With the Treasurer scheduled to announce the Australian government budget on March 29 as a likely curtain-raiser for the election, and only seven Parliamentary sitting days between now and then, there are several important pieces of financial services legislation that may lapse when the current Parliament is dissolved.
They include the Financial Accountability Reform Bill 2021, the National Consumer Credit Protection Amendment (Supporting Economic Recovery) Bill 2020 and the Financial Services Compensation Scheme of Last Resort Levy Bill 2021.
A couple of the bills are highly controversial – one that waters down the responsible lending provisions of the consumer credit law and one that establishes a compensation scheme that is well short of industry expectations – and the government may be happy to let them fade away.
The Financial Accountability Reform Bill has been referred to the Senate Economics Legislation Committee, with a report due by mid-February. This timing all but guarantees that the bill will not be passed in the life of this Parliament.
Financial Accountability Reform Bill 2021. The bill extends the obligations first introduced in the Banking Executive Accountability Regime in 2018 to the superannuation and insurance industries and replaces BEAR for the banking industry. The BEAR legislation will be repealed when FAR is passed.
The bill imposes obligations on directors and senior executives to conduct their business honestly and with care, skill and diligence. Companies must nominate executives to be responsible for areas of business operations. A deferred remuneration obligation is included to ensure remuneration is reduced if accountability obligations are not met.
National Consumer Credit Protection Amendment (Supporting Economic Recovery) Bill 2020. The bill removes the responsible lending provisions from the Act, except where they apply to high-risk lending (such as small amount credit contracts and consumer leases), relying instead on APRA’s prudential supervision to regulate lending practices.
Lenders will be entitled to rely on the information provided by borrowers, in the absence of reasonable grounds to suspect that information is unreliable. This would replace the current “lender beware” approach with a “borrower responsibility” approach.
The bill also extends the best interest duty that currently applies to mortgage brokers to other “credit assistance providers, and it gives the responsible minister power to set non-ADI credit standards.
Financial Services Compensation Scheme of Last Resort Levy Bill 2021. The proposed scheme will provide compensation to consumers where they have an Australian Financial Complaints Authority determination in their favour and where the relevant financial institution has not paid the consumer in accordance with the determination.
Court and tribunal rulings will be outside its scope. Compensation will be capped at A$150,000.
For a claim to be paid, AFCA must have been notified within 12 months that the company has not complied with a determination. In addition, the company must be unable to pay the compensation owed.
Specific products and services are those that financial institutions with an Australian financial services licences or an Australian credit licence are authorised to provide and where they are required to be AFCA members. Products and services provided by voluntary AFCA members will not be covered.