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January 23, 2014

Credit Reporting Privacy Code registered

The Credit Reporting Privacy Code (CR Code), a mandatory code that binds credit providers and credit reporting bodies, was registered on the OAIC’s Codes Register on 22 January 2014 and will take effect from 12 March 2014.

Among other things, the new Part IIIA of the Privacy Act and the Privacy Regulations 2013 restricts the types of credit information that may be disclosed to Credit Reporting Bodies (CRBs), the circumstances in which that information may be disclosed by a CRB to Credit Providers (CPs) and affected information recipients and their handling of that disclosed information.

The CR code supplements the new credit reporting laws by further defining the obligations of CRBs, CPs, and affected information recipients. It replaces the Credit Reporting Code of Conduct issued under Section 18A of the Privacy Act 1988 (which will be repealed on 12 March 2014).

The CR code contains both mandatory provisions and a high level summary of the provisions of Part IIIA of the Privacy Act 1988 that provide the context for the CR code obligations.

A breach of a mandatory provision of the CR code is a breach of the Privacy Act and the Information Commissioner can use his enhanced powers under the privacy reforms, including agreeing enforceable undertakings or seeking civil penalties, in relation to any breaches.

The CR code was developed by the Australian Retail Credit Association (ARCA) in consultation with industry and consumer groups.

While the CR code adds to aspects of the credit reporting obligations, the CR code does not encompass all aspects of Part IIIA: compliance with the CR code alone will not achieve full compliance with Part IIIA.

From 12 March 2014, a credit provider must be a member of an EDR scheme recognised under the Privacy Act to be able to participate in the credit reporting system.

Commercial lenders and businesses who are not already in a consumer credit EDR scheme will be required to join an EDR scheme.

Credit providers, as defined in s 6G of the Privacy Act, includes a bank, an entity where a substantial part of its business is provision of credit, a retailer that issues a credit card in connection with sale of goods or supply of services, a supplier which provides credit in relation to sale of goods or supply of services where repayment of credit is deferred for at least 7 days and a lessor who provides credit in connection with hiring, leasing or renting of goods and credit is in force for at least 7 days.

Only credit providers who are licensees under Chapter 3 of the National Consumer Credit Protection Act or prescribed by the Regulations and mortgage insurers will be able to access repayment history information. But all credit providers will be able to access an expanded range of consumer credit information.

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Posted 23rd January 2014 by David Jacobson in Compliance, Financial Services, Privacy

January 16, 2014

New technical FAQs on the Financial Claims Scheme

The Australian Prudential Regulation Authority (APRA) has updated its technical FAQs for ADIs relating to the implementation of the Financial Claims Scheme (FCS) requirements contained in APS 910.

New topics include:

  • If a trust has more than one trustee, should ADIs apportion the account entitlement across each trustee?
  • How are fees, charges and duties treated?
  • Liability of indirect ADI participants in the clearing and settlement systems (also known as Tier 2 ADIs) for sending payment instruction information directly to the RBA.

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Posted 16th January 2014 by David Jacobson in Financial Services

December 30, 2013

The regulatory schedule for 2014

2014 begins with some uncertainty: in addition to its legislation repealing the carbon tax and the mining tax, the Government has indicated it will be changing FOFA and conducting a Financial System Inquiry. Its charities changes have also been held up in the Senate.

It will also be "cleaning up" announced but unimplemented tax and superannuation changes. The Superannuation Guarantee charge percentage increase from 9.25% to 9.5% scheduled for 1 July 2014 has been postponed. The rate will remain at 9.25% until 30 June 2016.

But some significant changes will definitely commence in 2014, particularly the privacy changes commencing on 12 March.

1 January 2014

Anti-bullying law: anti-bullying legislation comes into effect on 1 January 2014 and will enable victims of workplace bullying to apply directly to the Fair Work Commission for an order that the bullying stop.

Small businesses will be apply to apply for External Dispute Resolution for disputes on loans up to $2 million

Risk management: New APRA standards for ADIs requiring a chief risk officer commence.

The Financial Claims Scheme single customer view commences.

The National Regulatory Scheme for Community Housing will also start in January.

The new statutory definition of charities will commence, notwithstanding the Government's proposed changes to the sector.

Other key dates

Personal Property Securities Act transition ends on 31 January 2014: pre-30 January 2012 securities must be registered on the PPS Register to retain priority.

National Gambling Reforms (including daily ATM limits in gambling venues) commence on 1 February 2014.

The Co-operatives National Law commences in NSW and Victoria on 3 March and later in the year in other States and Territories.

The Privacy Amendment Act commences on 12 March 2014 including changes to credit reporting.

Gender equality: from 1 April 2014 businesses with 100 or more employees will be required to lodge reports each year containing information relating to various gender equality indicators.

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Posted 30th December 2013 by David Jacobson in Charities, Compliance, Corporations Act, Financial Services, Privacy, Superannuation, Tax, Workplace

UBS gives EU over BBSW

ASIC has accepted an enforceable undertaking (EU) from UBS AG (UBS) in relation to potential misconduct involving the Australian Bank Bill Swap Rate (BBSW).

In July 2012, UBS reported to ASIC that it had found evidence of conduct between 2005 and 2011 seeking to influence its BBSW submissions, based on how the submissions may benefit UBS' derivatives positions.

The discovery was made following its global internal investigation relating to its LIBOR conduct.

In February 2013, UBS withdrew from the BBSW submissions panel.

At ASIC's request, UBS engaged an independent expert to conduct a review of BBSW submissions. The expert found that any market impact was insignificant.

UBS will also make a voluntary contribution of $1 million to fund independent financial literacy projects in Australia.

Since 27 September 2013 the BBSW has been electronically calculated, and the panel banks no longer make submissions. The BBSW calculation is different from the LIBOR calculation.

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Posted 30th December 2013 by David Jacobson in Corporations Act, Financial Services

Gambling reforms to commence on 1 February 2014

The Government's Bill to repeal parts of the National Gambling Reforms has not been passed by the Senate (Background).

A $250 a day ATM withdrawal limit will apply for gaming venues (other than casinos) from 1 February 2014.

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Posted 30th December 2013 by David Jacobson in Financial Services

Domestic systemically important banks in Australia

APRA has released an information paper on its framework for dealing with domestic systemically important banks (D-SIBs) in Australia.

Banks identified as D-SIBs have higher loss absorbency (HLA) capital requirements.

Based on size, interconnectedness, substitutability and complexity, APRA has determined that the following authorised deposit-taking institutions are D-SIBs:
•Australia and New Zealand Banking Corporation
•Commonwealth Bank of Australia
•National Australia Bank
•Westpac Banking Corporation.

The HLA capital requirement for D-SIBs is intended to reduce the probability of failure compared to non-systemic institutions, reflecting the greater impact a D-SIB failure is expected to have on the domestic financial system and economy.

The D-SIB framework in Australia focuses only on the larger banks. Other authorised deposit-taking institutions (ADIs), such as smaller banks, credit unions and building societies lack the scale and scope of banking activities to be considered within a D-SIB framework.

The D-SIB framework will come into effect from 1 January 2016.

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Posted 30th December 2013 by David Jacobson in Financial Services

December 23, 2013

FOFA changes announced

The Assistant Treasurer has announced proposed amendments to the Future of Financial Advice (FOFA) legislation.

The Government's amendments will include:

  • removing the opt-in requirements so that advisers no longer need to seek their client’s agreement every two years
  • restricting fee disclosure statements to new clients from 1 July 2013
  • removing 'catch-all' from the best interests duty of advisers
  • amending the best interests duty to explicitly allow for the provision of scaled advice to enable consumers to receive "one-off advice" from financial advisers
  • exempting general advice from conflicted remuneration: the ban on conflicted remuneration only applies to personal financial advice
  • amending grandfathering: advisers can move between licensees whilst continuing to access grandfathered benefits.

ASIC's response

ASIC will not take enforcement action in relation to the specific FOFA provisions that the Government is planning to repeal. For example, ASIC will not take action for breaches of current section 962S of the Corporations Act 2001, which requires fee disclosure statements to be provided to retail clients with ongoing fee arrangements entered into before 1 July 2013.

ASIC will review and consult on its regulatory guides on FOFA once the proposed amendments have been made.

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Posted 23rd December 2013 by David Jacobson in Corporations Act, Financial Services, Future of Financial Advice Reforms

APRA’s finalises standard on Basel III liquidity

The Australian Prudential Regulation Authority (APRA) has released its final position on implementation of the main elements of the Basel III liquidity reforms for authorised deposit-taking institutions (ADIs) in Australia.

Prudential Standard APS 210 Liquidity and Prudential Practice Guide APG 210 Liquidity come into force on 1 January 2014.

An ADI must actively manage its intraday liquidity positions and risks in order to meet payment and settlement obligations on a timely basis under both normal and stressed conditions.

The Basel III liquidity reforms involve two new quantitative measures: a 30-day Liquidity Coverage Ratio (LCR) to address an acute stress scenario and a Net Stable Funding Ratio (NSFR) to encourage longer-term funding resilience.

Retail deposits are divided into ‘stable’ and ‘less stable’ portions of funds.

Certain types of deposits are considered more likely to be withdrawn in a time of stress. These include high-value deposits (i.e. deposits above any government deposit guarantee limit), deposits from customers who do not have other established relationships with an ADI that make the deposit withdrawal unlikely, deposits where the internet is integral to the design, marketing and usage of the account (on-line accounts) and deposits with promotional interest rates (heavily rate-driven).

Cash outflows related to fixed or term deposits with a residual maturity or withdrawal notice period of greater than 30 days will be excluded from LCR calculations if the depositor has no legal right to withdraw deposits within the 30-day horizon of the LCR, or if early withdrawal results in a significant penalty that is materially greater than the loss of interest.

If an ADI allows a depositor to withdraw such deposits despite a clause that says the depositor has no legal right to withdraw, the entire category of these funds must be treated as demand deposits.

However, an ADI can allow depositors experiencing hardship to withdraw their term deposits without changing the treatment of the entire pool of deposits.

The LCR will become effective from 1 January 2015. The NSFR will become effective from 1 January 2018.

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Posted 23rd December 2013 by David Jacobson in Financial Services

Financial System Inquiry terms of reference finalised

The Treasurer has announced the final terms of reference for the Government’s Financial System Inquiry.

The Inquiry panel will consist of Mr David Murray AO (Chair), Professor Kevin Davis, Mr Craig Dunn, Ms Carolyn Hewson AO and Dr Brian McNamee AO.

Submissions will open in early January and close at the end of March 2014.

The Inquiry will publish an interim report in mid-2014 setting out initial findings.

A final report is to be provided to the Treasurer by November 2014.

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Posted 23rd December 2013 by David Jacobson in Financial Services

December 20, 2013

Privacy Regulations amended: credit reporting provisions

Privacy Regulation 2013 was registered on 17 December 2013. It updates and consolidates the Privacy Regulations with changes made to implement the Privacy Amendment (Enhancing Protection) Act 2012 which commences on 12 March 2014.

The main changes relate to credit reporting as a result of amendments to Part IIIA of the Privacy Act.

Regulation 6 – Consumer credit liability information
This Regulation prescribes the terms or conditions of the consumer credit for the purposes of the definition of consumer credit liability information in paragraph 6(1)(e) of the Act. These are:

(a) how the principal and interest on the consumer credit are to be paid (with the regulation specifying that payments be classified as either principal and interest, principal plus interest with a residual balloon, or interest only);

(b) whether the term of the consumer credit is fixed or revolving;

(c) if the term of the consumer credit is fixed – the length of the term;

(d) whether the individual is a guarantor to another individual is in relation to that particular line of credit of the other individual;

(e) whether the consumer credit is secured or unsecured; and

(f) any variation that may be made to items contained in the above paragraphs (a) to (e).

Regulation 10 – Meaning of credit provider
Regulation 10(2) excludes from the definition of credit provider under subsection 6G(6) of the amended Privacy Act any organisation or small business operators acting in the capacity of a current or prospective landlord in relation to the individual with whom an organisation or small business may be transacting. Any landlord which receives rent in arrears is therefore excluded from the definition of a credit provider.

Regulation 11 – Meaning of credit reporting business
This Regulation excludes from the definition of credit reporting business under subsection 6P(4) of the amended Privacy Act those businesses which provide personal information to a credit provider for the purposes of verifying an individual’s identity or validating other information relating to the individual’s financial position (such as real property assets) provided by an individual to a credit provider.

Regulation 12 – Meaning of repayment history information
This regulation specifies the circumstances in which an individual has not met an obligation to make a monthly payment that is due and payable, pursuant to subsection 6V(2) of the amended Privacy Act. The Regulation provides that where an individual misses any or all repayments due in a month, irrespective of the actual payment cycle for that obligation, then the individual is taken to have missed a payment. The intention of this section is to ensure that there is only one report each month per credit account of an individual’s repayment history information.

Regulation 22 – Transitional
The Regulation provides that information requests that are being processed on or before the commencement date of the Privacy Amendment Act may be processed under the existing Part IIIA of the Privacy Act up to, and including, 31 March 2014.

More about the Privacy Amendment Act

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Posted 20th December 2013 by David Jacobson in Compliance, Financial Services, National Credit Code, Privacy
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