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Australian Senate Standing Committee for the Scrutiny of Bills - Scrutiny Digests |
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Purpose
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Schedule 1 to this bill seeks to amend the National Consumer Credit
Protection Act 2009 to improve the flow of credit by reducing the time that
it takes consumer and businesses to access credit
Schedules 2 to 6 to this bill seek to amend the National Consumer Credit
Protection Act 2009 to enhance the consumer protection framework for
consumers of small amount credit contracts and consumer leases, while ensuring
that
these products can continue to fulfil an important role in the
economy
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Portfolio
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Treasury
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Introduced
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House of Representatives on 9 December 2020
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Bill status
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Before the House of Representatives
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2.108 In Scrutiny Digest 2 of 2021 the committee requested the Treasurer's advice as to:
• why it is considered necessary and appropriate to leave significant matters, such as comparisons of equity projections and aged care costs to consumers, to delegated legislation;
• whether the bill can be amended to include at least high-level guidance regarding the following matters on the face of the primary legislation:
• the manner of giving a comparison of equity projections and aged care costs to a consumer;
• the content of the non-ADI ['authorised deposit taking institution'] credit standards;
• conditions whereby repayments under a small amount credit contract are taken to be equal; and
• circumstances in which the regulations may prescribe that specified kinds of communications are not unsolicited communications for the purpose of the prohibition on unsolicited communications in proposed section 133CF.[34]
Treasurer's response[35]
2.109 The Treasurer advised:
Significant matters in delegated legislation, 133DB
The proposed amendments to the National Consumer Credit Protection Act 2009 (the Credit Act) introduced by item 60 and 65 of Schedule 1 to the Bill would amend section 133DB of the Credit Act (which requires licensees to give projections of equity before providing credit assistance or entering a credit contract). The amendments provide that licensees must show a consumer a comparison of the consumer’s stated expected aged care costs with equity projections before providing credit assistance for a reverse mortgage, entering into a reverse mortgage, increasing the credit limit of a reverse mortgage or making an unconditional representation about the consumer’s eligibility. The comparison must be shown to the consumer in person or in a way prescribed in the regulations (133DB(1)(b)(ba)). Non-compliance with the obligations to provide comparisons of equity projections and aged care costs is subject to criminal offences in addition to civil penalties (Subsections 133DB(1) and (2) of the Credit Act).
Leaving to delegated legislation the prescription of circumstances the manner of giving comparison of equity projection and aged care costs to a consumer to delegated legislation
Regarding proposed subsection 133DB(1)(b)(ba) of the Credit Act, the committee has asked why it is considered necessary and appropriate to leave the manner of giving the comparison of the equity projection and aged care costs to a consumer to be specified in delegated legislations; and whether the bill can be amended to include at least high-level guidance regarding these matters on the face of the primary legislation.
As outlined in the explanatory memorandum, this Bill is part of the Government’s economic response to the COVID-19 pandemic. It is appropriate for the manner of giving the information to be specified in regulations even though a contravention of the obligation can result in a civil and criminal penalty. This provides the necessary flexibility for the Government to respond quickly to address circumstances of concern as they arise and to make timely amendments including where necessary to deal with new and emerging risks and mitigation strategies related to COVID-19. For example; during the COVID-19 pandemic it may not be possible or preferable to require a licensee to show information to a consumer in person because of the level of community transmission of the virus in Australia at any one time; and/or collective governments’ responses to it (including restrictions on the movement of people to contain the spread of the virus). Moving beyond the pandemic, prescription by legislative instrument also facilitates adaptation to new and emerging technologies. In practice, this will accommodate innovation in the reverse mortgage sector while ensuring consumers receive the same level of protection across all modes of communication. Prescription by legislative instrument is necessary because of the changing nature of the subject matter.
This power is therefore appropriate and necessary to deal with situations where the operation of the Bill may produce unintended or unforeseen results that are not consistent with the policy intention for the consumer protection regime, for example, unnecessarily putting consumers and the Australian community at risk.
This regulation-making power provides the necessary flexibility for the Government to respond quickly to address circumstances of concern that arise and to make timely amendments. Therefore, although it may be desirable to place all of the details in primary legislation, I consider that it is necessary and appropriate to place specificity in delegated legislation as, given the nature of the reforms, this retains the ability to respond to unforeseen issues that could affect the ability for consumers to transact safely as well as accommodate future advances in business communications.
As regulations, the prescribed circumstances would be considered by the Federal Executive Council and subject to disallowance by the Parliament. Consistent with standard practice, the Government envisages undertaking consultation before making any regulations under this power to minimise the risk of unintended consequences. It is intended to rely on this justification.
While technically possible, the Government’s intent was not to provide high level guidance on the face of the primary legislation for when it is appropriate to exercise the power to make regulations for the purpose of 133DB(1)(b) of the Credit Act is to ensure that the power is sufficiently broad to accommodate unforeseen circumstances.
Significant matters in delegated legislation, section 133EA (non-ADI credit standards)
The proposed amendments to the Credit Act in item 67 of Schedule 1 to the Bill would insert new section 133EA into the Credit Act. Proposed section 133EA would allow the Minister to determine non-ADI credit standards. Obligations in Part 3-2 of the Credit Act to assess whether credit is unsuitable will no longer apply in relation to certain types of credit conduct. Instead, where this conduct is engaged in by ADIs, it will be regulated primarily by existing prudential standards made by legislative instrument by APRA under the Banking Act 1959 (Banking Act). Where this conduct is engaged in by non-ADI credit providers, it will be regulated by the non-ADI credit standards.
The policy intent of these reforms is to ensure that ADIs continue to comply with APRA’s prudential lending standards requiring sound credit assessment and approval criteria, while key elements of APRA’s ADI lending standards are adopted and applied to the new non-ADI framework.
Adopting elements from the APRA lending standards for the non-ADI standards ensures a level playing field between ADIs and non-ADIs in the new credit framework. The setting of non-ADI standards in subordinate legislation, enables them to be made consistently with the standards APRA requires of ADIs in APS 220 Credit Risk Management, which is itself subordinate legislation. Therefore, just as the ADI regime in APS 220 provides flexibility for APRA to update these requirements over time, it is necessary that a similar flexibility is afforded for the non-ADI standards to be dynamically updated in line with changes to the ADI regime. Requiring changes to be made to primary legislation to align APS 220 and the non-ADI Standard would result in periods of inconsistent regulatory frameworks, affording a competitive advantage to one of the sectors. This would be contrary to the Government’s commitment to encourage and facilitate competition in the financial system.
As an independent prudential regulator, APRA maintains control of the content of their prudential standards and is able to dynamically update them as the regulatory landscape evolves and demands it. Therefore, it is critical that APRA has the flexibility currently afforded by the Banking Act to enable it to make changes to its prudential standards.
The Minister’s power is already limited to determining systems, policies and processes that the non-ADI credit provider must have for engaging in non-ADI credit conduct.
If the non-ADI standards were contained in primary legislation, or were amended to further limit the Minister’s powers, this could constrain the scope of changes APRA could practically make to its prudential standards without disturbing the level playing field between ADIs and non-ADIs, and may require significant deferral of changes to APRA’s standards to enable primary legislation to amend the non-ADI credit standard framework.
Significant matters in delegated legislation, 133CD
The amendments in Schedules 2 and 6 to the Bill make amendments to the Credit Act relating to the regulation of small amount credit contracts (SACCs) and consumer leases. These amendments include prohibiting a licensee from entering into a SACC if the repayments under the contract would not be of equal amounts or would be repaid on an irregular basis (Schedule 2, item 12, proposed section 133CD), and prohibiting unsolicited communication about SACCs in certain circumstances (Schedule 2, item 12, proposed section 133CF).
The purpose of these provisions is to increase the consumer protections that apply in relation to SACCs by prohibiting behaviour by licensees that has historically resulted in harm to consumers. For example, allowing unequal payments or irregular repayment periods for SACCs permits licensees to lengthen the period of the SACC and therefore receive additional monthly fees.
The prohibitions in the Bill are broad and high-level so as to ensure effective coverage of the provisions, however there may be circumstances where unanticipated but legitimate behaviour by licensees would breach the provisions but not result in harm to consumers. To ensure that non-harmful behaviour is not captured by the prohibitions on unequal SACC repayments or certain unsolicited communications about SACCs, the Bill allows for delegated legislation to be made that specifies circumstances when the provisions would not be breached.
In the case of the prohibition on unequal and irregular SACC repayments, the Bill allows for one circumstance in which otherwise unequal repayment periods are taken to be equal, namely that regular payments that fall on non-business days may be paid on the previous or next business day and will still be taken to be equal (see Schedule 2, item 12, proposed section 133CD(4) of the Credit Act). However, there may be other unforeseen situations when otherwise unequal repayment periods should also be taken to be equal. Allowing ASIC to make an instrument that sets out the conditions where this will be the case ensures that businesses and consumers are not inappropriately penalised by the high-level prohibition.
The Bill also includes a general and broad prohibition on any communication that includes an offer to enter into a SACC or an invitation to apply for a SACC to a consumer has ever been a debtor under a SACC (including to consumers who currently have a SACC). As noted in the explanatory memorandum, this prohibition is intended to stop licensees from making unsolicited communications to vulnerable consumers and to ensure that consumers freely choose to enter into a SACC rather than being prompted to apply. This is an important part of the consumer protection provisions in the Bill, as the Review of the Small Amount Credit Contract Laws found that consumers can be directly targeted with invitations to enter into a new SACC when they are particularly vulnerable, such as around Christmas or when their current SACC is about to end. The prohibition on unsolicited communication is drafted at a high-level to only apply to certain targeted invitations to specific consumers (for example, by SMS or email), however the regulation-making power ensures that any unforeseen kinds of communication that do not cause harm to consumers can be excluded from the prohibition.
At this time it is not expected that ASIC would make an instrument setting out when unequal repayment periods are taken to be equal, nor that regulations would be made to permit communication that would otherwise be in breach of new section 133CF. However, the power to make delegated legislation is important in both of these instances to allow the law to respond appropriately to rapidly changing business practices and not unfairly penalise legitimate business behaviour.
Committee comment
2.110 The committee thanks the Treasurer for this response.
2.111 The committee notes the Treasurer's advice that specifying the manner of giving information about the comparison of the equity projection and aged care costs to a consumer in delegated legislation is appropriate, as this provides necessary flexibility to allow the government to respond quickly to circumstances of concern as they arise and to make timely amendments. The committee also notes the examples provided of where prescription by legislative instrument may be necessary to respond to risks related to COVID-19, and how prescription by legislative instrument may be useful beyond the pandemic.
2.112 The committee further notes the Treasurer's advice that the government's intent was not to provide high level guidance in primary legislation in relation to this matter to ensure that the power is sufficiently broad to accommodate unforeseen circumstances.
2.113 While noting this advice, the committee has generally not accepted a desire for administrative flexibility to be a sufficient justification, of itself, for leaving significant matters to delegated legislation.
2.114 The committee also notes the Treasurer's advice that, consistent with standard practice, the government envisages undertaking consultation before making regulations under the amended section 133DB. However, the committee notes that there are no specific requirements on the face of the bill to require that such consultation takes place.
2.115 The committee notes the Treasurer's advice that the policy intent behind proposed section 133EA and related provisions in the bill is to ensure that, in relation to certain types of credit conduct, authorised deposit taking institutions (ADIs) must continue to comply with prudential standards made by the Australian Prudential Regulation Authority (APRA) while key elements of APRA's ADI lending standards are adopted and applied to the framework governing non-ADI credit providers. The Treasurer further advised that adopting elements from the APRA lending standards for the non-ADI standards ensures a level playing field between ADIs and non-ADIs in the new credit framework.
2.116 The committee also notes the Treasurer's advice that the setting of non-ADI standards in delegated legislation enables them to be made consistently with certain standards required of ADIs by APRA, which are also prescribed by delegated legislation. The Treasurer advised that the regime for ADIs provides flexibility for APRA to update requirements over time, and that similar flexibility is necessary for the non-ADI standards so they may be updated in line with changes to the ADI regime. The committee further notes the Treasurer's advice that requiring changes to be made to primary legislation to align the relevant ADI standards made by APRA and the non-ADI standards would result in periods of inconsistent regulatory frameworks, affording a competitive advantage to one of the sectors.
2.117 The committee also notes the Treasurer's advice that the minister’s power to make non-ADI credit standards is limited in the bill to determining systems, policies and processes that the non-ADI credit provider must have for engaging in non-ADI credit conduct. The Treasurer advised that if the non-ADI standards were amended to further limit the minister’s powers, this could also constrain the scope of changes APRA could practically make to its prudential standards without disturbing the level playing field between ADIs and non-ADIs, and may require significant deferral of changes to APRA’s standards to enable primary legislation to amend the non-ADI credit standard framework.
2.118 The committee notes the Treasurer's advice that the purpose of proposed sections 133CD and 133CF is to increase the consumer protections that apply in relation to small amount credit contracts by prohibiting behaviour by licensees that has historically resulted in harm to consumers. The Treasurer advised that the prohibitions are broad and high-level so as to ensure effective coverage, but that bill allows for delegated legislation to specify when the provisions would not be breached to account for circumstances where unanticipated but legitimate behaviour by licensees would breach the provisions but not result in harm to consumers.
2.119 The committee also notes the Treasurer's advice that it is not at this time expected that ASIC would make an instrument setting out when unequal repayment periods are taken to be equal, nor that regulations would be made to permit communication that would otherwise be in breach of proposed section 133CF. The committee further notes the Treasurer's advice that, nevertheless, the power to make delegated legislation is important in both of these instances to allow the law to respond appropriately to rapidly changing business practices and not unfairly penalise legitimate business behaviour.
2.120 The committee requests that an addendum to the explanatory memorandum containing the key information provided by the minister be tabled in the Parliament as soon as practicable, noting the importance of these explanatory materials as a point of access to understanding the law and, if needed, as extrinsic material to assist with interpretation (see section 15AB of the Acts Interpretation Act 1901).
2.121 The committee also draws this matter to the attention of the Senate Standing Committee for the Scrutiny of Delegated Legislation.
2.122 In light of the information provided, the committee makes no further comment on this matter.
2.123 In Scrutiny Digest 2 of 2021 the committee requested the Treasurer's advice as to:
• why it is considered necessary and appropriate to leave the prescription or determination of avoidance schemes and matters relevant to making a conclusion that a scheme is an avoidance scheme to delegated legislation;
• whether the bill can be amended to include at least high-level guidance regarding schemes that will be presumed to be entered into for an avoidance purpose on the face of the primary legislation;
• why it is proposed to place a legal burden of proof on the defendant by including presumptions in relation to these civil penalty provisions; and
• why it is not sufficient to reverse the evidential, rather than legal, burden of proof in this instance.
2.124 The committee also noted that its consideration of the appropriateness of provisions which include presumptions in relation to civil penalty provisions or offences would be assisted if the Treasurer's response explicitly addressed relevant principles as set out in the Guide to Framing Commonwealth Offences.[37]
Treasurer's response
2.125 The Treasurer advised:
Leaving the prescription or determination of avoidance schemes and matters relevant to making a conclusion that a scheme is an avoidance scheme to delegated legislation, proposed section 323B
Proposed section 323B of the Credit Act outlines a number of matters that must be considered in determining whether there is an avoidance purpose in addition to the regulation-making power provided by proposed paragraph 323B(1)(c) of the Credit Act. The regulation-making power recognises that industry participants may develop new avoidance practices which may require the Government to specify additional matters that must be considered in determining whether the relevant avoidance purpose exists. Not including the regulation-making power will jeopardise the ability of the law to achieve its purpose of prohibiting schemes that prevent a contract from being a small amount credit contract or a consumer lease.
Not including high-level guidance regarding schemes that will be presumed to be entered into for an avoidance purpose on the face of the primary legislation, proposed section 323C
Proposed section 323B of the Credit Act outlines a number of matters that are key indicators of whether there is an avoidance purpose. The instrument making powers in proposed subsection 323C(1) reflects historical experience that avoidance schemes tend to proliferate quickly. The instrument making powers ensure that either the Government or ASIC can respond quickly and effectively to evolving practices as needed.
...
Burdens of proof, proposed section 323C
Placing the legal burden of proof on the defendant by including presumptions in relation to civil penalty provisions
In the context of proposed section 323C of the Credit Act, placing the legal burden of proof on the person is appropriate as it will be within the knowledge for the person, opposed to ASIC, to establish that it would not be reasonable to conclude that there was a relevant avoidance purpose. For example, if the scheme in question does have a legitimate (non-avoidance) purpose, that matter would be known to the person. Although not strictly relevant, this approach is consistence [sic] with the guidance provided by pages 50-52 of the Guide to Framing Commonwealth Offences, which was referred to by the Committee. It should also be noted that the presumption applies only in civil cases. Not reversing the legal burden of proof will jeopardise the ability of the law to achieve its purpose of prohibiting schemes that prevent a contract from being a small amount credit contract or a consumer lease.
Not reversing the evidential, rather than legal, burden of proof
In the context of proposed section 323C of the Credit Act, merely reversing the evidential burden of proof is not sufficient as it will likely fall to ASIC to establish that it would not be reasonable to conclude that there was a relevant avoidance purpose. This is inappropriate as it will be considerably easier for the person, opposed to ASIC, to establish that it would not be reasonable to conclude that there was a relevant avoidance purpose. Not reversing the legal burden of proof will jeopardise the ability of the law to achieve its purpose of prohibiting schemes that prevent a contract from being a small amount credit contract or a consumer lease.
Committee comment
2.126 The committee thanks the Treasurer for this response. The committee notes the Treasurer's advice that not including the regulation-making power in proposed paragraph 323B(1)(c) of the Credit Act and not reversing the legal burden of proof would jeopardise the ability of the law to achieve its purposes of prohibiting schemes that prevent a contract from being a small amount credit contract or a consumer lease.
2.127 While noting this advice, the committee remains concerned that using delegated legislation to prescribe or determine avoidance schemes and matters relevant to making a conclusion that a scheme is an avoidance scheme provides a broad power to expand or restrict the scope of the proposed prohibition on avoidance schemes, without the full range of parliamentary scrutiny inherent in bringing proposed changes in the form of an amending bill.
2.128 The committee also notes the Treasurer's advice that placing the legal burden of proof on a person is appropriate as it will be within the knowledge of the person to establish that it would not be reasonable to conclude that there was a relevant avoidance purpose.
2.129 The Treasurer also advised that merely reversing the evidential burden of proof is not sufficient as it will likely fall to ASIC to establish that it would not be reasonable to conclude that there was a relevant avoidance purpose. However, the committee notes that, if the provision only reversed the evidential burden of proof, ASIC would only be required to establish this matter if the person alleged to have engaged in an avoidance scheme could raise evidence that would suggest a reasonable possibility that it would not be reasonable to conclude that there was a relevant avoidance purpose.
2.130 The committee requests that an addendum to the explanatory memorandum containing the key information provided by the minister be tabled in the Parliament as soon as practicable, noting the importance of these explanatory materials as a point of access to understanding the law and, if needed, as extrinsic material to assist with interpretation (see section 15AB of the Acts Interpretation Act 1901).
2.131 The committee leaves to the Senate as a whole the appropriateness of:
• leaving the prescription or determination of avoidance schemes and matters relevant to making a conclusion that a scheme is an avoidance scheme to delegated legislation; and
• placing a legal burden of proof on a person by including a presumption of avoidance for certain schemes.
2.132 The committee also draws this matter to the attention of the Senate Standing Committee for the Scrutiny of Delegated Legislation.
2.133 In Scrutiny Digest 2 of 2021 the committee requested the Treasurer's more detailed advice as to:
• why it is proposed to confer on ASIC the broad power to exempt schemes from the operation of the prohibition on avoidance schemes in proposed section 323A; and
• whether the bill could be amended to include at least high-level guidance regarding the circumstances where it will be appropriate for ASIC to exempt a scheme from the operation of the avoidance prohibitions.[39]
Treasurer's response
2.134 The Treasurer advised:
Proposal to confer on ASIC the broad power to exempt schemes from the operation of the prohibition on avoidance schemes in section 323A, and the absence of high level guidance
The power for ASIC to, by legislative instrument, exempt a scheme or class of schemes from all or specified parts of the prohibitions set out in proposed section 323A of the Credit Act ensures that ASIC can appropriately deal with schemes that do not cause harm to consumers or regulated industry participants and have legitimate non-avoidance purposes. A broad power is needed in order to capture the full array of schemes that might arise and to ensure that non-harmful business practices are not subject to the prohibition. In the absence of a broad power, legitimate arrangements may be inappropriately subject to the prohibitions in proposed section 323A of the Credit Act. Providing high level guidance in the primary law might operate to inappropriately restrict the application of the power and prevent it from applying to unforeseen schemes.
Committee comment
2.135 The committee thanks the Treasurer for this response. The committee notes the Treasurer's advice that the broad power to exempt schemes from the operation of the prohibition on avoidance schemes ensures that ASIC can appropriately deal with schemes that do not cause harm to consumers or regulated industry participants and have legitimate non-avoidance purposes. The Treasurer advised that, without this broad power, legitimate arrangements may be inappropriately subject to the prohibitions in proposed section 323A of the Credit Act, and that providing high level guidance in the primary law might operate to inappropriately restrict the application of the power and prevent it from applying to unforeseen schemes.
2.136 While noting this advice, the committee reiterates its scrutiny concerns with respect to the use of delegated legislation to modify the operation of primary legislation in particular circumstances, with regard to the breadth of this proposed power and its potential impact on parliamentary scrutiny.
2.137 The committee requests that an addendum to the explanatory memorandum containing the key information provided by the minister be tabled in the Parliament as soon as practicable, noting the importance of these explanatory materials as a point of access to understanding the law and, if needed, as extrinsic material to assist with interpretation (see section 15AB of the Acts Interpretation Act 1901).
2.138 The committee otherwise draws its scrutiny concerns to the attention of senators and leaves to the Senate as a whole the appropriateness of conferring on ASIC the broad power to exempt schemes from the operation of the prohibition on avoidance schemes in proposed section 323A.
2.139 The committee also draws this matter to the attention of the Senate Standing Committee for the Scrutiny of Delegated Legislation.
2.140 In Scrutiny Digest 2 of 2021 the committee requested the Treasurer's advice as to why it is proposed to use offence-specific defences (which reverse the evidential burden of proof) in this instance. The committee also requested the Treasurer's detailed advice as to:
• why it is considered necessary and appropriate to leave to delegated legislation the prescription of circumstances in which it will be a defence to the offence or civil penalty provision of failing to comply with requirements to provide material to a consumer;
• whether the bill can be amended to include at least high-level guidance regarding the relevant circumstances that may be prescribed on the face of the primary legislation.[41]
Treasurer's response
2.141 The Treasurer advised:
Significant matters in delegated legislation; Reversal of evidential burden of proof, 133DB
Proposed paragraphs 133DB(1)(ba) and (bb) of the Credit Act establish a civil penalty for failure to provide a consumer with a comparison of equity projections and the consumer's expected aged care costs before entering into a reverse mortgage or providing other specified advice or services in relation to a reverse mortgage. Currently, subsection 133DB(2) of the Credit Act also makes it an offence to engage in conduct that breaches requirements in subsection 133DB(1). Proposed subsections 133DB(4A) and (4B) provide exceptions (offence-specific defences) to the civil penalty and offence, providing that the offence does not apply if another person has already given the required comparison; or circumstances prescribed by the regulations exist.
The criminal offence carries a maximum penalty of 50 penalty units and the civil penalty provision applies a civil penalty of 5000 penalty units.
Leaving to delegated legislation the prescription of circumstances in which it will be a defence to the offence or civil penalty provision of failing to comply with requirements to provide material to a consumer
As outlined above, this Bill is in response to the Government’s economic response to the COVID-19 Pandemic. Given the unpredictability of outbreaks of the virus and related government regulatory responses, it is appropriate to leave to delegated legislation the prescription of circumstances in which it will be a defence to the offence or civil penalty provision of a licensee failing to comply with requirements to provide information to a consumer (133DB(1)(b) and (ba)). Equally, this regulation-making power provides the enduring flexibility for Government to support advancements in technology which achieve efficiencies for business while providing an appropriate level of consumer protection. This will help consumers and businesses safely transact during the COVID-19 pandemic while also facilitating long-term technological improvements in business communications which can benefit both consumers and licensees. As regulations, the prescribed circumstances would be subject to disallowance by the Parliament. Consistent with standard practice, the Government envisages undertaking consultation before making any regulations under this power to minimise the risk of unintended consequences.
Using offence-specific defences (which reverse the evidential burden of proof)
Proposed subsection 133DB(4A) of the Credit Act provides for specific circumstances in which there will not be a contravention of subsection 133DB(1)(ba)-(bb) and (2). Subsection 133DB(4B) of the Credit Act provides for specific circumstances (prescribed in regulations) in which there will not be a contravention of subsection 133DB(1)(ba)-(bb) and (2). In a preceeding against a licensee in relation to 133DB, the defendant will bear the evidential burden that these specific circumstances occurred to successfully make out the defence.
The Attorney-General's Department's Guide to Framing Commonwealth Offences, Infringement Notices and Enforcement Powers (September 2011) (the Guide) provides that a matter should only be included in an offence-specific defence (as opposed to being specified as an element of the offence), where it is peculiarly within the knowledge of the defendant and it would be significantly more difficult and costly for the prosecution to disprove than for the defendant to establish the matter. It is intended to rely on this justification.
In accordance with the Guide, it is appropriate that the defendant bears the evidential burden for providing a defence. This is because it would be peculiarly within the mind of the defendant, and the defendant would be better positioned to readily adduce evidence, that they reasonably believed that another person had already shown the consumer in person the comparison described in subparagraph 133DB(1)(ba)-(bb) of the Credit Act and given the consumer a printed copy of the comparison; or circumstances prescribed by the regulations under subsection 133DB(4B) existed that justified the defendant not providing the consumer with a comparison of equity projections and consumer's expected aged care costs before the defendant entered into a reverse mortgage or providing other specified services in relation to a reverse mortgage. The alternative would be that the prosecution has to adduce evidence to the contrary. In addition to this, the defendant only has an evidential burden which is less onerous than the legal burden.
It is intended to rely on this justification for the reversals of the evidential burden of proof in proposed subsections 133DB(4A) and (48) of the Credit Act which provide exceptions (offence-specific defences) to the civil penalty and offence provisions. This reversal of the evidential burden of proof is proportional, necessary, reasonable and in pursuit of a legitimate objective.
Although it would have been technically possible to make amendments along the line described by the Committee, the Government's preferred approach was, and remains, to provide for such details in the subordinate legislation for the reasons stated above.
Committee comment
2.142 The committee thanks the Treasurer for this response. The committee notes the Treasurer's advice that it is appropriate to leave to delegated legislation the prescription of circumstances in which it will be a defence to the offence or civil penalty provision of a licensee failing to comply with requirements to provide information to a consumer, given the unpredictability of outbreaks of the COVID-19 virus and related government regulatory responses.
2.143 The Treasurer also advised that the regulation making power provides enduring flexibility for government to support advancements in technology. While noting this advice, the committee has generally not accepted a desire for administrative flexibility to be a sufficient justification, of itself, for leaving significant matters to delegated legislation.
2.144 While the Treasurer also notes that it is envisaged that the government will undertake consultation before making regulations under this power, the committee notes that the bill does not include a specific requirement on the government to undertake such consultation.
2.145 With respect to the use of offence-specific defences, the committee notes the Treasurer's advice that it would be peculiarly within the mind of the defendant that they reasonably believed that another person had already shown the consumer the required comparison in-person and given the consumer a printed copy of the comparison. The Treasurer also advised that the defendant would also be better positioned to readily adduce evidence of this matter.
2.146 The committee also notes the Treasurer's advice that it would be peculiarly within the mind of the defendant that circumstances prescribed by the regulations under subsection 133DB(4B) existed that justified the defendant not providing the consumer with a comparison of equity projections and consumer's expected aged care costs before the defendant entered into a reverse mortgage or providing other specified services in relation to a reverse mortgage. While acknowledging this advice, the committee notes that the regulation-making power does not appear to be confined in a way that would protect against circumstances that do not meet the test set out in the Guide to Framing Commonwealth Offences being prescribed in the regulations. That is, it appears open for regulations to prescribe circumstances, the existence of which would not be peculiarly within the knowledge of the defendant, and significantly more difficult and costly for the prosecution to disprove.
2.147 The committee requests that an addendum to the explanatory memorandum containing the key information provided by the minister be tabled in the Parliament as soon as practicable, noting the importance of these explanatory materials as a point of access to understanding the law and, if needed, as extrinsic material to assist with interpretation (see section 15AB of the Acts Interpretation Act 1901).
2.148 The committee otherwise draws its scrutiny concerns to the attention of senators and leaves to the Senate as a whole the appropriateness of the offence‑specific defence proposed in subsection 133DB(4B), which:
• reverses the evidential burden of proof, and
• allows the circumstances in which the defence will apply to be prescribed in delegated legislation.
2.149 The committee also draws this matter to the attention of the Senate Standing Committee for the Scrutiny of Delegated Legislation.
[33] Schedule 1, items 63 and 67; Schedule 2, item 12, proposed subsection 133CD(5) and proposed paragraph 133CF(2)(c). The committee draws senators’ attention to these provisions pursuant to Senate Standing Order 24(1)(a)(iv).
[34] Senate Scrutiny of Bills Committee, Scrutiny Digest 2 of 2021, pp. 12-15.
[35] The Treasurer responded to the committee's comments in a letter dated 10 March 2021. A copy of the letter is available on the committee's website: see correspondence relating to Scrutiny Digest 5 of 2021 available at: www.aph.gov.au/senate_scrutiny_digest.
[36] Schedule 4, item 3, proposed sections 323B–323C. The committee draws senators’ attention to this provision pursuant to Senate Standing Order 24(1)(a)(i) and (iv).
[37] Senate Scrutiny of Bills Committee, Scrutiny Digest 2 of 2021, pp. 15-18.
[38] Schedule 4, item 3, proposed section 323D. The committee draws senators’ attention to this provision pursuant to Senate Standing Order 24(1)(a)(iv).
[39] Senate Scrutiny of Bills Committee, Scrutiny Digest 2 of 2021, pp. 18-19.
[40] Schedule 1, item 65. The committee draws senators’ attention to this provision pursuant to Senate Standing Order 24(1)(a)(i) and (iv).
[41] Senate Scrutiny of Bills Committee, Scrutiny Digest 2 of 2021, pp. 19-20.
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