House of Representatives

Explanatory Memorandum

(Circulated by authority of the Assistant Treasurer and Minister for Financial Services, the Hon Dr Daniel Mulino MP)

Glossary

This Explanatory Memorandum uses the following abbreviations and acronyms.

General outline and financial impact

Amendment to the Payment Systems (Regulation) Act 1998

Outline

The Bill amends the PSRA to modernise the payments regulatory framework, ensuring it is fit-for-purpose and can address emerging risks related to payments. In particular, the Bill expands the regulatory coverage of the PSRA by updating key definitions, introducing new ministerial powers to ensure the Government can respond to issues beyond the existing remit of the RBA, and modernising the existing penalty regime in the PSRA.

Date of effect

The Bill commences the day after the end of the period of 3 months beginning on the day this Bill receives Royal Assent.

Proposal announced

The Bill partially implements the Modernising Australia's Payment System measure announced on 7 June 2023.

Financial impact

Nil.

Human rights implications

The Bill does not raise any human rights issues. See Statement of Compatibility with Human Rights — Chapter 2.

Compliance cost impact

The Bill is estimated to have minimal impact on compliance costs.

Chapter 1: Amendment of the Payment Systems (Regulation) Act 1998

Outline of chapter

1.1 The Bill amends the PSRA to modernise the payments regulatory framework, ensuring it is fit-for-purpose and can address emerging risks related to payments.

1.2 In particular, the Bill expands the regulatory coverage of the PSRA by updating key definitions to ensure that new and emerging payment systems and participants in payment systems can be appropriately regulated.

1.3 The Bill also introduces new ministerial powers that can be exercised in the national interest to ensure the Government can respond to payments issues beyond the existing remit of the RBA.

1.4 Finally, the Bill modernises the penalty regime in the PSRA by introducing civil penalty provisions and enforceable undertakings and increasing existing maximum criminal penalties.

Context of amendments

1.5 The RBA is currently the only entity provided with regulatory powers or functions under the PSRA. The RBA's powers under the PSRA in respect of payment systems and their participants include the ability to:

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designate a payment system;

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impose an access regime on participants in a designated payment system;

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determine standards to be complied with by participants in a designated payment system;

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give directions to participants in a designated payment system to ensure compliance with an access regime or standard;

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collect information from participants in a designated payment system; and

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arbitrate disputes between participants in a designated payment system.

1.6 Designation of a payment system does not, of itself, impose any obligations on a participant in the designated payment system. The RBA imposes obligations on participants in a designated payment system through access regimes and standards on public interest grounds.

1.7 The final report of the Review of the Australian Payments System (Payment Systems Review) found that the RBA's existing regulatory powers under the PSRA may not adequately capture the full suite of systems and participants within the payments ecosystem. The Payment Systems Review also noted the limits to the RBA's powers under the public interest test. It recommended the creation of a Ministerial designation power based on the national interest, to ensure emerging payment issues which fall outside of the scope of public interest can be addressed.

1.8 The Payment Systems Review found that the existing definitions of 'payment system' and 'participant' in the PSRA were not sufficient to capture sections of the broader payments system ecosystem as new technologies, business models, participants and even new forms of money transform the old payments system. This limitation could constrain the ability of the RBA to respond to risks to financial stability, efficiency or competition created by new innovations in the payments ecosystem.

1.9 Similarly, the existing designation system was found to lack the flexibility to designate payment systems for reasons beyond financial stability, efficiency and competition. It also limited the ability of other agencies, and the Treasurer, to engage with, and coordinate, payments-related matters.

Comparison of key features of new law and current law

Comparison of new law and current law

Detailed explanation of new law

Reforms to definitions

Adjustments to definition of payment system and funds

1.10 The Bill inserts a new definition of 'payment system' in the PSRA.

1.11 The new definition captures both bilateral and multilateral arrangements and ensures it is technology neutral. [Schedule 1, items 4 and 5, section 7 and subsection 7A(1) of the PSRA]

1.12 Differences between the current and new definitions are outlined in Table 1.2.

Comparison of new definition and current definition

1.13 The current definition of payment system is limited to a funds transfer system that facilitates the circulation of money. This means that systems that facilitate payments in non-monetary digital assets or that provide services which facilitate a payment being made, but do not action the payment itself, cannot be considered a payment system under the PSRA. The amendments ensure such systems are covered by the definition of 'payment system'. The new definition of payment system still includes any instruments or procedures that relate to the system in question. These instruments or procedures are not intended, in themselves, to be considered a payment system.

1.14 The current definition is also potentially limited in its application to arrangements in which there are multiple participants that operate under a common set of rules.

1.15 The updated definition captures 'three party' or 'closed loop' systems as payment systems under the PSRA. A closed loop system refers to a system that consists only of multiple bilateral arrangements between an entity and the payers and payees which use that system. A three party system refers to a situation where one entity – a card scheme – performs both the acquirer and issuer roles. For example, American Express and Diners Club both currently operate through a three party system. Both kinds of system will be captured by the updated definition of 'payment system'.

1.16 The new definition also captures an arrangement or arrangements that enable or provide for the exchange of messages. Messages could include payment instructions, authorisation messages and token keys that form part of the process for payments to be made or received. [Schedule 1, item 5, subsection 7A(1) of the PSRA]

1.17 For the purposes of the new definitions of 'payment system' and 'participant' (see below), a payment may be made under or pursuant to a system (the target system) even if the actual payment or transfer is caused by or processed through a different system. 'System' is defined to mean an arrangement or series of arrangements. [Schedule 1, item 5, section 7 and subsections 7A(3) and (4) of the PSRA]

1.18 For example, under a BNPL arrangement the BNPL provider orchestrates a payment from the customer to the merchant. To do this, the BNPL provider immediately pays the merchant in full, while the customer pays the BNPL provider in instalments over time. The BNPL provider may pay the merchant directly from their bank account and the customer may pay the BNPL provider with their debit card. The actual transfers of funds may occur via the Bulk Electronic Clearing System (for the account-to-account payment from the BNPL provider to the merchant) and the relevant debit card scheme (for the debit card payments from the customer to the BNPL provider), and not directly via the BNPL provider. Despite the different avenues for and timing of the payments, these payments will be considered to have been made under or pursuant to the BNPL system.

1.19 The Bill also introduces a definition for the term 'funds'. 'Funds' is an umbrella term that includes but is not limited to money and digital units of value (or unit of value) including digital currency (within the meaning of the A New Tax System (Goods and Services) Tax Act 1999). Digital currency is not the only digital unit of value captured by the new funds definition. A digital unit of value is a broader concept and intended to include stablecoins. [Schedule 1, item 2, section 7 of the PSRA]

Adjustments to definition of participant

1.20 The PSRA provides for the exercise of regulatory powers by the RBA in relation to a designated payment system. These powers allow for the making of access regimes and standards which apply to participants in the payment system.

1.21 The Bill repeals the current definition of 'participant' and introduces a new definition to capture all entities that play a role in the payments value chain, including entities that have a role in facilitating or enabling payments that are made through a payment system. [Schedule 1, items 3 and 5, section 7 and subsection 7A(2) of the PSRA]

1.22 Differences between the current and new definitions are outlined in Table 1.3.

Comparison of new definition and current definition

1.23 The new definition ensures all entities involved in the payments value chain are captured including entities with or without a direct relationship to a payment system. One example is digital wallet services which facilitate payments by storing digital representations of payment cards. The amended definition reflects that some entities acting as intermediaries between a person and one or multiple payment systems play an important role in facilitating or enabling payments from one party to another.

1.24 The new definition of participant would extend to entities providing BNPL products, digital wallet passthrough services (such as ApplePay and Google Wallet), cash distribution services, and services that facilitate payment in crypto assets (such as payments stablecoins) where such entities provide services that facilitate a range of activities including the making of payments or transfers of funds, that enable the participation of consumers in payment systems (such as Visa or Mastercard schemes).

1.25 The new definition would also extend to services that facilitate or enable the exchange of messages, which could include payment instructions, authorisation messages and token keys, that form part of the process for payers to make or payees to receive payments.

1.26 The new definition is not intended to capture merchants that sell goods and services unless they are a member of a payment system or provide payment services in their own right. It is not intended that stand-alone retailers will be captured.

1.27 Entities that facilitate participation in a payment system are captured in the new definition. While 'participant' has a new definition in the Bill, as explained above, the words 'participate' and 'participation' are used throughout the Bill and the PSRA and are not defined. They are intended to take on their ordinary meaning. The new definition replicates the technology neutral framing of the current definition to capture new services that emerge with a role in the payment chain.

Reforms to the regulation of payment systems

The role of the Minister

Power to designate payment systems

1.28 The Bill provides that the Minister may designate a payment system as a special designated payment system if the Minister considers that doing so is in the national interest. As the designation will be administrative in character, and will not, in itself, impose binding legal requirements on entities, any designation will be a notifiable instrument, which is required to be made publicly available on the Federal Register of Legislation. [Schedule 1, items 12 and 29, section 7 (definition of 'access regime') and subsection 11B(1) of the PSRA]

1.29 When determining if a particular action is in the national interest, the Minister may have regard to the same matters the RBA would be required to regard when considering the public interest. However, to be satisfied that a particular action is in the national interest, the Minister must identify an additional matter or matters the RBA would not be required to regard. The Minister must consider the additional matter or matters materially relevant to the national interest. This means that the public interest factors by themselves would not be sufficient to justify a decision to designate a payment system on national interest grounds. In light of this, the Minister must identify at least one additional materially relevant matter before such a decision could be made. [Schedule 1, items 14 and 19, sections 7 and 8A of the PSRA]

1.30 Including a ministerial power to designate payment systems when it is in the national interest will allow the Minister to direct a regulator to address issues that are outside the scope of the RBA's current powers under the PSRA. It is appropriate the Minister be the decision maker in this instance as the Minister can make timely decisions on urgent issues and be privy, for example, to broader national security risks.

1.31 The amendments introduce the concept of the 'national interest' to the PSRA. Consistent with the approach taken in other similar legislative frameworks, including the Foreign Acquisitions and Takeovers Act 1975, the legislation does not provide criteria the Minister may consider when determining whether an action is in the national interest. However, it is envisaged that when taking an action in the national interest, the Minister may have regard to such factors as:

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national security;

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consumer protection;

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data-related issues;

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innovation;

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cyber security;

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anti-money laundering and counter-terrorism financing;

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crisis management; and

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accessibility.

1.32 Before designating a special designated payment system, the Minister must consult with the RBA and each special regulator on the proposed designation. [Schedule 1, item 29, paragraph 11B(3)(a) of the PSRA]

1.33 Additionally, the Minister must consider whether there are alternatives to the designation available under the PSRA or another Act and the outcomes of consultation with the RBA and any special regulator. The Minister may also consider any other matters the Minister considers relevant. These conditions provide appropriate safeguards around the use of the Minister's new power to designate payment systems to ensure that the power is exercised appropriately. [Schedule 1, item 29, paragraph 11B(3)(b) of the PSRA]

1.34 The Minister may revoke the designation if the Minister considers that the designation is no longer necessary or appropriate. [Schedule 1, item 29, subsection 11B(4) of the PSRA]

1.35 If it is in the national interest to do so, the Minister may designate a payment system as a special designated payment system even if the RBA had previously designated it as a payment system on public interest grounds. The RBA may also designate a payment system that the Minister had previously designated a special designated payment system. As a result, there may be circumstances where a payment system will simultaneously be a designated payment system and a special designated payment system. [Schedule 1, items 10, 27 and 29, subsections 6(3), 11(1A) and 11B(2) of the PSRA]

1.36 Prior to designating a payment system in the public interest that is already a special designated payment system, the RBA must consult each nominated special regulator. Once the designation is made the RBA must consult each nominated special regulator prior to exercising certain powers in relation to the payment system. The powers of the RBA that are subject to this latter consultation requirement include:

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the power to impose an access regime on participants in a designated payment system;

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the power to vary or revoke an access regime;

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the power to determine standards to be complied with by participants in a designated payment system;

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the power to vary or revoke a standard;

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the power to give a direction to a participant in a designated payment system; and

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the power to vary or revoke a direction. [Schedule 1, item 28, section 11A of the PSRA]

Nomination of regulators

1.37 The amendments empower the Minister to nominate special regulators in relation to special designated payment systems and to give directions in relation to the special regulator's performance of functions or exercise of powers under the PSRA. A nomination will be a legislative instrument. [Schedule 1, items 21 and 25, subsections 10(1A) and 10(2) of the PSRA]

1.38 A special regulator is defined as the RBA or an entity that the regulations prescribed as a special regulator. An entity must only be prescribed as a special regulator if the entity is a Commonwealth entity or a Commonwealth company (within the meaning of the Public Governance, Performance and Accountability Act 2013). [Schedule 1, item 29, section 11C of the PSRA]

1.39 It is likely that the RBA will be the most suitable special regulator to be nominated in relation to a special designated payment system in most circumstances. This is because of the RBA's existing familiarity with the PSRA framework and its understanding of payments systems and the payments industry. Other prescribed special regulators are likely to include other Treasury portfolio entities such as ASIC, APRA and the ACCC.

1.40 The Minister may also prescribe special regulators which are Commonwealth entities or Commonwealth companies outside of the Treasury portfolio, such as AUSTRAC. This ensures that the payments regulatory framework can address emerging risks and technologies in the payments ecosystem through the appointment of the most appropriate regulator for the circumstances. [Schedule 1, items 16 and 29, sections 7 and 11C of the PSRA]

1.41 The Minister may nominate more than one special regulator in relation to a special designated payment system where the Minister considers that it would be in the national interest to do so. [Schedule 1, item 29, subsection 11D(1) of the PSRA]

1.42 The Minister must consult with the special regulator and consider the outcome of this consultation before nominating a special regulator. [Schedule 1, item 29, paragraph 11D(4)(a) and subparagraph 11D(4)(d)(i)]

1.43 If the Minister is not the responsible Minister for the nominated special regulator, the Minister must obtain written consent from the responsible Minister prior to nominating. [Schedule 1, item 29, paragraph 11D(4)(b) of the PSRA]

1.44 In addition to consulting with the proposed nominated special regulator, the Minister must also be satisfied that the nomination is consistent with the functions of the special regulator under the PSRA or any other Act and consider any other relevant matters. Relevant matters could include whether the nominated special regulator has the appropriate expertise, knowledge, resources and funding to carry out any functions, and the role of other regulators that may be relevant to the special designated payment system. The Minister may also consider if the nomination would restrict the nominated special regulator's business, adversely impact any perceptions of the regulator's independence or restrict their ability to meet international obligations as relevant. [Schedule 1, item 29, subsection 11D(4) of the PSRA]

1.45 Once nominated in relation to a special designated system, a special regulator may perform a function or exercise a power of a nominated special regulator under the PSRA in relation to that special designated payment system. This means a nominated special regulator may impose an access regime, make standards, arbitrate disputes, and give directions to participants in relation to a special designated system. The amendments update the overview of the main regulatory provisions in Part 3 of the PSRA to reflect this change. [Schedule 1, items 14, 22, 23 and 29, section 7 and subsections 10(2) and 11D(2) of the PSRA]

1.46 The special regulator is a nominated special regulator either for the period specified in the nomination or, if no period is specified, until the nomination is revoked. The Minister may revoke a nomination if, at the time of the revocation, the Minister considers that the nomination is no longer necessary or appropriate. [Schedule 1, item 29, subsections 11D(3) and 11D(5) of the PSRA]

Ministerial directions

1.47 The Minister may, by legislative instrument, give directions to a nominated special regulator in relation to the performance of its functions or the exercise of its powers under the PSRA, if the Minister considers that giving a direction is in the national interest. [Schedule 1, items 14 and 29, section 7 and subsections 11F(1) and (4) in the PSRA]

1.48 The Minister may give a 'matters direction' with specified matters to be considered by the nominated special regulator before performing or exercising a power or function. These matters will likely include the national interest factors considered by the Minister. [Schedule 1, items 14 and 29, section 7 and subsection 11F(1) of the PSRA]

1.49 The Minister may also give a 'purposes direction' specifying purposes for which a function or power must or must not be performed or exercised. If the Minister gives a purposes direction in relation to a function or power, the Minister must give or have given the nominated special regulator a matters direction in relation to that function or power before or at the same time as the purposes direction. [Schedule 1, items 16 and 29, section 7 and subsections 11F(1) and (2) of the PSRA]

1.50 A ministerial direction may relate to all functions and powers or only to a specified function or power or specified functions and powers. [Schedule 1, item 29, subsection 11F(3) of the PSRA]

1.51 A ministerial direction may specify matters or purposes that relate to a particular special designated payment system but must not specify matters or purposes that relate to a particular participant in a special designated payment system. [Schedule 1, item 29, subsection 11F(7)of the PSRA]

1.52 Additionally, ministerial directions to a nominated special regulator may not be given in regard to the performance of its functions or the exercise of its powers under the Regulatory Powers Act as it applies in relation to the PSRA, a function or power to delegate, a function or power to request information from participants, or a function or power to accept and enforce undertakings. [Schedule 1, item 29, subsection 11F(6) of the PSRA]

1.53 A direction from the Minister must not require the nominated special regulator to impose, vary or repeal a particular provision of an access regime; determine, vary or revoke a particular standard; or give, vary or revoke a particular direction. These limits on Ministerial directions ensure that the nominated special regulator can maintain independence and consistency in their regulatory functions as they relate to specific designated payment systems. [Schedule 1, item 29, subsection 11F(8) of the PSRA]

1.54 Before giving the direction, the Minister must consult the nominated special regulator; consult the RBA (if the RBA is not the nominated special regulator); consider the outcome of this consultation and any other matter the Minister considers relevant; and be satisfied that giving the direction is consistent with the functions of the regulator under the PSRA and any other Act. Additionally, section 17 of the Legislation Act 2003 requires that the Minister must consider whether appropriate consultation has occurred prior to making the instrument.

1.55 Before giving the direction, the Minister may consider any other relevant matter. Matters the Minister may consider relevant to determining whether to give a direction include whether a direction would restrict the nominated special regulator's business, adversely impact any perceptions of the regulator's independence or restrict their ability to meet international obligations as relevant. If the Minister is not the responsible Minister for the nominated special regulator, the Minister must obtain written consent from the responsible Minister prior to making a direction. [Schedule 1, item 29, subsection 11F(5) of the PSRA]

1.56 A direction comes into force on the day it is given, unless another day is specified, and continues in force until it is revoked. The nominated special regulator must comply with the direction. The Minister may revoke the direction if, at the time of revocation, the Minister considers that the direction is no longer necessary or appropriate. [Schedule 1, item 29 subsections 11F(9) and (10) of the PSRA]

1.57 Directions by the Minister are a legislative instrument. However, sections 9 and 11 of the Legislation (Exemptions and Other Matters) Regulation 2015 provide that an instrument that is a direction by a Minister to any person or body is not subject to either disallowance or sunsetting. It is appropriate that directions by the Minister are not subject to disallowance in this instance as directions are designed to ensure that the Minister's intended outcomes are complied with and appropriate outcomes in relation to the designated payment system are achieved. Given the potential serious circumstances in which this power may be exercised, noting any designation or direction must be in the national interest, it is intended that there is executive control over the instrument. As explained above, there are a number of safeguards in place to ensure directions are only made in appropriate circumstances.

Exercise of functions and powers by nominated special regulators

1.58 Once nominated, a nominated special regulator may perform functions or powers that it has under the PSRA in relation to a special designated payment system. [Schedule 1, item 29, subsection 11E(1) of the PSRA]

1.59 However, a nominated special regulator must not perform a function or exercise a power under the PSRA in relation to a special designated payment system unless the Minister has given a matters direction specifying matters that the nominated special regulator must consider when performing the function or exercising the power, and the nominated special regulator has considered those matters. In performing a function or exercising a power in relation to a special designated payment system, a nominated special regulator must comply with any directions the Minister gives to the nominated special regulator. [Schedule 1, item 29, subsections 11E(2) and (4) of the PSRA]

1.60 However, this restriction does not apply to a nominated special regulator's functions or powers under the Regulatory Powers Act, or a function or power to delegate, to require certain information from participants, or to accept or enforce undertakings. [Schedule 1, item 29, subsection 11E(3) of the PSRA]

1.61 The nominated special regulator must consult the RBA before performing a function or exercising a power. Where there are multiple nominated special regulators in relation to a particular special designated payment system, each regulator must consult the other regulators for the system before performing a function or exercising a power. [Schedule 1, item 29, subsection 11E(5) of the PSRA]

Reporting

1.62 A nominated special regulator may be required to provide a report to the Minister. The report may be either on the nominated special regulator's performance of functions and exercise of powers under the PSRA or details as to the regulator's compliance with a direction given to the regulator by the Minister. The nominated regulator must comply with this request.

1.63 In the event that the Minister is not the responsible Minister for the nominated special regulator, the regulator must also provide the responsible Minister with a copy of the report. [Schedule 1, item 29, subsection 11G of the PSRA]

Use and disclosure of information

1.64 The following persons may use or disclose information or documents obtained under, or for the purposes of, the PSRA to a nominated special regulator for the purposes of the PSRA:

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the RBA;

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an officer of the RBA (within the meaning of the RB Act, subject to certain exceptions);

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a person who has obtained information or documents under or for the purposes of this Act due to their employment or engagement (for example, as a consultant); or

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a person prescribed by regulations. [Schedule 1, item 83, subsections 26A(1) and (2) of the PSRA]

1.65 Additionally, the following persons may use or disclose information or documents obtained under or for the purposes of the PSRA to either the RBA or another nominated special regulator in relation to a special designated payment system for the purposes of the PSRA:

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a nominated special regulator;

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the head of such a nominated special regulator;

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a delegate of such a nominated special regulator or of the head of such a nominated special regulator; or

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a person prescribed by the regulations in relation to such a nominated special regulator. [Schedule 1, item 83, subsections 26A(3) and (4) of the PSRA]

1.66 A person is the head of a special regulator (including a special regulator that is a nominated special regulator) if:

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in the case of the RBA, that person is the Governor of the RBA; or

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in the case of an entity prescribed by the regulations as a special regulator, the person prescribed by the regulations as the head of that special regulator. [Schedule 1, items 14 and 17, section 7 of the PSRA]

1.67 A person using or disclosing information and documents in accordance with the above does not commit an offence and is not liable to any other penalty under Commonwealth, State or Territory law as a result of using or disclosing information or documents as described. [Schedule 1, item 83, subsection 26A(5) of the PSRA]

1.68 To qualify for this protection from liability, the use or disclosure of information or documents must only be for the purposes of the PSRA. Additionally, if disclosing information or documents, such disclosure must only be to a nominated special regulator (and will therefore only be relevant where a special payment system has been designated in the national interest). The protection therefore applies to specified persons within the RBA or other nominated special regulator (at subsections 26A(2) and (4) respectively) and in circumstances where there is a purpose under the PSRA for which the information needs to be used or disclosed.

1.69 It is important that the regulation of payment systems can continue to function seamlessly and therefore that information or documents can be used within either the RBA or other nominated special regulator to achieve purposes of the PSRA. In the event that there are multiple special regulators nominated in relation to a special designated payment system, it is necessary to further authorise disclosure between those regulators to achieve the purposes of the PSRA. The exclusion from liability supports the regulator's (or regulators') effective oversight of payments systems and participants and is appropriate considering this operational context.

1.70 For the purposes of subsection 79A(2) of the RB Act, a use or disclosure of documents that is authorised by this section is a use or disclosure for the purposes of the PSRA.

Access Regimes

1.71 The Bill makes a minor amendment to the definition of 'access' to ensure the definition refers to a 'payment system' rather than 'system'. The definition of access regime is also updated to account for the introduction of special regulators. [Schedule 1, items 1 and 12, section 7 of the PSRA]

1.72 The amendments empower the nominated special regulator to impose an access regime by legislative instrument. Item 26 in the table at section 10 of the Legislation (Exemptions and Other Matters) Regulations 2015 provides that instruments made under Subdivision A of Division 3 of Part 3 of the PSRA (which includes the making of access regimes) are not subject to disallowance. Allowing instruments made under these sections to be disallowable may cause significant commercial uncertainty and delay. [Schedule 1, item 33, subsection 12(1A) of the PSRA]

1.73 The RBA may only impose or vary an access regime where it considers doing so is appropriate. Similarly, the amendments allow the nominated special regulator to impose or vary an access regime only where the nominated special regulator considers doing so to be appropriate. [Schedule 1, items 32, 33, 39, 40 and 41, subsections 12(1), 12(1A) and 14(1) of the PSRA]

1.74 When considering if an imposition or variation is appropriate, the RBA must consider if it is in the public interest to do so and may have regard to other matters it considers relevant. When a nominated special regulator (which may be the RBA) is considering whether making or varying an access regime imposed by that nominated special regulator is appropriate, it may have regard to any other matter it considers relevant. If the RBA is acting in its capacity as a nominated special regulator, it does not have to consider the public interest. [Schedule 1, items 33, 34, 35, 36, 39, 40, 41, 42, 43 and 44, subsection 12(1A), subsection 12(2), paragraphs 12(2)(a) and (d), subsection 14(1), paragraphs 14(1)(a) and (d) and subsection 14(5) of the PSRA]

1.75 When imposing an access regime, the RBA or other nominated special regulator may specify participants or classes of participants to whom the access regime does or does not apply or provide that the access regime applies differently in relation to different participants or classes of participants. [Schedule 1, item 37, subsection 12(3) of the PSRA]

1.76 The RBA or other nominated special regulator must provide a notification as soon as practicable after imposing or varying the access regime. If this notification is not provided, it will not affect the validity of the access regime. The use of a no-invalidity clause in this circumstance is appropriate noting this is currently provided for notifications by the RBA. [Schedule 1, items 38 and 44, subsections 12(5) and 14(5) of the PSRA]

1.77 Unless a particular entity is specified, the Bill uses the term 'entity' to refer to the nominated special regulator or RBA interchangeably when discussing when access regimes cease to be in force. [Schedule 1, items 46, 47, 49, 50, 52 and 53, subsection 15(1), paragraphs 15(1)(b) and (c), subsection 15(3), paragraph 15(3)(d) and subsection 15(5) of the PSRA]

1.78 An access regime will cease to be in force if the entity that imposed the access regime revokes the access regime. The revocation can be made either on application of the participants in the designated payment system or on the entity's own initiative. An access regime also ceases to be in force if the payment system itself ceases to exist, or the payment system ceases to be a designated payment system or special designated payment system (as the case may be). [Schedule 1, items 45, 46 and 48, subsection 15(1) and paragraphs 15(1)(b), 15(1)(d) and 15(1)(e) of the PSRA]

1.79 The amendments provide that the RBA or a special nominated regulator may, by legislative instrument, revoke an access regime that it has imposed where it considers it appropriate to do so, having regard to the interests of the current participants in the system, the interests of people who, in the future, may want access to the system, any other matters it considers relevant. [Schedule 1, items 49, 50 and 52, subsection 15(3) and paragraph 15(3)(d) of the PSRA]

1.80 Before revoking an access regime that the RBA imposed, the RBA must also have regard to whether revoking the access regime would be in the public interest. However, if the RBA is acting in its capacity as a nominated special regulator, the public interest test does not apply. [Schedule 1, item 51, paragraph 15(3)(a) of the PSRA]

1.81 If the entity that imposed the access regime revokes the access regime, it must provide notification under section 29 as soon as practicable. [Schedule item 53, subsection 15(5) of the PSRA]

1.82 Anything done by a participant in a designated payment system or special designated payment system under an access regime and in accordance with the access regime is taken to be specified in, and specifically authorised by, the CCA. [Schedule 1, item 55, paragraph 15A(a) of the PSRA]

1.83 If a particular payment system is a designated payment system and special designated payment system and the access regimes imposed by the RBA and a nominated special regulator are inconsistent with each other, the access regime imposed by the RBA does not apply to the extent of the inconsistency. [Schedule 1, item 54, section 15AA of the PSRA]

1.84 In the unlikely event that an access regime imposed by the RBA is partially inconsistent with an access regime imposed by a nominated special regulator, the RBA may choose to publish regulatory guidance for participants. This guidance may include, for example, identification of any provisions which no longer have effect due to the inconsistency between access regimes; explanation of how the RBA interprets the interaction between the two access regimes; and practical guidance for regulated entities on how they should continue to meet their obligations under the access regime imposed by the RBA.

Enforcement of access regimes

1.85 The Bill updates provisions in the PSRA concerning the enforcement of access regimes so that these provisions apply in relation to both designated systems and special designated systems.

1.86 Under the PSRA, a person may ask the RBA to give a direction to a participant to remedy a situation in which the person has been denied access to a designated payment system. The amendments ensure that a person may make an analogous request to the nominated special regulator that imposed an access regime in relation to a special designated payment system. [Schedule 1, item 56, section 16 of the PSRA]

1.87 A person may also apply to the Federal Court for an order directing the participant to comply with an access regime. The amendments provide that where an application of this kind is made the person must notify the entity that imposed the access regime, whether that entity is the RBA or a nominated special regulator, and that entity may be joined as a party to the proceedings for the order. [Schedule 1, items 57 and 58, subsections 17(1), (2) and (2A) of the PSRA]

Standards

1.88 The Bill allows for nominated special regulators in relation to a special designated payment system to, by legislative instrument, determine standards to be complied with by participants in that special designated system. The amendments update headings to reflect this change. A failure to comply with a standard is not an offence but may lead to the nominated special regulator giving a direction to a participant to comply with the standard. [Schedule 1, items 59 to 61, Division 4 of Part 3 (heading), Section 18 (heading), subsection 18(1A) of the PSRA]

1.89 The RBA or the nominated special regulator may specify participants or classes of participants to whom the standard does or does not apply, or may provide that the standard applies differently to specified participants or classes of participants. [Schedule 1, item 61, subsection 18(1B) of the PSRA]

1.90 If the RBA or the nominated special regulator revokes a standard, it must provide notification under section 29 as soon as practicable after the revocation. Item 26 in the table at section 10 of the Legislation (Exemptions and Other Matters) Regulations 2015 provides that instruments made under section 18 of the PSRA are not subject to disallowance. Allowing instruments made under these sections to be disallowable may cause significant commercial uncertainty and delay. [Schedule 1, items 61 and 63, subsections 18(1B) and 18(6) of the PSRA]

1.91 If a particular payment system is a designated and a special designated payment system and is subject to standards imposed by the RBA and nominated special regulator that are inconsistent, the standard imposed by the RBA does not apply to the extent of the inconsistency. [Schedule 1, item 64, section 18AA of the PSRA]

1.92 As with access regimes, in the unlikely event that a standard imposed by the RBA is partially inconsistent with a standard imposed by a nominated special regulator, the RBA may choose to publish regulatory guidance for participants.

1.93 A standard made by the RBA in relation to a designated payment system continues to be in force until it is revoked. However, it may cease to apply (in part or wholly) because it conflicts with a standard made by a nominated special regulator. [Schedule 1, item 62, subsection 18(2) of the PSRA]

Arbitration of disputes

1.94 The amendments expand the scope of the arbitration powers in the PSRA to ensure they can be applied to disputes between a person and 2 or more participants in a special designated payment system. [Schedule 1, items 65, 66 and 67, Division 5 of Part 3 (heading) and paragraphs 19(a)-(b) of the PSRA]

1.95 The RBA may arrange for a dispute to which Division 5 applies, and that includes a designated payment system for which there is an access regime, to be settled by arbitration. The RBA may only do so if the dispute relates to compliance with the access regime. [Schedule 1, items 68 and 69, subsection 20(1) and paragraph 20(1)(c) of the PSRA]

1.96 A nominated special regulator in relation to a special designated payment system may arrange for a dispute relating to an access regime for the special designated payment system to be settled by arbitration in accordance with the PSRA. The nominated special regulator may only do so if it imposed the access regime and the parties to the dispute agree to the nominated special regulator arranging the arbitration. The nominated special regulator may act on its own initiative or in response to a request from one or more of the parties to the dispute in arranging the arbitration. [Schedule 1, item 70, subsection 20(1A) of the PSRA]

1.97 If the case concerns a designated payment system, the Governor of the RBA or a person appointed in writing by the Governor must conduct the arbitration. If the case concerns a special designated system, the head of the nominated special regulator or a person appointed in writing by the head of the nominated special regulator must conduct the arbitration. These functions and powers of the RBA Governor or head of the nominated special regulator cannot be delegated. [Schedule 1, item 71, subsection 20(2) and note to subsection 20(2) of the PSRA]

Directions to participants

1.98 The RBA or other nominated special regulator may give participants directions in accordance with the PSRA. [Schedule 1, item 72, Division 6 of Part 3 (heading) of the PSRA]

1.99 The RBA may give a direction to a participant in a designated payment system if the RBA considers the participant has failed to comply with a standard the RBA has determined or an access regime the RBA has imposed. Similarly, a nominated special regulator in relation to a special designated payment system may give a direction to a participant in the special designated payment system if the nominated special regulator considers the participant has failed to comply with a standard determined by the nominated special regulator, or the participant has failed to comply with an access regime imposed by the nominated special regulator. [Schedule 1, items 73 and 74, subsection 21(1) and 21(1A) of the PSRA]

1.100 The direction from the RBA or the nominated special regulator to a participant must not be inconsistent with any applicable standards and any applicable access regime, regardless of whether the standard was determined, or the access regime was imposed by the entity giving the direction. [Schedule 1, item 77, subsection 21(3) of the PSRA]

1.101 The direction must require the participant to take a specified action or to refrain from specified action, as the RBA or other nominated special regulator considers appropriate having regard to the failure. [Schedule 1, items 75, subsection 21(2) of the PSRA]

1.102 If a payment system is a designated and special designated payment system with directions from the RBA and nominated special regulator that conflict, the RBA's direction does not apply to the extent of the inconsistency. In the unlikely event that a direction from the RBA is partially inconsistent with a direction from a nominated special regulator, the RBA may choose to publish regulatory guidance for participants. [Schedule 1, item 79, section 21A of the PSRA]

1.103 The direction comes into force on the day on which it is given, unless another day is specified, and continues in force until it is revoked. Even if a direction from the RBA is not revoked, the whole or a part of the direction may not apply to the extent that it is inconsistent with a direction from a nominated special regulator. [Schedule 1, items 78, note to subsection 21(8) of the PSRA]

1.104 The RBA may require a participant in a payment system (whether or not it is a designated payment system or a special designated payment system) to give the RBA information relating to the payment system and its participants. The amendments provide that a nominated special regulator in relation to a special designated payment system may require participants in that payment system to provide information relating to the payment system and its participants. [Schedule 1, items 80, 81 and 82, section 26 (heading) and subsections 26(1) and 26(1A) of the PSRA]

1.105 The RBA or a nominated special regulator must take reasonable steps to ensure the participants in the payment system concerned are informed of the imposition of an access regime, the variation of an access regime, the determination of a standard, the variation of a standard, and the revocation of a standard or access regime. [Schedule 1, items 84, 85 and 86, subsections 29(1), (2) and (3) of the PSRA]

1.106 The RBA's delegation powers are highlighted by an amendment to the heading of the section empowering it to delegate its functions. The RBA or Governor may, by written instrument, delegate its functions or powers under the PSRA including its functions or powers as a nominated special regulator, except for the functions and powers relating to the conduct of arbitrations. The RBA's ability to delegate its functions and powers as a nominated special regulator in relation to a special designated payment system is equivalent to its existing ability to delegate functions and powers in relation to a designated payment system. This does not limit the RBA or Governor from delegating powers in accordance with another Act. [Schedule 1, items 87, 88, 89, 90, 91 and 92, section 31 (at the end of the heading) and subsections 31(1), (2), (2A) and (4) of the PSRA]

1.107 A nominated special regulator (other than the RBA), in relation to special designated payment systems may, by written instrument, delegate all or any of their functions or powers under the PSRA to the head of the nominated special regulator or a person prescribed as an eligible delegate in the regulations. [Schedule 1, item 93, subsection 31A(1) of the PSRA]

1.108 In turn, the head of a nominated special regulator (other than the Governor of the RBA), in relation to a special designated payment system may, in writing, delegate all or any of the head's functions or powers under the PSRA to a person prescribed as an eligible delegate in the regulations, except for the functions and powers relating to the conduct of arbitrations. [Schedule 1, item 93, subsections 31A(2) and (3) of the PSRA]

1.109 The specifics of an eligible delegate may vary depending on the special regulator being nominated. It is therefore appropriate for the eligible delegate to be prescribed by written instrument. However, before delegating a function or power to a person, the delegator must consider if the office or position is sufficiently senior for the person to perform the function or exercise the power if the power or function is to be delegated to a person occupying, holding or performing the duties of a specified office or position. Otherwise, the delegator must consider if the person has appropriate qualifications or expertise to perform the function or exercise the power. [Schedule 1, item 93, subsection 31A(4) of the PSRA]

1.110 The delegate must comply with any directions of the delegator when exercising delegated powers. This enables appropriate oversight by the delegator depending on the nature of the function or power being exercised. However, this obligation to comply does not limit any other powers a person has been delegated under other Acts. [Schedule 1, item 93, subsections 31A(5) and (6) of the PSRA]

1.111 The RBA or other nominated special regulator may revoke directions by notice in writing if it considers the directions are no longer necessary or appropriate. [Schedule 1, item 106, subsection 21(7) of the PSRA]

1.112 A participant commits an offence attracting a maximum penalty of 100 penalty units if the participant does, or fails to do, an act and doing or failing to do so results in a contravention of a direction. The moment at which the person contravenes the direction arises when the participant is still a participant in the payment system and the payment system is still a designated or special designated payment system. [Schedule 1, item 106, subsection 21(8) of the PSRA]

Protection from civil liability

1.113 The Bill provides that:

•

the RBA;

•

an officer of the RBA (within the meaning of the RB Act, subject to certain exceptions); or

•

a person prescribed by the regulations;

is not subject to civil liability in respect of an act or omission if the act or omission relates to a designated payment system or a special designated payment system, and is done in good faith in the performance or exercise (or purported performance or exercise) of a function or power under the PSRA, or for the purposes of assisting another person to perform or exercise a function or power under the PSRA. If the act or omission relates to a special designated payment system and contravenes a direction given by the Minister or a delegator, the person must have attempted in good faith to comply with the direction. [Schedule 1, item 119, subsections 30B(1), (2) and (3) of the PSRA]

1.114 Similarly:

•

a nominated special regulator (other than the RBA);

•

the head of such a nominated special regulator;

•

a delegate of such a nominated special regulator, or the head of such a nominated special regulator; or

•

a person prescribed by regulations in relation to such a nominated special regulator;

is not subject to civil liability in respect of an act or omission if the act or omission relates to a special designated payment system, and is done in good faith in the performance or exercise (or purported performance or exercise) of a function or power under the PSRA, or for the purposes of assisting another person to perform or exercise a function or power under the PSRA. If the act or omission contravenes a direction given by the Minister or a delegator, the person must have attempted in good faith to comply with the direction. [Schedule 1, item 119, subsections 30B(3) and (4) of the PSRA]

1.115 These protections do not limit and are not limited by any other provision in the PSRA or any other Commonwealth law that protects any of the above persons from civil liability. It is necessary and appropriate that regulators and their staff and employees are provided immunity from civil liability in circumstances where they have acted or attempted to act in good faith, to ensure the RBA and other nominated special regulators are able to appropriately regulate the scheme. [Schedule 1, item 119, section 30C of the PSRA]

Clarification of the RBA's power to designate payment systems in the public interest

1.116 The amendment clarifies the RBA's power to designate payment systems includes the power to designate payment systems in a class of payment systems. [Schedule 1, item 6, subsection 11(1) of the PSRA]

1.117 Subsections 33(3A) and (3AB) of the Acts Interpretation Act 1901 provide that where an Act confers a power to make an instrument with respect to particular matters, the power shall be construed as including a power to make an instrument with respect or by reference to a particular class or particular classes of those matters.

1.118 The primary effect of this amendment is to explicitly allow the RBA to, for example, designate credit cards as a class of payment system instead of needing to designate each individual credit card payment system.

Enforceable undertakings

1.119 The Bill creates a framework for accepting and enforcing undertakings. [Schedule 1, item 119, section 30A of the PSRA]

1.120 The policy intention is for the RBA to be able to enter into enforceable undertakings with a participant prior to an access regime being imposed under section 12 of the PSRA or a standard being made under section 18 of the PSRA.

1.121 The RBA may accept a written undertaking given by a participant in a payment system (whether or not it is a designated payment system or a special designated payment system) in connection with a matter in relation to which the RBA has a function or power under the PSRA, the regulations or another legislative instrument made under the PSRA. This includes a matter in relation to standards made under section 18 of the PSRA and access regimes imposed under section 12 of the PSRA. [Schedule 1, item 119, subsection 30A(1) of the PSRA]

1.122 If the written undertaking is in connection with a matter in relation to which the RBA has a function or power under the PSRA other than as a nominated special regulator, the RBA may accept the undertaking only if doing so would be consistent with the RBA's payments system policy within the meaning of the RB Act. [Schedule 1, item 119, subsection 30A(2) of the PSRA]

1.123 A nominated special regulator in relation to a special designated payment system may accept a written undertaking given by a participant in that payment system in connection with a matter in relation to which the nominated special regulator has a function or power under the PSRA, the regulations or another legislative instrument made under the PSRA. [Schedule 1, item 119, subsection 30A(3) of the PSRA]

1.124 The participant may withdraw or vary an undertaking at any time, but only with the consent of the RBA or the nominated special regulator. [Schedule 1, item 119, subsection 30A(4) of the PSRA]

1.125 The RBA or the nominated special regulator may apply to the Court for an order if the RBA considers the participant who gave the undertaking has breached any terms of the undertaking. [Schedule 1, item 106A, subsection 30A(5) of the PSRA]

1.126 The Federal Court, Federal Circuit and Family Court of Australia, or the court of a State of Territory that has jurisdiction are the relevant courts an application can be made to. New Part 4 of the PSRA gives a relevant court power to make orders where there is a breach of an enforceable undertaking. [Schedule 1, item 119, subsections 30A(6) and (8) of the PSRA]

1.127 If the Court is satisfied that a participant has breached a term of an undertaking the Court may make:

•

an order directing the participant to comply with the term of the undertaking;

•

an order directing the participant to pay to the Commonwealth an amount up to the amount of any financial benefit that the participant has obtained directly or indirectly and that is reasonably attributable to the breach;

•

any order that the Court considers appropriate directing the participant to compensate any other person who has suffered loss or damage as a result of the breach; or

•

any other order that the Court considers appropriate.

[Schedule 1, item 119, subsection 30A(6) of the PSRA]

1.128 Anything done by the RBA or a nominated special regulator in relation to enforceable undertakings under section 30A, the giving by a participant of a written undertaking, anything done by the participant in accordance with the terms of that written undertaking is taken to be specified in, and specifically authorised by, the CCA. [Schedule 1, item 119, subsection 30A(7) of the PSRA]

1.129 The RBA currently obtains voluntary undertakings in relation to standards determined under section 18 of the PSRA. By creating a framework in the primary law for court enforcement of the terms of an undertaking in the event of a breach, the amendments provide greater certainty for entities that receive services from participants who have entered into an enforceable undertaking.

Criminal and civil penalties

Increases to maximum penalties for certain criminal offences

1.130 The Bill repeals the existing offence provisions for failure to comply with a direction and failure to give the RBA information and replaces them with new provisions covering both criminal and civil penalties. The Bill also updates the numbering and adds minor legislative notes to aid interpretation for new provisions. [Schedule 1, items 102, 103, 104, 105, 106, 107, 108, 109, 110, 111, 112, 113, 114, 115 and 116, subsections 21(6), (7), (8), (9), (10) and (11), subsection 26(1)(note), subsection 26(3), subsection 26(3)(penalty), subsection 26(3)(notes 1, 2, and 3), subsection 26(3A) and (3B), subsection 26(4) subsection 26(4)(note 1 and note 2), and section 30 of the PSRA]

1.131 The Bill inserts definitions for 'civil penalty provision', 'contravene' and the 'Regulatory Powers Act'. The Bill also provides that a person contravening another provision of the PSRA (defined as the conduct provision) commits an offence or is liable to a civil penalty. For the purposes of the PSRA and the Regulatory Powers Act to the extent it relates to the PSRA, a reference to a contravention of an offence provision or a civil penalty provision includes a reference to a contravention of the conduct provision. [Schedule 1, items 100 and 101, sections 7 and 9B of the PSRA]

1.132 The new provisions are substantially the same as the repealed ones, with updates to reflect the introduction of a civil penalty regime. Maximum penalties provide a court with guidance on how to punish criminal or otherwise non-compliant behaviour. They restrict the court's sentencing discretion as the court is unable to order a penalty in excess of the prescribed maximum penalty. The maximum penalty is generally reserved only for the most egregious cases.

1.133 The existing maximum penalty for failure to comply with a direction does not currently reflect the seriousness of that offence. The maximum penalty has been increased to reflect the seriousness of that conduct, and to deter and punish such behaviour as appropriate.

1.134 The increased penalty is consistent with penalties for similar offences in other frameworks. It is appropriate to maintain consistency with other existing penalties for actions of a similar kind and similar seriousness.

1.135 The criminal penalty for failure to give the RBA information (or other offences in the PSRA) has not changed.

Offence where the maximum penalty has been increased

[Schedule 1, item 106, subsections 21(7), (8), (9) and (11) of the PSRA]

Civil penalty regime

1.136 The Bill introduces a civil penalty regime for a number of provisions in the PSRA.

1.137 The inclusion of civil penalty provisions is intended to deter non-compliant behaviour and will reduce the regulator's reliance on criminal prosecutions. The provisions will allow the relevant regulator to take enforcement action that is commensurate with the seriousness of a breach of the PSRA.

1.138 The civil penalty regime has been introduced for the following existing provisions.

New civil penalty provisions

[Schedule 1, items 106 and 112, subsections 21(10) and 26(3B) of the PSRA]

1.139 The civil penalty provisions will be enforced under Part 4 of the Regulatory Powers Act. [Schedule 1, item 116, subsection 30(1) of the PSRA]

1.140 For the purposes of the PSRA, the relevant regulator is the authorised applicant empowered to exercise the powers under Part 4 of the Regulatory Powers Act. In relation to a failure to comply with a direction to participants, the authorised applicant is the entity that gave the direction to which the contravention relates. In relation to a failure to give information, the authorised applicant is the entity that imposed the requirement to give information to which the contravention relates. [Schedule 1, item 116, subsection 30(2) of the PSRA]

1.141 The Federal Court of Australia, the Federal Circuit and Family Court of Australia, and a court of a State or Territory that has jurisdiction are the relevant courts in relation to provisions of the PSRA that are enforceable under Part 4 of the Regulatory Powers Act. Part 4 of the Regulatory Powers Act gives a relevant court power to make orders where there is a contravention of a civil penalty provision. [Schedule 1, item 116, subsection 30(3) of the PSRA]

1.142 Part 4 of the Regulatory Powers Act, as it applies to provisions in the PSRA, extends to external Territories. [Schedule 1, item 116, subsection 30(4) of the PSRA]

1.143 The amendments apply in relation to the commission of an offence or contravention of a civil penalty provision if the conduct constituting the offence or contravention of the provision occurs wholly on or after the commencement of this Part. [Schedule 1, item 118]

Overviews, headings and other minor amendments

1.144 In order to reflect these amendments to the PSRA, the Bill makes minor amendments to the headings and overviews of the relevant Divisions and Subdivisions to reflect the greater range of matters dealt with in those Divisions and Subdivisions. [Schedule 1, items 1, 8, 9, 10, 11, 20, 21, 22, 23, 24, 30 and 31, subparagraphs 6(3)(a) and 6(3)(b)-(e), note to subsection 6(3), section 7, paragraph 7(a), subsection 10(1), subsection 10(1A), subsection 10(2), paragraph 10(2)(a) and paragraphs 10(2)(b)-(d), Division 2 of Part 3 (heading), Division 3 of Part 3 (heading) and Subdivision A of Division 3 of Part 3 (heading)]

1.145 The amendments also include a definition for functions and powers under the PSRA, which includes a function or power under the Regulatory Powers Act as it applies in relation to the PSRA. The Regulatory Powers Act applies in relation to civil penalty provisions under the PSRA – that is, subsections 21(10) and 26(3B). [Schedule 1, item 101, section 9A of the PSRA]

1.146 Definitions for the following new expressions have been added to the definitions section in the PSRA: funds, matters direction, head (of a nominated special regulator), national interest, nominated special regulator, responsible Minister, special designated payment system, special regulator, civil penalty provision, contravene and Regulatory Powers Act. A minor amendment is also made to an expression used to cross reference in the existing definition of public interest. The numbering of the section has been amended accordingly. [Schedule 1, items 2, 11, 14, 15, 16 and 100, section 7 of the PSRA]

1.147 The Bill bolds and italicises the term 'public interest' as it is a defined term. [Schedule 1, item 18, section 8 of the PSRA]

Consequential amendments

1.148 The Bill makes consequential amendments to the ASIC Act, the CCA, the Corporations Act, and the ITAA 1997 to reflect the expanded scope of the payments regulatory framework.

1.149 The Bill amends the definition of 'financial product' in section 12BAA of the ASIC Act.

1.150 Subsection 12BAA(8) of the ASIC Act provides a list of specific things that are not financial products for the purposes of Division 2 of the ASIC Act. This includes a facility that is a designated payment system for the purposes of the PSRA. The Bill amends this provision to provide that a facility that is a designated payment system or a special designated payment system (or both) will not be a financial product for the purposes of that Division where it is declared by regulations not to be a financial product. [Schedule 1, item 122, paragraph 12BAA(8)(e) of the ASIC Act]

1.151 Similarly, the Bill amends the list of specific things that are not financial products for the purposes of Chapter 7 of the Corporations Act. The Bill updates the list in section 765A so that the exclusion covers a facility that is a designated payment system or special designated payment system (or both) for the purposes of the PSRA where it is declared by regulations not to be a financial product. [Schedule 1, item 127, paragraph 765A(1)(j) of the Corporations Act]

1.152 The expanded definition of payment system will allow both the RBA and the Minister to designate payment systems that may appropriately need to be regulated as financial products. Providing the ability for regulations to specify which designated and special designated payment systems are not financial products will provide certainty for existing designated payment systems while allowing consideration to be given to whether any additional payment systems should be similarly exempted.

1.153 The amendments update a number of references in the CCA from 'Reserve Bank Standard' to 'payment system standard' to reflect that standards can now be determined by the RBA or by a nominated special regulator. [Schedule 1, items 123, 124, 125 and 126, section 55A, subparagraph 55B(2)(a)(i) and paragraph 55B(2)(b) of the CCA]

1.154 The Bill also amends the ITAA 1997 to ensure that an authorised deposit-taking institution may be considered a specialist credit card institution, if it has been given authority under the Banking Act 1959 to only carry on banking business that is participation in a designated or special designated payment system. [Schedule 1, item 128, paragraph 820-588(3)(a) of the ITAA 1997]

Commencement, application, and transitional provisions

1.155 The Bill commences on the day after the end of the period of 3 months beginning on the day this Bill receives Royal Assent.

Information and documents

1.156 The information a nominated special regulator may require a participant in a special designated payment system to provide under subsection 26(1A) can be information obtained by a participant in a special designated payment system before, on or after the commencement of Part 2 of Schedule 1 to the Bill. [Schedule 1, item 99(1)]

1.157 The information or documents the RBA or other nominated special regulator may use or disclose under section 26A, on or after the commencement of Part 2 of Schedule 1 to the Bill, can be information or documents obtained before, on or after the commencement of that Part. [Schedule 1, item 99(2)]

Conflicting access regimes, standards and directions

1.158 In the event a particular payment system is both a designated payment system and a special designated payment system– and an access regime imposed by the RBA before, on or after the commencement of Part 2 of Schedule 1 to the Bill is inconsistent with an access regime imposed by a nominated special regulator – the access regime imposed by the RBA does not apply to the extent of that inconsistency. [Schedule 1, item 94(1)]

1.159 In the event a particular payment system is both a designated payment system and a special designated payment system – and a standard determined by the RBA before, on or after the commencement of Part 2 of Schedule 1 to the Bill is inconsistent with a standard determined by a nominated special regulator – the standard determined by the RBA does not apply to the extent of that inconsistency. [Schedule 1, item 94(2)]

1.160 In the event a particular payment system is both a designated payment system and a special designated payment system – and a direction given by the RBA before, on or after the commencement of Part 2 of Schedule 1 to the Bill is inconsistent with a direction given by a nominated special regulator – the direction given by the RBA does not apply to the extent of that inconsistency. [Schedule 1, item 94(3)]

Denials of access

1.161 A person may ask an entity that has imposed an access regime to give a direction to remedy a denial of access to a designated payment system. Such requests can be made in relation to a denial of access that occurred before, on or after the commencement of Part 2 of Schedule 1 to the Bill. [Schedule 1, item 95(1)]

1.162 A request of the kind described above which is made to the RBA before the commencement of Part 2 of Schedule 1 to the Bill, and in relation to which the RBA had not made a decision before commencement of Part 2 of this Schedule, is taken to have been made under the new subsection 16(2) of the PSRA. [Schedule 1, item 95(2)]

Notification of Federal Court applications

1.163 A person who has applied to the Federal Court for an order directing a participant to comply with an access regime must notify the entity that imposed the access regime of the application. This requirement applies to applications to the Federal Court made before, on or after the commencement of Part 2 of Schedule 1 to the Bill – unless before the commencement of this Part 2 of this Schedule, the person notified the RBA of the application under subsection 17(2). [Schedule 1, item 96]

Applications to be joined to Federal Court proceedings

1.164 Where a person has applied to the Federal Court for an order directing a participant to comply with an access regime, the entity which imposed the access regime may apply to be joined as a party to the proceedings. An application of this kind made by the RBA before the commencement of Part 2 of Schedule 1 to the Bill, and that had not been decided immediately before that commencement is taken to have been made under subsection 17(2A). [Schedule 1, item 97]

Directions

1.165 A direction given by the RBA under section 21 before the commencement of Part 2 of Schedule 1 to the Bill, and that was in force immediately before that commencement, continues in force on and after that commencement. [Schedule 1, item 98]

Protection from liability

1.166 The protection from civil liability provided for by section 30B applies in relation to a thing done, or omitted to be done, on or after the commencement of Part 4 of Schedule 1 to the Bill. [Schedule 1, item 121]

Contravention of directions

1.167 The RBA or the nominated special regulator may revoke a direction given before, on or after the commencement of Part 3 of Schedule 1 to the Bill by notice in writing given to the participant, if at the time of the revocation, it considers that the direction is no longer necessary or appropriate. The amendments made by Part 3 of this Schedule apply in relation to a contravention of a direction if the conduct constituting the contravention occurs wholly on or after the commencement of Part 3 of this Schedule. This applies regardless of whether the direction to which the contravention relates was given before, on or after the commencement of Part 3 of this Schedule. [Schedule 1, item 117]

Contravention of requests for information

1.168 The amendments made by Part 3 of Schedule 1 to the Bill apply in relation to a refusal or failure to comply with a requirement to give information if the conduct constituting the refusal or failure to comply occurs wholly on or after the commencement of this Part 3 of this Schedule. This applies regardless of whether the requirement to give information arose before, on or after the commencement of this Part 3 of this Schedule. [Schedule 1, item 118]

Enforceable undertakings

1.169 The amendments made by Part 4 of Schedule 1 to the Bill apply to undertakings made on or after the commencement of that Part of the Schedule. [Schedule 1, item 120]

Amendment to the ITAA

1.170 The consequential amendment to the ITAA 1997 applies to assessments for the 2026-27 income year and later income years. [Schedule 1, item 129]

Designated systems

1.171 The Bill includes a savings provision to clarify that any designations made by the RBA prior to the commencement of Part 1 of Schedule 1 to the Bill continue to be in force. [Schedule 1, item 7]

Chapter 2: Statement of Compatibility with Human Rights

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

Treasury Laws Amendment (Payments System Modernisation) Bill 2025

Overview

2.1 The Bill is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

2.2 The Bill amends the PSRA to modernise the payments regulatory framework, ensuring it is fit-for-purpose and can address emerging risks related to payments.

2.3 In particular, the Bill expands the regulatory coverage of the PSRA by updating key definitions to ensure that new and emerging payment systems and participants in payment systems can be appropriately regulated.

2.4 The Bill also introduces new ministerial powers that can be exercised in the national interest to ensure the Government can respond to payments issues beyond the existing remit of the RBA.

2.5 Finally, the Bill modernises the penalty regime in the PSRA by introducing civil penalty provisions and enforceable undertakings, and increasing existing maximum criminal penalties, which will apply to corporations only.

Human rights implications

2.6 The Bill engages the right to protection from unlawful or arbitrary interference with privacy under Article 17 of the ICCPR, as certain persons may use or disclose information or documents obtained under, or for the purposes of, the PSRA and, in the case of disclosure, the disclosure is to a nominated special regulator. A person using or disclosing information and documents in accordance with the above does not commit an offence and is not liable to any other penalty under Commonwealth, State or Territory law as a result of using or disclosing information or documents as described.

2.7 To qualify for this protection from liability, the use or disclosure of information or documents must only be for the purposes of the PSRA. Additionally, if disclosing information or documents, such disclosure must only be to a nominated special regulator (and will therefore only be relevant where a special payment system has been designated in the national interest). The protection therefore applies to specified persons within the RBA or other nominated special regulator and in circumstances where there is a purpose under the PSRA for which the information needs to be used or disclosed. Disclosure is limited to occurring between only nominated special regulators.

2.8 It is important that the regulation of payment systems can continue to function seamlessly and therefore that information or documents can be used within either the RBA or other nominated special regulator to achieve purposes of the PSRA. In the event that there are multiple special regulators nominated in relation to a special designated payment system, it is necessary to further authorise disclosure between those regulators to achieve the purposes of the PSRA.

2.9 The right in Article 17 may be subject to permissible limitations, where these limitations are authorised by law and are not arbitrary. In order for an interference with the right to privacy to be permissible, the interference must be authorised by law, be for a reason consistent with the ICCPR and be reasonable in the particular circumstances. The UN Human Rights Committee has interpreted the requirement of 'reasonableness' to imply that any interference with privacy must be proportional to the end sought and be necessary in the circumstances of any given case.

2.10 The amendments are not arbitrary as they are aimed at a legitimate objective and are reasonable and proportionate in achieving that objective. The amendments support the regulator's (or regulators') effective oversight of payments systems and participants, and if relevant, enables multiple regulators to work more collaboratively.

2.11 The amendments are reasonable and proportionate in achieving this objective and are sufficiently circumscribed so as not to constitute an arbitrary interference with the right to privacy, particularly noting that the use or disclosure of information or documents is limited to information or documents obtained under, or for the purposes of, the PSRA.

Conclusion

2.12 Accordingly, to the extent that the Bill engages with the rights under Articles 17 of the ICCPR, it is compatible with human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 as the limitations are appropriate, proportionate and achieve a legitimate objective.