National Consumer Credit Protection Amendment (Small Amount Credit Contract and Consumer Lease Reforms) Bill 2018 [2018] AUSStaCSBSD 60 (21 March 2018)

• National Consumer Credit Protection Amendment (Small Amount Credit Contract and Consumer Lease Reforms) Bill 2018
• Significant matters in delegated legislation 33
• Strict liability offences36
• Power for delegated legislation to amend primary legislation (Henry VIII clause)40

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National Consumer Credit Protection Amendment (Small Amount Credit Contract and Consumer Lease Reforms) Bill 2018

Purpose	This bill seeks to amend the National Consumer Credit Protection Act 2009 and the National Credit Code in relation to small amount credit contracts and consumer leases
Sponsor	Mr Tim Hammond MP
Introduced	House of Representatives on 26 February 2018

Significant matters in delegated legislation ^[33]

1.42 The bill seeks to create a number of offences and civil penalty provisions relating to small amount consumer contracts (SACCs)^[34] (commonly known as payday loans) and to consumer leases^[35] for household goods (commonly known as rent-to-buy arrangements). In several cases, significant elements of these offences and civil penalty provisions (including threshold amounts, conditions, and the persons to which the offence or civil penalty applies) are left to regulations or to other delegated legislation (e.g. determinations). For example:

• proposed subsection 133CC(1) creates a prohibition on entering into, or offering to enter into, a SACC, where the repayments that would be required under the SACC would not meet the requirements prescribed by regulations. It is proposed to make breaches of this prohibition subject to a civil penalty of 2000 penalty units. Additionally, existing subsection 133CC(2) of the National Consumer Credit Protection Act 2009 provides that a breach of subsection 133CC(1) constitutes an offence;

• proposed section 133CD seeks to make it an offence for a licensee or 'a person prescribed by the regulations' to require or accept payment under a SACC. Proposed subsection 133CD(2) provides that the offence does not apply to the extent that the repayment does not exceed the amount that meets the requirements prescribed by regulations;

• proposed section 133CE seeks to make it an offence for a licensee to enter into, or to offer to enter into, a SACC, where the repayment amounts under the SACC are unequal. A breach of proposed section 133CE would also be subject to a civil penalty. Proposed paragraph 133CE(2)(c) provides that repayments will be equal if they meet conditions determined by ASIC in a legislative instrument;

• proposed section 156A seeks to make it an offence for a person to enter into, or to offer to enter into, a consumer lease for household goods if the amount that would be required to be paid under the lease would not meet the requirements prescribed by the regulations. Breaches of proposed section 156A would also be subject to a civil penalty; and

• proposed section 156B seeks to make it an offence for a lessor or 'a person prescribed by the regulations' to require or accept payment of an amount under a consumer lease. Proposed subsection 156B(2) provides that the offence does not apply to the extent that the amount does not exceed the amount that meets the requirements prescribed by regulations.

1.43 From a scrutiny perspective, it is desirable for the content of an offence, or civil penalty provision to be clear from the provision itself, so that the scope and effect of the offence or civil penalty provision is clear and so that affected persons may readily ascertain their obligations. It appears to the committee that, from the way the offences and civil penalty provisions identified above are structured, persons may be required to consult the regulations (and other instruments) to determine whether an offence or civil penalty provision applies to their conduct.

1.44 The committee draws its concerns to the attention of senators, and leaves to the Senate as a whole the appropriateness of leaving significant elements of the offences or civil penalty provisions in proposed sections 133CC, 133CD, 133CE, 156A and 156B to regulations and other forms of delegated legislation.

Strict liability offences^[36]

1.45 Proposed section 133CE seeks to make it an offence for a licensee to enter into, or to offer to enter into, a SACC where the repayment amounts, or the intervals between payment dates, are not equal. Proposed section 31C seeks to make it an offence for a credit provider to charge or require the payment of an unexpired permitted monthly fee in certain circumstances. The bill proposes that both of those offences would be offences of strict liability, punishable by up to 100 penalty units.

1.46 Under general principles of criminal law, fault is required to be proved before a person can be found guilty of a criminal offence (ensuring that criminal liability is only imposed on persons who are sufficiently aware of what they are doing and the consequences it may have). When a bill states that an offence is one of strict liability, this removes the requirement for the prosecution to prove the defendant's fault. In such cases, an offence will be made out if it can be proven that the defendant engaged in certain conduct, without the prosecution having to prove that the defendant intended this, or was reckless or negligent. As the imposition of strict liability undermines fundamental criminal law principles, the committee expects the explanatory memorandum to provide a clear justification for any imposition of strict liability, including outlining whether the approach is consistent with the Guide to Framing Commonwealth Offences.^[37]

1.47 In this instance, the explanatory memorandum only states that strict liability is proposed to be applied 'given the need for deterrence and the significant consequences that breaches...can have for customers'.^[38]

1.48 The committee also notes that the Guide to Framing Commonwealth Offences states that the application of strict liability is only considered appropriate where the relevant offence is not punishable by imprisonment, and is only punishable by a fine of up to 60 penalty units for an individual.^[39] In this instance, the bill proposes to apply strict liability to offences punishable by 100 penalty units.

1.49 The committee draws its concerns to the attention of senators, and leaves to the Senate as a whole the appropriateness of applying strict liability to the offences in proposed sections 133CE and 31C, which attract a penalty of 100 penalty units.

Power for delegated legislation to amend primary legislation (Henry VIII clause)^[40]

1.50 Proposed Division 1A sets out measures (anti-avoidance measures) to prohibit schemes that are designed to avoid the operation of the National Consumer Credit Protection Act 2009 (NCCP Act), and in particular provisions of the Act that relate to SACCs and consumer leases. Within that Division, proposed section 323A provides that a person must not enter into, or carry out, a scheme if it is reasonable to conclude that a purpose of doing so is to prevent certain contracts from being SACCs or consumer leases. Proposed section 323C similarly provides that a person must not enter into, or carry out, a scheme if it is reasonable to conclude that a purpose of doing so is to avoid a provision of the NCCP Act that would apply in respect of a SACC or a consumer lease. Breaches of those provisions are proposed to be subject to a civil penalty of 2000 penalty units and criminal offences punishable by a penalty of up to 2 years imprisonment, 120 penalty units, or both.

1.51 Proposed section 323D provides that ASIC may, by legislative instrument, exempt a scheme, or a class of schemes, from all or specified provisions of proposed sections 323A and 323C. Proposed subsection 323D(2) provides that an exemption may apply subject to any specific conditions imposed by ASIC. Proposed section 323D appears to allow delegated legislation (that is, an instrument made by ASIC) to amend the operation of primary legislation.

1.52 A provision that enables delegated legislation to amend the operation of primary legislation is known as a Henry VIII clause. There are significant scrutiny concerns with enabling delegated legislation to override the operation of legislation which has been passed by Parliament, as such clauses impact on levels of parliamentary scrutiny and may subvert the appropriate relationship between the Parliament and the Executive. As such, the committee expects a sound justification for the use of any Henry VIII clauses to be provided in the explanatory memorandum. In this instance, the explanatory memorandum provides no justification for the use of a Henry VIII clause in proposed section 323D, merely stating the operation and intent of the anti-avoidance measures.

1.53 The committee draws its concerns to the attention of senators, and leaves to the Senate as a whole the appropriateness of allowing ASIC to exempt a scheme, or a class of schemes, from the operation of proposed sections 323A and 323C, by way of delegated legislation.

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[33] Schedule 1, item 19, proposed subsection 133CC(1), Schedule 1, item 21, proposed sections 133CD and 133CE, and Schedule 1, item 34, proposed sections 156A and 156B. The committee draws senators’ attention to these provisions pursuant to Senate Standing Order 24(1)(a)(iv).

[34] 'Small amount credit contract' is defined in section 5 of the National Consumer Credit Protection Act 2009 as a finite (non-continuing) contract with a term of between 16 days and one year, for an amount of $2,000 or less. Additionally for a contract to be a SACC, the credit provider under the contract must not be an authorised deposit-taking institution (ADI).

[35] 'Consumer lease' is defined in section 169 of the National Credit Code as a contract for the hire of goods by a natural person or strata corporation under which that person or corporation does not have a right or obligation to purchase the goods.

[36] Schedule 1, item 21, proposed section 133CE, and item 42, proposed section 31C. The committee draws senators’ attention to these provisions pursuant to Senate Standing Order 24(1)(a)(i).

[37] Attorney-General's Department, A Guide to Framing Commonwealth Offences, Infringement Notices and Enforcement Powers, September 2011, pp. 22-25.

[38] Explanatory memorandum, p. 6.

[39] Attorney-General's Department, A Guide to Framing Commonwealth Offences, Infringement Notices and Enforcement Powers, September 2011, p. 23.

[40] Schedule 1, item 38, proposed section 323D. The committee draws senators’ attention to these provisions pursuant to Senate Standing Order 24(1)(a)(iv).