Senate debates

Monday, 7 September 2009

Automotive Transformation Scheme Bill 2009; Acis Administration Amendment Bill 2009; National Consumer Credit Protection Bill 2009; National Consumer Credit Protection (Fees) Bill 2009; National Consumer Credit Protection (Transitional and Consequential Provisions) Bill 2009

Second Reading

5:43 pm

Photo of Penny WongPenny Wong (SA, Australian Labor Party, Minister for Climate Change and Water) Share this | | Hansard source

I table a revised explanatory memorandum relating to the Automotive Transformation Scheme Bill 2009 and move:

That these bills be now read a second time.

I seek leave to have the second reading speeches incorporated in Hansard.

Leave granted.

The speeches read as follows—

Automotive Transformation Scheme Bill 2009

Introduction

The bill establishes the legislative framework for the new Automotive Transformation Scheme.

This bill, together with the ACIS Administration Amendment Bill, demonstrates once again the government’s commitment to securing the long-term viability of the automotive industry. Car making is a cornerstone of Australian manufacturing. It makes a critical contribution to Australian employment, skills, innovation, and exports. The automotive industry directly employs over 52,000 people. This scheme will help to secure these vital jobs as the industry faces intense pressure in the short-term as a result of the global economic downturn, as well as the long-term challenge of modernisation and renewal. The automotive industry is also one of Australia’s top export earners—despite the recent effects of the global economic downturn—with exports of $5.8 billion in 2008.

These are just some of the reasons why, on 10 November 2008, the government launched the $6.2 billion initiative, A New Car Plan for a Greener Future, the most comprehensive package ever devised for the Australian automotive industry. The Automotive Transformation Scheme, established by this bill, is a centrepiece of the new car plan and a vital complement to other elements of the plan, such as the $1.3 billion Green Car Innovation Fund.

Assistance under the Automotive Transformation Scheme will commence on 1 January 2011. The scheme will support the competitive investment and innovation needed to make the Australian automotive industry economically and environmentally sustainable. It will achieve this by increasing support for strategic investment in research and development, plant and equipment, and the production of motor vehicles.

The Automotive Transformation Scheme replaces the previous government’s Automotive Competitiveness and Investment Scheme—or ACIS for short—which was due to run until 2015. Assistance under the new scheme will continue until 31 December 2020.

The new scheme improves on the existing ACIS by placing a renewed focus on innovation, with increased support for eligible investment in R&D. Stimulating additional R&D—a major contributor to innovation—will improve productivity and build competitive advantage. The new scheme also requires participants to demonstrate a commitment to improving environmental outcomes. This will lead to the development of vehicles with lower fuel consumption and lower greenhouse gas emissions.

Innovation is the key to making the automotive industry greener and more internationally competitive. It will enable the industry to adapt to the challenges presented by changing consumer preferences and climate change. Above all, innovation is the key to creating long-term, full-time, high-skill, high-wage jobs.

A companion to this bill, the ACIS Administration Amendment Bill, makes amendments to the final year of ACIS. The amendments repeal ACIS stage 3 and provide additional assistance to motor vehicle producers in 2010. The amendments guarantee continuity in support for the industry, and will ensure a smooth transition from ACIS to the new Automotive Transformation Scheme.

Passage of this bill will give the automotive industry 10 years of policy certainty at a time when it is under acute pressure both in Australia and overseas. In the short term, the bill, in addition to proposed amendments to ACIS, will restore much needed confidence to deal with the global economic downturn. At the same time, the bill looks to the future by encouraging the industry to develop new technologies and take advantage of new opportunities.

In designing the scheme, the government recognised that a successful, innovative automotive industry needs a highly skilled workforce. This is why we will also require participants to demonstrate their commitment to boosting workforce skills and capabilities. Ensuring that scheme participants meet these obligations will provide significant benefits to the entire Australian economy.

This bill coincides with the legislated reduction of automotive tariffs from 10 per cent to five per cent on 1 January 2010. This will make Australia’s tariffs on passenger motor vehicles among the lowest in the world. This is consistent with the government’s belief that the long-term viability of the automotive sector depends on action to increase its innovation capacity, competitiveness and globally integration—not on tariff protection.

Main body

Replacing ACIS with the Automotive Transformation Scheme is consistent with the recommendation of the Review of Australia’s Automotive Industry by the Hon. Steve Bracks, which reported on 22 July 2008.

The bill establishes the framework for the scheme, with the administrative details to be included in regulations. This reduces the administrative complexity of the legislation and provides the flexibility required to deal with changing circumstances in the Australian automotive industry. The regulations are currently being drafted and will be subject to industry consultation later in the year.

The new scheme provides assistance to participants in the form of grants, instead of the duty credits paid under ACIS. The move to grants will assist in the administration of the scheme and remove some of the complexity in the current legislation. The automotive industry has endorsed this change.

Despite the move to grants, the payment timetable for the new scheme will be similar to the one for ACIS. This will provide continuity for participants, which is especially important during these difficult times.

The scheme provides $3.4 billion of capped and uncapped transitional assistance to registered participants.

The bill guarantees up to $2.5 billion over 10 years in capped assistance—available to both vehicle producers and supply chain participants—through a standing appropriation. Participants will be eligible to receive up to:

  • $1.5 billion in capped assistance over stage 1, running from 2011 to 2015; and
  • $1 billion in capped assistance over stage 2, running from 2016 to 2020.

The standing appropriation will give the industry the certainty it needs to plan long-term investment.

The move from duty credits to grants also requires further changes from the approach set out in ACIS to ensure the effective administration and accountability of the scheme. The bill allows the Commonwealth to recover assistance that is overpaid to participants. The standing appropriation will allow debts recovered from participants to be returned to the scheme for redistribution.

The bill also includes a strong monitoring regime, including provision for authorised officers to obtain a monitoring warrant to check compliance and substantiate information. The scheme imposes obligations on participants to ensure authorised officers appointed by the Commonwealth can verify information efficiently and effectively. Contravening these requirements will be an offence. These provisions are necessary to protect the Commonwealth, since assistance is paid almost immediately based on a participant’s claim.

The scheme can adapt to industry investment cycles by allowing unspent money in a calendar year to be rolled over to other years within the stage.

The new scheme puts a renewed emphasis on stimulating R&D. It increases the rate of claims for investment in eligible R&D from 45 per cent to 50 per cent. The aim is to support R&D activities that would not have taken place without assistance. The rate of assistance for investment in approved plant and equipment will be reduced from 25 per cent for the supply chain to 15 per cent to make investment in R&D even more attractive.

The bill will commence on 1 July 2010 to allow for pre-registration of existing ACIS participants. This will guarantee continuity of assistance when payments under the new scheme commence from 1 January 2011. The transition to the new scheme will also be smoothed by provisions that allow for the recognition of existing eligible investments made under ACIS.

While the scheme provides significant funding for the industry over the next decade, the ultimate aim is to make it economically and environmentally sustainable. That is why the funding is front-loaded in the early years and will be reduced to zero by 2020.

Conclusion

This bill is the result of extensive policy design and industry consultation, and it has strong stakeholder support.

Its ultimate goal is to reinvigorate the automotive industry so that it can go on contributing to Australia’s prosperity for decades to come.

I commend this bill to the House.

ACIS Administration Amendment Bill 2009

The bill amends the ACIS Administration Act 1999 to ensure the smooth transition from the current Automotive Competitiveness and Investment Scheme, ACIS for short, to its replacement, the Automotive Transformation Scheme.

This bill, together with the Automotive Transformation Scheme Bill, will give effect to the government’s policies to revitalise the Australian automotive industry though increased support for investment and innovation. This support is necessary to ensure the long-term economic and environmental sustainability of the industry.

The replacement of assistance under ACIS from 2011, by a new, retargeted and greener scheme is a key element of the government’s New Car Plan for a Greener Future. It demonstrates once again the government’s commitment to secure the future of this vital industry to the Australian economy.

This bill repeals ACIS stage 3 to allow for its replacement with the Automotive Transformation Scheme. The bill also provides increased assistance to motor vehicle producers in 2010, as part of the transitional arrangements prior to the establishment of the Automotive Transformation Scheme. This increase in transitional support in 2010 provides the industry with the certainty it requires to continue long-term strategic investment as it meets the challenges of a reduced rate of tariff protection and the global economic downturn. The Australian government believes that the key to the future of the industry is innovation, not tariff protection.

The bill also corrects an anomaly in ACIS where the level of assistance for vehicles sold for export is less than assistance for vehicles sold domestically.

I commend this bill.

National Consumer Credit Protection Bill 2009

Today, I introduce a bill that will deliver on the commitment of the Rudd government to modernise Australia’s consumer credit laws.

This bill will—for the first time in our country’s history—provide for one, single, standard and uniform regime for consumer credit regulation and oversight.

And for the first time, Australian financial services consumers will have a truly national set of laws.

The bill follows the historic agreement by the Council of Australian Governments in October 2008 to implement a two-phase approach for the Australian government to take over responsibility for the regulation of consumer credit.

By replacing the state-based Uniform Consumer Credit Code, which operates inconsistently across the eight jurisdictions, it will also reduce duplication, red tape and compliance costs for business.

This bill also has the benefit of being “road-tested” through a consultation process involving industry and consumer groups. The exposure drafts were released for public comment. The legislation was then reviewed and amended in light of the submissions received by the government.

The new national regime includes several components, which I will now outline.

National licensing regime

The National Consumer Credit Protection Bill, together with the National Consumer Credit Protection (Transitional and Consequential Provisions) Bill, and the National Consumer Credit Protection (Fees) Bill, will establish, for the first time, a comprehensive national licensing regime for people engaging in credit activities.

Lenders and providers of consumer credit broking services must be registered with the Australian Securities and Investments Commission, then obtain an Australian credit licence.

Participants will need to be registered or licensed if they engage in any of the following activities:

  • providing credit or consumer leases;
  • collecting money due under a credit contract or a consumer lease (including lenders who have ceased providing credit, or assignees who have purchased the debts from the original credit provider);
  • exercising rights as a mortgagee or the beneficiary of a guarantee;
  • acting as an intermediary between the borrower and the lender. This principally covers finance brokers, however the definition also covers bodies such as mortgage managers and aggregators; or
  • suggesting or providing assistance in respect of a specific credit contract or lease with a particular credit provider.

The licensing process will start on 1 January 2010.  Before that date, anyone engaging in credit activities will need to be registered with ASIC, and must apply for registration between 1 November 2009 and 31 December 2009.

They will then have the six-month period between 1 January 2010 and 30 June 2010 to apply for an Australian credit licence.

Anyone who engages in credit activities for the first time on or after 1 January 2010 must apply for, and receive, an Australian credit licence before starting business.

The two-stage process has been adopted to facilitate a smooth transition to licensing. The registration procedure has been designed to be straightforward for industry and can be completed online. The two-stage process also gives industry adequate time to meet all the licensing requirements.

It is expected that ASIC will issue guidance on the procedures for becoming a licence holder including guidance for small businesses.

To qualify for an Australian credit licence, lenders and brokers must meet minimum training requirements and have adequate financial and human resources to meet their obligations.

Licensees must also meet enhanced standards of conduct including the requirement to act honestly, efficiently and fairly. They must also adequately train and supervise people who act on their behalf.

Authorised deposit-taking institutions can be streamlined to a licence because we are confident that these institutions already satisfy the entry requirements.

We also propose to similarly streamline, by way of regulations, the application process for Western Australian brokers who hold an “A” or “B’ class licence, because of the rigour of the licensing scheme in that state.

As well, consumers will be able to resolve consumer credit disputes outside the court system at no cost to them, as licensees must be members of an external dispute resolution scheme.

The new scheme enables ASIC to refuse an application if the person does not meet those standards.

ASIC will also be given the power to cancel or suspend a licence, or to ban people from engaging in credit activities, where this is necessary to protect consumers from the risk of financial harm and to maintain the integrity of the credit industry.

A national licensing scheme will mean that a person who is banned or loses their licence or registration will be unable to legally engage in credit activities anywhere in Australia. Currently, there is nothing to prevent a person banned in one state or territory from continuing to operate as a broker or lender simply by moving to a different jurisdiction.

Responsible lending obligations

The National Consumer Credit Protection Bill will establish new responsible lending conduct requirements.

The requirement to meet the responsible lending obligations will be a key condition of holding an Australian credit licence.

When offering consumer credit, lenders and assistants such as finance brokers will be required to do two things. Firstly, they must assess that the loan is not unsuitable for the consumer.

And secondly, they must assess that the consumer has the capacity to repay the loan. In making this assessment, they will need to make reasonable inquiries and verify the details provided to them. To assist consumers to make better-informed borrowing decisions, or in the event of a dispute, consumers will be able to request a copy of this assessment.

All consumers applying for credit will be provided with a Credit Guide which will inform them of key information early in the process of a credit-related transaction. It is important that the consumer knows who they are dealing with, that the credit provider is licensed—and has therefore met the stringent entry requirements of participating in the credit market—and also has early advice of any fees and costs.

As part of the responsible lending requirements, licensees will also have to let consumers know, upfront, what fees and charges they will need to pay before the loan is suggested or entered into. As well, brokers will need to disclose any commissions if the suggested loan is secured, and credit providers will continue to disclose various commissions related to the matter.

Further, consumers will now be made aware of their right to request a variation in their credit contract in the event of financial hardship, rather than continue to suffer distress or seek to refinance their loan and exacerbate their debt levels.

Additional measures have been included to help protect consumers’ family home by requiring more rigorous assessment of any credit offer that will require the consumer to sell their home in order to meet the obligations of that contract.

These provisions will help consumers to make better informed choices and use credit more effectively.

ASIC’s role during the transition to the new regime

To ease the transition for industry and allow the national credit regime to be implemented in a sensible and practical fashion, the government has made some key changes in light of the insights gained through the consultation process.

Firstly, we have simplified the way in which the proposed responsible lending arrangements will apply. We have removed the requirement for lenders to meet credit assistance conduct obligations when providing assistance in relation to their own credit products.

Secondly, we have delayed the commencement of the responsible lending obligations to 1 January 2011. This will give industry more time to implement the necessary changes to support responsible lending.

Thirdly and importantly, the government has given ASIC greater flexibility to exempt or modify the licensing and registration requirements in the law. During the transition period, ASIC will play a key role in providing assistance to industry.

The government has given ASIC greater resources to ensure it will be proactive in assisting industry to comply with the law. ASIC will undertake intensive industry consultation to explain and clarify the licensing requirements, and will work closely and cooperatively with industry.

I am confident that, by working together closely during this process, industry and ASIC will achieve a seamless and successful transfer to the new credit regime.

Sanctions and remedies

The National Consumer Credit Protection Bill will enhance ASIC’s enforcement powers. The relevant provisions are consistent with the Corporations Act 2001 and other Commonwealth consumer protection laws.

The regulatory framework is supported by a tiered approach to the sanctions regime, which includes:

  • criminal penalties for licensee misconduct, including possible imprisonment for up to two years for those who lend contrary to the responsible lending requirements;
  • civil penalties for licensee misconduct which enable ASIC to seek fines of up to $220,000 for an individual and $1.1 million for a corporation;
  • infringement notices enabling ASIC to act quickly to penalise certain breaches of the law; and
  • consumer remedies, such as compensation, which allow consumers to seek redress for their loss and damage from a licensee.

Additionally, ASIC’s current regulatory powers under the Australian Securities and Investments Commission Act 2001 will be replicated in the Credit Bill.

New dispute resolution mechanism

The National Consumer Credit Protection Bill will introduce a three-tier dispute resolution system for consumer credit issues. This will make it easier and less costly for consumers to have their disputes resolved.

The three-tier system will give consumers access to:

  • the licensee’s internal dispute resolution process;
  • the licensee’s ASIC-approved external dispute resolution scheme; and
  • the Federal Court, Federal Magistrates Court and the courts of the states and territories, including the magistrates or local courts.

Consumers will also have access to an “opt-in” streamlined court procedure for claims of compensation for loss or damage up to $40,000.

These streamlined procedures will also apply to several key consumer rights under the National Credit Code. For example, consumers will be able to utilise the streamlined processes for:

  • applications for hardship variations;
  • postponement of enforcement actions;
  • regaining possession of mortgaged goods; and
  • action against unconscionable fees and charges imposed by their credit provider.

The “opt-in” streamlined court procedure is designed to ensure consumers continue to receive the benefit of accessibility to dispute resolution in terms of location, procedural simplicity and minimised legal costs.

The procedure will provide consumers with informal court proceedings where legal forms and technicalities do not have to be observed and legal representation is not required.

National Credit Code

The new National Credit Code will also provide a consumer protection framework for consumer credit and related transactions.  It largely replicates the Uniform Consumer Credit Code, enacted in the Consumer Credit (Queensland) Act 1994 and in force in the states and territories since 1996. 

The code will be enacted as a schedule to the National Consumer Credit Protection Bill.

The National Credit Code is as similar to the Uniform Consumer Credit Code as is practicable, except where the Commonwealth has specifically decided to enhance or extend its operation.

The code has been extended in the following ways:

  • It covers credit for residential investment properties, providing important protections to “mum-and-dad” property investors.
  • It increases the monetary threshold under which consumers can request a change to certain terms of their credit contract on the grounds of financial hardship from a fluctuating figure of around $330,000 to a fixed figure of $500,000. The code includes a new, flexible power to raise this threshold if necessary. This amendment will enable more consumers to apply for changes to the terms of their credit contract when in financial hardship, for example because of illness or unemployment. This increased threshold also applies to requests for stays of enforcement. In addition, credit providers will have to respond to such requests within 21 days.
  • Credit providers will be prohibited from using essential household goods as security.
  • Credit providers will be required to give consumers information when a consumer defaults on their contract or a direct debit is dishonoured.
  • As well, the code reduces the potential for unscrupulous lenders to avoid the application of the law to consumers.

The National Credit Code also includes amendments to enable the former Uniform Consumer Credit Code to operate effectively as Commonwealth legislation.

The National Consumer Credit Protection Bill and the transitional bill contain power to exempt persons from some or all of the regulatory requirements. This means that the requirements in the Bills can be “turned off” or varied, enabling the application of the bills to be refined or calibrated to meet different practices across the credit industry; or to be applied in a sensible and practical way.

Point-of-sale retailers who provide credit assistance to consumers will be exempt from the requirements, with a review of the issue of regulatory oversight to occur within 12 months. However, the providers of credit and leases at point of sale will not be exempt.

In addition, debt collectors who hold a state or territory licence and are authorised by a lender to collect a debt will be exempt for a 12-month period, pending further consultation with state and territory governments and industry.

Conclusion

The National Consumer Credit Protection Bill introduces sweeping changes to our consumer credit laws. It establishes the foundations for a new robust regulatory framework, on which phase two of the COAG reforms will be built.

As well as making the consumer credit system fairer, more consistent and more workable, the new regime will significantly improve the effectiveness of protection for consumers. It will also address many of the regulatory gaps that have plagued the state regulatory system.

Full details of the measures in the bill are contained in the explanatory memorandum.

I commend this bill.

National Consumer Credit Protection (Fees) Bill 2009

The National Consumer Credit Protection (Fees) Bill forms part of a reform package which will provide for one, single, standard and uniform regime for consumer credit regulation and oversight.

The bill enacts provisions about the imposition of fees, for chargeable matters, collected by the Australian Securities and Investments Commission (ASIC).

These chargeable matters include such things as the lodgment of a document with, or the inspection of a register kept by, ASIC.

Amongst other things, the National Consumer Credit Protection (Fees) Bill also provides for the imposition of differential fees in relation to a chargeable matter. For example, under the proposed regulations to this bill, different fees will be imposed on the lodgment of different documents, such as licence applications and annual compliance certificates.

The National Consumer Credit Protection (Fees) Bill is a separate bill in order to comply with the requirements of section 55 of the Constitution. That constitutional provision provides, in part, that laws imposing taxation shall deal only with the imposition of taxation, and that any other provisions dealing with any other matter must be dealt with separately.

I commend this bill.

National Consumer Credit Protection (Transitional and Consequential Provisions) Bill 2009

The National Consumer Credit Protection (Transitional and Consequential) Provisions Bill sets out the transitional and consequential arrangements to support a smooth and comprehensive transition from the current state based regulation of consumer credit to the new national scheme under the National Consumer Credit Protection Bill. This is crucial to ensure that in the transition to the new regulatory framework, consumers’ rights are preserved and the disruption to business is minimised.

The key elements of the National Consumer Credit Protection (Transitional and Consequential Provisions) Bill are that:

  • it sets out the requirement for persons currently engaging in credit activities to register with the Australian Securities and Investments Commission (ASIC) prior to becoming holders of an Australian credit licence. The procedures for applying for an Australian credit licence are contained in Chapter 2 of the National Consumer Credit Protection Bill 2009;
  • it will substitute existing rights and liabilities under the state based Uniform Consumer Credit Code with equivalent rights and liabilities under the National Credit Code;
  • it will substitute existing court proceedings in train under the Uniform Consumer Credit Code with equivalent new proceedings under the National Credit Code;
  • it provides that the National Credit Code does not apply to state or territory tribunal proceedings; and
  • it grants functions and powers in relation to appeal, review or enforcement proceedings.

Both the National Consumer Credit Protection Bill, and the National Consumer Credit Protection (Transitional and Consequential Provisions) Bill, provide for a broad regulation-making power, in recognition of the need for flexibility to deal with circumstances that may arise in the future.

Such a power ensures that any necessary consequential amendments can be made without the need for the enactment of another Act.

I commend thi