Financial Sector Reform (Hayne Royal Commission Response No. 2) Act 2021 (19 of 2021)

Schedule 1   Ongoing fee arrangements

Part 1   Main amendments

Corporations Act 2001

24   Subdivision C of Division 3 of Part 7.7A

Repeal the Subdivision, substitute:

Subdivision C - Consent required for deduction of ongoing fees from accounts

962R Fee recipient must not deduct ongoing fees without consent

(1) This section applies if:

(a) an ongoing fee is, or will be, payable to a fee recipient under an ongoing fee arrangement; and

(b) a person (the account holder ) holds an account with the fee recipient; and

(c) the account is not:

(i) an account linked to a credit card; or

(ii) a basic deposit product; and

(d) the fee recipient proposes to deduct the amount of the ongoing fee from the account holder's account.

(2) Subject to subsection (3), the fee recipient must not deduct the amount of the ongoing fee from the account unless all of the following are satisfied:

(a) the account holder has given the fee recipient written consent for the fee recipient to deduct amounts from the account in respect of ongoing fees under the ongoing fee arrangement;

(b) if requirements that apply in relation to the consent are determined under section 962T - the consent complies with those requirements;

(c) at the time of making the deduction:

(i) the consent has not been withdrawn under paragraph 962U(1)(a); and

(ii) if the consent has been varied under paragraph 962U(1)(b) - the consent as varied still allows for the deduction to be made; and

(iii) the consent has not ceased to have effect under section 962V.

(3) If the account holder holds the account jointly with one or more other persons, the fee recipient must not deduct the amount of the ongoing fee from the account unless all of the paragraphs in subsection (2) are satisfied in relation to the account holder as well as each of those other persons as account holders.

(4) A person contravenes this subsection if the person contravenes subsection (2) or (3).

Note: This subsection is a civil penalty provision (see section 1317E).

962S Fee recipient must not arrange for deduction of ongoing fees without consent or accept such deductions

(1) This section applies if:

(a) an ongoing fee is, or will be, payable to a fee recipient under an ongoing fee arrangement; and

(b) a person (the account holder ) holds an account with another person (the account provider ) who is not the fee recipient; and

(c) the account is not:

(i) an account linked to a credit card; or

(ii) a basic deposit product; and

(d) the fee recipient proposes to arrange with the account provider for the amount of the ongoing fee to be deducted from the account holder's account.

(2) To avoid doubt, the fee recipient proposes to arrange with the account provider for the amount of the ongoing fee to be deducted from the account holder's account:

(a) if the fee recipient is a financial services licensee - by doing so directly or through another entity such as a representative of the financial services licensee; or

(b) if the fee recipient is a representative of a financial services licensee - by doing so directly or through another entity such as the financial services licensee.

Fee recipient must not arrange deductions without consent

(3) Subject to subsection (4), the fee recipient must not arrange for the account provider to deduct the amount from the account unless all of the following are satisfied:

(a) the account holder has given the fee recipient written consent for the fee recipient to arrange for amounts to be deducted from the account in respect of ongoing fees under the ongoing fee arrangement;

(b) if requirements that apply in relation to the consent are determined under section 962T - the consent complies with those requirements;

(c) the fee recipient has given a copy of the account holder's consent to the account provider;

(d) at the time of giving the copy of the consent to the account provider:

(i) the consent has not been withdrawn under paragraph 962U(1)(a); and

(ii) if the consent has been varied under paragraph 962U(1)(b) - the consent as varied still allows for the deduction to be made; and

(iii) the consent has not ceased to have effect under section 962V.

(4) If the account holder holds the account jointly with one or more other persons, the fee recipient must not arrange for deductions from the account unless all of the paragraphs in subsection (3) are satisfied in relation to the account holder as well as each of those other persons as account holders.

(5) A person contravenes this subsection if the person contravenes subsection (3) or (4).

Note: This subsection is a civil penalty provision (see section 1317E).

Fee recipient must not accept deductions made without consent

(6) Subject to subsection (7), if the fee recipient has arranged with the account provider, with the account holder's consent, for an amount to be deducted from the account, the fee recipient must not accept payment of the amount unless at the time the payment is made to the fee recipient all of the following are satisfied:

(a) the consent has not been withdrawn under paragraph 962U(1)(a);

(b) if the consent has been varied under paragraph 962U(1)(b) - the consent as varied still allows for the deduction to be made;

(c) the consent has not ceased to have effect under section 962V.

(7) If the account holder holds the account jointly with one or more other persons, the fee recipient must not accept the payment unless all of the paragraphs in subsection (6) are satisfied in relation to the account holder as well as each of those other persons as account holders.

(8) A person contravenes this subsection if the person contravenes subsection (6) or (7).

Note: This subsection is a civil penalty provision (see section 1317E).

(9) However, subsection (8) does not apply if an amount accepted in contravention of subsection (6) or (7) is repaid into the account holder's account within 10 business days of the day on which the payment was accepted.

962T Requirements relating to consent

(1) ASIC may, by legislative instrument, determine requirements for the giving of consent to deductions from an account for the purposes of this Subdivision.

(2) Without limiting subsection (1), the instrument may require that:

(a) a specified form, or specified form of words, must be used for giving consent; or

(b) a consent must include specified information.

962U Variation or withdrawal of consent

(1) If a person (the account holder ) who holds an account gives consent to a fee recipient under section 962R or 962S for the purposes of this Subdivision, the account holder may:

(a) withdraw the consent at any time, by notice in writing to the fee recipient; and

(b) vary the consent at any time, by notice in writing to the fee recipient.

(2) If the fee recipient receives a notice from the account holder under subsection (1), the fee recipient must within 10 business days of receipt:

(a) give written confirmation to the account holder that the notice was received; and

(b) if the fee recipient gave a copy of the account holder's consent to an account provider under paragraph 962S(3)(c) - give the account provider a copy of the notice.

(3) A person contravenes this subsection if the person contravenes subsection (2).

Note: This subsection is a civil penalty provision (see section 1317E).

962V When consent ceases to have effect

(1) A consent given in relation to an ongoing fee arrangement for the purposes of this Subdivision ceases to have effect:

(a) unless paragraph (b) or (c) applies - at the end of the period of 150 days after the anniversary day for the ongoing fee arrangement; or

(b) if the ongoing fee arrangement is terminated - at the time the ongoing fee arrangement terminates; or

(c) if a new consent is given in relation to the ongoing fee arrangement for the purposes of this Subdivision - at the time that new consent is given.

(2) If:

(a) a consent given in relation to an ongoing fee arrangement for the purposes of this Subdivision ceases to have effect under subsection (1); and

(b) a fee recipient gave a copy of the consent to an account provider under paragraph 962S(3)(c);

the fee recipient must give written notice of the cessation to the account provider within 10 business days of the cessation.

(3) A person contravenes this subsection if the person contravenes subsection (2).

Note: This subsection is a civil penalty provision (see section 1317E).

962W Conditions requiring consent to be given are void

Any condition of the ongoing fee arrangement, or any other arrangement, that requires the client to do either or both of the following is void:

(a) to give consent under this Subdivision in relation to the deduction of ongoing fees relating to the ongoing fee arrangement;

(b) not to vary or withdraw such consent.

Subdivision D - Records of compliance

962X Obligation to keep records of compliance

(1) A fee recipient in relation to an ongoing fee arrangement must keep records sufficient to enable the fee recipient's compliance with this Division in relation to the ongoing fee arrangement to be readily ascertained.

Note 1: Failure to comply with this subsection is an offence: see subsection 1311(1).

Note 2: For preservation of records, see section 1101C.

(2) The regulations may specify records that the fee recipient must keep as part of the obligation in subsection (1).