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Credit (Commonwealth Powers) Bill 2009
Credit (Commonwealth Powers) Bill 2009
Explanatory Notes
Short Title
The short title of the Bill is the Credit (Commonwealth Powers) Bill 2009.
Objectives of the Bill
The objectives of the Credit (Commonwealth Powers) Bill 2009 are to refer
constitutional power for credit (including finance broking) to the
Commonwealth and repeal the Credit Act 1987, the Consumer Credit
(Queensland) Act 1994, the appended template Consumer Credit Code, the
Consumer Credit (Queensland) Special Provisions Regulation 2008 and
the Consumer Credit Regulation 1995.
It is not proposed to repeal the Credit (Rural Finance) Act 1996 at this
time. The Credit (Rural Finance) Act 1996 was commenced at the same
time as the Consumer Credit Code. As farming is seen as a business, credit
for farming purposes does not come within the ambit of the Consumer
Credit Code (which is credit predominantly for personal, domestic and
household use). It was recognised at the time the Consumer Credit Code
was introduced in Queensland that farmers also needed protection in place
regarding the enforcement of mortgages over equipment they use to carry
out their farming business.
As the Commonwealth is not examining the extension of the national credit
laws to business credit until phase two, Queensland will continue to
administer the Credit (Rural Finance) Act 1996 in the meantime. There
will not be any inconsistency until the Commonwealth regime is extended
to cover credit for business purposes. Should the Commonwealth regime
be expanded in phase two to cover business credit, it is likely Queensland
would repeal the Credit (Rural Finance) Act 1996 at that time.
Reasons for the Bill
In March 2008, the Council of Australian Governments (COAG)
committed to a comprehensive microeconomic reform program including a
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Credit (Commonwealth Powers) Bill 2009
regulatory reform agenda to help deliver significant improvements in
Australia's competition, productivity and international competitiveness.
As part of these reforms, COAG agreed on 3 July 2008 that responsibility
for the regulation of credit and finance broking should be transferred from
the states and territories to the Commonwealth. The Australian Securities
and Investments Commission (ASIC) will be given extra powers to police
the scheme. The Commonwealth will then be the sole regulator and
enforcer of credit and finance broking.
Achievement of the Objectives
To enable the Commonwealth to commence its new national credit laws,
the states must first pass legislation referring power for the regulation of
credit to the Commonwealth. It is anticipated the Commonwealth's
low-level registration provisions, which require industry to provide contact
details to ASIC, will commence on 1 April 2010.
The Commonwealth Government's legislative powers in the absence of a
referral of powers from the States are not sufficient to enact a
comprehensive regulatory framework for consumer credit to operate
nationally. As such, a specific referral of powers from the States for
consumer credit is required.
The referral of powers is based on section 51(xxxvii) of the
Commonwealth Constitution `matters referred to the Parliament of the
Commonwealth by the Parliament or Parliaments of any State or States,
but so that the law shall extend only to States by whose Parliaments the
matter is referred, or which afterwards adopt the law'.
The Bill makes two references of matters to the Commonwealth:
(a) The first reference refers the tabled text of the proposed National
Consumer Credit Protection Bill 2009 and the proposed National
Consumer Credit Protection (Transitional and Consequential Provisions)
Bill 2009.
(b) The second reference (the amendment reference) provides a limited
amendment reference to allow the Commonwealth to amend the referred
credit matters. State and Territory governments will continue to explore
the development of a subject matter amending reference that will facilitate
future amendment of the scheme to ensure the Commonwealth has
sufficient scope to regulate for new and emerging issues that arise in the
credit and finance broking area.
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Credit (Commonwealth Powers) Bill 2009
A matter is not referred to the Commonwealth from a particular State until
the State referral commences under the referral Bill. It is expected that
each State will enact a referral Bill. It is possible that in one or more
States, this may follow the original enactment of the proposed National
Consumer Credit Protection Bill 2009 and the proposed National
Consumer Credit Protection (Transitional and Consequential Provisions)
Bill 2009 by the Commonwealth Parliament.
The referral approach has been previously used with the transition of the State
and Territory corporations legislation to the Commonwealth (as set out in
Chapter 10 Part 10.1 Division 6 of the Corporations Act 2001). The
validity of this approach has been upheld by the High Court in Forge v
ASIC [2006] HCA 44. Given this precedent, it would appear there are no
substantive legal impediments to a complete transfer of responsibility for
existing credit contracts to the Commonwealth.
The Bill will be underpinned by an intergovernmental agreement (the
National Credit Law Agreement 2009), to which the Commonwealth and
the States and Territories will be parties. The intergovernmental agreement
operates similarly to the Corporations Agreement 2002.
Consequential amendments are made to a range of Queensland Acts to
update references to the legislation that will be repealed.
Estimated Cost for Government Implementation
Queensland has signed the National Partnership Agreement to Deliver a
Seamless National Economy. Under this National Partnership Agreement,
Queensland is eligible for National Partnership payments of up to $112.7
million over five years to 2012-13, including a potential payment of up to
$20.1 million in 2008-09. National Partnership payments are contingent on
Queensland achieving the milestones for all 38 reform priorities as set out
in the National Partnership Agreement Implementation Plan. Progress
against these milestones will be independently assessed by the COAG
Reform Council on an annual basis. Passage of the referral of powers
legislation by states and territories is one of the milestones under the
National Partnership Agreement Implementation Plan.
The regulation of credit in Queensland does not provide a revenue stream
for the Government. Accordingly, the complete transition of credit to the
Commonwealth is set to deliver savings for Queensland as the Government
would not have to continue paying for the administration of the laws.
However, currently administration costs of approximately $1.5 million per
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Credit (Commonwealth Powers) Bill 2009
year will remain as the Bill provides savings provisions for the
continuation of an interest rate cap in Queensland.
Consistency with Fundamental Legislative Principles
Section 4(1) of the Legislative Standards Act 1992 requires legislation to
have accord with the principles relating to legislation that underlie a
parliamentary democracy based on the rule of law.
While the Commonwealth Constitution does not confer on the States a
power of referral, the power to refer a matter must fall within the general
legislative power of the States to make laws for the peace, welfare and good
government of the State. Referral must occur by way of enactment of a
State Parliament.
It is noted the ability for a State to actually terminate a referral in
accordance with the standard provisions contained in the Bill was raised by
the Scrutiny of Legislation Committee in relation to the Water
(Commonwealth Powers) Act 2008. The Committee questioned whether a
State can revoke its referral of power at any time, by enactment,
irrespective of the period of the referral, and the effect of that revocation on
the Commonwealth enactment made pursuant to the referral.
It is arguable that the States can revoke the referral, given their incapacity
to abdicate legislative power. It is also arguable that the effect of a
revocation is not only to terminate the referral of power to the
Commonwealth, but it also terminates the operation of any Commonwealth
law enacted in reliance on that referral. It is acknowledged that an
alternative argument is that State legislation revoking the reference would
be rendered ineffective by section 109 for being inconsistent with the
Commonwealth legislation enacted pursuant to the original reference.
As outlined in relation to the Water (Commonwealth Powers) Act 2008, the
use of revocation provisions is extremely common in State referral of
power legislation. The approach taken in the Bill, enabling the Governor to
fix a day by proclamation to terminate the reference, accords with the vast
majority of precedent State referrals of power to the Commonwealth since
1952.
This may be considered a "Henry VIII" clause by allowing the revocation
of a State referral by subordinate legislation. The only circumstances
where it is envisaged a reference would be terminated would be of such an
extraordinary kind (for example, passing of oppressive Commonwealth
amendments that have not been agreed to by the jurisdictions). In such
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Credit (Commonwealth Powers) Bill 2009
circumstances, it is submitted that permitting rapid Executive action would
be warranted.
The Bill makes provision for Queensland to terminate both the initial
reference and the amendment reference or just the amendment reference at
any time.
Clause 19 of the National Consumer Credit Protection Bill 2009
adequately protects the State's interests in the event that the State no longer
wishes the Commonwealth to continue to have power to legislate for
Queensland in relation to the referred matters.
The National Consumer Credit Protection Bill 2009 makes it clear that the
termination of the initial reference has the effect of revoking in its entirety
the referral of powers (including both initial and amendment) on behalf of
Queensland to the Commonwealth, resulting in Queensland ceasing to be a
referring State, and consequently terminating the Commonwealths power
to legislate for Queensland in relation to the referred matters. This does not
however, affect the status of other referring States or the Commonwealth's
power to legislate for them.
Part 5 of the Bill provides for the transfer of information held by the
Queensland Minister responsible for the administration and enforcement of
the Credit Act 1987, the Consumer Credit (Queensland) Act 1994, the
appended template Consumer Credit Code, the Consumer Credit
(Queensland) Special Provisions Regulation 2008 and the Consumer
Credit Regulation 1995 to ASIC.
Enabling the supply of information held by Queensland to the
Commonwealth may impact on requirements under the Legislative
Standards Act 1992 that legislation shall have sufficient regard to the rights
and liberties of individuals, including privacy. However, any potential
breach of such a fundamental legislation principle is considered reasonable
and necessary. The only information provided will be that information
obtained in the lawful administration of the repealed credit laws. As
administration of credit will be transferred to the Commonwealth, this
information will be necessary to ensure the ongoing efficient
administration and enforcement of credit.
Consultation
The Department of the Premier and Cabinet, the Office of Queensland
Parliamentary Counsel, Queensland Treasury, Queensland Health, the
Department of Environment and Resource Management, Queensland
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Credit (Commonwealth Powers) Bill 2009
Police Service, the Department of Mines and Energy and the Department
of Justice and Attorney-General have been consulted.
Consistency of Bill with legislation of other jurisdictions
The Bill, to the extent it relates to the referral of powers, is uniform with all
other referring jurisdictions and was prepared through the Parliamentary
Counsel's Committee in consultation between the Commonwealth and the
States and Territories.
Notes on Provisions
Part 1 Preliminary
1 Short title
Clause 1 states that this Act may be cited as the Credit (Commonwealth
Powers) Act 2009.
2 Commencement
Clause 2 provides for the commencement of the proposed Act. It is
intended to commence the referral of power provisions (part 2) on assent.
Part 5, will also commence on assent to allow the smooth transition of
information to ASIC that has been acquired through the regulation and
supervision of credit providers in Queensland. The remaining provisions
will commence by proclamation. The repeal of the Credit Act 1987, the
Consumer Credit (Queensland) Act 1994, the appended template
Consumer Credit Code, Consumer Credit (Queensland) Special Provisions
Regulation 2008 and the Consumer Credit Regulation 1995 will coincide
with the commencement of the National Consumer Credit Protection Act
2009 (Cwth).
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Credit (Commonwealth Powers) Bill 2009
Part 2 Reference of matters
Clause 3 defines certain terms and expressions in the Act. The following is
an explanation of certain terms and expressions used in the referral
provisions of the Act, including the following.
The expression `express amendment' is defined to mean the direct
amendment of the text of the National Credit legislation (whether by
insertion, omission, repeal, substitution or relocation of words or matter)
by another Commonwealth Act or by an instrument under a
Commonwealth Act, but does not include the enactment by a
Commonwealth Act of a provision that has or will have substantive effect
otherwise than as part of the text of the National Credit legislation. This
ensures that the matters covered by the amendment reference cannot be the
source of power for other Commonwealth legislation.
There are various definitions dealing with the mechanism of the referral.
The expression `initial referred provisions' means the tabled text to the
extent to which that text deals with matters that are included in the
legislative powers of the Parliament of the State; and the expression
`tabled text' means:
· the text of the National Consumer Credit Protection Bill 2009; and
· the text of the National Consumer Credit Protection (Transitional and
Consequential Provisions) Bill 2009, as tabled by the Minister
introducing the Bill in the State Parliament which is the lead
jurisdiction.
The term `initial National Credit Code' means the text of Schedule 1 to
the National Consumer Credit Protection Bill 2009 under paragraph (a) of
the definition of `tabled text'.
`National Credit legislation' is defined to mean the Commonwealth Acts
enacted in the terms, or substantially in the terms, of the tabled text set out
as:
· the National Consumer Credit Protection Bill 2009; and
· the National Consumer Credit Protection (Transitional and
Consequential Provisions) Bill 2009.
The term `reference' is defined to mean `the initial reference' or the
`amendment reference'.
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Credit (Commonwealth Powers) Bill 2009
The reference of matters uses the expression `referred credit matter'
which means a matter relating to either of the following:
· credit, being credit the provision of which would be covered by the
expression "provision of credit to which this Code applies" in the
initial National Credit Code;
· consumer leases, being consumer leases each of which would be
covered by the expression "consumer leases to which Part 11 applies"
in the initial National Credit Code.
This definition of `referred credit matter' ensures that the reference of
constitutional power by the States is tied to the content of the `initial
National Credit Code'.
Clause 4 deals with the references described in the Act. The referral of
matters to the Commonwealth is achieved by two mechanisms:
· the matters to which the initial referred provisions relate, but only to
the extent of the making of laws with respect to those matters by
including the initial referred provisions in Acts enacted in the terms,
or substantially in the terms, of the tabled text (defined as the `initial
reference'); and
· any referred credit matter, but only to the extent of the making of laws
with respect to such a matter by making express amendments of the
National Credit legislation (defined as the `amendment reference').
Clause 4(2) provides that the reference of a matter has effect only in
situations where a State has power to make laws on that matter and the
Commonwealth will not otherwise have power to do so unless the State
refers the matter to the Commonwealth.
Clause 4 (3) removes a possible contention that one of the references might
be limited by the other.
Clause 4(4) provides that the State Parliament envisages that the National
Credit legislation can be amended or affected by Commonwealth
legislation enacted in reliance on other powers and that instruments under
the National Credit legislation may affect the operation of that legislation
otherwise than by express amendment.
Clause 4(5) specifies the period during which a reference under this Act
has effect.
Clause 5(1) provides for the termination of the references or the
amendment reference in the Act and this enables the Governor, by
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Credit (Commonwealth Powers) Bill 2009
proclamation, to fix a day on which the references or amendment reference
shall terminate.
Clause 5(2) provides that a proclamation may be revoked by the Governor
and in which case it is taken never to have been published.
Clause 5(3) provides that a revoking proclamation will be effective if
published before the proclamation date.
Clause 5(4) provides that the revocation of a proclamation does not stop
the publication of further proclamations.
Clause 5(5) states that in the event that the amendment reference is
terminated, the effect is that the references refer only to the amendment
reference.
Clause 6 provides that the separate termination of the period of an
amendment reference does not affect laws already in place. Accordingly,
the amendment reference continues to have effect to support those laws
unless the period of the initial reference is also terminated.
Clause 7 provides for the accuracy of a copy of the tabled text containing
the national Credit legislation to be certified by the Clerk of the House of
Assembly of Tasmania. Such a certificate is evidence of the accuracy of
the tabled text was in fact tabled as contemplated by the Referral Bill.
Part 3 Repeals
8 Repeals
Clause 8 provides for the repeal of the Credit Act 1987, the Consumer
Credit (Queensland) Act 1994, the appended template Consumer Credit
Code, the Consumer Credit (Queensland) Special Provisions Regulation
2008 and the Consumer Credit Regulation 1995.
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Credit (Commonwealth Powers) Bill 2009
Part 4 Transitional provisions
Division 1 Preliminary
9 Definitions for part
Clause 9 defines the use of words in Part 4.
10 Acts Interpretation Act, s 20 not limited
Clause 10 is inserted as an aid to statutory interpretation.
Division 2 Transitional provisions for the repeal
of the Credit Act 1987
11 Definition for division
Clause 11 defines the "repealed Act" for this division to mean the Credit
Act 1987.
12 Continuation of effect of the repealed Credit Act 1987
Clause 12 provides a savings provision to ensure that any remaining
contracts existing under the Credit Act 1987 continue to be of full force and
effect as if this Bill had not been passed.
The Credit Act 1987 regulates personal loans up to $40,000. The Credit
Regulation 1988 contains extensive provisions about credit contracts
(including prescribed forms). On 1 November 1996, the Consumer Credit
Code commenced regulating most consumer credit in Australia. The
Credit Act 1987 now only regulates loans up to $40,000 entered into before
1 November 1996. The Act no longer regulates continuing credit contracts.
It is not known whether any contracts still exist under the Credit Act 1987.
If there are outstanding contracts, there would only be a very small number.
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Credit (Commonwealth Powers) Bill 2009
Division 3 Transitional and other provisions for
the repeal of the Consumer Credit
(Queensland) Act 1994
Subdivision 1 Preliminary
13 Definition for division
Clause 13 defines "repealed Act" for Division 3 to mean the Consumer
Credit (Queensland) Act 1994.
Subdivision 2 Consumer Credit Fund
Clauses 14 to 17 provide savings and transitional provisions for the
continuation of the Consumer Credit Fund as this will not transition to the
Commonwealth.
The Consumer Credit Fund was originally established under the repealed
Credit Act 1987 and continued under the Consumer Credit (Queensland)
Act 1994. The Consumer Credit Fund consists of amounts paid by credit
providers (for example, court ordered and/or agreed penalties under
Conduct Deeds), costs awarded to the Chief Executive by a court in a
proceeding under the Consumer Credit (Queensland) Act 1994, and interest
and other income derived from the investment of the Consumer Credit
Fund.
The Consumer Credit Fund will be transferred into a general Fund and will
continue to be administered by the Department of Employment, Economic
Development and Innovation. This will allow the continuation of payments
to the Consumer Credit Fund for any credit enforcement matters not yet
finalised and for the chief executive to approve payments from the Fund.
Clause 16 outlines what payments can be made from the new Fund (similar
to those currently in the Consumer Credit (Queensland) Act 1994 but with
a focus other than credit):
· consumer stakeholder engagement;
· research for consumer policy;
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Credit (Commonwealth Powers) Bill 2009
· general consumer education campaigns;
· consumer surveys;
· other consumer-related initiatives;
· legal fees incurred by the chief executive, or costs awarded by a court
against the chief executive, in a proceeding under the repealed
Consumer Credit (Queensland) Act 1994; and
· legal fees incurred by the registrar, or costs awarded by a court against
the registrar, in a proceeding under the repealed Credit Act 1987.
Clause 17 retains the annual reporting requirements of the Fund up until
the year the funds are eventually depleted and the account closed.
Division 4 General provisions
Clauses 18 to 22 provide savings provisions for the continuation of
investigations and enforcement of offences against the repealed Act prior to
commencement of the national credit laws.
23 References to superseded legislation and subordinate
legislation
Clause 23 is inserted as an aid to statutory interpretation.
24 Transitional regulation-making power
Clause 24 provides a transitional regulation making power for the Bill.
Division 5 Provisions relating to ASIC
25 Provision of information and assistance to ASIC
Clause 25 enables the conferral of powers and functions through the
transfer of information, documents, assets or liabilities to ASIC. The aim
of this provision is to provide a smooth transition of information between
the regulators.
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Credit (Commonwealth Powers) Bill 2009
26 ASIC has particular functions and powers
Clause 26 confers functions and powers to ASIC in relation to appeals,
review and enforcement proceedings for the purposes of giving effect to the
National Consumer Credit Protection Bill 2009.
Part 6 Maximum annual percentage rate
for credit contracts
Clause 27 provides meaning for words used by the Consumer Credit
Queensland Code before it was repealed.
Clauses 28 to 31 provide savings provisions for the continuation of the
interest rate cap in Queensland. Queensland introduced an interest rate cap
of 48% applying to both interest and other credit fees and charges, on 31
July 2008.
The transition of credit to the Commonwealth will be implemented in a
phased approach. The majority of provisions will commence on 1 July
2010, although the low-level registration requirements, which require
industry to provide ASIC with contact details, will commence on 1 April
2010. Phase two of implementation will include, among other things, an
examination of State approaches to interest rate caps.
Part 7 Amendment of other Acts
Clause 32 amends the Acts contained in the Schedule.
Schedule - Consequential amendments of other Acts
The Schedule replaces references to the Consumer Credit (Queensland)
Act 1994 and the Consumer Credit Code to the name of the new national
credit law the "National Consumer Credit Protection Act 2009", or repeals
unnecessary sections in the following Acts:
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Credit (Commonwealth Powers) Bill 2009
1. Bills of Sale And Other Instruments Act 1955, sections 6, 19(1A),
19A(3), 20(1), 21(4), 45(3) and Schedule 5.
2. Credit (Rural Finance) Act 1996, sections 5(3)(a), 5(3)(b) and Schedule.
3. Forestry Act 1959, section 61E(12) and Schedule.
4. Hire-Purchase Act 1959, section 2.
5. Legal Aid Queensland Act 1997, section 36(4).
6. Mineral Resources Act 1989, Schedule Dictionary.
7. Police Powers and Responsibilities Act 2000, sections 73 and 753,
Schedule 6.
8. Property Agents and Motor Dealers Act 2000, sections 347(4) and
347(5).
© State of Queensland 2009
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