Natasha Griggs (Solomon, Country Liberal Party) Share this | Link to this | Hansard source

I rise to speak on the Personal Property Securities Amendment (Registration Commencement) Bill 2011. This bill seeks to extend the commencement date of the personal property securities regime beyond that specified in the principal act due to technical issues with the online registration system. As explained in the Bills Digest, the purpose of the Personal Property Securities Act was to establish a register of personal property securities in place of separate registers tracking whether or not there is a mortgage, a loan or other financial impediments over assets. The original Personal Property Securities Act established rules governing the priority of competing security interests by references to the Personal Property Securities Register.

The Bills Digest notes that the intermediary provisions in the Personal Property Securities Act, which received royal assent on 14 December 2009, consist of two main concepts: migration time and registration commencement time. Migration time is the period during which data from the current state, territory and Commonwealth registers recording security interests in personal property is to be transferred to the Personal Property Securities Register. Under existing subsection 306(6), a determination of an earlier time is a legislative instrument; however, section 42—disallowance—of the Legislative Instruments Act 2003 is not applicable to the determination.

As the Personal Property Securities Act is currently drafted, the migration time is required to start no later than 1 January 2012. The Personal Property Securities Act does not allow for the minister to determine any later time. The registration commencement time is from the start of the month—that is, 26 months after royal assent to the bill—or an earlier time chosen by the minister. The registration commencement time, which was established in the transitional provisions, will be the day that the Personal Property Securities Register begins operation.

The bill seeks to extend the commencement date of the personal property securities regime beyond that specified in the principal act because of technical issues with the online registration system. When the Personal Property Securities Bill was introduced, the explanatory memorandum accompanying the bill indicated that it was expected that the Personal Property Securities Register would be operational before 1 February 2012. On 3 May this still appeared to be the case when the Attorney-General announced that he anticipated the national register would operate from October 2011. This is no longer the case, hence the need for this bill, which will amend the Personal Property Securities Act to allow the minister to provide for a later commencement date.

Systems testing by industry volunteers such as the National Australia Bank and GE Capital have disclosed that there are unresolved problems with the operation of the computerised register. The need for an extended commencement time is not explained in the explanatory memorandum and, sadly, that is symptomatic of a Labor government which consistently fails to deliver on its promises. The coalition believes that the explanation should be made public to a Senate committee. My colleague and friend the member for Macarthur will speak in more detail on how the proposed changes in the legislation will affect a hire company in his electorate.

In summary, the personal property securities legislation will rationalise the current Commonwealth state and territory laws on securities in personal properties. It will create one set of national rules and one single national online register. The coalition supports the passage of this bill through the House and reserves the right to move amendments subject to the recommendations of the Senate committee.

Shayne Neumann (Blair, Australian Labor Party) Share this | Link to this | Hansard source

I rise to speak in support of the Personal Property Securities (Registration Commencement) Bill 2011. The Federal Attorney-General made it plain that the purpose of this legislation is to ensure that the Personal Property Securities Act does not commence operating before the PPS Register can be made available for public use. He also made the point in his second reading speech that, if he did not determine an earlier time, what he described as the migration time will be 1 January 2012 and the registration commencement time will be 1 February 2012.

This legislation has a long history, and it is important for personal property securities. Land title is held across the states and territories, and it is in their jurisdiction. If someone wants to refinance their mortgage or they want to purchase a property, they contact the land titles office in the state or territory. They can do that online. In Queensland, solicitors usually do that if they are acting in a conveyancing role; indeed it is the solicitors for the mortgagee who do that. Of course, the mortgagor has to pay. For a very long time this country has had a regulatory framework for personal property which is totally unsatisfactory: different registers for different types of debtors; different registers for different types of properties; no registers for some securities; and different consequences for a nonregistration. Because of the eccentricities of Federation and because of the procrastination of previous coalition governments, nothing much was done. This reform had its genesis back in 1990, when we were in power and the then Attorney-General referred the adequacy of the situation to the Australian Law Reform Commission for review. Not much was done in relation to the reform for about 16 years until the Standing Committee of Attorneys-General put out an issues and options paper on it. So for a long time a worthy and important financial reform in this country lay dormant, and that is very sad indeed. This particular legislation deals with personal property. That is commonly known in law as personalty, and it is any form of property other than land or the buildings and fixtures which form part of that land. So it can be intangible things such as shares, intellectual property, contract rights or tangible things such as cars, boats machinery or crops.

The Personal Property Securities Act 2009, a commitment of this federal Labor government and a worthy piece of financial reform in this country, created one national law with one set of rules governing personal property, securities or interest held in property other than land. It simplified about 70 items of state, territory and Commonwealth legislation. It made big changes to the rules of equity and common law which govern securities in terms of personal property. These are very complex areas of law. This is some of the most significant law reform we have seen in this country, and it took a federal Labor government to do it. Virtually nothing was done in this area—in fact, there was not a jot of legislative reform—by those opposite when they were on the Treasury benches. The PPS reform will improve the ability of individuals and businesses, particularly small to medium-sized businesses, to use more of their property in raising capital. It is good for the economy and it is good for those businesses and their profitability.

Development of these types of reforms has been occurring across the world. Canada, New Zealand and the United States have all undertaken this type of thing, but of course this all bypassed the coalition when they were in power—it just seemed to go over their heads. But, after completion of a trial of the system, about 4.6 million records will be migrated onto the new PPS and we will see the Insolvency and Trustee Service Australia assume responsibility for the PPS register and the customer contract centre when it commences in early 2012. The new role will form a very core part of the role of ITSA,. It will be an information provider to major creditors, financial institutions and the public.

This bill will help the government in terms of the registration time, and I think it will be important because not just government but also stakeholders, industry, consumer advocates, small businesses and individuals will have access to a register so they can have security. If you are a lender and you have the asset in your possession and you are lending the money, you have security. But, if you are a lender and the assets are in the hands of the person who wants the money, you do not have that kind of security and you cannot check out online whether that person has then decided to falsely, fraudulently or wrongly decide to seek further security. If you are plan to buy a car, you want to know whether there is some form of security over that car when you are going to buy it at a dealer or privately.

So the PPS will make important changes. It will improve the ability to raise capital. It will also mean that a person can have knowledge by checking online. I think there are some overlaps in the current law, and that was my experience when I was in private practice. It depended on the jurisdiction—New South Wales was different from Queensland—and on the type of interest. I certainly saw different types of interest, tangible and intangible. I think that the registration requirement being the same across all jurisdictions will make a difference. I am sure that the jurisdictions in this country have been created differently and that section 51 of the Constitution means that the things the Commonwealth can do in the various jurisdictions are very different; but I applaud the COAG process because we have seen a national system for registration of personal property arise, and I think that is an important reform. The Department of Finance and Deregulation has estimated that 10 of the 27 of this government's seamless national economy business regulation reforms will add about $3.5 billion to the Australian economy with about $1.8 billion flowing to business profitability and advantage. We see business regulation and small business assistance as fundamental core business for this government. We believe it is important to the Australian public. About 4.4 million Australians work in small business. In fact there are more sole traders than trade unionists in this country. We believe ongoing regulatory reform is vital and we have undertaken many steps to reduce red tape.

This particular measure is important. I am pleased to see that a federal Labor government has implemented it. When they were in power the coalition government could not be trusted to tackle this reform. The Leader of the Opposition and the shadow minister for small business sat in the government of Mr Howard and could not see fit to make this reform, but I am pleased that they will support it now in opposition. Consumers need to protect themselves when purchasing goods which could be repossessed, by using a function on the PPS register. The opposition say they are prepared to do in opposition what they would not do in government—that is, get rid of red tape in business. They have had a Damascus road conversion in relation to this issue, and we are pleased that they will now support small business in a way they would never do when they were in government. The coalition government promised to cut red tape for small business by 50 per cent in its first term of government, and guess what? They left the country with eight different regulatory systems in terms of key business regulation. They have left a legacy of neglect, which we are now fixing up. Their lack of interest is matched by our acute interest in this area. It has taken this government to embark on a bold agenda in competition and consumer reform and in regulatory reform like the PPS to cut the red tape and to make sure that we engage in economically sound measures so that this country's wealth can be spread across the whole economy.

I support this reform. I think it is good for the economy. It will make our economy stronger. It will protect security. It will give greater opportunity and the ability for business to raise capital. It will protect consumers and individuals who might be going to purchase assets and who want to use those assets to raise money, for example, in the creation of jobs in small business. This particular measure is worthy of support and I commend it to the House.

Russell Matheson (Macarthur, Liberal Party) Share this | Link to this | Hansard source

I rise today to support the Personal Property Securities Amendment (Registration Commencement) Bill 2011 and the regime established by the Personal Property Securities Act 2009. The Personal Property Securities Act establishes a national system for regulating personal property and security interests. This will repeal the fragmented and confusing system that currently exists. Central to this new system is a national online electronic register which is to contain registration for personal property and security interests. Parties can seek registration of their interest for a registration application either before or after they have entered into a security agreement or when the security interest has attached to a personal property. Reforms will also introduce uniform interest priority rules and interest enforcement mechanisms which will apply to all personal property and security interests across Australia.

Naturally a reform of this magnitude will have a substantial impact upon commercial dealings in this country. Because of this, I would encourage the government to complement the rollout of these reforms with an education campaign so that businesses, especially small to medium sized businesses, will be able to understand precisely how the reforms will impact upon them and their operations. I am also concerned by the fact that the bill before the House today seeks to delay the commencement of these reforms and that no explanation has been offered as to why such an extension of time is appropriate.

The existing system of Australian personal property securities law involves more than 70 Commonwealth, state and territory acts administered by 30 government agencies. This is problematic for the following reasons. There are different registers for different kinds of debtor, property and forms of securities. Because of this level of particularity, some forms of securities do not have the appropriate register and thus cannot be registered. There are different rules for registering different forms of security. Some registers are electronic while others are paper based. Different registers have different consequences for nonregistration and, in some cases, security interests must be registered in more than one jurisdiction for them to be fully effective in their provision of priority protection for the creditor. There are substantial compliance costs involved in investigating the appropriate register and the different rules which apply to registration of different interests and in registering an interest in numerous jurisdictions.

The fact that these costs exist has deterred businesses from registering their personal property and security interests under the existing voluntary registration system. This practice of not registering their interests exposes businesses to the risks associated with personal property being used as security for subsequent borrowings. If this occurs, businesses as second lenders would not be made aware of any other existing security interests in the property. Furthermore, even if an interest is registered, the second lender would be hard pressed to find any other existing security interests in the property due to the lack of uniformity and organisation under the current system. This situation of uncertainty has substantial implications for businesses, including losing their interest in the property upon a borrower's becoming insolvent and the first lender claiming their superior interest during liquidation.

The presence of these issues prompted the Law Reform Commission to recommend the establishment of a single system that would uniformly regulate personal property security priorities in all Australian jurisdictions. In 2008, this recommendation was considered by the Council of Australian Governments, who supported the idea of a single online national system for the registration and regulation of personal property securities in Australia. COAG advocated that a uniform national system would lead to significant cost savings for business through reduced compliance costs and greater choice and certainty for consumers and businesses who borrow money against secured personal property. The legal profession has echoed this sentiment by conveying that the establishment of a national law supported by a national electronic register would result in substantial efficiency gains, despite the fact that the reforms will introduce major changes to Australian commercial law.

My coalition colleagues and I, particularly the member for Solomon, support the much needed reform of Australia's personal property securities law that the Personal Property Securities Act offers. We agree with the assertions by the Law Reform Commission, COAG and the legal profession of a need to simplify regulation of personal property security interests in Australia. The Personal Property Securities Act regime represents the best way of achieving this. This is because the act condenses the regulation into a national regime which includes a national electronic register for all security interests in personal property, as well as uniform national priority rules and enforcement provisions for personal property interests.

However, I do maintain concerns about the level of education that has been provided to small and medium-sized businesses about the potential impact of these reforms. Any potential injustices that could be caused by the reforms to businesses will be due to the lack of adequate education for those who are or will be significantly affected by the new personal property securities system. To avoid any potential injustices, these reforms should be complemented by a comprehensive PPS Act education campaign for these businesses and other relevant stakeholders during the commencement period of the new national system.

I have received correspondence from businesses in my electorate of Macarthur that are engaged in the hire-purchase industry. They are concerned about the impact of these reforms on their business operations. Under the PPS Act regime, businesses engaged in the hire-purchase industry will face the unprecedented risk of losing ownership of their equipment. This is because the ownership on its own no longer guarantees the hire companies' ability to retrieve their equipment if a customer becomes insolvent or inappropriately deals with the equipment in favour of a third party. In order to guarantee their interest of ownership, hire companies will have to register their interests for every item of equipment in accordance with the act's regime.

This represents a significant compliance cost for these companies as they change their inventory management and accounts systems to integrate the personal property security system into their business practices. However, once these companies adapt to the changes introduced, they will be able to reap the benefits of the PPS Act regime. The benefits will include: being able to check for prior interest when purchasing new equipment by checking the personal property and securities electronic register; being able to effectively secure their interests through perfection and registration in the event of a customer's insolvency; and the super priority given to purchase money security interests, or PMSI. This super priority applies only to goods that are inventory, and it allows hire companies to retain priority even if a subsequent interest holder in the inventory equipment perfects their interest before the hire company. This mechanism provides an important and necessary protection for hire-purchase companies as it allows for the new regime to cater to specific needs of the hire-purchase industry.

The Personal Property Securities Amendment (Registration Commencement) Bill that is currently before the House seeks to amend the principal Personal Property Securities Act to allow the Attorney-General to determine that the commencement time for the regime be other than that provided for in the act. Essentially this allows the Attorney-General—who is in this room today—to extend the commencement time of the regime. On 3 May this year, the Attorney-General announced that he anticipated that the national register and the personal property and securities regime would be operational from October this year. However, this has not proven to be the case and he is now seeking to pass a bill which allows him to postpone the commencement of the act. No explanation has been offered by the government for why there is now a need for such an extension of time. My coalition colleagues and I will encourage the government to provide such an explanation to a Senate committee so that the public can remain informed of the process of a substantial reform.

This is especially important to the business community as they need to know when it will be appropriate for them to begin implementing their new policies and procedures so as to ensure effective compliance with the new system. Businesses and industry associations have been trying their hardest during the past two years to seek advice so that they can educate themselves on the potential impacts of these reforms, how they will specifically affect their operations and how they can best ensure their compliance with the new system. By delaying the commencement of these reforms, the government is leaving the business community in limbo yet again. They have been told that the reforms that they have been bracing for for two years will be delayed without being told why. This leaves commerce in this country in a state of uncertainty as the business community wonders whether further changes are going to be made to the system.

I ultimately support the Personal Property Securities Amendment (Registration Commencement) Bill. However, for the reasons I have given I would strongly encourage the government to subject the bill and the reasons for it to a Senate committee for consideration. This is so that any issues associated with the implementation of the regime can be effectively resolved so as to provide the business community with the certainty that will allow them to effectively implement their Personal Property Securities Act compliance plans.

Graham Perrett (Moreton, Australian Labor Party) Share this | Link to this | Hansard source

I rise in support of the Personal Property Securities Amendment (Registration Commencement) Bill 2011. Back in 2009 the Labor government introduced legislation to provide one consistent law regarding personal property securities across the country and one online register. This replaced about 70 Commonwealth, state and territory laws and at least 40 registers, some still held in paper form. I well remember my time as an articled clerk when I seemed to spend half my time waiting to access some of those registers. I said to the Attorney-General before, and I will say it again on the public record, that he is putting articled clerks out of work. That is a good thing because it is simplifying their jobs.

Personal property securities are interests in personal property that secure a payment. For example, it might be a car loan for an individual or multimillion dollar company charges. Our sensible reform provides greater protection to consumers. For example, when the online register is up and running early next year, individuals in the market for a used car will be able to do an online search to see whether a particular car is being used as security for a loan. This bill will make technical but urgent amendments to the Personal Property Securities Act 2009 to enable the effective and stable operation of the PPS register next year. I understand the register is ready for final testing but some stakeholders, including banks, are concerned that the 1 February deadline is not feasible. I understand they need more time to prepare for the new system. States and territories also need more time to migrate their data and make the necessary legislative amendments, so it is important that we get the timing right for this momentous change.

This bill amends the definitions of 'migration time' and 'registration commencement time' to enable the Attorney-General to determine an earlier or later time for each. This is a practical and necessary measure to ensure the online register is stable and ready. Personal property securities reform is a part of this government's effort to slash red tape, remove duplication and deliver greater consistency across this wonderful nation. This is never easy. In fact, I am sure the Attorney-General can say it was like mustering cats on occasion. But at the completion of the trial about 4.6 million records will be transferred to the new PPS register. This is a massive undertaking in anyone's terms. A precipitate launch of the online register to meet an arbitrary deadline would be pointless and perhaps self-defeating. In response to the concerns of state and territory governments and other stakeholders like the banking and finance sector, the PPS will only become publicly available when stakeholders are confident to use the new system. The open-ended time frame provides greater flexibility to allow the Attorney-General to determine the best time to launch the online register.

On a related topic, I note in my local Quest paper on Thursday, 27 October that Cash Converters has taken out a prominent ad in my local newspaper calling on me to abandon reforms to payday lending. There is an ad with a photograph of me which is attributed to Ray Strange, but I hasten to point out that whilst Ray Strange does work for News Limited, it was Kim Smith who took the photograph. I recognise it because it is a photograph of me with my book. But, as the House is aware, payday loans offer consumers easy access to cash to meet urgent expenses. They are usually very short term and, unfortunately, very high interest. They can be as high as 38 per cent. These kinds of loans are preying on and exploiting desperate and vulnerable people who have legitimate reasons, mostly, for turning up—the washing machine or the car has died. However, with the exorbitant interest rates it is obviously not a good financial decision.

The government is acting because it is the right thing to do. I will not be intimidated by scare and smear campaigns from sectional interests. It has not worked for Clubs Australia and it will not work for Cash Converters. Their glossy ad urged people to bombard my office with complaints. Instead, I actually received emails like this one this morning, which I will read out. I will not name the person who sent it. It says:

Hi,

I noticed an advertisement in the Southern Start from Cash Converters where they oppose moves by yourself to provide some limits to their short term loans operations.

I don't exactly know what legislative plans you have, but what I do know is that these short term loan businesses charge extremely high interest and target the poor end of town. I believe that it is beyond question that these businesses exploit the poor.

This next bit is bolded:

If you are making legislative moves to protect the poor from businesses that exploit them, then I support you all the way.

Please send me any information you might have about your plans.

This was from a gentleman from Acacia Ridge.

I do not begrudge Cash Converters their right to spend their cash to state their case or even to organise a campaign against me. In fact, I met Paul Hartley and Greg Lemon from Cash Converters last week. I recognise their concerns. Obviously this legislation is important. We do not want to send people towards loan sharks. Cash Converters are a reputable business. They did not actually mention the ad. I think they might have done since it was already at the printing press. I do think in this instance they are out of step with the community.

The bill before the House shows how well this government is working with all the states and territories as well as the private sector to bring about reform and to get rid of red tape. I commend the Attorney-General on his consultative approach and commend the bill to the House.

Robert McClelland (Barton, Australian Labor Party, Attorney-General) Share this | Link to this | Hansard source

I would like to thank all members who spoke in this debate for their worthwhile contributions. As mentioned throughout the debate, the Personal Property Securities Amendment (Registration Commencement) Bill 2011 amends the definitions of the migration time and the registration commencement time in the Personal Property Securities Act 2009 so that the times can be determined rather than just be the default times in the PPS Act.

In my second reading contribution I set out the reasons for these amendments. Under the current legislation, if an earlier time is not determined by default the migration time will be 1 January 2012 and the registration commencement time will be 1 February 2012. But the amendments that we are dealing with will enable times to be determined for both migration time and registration commencement time which could be earlier or later than the default times in the PPS Act. The ability to determine the commencement of the PPS register will assist governments to ensure that stakeholders have confidence that the online PPS register will operate effectively.

I indicate our appreciation for the work that is being undertaken by stakeholders to ensure that this transition to the new system is effective. The government is doing what it can do in terms of roadshows and distributing information to inform small business. But, equally, a number of the larger financial institutions are undertaking considerable effort to educate their customers.

Personal property securities, as has been mentioned by a number of speakers, is currently governed by complex regulatory arrangements. But the PPS Act will replace these with a single, national, functional approach. The PPS reform will simplify over 70 Commonwealth, state and territory laws and replace the many existing registers of interest that complement these laws with the one PPS register. PPS reform is essential for making secured financing more accessible and efficient by lowering risks for lenders, increasing competition between finance providers and providing greater certainty for both lenders and borrowers.

In conclusion, PPS reform is a key aspect of the government's continued commitment to cooperation with the states and territories on the government's deregulation agenda and the National Partnership Agreement to Deliver a Seamless Economy. I would like to acknowledge the assistance of the states and territories in achieving this reform. All of the states have now passed their referral legislation. The states and territories have also made consequential amendments to their own legislation dealing with personal property securities interest. The passage of this bill and the commencement of the PPS regime in early 2012 is a significant achievement and will deliver major benefits for many sectors of the Australian economy. I commend the bill to the House.

Question agreed to.

Bill read a second time.

Ordered that this bill be reported to the House without amendment.