House of Representatives

Explanatory Memorandum

(Circulated by the authority of the Minister for Human Services, Minister for Financial Services, Superannuation and Corporate Law, the Hon Chris Bowen MP)

Glossary

The following abbreviations and acronyms are used throughout this explanatory memorandum.

General outline and financial impact

Outline

The National Consumer Credit Protection Amendment Bill 2010 (Amendment Bill) makes amendments to the National Consumer Credit Protection Act 2009 (Credit Act). The Credit Act establishes a new national credit protection regime based in part on referrals of power from the States.

Tasmania has referred power in the Credit (Commonwealth Powers) Act 2009 which commenced on 17 November 2009. Some other States have requested a variation to the scope of the amendment power as set out in the Tasmanian Act. They have also requested that the national credit protection regime provide for the States to adopt, under paragraph 51(xxxvii) of the Constitution, the National Consumer Credit Protection Act 2009 and National Consumer Credit Protection (Transitional and Consequential Provisions) Act 2009 (National Credit legislation) at the same time as they refer the amendment power.

To accommodate this request, it is necessary to treat as a 'referring State' for the purposes of the Credit Act, a State which refers with the inclusion of 'carve out' provisions to the amendment power in the Proposed State Credit (Commonwealth Powers) Act (Referral Bill); and a State which 'adopts', under paragraph 51(xxxvii) of the Constitution, the National Credit legislation and refers an agreed amendment power.

These amendments to the Credit Act will ensure that the Credit Act remains fully effective.

Date of effect: The Amendment Bill commences on the day the Bill receives the Royal Assent.

Proposal announced: The proposal to transfer responsibility for regulating consumer credit to the Commonwealth was announced by the Council of Australian Governments (COAG) on 26 March, 3 July and 2 October 2008.

Financial impact: The measures within this Amendment Bill will not have a financial impact.

Compliance cost impact: The measures within the Amendment Bill will not have a compliance cost impact.

Summary of regulation impact statement

Regulation impact on business

Impact: A regulation impact statement was prepared for the National Credit legislation as a package which is set out in the explanatory memorandum to the Credit Act.

Chapter 1 - Meaning of referring State

Outline of chapter

1.1 The Amendment Bill makes amendments to the Credit Act to recognise certain variations to the scope of the amendment power which some States wish to make in their Referral Bills; and to enable a State to adopt the National Credit legislation and refer an agreed amendment power. These amendments will enable effective referrals of State power to be made either with or without any such variation. The scope and effectiveness of the national credit protection regime will neither be affected by any such variation nor by whether States refer power or adopt the National Credit legislation.

Context of amendments

1.2 The National Credit legislation gives effect to a new national consumer credit regime.

1.3 The new regime:

•

gives effect to the COAG agreements of 26 March 2008 and 3 July 2008 to transfer responsibility for regulation of consumer credit to the Commonwealth; and

•

implements the first phase of the two-phase Implementation Plan endorsed by COAG on 2 October 2008.

1.4 The Commonwealth Government's legislative powers are not sufficient to enact a nationally comprehensive regulatory framework for consumer credit, in the absence of a referral of powers from the States under paragraph 51(xxxvii) of the Australian Constitution.

1.5 Paragraph 51(xxxvii) of the Australian Constitution gives the Commonwealth Parliament power to make laws with respect to matters referred to it by the Parliament or Parliaments of any State or States. Paragraph 51(xxxvii) also enables a State, as an alternative to referral, to adopt a Commonwealth law based on a referral given by another State. A Commonwealth law so adopted by a State remains a Commonwealth law.

1.6 The referral of State powers for the regulation of credit matters is supported by the intergovernmental agreement entitled the National Credit Law Agreement 2009 (IGA), which provides a political compact amongst the Commonwealth, State and Territory governments. The IGA has been signed by the Commonwealth, State and Territory Governments.

1.7 The Commonwealth and certain State Governments have agreed to:

•

the inclusion of 'carve out' provisions to the amendment power in the Referral Bill, expressly to exclude limited subject matters such as state taxes, duties, charges or other imposts from the amendment power to be referred by those States; and

•

to include provisions which would treat as a referring State, for the purposes of the Credit Act, a State which adopted, under paragraph 51(xxxvii) of the Constitution, the National Credit legislation and referred an agreed amendment power.

1.8 As a result of the agreed changes to the Referral Bill it is necessary to extend the definition of a 'referring State' in the 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.

Summary of new law

1.9 The Amendment Bill amends the meaning of the term 'referring State' in the Credit Act to include States that enact a reference to the Commonwealth that expressly excludes certain areas of State legislative power. One State has already enacted the Referral Bill without any exclusions. To ensure this reference remains effective and at the same time accommodates those States that seek to refer a power subject to certain limited exclusions, an amendment is required to the definition of the term 'referring State'. Furthermore, the Amendment Bill amends the term 'referring State' to accommodate those States which intend to adopt the National Credit legislation.

1.10 The Amendment Bill also inserts related terms to ensure an effective reference of State powers, subject to any such limited exclusions, and also makes minor consequential amendments to related provisions in the Credit Act.

Detailed explanation of new law

Revised definition of 'referring State'

1.11 The Amendment Bill makes amendments to the Credit Act to broaden the scope of the term 'referring State', which will enable the States to choose one of two approaches to effectuate a referral of power to the Commonwealth.

1.12 A State is a 'referring State' if, under paragraph 51(xxxvii) of the Constitution, the State has referred to the Commonwealth Parliament the power to make the National Credit legislation and a power to make express amendments to the National Credit legislation. [Schedule 1, paragraph 3(1)(a)]

1.13 A State is also a 'referring State' if, under s 51(xxxvii) of the Constitution, the State has adopted the National Credit legislation and has referred an express amendment power to the National Credit legislation. [Schedule 1, paragraph 6(1)(b)]

1.14 A State remains a 'referring State' if the State's Referral Act provides that the referral or adoption is to terminate in particular circumstances; or the reference of the express amendment power to the National Credit legislation to the Commonwealth Parliament does not include the following excluded matters:

•

the matter of making provision with respect to the imposition or payment of State taxes, duties, charges or other imposts, however described; or

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the matter of making provision with respect to the general system for the recording of estates or interests in land and related information; or

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the matter of providing for the priority of interests in real property; or

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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.

1.15 The amendments to section 19 continue to recognise that a State is still a referring State if its Referral Act provides that the reference to the Commonwealth Parliament has effect only:

•

if and to the extent that the matter is not included in the legislative powers of the Commonwealth Parliament (otherwise than by a reference under paragraph 51(xxxvii) of the Constitution); or

•

if and to the extent that the matter is included in the legislative powers of the Parliament of the State.

1.16 This was formerly provided for in subsection 19(1) of the Credit Act, and will now be set out in subsection 19(2). [Schedule 1, subitem 6(2)]

Related definitions

1.17 Given the changes to the term 'referring State', technical and minor amendments to related definitions are also necessary.

1.18 The Amendment Bill amends the terms 'initial National Credit Act' and 'initial Transitional Act', currently defined in subsection 5(1) of the Credit Act to 'relevant version of this Act' and 'relevant version of the Transitional Act' [Schedule 1, items 1, 2, 7, 12 and 14]. Since one of the purposes of the Amendment Bill is to accommodate references of State power with, or without, certain limited exclusions to the amendment power in the Referral Bill, the definition of 'relevant version of this Act' has been inserted. [Schedule 1, items 15, 16 and 19]

1.19 As a result of the above amendments, a new definition of 'referral law' has also been included. [Schedule 1, item 13]

1.20 A consequential amendment is made to the constitutional basis and application of the Credit Act and the National Consumer Credit Protection (Transitional and Consequential Provisions) Act 2009 (Transitional Act) by ensuring it is based on a reference or an adoption by the Parliaments of the referring States under paragraph 51(xxxvii) of the Constitution. [Schedule 1, items 3 to 5]

1.21 To correct a drafting error, a minor amendment is made to the provision dealing with the reference covering amendments of the Credit or Transitional Act. [Schedule 1, items 8 and 11]

Effect of terminating reference or adoption of relevant versions

1.22 A State ceases to be a referring State if:

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the State reference of the National Credit legislation to the Commonwealth Parliament terminates; or

•

where the State has adopted the National Credit legislation, the adoption of the National Credit legislation terminates.

[Schedule 1, item 9]

Definitions about excluded subject matters

1.23 To ensure certainty in the scope of the excluded subject matters in the Referral Bill the Amendment Bill has also added definitions of:

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forfeiture;

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State law; and

•

State statutory right.

[Schedule 1, items 10, 17 and 18]

1.24 These new terms are integral to the operation of the excluded subject matters in the Referral Bill. For example: the term 'State statutory right' is broadly defined to cover a right, entitlement or authority that is granted by or made under a State Act such as water rights, but does not include a right, entitlement or authority that relates to credit as covered in the definition of 'referred credit matter' in section 20 of the Credit Act. [Schedule 1, item 18]