
which will accommodate references of State power with or without the exclusions
allowed by proposed subsection 19(2).
Members, Senators and
Parliamentary staff can obtain further information from the Parliamentary
Library on (02) 6277 2434.
Paula Pyburne
23 February 2010
Bills Digest Service
Parliamentary Library
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