Banking regulation and credit card reform bill passed

The Treasury Laws Amendment (Banking Measures No. 1) Bill 2017 has been passed by both houses of Parliament and is awaiting Royal Assent. Background.

UPDATE: Royal Assent given on 5 March 2018.

The Bill is comprised of a number of amendments designed to:
• strengthen the Australian Prudential Regulation Authority’s (APRA’s) ability to respond to developments in non-Authorised Deposit-taking Institution (non-ADI) lending;
• reduce barriers to new entrants to the banking sector and remove restrictions on existing smaller ADI’s on the use of the term ‘bank’;
• modernise the Banking Act 1959 by inserting an objects provision; and
• improve customer outcomes under credit card contracts through amendments to the National Consumer Credit Protection Act 2009.

Banking regulation

Amendments in the Bill give APRA the ability to make rules relating to the lending activities of non-ADI lenders. Those rules will be made when APRA considers that the provision of finance by non-ADI lenders materially contributes to the risks of instability in the Australian financial system. APRA will also be given the power to issue directions to seek compliance with the whole or part of a non-ADI lender rule.

The amendments widen the class of corporations which must be registered under the Financial Sector (Collection of Data) Act 2001.

The Bill also removes restrictions in the Banking Act 1959 to allow all ADIs to use the term ‘bank’, ‘banker’ or ‘banking’ in relation to the ADI’s financial business. APRA will retain the ability to restrict the use of these terms by providing an affected ADI with a written determination.

Credit cards

The bill contains four key reforms relating to credit cards. Background.

The changes include:

  • requiring affordability assessments be based on a consumer’s ability to repay the credit limit within a reasonable period (from July 2018 1 January 2019);
  • banning unsolicited offers of credit limit increases (from January 2019 1 July 2018);
  • simplifying how credit card interest is calculated and banning the practice of backdating interest rate charges (from 1 January 2019); and
  • requiring credit card providers to have online options to cancel cards or to reduce credit limits (from 1 January 2019).
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