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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