AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION (FAIR BANK AND CREDIT CARD FEES) AMENDMENT BILL 2008

i Australian Securities and Investments Commission (Fair Bank and Credit Card Fees)

Amendment Bill 2008 No. , 2008

Contents

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

Commencement .................................................................................. 1

Schedule(s) ......................................................................................... 1

Schedule 1--Amendme nt of the Australian Securities and

Investments Commission Act 2001

Australian Securities and Investments Commission (Fair Bank and Credit Card Fees) Amendment

Bill 2008 No. , 2008 1

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 Commence ment

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repealed as set out in the applicable items in the Schedule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 A mendment of the Australian Securities and Investments Commission Act

2001

2 Australian Securities and Investments Commission (Fair Bank and Credit Card Fees)

Amendment Bill 2008 No. , 2008

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

Amend ment of the Australian Securities and Investments Co mmission Act 2001

Schedule 1

Australian Securities and Investments Commission (Fair Bank and Credit Card Fees) Amendment

Bill 2008 No. , 2008 3

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;

Schedule 1 A mendment of the Australian Securities and Investments Commission Act

2001

4 Australian Securities and Investments Commission (Fair Bank and Credit Card Fees)

Amendment Bill 2008 No. , 2008

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 consume r 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;

Amend ment of the Australian Securities and Investments Co mmission Act 2001

Schedule 1

Australian Securities and Investments Commission (Fair Bank and Credit Card Fees) Amendment

Bill 2008 No. , 2008 5

(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;

(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.

Commonwealth of Australia Bills

AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION (FAIR BANK AND CREDIT CARD FEES) AMENDMENT BILL 2008