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National Consumer Credit Protection Amendment (Mandatory Comprehensive Credit Reporting) Bill 2018

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2016-2017-2018

 

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

 

 

 

HOUSE OF REPRESENTATIVES

 

 

 

National Consumer Credit Protection Amendment (Mandatory Comprehensive Credit Reporting) Bill 2018

 

 

 

 

EXPLANATORY MEMORANDUM

 

 

 

(Circulated by authority of the

Treasurer, the Hon Scott Morrison MP)

 

 



Table of contents

Glossary............................................................................................................. 1

General outline and financial impact........................................................... 3

Chapter 1 ........... Mandatory comprehensive credit reporting.................... 5

Chapter 2 ........... Statement of Compatibility with Human Rights.......... 41

 

 



The following abbreviations and acronyms are used throughout this explanatory memorandum.

Abbreviation

Definition

ACCC

Australian Competition and Consumer Commission

ADI

Authorised Deposit-taking Institution

ARCA Technical Standard

Australian Credit Data Reporting - Industry Requirements & Technical Standards

ASIC

Australian Securities and Investments Commission

Bill

National Consumer Credit Protection Amendment (Mandatory Comprehensive Credit Reporting) Bill 2018

Credit Act

National Consumer Credit Protection Act 2009

Murray Inquiry

Financial System Inquiry

OAIC

Office of the Australian Information Commissioner

PRDE

Principles of Reciprocity and Data Exchange

Privacy Act

Privacy Act 1988

Privacy Code

Privacy (Credit Reporting) Code 2014 (Version 1.2)

 

 



Mandatory comprehensive credit reporting

This Bill amends the Credit Act to mandate a comprehensive credit reporting regime (the mandatory regime). Under the regime eligible licensees, who on 1 July 2018 are large ADIs, must provide credit information on consumer credit accounts to credit reporting bodies.

Date of effect :  1 July 2018

Proposal announced In the 2017-18 Budget, the Government undertook to mandate a comprehensive credit reporting regime if credit providers did not meet a threshold of 40 per cent data reporting by the end of 2017.

On 2 November 2017 the Treasurer announced that legislation would be introduced to mandate comprehensive credit reporting from 1 July 2018.

Financial impact Nil

Human rights implications: This Bill does not raise any human rights issues. See Statement of Compatibility with Human Rights — in Chapter 2, at paragraphs 2.1 to 2.58.

Summary of regulatory impact statement

Impact: The reforms to mandate the supply of comprehensive credit information will have a regulatory impact on certain credit providers and credit reporting bodies.

Main points:

•        The Government considered the regulatory impacts of mandating comprehensive credit reporting through the Productivity Commission’s Inquiry into Data Availability and Use (the PC Inquiry), as well as through extensive consultation with industry stakeholders.

•        The PC Inquiry noted that the effective and efficient operation of credit markets relies upon credit providers being able to access sufficient and reliable information about borrowers as a basis for making lending decisions, and that comprehensive credit reporting would be a desirable reform in this respect.

•        The PC Inquiry found that government action may be necessary as a ‘circuit breaker’ if no progress towards a critical mass of comprehensive credit information was made by mid-2017, due to the existence of a first-mover problem. Credit providers will only invest in the necessary systems and procedures necessary for comprehensive credit reporting if there is a benefit to be gained, which will only be the case if other credit providers are participating in the system.

•        The PC Inquiry can be found on the Productivity Commission’s website.

 

 



Chapter 1          

Mandatory comprehensive credit reporting

Outline of chapter

1.1                   This Bill amends the Credit Act to mandate a comprehensive credit reporting regime. Under this mandatory regime, large ADIs must provide comprehensive credit information on consumer credit accounts to certain credit reporting bodies.

1.2                   The Bill expands ASIC’s powers so it can monitor compliance with the mandatory regime. The Bill also imposes additional requirements on where data held by a credit reporting body must be stored.

Context of amendments

1.3                   Since March 2014, the Privacy Act has allowed credit providers and credit reporting bodies to use and disclose ‘comprehensive credit information’ about a consumer. This includes information about the maximum amount of credit available to a person and how well the person is meeting their repayments.

1.4                   Prior to March 2014, the information that could be shared was limited to ‘negative information’. This includes details of a person’s overdue payments, defaults, bankruptcy or court judgments against that person.

1.5                   The Privacy Act does not mandate the disclosure of comprehensive credit information by credit providers to credit reporting bodies.

1.6                   The 2014 Financial System Inquiry (the Murray Inquiry) and the Productivity Commission Inquiry into Data Availability and Use recommended that the Government mandate comprehensive credit reporting in the absence of voluntary participation. Comprehensive credit reporting is expected to let credit providers better establish a consumer’s credit worthiness and lead to a more competitive and efficient credit market.

1.7                   In the 2017-18 Budget, the Government committed to mandating a comprehensive credit reporting regime if credit providers did not meet a threshold of 40 per cent of data reporting by the end of 2017.

1.8                   On 2 November 2017 the Treasurer announced that the Government would introduce legislation for a mandatory regime as it was clear the 40 per cent target would not be met.

Summary of new law

1.9                   The Bill amends the Credit Act to establish a mandatory comprehensive credit reporting regime to apply from 1 July 2018. The amendments do not require or allow disclosure, use or collection of credit information beyond what is already permitted under the Privacy Act and Privacy Code.

1.10               Australia’s credit reporting system is characterised by an information asymmetry. A consumer has more information about his or her credit risk than the credit provider. This can result in mis-pricing and mis-allocation of credit.  

1.11               The Bill seeks to correct this information asymmetry. It lets credit providers obtain a comprehensive view of a consumer’s financial situation, enabling a provider to better meet its responsible lending obligations.

1.12               The Government expects that the mandatory regime will also benefit consumers in other ways. Consumers will have better access to consumer credit, with more reliable individuals able to seek more competitive rates when purchasing credit. Consumers that are looking to enter the housing market can better show their credit worthiness.

1.13               Consumers that possess a poor credit rating will also be able demonstrate their credit worthiness through future consistency and reliability.

1.14               The mandatory regime applies to ‘eligible licensees’ which initially will be large ADIs that hold an Australian credit licence. An ADI is considered large when its total resident assets are greater than $100 billion. Other credit providers will be subject to the regime if they are prescribed in regulations.

1.15               In June 2017 large ADIs accounted for more than 80 per cent of household lending. The critical mass of information supplied by these large ADIs and their subsidiaries is expected to encourage other credit providers to also share comprehensive credit information.

1.16               The supply of information under the mandatory regime includes an initial bulk supply of credit information and an ongoing requirement to keep information up-to-date and accurate.

1.17               The initial bulk supply is split across two years:

•        By 28 September 2018, large ADIs must supply credit information on 50 per cent of the consumer credit accounts within the banking group to all credit reporting bodies the large ADI had a contract with on 2 November 2017.

•        By 28 September 2019, large ADIs must supply credit information on the remaining accounts, including those that open after 1 July 2018 and those held by subsidiaries of the large ADI to the same credit reporting bodies as the first bulk supply.

1.18               Supplying the initial bulk supply to credit reporting bodies the large ADI had a contract with on 2 November 2017 recognises the established relationship the licensee has with that credit reporting body including an agreement on the handling of data to ensure it remains confidential and secure.

1.19               Following the bulk supply of information, large ADIs must keep the information supplied accurate, complete and up-to-date, including by supplying information on subsequently opened accounts. This information must be supplied to credit reporting bodies that received the initial bulk supply and with whom the licensee continues to have a contract under the Privacy Act.

1.20               The security and privacy of a consumer’s credit information will be preserved and protected. The Bill relies on the existing protections established by the Privacy Act and Privacy Code and the oversight of the Australian Information Commissioner.

1.21               ASIC will be responsible for monitoring compliance with the mandatory regime. It has new powers to collect information and require audits to confirm the supply requirements are being met. ASIC can also prescribe the technical standards for the reported credit information.

1.22               The Treasurer will receive statements from large ADIs and credit reporting bodies to show that the initial bulk supply requirements have been met.

1.23               The mandatory comprehensive credit regime recognises that industry stakeholders have already taken steps to support sharing comprehensive credit information. This includes the Principles of Reciprocity and Data Exchange (PRDE) and supporting Australian Credit Data Reporting - Industry Requirements & Technical Standards (ARCA Technical Standards).

1.24               To the extent possible, the mandatory comprehensive credit reporting regime operates within the established industry framework but also provides scope for future technological developments.

1.25               The Treasurer must cause an independent review of the mandatory regime to be completed and a written report provided to the Treasurer by 1 January 2022. The Treasurer must table the report in each House of Parliament within 15 sitting days of receiving the report.

Comparison of key features of new law and current law

New law

Current law

Eligible licensees must supply credit information on:

•        50 per cent of their eligible credit accounts within 90 days of the first 1 July of becoming an eligible licensee.

•        All remaining eligible credit accounts, including those held by subsidiaries, within 90 days of the following 1 July.

No equivalent.

A credit provider that has supplied credit information under the mandatory regime must keep the information up to date, complete and accurate, including by supplying information on eligible accounts that are subsequently opened.

No equivalent.

Regulations will set out the circumstances when a credit reporting body can share the credit information supplied through the mandatory regime.

No equivalent.

Detailed explanation of new law

1.26               Before 2014, the credit reporting system, which is regulated by the Privacy Act, limited the information that could be collected, used and disclosed by credit providers and credit reporting bodies to ‘negative information’ about an individual. Negative information includes identification information such as a person’s name and address, default history and bankruptcy information about that person. 

1.27               The Privacy Amendment (Enhancing Privacy Protection) Act 2012 amended the Privacy Act to let credit providers and credit reporting bodies collect, use and disclose comprehensive credit information. Comprehensive credit information includes repayment history information, the type of credit a person has and the maximum amount of credit available to a person.

1.28               The explanatory memorandum to the Privacy Amendment (Enhancing Privacy Protection) Act 2012 stated:

‘Comprehensive credit reporting will give credit providers access to additional personal information to assist them in establishing an individual’s credit worthiness. The additional personal information will allow credit providers to make a more robust assessment of credit risk and assist credit providers to meet their responsible lending obligations. It is expected that this will lead to decreased levels of over-indebtedness and lower credit default rates. More comprehensive credit reporting is also expected to improve competition and efficiency in the credit market, which may result in reductions to the cost of credit for individuals.’

1.29               These amendments aligned Australia’s credit reporting system with comparable international systems, including in the United States, United Kingdom and New Zealand, which also allow for the disclosure and sharing of more comprehensive credit information.

1.30               Sharing comprehensive credit information under the Privacy Act is voluntary. A credit provider is not required to share comprehensive credit information with a credit reporting body.

1.31               The mandatory regime does not alter the existing provisions set out in the Privacy Act and the Privacy Code governing the use and disclosure of credit information. However, the Bill does place a new obligation on credit reporting bodies as to where and how data is stored.

1.32               The Privacy Act and Privacy Code will continue to:

•        set out the permitted uses and disclosure of an individual’s personal and credit information by credit providers and credit reporting bodies;

•        impose a requirement on credit providers and credit reporting bodies to ensure the accuracy and currency of information in the credit reporting system;

•        impose a requirement on a credit reporting body to protect the information it collects from misuse and unauthorised access;

•        impose a requirement on a credit reporting body to have a publicly available policy on how it collects, holds, uses and discloses credit information as well as procedures in place to ensure that the obligations under the Privacy Act and Privacy Code are met; and

•        impose timeframes on both credit providers and credit reporting bodies on how long credit information can be kept before it must be destroyed.

1.33               Within the framework established by the Privacy Act, the Bill provides that eligible licensees must supply certain credit information to eligible credit reporting bodies on consumer credit accounts the licensee holds. The licensees must supply updated information to these bodies on an ongoing basis.

1.34               The Bill requires the Treasurer to cause an independent review of the mandatory regime which must be completed and a report given to the Treasurer before 1 January 2022. The Treasurer must table the report in Parliament within 15 sitting days of receiving the report. [Schedule 1, item 4, section 133CZL]

1.35               The report will not be a legislative instrument because of the exemption in table item 12 in 6(1) of the Legislation (Exemptions and Other Matters) Regulation 2015.

1.36               The Bill is not specific on the scope of the review so as not to limit the review when it is established. However, the Government expects that the review could consider:

•        how the specific objectives of the mandatory regime have been met, including whether sufficient participation by credit providers in the voluntary regime has been achieved;

•        the benefits for consumers and small businesses from the mandatory regime;

•        options for broadening the scope of the mandatory regime (including access by non-Australian credit licence holders to information supplied under the regime); and

•        whether further measures are required to maintain the security of comprehensive credit information (including to facilitate new technological solutions for data exchange).

1.37               All references in this explanatory memorandum are to the Credit Act, unless otherwise stated.

Mandating the supply of credit information

Which credit providers must supply credit information?

1.38               The mandatory regime applies to eligible licensees. An eligible licensee is a credit provider who holds an Australian credit licence, and who on 1 July 2018, or a later date is:

•        A large ADI; or

•        A body corporate of a kind prescribed in the regulations.

[Schedule 1, item 4, subsection 133CN(1)]

1.39               Identifying which credit providers are subject to the mandatory regime relies on a number of existing definitions in the Credit Act and Privacy Act and some new definitions.

•        Existing subsection 35(1) of the Credit Act defines Australian credit licence as a licence that allows the holder to engage in particular credit activities.

•        The concept of a ‘large’ ADI relies on the legislative instrument made under the Banking Act 1959 as amended by the Treasury Laws Amendment (Banking Executive Accountability Regime) Act 2018 . Broadly, an ADI meets the definition of large where its total resident assets exceed $100 billion. [Schedule 1, item 3, subsection 5(1)]

•        The Part of the Credit Act inserted by this Bill relies on the definition of credit provider in sections 6G to 6K of the Privacy Act. This definition includes a bank or an organisation for which a substantial part of the organisation’s business is the provision of credit. [Schedule 1, item 2, subsection 5(1)]

1.40               The Government expects that regulations would be made after the mandatory regime has been in operation for a period of time and other credit providers are not voluntarily supplying data.

1.41               Where a credit provider is a large ADI on 1 July 2018, it will have 90 days from that date to supply the required information for 50 per cent of its eligible credit accounts. In certain circumstances the large ADI may have longer than 90 days to supply the credit information. This is explained at paragraphs 1.67 to 1.85. [Schedule 1, item 4, subparagraph 133CR(1)(a)(i) and subsection 133CR(2)]

1.42               A large ADI can meet the requirement to supply credit information for 50 per cent of its eligible accounts from eligible accounts across the banking group for which it is the head company. [Schedule 1, item 4, subsection 133CR(2)]

1.43               For example, if the large ADI is the head company across a banking group that has multiple subsidiaries each of which individually or collectively hold an Australian credit licence, the large ADI can supply information for 50 per cent of accounts across the banking group in order to meet its obligations on 1 July 2018.

1.44               How the ADI chooses to make up 50 per cent of accounts is a decision for the ADI. The information may be sourced from the head company or from within the group (its subsidiaries) or both. The information may relate to a particular type of credit while systems are put in place to supply information for more complex accounts in the second tranche. [Schedule 1, item 4, subsection 133CR(2)]

1.45               On 1 July 2019, a large ADI must supply the required information for all of the remaining eligible credit accounts that have either opened after 1 July 2018 or were not reported in the first tranche. This includes those eligible credit accounts held by other members of the banking group for which the ADI is the head company. [Schedule 1, item 4, subsections 133CR(3) and 133CR(4)]

1.46               Generally, the large ADI will have 90 days from 1 July 2019 to supply the remaining information. There are circumstances when a longer period may apply which is explained at paragraphs 1.86 to 1.99. [Schedule 1, item 4, paragraph 133CR(3)(a)]

1.47               Where a licensee becomes an eligible licensee after 1 July 2018 and is otherwise subject to the mandatory regime, the credit provider must supply information about 50 per cent of its eligible credit accounts within 90 days of the 1 July when it first became an eligible licensee.

1.48               As explained at paragraph 1.42, if an eligible licensee is part of a banking group, it can meet the requirement to supply credit information for 50 per cent of its eligible accounts from across the banking group for which it is the head company. [Schedule 1, item 4, subsection 133CR(2)]

1.49               In respect of its remaining eligible credit accounts, the credit provider must supply the information about those eligible credit accounts within 90 days of the 1 July that falls 12 months later.

1.50               There are circumstances when a longer period to supply the information may apply. This is explained at paragraphs 1.67 to 1.99.

Example 1.1 

On 1 July 2018, an ADI has total resident assets less than $100 billion and as a result is a medium ADI and not subject to the mandatory comprehensive credit reporting regime.

However, on 25 March 2020 the ADI became a large ADI.

The ADI must supply mandatory credit information for 50 per cent of its eligible credit accounts within 90 days of 1 July 2020.

Information about the remaining accounts and accounts opened after 1 July 2020 must be supplied within 90 days of 1 July 2021.

How does the mandatory regime operate when a credit reporting body is not complying with the security requirements in the Privacy Act?

1.51               The Information Commissioner administers the Privacy Act and has oversight of the handling of information, including information disclosed as part of Australia’s credit reporting regime. This does not change under the Bill.

1.52               The existing protections in the Privacy Act reflect that the community expects that the information shared in the credit reporting regime is given a high level of protection.

1.53               These protections include requiring credit reporting bodies to take reasonable steps to protect the information received, including from misuse, interference and unauthorised access (section 20Q of the Privacy Act) and having contracts which place similar obligations on a licensee.

1.54               Publications produced by the Office of the Australian Information Commissioner such as the Guide to securing personal information  - ‘Reasonable steps’ to protect personal information set out the steps that could be taken and how the reasonableness test adjusts based on the amount of information held.

1.55               While the Privacy Act places obligations on a credit reporting body, licensees also typically place their own obligations on a credit reporting body to ensure the security of their customer’s information that is disclosed.

1.56               These obligations are set out in the contract between the licensee and credit reporting body and could include requiring audits, reviewing the results of stress tests or requiring that certain procedures are put in place to train staff.

1.57               It is important, in the context of the mandatory regime, that a licensee’s ability to have its own security requirements for the information it discloses is not weakened. A licensee is well placed to consider emerging risks and adjust requirements as the threat environment changes.

1.58               The Bill recognises this existing relationship between a licensee and credit reporting body by enabling a licensee to withhold the supply of mandatory credit information where a licensee does not reasonably believe that the credit reporting body is meeting its information security obligations under the Privacy Act.

1.59               Paragraphs 1.67 to 1.99 explain what a licensee needs to do if, when making the initial bulk supplies, the licensee does not believe the credit reporting body is meeting its information security obligations. This includes notifying the credit reporting body, ASIC and the Information Commissioner.

1.60               Paragraphs 1.118 to 1.126 explain what a licensee needs to do if, for the ongoing supply of information, the licensee does not believe the credit reporting body is meetings its information security obligations. This includes notifying the credit reporting body, ASIC and the Information Commissioner.

1.61               The notification obligations give the credit reporting body an opportunity to engage with the credit provider and take steps to meet its section 20Q obligations. Giving the notices to ASIC and the Information Commissioner also gives the regulators of the mandatory regime and the Privacy Act visibility about broader compliance with those two frameworks.

1.62               If a licensee has an ongoing concern with a credit reporting body’s approach to information security, there may be a role for the Information Commissioner to intervene including by providing additional guidance.

1.63               Where a licensee wants to withhold information on the basis that it does not reasonably believe the credit reporting body is meeting its section 20Q obligations in the Privacy Act, the licensee bears an evidential burden. The evidential burden is placed on the licensee because the information that the licensee would use to form its reasonable belief would be peculiarly within the knowledge of the licensee.

1.64               For example, a licensee may hold this belief on the basis of a stress test carried out under the terms of a contract between the licensee and credit reporting body. The results of such a test would only be shared with the licensee.

1.65               The licensee should have sound justification when it does not supply the mandatory information.

1.66               This evidence would be used where ASIC applied to a court to declare that the supply obligations had not been met (existing section 166) and order a pecuniary penalty to be paid (existing section 167). Definitions of ‘declaration of contravention’ and ‘pecuniary penalty order’ are inserted into the Credit Act. [Schedule 1, item 3, subsection 5(1)]

Timeframe to supply data - the first bulk supply

1.67               The requirement to supply information within 90 days of the first 1 July when the obligation applies only operates when the eligible licensee reasonably believes that the eligible credit reporting body meets its obligations under section 20Q of the Privacy Act. [Schedule 1, item 4, subparagraph 133CR(1)(a)(ii) and subsection 133CR(5)]

1.68               As explained above, section 20Q of the Privacy Act requires a credit reporting body to take reasonable steps to protect the information it receives, including from misuse, interference and unauthorised access.

1.69               Credit providers already have mechanisms in place to satisfy themselves about a credit reporting body’s compliance with its section 20Q obligations in the Privacy Act. These include requiring audits, reviewing results of stress tests and requiring certain procedures to be in place for the training of staff.

1.70               The Government expects that eligible licensees will rely on these existing mechanisms in forming a reasonable belief that the credit reporting body is meeting its obligations under the Privacy Act.

1.71               If, on the first 1 July that the eligible licensee must supply data, the licensee does not reasonably believe that the eligible credit reporting body meets its section 20Q obligations, and the licensee continues to hold that belief at the end of the 90 day period, the licensee does not need to make the first bulk supply. [Schedule 1, item 4, subsection 133CS(1)]

1.72               However, the eligible licensee will be required to supply the credit information on all its accounts after the second 1 July after the supply obligation applies, once it believes that the credit reporting body is meeting its section 20Q obligations.

1.73               If an eligible licensee wants to rely on this exception it must meet certain notification obligations. [Schedule 1, item 4, paragraph 133CS(1)(c)]

1.74               If the eligible licensee believes the credit reporting body is not meeting its section 20Q obligations on the first 1 July, the eligible licensee must notify the credit reporting body, the Information Commissioner and ASIC within 7 days. [Schedule 1, item 4, paragraphs 133CS(2)(a) and 133CS(2)(b)]

1.75               If the eligible licensee still believes at the end of the 90 day period when the information should have been supplied that the credit reporting body is not meeting its section 20Q obligations, the eligible licensee must give the credit reporting body, the Information Commissioner and ASIC a notice within 7 days of the end of the 90 day period. [Schedule 1, item 4, paragraphs 133CS(2)(c) and 133CS(2)(d)]

1.76               Both of these notices must explain why the eligible licensee believes that the credit reporting body is not meeting its section 20Q obligations. [Schedule 1, item 4, subparagraphs 133CS(2)(a)(ii) and 133CS(2)(c)(ii)]

1.77               The first notice must also explain that the credit reporting body may convince the eligible licensee of how it is meeting its section 20Q obligations. [Schedule 1, item 4, subparagraph 133CS(2)(a)(iii)]

Example 1.2 

On 1 July 2018 (the first 1 July), a large ADI does not reasonably believe a credit reporting body is meeting its section 20Q obligations. It still holds this belief at the end of the 90-day period.

1.78               The notification obligations give the credit reporting body an opportunity to engage with the credit provider and take steps to meet the section 20Q obligations. Giving the notices to ASIC and the Information Commissioner also gives the regulators of the mandatory regime and the Privacy Act visibility about broader compliance with those two frameworks.

1.79               Where a licensee wants to withhold information on the basis that it does not reasonably believe the credit reporting body is meeting its section 20Q obligations in the Privacy Act, the licensee bears an evidential burden. [Schedule 1, item 3, subsection 5(1) and item 4, subsection 133CS(3)]

1.80               The evidential burden is placed on the licensee because the information that the licensee would use to form its reasonable belief would be peculiarly within the knowledge of the licensee.

1.81               For example, a licensee may hold this belief on the basis of a stress test carried out under the terms of a contract between the licensee and credit reporting body. The results of such a test would only be shared with the licensee.

1.82               It would be significantly more costly and difficult for the prosecution to disprove the reason for the licensee believing the credit reporting body is not meeting its section 20Q information security obligations than for the licensee to prove.

1.83               Placing an evidential burden on the licensee also highlights the significance of the exception and the need for the licensee to have sound justification when not supplying the mandatory credit information.

1.84               If, during the 90 day period after the first 1 July the eligible licensee believes that credit reporting body has begun to meet its section 20Q obligations the eligible licensee must supply the mandatory credit information within 14 days of holding this belief, or by the end of the original 90 day period, if this is longer. [Schedule 1, item 4, paragraph 133CR(1)(a) and subsection 133CR(5)]

1.85               The eligible licensee must also notify the credit reporting body, the Information Commissioner and ASIC within 7 days of the eligible licensee believing that the credit reporting body is meeting its section 20Q obligations. [Schedule 1, item 4, section 133CT]  

Example 1.3 

On 1 July 2018 (the first 1 July), a large ADI does not reasonably believe that a credit reporting body is meeting its section 20Q obligations in the Privacy Act. The large ADI stops holding this belief during the 90-day period. The original 90-day period is the longer time to supply the information.



Example 1.4 

The longer period to supply the information is 14 days from the day the large ADI believed the credit reporting body was meeting its section 20Q obligations.

Timeframe to supply data - the second bulk supply

1.86               The obligation to supply information within 90 days of the second 1 July does not apply while the eligible licensee believes that the eligible credit reporting body does not meet its obligations under section 20Q of the Privacy Act. [Schedule 1, item 4, subparagraphs 133CR(3)(a)(ii) and 133CR(3)(a)(iii)]

1.87               Paragraphs 1.68 and 1.69 summarised the requirements in section 20Q of the Privacy Act and the steps that an eligible licensee may already be taking in order to be satisfied that the credit reporting body is meeting its obligations regarding the security of information as set out in the Privacy Act.

1.88               Similar to the first 1 July bulk supply obligations, if an eligible licensee wants to rely on the exception to not supply on the basis of a credit reporting body not complying with its information security requirements, the eligible licensee must meet certain notification obligations. [Schedule 1, item 4, paragraph 133CS(1)(c)]

1.89               If the eligible licensee believes the credit reporting body is not meeting its section 20Q obligations on the second 1 July, the eligible licensee must notify the credit reporting body, the Information Commissioner and ASIC within 7 days. [Schedule 1, item 4, paragraphs 133CS(2)(a) and 133CS(2)(b)]

1.90               Once the eligible licensee does believe the credit reporting body is meeting its section 20Q obligations the eligible licensee must notify the credit reporting body, ASIC and the Information Commissioner within 7 days of holding that belief. [Schedule 1, item 4, section 133CT]  

1.91               If, the eligible licensee begins to hold this belief during the 90 day period the eligible licensee must supply the mandatory credit information within 14 days of holding this belief, or by the end of the original 90 day period, if this is longer. [Schedule 1, item 4, paragraph 133CR(3)(a) and subsection 133CR(5)]

1.92               If the eligible licensee does not believe the credit reporting body meets its section 20Q obligations during the 90 day period the eligible licensee will need to notify the credit reporting body, ASIC and the Information Commissioner, that the eligible licensee did not believe the credit reporting body was meeting its section 20Q obligations during the 90 day period. The eligible licensee must issue the notice within 7 days. [Schedule 1, item 4, paragraphs 133CS(2)(c) and 133CS(2)(d)]

1.93               However, unlike the initial bulk supply, the eligible licensee will need to supply the mandatory credit information after the 90 day period once it believes the credit reporting body is meeting its section 20Q obligations. The eligible licensee will have 7 days to notify the credit reporting body, ASIC and the Information Commissioner and 14 days to supply the mandatory credit information. [Schedule 1, item 4, subparagraph 133CR(3)(a)(ii) and section 133CT]

Example 1.5  

The eligible licensee does not reasonably believe the credit reporting body is meeting its section 20Q obligations on 1 July 2019 but begins to hold this belief after the 90-day period.

1.94               All the mandated credit information may be supplied when the second bulk supply is required if the eligible licensee was not satisfied the credit reporting body was meeting its section 20Q obligations before the end of the 90 day period for the first 1 July.

1.95               Where a licensee wants to withhold information on the basis that it does not reasonably believe the credit reporting body is meeting its section 20Q obligations in the Privacy Act, the licensee bears an evidential burden. [Schedule 1, item 3, subsection 5(1) and item 4, subsection 133CS(3)]

1.96               The evidential burden is placed on the licensee because the information that the licensee would use to form its reasonable belief would be peculiarly within the knowledge of the licensee.

1.97               For example, a licensee may hold this belief on the basis of a stress test carried out under the terms of a contract between the licensee and credit reporting body. The results of such a test would only be shared with the licensee.

1.98               It would be significantly more costly and difficult for the prosecution to disprove the reason for the licensee believing the credit reporting body is not meeting its section 20Q information security obligations than for the licensee to prove.

1.99               Placing an evidential burden on the licensee also highlights the significance of the exception and the need for the licensee to have sound justification when not supplying the mandatory credit information.

Ongoing supply obligations

1.100           The usefulness and efficiency of Australia’s credit reporting system relies on credit information disclosed to a credit reporting body being kept complete, accurate and up-to-date.

•        Section 20N of the Privacy Act requires credit reporting bodies to enter into agreements with credit providers to ensure that information provided is accurate, up-to-date and complete.

•        Section 21U of the Privacy Act requires a credit provider, who holds credit information which has been previously disclosed to a credit reporting body, to notify the credit reporting body of a correction when the credit provider has taken steps to make the information it holds, accurate, up-to-date, complete, relevant and not misleading.

1.101           No amendments to the Privacy Act or Code are required for the obligations to keep credit information complete, up-to-date and accurate to apply to the credit information supplied under the mandatory regime.

1.102           However, where an obligation under the Privacy Act and the Privacy Code require a credit provider who has supplied information to a credit reporting body to update that information and no timeframe is specified in the Privacy Act or Privacy Code, the amendments in this Bill provide that the information must generally be supplied within 45 days of the change or update. [Schedule 1, item 4, subsection 133CU(1)]

1.103           The table inserted by the Bill includes a number of ‘events’, already captured by the broad obligations in the Privacy Act and Privacy Code, as well as requiring mandatory credit information for new accounts that open.

1.104           The following table lists when a licensee must supply information to a credit reporting body, including where the change occurred to an account held by a subsidiary.

Table 1.1 

Event

Description

Changes required to the information supplied to a credit reporting body necessary to keep the information accurate, up-to-date and complete.

[Schedule 1, item 4, item 1 in the table in subsection 133CU(1)]

This includes where named account holders change, for example a person ceases to be an account holder, there are corrections or changes in consumer credit liability information or where an account goes into default.

A payment has been made where default information has previously been supplied to a credit reporting body.

[Schedule 1, item 4, item 2 in the table in subsection 133CU(1)]

Section 21E of the Privacy Act requires a credit provider that has provided default information to a credit reporting body to update that information once payment has been made. The Privacy Act and Privacy Code set out how to establish when an overdue payment has been made and the day when it has been taken to have been made.

New accounts opened after the two initial bulk supplies of information have been supplied to credit reporting bodies.

[Schedule 1, item 4, item 3 in the table in subsection 133CU(1)]

Mandatory credit information is required for a new account opened with the licensee that has not previously been submitted to the credit reporting body. There is no requirement in the Privacy Act or Privacy Code to supply information in this circumstance.

1.105           A regulation making power also allows regulations to prescribe other circumstances for an eligible credit account or the consumer which would require the supply of mandatory credit information, or related information. [Schedule 1, item 4, item 4 in the table in subsection 133CU(1)]

1.106           A licensee may supply information in bulk and is not required to separately supply credit information for each event. [Schedule 1, item 4, subsection 133CU(3)]

1.107           Where a licensee and credit reporting body meet conditions prescribed in regulations, the licensee may supply information for the events listed in the table in accordance with those conditions. [Schedule 1, item 4, subparagraph 133CU(1)(b)(i)]

1.108           The Government expects that the conditions prescribed in the regulations would recognise alternative IT solutions. For example, an approach under which a credit reporting body could request information from a licensee and receive that information in real-time.

1.109           However, before prescribing an alternative arrangement in the regulations the Government would consider the operability of such an approach and whether it could be reasonably supported by both credit reporting bodies and licensees.

1.110           The Government would also consider the implications of an alternative approach and its impact on the competitiveness and efficiency of the credit market.

1.111           The regulations made under this provision may refer to a published document such as an industry developed standard. Where this is the case, the document would be referred to as in force for time to time. It is important the regulations are dynamic and can automatically capture the changes in a document. This would allow industry to readily respond to changes, such as technological developments, without the need for the Government to remake the regulations. [Schedule 1, item 4, subsections 133CU(5) and 133CU(6)]

1.112           In deciding whether to refer to a document, the Government would consider whether the document is publicly available and easily accessible for licensees and those that need to use the documents.

1.113           The table should not be read as narrowing obligations under the Privacy Act so that only events listed in the table require updates.

1.114           The Privacy Act and Privacy Code include some specific timeframes in which a credit provider or credit reporting body must update or correct information. These are generally not disrupted by the amendments in this Bill. [Schedule 1, item 4, section 133CZK]

1.115           For example, section 20T and 21V provide an individual with correction of information rights. The Privacy Code sets out how a credit reporting body or credit provider must respond to such a request. Once a request has been made, and the credit reporting body or a credit provider is satisfied that credit-related personal information is inaccurate, out-of-date, incomplete, irrelevant or misleading, the credit reporting body or credit provider must take reasonable steps to correct the information within 30 days of the request.

1.116           Similarly, subsection 13.1 of the Privacy Code requires a credit provider (and the receiving credit provider) to notify a credit reporting body that has received information on a credit account which is subsequently transferred between those credit providers of the transfer within 45 days of it occurring.

1.117           Subsection 6.4 of the Privacy Code requires a credit provider to notify a credit reporting body within 45 days where credit is terminated or ceases to be in force and the credit provider has previously disclosed consumer credit liability information.

1.118           However, the obligation to supply information and keep it up-to-date, accurate and complete does not apply while the eligible licensee believes that the eligible credit reporting body does not meet its obligations under section 20Q of the Privacy Act. This does not apply where the correction is to an error in information previously supplied and the information was incorrect at the time it was supplied. [Schedule 1, item 4, subsections 133CV(1) and 133CV(4), and section 133CZK]

1.119           To rely on this exception the credit provider must meet a number of notification obligations. [Schedule 1, item 4, paragraph 133CV(1)(c)]

1.120           If the eligible licensee believes the credit reporting body is not meeting its section 20Q obligations on the day that the event which triggers the supply of information occurs, the eligible licensee must notify the credit reporting body, the Information Commissioner and ASIC within 7 days of that day. [Schedule 1, item 4, paragraphs 133CV(2)(a) and 133CV(2)(b)]

1.121           If the eligible licensee holds this belief at the end of the 45 day period in which the information should have been supplied, the eligible licensee must give the credit reporting body, the Information Commissioner and ASIC a notice within 7 days of that day. [Schedule 1, item 4, paragraphs 133CV(2)(c) and 133CV(2)(d)]

1.122           Both of these notices must explain why the eligible licensee believes that the credit reporting body is not meeting its section 20Q obligations. [Schedule 1, item 4, subparagraphs 133CV(2)(a)(ii) and 133CV(2)(c)(ii)]

1.123           The first notice must also explain that the credit reporting body may convince the eligible licensee as to how it is meeting its section 20Q obligations. [Schedule 1, item 4, subparagraph 133CV(2)(a)(iii)]

1.124           Once the eligible licensee believes the credit reporting body is meeting its 20Q obligations the eligible licensee has 7 days to notify the credit reporting body, ASIC and Information Commissioner. [Schedule 1, item 4, section 133CW]  

1.125           The eligible licensee has the longer of the remaining 45 days since the ‘trigger event’ or 20 days since the eligible licensee believed the credit provider was meeting its obligations under the Privacy Act to supply the required information. [Schedule 1, item 4, paragraph 133CU(1)(c) and subsection 133CU(2)]  

1.126           An eligible licensee has an evidential burden where the licensee withholds credit information on the basis of the credit reporting body not meeting its section 20Q obligations in the Privacy Act. Paragraphs 1.79 to 1.83 explain why the evidential burden is being placed on the licensee. [Schedule 1, item 3, subsection 5(1) and item 4, subsection 133CV(3)]

Which information must be supplied?

1.127           To meet its obligation under the mandatory regime, a credit provider must supply ‘mandatory credit information’ on its ‘eligible credit accounts’ to all ‘eligible credit reporting bodies’. [Schedule 1, item 4, section 133CR]

1.128           The definition of ‘eligible credit account’ is included in paragraphs 1.143 to 1.149. The definition of ‘eligible credit reporting body’ is included in paragraphs 1.152 and 1.159.

1.129           ‘Mandatory credit information’ is ‘credit information’ as defined in section 6N of the Privacy Act for a natural person that is personal information (other than sensitive information), that is:

•        identification information;

•        consumer credit liability information;

•        repayment history information;

•        default information;

•        payment information; and

•        new arrangement information

[Schedule 1, item 1, subsection 5(1), item 3, subsection 5(1) and item 4, subsection 133CP(1)]

1.130           Each of these terms is defined in the Privacy Act.

1.131           The Privacy Code supplements and provides further guidance on terms used in the definition of ‘credit information’. For example, the Privacy Code requires credit reporting bodies to develop and maintain in conjunction with credit providers, common descriptors for ‘types of consumer credit’.

1.132           The Privacy Code also explains how to establish the date when credit was entered into or was terminated. This guidance also applies under the mandatory regime implemented by this Bill.  

1.133           There may be restrictions on the use and disclosure of credit information under the Privacy Act and Privacy Code.

1.134           For example, default information can only be disclosed to a credit reporting body where the credit provider has notified the consumer that the information will be shared with a credit reporting body (see section 21D of the Privacy Act). 

1.135           These restrictions remain under the mandatory comprehensive credit reporting regime. That is, a licensee is only mandated to share information to the extent that is it allowed under the Privacy Act and Privacy Code. [Schedule 1, item 4, paragraphs 133CR(1)(c), 133CR(3)(c) and 133CU(1)(e)]  

1.136           Where these obligations have been met, and the default information can be shared, a credit provider is only required to supply default information that relates to the period from when the eligible licensee is subject to the mandatory regime. For a subsidiary within a banking group, it is the point in time from when the head company became an eligible licensee. [Schedule 1, item 4, subsection 133CP(3)]

1.137           The Bill also sets out how many months of repayment history must be provided. A person may have many years of repayment history information depending on when a credit account was first opened. A credit provider is able to store repayment history information for up to two years.

1.138           However, under the mandatory credit reporting regime, a licensee will meet its obligation to supply repayment history information where it supplies repayment history information for an account for the three months preceding the 1 July from when the obligation to supply data was first triggered. [Schedule 1, item 4, subsection 133CP(2)]

1.139           For example, if a licensee makes its initial bulk supply of data on 2 July 2018, the licensee would include repayment history information for 50 per cent of its eligible credit accounts for the months of April 2018, May 2018 and June 2018.

1.140           Similarly, if the provider did not make its initial bulk supply until August 2018, the first bulk supply would include repayment history information for 50 per cent of its eligible credit accounts for the months of April 2018, May 2018, June 2018 and July 2018.

1.141           For accounts included in the second bulk supply, the licensee would meet its obligations under the mandatory regime by supplying repayment history information:

•        For accounts open on 1 July 2018 not included in the initial supply: data for April 2018, May 2018 and June 2018 and the period between 1 July 2018 and when the bulk supply is made; and

•        For accounts opened after 1 July 2018: all repayment history available at the date of the supply.

1.142           In this way, all accounts that are part of the bulk supply of data will include up to 15 months of repayment history information.

What is an ‘eligible credit account’?

1.143           An ‘eligible credit account’ is defined as an account on which consumer credit is or can be taken that is held by a natural person. [Schedule 1, item 4, section 133CO]

1.144           Consumer credit is defined in section 6 of the Privacy Act. It includes credit for personal, family or household purposes or to purchase or renovate a house including an investment property. It includes mortgage accounts, credit cards, overdraft facilities and personal loans.

1.145           A regulation making power enables the prescription of a type of credit account which is not an eligible credit account. [Schedule 1, item 4, paragraph 133CO(c)]

1.146           The Government expects that this regulation making power could be used where the supply of information of some accounts is not necessary to ensure transparency within the mandatory regime and may impose a disproportionate regulatory burden on a credit provider. The Government will also consider the approach adopted by industry.

1.147           For example, the PRDE does not require the supply of information for accounts where that type of credit can no longer be issued, the number of accounts is less than 10,000 and the total number of accounts is less than 3 per cent of the total consumer credit accounts held by that credit provider.

1.148           The PRDE, also lists margin loans, novated leases, flexible payment option accounts, overdrawn accounts that are not formal overdrafts as accounts for which credit information does not need to be supplied.

1.149           As part of its business model a credit provider may store data outside of Australia. However, irrespective of where the data is stored, a credit provider subject to the mandatory regime must supply credit information to an eligible credit reporting body. [Schedule 1, item 4, subsections 133CR(6) and 133CU(4)]

Who must the information be supplied to?

1.150           An eligible licensee will meet its obligations under the initial bulk supply requirements if it supplies ‘mandatory credit information’ for all its ‘eligible credit accounts’ to all ‘eligible credit reporting bodies’. [Schedule 1, item 4, subsections 133CR(1) and 133CR(3)]

1.151           Paragraphs 1.129 to 1.142 explain ‘mandatory credit information’ and paragraphs 1.143 to 1.149 explain ‘eligible credit account’. 

1.152           An eligible credit reporting body for an eligible licensee that must meet the bulk supply requirements on 1 July 2018 is a body that had a contract with the licensee under paragraph 20Q(2)(a) of the Privacy Act on 2 November 2017. [Schedule 1, item 3, subsection 5(1) and item 4, paragraph 133CN(2)(a)]

1.153           In this way the credit provider has an established relationship with the credit reporting body and will have an agreement in place on the handling of data to ensure it remains confidential and secure.

1.154           The requirement that the credit information must be supplied to all credit reporting bodies the licensee had a contract with is intended to reflect the ‘consistency principle’ in the PRDE (paragraph 16 in the PRDE).

1.155           The ‘consistency principle’ is important. It ensures that all credit reporting bodies have the same information and no credit reporting body has a competitive advantage on the basis of the information it holds. It provides an environment which encourages product innovation and supports competitive pricing of credit reporting information.  

1.156           The mandatory regime gives effect to the ‘consistency principle’ by requiring mandatory credit information be supplied to those credit reporting bodies an eligible licensee had a contract with on 2 November 2017. [Schedule 1, item 4, subsections 133CR(1) and 133CR(3)]

1.157           Referring to contracts in place on 2 November 2017 does not prevent new entrants to the credit reporting sector. A new credit reporting body can still receive comprehensive credit reporting information from a credit provider subject to the mandatory regime. However, the body will negotiate the receipt of this data outside the mandatory comprehensive credit reporting regime.

1.158           Once the bulk supply of data has been made, a licensee is only required to provide ongoing updates, corrections and information on new accounts to those credit reporting bodies it had a contract with on 2 November 2017 and with whom the licensee continues to have a contract. [Schedule 1, item 4, paragraph 133CU(1)(a) and subparagraph 133CU(1)(b)(iv)]

Example 1.6 

On 1 July 2018, an eligible licensee must make its initial bulk supply to three eligible credit reporting bodies: CRB-Ich Pty Ltd; CRB-Ni Pty Ltd; and CRB-San Pty Ltd.

A period of time passes and the eligible licensee does not renew its contract with CRB-Ich Pty Ltd but it keeps its contracts with CRB-Ni Pty Ltd and CRB-San Pty Ltd.

Separately a new credit reporting body enters the market (CRB-Shi Pty Ltd) and the eligible licensee enters into a contract with it to supply data.

Under the mandatory regime, the eligible licensee would be required to supply data on new accounts and provide updates on information supplied under the initial bulk supply within 45-days of the event, to CRB-Ni Pty Ltd and CRB-San Pty Ltd.

There may be other obligations in the Privacy Act which would require certain updates to CRB-Ich Pty Ltd.

All data supplied to CRB-Shi Pty Ltd would be subject to the contract it has with the eligible licensee.

1.159           A licensee that becomes an eligible licensee after 1 July 2018 must make its initial bulk supply of data to a credit reporting body that meets conditions prescribed in regulations and on an ongoing basis, to a credit reporting body that it has a current contract with under section 20Q of the Privacy Act. [Schedule 1, item 4, paragraph 133CN(2)(b), paragraph 133CU(1)(a) and subparagraph 133CU(1)(b)(iv)]

How the data must be supplied?

1.160           To meet its obligations under the mandatory comprehensive credit reporting regime a licensee must supply data in accordance with the ‘credit information supply requirements’. [Schedule 1, item 4, section 133CQ]

1.161           These requirements include supplying data in accordance with the Privacy Code. Paragraphs 1.131 and 1.132 provided examples of when the Privacy Code clarified the definitions and terms used in the Privacy Act. [Schedule 1, item 4, subsection 133CQ(1)]

1.162           The requirements also include supplying content or particulars of information in accordance with a determination made by ASIC. [Schedule 1, item 4, subsection 133CQ(2)]

1.163           A determination made by ASIC for this purpose is not subject to subsection 14(2) of the Legislation Act 2003 . [Schedule 1, item 4, subsection 133CQ(3)]

1.164           In its determination ASIC may incorporate another administrative document. The Government expects that a determination made by ASIC will refer to the industry developed PRDE which is publicly available on the Australian Retail Credit Association website.

1.165           It is necessary to apply the document as in force from time to time as the PRDE may change and take into account new developments. The approach taken in the Bill will reduce compliance costs and ensure it is not necessary to amend the instrument each time a change is made to the PRDE.

1.166           Finally, under the supply requirements a licensee must supply the data under a technical standard approved by ASIC. [Schedule 1, item 4, subsection 133CQ(4)]

1.167           Technical standards ensure simple implementation of the mandatory regime and interoperability between credit providers and credit reporting bodies. Technical standards specify how data is to be described and recorded and enable uniform transfer methods.

1.168           While ASIC has the power to approve technical standards, the Government notes that the sector has already developed a technical standard - the ARCA Technical Standard.

1.169           The ARCA Technical Standard was developed by industry, including those ADIs and credit reporting bodies that will be subject to the mandatory regime. However, its use is only mandatory for those ADIs and credit reporting bodies who are signatories to the PRDE.

1.170           Nonetheless, the Government does not expect to need to intervene and prescribe a technical standard even where an ADI or credit reporting body is not a signatory to the PRDE. The Government expects ASIC would only exercise its power and prescribe a technical standard if it became apparent that the approach adopted by some in the sector was creating inefficiencies or meant that the mandatory regime was inoperable.

1.171           ASIC’s power allows it to approve an existing document, or parts of an existing document, including one developed by industry such as the ARCA Technical Standard.  

1.172           If there is an inconsistency between a determination made by ASIC or a technical standard and the Privacy Code, the Privacy Code prevails. [Schedule 1, item 4, subsection 133CQ(5)]

Obligations on credit reporting bodies

1.173           The Privacy Act and Privacy Code and the Information Commissioner currently regulate credit reporting bodies. As a result of amendments contained in this Bill, credit reporting bodies who receive mandatory credit information will be regulated by ASIC for the purposes of the mandatory regime.  

1.174           A definition of credit reporting body is inserted into the Credit Act which references the Privacy Act. [Schedule 1, item 3, subsection 5(1)]

1.175           This ensures there is no difference between the definitions in these two Acts. This is because the mandatory regime is intended to work within the framework established by the Privacy Act.

1.176           The Bill places restrictions and obligations on a credit reporting body that has received information under the mandatory regime. These restrictions apply both to the information received from the licensee and information derived by the credit reporting body. [Schedule 1, item 4, subsection 133CZA(1)]

1.177           A credit reporting body who has received credit information under the mandatory regime may be restricted in disclosing that information to a credit provider where the credit reporting body and the credit provider meet certain conditions in the regulations. [Schedule 1, item 4, subsections 133CZA(2) and 133CZA(7)]

1.178           The regulations may also include circumstances when a credit reporting body must disclose the information it has received under the mandatory regime. [Schedule 1, item 4, subsections 133CZA(3) and 133CZA(7)]

1.179           Where a credit reporting body is required to disclose information it has received under the mandatory regime, the information must be made in the timeframe and requirements included in regulations. [Schedule 1, item 4, subsection 133CZA(4)]

1.180           The Government expects that regulations would be made which reflect ‘principles of reciprocity’. The mandated regime will only apply to large ADIs and their subsidiaries on the expectation that the critical mass of information supplied by these ADIs will encourage other credit providers to supply comprehensive credit information. However, this relies on the ‘principle of reciprocity’ - a credit provider must contribute information to receive information.

1.181           Industry stakeholders have reflected the principles of reciprocity in the PRDE. The regulations can set conditions with reference to the PRDE. Despite subsection 14(2) of the Legislation Act 2003 , where the regulations reference the PRDE or another industry developed standard, the regulations are able to refer to such a document as in force from time to time. [Schedule 1, item 4, subsections 133CZA(5) and 133CZA(6)]

1.182           The ability to refer to a document as it exists from time to time is important as it allows industry to respond to changes in the market, including technological changes, without there being a need to amend the regulations.

1.183           In developing the regulations, and deciding whether to refer to an industry developed agreement or standard, the Government would consider whether the document was publicly available. The PRDE is publicly available on the ARCA website.

Statements to the Treasurer

1.184           The Bill requires licensees and eligible credit reporting bodies to give the Treasurer statements about the mandatory comprehensive credit regime. [Schedule 1, item 4, sections 133CZC]

1.185           Statements that relate to the initial bulk supply need to be provided to the Treasurer within 6 months after the 1 July to which the supply relates. [Schedule 1, item 4, paragraphs 133CZC(1)(c) and 133CZC(2)(c)]

1.186           Regulations will specify the information which needs to be included in the statements. The Government expects the regulations would require information that enables the Treasurer to determine that the mandatory supply requirements have been met. [Schedule 1, item 4, paragraphs 133CZC(1)(a) and 133CZC(2)(a)]

1.187           For example, the number of consumer credit accounts held by a licensee, the proportion of those accounts supplied to a credit reporting body, the date the data transmission was made and the type of credit accounts included in each supply. For a credit reporting body, the statements may require the number of accounts for which data has been received and the type of credit accounts included in the supply.

1.188           The statements given to the Treasurer must be audited. ASIC may appoint in writing a suitably qualified person, or class of persons to be auditors. An auditor may charge a reasonable fee to produce the report on the statement. [Schedule 1, item 4, paragraphs 133CZC(1)(b) and 133CZC(2)(b), and section 133CZD]

1.189           Appointments made under this provision are not legislative instruments because of the exemption in table item 8 in subsection 6(1) of the Legislation (Exemptions and other matters) Regulation 2015 .

Monitoring and Compliance

1.190           ASIC is responsible for administering the Credit Act. The Credit Act includes a number of powers to assist ASIC in its role, including enforcement, information gathering and investigative powers. These powers will be extended to cover eligible licensees and credit reporting bodies in the mandatory regime.

1.191           It is expected that ASIC will take a sensible approach to ensuring that eligible licensees and credit reporting bodies are complying with the mandatory regime. ASIC can pursue one or several enforcement or non-enforcement remedies.

1.192           ASIC's broad approach to using its powers (and enforcement more generally) is set out in ASIC’s approach to enforcement - Information Sheet 151 , available on the ASIC website.

1.193           In deciding which tools to use, ASIC considers all the relevant facts and circumstances of each matter on a case-by-case basis, with a focus on the seriousness of the alleged contravention and the extent of the consumer harm.

1.194           In line with its broad approach to enforcement, ASIC may take into account factors such as whether the entity has taken reasonable steps to comply with the regime, the compliance record of the subject, and the effect of the misconduct on the market. In the past ASIC has also considered whether a facilitative approach to compliance is required shortly after commencement of new obligations.

1.195           The OAIC is responsible for ensuring compliance with the Privacy Act. This Bill does not alter its existing functions.

Penalties under the mandatory regime

1.196           New civil penalties and offence provisions are included in the Credit Act where a licensee or a credit reporting body does not meet the obligations imposed by the mandatory regime. The new provisions reflect the existing penalty framework in the Credit Act.

1.197           ASIC may seek a civil penalty where an eligible licensee:

•        fails to supply credit information as required under the mandatory regime (see paragraphs 1.38 to 1.50 and 1.104 to 1.113). [Schedule 1, item 4, section 133CR and section 133CU)];

•        fails to notify the credit reporting body, ASIC and the Information Commissioner once the eligible licensee believes a credit reporting body is meeting its section 20Q obligations in the Privacy Act, where the eligible licensee previously believed the credit reporting body was not meeting its obligations (see paragraphs 1.85, 1.90 and 1.124). [Schedule 1, item 4, sections 133CT and 133CW ]; and

•        fails to submit audited statements to the Treasurer following the initial bulk supplies (see paragraphs 1.184 to 1.188). [Schedule 1, item 4, subsection 133CZC(1) ]

1.198           Similarly, ASIC may seek a civil penalty where a credit reporting body:

•        discloses information that it has received under the mandatory regime that it should not disclose (see paragraph 1.176 and 1.177). [Schedule 1, item 4, subsection 133CZA(2)]

•        fails to disclose information it has received under the mandatory regime, including not in the required timeframe or inconsistent with requirements included in the regulations (see paragraph 1.176, 1.178 to 1.179). [Schedule 1, item 4, subsections 133CZA(3) and 133CZA(4)]; and

•        fails to submit audited statements to the Treasurer following the initial bulk supplies (see paragraphs 1.184 to 1.188) [Schedule 1, item 4, subsection 133CZC(2) ]

1.199           A civil penalty must be imposed by a court. The maximum penalty that can be applied under the mandatory regime in the circumstances listed above is 2,000 penalty units if the person is a natural person (currently $420,000) and 10,000 penalty units if the person is a body corporate (currently $2.1 million).

1.200           ASIC may also seek a criminal sanction if either a licensee or credit reporting body has breached a requirement under the mandatory credit reporting regime. [Schedule 1, item 4, sections 133CX, 133CY, 133CZ, 133CZB and 133CZE]

1.201           The circumstances include failing to make the initial bulk supplies or ongoing supply of credit information when the eligible licensee reasonably believes the credit reporting body is meeting its security requirements in the Privacy Act, failing to supply statements to the Treasurer or failing to notify the credit reporting body, ASIC and the Information Commissioner when the licensee subsequently believes the credit reporting body is meeting the security requirements.

1.202           The maximum criminal penalty that can be applied is 100 penalty units for an individual (currently $21,000) and 500 penalty units if the person is a body corporate (currently $105,000).

1.203           The criminal penalty is a ‘continuing offence’. That is, the person is guilty of a separate offence for each day of non-compliance. For example, for each day that an eligible licensee fails to supply the initial bulk supply of information, the penalty amount will apply. The continuing offence provides a strong incentive to comply.

1.204           The standard geographical jurisdiction set out in section 14.1 of the Criminal Code does not apply to an offence for failing to supply information. [Schedule 1, item 4, subsections 133CX(2) and 133CY(2)]

1.205           This is because an eligible licensee may store or hold credit information outside Australia. However, irrespective of where the information is stored or held it must be included in the supplies made by the eligible licensee. If section 14.1 of the Criminal Code applied an eligible licensee would not be subject to a penalty for failing to supply information held outside Australia.

1.206           Existing section 331 of the Credit Act allows for regulations to be made so that ASIC can issue an infringement notice. A person in breach of an obligation in the Credit Act can pay the amount in the infringement notice as an alternative to civil proceedings in court. This regulation making power also applies to the mandatory regime without amendments.

1.207           The Government intends to make a regulation under this power for the purposes of the mandatory regime to provide ASIC with the ability to issue infringement notices.

1.208           The existing power in the Credit Act limits the amount that could be included in the infringement notice to one-fortieth of the maximum penalty that could be applied by a court. For example, where the maximum civil penalty that could be applied to a natural person was 2,000 penalty units, the infringement notice could not be more than 50 penalty units (currently $10,500).

1.209           As is currently the case, the issuing of infringement notices is at the discretion of ASIC. Infringement notices are employed for breaches, where a higher volume of contraventions are expected, or where a penalty is more effective where it is imposed immediately, and the person committing the breach still has a fresh memory of their conduct, and may be more inclined to remedy it in the future.  

Information gathering powers

1.210           ASIC’s existing powers in the Credit Act are extended to the mandatory comprehensive credit reporting regime requirement so that ASIC can monitor and ensure compliance with the supply requirements and on-disclosure restrictions. [Schedule 1, item 4, sections 133CZF, 133CZG, 133CZH, 133CZI and 133CZJ]

1.211           For drafting simplicity a new term, Part 3-2CA body , is inserted into the Credit Act. It means an eligible licensee or an eligible credit reporting body for a licensee. [ Schedule 1, item 4, section 133CZF]

1.212           Paragraphs 1.214 to 1.234 below set out the amendments to the Bill which provide ASIC with the ability to:

•        seek information from an eligible licensee and credit reporting body;

•        seek assistance from an eligible licensee and credit reporting body; and

•        inspect books or seek information from a third party.

1.213           The penalties that ASIC may seek to apply include civil penalties and criminal penalties (including imprisonment). The penalty regime applied as part of the mandatory regime is consistent with the existing regime in the Credit Act. It is consistent with the penalties that apply for existing offences of a similar kind and of a similar seriousness.

Obligation to provide ASIC with a statement or an audit report

1.214           ASIC may issue a written notice directing an eligible licensee or a credit reporting body, to give it a statement which contains certain information about whether the licensee or body is complying with its obligations under the mandatory comprehensive credit reporting regime. [Schedule 1, item 4, subsection 133CZG(1)]

1.215           ASIC can also seek a statement from either a licensee or body to assist it in determining whether another licensee or credit reporting body subject to the mandatory regime is complying with its obligations. [Schedule 1, item 4, subsection 133CZG(1)]

1.216           The notice which directs the licensee or credit reporting body can be given at any time and can be given to a licensee or credit reporting body or a class of either. The information which is required may be the same or different and could be required on a periodic basis or when certain events occur. [Schedule 1, item 4, subsection 133CZG(2)]

1.217           A written notice form ASIC is not a legislative instrument because of the exemption in table item 17 in 6(1) of the Legislation (Exemptions and Other Matters) Regulation 2015 .

1.218           ASIC may also issue a written notice directing an eligible licensee or an eligible credit reporting body to obtain an audit on the statement. [Schedule 1, item 4, subsection 133CZG(3)]

1.219           The Bill clarifies that a notice directing an eligible licensee or eligible credit reporting body to obtain an audit on a statement is not a legislative instrument. This is because the notice is not a legislative instrument within the meaning of subsection 8(1) of the Legislation Act 2003 . [Schedule 1, item 4, subsection 133CZG(4)]

1.220           The audit report given on the statement is subject to the existing requirements in sections 102, 103, 104, 105 and 106 of the Credit Act including that the auditor:

•        has a right to access the records and information that he or she needs for the purpose of conducting the audit;

•        may charge reasonable fees; and

•        must advise ASIC if it becomes aware that the eligible licensee or eligible credit reporting body is unable to meet its obligations under the mandatory comprehensive credit regime.

[Schedule 1, item 4, section 133CZJ]

1.221           An eligible licensee or eligible credit reporting body may be subject to a maximum civil penalty of 2,000 penalty units if it fails to comply with a direction from ASIC to supply a statement or audit report within the timeframe included in the written notice. [Schedule 1, item 4, subsection 133CZG(6)]

1.222           ASIC may extend the day the audit report or statement is due and where it does the written notice giving the extension will not be a legislative instrument because of the exemption in table item 29 in subsection 6(1) of the Legislation (Exemptions and Other Matters) Regulation 2015 . [Schedule 1, item 4, subsection 133CZG(5)]

1.223           A civil penalty must be imposed by a court. The maximum penalty that can be applied is 2,000 penalty units if the person is a natural person (currently $420,000) and 10,000 penalty units if the person is a body corporate (currently $2.1 million).

1.224           An eligible licensee or eligible credit reporting body can also be subject to a criminal offence if the person fails to comply with a direction from ASIC to supply a statement or audit report. The maximum criminal penalty that could apply would be 25 penalty units or six months imprisonment, or both for a person who is a natural person or 125 penalty units for a body corporate. [Schedule 1, item 4, subsection 133CZG(7)]

Obligation to give ASIC information required by the regulations

1.225           Regulations may prescribe information which an eligible credit provider or eligible credit reporting body, or a class of licensees or bodies, must give to ASIC. [Schedule 1, item 4, subsection 133CZH(1)]

1.226           An eligible licensee or credit reporting body may be subject to a civil penalty of 2,000 penalty units if it fails to give ASIC this information. [Schedule 1, item 4, subsection 133CZH(2)]

1.227           A civil penalty must be imposed by a court. The maximum penalty that can be applied is 2,000 penalty units if the person is a natural person (currently $420,000) and 10,000 penalty units if the person is a body corporate (currently $2.1 million).

1.228           An eligible licensee or credit reporting body can also be subject to a criminal offence if the person fails to give ASIC the prescribed information. The maximum criminal penalty that could apply is 25 penalty units or six months imprisonment or both for a natural person or 125 penalty units for a body corporate. [Schedule 1, item 4, subsection 133CZH(3)]

Obligation to provide ASIC with assistance

1.229           ASIC can request that an eligible licensee or a credit reporting body give it assistance to determine whether the licensee or body, or another licensee or body is complying with its obligations under the mandatory comprehensive credit regime. [Schedule 1, item 4, subsection 133CZI(1)]

1.230           The request for assistance may be in writing and where it is the request will not be a legislative instrument within the meaning of subsection 8(1) of the Legislation Act 2003 . The Bill makes clear that a request in writing is not a legislative instrument to assist the reader. [Schedule 1, item 4, subsection 133CZI(2)]

1.231           An eligible licensee or eligible credit reporting body may be subject to a civil penalty of 2,000 penalty units if it fails to provide ASIC with assistance. [Schedule 1, item 4, subsection 133CZI(1)]

1.232           A civil penalty must be imposed by a court. The maximum penalty that can be applied is 2,000 penalty units if the person is a natural person (currently $420,000) and 10,000 penalty units if the person is a body corporate (currently $2.1 million).

1.233           An eligible licensee or eligible credit reporting body may also be subject to a criminal offence if it fails to assist ASIC. The maximum criminal penalty that could apply would be 25 penalty units or six months imprisonment, or both if the person is a natural person or 125 penalty units if the person is a body corporate. [Schedule 1, item 4, subsection 133CZI(3)]

Inspection of books and audit-information gathering powers

1.234           ASIC’s existing powers in Chapter 6 of the Credit Act are extended to the enforcement of the mandatory comprehensive credit regime. This includes being able to:

•        ask an auditor for information or books; [Schedule 1, item 5, paragraph 265(2)(c)]

•        ask an eligible licensee or an eligible credit reporting body or a representative, banker, lawyer or auditor of the licensee or body to provide information or statements about the mandatory comprehensive credit regime; [Schedule 1, items 6, 7 and 8, section 266]

•        ask a person for information in their possession relating to the activities of an eligible licensee or eligible credit reporting body and the mandatory comprehensive credit regime; and [Schedule 1, item 9, paragraph 267(1)(b)]

•        admit as evidence information collected about the eligible licensee or eligible credit reporting body’s compliance with the mandatory comprehensive credit regime. [Schedule 1, item 10, paragraph 307(1)(b)]

Consequential amendments

1.235           The Privacy Act is amended to require that a credit reporting body store credit reporting information in Australia or with a service that is listed by the Australian Signals Directorate (ASD) as a certified Cloud Service or that meets the conditions in the Privacy Code. [Schedule 1, item 11, section 20Q of the Privacy Act]

1.236           A list of cloud service providers which have been awarded ASD Certification is available on the ASD website: www.asd.gov.au . While the purpose of ASD certification assists Government departments and agencies procuring these services, there is nothing preventing a private company from procuring a service with ASD Certification.

1.237           ASD Certification may be given at an ‘unclassified’ or ‘protected’ classification level. The amendments inserted by this Bill into the Privacy Act do not specify a particular classification level.

1.238           The requirement to use a certified Cloud Service applies to all credit reporting bodies operating in Australia and is not limited to those who meet the definition of eligible credit reporting body in the Credit Act or who are supplied mandatory credit information.

1.239           Depending on passage and commencement of the Intelligence Services Amendment (Establishment of the Australian Signals Directorate) Bill 2018, the amendments in this Bill provide that ASD is not referenced as being ‘of the Defence Department’. The amendment will only take effect if the Intelligence Services Amendment (Establishment of the Australian Signals Directorate) Bill 2018 commences. [Schedule 1, item 12, subparagraph 20Q(3)(b)(i)]

Miscellaneous amendments

1.240           Without limiting its effect, the Bill makes clear that the amendments also have effect as if references to an eligible licensee or eligible credit reporting body are to a corporation in paragraph 51(xx) of the constitution. [Schedule 1, item 4, section 133CZM]

Application and transitional provisions

1.241           The amendments in this Bill commence the day after the Bill receives the Royal Assent.



Chapter 2          

Statement of Compatibility with Human Rights

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

National Consumer Credit Protection Amendment (Mandatory Comprehensive Credit Reporting) Bill 2018

2.1                   This Bill is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 .

Overview

2.2                   This Bill amends the Credit Act to establish a mandatory comprehensive credit reporting regime.

2.3                   Under the regime eligible licensees, who on 1 July 2018 are large ADIs, must provide credit information on consumer credit accounts to certain credit reporting bodies.

2.4                   Credit information is defined in the Privacy Act and includes information about the maximum amount of credit available to a person, how well the person is meeting their repayments, details of the person’s overdue payments and defaults.

2.5                   Amendments to the Privacy Act which took effect in 2014 have permitted credit providers to disclose this information to credit reporting bodies but this is a voluntary scheme.

2.6                   The Bill operates within the framework established by the Privacy Act but mandates the supply of credit information.

2.7                   It is expected that by applying the measure to large ADIs and other credit providers within that banking group other credit providers will voluntarily share comprehensive credit information. In June 2017 large ADIs accounted for more than 80 per cent of household lending.

2.8                   Regulations will set out conditions that must be met before a credit reporting body can share the information disclosed under the regime. Regulations will also set out circumstances when the credit reporting body must share credit information.

Human rights implications

2.9                   The Bill engages the following human rights and freedoms:

•        the right to protection from arbitrary or unlawful interference with privacy under article 17 of the International Covenant on Civil and Political Rights (ICCPR);

•        the right against self-incrimination under article 14(3)(g) of the ICCPR;

•        the right to be presumed innocent until proved guilty according to law; and

•        the right to a fair and public hearing.

Right to protection from unlawful or arbitrary interference with an individual’s privacy

2.10               Article 17 of the ICCPR prohibits unlawful or arbitrary interferences with a person’s privacy, family, home, or correspondence. It also provides that everyone has a right to the protection of the law against such interference or attacks.

2.11               The right to privacy encompasses respect for informational privacy, including the right to respect for private information and private life, particularly the storing, use and sharing of personal and confidential information.

2.12               Division 2 of the Bill engages the right to privacy by requiring certain eligible licensees, initially large ADIs, to supply credit information to certain credit reporting bodies. Credit information is the personal information about individual bank customers.

2.13               The mandatory comprehensive credit reporting regime implemented by this Bill does not allow for the disclosure of an individual’s credit information. Amendments to the Privacy Act which took effect in 2014 and were contained in Privacy Amendment (Enhancing Privacy Protection) Act 2012 established the framework under which information being shared under the mandatory comprehensive credit regime can be disclosed.

2.14               At the time of the amendments, the Government of the day expected that credit providers would voluntarily share credit information. This was the case in comparable jurisdictions.

2.15               A more comprehensive credit reporting regime allows credit providers to better establish a consumer’s credit worthiness and lead to a more competitive and efficient credit market. A more comprehensive regime benefits consumers by enabling more reliable individuals to seek more competitive rates when purchasing credit and enabling those with a historically poor credit rating to demonstrate their credit worthiness through future consistency and reliability.

2.16               The explanatory memorandum to the Privacy Amendment (Enhancing Privacy Protection) Bill 2012, explains the safeguards that were put in place to protect an individual’s credit information.

2.17               Greater responsibility was placed on credit reporting bodies and credit providers to assist individuals to access, correct and resolve complaints about their personal information. Those amendments included specific rules to deal with pre-screening of credit offers and the freezing of access to an individual’s personal information in cases of suspected fraud or identity theft. 

2.18               The amendments also restricted access to repayment history information to those credit providers who hold an Australian Credit Licence and are therefore subject to responsible lending obligations.

2.19               Any effect on privacy rights was considered proportionate and limited by the introduction of specific safeguards, including:

•        only de-identified information can be used for the purpose of research, and the research must be reasonably connected to the credit reporting system, and

•        the use of credit reporting information for the purposes of pre-screening is expressly limited to the purpose of excluding adverse credit risks from marketing lists.

2.20               In considering the impact on a person’s right to privacy, the explanatory memorandum to the Privacy Amendment (Enhancing Privacy Protection) Bill 2012 noted:

‘The policy rationale to allow for the disclosure of credit information In the consumer credit environment it is important to achieve a balance between privacy protection and the efficient operation of the credit market. Access to narrowly defined categories of credit information to ensure a more balanced picture of an individual’s credit situation, taking into account positive action such as payment, and not just negative information like defaults, and to allow for more effective risk assessment by credit providers is balanced with the enhanced privacy protections set out above.

Any limitations on the prohibition against arbitrary interference with privacy in the Bill are clearly and narrowly defined, for the legitimate purpose of improving the management of personal and credit reporting information, and accompanied by sufficient safeguards to maintain reasonable privacy protections. The measures are reasonable, necessary and proportionate as they ensure the smallest possible set of data is used for the narrowest purposes to achieve the objective of providing a functional consumer credit market.’

2.21               The mandatory comprehensive credit reporting regime does not alter the existing protections set out by the Privacy Act governing the use and disclosure of credit information. The Bill clearly states the requirement to supply credit information only applies to the extent that the disclosure is permitted under the Privacy Act.

2.22               Division 3 of the Bill also engages the right to privacy by providing that regulations may set out the circumstances when a credit reporting body must share credit information received under the mandatory comprehensive credit regime. These circumstances will be limited and not extend beyond those circumstances in the Privacy Act. Primarily this will be when a credit provider is seeking information about a customer’s credit worthiness when considering a request for consumer credit.

2.23               The Bill extends the protections in the Privacy Act by amending the existing protections to more clearly set out where data held by a credit reporting body must be stored. A credit reporting body must store data in Australia or with a service which has been certified by the Australian Signals Directorate.

2.24               In the context of the existing protections and additional protections added by this Bill, the mandatory comprehensive credit regime is reasonable, necessary and proportionate to deliver a credit reporting system which is efficient and effective.

The right against self-incrimination under article 14(3)(g) of the ICCPR

2.25               Paragraph 3(g) of Article 14 of the ICCPR guarantees the right of an individual not to be compelled to testify against oneself or to confess guilt. The privilege against self-incrimination is recognised by the common law and applies unless it is expressly abrogated.

2.26               The right is engaged for the purposes of the new mandatory comprehensive credit reporting regime as existing Chapter 6 of the Credit Act is amended by the Bill to expand ASIC’s existing compliance and enforcement powers, such as its power to conduct investigations, examine a person, gather information, and conduct hearings, to the new mandatory comprehensive credit regime.

2.27               Existing section 295 expressly provides that it is not a reasonable excuse for a person to refuse or fail to produce a book in accordance with a requirement that the production of the book might tend to incriminate the person or make the person liable to a penalty.

2.28               However, existing subsection 295(3) operates to provide that the information or documents cannot be used as evidence in criminal proceedings except to the extent that the proceedings relate to compliance with a disclosure notice or the provision of false or misleading information in response to a disclosure notice.

2.29               It is considered necessary to override the privilege against self-incrimination to allow ASIC to acquire all relevant information to administer the Credit Act.

2.30               The provision of derivative use immunity with respect to self-incriminating information would impair ASIC’s ability to effectively perform its regulatory functions.

2.31               It is relatively straightforward to prove compliance with use immunity in that all of the evidence obtained under compulsion from the person concerned is easily identifiable and can be excluded from any subsequent criminal or civil penalty proceedings against that person.

2.32               In most cases, establishing compliance with derivative use immunity would be substantially more difficult. It would require persuading the court to the required standard that no part of the original information was taken into account, directly or indirectly, when obtaining the information upon which the prosecution is based.

2.33               This may require the introduction of Chinese walls in the agency who received the original information in order to avoid contagion of other employees of that agency who may be involved in obtaining the information upon which the prosecution is based. The effectiveness of these Chinese walls would also have to be proven.

2.34               In its submission to the Australian Law Reform Commission Inquiry into Traditional Rights and Freedoms: Issues Paper 46 (March 2015) ASIC notes: 'Any grant of derivative use immunity has the potential to render a person conviction-proof for an unforeseeable range of offences'.

2.35               The application of use immunity to only those who claim self-incrimination prior to the examination is consistent with other legislative provisions and the process is clearly explained to an examinee prior to the examination being conducted so it is up to the examinee to assert that right.

2.36               Existing section 296 of the Credit Act provides that if a requirement to produce books is made to a person who is a lawyer, and the book contains a privileged communication made by or on behalf of the lawyer in his or her capacity as a lawyer, the lawyer is entitled to refuse to comply.

2.37               The lawyer may not refuse to comply if the person, on behalf of whom the communication was made, or, if this person is a body corporate that is being wound up, the liquidator of the body, consents to the lawyer complying with the requirement but allows the person to maintain protection from the information being used against them in criminal proceedings or proceedings for the imposition of a penalty.

The right to be presumed innocent until proved guilty according to law

Assessment of civil penalties

2.38               Practice Note 2: Offence provisions, civil penalties and human rights observes that civil penalty provisions may engage criminal process rights under Articles 14 and 15 of the ICCPR, regardless of the distinction between criminal and civil penalties in domestic law. This is because the word ‘criminal’ has an autonomous meaning in international human rights law. When a provision imposes a civil penalty, an assessment is therefore required as to whether it amounts to a ‘criminal’ penalty for the purposes of the Articles 14 and 15 of the ICCPR.

2.39               The Bill includes new civil penalty provisions where:

•        an eligible licensee:

-       fails to supply credit information as required under the mandatory regime;

-       fails to notify the credit reporting body, ASIC and the Information Commissioner once the eligible licensee believes a credit reporting body is meeting its section 20Q obligations in the Privacy Act, where the eligible licensee previously believed the credit reporting body was not meeting its obligations; and

-       fails to submit audited statements to the Treasurer following the initial bulk supplies.

•        a credit reporting body:

-       discloses information that it has received under the mandatory regime that it should not disclose;

-       fails to disclose information it has received under the mandatory regime, including not in the required timeframe or inconsistent with requirements included in the regulations;

-       fails to submit audited statements to the Treasurer following the initial bulk supplies.

2.40               While the provisions impose significant civil penalties it is considered appropriate to encourage compliance with the supply obligations. The approach is consistent with other civil penalties in the Credit Act.

2.41               The civil penalty provisions in the Bill should not be considered ‘criminal’ for the purposes of international human rights law.

2.42               While the civil penalty provisions included in the Bill are intended to deter people from non-compliance with the mandatory comprehensive credit reporting regime, none of the civil penalty provisions carry a penalty of imprisonment and there is no sanction of imprisonment for non-payment of penalty. The statement of compatibility therefore proceeds on the basis that the civil penalty provisions in the Bill do not create criminal offences for the purpose of Articles 14 and 15 of the ICCPR.

Criminal penalty provisions

2.43               The Bill engages Article 14 of the ICCPR, which guarantees a person be afforded, in the determination of any criminal charge against them, the right to a fair trial.

2.44               The Bill includes criminal penalty provisions of up to 100 penalty units where an eligible licensee has failed to supply credit information, provide a statement to the Treasurer or notify a credit reporting body, ASIC and the Information Commissioner when the credit provider no longer holds the belief that the credit reporting body is not .

2.45               For some offences, which mirror existing provisions in the Credit Act give ASIC information penalties, the penalty provisions are consistent with the existing penalties for the existing offences and are set at 25 penalty units or up to 6 months imprisonment, or both.

2.46               Paragraph 2 of Article 14 of the ICCPR protects the right of a person charged with a criminal offence to be presumed innocent until proven guilty according to law. The presumption of innocence is also a fundamental principle of the common law. As the Human Rights Committee has observed, the presumption of innocence ‘imposes on the prosecution the burden of proving the charge, guarantees that no guilt can be presumed until the charge has been proved beyond reasonable doubt, ensures that the accused has the benefit of doubt, and requires that persons accused of a criminal act must be treated in accordance with this principle’. [1]

2.47               The presumption of innocence generally requires the prosecution to prove each element of a criminal offence beyond reasonable doubt. This is the case for the criminal offence provisions included in this Bill.

2.48               However, the Bill does place an evidential burden on a credit provider where a credit provider does not supply mandatory credit information to a credit reporting body within the required timeframe on the basis that it is the belief of the credit provider that the credit reporting body is not meeting its obligations in section 20Q of the Privacy Act.

2.49               The imposition of an evidential burden is justified because the reason why a credit provider held the belief that the credit reporting body was not meeting its obligations under 20Q in the Privacy Act will be a matter that is peculiarly within the credit provider’s knowledge.

2.50               Moreover, the effect is that the credit provider must merely adduce or point to evidence that explains why the credit provider holds this ‘reasonable belief’. The belief could be held as a result of stress test or audit that was conducted on the behest of the credit provider. This ‘evidence’ would be peculiarly within the credit provider’s knowledge as such an audit or stress test would be carried out as a result of the contractual arrangement that existed between the credit provider and credit reporting body. 

2.51               Once the credit provider has demonstrated why it holds this belief the prosecution must refute this beyond reasonable doubt to obtain a conviction (see section 13.3 of the Criminal Code ).

2.52               As a result, the risk that a credit provider may be found guilty of an offence for not supplying credit information while the credit provider held the reasonable belief that credit reporting body was not meeting its obligations under section 20Q of the Privacy Act is low. Accordingly, to the extent this provision might be considered to limit the presumption of innocence, the limitation is reasonable in all the circumstances.

The right to a fair and public hearing

2.53               Article 14 of the ICCPR ensures that everyone shall be entitled to a fair and public hearing by a competent, independent and impartial tribunal established by law.

2.54               The amendments included in the Bill can leverage the existing regulation making power in section 331 that allows regulations to be made that would allow ASIC to issue an infringement notice rather than pursue a civil penalty through a court.

2.55               The explanatory memorandum to the Bill indicates that the Government intends to make a regulation under this power for the purpose of issuing infringement notices for breaches of the Credit Act rather than seeking a civil penalty.

2.56               The ability to issue an infringement notice could be considered to engage the right to a fair and public hearing. However, the right of a person to fair and public hearing by a competent, independent and impartial hearing is not limited by the Bill because the existing regulation making power in section 331 allows a person to elect to have the matter heard by a court rather than pay the amount specified in the infringement notice.

2.57               Moreover, the Regulatory Powers Act (Standard Provisions) Act 2014 requires that this right must be stated in any infringement notice given to the person. For these reasons the Bill is not considered to limit the right to a fair and public hearing.

Conclusion

2.58               The application of use immunity to only those who claim self-incrimination prior to the examination is consistent with other legislative provisions and the process is clearly explained to an examinee prior to the examination being conducted so it is up to the examinee to assert that right.

 




[1]     Human Rights Committee, General Comment No 43 Article 14: Right to equality before courts and tribunals and to a fair trial , CCPR/C/GC/32, 23 August 2007, [30].