BALANCING REFORM OF AUSTRALIA'S CONSUMER POLICY FRAMEWORK WITH REGULATORY IMPACT ON BUSINESS

Sydney, 12 December, 2007: The Australian Bankers’ Association (ABA) said getting the right balance between reforms to Australia’s consumer policy framework with the regulatory impact on Australian businesses will be a critical component of implementation of the Productivity Commission’s proposals in its draft report into the review of Australia’s Consumer Policy Framework.

The ABA supports the removal of national inconsistency in regulation and is pleased with the general direction of the Productivity Commission’s proposals but in implementing any changes there should not be an increase in banks’ compliance burden. 

David Bell, Chief Executive of the ABA, said: “This is one of the most significant inquiries undertaken in Australia in relation to consumer protection laws.”

Concerns about the ability of the State and Territory-based system of consumer credit regulation to ensure maintenance of national uniformity have been recognised by the Productivity Commission.

Mr Bell said: “National inconsistency in consumer credit regulation is a major cause of concern and increases costs for banks. One option, which is proposed by the Commission, is to transfer responsibility for consumer credit regulation to the Commonwealth to ensure there is national consistency for the future of this regulation.”

“The ABA supports national consistency and will give further consideration for options for achieving this. One important factor which the Commission has recognised is that a transfer of the Uniform Consumer Credit Code to the Commonwealth could reduce transitional costs. Otherwise, banks and other credit providers could face significant transitional costs if the Commonwealth were to develop new national consumer credit regulation instead.”

“The ABA particularly welcomes the Productivity Commission’s proposal that existing individual State and Territory laws that are inconsistent with the national regulation should be repealed.”

“While the proposals are significant and are directed towards improvement in policy development and national consistency, the Commission’s proposals will require careful consideration. In particular, the detail to ensure that there is an appropriate balance between reform of Australia’s consumer policy framework and the need to ensure minimum regulatory impact and cost on banks and other Australian businesses. Centralised regulation sounds good in principle but ultimately it is the substance of the regulation that really counts,” he said.

Proposals for national unfair contract terms legislation is an example of the need for careful consideration of the implications. Standard form contracts are a critical component in banks, and other financial services providers, in ensuring compliance with the vast array of consumer protection laws in Australia.

Further, many financial services contracts are of long duration and can be terminated by consumers at will. Therefore, it is important to understand the need for a financial services provider to make changes to contractual terms over the term of the particular facility to ensure it remains relevant in a world of changing circumstances.

Mr Bell said: “Ruling standard form contracts and terms permitting a bank to unilaterally vary a contract as ‘unfair’, without a full consideration of the context, risks inappropriate outcomes for banks and their customers. The ABA will give careful consideration to the proposed requirement that actual consumer detriment must be established before a term is deemed unfair.”  

The ABA welcomes the Commission’s recognition that the use of unfair contract terms legislation as a means of price control is not an appropriate application of such regulation.

Mr Bell said: “In a competitive and innovative financial services market, as exists in Australia, price control can actually result in consumer detriment. The ABA will be working through the draft report with a view to providing constructive feedback to the Commission on what is major constitutional and regulatory initiative.”


For further information:

Heather Wellard
ABA PR
Ph: 02 8298 0411
Mobile: 0409 830 439