The Council of Australian Governments (COAG) meeting on 2 October 2008 discussed furthering its reform agenda including consumer protection, health services, climate change and indigenous Australian issues (see communique).

Financial Regulation and Consumer Protection

COAG agreed to an implementation plan for the regulation of remaining areas of consumer credit. This follows COAG’s earlier decision that the Commonwealth would assume responsibility for the regulation of mortgages, mortgage broking, margin lending and all remaining areas of consumer credit, such as pay-day lending and financial counselling services. 

This reform will be implemented in a phased approach, beginning with the transfer of responsibility for trustee companies and existing key credit regulation, including the Uniform Consumer Credit Code as phase one.  The Commonwealth, States and Territories will ensure that legislation giving effect to phase one of the reform agenda will be introduced in the first half of 2009. 

COAG has also agreed to an implementation plan for phase two, the regulation of remaining areas of consumer credit, including pay-day lending (for example, pawnbrokers), credit cards, store credit, investment and small business lending, and personal loans, so that the reform package is completed in the first half of 2010.

COAG also agreed to a new consumer policy framework comprising a single national consumer law based on the Trade Practices Act 1974, drawing on the recommendations of the Productivity Commission and best practice in State and Territory consumer laws, including a provision regulating unfair contract terms.

UPDATE 5 October: The Assistant Treasurer has released further details of the implementation of phase one and two of credit code reform:

Phase one

• Enacting the existing State legislation, the Uniform Consumer Credit Code (UCCC), into Commonwealth legislation.
• Establishing a national licensing regime to require providers of consumer credit and credit-related brokering services and advice to obtain a licence from ASIC.
• Extending the powers of the Australian Securities and Investment Commission (ASIC) to be the sole regulator of the new national credit framework with enhanced enforcement powers.
• Requiring licensees to observe a number of general conduct requirements including responsible lending practices.
• Requiring mandatory membership of an external dispute resolution (EDR) body by all providers of consumer credit and credit-related brokering services and advice.
• Extending the scope of credit products covered by the UCCC to regulate the provision of consumer mortgages over residential investment properties.
• Extending the operation of the Corporations Act to regulate margin lending.
• Regulation of trustee corporations.

Phase One legislation in place by mid 2009.

Phase two

• Enhancements to specific conduct obligations to stem unfavourable lending practices, such as a review of credit card limit extension offers, an examination of State approaches to interest rate caps; and other fringe lending issues as they arise.
• Regulation of the provision of credit for small businesses.
• Regulation of investment loans other than margin loans and mortgages for residential investment properties.
• Reform of mandatory comparison rates and default notices.
• Enhancements to the regulation and tailored disclosure of reverse mortgages.
• Examination of remaining existing State and Territory reform projects.

Phase Two legislation in place by mid 2010.