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New Australian Consumer Law: national unfair contracts law
Assistant Treasurer Chris Bowen has announced that the national consumer protection law which was agreed between the Commonwealth and the states last year, will be fast tracked with a bill to be introduced by June 2009 and commencement on 1 January 2010.

Proposals for the law are outlined in a consultation paper (An Australian Consumer Law: Fair markets — Confident consumers). Submissions on the Australian Consumer Law are due by the 17th March 2009.

The consultation paper follows recommendations from a Productivity Commission review that there be a new consumer policy framework, comprising a single national consumer law and streamlined enforcement arrangements.

The reforms have three key elements:

• the development of a consumer law to be applied both nationally and in each State and Territory, which is based on the existing consumer protection provisions of the Trade Practices Act 1974, and which includes a new national provision regulating unfair contract terms, new enforcement powers and, where agreed, changes based on best practice in state and territory laws;
• the implementation of a new national product safety regulatory and enforcement framework, as part of the national consumer law; and
• the development of enhanced enforcement cooperation and information sharing mechanisms between national and state and territory regulatory agencies.

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Increase in disputes received by Financial Ombudsman Service
The Financial Ombudsman Service reports that it has seen a significant increase in the number of new disputes received. It experienced an average 45.4% rise across all divisions in the six months to 31 December 2008, compared with the same period in 2007. This reflected a substantial 85.5% rise in new disputes within Investments, Life Insurance & Superannuation, a 33% rise in General Insurance disputes and 17.8% in Banking & Finance.

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Bank account switching
On 1 November 2008, a new Account Switching Package came into effect with banks, credit unions and building societies now offering full listing and switching services to customers.

To assist customers who want to switch, financial institutions are now obliged to provide customers with a list of all their regular direct debits and credit from the last 13 months to help them re-establish those payments on the new account.

Customers can also call the relevant Ombudsman or ASIC's switching hotline on 1300 300 630 for advice .

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Mortgage duty update
Currently Victoria, Tasmania, ACT, NT, Queensland and Western Australia have no mortgage duty.

South Australia will abolish mortgage duty on 1 July 2009.

In New South Wales, mortgage duty has already been abolished on owner occupied housing and investment housing. But the abolition of the remaining mortgage duty has been deferred until 1 July 2012.

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New rules for Queensland mortgagee sales
The Queensland Property Law (Mortgagor Protection) Amendment Act 2008 has amended section 85 of the Property Law Act to require that, unless they have a reasonable excuse, mortgagees or receivers selling Queensland property secured by consumer credit mortgages must:

• adequately advertise the sale; and
• obtain reliable evidence of the property's value; and
• maintain the property, including by undertaking any reasonable repairs; and
• sell the property at auction unless it is appropriate to sell it in another way; and
• do anything else prescribed by regulation (there is nothing prescribed at this stage).

Failure to comply with the above can result in a maximum penalty of $20,000.

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ASIC review of financial services EDR schemes
ASIC has released Consultation Paper 102: Dispute Resolution – update of RG 139 & RG 165 proposing improvements to the way financial services businesses resolve disputes with consumers, including harmonisation of the different schemes.

A key proposal of ASIC’s is to replace monetary limits with a cap on compensation that can be awarded by an external dispute resolution scheme approved by ASIC (EDR scheme) and to increase the compensation amount to $280,000.

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Responsible Lending Practices: Consumer Credit Cards
The Ministerial Council on Consumer Affairs has released a consultation Regulatory Impact Statement on Responsible Lending Practices in Relation to Consumer Credit Cards (pdf).
The Paper discusses options to assist consumer choice of card products and protect consumers from lending practices which provide continuing credit at levels which cannot be repaid without substantial hardship.

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AML and finance brokers
AUSTRAC has published an information sheet on its interpretation of the AML obligations of finance brokers.

Comments include:
Finance brokers who are holders of an Australian financial services (AFS) licence and only provide the designated service specified in item 54 of table 1 in section 6 of the AML/CTF Act, will have suspicious matter reporting (SMR) obligations from 12 December 2008.
Finance brokers who provide one or more other designated services and are not merely acting as agents of another reporting entity, will be obliged to report suspicious matters to AUSTRAC when the relevant provisions come into effect.

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First Home Saver Accounts: training requirements for financial product advisers
ASIC has released an update to RG 146 Licensing: Training of financial product advisers (pdf) to include new requirements for people who give advice about First Home Saver Accounts (FHSA's).

ASIC has applied the Tier 2 level to courses and individual assessments that cover First Home Saver Account (FHSA) deposit accounts, i.e. FHSAs that are an account issued by an authorised deposit-taking institution (ADI), such as a bank, building society or credit union.

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Privacy Law Reform
The Australian Law Reform Commission has released its Report "For Your Information: Australian Privacy Law and Practice".

The 3 volume report covers most areas of privacy law and makes 295 recommendations for reform, starting with the recommendation that the Privacy Act 1988 be redrafted and restructured to achieve significantly greater consistency, clarity and simplicity.

The ALRC’s national consultation exercise identified concern relating to the loss of privacy as one of the major factors considered by consumers in their dealings with businesses. People are concerned that personal information can be exchanged, bought or sold for secondary use without their knowledge or consent. They are concerned about identity fraud, use of personal information on the internet, businesses sending personal information overseas for processing and the use of personal information for marketing.

By sector, the finance sector continues to be the most frequently complained about industry.

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Queensland consumer credit interest cap commenced on 31 July
The Consumer Credit (Queensland) Special Provisions Regulation 2008 commenced on 31 July 2008.

Any Consumer Credit Code regulated loans made in Queensland (or made interstate to Queensland residents) after that date are subject to a maximum annual percentage rate of 48 per cent.

The cap also applies to existing contracts if they are changed after 31 July 2008.

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Transfer of consumer credit regulation to Commonwealth
On 3 July the Commonwealth Government reached agreement with the States and Territories at the Council of Australian Governments (COAG) meeting in Sydney, to assume responsibility for regulation of all consumer credit.

What is still unknown is whether the existing Consumer Credit Code will be adopted "as is" by the Commonwealth or whether new laws will be drafted.

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Mortgage duty reduction schedule update

Currently Victoria, Tasmania, ACT and NT have no mortgage duty.

• Queensland and Western Australia will abolish mortgage duty on 1 July 2008.

• In New South Wales, mortgage Duty in respect of investment housing will be abolished from 1 July 2008, followed by the complete abolition of mortgage duty from 1 July 2009 (brought forward from 1 January 2011). NSW Mortgage Duty for the purposes of owner occupied housing was previously abolished.
  

• South Australia will reduce the rate of mortgage duty from 1 July 2008 to 15 cents per $100 and will abolish the duty on 1 July 2009.
  

In states where mortgage duty is payable, concessions may apply. Talk to your local Network Law firm for an estimate of duty payable.

Currently each state has special provisions for calculating the duty payable on mortgages or mortgage packages that secure property in more than one jurisdiction. In each state, mortgage duty is only payable on a proportion of the secured advances.

Labels: mortgage duty Australia

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Green Paper on Financial Services and Credit Reform

Senator the Hon Nick Sherry, Minister for Superannuation and Corporate Law, has released a Green Paper on Financial Services and Credit Reform.

The Green Paper outlines options for the Commonwealth and states to transfer the remaining financial services regulation from the State level. Under the plan, financial services, including mortgages, mortgage brokers, margin lending, non-bank lending and trustee companies, will move to the Federal level. The Green Paper also seeks input on the regulation of other credit products, such as credit cards and personal loans, as well as debentures and property spruikers.

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Financial Claims Scheme to protect depositors

The Treasurer has announced the Government's intention to introduce legislation to establish a Financial Claims Scheme (FCS)to assist depositors and policyholders in the event that an authorised deposit‑taking institution (ADI) or general insurer fails. Wayne Swan's Ministerial Statement

In light of the potential for delays to cause real hardship, and to further assist the management of a failing institution, the FCS will allow customers to quickly recover money in deposit accounts. Customers will be able to recover monies up to a specified cap (up to a limit per person of $20,000), with the remainder likely to be recovered when the ADI is liquidated.

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Queensland mortgage duty abolished
Under the Queensland State Budget announced on 3 June 2008, full abolition of mortgage duty has been brought forward to 1 July 2008 (previously 1 January 2009).

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Instalment Contracts and the Uniform Consumer Credit Code

The Justice Legislation Amendment Bill 2008 (pdf) has been introduced into the Queensland Parliament to amend the Consumer Credit Code (the Code) to ensure particular contracts for the sale of land or goods by instalments (known as ‘terms sale of land contracts’, ‘conditional sale agreements’ and ‘tiny terms contracts’) are credit contracts under the Code.

A terms sale of land (a sale on ‘vendor’s terms’ or a ‘wrap loan’) is a sale of land under which the purchase price is payable by instalments. The vendor lets the purchaser into possession but retains title until conveyance following the final payment.

A conditional sale agreement (or ‘Romalpa agreement’) is a sale of goods under which the purchase price is payable by instalments. The seller delivers the goods to the buyer but retains title until the final payment.

Tiny terms contracts are contracts where the cost of credit is incorporated into the cash price and the transaction is represented as a sale of goods by instalment (without any credit charges).

Technical amendments have also been drafted to capture contracts containing instalment payments that exceed the cash price of the goods, which are related to the contract for the actual sale of the goods.

Once the amendments are passed by the Queensland Parliament, industry will be provided with at least 6 months before they are commenced.

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Consumer credit interest rate cap for Queensland

The Consumer Credit (Queensland) and Other Acts Amendment Bill 2008 (pdf) has been introduced into Queensland Parliament.

The Biil, if passed, will introduce the concept of a maximum annual percentage rate for consumer credit contracts. In calculating the rate, fees and charges will be taken into account.

The Regulations are expected to prescribe a 48 per cent per annum annual percentage rate cap on consumer loans. It is also expected that credit fees or charges arising from the establishment or maintenance of a temporary credit facility by an ADI will not be included in the calculation.

There are currently no caps on interest rates in Queensland and lenders can charge high interest rates, fees and charges on loans. Victoria, New South Wales and the Australian Capital Territory currently have interest rate caps to control the cost of consumer credit.

Credit providers who charge above the legislated maximum will be required to pay back any amount over the cap and will face civil penalties of up to $500,000 for breaching the Consumer Credit Code. They will also face criminal penalties of $10,000 for individuals and $50,000 for corporations.

The cap will apply to new loans made after the Act commences as well as to existing credit contracts which are extended or under which interest rates are increased or new fees or charges imposed after the Act commences.

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