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2011
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
BANKING AND CONSUMER CREDIT PROTECTION AMENDMENT
(MOBILITY AND FLEXIBILITY) BILL 2011
EXPLANATORY MEMORANDUM
Circulated by the authority of Adam Bandt
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Banking and Consumer Credit Protection Amendment
(Mobility and Flexibility) Bill 2011
OUTLINE
The Banking and Consumer Credit Protection Amendment (Mobility and Flexibility) Bill 2011
(the Bill) amends the Banking Act 1959 by:
· allowing consumers to switch bank accounts more easily, by requiring the new
authorised deposit-taking institution (ADI), after being advised to do so by the account
holder, to arrange for all direct debits and direct credits made in relation to the account
holder's old ADI to be made instead in relation to the new ADI for 13 months, and to oblige
the old ADI to provide the new ADI with all the information necessary to comply with this;
and
· providing consumers with more transparent information regarding their term
deposits, by requiring their ADI to give written notice of the interest rate and the term that
will apply if the money in the term deposit is automatically reinvested at the end of the
current term, and any special term interest rates and other special offers available from the
ADI at that time.
The Bill also amends the National Consumer Credit Protection Act 2009 by:
· providing consumers with more transparent information about their rights, by
requiring lenders to clearly and prominently inform borrowers when they take out a loan of
the provisions of the Act which relate to unconscionable charges; and
· requiring mortgage indemnity insurance contracts to be terminated when the
mortgage it relates to is also terminated, and requiring the credit provider to pay the
debtor or credit the debtor with an actuarially fair rebate of premium paid under the
contract, and allowing the credit provider, in turn, to recover the amount of the rebate from
the insurer.
NOTES ON CLAUSES
Clause 1 - Short Title
This is a formal provision specifying the short title.
Clause 2 - Commencement
The Bill's provisions are to commence 28 days after the Bill receives Royal Assent
Clause 3 - Schedules
This clause provides that the Banking Act 1959 and the National Consumer Credit Protection Act
2009 are amended as set out in Schedules 1 and 2.
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Schedule 1 - Amendments to the Banking Act 1959
Item 1 gives effect to new sections 9AG and 9AH of the Act, as outlined in this Bill.
Item 2 inserts sections 9AG and 9AH into the Act.
Section 9AG - Variation of conditions of authorities--switching services
Subsection 9AG(1) empowers and requires the Australian Prudential Regulation Authority
(APRA) to vary the conditions of existing section 9 authorities such that authorised deposit-
taking institutions (ADIs) abide by the provisions of this section.
Subsection 9AG(2) requires ADIs to offer switching services to personal account holders.
Subsection 9AG(3) explains how such a switching service would operate. Personal account
holders advising their new ADI that they wish to transfer one or more transaction accounts from
their existing ADI(s) to their new ADI will empower the new ADI to arrange for all direct debits
and direct credits made in relation to the old accounts to be made instead in relation to the new
account.
Subsection 9AG(4) obliges the old ADI to cooperate with the new ADI, by requiring the old ADI
to provide all the information necessary for the new ADI to comply with subsection 3, and to
otherwise facilitate the transaction account(s) by all reasonable means.
Subsection 9AG(5) defines `direct credit', `direct debit' and `switching service' for the purposes of
this section.
Section 9AH - Variation of conditions of authorities--term deposits
Subsection 9AH(1) empowers and requires APRA to vary the conditions of existing section 9
authorities such that authorised deposit-taking institutions (ADIs) abide by the provisions of
this section.
Subsection 9AH(2) requires any ADI offering term deposits to give written notice to the holder
of a term deposit at least 15 working days before the end of the term the following information:
the interest rate and the term that will apply if the if the funds are automatically reinvested; and
any special term interest rates, special interest rates or additional bonus interest rates that are
available from the ADI at that time. Such information is required to be set out clearly and
prominently on the written notice.
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Schedule 2 - Amendments to the National Consumer Credit Protection Act 2009
New provisions relating to unjust transaction and unconscionable interest and other charges
Item 1 inserts a new subsection 17(4A) into the National Credit Code relating to unjust
transactions and unconscionable interest and other charges in credit contracts.
This new subsection requires the credit contract to contain information that expressly advises
the debtor of any unjust transactions and unconscionable interest and other charges as defined
in the National Credit Code, as well as the debtor's rights under those provisions.
New provisions relating to mortgage indemnity insurance
Item 2 inserts a new subsection 17(15A) into the National Credit Code relating to information
about recovery of insurance premiums.
This new subsection requires contracts of the type mentioned in sections 147A, 148 and 149 of
the National Credit Code (i.e. mortgage indemnity insurance contracts) to expressly advise the
debtor of the debtor's rights under these sections.
Item 3 inserts a new section 147A into the National Credit Code relating to the termination of
mortgage indemnity insurance contracts. It contains 5 subsections:
Subsection 147A(1) requires a mortgage indemnity insurance contract relating to a mortgage
contract to be terminated when the mortgage contract is terminated.
Subsection 147A(2) requires the mortgage credit provider to pay the debtor or credit the debtor
with a rebate of premium paid under the mortgage indemnity insurance contract, within 28
days of the mortgage indemnity contract being terminated.
Subsection 147A(3) allows the regulations to dictate the amount of rebate that must be paid
under subsection 2, but requires the regulations to provide for an actuarially fair amount of
rebate.
Subsection 147A(4) enables the mortgage credit provider, which has paid the debtor a rebate of
premium paid under a mortgage indemnity insurance contract as per subsection 2, to, in turn,
recover the amount of that rebate from the insurer.
Subsection 147A(5) gives effect to this section despite any provisions in any mortgage
indemnity insurance contract.
Item 4 clarifies subsection 149(1) of the National Credit Code.
END.
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