Financial Services and Credit Monthly Update February 2025
CONSUMER CREDIT
Buy Now Pay Later
An exposure draft of the National Consumer Credit Protection Amendment (Low Cost Credit) Regulations 2025 (Cth) was released by the Treasury on 5 February 2025. They support the regulation of buy now pay later (BNPL) introduced by the Treasury Laws Amendment (Responsible Buy Now Pay Later and Other Measures) Act 2024 (Cth). Comments closed on 12 February 2025 after a very short consultation period.
On 7 February 2025, the Australian Securities and Investments Commission (ASIC) announced a consultation on new regulatory guidance for BNPL, releasing draft Regulatory Guide 000, Low cost credit contracts together with Consultation Paper 382, Low cost credit contracts for comment. ASIC is seeking responses by 7 March 2025.
Regulatory changes to facilitate home ownership
The Federal Government has announced regulatory updates to assist Australians with Higher Education Loan Program (HELP) debts in obtaining mortgages and to boost the construction of new housing units. The Australian Prudential Regulation Authority (APRA) and ASIC will revise their guidance to address barriers faced by potential homebuyers and property developers.
Key updates include:
APRA will consult on the treatment of HELP debts in serviceability requirements and debt reporting;
ASIC will update its guidance on responsible lending laws, including guidance on the treatment of HELP debts; and
APRA has clarified that 100% pre-sales are not required for the financing new unit blocks – for further details, see “APRA clarifies position on commercial property lending” in the Prudential section below.
CONSUMER PROTECTION
Scams Prevention Framework
On 13 February 2025, the Parliament passed the Scams Prevention Framework Act 2025 (Cth) to establish the scams prevention framework (SPF). The law commenced on 21 February 2025. The SPF will require designated entities to prevent, detect, disrupt, respond and report scams. The Federal Government has committed to designate banks, telcos and certain digital platform providers as the first three regulated sectors. Regulated businesses that fail to comply with the requirements under the SPF could face heavy fines. The SPF also provides scam victims with clear pathways to claim compensation if regulated businesses do not meet the prescribed standards.
The Federal Government has published a guide on the implementation and key features of the SPF. The guide covers matters including:
what is considered to be a scam under the SPF;
examples of obligations to be imposed on the initial three designated sectors (i.e. banks, telcos and digital platforms) under the proposed mandatory industry code under the SPF;
enhanced scam intelligence sharing obligations on designated businesses; and
redress available to scam victims.
A significant reduction in scam losses has been reported for 2024, with a 33% overall annual decrease. These improvements are credited to the efforts of the National Anti-Scam Centre, which collaborates with industry to combat scam activities.
CORPORATE
Government’s response to meetings and documents review
The Federal Government has released its response to the Statutory Review of the Meetings and Documents Amendments, which assessed the effectiveness of legislative changes in 2021-22 aimed at modernising company meetings and document handling.
Key recommendations from the review include maintaining the current meeting formats for listed entities, allowing non-listed entities to choose their meeting formats without constitutional requirements, encouraging relevant bodies to provide increased guidance on the conduct of virtual meetings, and the need for a future review of meeting laws in five years to assess the evolution of meeting formats and the effectiveness of the current regulations. The Government has agreed to all these recommendations. Additionally, the Government supports maintaining laws on mandatory polls and independent reports on polls, as well as the electronic distribution of meeting-related materials and electronic signing and execution of documents.
FINANCIAL ADVICE
Changes to pathway for financial advisers
The Federal Government has announced significant reforms to the education requirements for financial advisers, aiming to rebuild a sustainable industry. The current pathway, which includes a specialised qualification, a 1,600-hour professional year, a financial adviser exam, and ongoing education, has proven unsustainable. The number of advisers has plummeted from 28,000 in January 2019 to under 16,000.
Under the new reforms, prospective advisers will need a bachelor's degree or higher in any discipline, with additional study in relevant financial concepts. This change is designed to lower costs and make it easier for career changers to enter the profession. The reforms also streamline entry by focusing on core knowledge areas such as ethics, legal obligations, and consumer behaviour.
Additionally, the Government will not proceed with Stage 2 of the registration process under the Better Advice Act, which would have required annual registration with ASIC from July 2026.
FINANCIAL MARKETS
New clearing and settlement rules
ASIC has introduced new rules under the Competition in Clearing and Settlement services reforms which require the Australian Securities Exchange (ASX) to provide its clearing and settlement services transparently and fairly, with an obligation to publish fee comparisons with international providers.
Under the new rules, ASX must ensure its service pricing is transparent, fair, and reasonable. ASX must also offer non-discriminatory access to its services and facilitate third-party access through its core technology systems. These measures are intended to limit ASX’s monopoly power and reduce barriers to entry for new market participants and will come into effect in three months.
Consultation on capital markets dynamics
ASIC has released a discussion paper titled “Australia’s evolving capital markets: A discussion paper on the dynamics between public and private markets.” The paper invites feedback on the opportunities and risks arising from shifts in capital markets. In the paper, ASIC addresses declining public market listings, the growth of private market investments, and the influence of superannuation funds. ASIC is seeking actionable ideas to enhance the operation of Australia’s capital markets, focusing on whether regulatory interventions are needed to address risks or improve market attractiveness. Submissions are due by 28 April 2025.
FINANCIAL SERVICES
Review of wholesale investor test
The Parliamentary Joint Committee on Corporations and Financial Services (Committee) has released its report on the appropriateness of the current financial thresholds for qualifying as a wholesale investor or client under the Corporations Act 2001 (Cth) following a 12-month inquiry. Despite data showing a significant increase in the proportion of Australians qualifying as wholesale investors since the thresholds were set in 2001, the Committee found that there was insufficient evidence of an increase in systemic harm from the current thresholds. In addition, the Committee noted that increasing the test thresholds would reduce the available pool of wholesale investors and clients, which would broadly impact the investment industry.
The report recommends that the Government consider establishing a mechanism for periodic review of the thresholds, including mandatory industry consultation. The Committee also suggests amending the Corporations Act 2001 (Cth) to introduce objective criteria for the sophisticated investor test, replacing the current subjective elements.
FINANCIAL SYSTEM
Regional banking services
On 11 February 2025, the Federal Government announced a series of commitments from major banks to ensure the availability of banking services in regional Australia. This initiative seeks to address the significant decline in regional bank branches, with 36% having closed since 2017.
Key measures include a moratorium on branch closures for two and a half years. NAB has committed to a new moratorium, while CBA and Westpac will extend their existing ones. ANZ and Suncorp are also bound by conditions preventing regional branch closures until 31 July 2027.
Additionally, new Bank@Post agreements have been reached. CBA, NAB, and Westpac have agreed to new in-principle agreements, and ANZ has settled key terms to join the service. Macquarie and HSBC are also entering negotiations with Australia Post to provide Bank@Post services.
New law to enhance First Nations investment
The Federal Government has amended the Aboriginal and Torres Strait Islander Act 2005 (Cth) to enhance investment in First Nations businesses and communities. This reform empowers Indigenous Business Australia (IBA) to borrow and raise funds to pursue co-investment and partnership opportunities with both government and private entities. The amendments aim to address the significant barrier of access to capital for First Nations economic development.
FOREIGN INVESTMENT
Restrictions on foreign investment in established homes and land banking
The Federal Government has announced a two-year ban on foreign investors purchasing established homes, effective from 1 April 2025 to 31 March 2027. This measure aims to ease pressure on the housing market and increase homeownership opportunities for Australians. Key features of the ban include:
foreign investors, including temporary residents and foreign-owned companies, will be prohibited from buying established dwellings unless exceptions apply; and
limited exceptions include investments that significantly increase housing supply or support the availability of housing, and for the Pacific Australia Labour Mobility (PALM) scheme.
In addition, the Federal Government is clamping down on “land banking” by foreign investors to free up land and expedite the development of residential and commercial properties. Land banking is the practice of buying undeveloped land and holding on to it for a long period in anticipation that its value will increase due to future development, infrastructure improvements or zoning changes.
INSURANCE
Ban on adverse predictive genetic testing: consultation paper
The Treasury has released a consultation paper inviting views on design issues for the Federal Government’s proposed ban on the use of adverse predictive genetic testing results in life insurance. Submissions are due by 12 March 2025.
PRUDENTIAL
APRA clarifies position on commercial property lending
On 13 February 2025, APRA published its letter to authorised deposit-taking institutions (ADIs) with respect to presales covering for commercial property lending. In March 2017, APRA issued a letter to ADIs in which it observed that “some ADIs had tightened underwriting criteria for presales coverage following market concerns with regard to settlement risk. ADIs are now generally requiring qualifying presales equivalent to at least 100 per cent of committed debt”. In its latest letter, APRA has clarified that the reference to presales coverage in its March 2017 letter does not represent a minimum requirement or expectation of APRA, but was only a reflection of industry practice observed at the time through the thematic review. APRA says that while presales do have an important role to play in a sound credit risk management approach, APRA has not set minimum requirements or expectations for presales in these standards and guidance: APRA’s requirements and guidance for prudent credit risk management relevant to commercial property lending are contained in APS 220 and APG 220.1.
APRA simplifies prudential framework with key changes
On 19 February 2025, APRA announced two significant steps to streamline its prudential framework. Firstly, APRA has rescinded its 2018 Information Paper on cloud outsourcing, in light of the upcoming Prudential Standard CPS 230 Operational Risk Management, effective from 1 July 2025. CPS 230 will replace existing standards on outsourcing and business continuity management, providing formal supervisory coverage for cloud service provider arrangements. Secondly, APRA has ceased the collection of the “ARF 923.0 Covid-19 Capital and Credit” data, with the final submission for the period ending 31 January 2025.
APRA consults on capital requirements for annuity products
APRA has announced a public consultation on capital settings for annuity products. This initiative is part of APRA’s effort to support life insurers in increasing the availability of retirement products in its Corporate Plan 2024-25. The key proposal involves revising the approach to calculating the ‘illiquidity premium’ in LPS 112 Capital Adequacy: Measurement of Capital. This change would lower capital requirements for annuity products, provided certain risk controls are in place. The consultation paper will be released in the second quarter of 2025.
AML/CTF
New guidance on sanctions laws
The Australian Sanctions Office (ASO) has published 6 new guidance to assist Australians and Australian businesses to comply with sanctions laws. The 6 new notes include guidance on:
sanctions compliance for Australian Government agencies and employees;
dealing with assets owned or controlled by designated persons and entities;
financial transactions involving designated persons and entities;
import, purchase or transport of firearms and other ‘arms or related materials’ from sanctioned countries;
reporting a sanctions contravention; and
sanctions compliance for universities.
In addition, ASO has released a Sanctions Compliance Toolkit and a Sanctions Risk Assessment Tool to provide more comprehensive guidance for regulated entities and legal professionals.
DISPUTES AND ENFORCEMENT
ASIC releases enforcement and regulatory update
ASIC has released an enforcement and regulatory update for the period of July to December 2024, revealing data on its scam crackdown efforts. The report highlights that since July 2023 ASIC has taken down on average 130 scam websites per week and in total 10,240 websites with 7,227 fake investment platform scams, 1,564 phishing scam hyperlinks and 1,257 cryptocurrency investment scams. As part of its enforcement, ASIC also initiated court action against HSBC Australia for failing to protect customers from scams in December 2024 following its reports into the anti-scam practices of 15 banks outside the major four. The report notes a 31% increase in new investigations, with ASIC commencing 109 new investigations and 15 court actions in the last six months of 2024. ASIC is also reported to be successful in most of its civil and criminal prosecutions, securing $46.6 million in civil penalties and 13 criminal convictions.
Reportable situation regime proposed relief
ASIC has proposed further relief measures to assist Australian financial services and credit licensees in complying with the reportable situations regime. The proposed relief aims to reduce the reporting burden on the industry while ensuring that ASIC continues to receive reports of high regulatory value.
The proposal includes relief from reporting certain breaches of misleading and deceptive conduct provisions and specific contraventions of civil penalties where the breach is rectified within 30 days, impacts no more than five consumers, and results in a total financial loss of no more than $500. Breaches of client money reporting rules and clearing and settlement rules are excluded from this relief.
Submissions are due by 11 March 2025.
Cbus enforceable undertaking and investigation
APRA has accepted a court enforceable undertaking (CEU) from United Super Pty Ltd (United Super), the trustee for Construction and Building Unions Superannuation Fund (Cbus). The CEU requires Cbus to undertake a holistic risk transformation program to address concerns in relation to Cbus’ risk management and related issues, following a recent prudential review by APRA. The undertakings given by Cbus are in addition to the licence conditions that were imposed by APRA in August 2024. Cbus is also required to develop and publish a rectification plan.
APRA is also investigating possible breaches of the Superannuation Industry (Supervision) Act 1993 (Cth) (the SIS Act) by Cbus through an investigation with a focus on expenditure management practices.
APRA responds to BUSSQ Federal Court appeal
APRA has issued a statement regarding the ongoing legal proceedings involving BUSS (Queensland) Pty Ltd (BUSSQ). In August 2024, APRA imposed additional licence conditions on BUSSQ to address prudential concerns and ensure member interests were safeguarded. In response, BUSSQ sought judicial review of APRA’s decision, despite an available internal review process. On 31 January 2025, Justice Derrington ruled that BUSSQ should have pursued the internal review instead of approaching the Federal Court. Subsequently, BUSSQ has decided to challenge this ruling. APRA is currently considering the notice of appeal.
Australian Super fined for failure to merge accounts
On 21 February 2025, the Federal Court imposed a $27 million fine on AustralianSuper, the trustee of Australia’s largest superannuation fund, for failing to merge multiple member accounts, breaching its fundamental duties to its members. The Court highlighted systemic failings, including the absence of appropriate systems and processes to ensure compliance with legislative requirements. From 1 July 2013 to 31 March 2023, approximately 90,700 members held multiple accounts, incurring around $69 million in losses due to multiple administration fees, insurance premiums, and lost investment earnings. All affected members have since been remediated. This case marks the first instance where ASIC, in its role as co-regulator with APRA, has alleged contraventions of section 52 of the SIS Act.
ASIC wins appeal on voluntary disclosure and legal privilege
The Federal Court has upheld ASIC’s appeal in the case against Noumi Limited’s (Noumi) former managing director and CEO, Rory Macleod. The court ruled that by providing documents to ASIC under a Voluntary Disclosure Agreement, Noumi does not necessarily waive legal professional privilege (LPP). This decision overturns an earlier ruling that Noumi had waived LPP by submitting documents to ASIC. The appeal decision clarifies the use of voluntary disclosure agreements, which have been a key tool for ASIC in expediting investigations. The proceedings against Mr Macleod will continue, with a liability hearing to be scheduled.
Allianz and AWP fined $16.8 million for misleading statements
On 28 February 2025, the Supreme Court of New South Wales found Allianz Australia Insurance Limited (Allianz) and AWP Australia Pty Ltd (AWP) liable for making false or misleading statements and imposed fines totalling $16.8 million. Allianz was fined $13.5 million for six counts of disseminating misleading information, while AWP was fined $3.3 million for one count. Between 2016 and 2018, Allianz and AWP published misleading information on Allianz’s travel insurance web pages, misrepresenting the coverage levels. The Court found that the companies failed to disclose sub-limits, terms, conditions, or exclusions that limited the advertised benefits on several occasions. In his judgment, Justice Rothman emphasised the need for corporations to ensure proper oversight of published information.