Keeping on top of the latest financial services regulatory & compliance trends?
Investing time in your professional development within a rapidly changing financial services industry is challenging. To meet that challenge, the Australian regulators weekly wrap is designed to keep you at forefront of your practice by quickly setting out the top 5 developments from the past week, analysis and practical considerations for the future.
- Commonwealth Integrity Commission (Treasury): the Government has committed $147 million to the development and operation of a Commonwealth Integrity Commission (CIC). The process has already started with the expansion of the Australian Commission for Law Enforcement Integrity (ACLEI). ACLEI’S jurisdiction will be expanded from 1 January 2021 to cover four new agencies . The second phase will be the establishment of the CIC, which will subsume ACLEI and cover the remainder of the public sector. The draft legislation comprises two Bills: 1) the draft Commonwealth Integrity Commission Bill, which will establish the CIC as a centralised agency to investigate criminality and corruption in the public sector; and 2) the draft Integrity and Anti-Corruption Legislation Amendment (CIC Establishment and Other Measures) Bill, which makes the necessary consequential amendments to existing Commonwealth legislation to support the introduction of the Commonwealth Integrity Commission Bill. The CIC will have greater investigatory powers than a Royal Commission to look into Federal sector corruption issues. These include the ability to: hold hearings and compel witnesses to testify; enter and search premises; require people to surrender documents and other evidence; use telecommunication interceptions; and, have individuals arrested and confiscate passports. Submissions on the draft legislation closes in February 2021. The key focus is to get the thresholds correct for what constitutes behavior which can trigger an investigation — from my review of the legislation, they look far too broad from a principles-based perspective i.e. ‘misuses their office’. The risk with these types of bodies is that they becomes tools for those with an axe to grind (and powers unto themselves) — the work to be done by the CIC will be critical, and the powers it wields immense, so getting the balance right from the start is important.
- Privacy Act (Treasury): the Government has released the terms of reference and issues paper for a wide-ranging review of the Privacy Act 1988 (Cth) (Privacy Act). The Government committed to a review following the Australian Competition and Consumer Commission’s Digital Platforms Inquiry in 2019. The review covers areas including: a) the scope and application of the Privacy Act; b) whether the Privacy Act effectively protects personal information and provides a practical and proportionate framework for promoting good privacy practices; c) whether individuals should have direct rights of action to enforce privacy obligations under the Privacy Act; d) whether a statutory tort for serious invasions of privacy should be introduced into Australian law; e) the impact of the notifiable data breach scheme and its effectiveness in meeting its objectives; f) the effectiveness of enforcement powers and mechanisms under the Privacy Act and how they interact with other Commonwealth regulatory frameworks; and g) the desirability and feasibility of an independent certification scheme to monitor and demonstrate compliance with Australian privacy laws. The review will be conducted by the Attorney-General’s Department and public submissions can be lodged up until 29 November 2020. One to watch — whatever is decided will affect all Australian businesses — you can access the issues paper here.
- ASIC Update (ASIC): Sean Hughes, ASIC Commissioner, gave a speech at the 30th Annual Credit Law Conference which is notable for the indications it provides of ASIC’s focus points. He stated that ASIC is prioritising: a) industry engagement on COVID-related issues. ASIC is closely monitoring how lenders are assisting consumers experiencing financial difficulties due to COVID-19. It is also focusing on the potential for unregulated fringe lenders who are using the pandemic to prey on vulnerable people; b) product intervention on continuing credit. ASIC is continuing to take action in this area to protect consumers from being sold high-cost unregulated credit. In September 2019, ASIC made its first industry-wide product intervention order (PIO) in relation to short-term credit, which prevented credit providers and their associates from charging fees and charges which exceed the short-term credit exemption in section 6(1) of the National Credit Code; c) enforcement action in the automotive industry; and, d) debt management firm licensing. This is an area of concern to ASIC, particularly in relation to vulnerable consumers, is the debt-management sector, which also includes services known as ‘credit repair’. My top read for the week, for the fact that it comes off the back of some large recent announcements and shake-ups at ASIC, and the detail it provides as to ASIC’s plans, you can read the speech here.
- Responsible lending (Treasury): on the 25 September 2020, the Government announced a suite of changes to Australia’s consumer credit framework contained in the National Consumer Credit Protection Act 2009 aimed at reducing the time it takes for individuals and small business to access credit while maintaining strong protections for vulnerable consumers. One aspect of the reforms amends the existing responsible lending obligations — in place will be a risk-based regime that allows lenders the flexibility to make decisions based on the characteristics of the borrower and the type of credit. Basically, Australia moves from a position where the lender is obligated to protect the customer from poor credit decisions to the reverse. The measures will commence on 1 March 2021, subject to the passing of legislation which is here. Public consultation on the exposure draft and explanatory material will close on 20 November 2020.
- Loan deferrals (APRA): Many authorised deposit-taking institutions (ADIs) have granted temporary relief to borrowers impacted by COVID-19, allowing them to defer loan repayments for a period of time. APRA is now publishing some of this data which you can read here. It is rather sobering reading. As at 30 September, data submitted by all ADIs indicates that $179 billion worth of loans have been granted temporary repayment deferrals, which is around 6.7 per cent of total loans outstanding. Housing loans make up the majority of total loans granted repayment deferrals, although SME loans have a higher incidence of repayment deferral with 10.8 per cent of SME loans subject to repayment deferral, compared with 7.4 per cent of housing loans. Exits from deferral continued to outweigh new entries for the third straight month in September, with $66 billion loans expiring or exiting deferral and $17 billion of entries approved or extended. Pace of exits increased significantly over the month, with total exits increasing 169 per cent from $24 billion in August. Happily, the majority of these loans have returned to a performing status.
Thought for the future: next year is going to be a really big one! Design & distribution, Financial Accountability regime, new Breach Reporting regime, Mortgage Brokers’ BID Regime. If you have not prepared your regulatory roadmap yet, now is the time before the Christmas break sets in.
(These views are my own and do not constitute legal advice. These updates are not designed to be comprehensive. Photo credit Tom Wheatley)