A Bill for an Act to amend the Australian Securities and Investments Commission Act 2001 to limit unfair banking and credit card penalty fees, and for related purposes
The Parliament of Australia enacts:
1 Short title
This Act may be cited as the Australian Securities and Investments Commission (Fair Bank and Credit Card Fees) Amendment Act 2008.
2 Commencement
This Act commences on the day on which it receives the Royal Assent.
3 Schedule(s)
Each Act that is specified in a Schedule to this Act is amended or repealed as set out in the applicable items in the Schedule concerned, and any other item in a Schedule to this Act has effect according to its terms.
Schedule 1—Amendment of the Australian Securities and Investments Commission Act 2001
1 After Subsection E of Division 2 of Part 2
Insert:
Subdivision FA—Fees and charges connected with provision of financial services
12FAA Definitions
In this Subdivision:
consumer default means a breach by a consumer of a term of a contract between a financial service provider and the consumer.
default charge means a pre‑determined fee or charge of any kind in a contract between a financial service provider and a consumer where that fee or charge is payable by the consumer in the event of a consumer default.
12FA Default charge to be genuine estimate of damage
(1) A financial service provider must not include a default charge in a contract with a consumer for the provision of financial services, unless the default charge is at or below a genuine pre‑estimate of the damage likely to be suffered by the financial service provider resulting from the consumer default.
(2) Any provision of any contract relating to the provision of financial services that purports to allow a default charge in contravention of subsection (1) is void.
(3) If, in contravention of subsection (1), a financial service provider includes a default charge in one or more contracts that is higher than a genuine pre‑estimate of the damage likely to be suffered by the financial service provider resulting from a consumer default and the financial service provider has been paid monies in accordance with the default charge, the financial service provider must, within a reasonable time after becoming aware of the contravention, refund to the consumer the difference between the default charge and the amount equal to a genuine estimate of the damage that was in fact suffered by the financial service provider.
12FB Valid default charge
(1) ASIC may require a financial service provider to produce to it, within 2 months of the commencement of this section or within 2 months of the use by the financial provider of contracts that impose default charges, the information and methodology relied on by the financial service provider to calculate any default charges in contracts used by the financial service provider.
(2) ASIC may, after receipt of the information and methodology referred to in subsection (1), request that further information related to the calculation of default charges be produced to ASIC.
(3) A financial service provider must comply with a request by ASIC pursuant to subsection (2) within a reasonable time after the receipt of that request.
(4) ASIC may, after receipt of the information and methodology referred to in subsection (1) and, if relevant, subsection (2), determine a valid default charge that, in all the circumstances, is the default charge that ASIC considers equal to a genuine pre‑estimate of the damage suffered by the financial service provider resulting from a consumer default.
(5) Without limiting the matters that ASIC may consider for the purpose of determining a valid default charge under subsection (4), ASIC may take into account the following:
(a) whether the default charge reflects a genuine pre‑estimate of the additional administrative costs that might reasonably be expected to result from the consumer default, reduced by costs that are not able to be identified with reasonable precision and an amount that takes account of the ability of the financial service provider to mitigate the loss it suffers resulting from consumer defaults;
(b) whether the default charge reflects a fair attribution of costs between defaulting consumers;
(c) whether the default charge is based on a genuine estimate of the total numbers of expected instances of consumer defaults in a relevant period.
(6) ASIC may, after review of the information and methodology referred to in subsection (1) and, if relevant, subsection (2), require that the financial service provider alter a default charge to the valid default charge referred to in subsection (4).
(7) A financial service provider may apply to a court for a review of a decision made under subsection (6). If such a review application is made, the onus is on the financial service provider to prove that a default charge is at or below a genuine pre‑estimate of the damage likely to be suffered by the financial service provider resulting from the consumer default.
12FC Fees when consumer default results from a third party default
A financial service provider must not impose a fee or charge of any kind on a consumer for presenting a cheque to it for payment that is dishonoured.
12FD Enforceable undertakings
(1) ASIC may accept a written undertaking given by a financial service provider in connection with default charges.
(2) Without limiting the generality of subsection (1), such an undertaking may include provisions relating to:
(a) the maximum amount of a default charge to be imposed for a consumer default; and
(b) the maximum total of default charges to be imposed on a consumer for consumer defaults in a 12‑month period.
(3) The financial service provider may withdraw or vary the undertaking at any time, but only with the consent of ASIC.
(4) If ASIC forms the reasonable view that the financial service provider has breached any of the terms of the undertaking, ASIC may apply to the Court for:
(a) an order directing the financial service provider to comply with the term that has been breached;
(b) any order that the Court considers appropriate directing the financial service provider to compensate any person who has suffered loss or damage resulting from the breach;
(c) any other order that the Court considers appropriate.
(5) ASIC must keep a record of the full text of the undertaking.
12FE Multiple default charges void
(1) A financial service provider must not:
(a) impose more than one default charge on a consumer on any one day in relation to any one contract;
(b) impose more than one default charge on a consumer for any one consumer default;
(c) impose a default charge when, if such a charge were imposed, the financial transaction immediately prior to the imposition of that charge is a fee or charge, including a default charge, imposed by the financial service provider;
(d) impose a default charge in the event of a consumer overdrawing from a non‑credit account or obtaining credit over a credit limit, unless the consumer has elected to have an overdraft or additional credit facility on that account.
(2) Any imposition of any charge in contravention of subsection (1) is void.
12FF ASIC to produce copy of information
(1) ASIC must, upon request by any person, produce information received by ASIC pursuant to section 12FB or 12FD, but ASIC must not produce information:
(a) that the financial service provider has asked it not to release; and
(b) that ASIC is satisfied:
(i) is commercial in confidence; or
(ii) should not be disclosed because it would be against the public interest to do so; or
(iii) contains personal information (as defined in the Privacy Act 1988) without the individual’s written consent.
(2) If ASIC produces a copy of information that has certain information deleted from it pursuant to subsection (1), the copy must include a note stating that certain information has been deleted.