Financial Services and Credit Monthly Update November 2024

CONSUMER CREDIT

Buy now pay later reforms passed

The Treasury Laws Amendment (Responsible Buy Now Pay Later and Other Measures) Bill 2024 (Cth) was passed on 29 November 2024. Most of the provisions will commence 6 months after assent. The legislation extends the application of the National Credit Code to buy now pay later (BNPL) contracts and establishes low cost credit contracts (LCCCs) as a new category of regulated credit. LCCCs are continuing or non-continuing credit contracts for providing credit to consumers on a low-cost basis. Most BNPL contracts will be regulated as LCCCs. There will also be an optional modified responsible lending framework for LCCCs and new regulation-making powers in respect of LCCCs.

Help to Buy

The Help to Buy Bill 2023 (Cth) passed on 27 November 2024. It establishes a shared equity program to assist low to middle income earners to purchase new or existing homes by accessing an equity contribution from the Commonwealth. The shared equity arrangements will be administered and monitored by Housing Australia.

COMPETITION

Merger reforms passed

The Treasury Laws Amendment (Mergers and Acquisitions Reform) Bill 2024 (Cth) passed through the Senate on 28 November 2024. Under the new regime, there will be a mandatory notification system for mergers above certain thresholds and the ACCC will be the decision maker on approvals. The new system will come into effect from 1 January 2026, with businesses able to make voluntary notifications under the new regime from 1 July 2025.

CONSUMER PROTECTION

Scams Prevention Framework Bill introduced

On 7 November 2024, the Scams Prevention Framework Bill 2024 (Cth) was introduced into Parliament to legislate for a Scams Prevention Framework (SPF). Banks, social media platforms and telecommunications companies are intended to be the first three designated sectors under the SPF once it comes into effect. Key features of the SPF include:

• enabling the Minister to designate specific sectors as being subject to the SPF and establish sector-specific codes imposing mandatory obligations on the designated sectors;

• requiring the designated sectors to have in place a clear, accessible and transparent internal dispute resolution (IDR) mechanisms available for consumers;

• enabling the Minister to make SPF rules on liability apportionment between businesses which fail to assist victims seeking redress;

• designating a single external dispute resolution scheme for scam-related complaints which are not resolved satisfactorily at IDR; and

• setting up a mandatory coordinated intelligence sharing ecosystem that requires timely reporting and information sharing across industry and government.

Unfair trade practices

In September 2022, Commonwealth, State and Territory Consumer Ministers agreed that the Commonwealth would lead a public consultation on options to address unfair trading practices. Following an initial regulatory impact statement released in August 2023, Treasury has now released a consultation paper seeking feedback on the design elements of general and specific prohibitions on unfair trading practices, and on the benefits to consumers and compliance costs for business associated with the proposed prohibitions. Submissions close on 13 December 2024.

Preventing financial abuse in banking

On 1 November 2024, the Australian Banking Association, in collaboration with Westpac, introduced a Safety by Design toolkit which provides banks with guidance on designing products and services that protect customers from financial abuse and to help identify perpetrators.

CORPORATE

Consultation on licensing regime for franchising sector

On 11 November 2024, Treasury released a consultation paper seeking submissions on the need for a licensing regime for the franchising sector. The consultation paper outlines five potential functions of a licensing regime (including regulatory oversight, dispute resolution, disclosure of information, business model preconditions to franchising, and education and resources), and seeks feedback on whether and how these functions could address the needs of the franchising sector. Submissions can be made up to 8 December 2024.

Beneficial ownership reforms

An exposure draft of the Treasury Laws Amendment Bill 2024: Enhanced Disclosure of Ownership of Listed Entities (Cth) was released for public consultation on 14 November 2024. It proposes legislative amendments to improve the beneficial ownership disclosure regime for listed entities.

DIGITAL ASSETS

Wholesale tokenised asset market research paper

The Reserve Bank of Australia (RBA) and Digital Financial Cooperative Research Centre have published a consultation paper on “Project Acacia”, a research initiative to create a wholesale tokenised asset market in Australia.  The paper calls for expressions of interest for participation in the research phase of the project, and technical and functional input. Responses are due by 11 December 2024. 

Crypto Asset Reporting Framework and related amendments

Treasury is seeking submissions on how Australia will apply the Crypto Asset Reporting Framework (CARF) and related amendments to the Common Reporting Standard. The Organisation for Economic Co‑operation and Development (OECD) developed the CARF, which is a new international tax transparency framework. It allows tax authorities to collect tax‑related information from providers of crypto asset transactions and share tax‑related information on crypto assets with other tax authorities.

ESG

ASIC consultation on sustainability reporting regime guidance

On 7 November 2024, the Australian Securities and Investments Commission (ASIC) released a consultation paper on a draft regulatory guide for the sustainability reporting regime. Submissions can be made up to 19 December 2024.

APRA releases second climate risk self-assessment survey findings

On 13 November 2024, APRA released its findings of the second climate risk self-assessment survey conducted with over half of the regulated entities in scope across banks, insurers and superannuation trustees. Key insights from the survey include:

• the self-assessment results were broadly aligned with APRA’s expectations;

• a majority of large entities have improved their climate risk maturity since the previous survey in 2022, but one quarter have seen a maturity decline;

• the average level of climate risk maturity for large banks has increased since the 2022 survey, but remains unchanged for large insurers and superannuation trustees;

• strengths were seen in areas of governance and strategy and risk management, while weaknesses were in disclosures and metrics and targets areas; and

• entities have begun to take into consideration adjacent risk and practices including nature risk and transition plans.

APRA has urged regulated entities to consider the findings of the survey and implement leading practice for climate risk management.

FINANCIAL SYSTEM

RBA reforms passed

The Treasury Laws Amendment (Reserve Bank Reforms) Bill 2023 (Cth) has passed through Parliament and received assent on 29 November 2024. It implements the recommendations of the RBA Review, including to:

• mandate that the RBA’s overarching objective is to “promote the economic prosperity and welfare of the people of Australia, both now and into the future”;

• confirm that monetary policy should have dual objectives of price stability and contributing to full employment; and

• clarify the RBA’s responsibility to contribute to financial system stability.

PAYMENTS

Cheques Transition Plan

The Federal Government has released its Cheques Transition Plan, outlining the phased discontinuation of cheques by 2030. Published on 18 November 2024, it details a two-step timeline: ceasing the issuance of cheques by 30 June 2028 and stopping their acceptance by 30 September 2029.

PRIVACY AND DATA

Privacy Amendment Bill passes

The Privacy and Other Legislation Amendment Bill 2024 (Cth) passed on 29 November 2024. It amends the Privacy Act 1988 (Cth) (the Privacy Act) and other legislation to:

• expand the Information Commissioner’s powers;

• facilitate information sharing in emergency situations or following eligible data breaches;

• require the development of a Children’s Online Privacy Code;

• modify the protections for overseas disclosures of personal information,

• introduce new civil penalties;

• increase transparency about automated decisions which use personal information;

• introduce a statutory tort for serious invasions of privacy; and

• introduce criminal offences for doxxing.

Most provisions will commence when the Bill receives assent.

OAIC guidance on tracking pixels and privacy

On 4 November 2024, the OAIC issued guidance to help private sector organisations meet their obligations under the Privacy Act when using third-party tracking pixels. These pixels collect user activity data and are often used by social media and digital platforms. The guidance advises that organisations must configure these pixels to comply with the Privacy Act.

Consumer Data Right rule changes

On 12 November 2024 the Federal Government announced changes to encourage consumer use of the Consumer Data Right (CDR). These amendments aim to simplify the consent process and operational requirements, enhance consumer experience and provide efficiency. Key changes include:

• Simplifying consumer consent by allowing multiple consents through a single action.

• Reducing barriers for banks by streamlining data request processes.

• Extending a CDR-enabled energy product trial to 24 months and 2,000 customers.

Treasury will further consult stakeholders on improving business consumer participation in the CDR. The new rules took effect on 12 November 2024.

Draft rules to expand CDR to non-bank lenders

Treasury has released draft rules for public comment to expand the CDR to non‑bank lending. The proposed changes will also remove the requirement for banking and non‑bank lending data holders to share CDR data for niche products and data that does not add significant value to consumers. Submissions close on 24 December 2024.

PRUDENTIAL

Consultation on adjustments to general insurance reinsurance framework

The Australian Prudential Regulation Authority (APRA) is seeking submissions from stakeholders on ways to promote general insurers’ access to reinsurance. The proposed adjustments are in relation to APRA’s general insurance reinsurance eligibility criteria which are detailed in APRA’s letter to all general insurers and reinsurers. Submissions can be made until 17 February 2025.

APRA maintains macroprudential policy settings

APRA has confirmed the continuation of its current macroprudential policy settings. The mortgage serviceability buffer remains at 3 percentage points, while the countercyclical capital buffer is held at 1 per cent of risk-weighted assets. No new lending limits or constraints on capital distributions have been introduced.

FAR implementation: ASIC and APRA insights

ASIC and APRA have shared observations on the registration and notification lodgements made by banking entities since the commencement of the Financial Accountability Regime (FAR), identified areas that require further consideration by banking entities, and highlighted specific aspects in line with previously released FAR guidance. The regulators say that accountable entities should have robust frameworks in place to ensure that registration and notification submissions are complete and comply with applicable obligations under the FAR. They expect an accountable entity’s board to be able to demonstrate appropriate oversight and to be prepared to attest to the adequacy of the entity’s FAR framework and its compliance with FAR obligations.  

New and updated FAQs on capital for ADIs and insurers

APRA has published one new FAQ, updated 19 and deleted 11 FAQs on measurement of capital for Authorised deposit-taking institutions (ADIs) and insurers.

SUPERANNUATION

Superannuation objective legislation

The Superannuation Objective Bill 2023 (Cth) was passed on 28 November 2024. The law defines the objective of superannuation as “to preserve savings to deliver income for a dignified retirement, alongside government support, in an equitable and sustainable way”.

Improving the retirement phase of superannuation

On 20 November 2024 the Treasurer announced planned improvements to the retirement phase of superannuation, which focus on four critical areas:

• Enhanced independent guidance: Updating the ASIC Moneysmart website with new content on superannuation, and an ASIC consumer education campaign.

• Better retirement products: Improving the innovative income stream regulations to allow funds to offer product features that members want, such as money back guarantees and instalment payments instead of an upfront lump sum.

• Best practice principles: A new set of voluntary best practice principles. Consultation on draft principles will begin in 2025.

• Increased transparency: A new reporting framework on retirement outcomes will commence from 2027 and enable monitoring of the outcomes delivered to members in retirement in a consistent and transparent way. APRA will collect and publish data on an annual basis.

AML/CTF

AML/CTF Amendment Bill passed

The Anti-Money Laundering and Counter-Terrorism Financing Amendment Bill 2024 (Cth) passed both Houses of Parliament on 29 November 2024. It amends the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) to:

• extend the anti-money laundering and counter-terrorism financing (AML/CTF) regime to additional “Tranche 2” services that are recognised as posing high money laundering and terrorism financing risks, including some professionals such as lawyers and accountants;

• reframe and clarify the AML/CTF program and customer due diligence obligations;

• update the “tipping off” offence;

• enable the Australian Transaction Reports and Analysis Centre (AUSTRAC) to require the disclosure of information and conduct examinations; and

• update the AML/CTF regime to reflect changing business structures, technologies and illicit financing methodologies; and

• repeal the Financial Transaction Reports Act 1988 (Cth).

Most of the major changes will take effect from March 2026.

DISPUTES AND ENFORCEMENT

ASIC 2025 enforcement priorities

ASIC has announced its enforcement priorities for 2025 in light of consumer risks driven by cost of living pressures, setting out the areas in which it will focus its resources and expertise. In 2025, ASIC will have its focus on:

• misconduct exploiting superannuation savings;

• unscrupulous property investment schemes;

• insurers’ failure to deal fairly and in good faith with customers;

• strengthening investigation and prosecution of insider trading;

• business models designed to circumvent consumer credit protections;

• misconduct affecting small businesses and their creditors;

• misconduct in debt management and collection;

• licensee failures to have adequate cyber-security protections;

• greenwashing and misleading conduct involving environmental, social and governance claims;

• member services failures in the superannuation sector;

• misconduct by auditor; and

• finance providers’ used car finance provided to vulnerable consumers.

Regardless of any changes, ASIC’s enduring priorities remain the same which continue to target:

• misconduct damaging market integrity (including insider trading, continuous disclosure breaches and market manipulation);

• misconduct affecting First Nations peoples;

• misconduct involving a high risk of significant consumer harm;

• conduct which target financially vulnerable consumers;

• large financial institutions’ systemic compliance failures resulting in widespread harm to consumers;

• new or emerging conduct risks within the financial system; and

• governance and directors’ duties contraventions.

ASIC insights on breach reporting

ASIC has published its third report with insights on the reportable situations regime. The report includes statistics on the types of matters reported between 1 July 2023 and 30 June 2024. During the period, licensees submitted 12,298 reports. 79% had a financial and/or non-financial impact on customers.

AFCA process update on further issues

On 12 November 2024 AFCA announced process updates to provide clearer guidance on dealing with further issues raised during the complaints process.  The update clarifies when AFCA will combine further issues with an existing complaint or where it should be the subject of a new complaint. The update also outlines when AFCA may introduce issues not specifically raised by a party.

AFCA Systemic Issues Insights Report

AFCA published the latest edition of its Systemic Issues Insights Report on 8 November 2024. Between January and June 2024, AFCA commenced investigations into 114 systemic issues.

ASIC sues Cbus on claims handling failures

ASIC has commenced civil proceedings against United Super Pty Ltd (United Super), the trustee of Cbus, alleging failure to act efficiently, honestly and fairly in its handling of claims for death benefits and total and permanent disability insurance between September 2022 and November 2024. United Super is alleged to have failed to properly assess the extent of the impact to members and claimants resulting in an estimated loss of $20 million, despite receiving reports from its third-party administrator. More than 6,000 members and claimants were reported to have had their benefits delayed by more than 12 months, which constituted more than half of Cbus’ total claims by late 2022.

Additional $10m capital for Pacific International Insurance

On 1 November 2024 APRA applied an additional $10 million capital requirement to Pacific International Insurance Pty Limited following a review on its binder holder arrangements authorising an insurance intermediary to issue policies on the insurer’s behalf. The review identified fundamental deficiencies in oversight and control of its binder holder business and risk management framework.

ASIC sues NAB on financial hardship

ASIC has initiated legal proceedings against National Australia Bank Limited (NAB) and its subsidiary, AFSH Nominees Pty Ltd (AFSH), for failing to respond to 345 hardship applications within the legally required 21-day timeframe. The allegations cover the period from 2018 to 2023. ASIC is seeking declarations, pecuniary penalties, and adverse publicity orders against NAB and AFSH. This action follows similar proceedings against Westpac in September 2023 for financial hardship misconduct.

Court finds that an interest in Bitcoin is property

In Re Blockchain Tech Pty Ltd [2024] VSC 690, Justice Attiwill of the Supreme Court of Victoria ruled that a person's interest in Bitcoin constitutes property. This is the first decision by an Australian superior court to recognise cryptocurrency as possessing the characteristics of property under common law.

ASIC halts non-compliant Centrepay credit arrangements

ASIC has issued a final stop order against Indy-C-Fashion Accessories Pty Ltd (Indy-C), preventing the company from offering Centrepay credit arrangements to consumers. This decision follows Indy-C’s failure to produce a compliant Target Market Determination (TMD). Indy-C had been providing credit arrangements to First Nations consumers for purchasing clothing and household goods via deductions from their Centrelink benefits. However, ASIC found that Indy-C did not adequately consider whether these credit arrangements met the consumers’ financial needs and objectives. Despite multiple attempts to rectify the deficiencies in their TMDs, Indy-C’s submissions remained non-compliant. This is the second time where ASIC has made a final stop order.