Federal Register of Legislation - Australian Government

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A Bill for an Act to deliver essential financial services at reasonable cost, fair mortgages for families and increased competition for the community, and for related purposes
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Registered 18 Jun 2010
Introduced Senate 15 Jun 2010

2008‑2009‑2010

 

The Parliament of the

Commonwealth of Australia

 

THE SENATE

 

 

 

 

Presented and read a first time

 

 

 

 

Banking Amendment (Delivering Essential Financial Services for the Community) Bill 2010

 

No.      , 2010

 

(Senator Bob Brown)

 

 

 

A Bill for an Act to deliver essential financial services at reasonable cost, fair mortgages for families and increased competition for the community, and for related purposes

  

  


Contents

1............ Short title............................................................................................ 1

2............ Commencement.................................................................................. 1

3............ Schedule(s).......................................................................................... 2

Schedule 1—Amendment of the Banking Act 1959                                             3

Part 1—Conditions on banks’ authorities                                                                3

Part 2—Fixed interest gap mortgages                                                                       9

Part 3—Exit fees on mortgages                                                                                 11

 


A Bill for an Act to deliver essential financial services at reasonable cost, fair mortgages for families and increased competition for the community, and for related purposes

The Parliament of Australia enacts:

1  Short title

                   This Act may be cited as the Banking Amendment (Delivering Essential Financial Services for the Community) Act 2010.

2  Commencement

                   This Act commences on the day after 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                   Each Act that is specified in a Schedule to this Act is amended or repealed as set out in the applicable items in the Schedule concerned, and any other item in a Schedule to this Act has effect according to its terms.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 1Amendment of the Banking Act 1959

Part 1Conditions on banks’ authorities

1  After section 9

Insert:

9AA  Variation of conditions of banks’ authorities—accounts

             (1)  APRA must, within 30 days of the commencement of the Banking Amendment (Delivering Essential Financial Services for the Community) Act 2010, vary the conditions of all existing section 9 authorities of banks to give effect to this section and any new section 9 authority granted to a bank after the commencement of that Act must include conditions that give effect to this section.

Basic accounts

             (2)  A bank’s section 9 authority must require the bank:

                     (a)  to offer to account‑holders and prospective account‑holders a basic account with the minimum features listed in subsection (3); and

                     (b)  to make account‑holders and prospective account‑holders aware of the existence of that type of basic account.

Features of basic accounts

             (3)  A basic account must have the following minimum features:

                     (a)  the basic transaction services of deposit, withdrawal and transfer;

                     (b)  Internet access to the account;

                     (c)  an ATM card or an EFTPOS card linked to the account suitable for use in ATM and EFTPOS transactions;

                     (d)  a debit card linked to the account suitable for use in credit card transactions;

                     (e)  the account is to be free of:

                              (i)  ongoing service fees such as monthly account service fees; and

                             (ii)  penalty fees for actions and transgressions of third parties;

                      (f)  a real‑time warning that a proposed Internet, electronic or face‑to‑face transaction may result in the imposition of a fee under subsection (5) or (8) and the opportunity to discontinue the proposed transaction.

             (4)  The regulations must prescribe the actions and transgressions of third parties covered by subparagraph (3)(e)(ii).

Penalty fees

             (5)  A bank’s section 9 authority must require a basic account offered to account‑holders and prospective account‑holders by the bank to be free of any penalty fee for a breach of a term of the contract by the account‑holder, unless the bank has applied in the prescribed form for approval of the fee by APRA and the fee has been approved by APRA.

             (6)  In deciding whether to approve a fee under subsection (5), APRA:

                     (a)  must not approve a fee covered by subparagraph (3)(e)(ii); and

                     (b)  must be satisfied that the fee is not greater than the reasonable costs incurred by the bank in relation to the breach.

ATM fees—own‑branded ATMs

             (7)  A bank’s section 9 authority must require any account offered to account‑holders and prospective account‑holders by the bank to be free of any access fees for use of the bank’s own‑branded ATMs by the account‑holder.

ATM fees—foreign ATMs

             (8)  A bank’s section 9 authority must require the bank (the relevant bank) not to impose either of the following fees:

                     (a)  in the case of any account of an account‑holder of the relevant bank—an access fee if the account‑holder uses a foreign ATM;

                     (b)  in the case of any account of an account‑holder of another ADI—an access fee if the account‑holder uses one of the relevant bank’s own‑branded ATMs;

unless the relevant bank has applied in the prescribed form for approval of the fee by APRA and the fee has been approved by APRA.

             (9)  In deciding whether to approve a fee under subsection (8), APRA must be satisfied that the fee is not greater than the reasonable costs incurred by the bank in providing the relevant service.

           (10)  The regulations must provide for:

                     (a)  the collection of cost information and data from banks; and

                     (b)  the period of review of the cost structures of banks; and

                     (c)  any other matter identified in regulations made for the purposes of this paragraph;

to facilitate the calculation by APRA of the reasonable costs incurred by banks for the purposes of paragraph (6)(b) and subsection (9).

Definitions

           (11)  In this section:

ATM card means any magnetic stripe card or smart chip card issued by an ADI to a customer of the ADI, which enables that customer, as an ATM cardholder, to effect ATM transactions.

ATM cardholder means a customer of an ADI who is issued an ATM card and who has a PIN for use with it.

ATM transaction means a cash deposit, a cash withdrawal or a balance enquiry effected by an ATM cardholder’s use of an ATM card and the keying in by the cardholder of the cardholder’s PIN at an ATM.

automatic teller machine or ATM means an electronic hardware device, owned or operated by or on behalf of an ADI, a constitutional corporation, or a person, body corporate or corporation that uses an eligible communications service to provide a cash facility, that is capable of automatically dispensing cash in response to a cash withdrawal transaction initiated by an ATM cardholder, to be debited against or charged to an account of the cardholder, through the use of an ATM card issued by an ADI that is a member of the Consumer Electronic Clearing System (CS3) and the keying in by the cardholder of the cardholder’s PIN, and includes limited service devices (cash dispensers) that only allow for cash withdrawals, although other transactions such as balance enquiries may also be supported by an automatic teller machine.

bank means an ADI listed on the APRA web site as a bank.

cardholder means an ATM cardholder, an EFTPOS cardholder or a credit cardholder.

cash facility means:

                     (a)  an ATM; or

                     (b)  an EFTPOS terminal; or

                     (c)  any other prescribed facility that enables a person to gain access to the funds in his or her account or to a cash advance through a credit card.

constitutional corporation means a corporation to which paragraph 51(xx) of the Constitution applies.

Consumer Electronic Clearing System (CS3) means the standards, policies and procedures coordinated by the Australian Payments Clearing Association for the purpose of settlement of obligations incurred between ADIs that arise from the operation of the national automatic teller machine and EFTPOS networks.

credit card means any magnetic stripe card or smart chip card issued by an ADI, a credit card company or a charge card company to a customer of the ADI, the credit card company or the charge card company, which enables that customer, as a credit cardholder, to effect credit card and charge card transactions, including obtaining cash advances.

credit card company or charge card company means a company that issues a card that allows the cardholder to purchase goods or services or to obtain a cash advance against the card at multiple locations and with entities that are not related to the company issuing the card.

credit cardholder means a customer of an ADI, a credit card company or a charge card company who is issued with a credit card or a charge card and who may have a PIN for use with that card.

credit card terminal means an electronic hardware device used to put into effect a credit card transaction.

credit card transaction means a transaction initiated by a credit cardholder to be charged to an account of the cardholder, through the use at point of sale of a credit card issued by an ADI, a credit card company or a charge card company at a credit card terminal, to purchase goods or services or to obtain a cash advance.

debit card means any magnetic stripe card or smart chip card issued by an ADI to a customer of the ADI, which enables that customer to withdraw money or to have payment for goods or services made directly from the customer’s account with the ADI.

eligible communications service means a communications service to which paragraph 51(v) of the Constitution applies.

EFTPOS means an electronic funds transfer at the point of sale.

EFTPOS card means any magnetic stripe card or smart chip card issued by an ADI to a customer of the ADI, which enables that customer, as an EFTPOS cardholder, to effect EFTPOS transactions.

EFTPOS cardholder means a customer of an ADI who is issued with an EFTPOS card and who has a PIN for use with that card.

EFTPOS terminal means an electronic hardware device used to put into effect an EFTPOS transaction.

EFTPOS transaction means an electronic funds transfer initiated by an EFTPOS cardholder, to be debited against or charged to an account of the cardholder, through the use at point of sale of an EFTPOS card issued by an ADI that is a member of the Consumer Electronic Clearing System (CS3), and in the normal course, the keying in by the cardholder of the cardholder’s PIN, at an EFTPOS terminal, and includes any cash withdrawal, refund and reversal of any such transfer.

foreign ATM means an ATM not owned by the relevant bank.

own‑branded ATM means an ATM owned by the relevant bank.

personal identification number or PIN means the number that is either issued by an ADI, a credit card company or a charge card company, or selected by the cardholder, for authenticating the use by the cardholder of the ATM card, EFTPOS card or credit card, as the case may be.

Part 2Fixed interest gap mortgages

2  After section 9

Insert:

9AB  Variation of conditions of authorities—fixed interest gap mortgages

             (1)  APRA must, within 30 days of the commencement of the Banking Amendment (Delivering Essential Financial Services for the Community) Act 2010, vary the conditions of all existing section 9 authorities to give effect to this section and any new section 9 authorities granted after the commencement of that Act must include conditions that give effect to this section.

             (2)  A section 9 authority must require an ADI that offers mortgage products, including mortgages offered through or packaged by third parties:

                     (a)  to offer fixed interest gap mortgages to existing and prospective customers; and

                     (b)  to develop its own formula for the benchmark base rate that it will offer to customers under a fixed interest gap mortgage.

             (3)  An ADI must apply in the prescribed form for approval of a formula developed under paragraph (2)(b) and the formula must be approved by APRA before the ADI offers the relevant fixed interest gap mortgage to customers.

             (4)  In deciding whether to approve a formula under subsection (3), APRA must be satisfied that the formula does not produce a result that is greater than the costs incurred by the ADI to borrow funds.

             (5)  APRA may, in writing, determine guidelines in relation to:

                     (a)  the obligation on an ADI periodically to recalculate its benchmark base rate and vary its existing and prospective fixed interest gap mortgages; and

                     (b)  the calculation by an ADI of its net interest margin or margins.

             (6)  In this section:

benchmark base rate means the basic interest rate, calculated by an ADI using the formula approved under subsection (3) and that reflects the actual costs incurred by the ADI to borrow funds, to be offered to customers as part of a fixed interest gap mortgage.

fixed interest gap mortgage means a mortgage the interest rate of which is the total of the benchmark base rate of an ADI and the net interest margin which that ADI offers to an individual customer.

net interest margin means the additional interest rate negotiated by an ADI with a customer, based on competitive pressures, reserve requirements, the customer’s financial history and any other matters considered relevant by the ADI or included in guidelines under paragraph (5)(b), to be offered to that customer as part of a fixed interest gap mortgage.

             (7)  The regulations must provide for:

                     (a)  the collection of cost information and data from ADIs; and

                     (b)  any other matter identified in regulations made for the purposes of this paragraph;

to facilitate the making of a decision by APRA under subsection (3).

Part 3Exit fees on mortgages

3  After section 9

Insert:

9AC  Variation of conditions of authorities—mortgage products

             (1)  APRA must, within 30 days of the commencement of the Banking Amendment (Delivering Essential Financial Services for the Community) Act 2010, vary the conditions of all existing section 9 authorities to give effect to this section and any new section 9 authorities granted after the commencement of that Act must include conditions that give effect to this section.

             (2)  A section 9 authority must require an ADI that offers variable interest rate mortgage products and fixed interest gap mortgages, including mortgages offered through or packaged by third parties:

                     (a)  to submit to APRA for approval, and receive approval of, a formula that links the level of its early termination fees charged in conjunction with a mortgage product with the actual and reasonable costs of the early termination of the relevant mortgage; and

                     (b)  to include as part of the mortgage contract the costs of the early termination of the relevant mortgage, under the heading “Early Repayment Charges”; and

                     (c)  to include in any advertising of a mortgage product reference to the existence of an early termination fee in relation to the relevant mortgage.

             (3)  A section 9 authority must require an ADI that offers fixed interest rate mortgage products, including mortgages offered through or packaged by third parties:

                     (a)  to submit to APRA for approval, and receive approval of, a formula that links the level of its early termination fees charged in conjunction with a mortgage product with the actual and reasonable costs of the early termination of the relevant mortgage; and

                     (b)  to include as part of the mortgage contract a plain English explanation of its formula for the calculation of the early termination fee in relation to the relevant mortgage, under the heading “Early Repayment Charges”; and

                     (c)  to include in any advertising of a mortgage product reference to the existence of an early termination fee in relation to the relevant mortgage.

             (4)  APRA must, within 30 days of the commencement of the Banking Amendment (Delivering Essential Financial Services for the Community) Act 2010, prescribe guidelines in relation to the ability of an ADI to vary its formula for the calculation of its early termination fees.

             (5)  In this section:

early termination fee means any additional charge imposed on a mortgagor in any situation in which the mortgagor choses to pay out the mortgage contract ahead of the time specified in the mortgage contract.

             (6)  The regulations must provide for:

                     (a)  the collection of cost information and data from ADIs; and

                     (b)  any other matter identified in regulations made for the purposes of this paragraph;

to facilitate the making of a decision by APRA under paragraph (2)(a) or (3)(a).