Andrea Beatty - K&L Gates - Annual regulatory update of Australian credit law
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Transcript of Andrea Beatty - K&L Gates - Annual regulatory update of Australian credit law
© Copyright 2014 by K&L Gates. All rights reserved.
Andrea Beatty Partner, K&L Gates 1 October 2014
Regulatory update – what's next and the year in review
The 24th Annual Credit Law Conference
23259329v3
OUTLINE
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Part A – Australia
Part B – USA
Part C – Europe/UK
2014 AFL Grand Final – Hawks v. Sydney Swans Hawthorn 2014 premiers…again!
© Copyright 2014 by K&L Gates. All rights reserved.
PART A - AUSTRALIA
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I Reform timeline
II Regulatory landscape
III NCCP progress report
IV ASIC action
V Privacy hot spots
VI Payments activity
VII AML update
VIII What’s on the horizon?
© Copyright 2014 by K&L Gates. All rights reserved.
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graphic: courtesy of imgarcade.com/1/john-‐deere-‐tractors-‐stuck-‐in-‐the-‐mud/
ASIC TRACTION & POLICYMAKERS – SPINNING WHEELS???
© Copyright 2014 by K&L Gates. All rights reserved.
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5TH EDITION – “PINK BOOK”
Edition Publication Year
Total Pages
1st 1997 399
2nd 2000 460
3rd 2006 608
4th* 2011 907
5th 2014 1188
Growth of financial services regula4on
© Copyright 2014 by K&L Gates. All rights reserved.
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I. REFORM TIMELINE
Jan 2014
1.1.14 EDR changes – if small business loan >$2M & proceedings commenced – no EDR
Feb
1.2.14 CBP changes
May July
K&L Gates – Financial Services Masterclass (ACL & AFSL) 12.11.14 and 26.11.14. Sydney & Melbourne.
2015 § Competition law
review § Unfair contract
terms for small business?
§ Commercial credit providers join privacy EDR scheme?
§ FOFA changes? § New payments
platform? § Financial sales
regulated? § Credit repair?
? Phase 2 Credit
Reforms
August Oct
12.3.14 Privacy changes commenced
15.7.14 Financial System Inquiry – release of interim report
ARCA to lodge PDRE industry code to ACCC
Mar 2015
11.14
Financial System Inquiry – expected release of final report
Nov
8.14 Chip & PIN – card activation
2.9.14 Federal Court judgment - The Cash Store case
28.4.14 Australia & US enter into IGA for FATCA compliance
08.14 Australian Payments Council established
© Copyright 2014 by K&L Gates. All rights reserved.
1. Financial System Inquiry
2. ASIC Senate Inquiry
3. FATCA update
4. Industry codes of practice
5. Technology & regulation
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II. REGULATORY LANDSCAPE
© Copyright 2014 by K&L Gates. All rights reserved.
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II. REGULATORY LANDSCAPE CONT.
1. FINANCIAL SYSTEM INQUIRY (FSI)
FSI focus
Stability
Consumer outcomes
Technology
Regulatory architecture
CompePPon
Funding
SuperannuaPon & rePrement income
InternaPonal integraPon
© Copyright 2014 by K&L Gates. All rights reserved.
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II. REGULATORY LANDSCAPE CONT.
2. ASIC SENATE INQUIRY
Final report on ASIC’S
performance -‐ 26 June 2014
• Aim of report – strengthen ASIC as a regulator
• 61 recommendaPons
Increase range of civil & criminal penalPes available to ASIC
ASIC to increase potency of enforceable undertakings
Expand protecPons for corporate whistleblowers
ASIC to pursue complex liPgaPon
Recommenda)on 3 – ASIC to carefully monitor the implementaPon of the credit laws with parPcular aXenPon to acPviPes that may fall outside the legislaPon
© Copyright 2014 by K&L Gates. All rights reserved.
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2010
03.2010 FATCA enacted by the US Congress to prevent tax evasion by US residents
April 2014
30.6.15 Finalise due diligence review of individual accounts with balance > US $1 million
December Jan 2015
30.6.2016 § Finalise due
diligence of individual & company accounts
31.7.16 § Report for 2015
calendar year to be submitted to the ATO
June
1.7.14 Implement new account opening procedures to identify US persons
1.1.15 FATCA withholding tax implications begin for non-registered financial institutions
July 2016
1.1.15 § Implement new account
opening procedures to identify US entities
§ Carry out due diligence for payments made to Nonparticipating Institutions
28.4.14 Australia & US enter into IGA for FATCA compliance
22.12.14 Register as Foreign Financial Institution with IRS
II. REGULATORY LANDSCAPE CONT.
3. FATCA UPDATE
31.07.15 Report for 2014 calendar year to be submitted to the ATO
July
© Copyright 2014 by K&L Gates. All rights reserved.
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II. REGULATORY LANDSCAPE CONT.
4. INDUSTRY CODES OF PRACTICE
Industry Codes of PracPce
Revised Code of Banking PracPce Jan 2013 -‐ commenced 1 Feb 2014
ePayments Code -‐ commenced March 2013
Customer Owned Banking Code of PracPce -‐ commenced 1 Jan 2014
See “Pink Book” for changes to the industry codes & how they impact consumer credit
Further changes to FOS’ Terms of Reference
© Copyright 2014 by K&L Gates. All rights reserved.
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II. REGULATORY LANDSCAPE CONT.
5. TECHNOLOGY & REGULATION
Technology & regulaPon
Australian regulatory se_ngs in a global system
observaPons from the FSI
regulaPon of disrupPve technologies
electronic disclosure & markePng in social media
privacy & cybersecurity from electronic transacPons
Impact on regulation - there will be changes!
A seminar in itself! K&L Gates is hosPng seminars in Melbourne & Sydney
© Copyright 2014 by K&L Gates. All rights reserved.
1. NCCP changes
2. Debt collection guidelines – 2014
3. NCCP case update
4. Protecting your ACL
16 klgates.com
III. NCCP PROGRESS REPORT
© Copyright 2014 by K&L Gates. All rights reserved.
Small amount credit contracts: § limited fees § obtain 90 day bank statement
§ addiPonal disclosure obligaPons
Non ADI loans under 15 days prohibited
Greater consistency between requirements for consumer leases & credit
contracts eg linked lessor provisions
New hardship regime – ASIC guidance to come
…
Remedy for unfair or dishonest conduct by credit service providers
ASIC has the power to make applicaPons & appear on behalf of
consumer & in its own right
Reverse mortgages: § pre-‐contractual conduct § documentary requirements § enforcement
Consumer lease statements
Enhancements Act
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III. NCCP PROGRESS REPORT CONT.
1. NCCP CHANGES
See “Pink Book” for changes introduced by the Enhancements Act
© Copyright 2014 by K&L Gates. All rights reserved.
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III. NCCP PROGRESS REPORT CONT.
1. NCCP CHANGES CONT.
Consumer Credit fine-‐tuning regulaPons
SACC Amendment RegulaPons 12 June 2104
SACC -‐ brokerage fee subject to maximum
fee limits
Modifies s6(1) low-‐cost short term credit
contracts exempPon ≠ “membership fees”
Clarifies SACC & MACC disPncPon
Fix incorrect Regs cross references – see “Pink Book”
“mis-‐described amendments”
Simplify Reg numbering – tell us if
reg sequence deliberately omiXed eg no Reg 105I, 28O
© Copyright 2014 by K&L Gates. All rights reserved.
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graphic: courtesy of www.dilbert.com
© Copyright 2014 by K&L Gates. All rights reserved.
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III. NCCP PROGRESS REPORT CONT.
2. DEBT COLLECTION GUIDELINES – 2014
Debt collecPon Guideline: for
collectors & creditors (July 2014)
Joint ACCC & ASIC
Replaces 1999 guidelines
Updates RG 96 -‐ Debt collec)on guideline for collectors and creditors
“Flexible, fair and realisPc” approach to debt collecPon
Protect privacy, no excessive communicaPon, reasonable contact Pmes
Care! No misleading representaPons re consequences of non-‐payment
Credit providers (CPs) must have internal complaints & disputes process
CPs must have adequate staff training
Compliance programs
See 6 page comparison table in “Pink Book” – sec4on 155 NCC commentary
© Copyright 2014 by K&L Gates. All rights reserved.
Case name Court Date Summary of decision
Gray v Cash Converters International Ltd
Federal Court of Australia
Ongoing Class action with statements of claim of over $40 million. Allegations of breach of interest rate caps in NSW.
ASIC v The Cash Store Pty Ltd & Assistive Finance Australia Pty Ltd
Federal Court of Australia
26 August 2014 The Federal Court ruled that TCS & AFA failed to comply with their responsible lending obligations & that TCS acted unconscionably in selling consumer credit insurance that could never provide any benefit to their customers
ASIC v GE Capital Finance Australia
Federal Court of Australia
1 July 2014 Court ordered a penalty of $1.5 million for misrepresentations about credit limit increases
Hickie v ASIC Administrative Appeals Tribunal
29 November 2013
The Tribunal found that the banning order issued by ASIC was appropriate as Mr Hickie had displayed a serious disregard for the financial services laws.
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III. NCCP PROGRESS REPORT CONT.
3. NCCP CASE UPDATE
© Copyright 2014 by K&L Gates. All rights reserved.
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graphic: courtesy of ap-‐perspecPve.blogspot.com.au/2013/03/australian-‐government-‐to-‐leave-‐public.html
‘Debt’ …’Someday all of this will be yours’
© Copyright 2014 by K&L Gates. All rights reserved.
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Financial services is constantly changing – cf Regulatory update papers at annual credit conference!
ASIC imposed audit – expensive!
Warning! Avoid paXern of: ignore law è breach è enforceable undertaking & penalPes
RMs must understand what they are responsible for
RMs must understand financial services laws
RMs must know their ACL condiPons! ACL protecPon – Responsible
Manager’s key
III. NCCP PROGRESS REPORT CONT.
4. PROTECTING YOUR ACL
© Copyright 2014 by K&L Gates. All rights reserved.
IV. ASIC ACTION
1. ASIC’s powers
2. Enforcement – balancing interests
3. ASIC activities
24 klgates.com © Copyright 2014 by K&L Gates. All rights reserved.
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graphic: courtesy of www.dilbert.com
© Copyright 2014 by K&L Gates. All rights reserved.
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Fines
Suspend or cancel an ACL
or AFSL
InformaPon gathering powers
Infringement noPces
InjuncPons Ban a person from engaging in credit
acPviPes
Accept enforceable undertakings
ASIC
IV. ASIC ACTION CONT.
1. ASIC’S POWERS
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IV. ASIC ACTION CONT.
1. ASIC’S POWERS CONT.
ASIC – more visible
enforcement
173 outcomes in small business area
83 outcomes in market integrity, corporate governance & financial services
1.1.14 – 30.6.16 256 enforcement acPons
banning or disqualificaPon orders
negoPated outcomes – eg enforceable undertakings
© Copyright 2014 by K&L Gates. All rights reserved.
Sept
Aug
Retail bank – $40,800 fine – home loan ads ≠ disclose the minimum loan amount & other condiPons of offer
2014 Retail bank paid $17 million compensaPon for Storm Financial claims
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IV. ASIC ACTION CONT.
2. ENFORCEMENT – BALANCING INTERESTS
Car dealership –$42,500 penalty & $36,250 refund to consumers – credit acPviPes outside Point of Sale exempPon
Supermarket chain – changes to signage – credit card surcharge fees disclosure
Consumer lessor – $20,400 penalty – misrepresentaPon of $1 buyout claims – no right to purchase in consumer lease
The Cash Store – Federal Court -‐ responsible lending breaches & unconscionable conduct (CCI) – penalty hearing on 15.12.14
© Copyright 2014 by K&L Gates. All rights reserved.
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IV. ASIC ACTION CONT.
2. ENFORCEMENT – BALANCING INTERESTS CONT.
The Cash Store - ASIC iniPated legal
proceedings - Federal Court 2014
Failure to provide credit guides – no copies on loan files*
Unconscionable conduct – Over 182,000 CCI policies issued – 43 consumers only received a benefit
“Wholesale failure in process” – no inquiries as to expenses other than accommodaPon, checklists were “occasionally” completed
Credit laws – 7 breaches – civil penalPes
No exoneraPon for credit provider outsourcing loan services
Penalty hearing scheduled for 15 December 2014
RG 209 – ASIC update with court findings?
© Copyright 2014 by K&L Gates. All rights reserved.
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graphic: courtesy of www.smh.com.au/photogallery/federal-‐poliPcs/cartoons/ron-‐tandberg
© Copyright 2014 by K&L Gates. All rights reserved.
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IV. ASIC ACTION CONT.
3. ASIC ACTIVITIES
Property developers – purchase price shorqalls & vendor
Report 410 -‐ low-‐doc lending -‐ released on 23.09.14
AFSL breach reporPng review
ASIC ‘hot spots’
focus Hardship guidance?
Updates to RG 209 – responsible lending?
Add on insurance sales
Care! retrospecPve state legislaPon breach invesPgaPons!
© Copyright 2014 by K&L Gates. All rights reserved.
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1. Key reforms – March 2014
2. Privacy hot spots
3. Privacy war stories
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V. PRIVACY HOT SPOTS
© Copyright 2014 by K&L Gates. All rights reserved.
33
Creation of the Australian Privacy Principles (APPs)
Privacy Commissioner
powers – fines of up to $1.7m for companies!
Part IIIA – credit reporting provisions completely revised
– EDR impact
New information in policies & documents
§ Privacy (Credit ReporPng) Code 2014 (v1.2) – 24 April 2014 § OAIC to be disbanded from 1 Jan 2015 but the Privacy Commissioner will conPnue to administer
the Privacy Act
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V. PRIVACY HOT SPOTS CONT.
1. KEY REFORMS – MARCH 2014
Mandatory data
breach reporting??
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Reasonable steps to comply &
maintain privacy compliance
integrity – civil penal4es -‐ $1.7
million
periodic review
s of compliance
framework for
appropriateness
periodic informaPon audits
monitor / audit 3rd parPes to whom informaPon is disclosed
monitor data accuracy,
destrucPon & security privacy reviews / privacy impact assessments – projects with
personal informaPon risks / new products or services
V. PRIVACY HOT SPOTS CONT.
1. KEY REFORMS – MARCH 2014 CONT.
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V. PRIVACY HOT SPOTS CONT.
1. KEY REFORMS – MARCH 2014 CONT.
K&L Gates privacy modules create ‘reasonable steps to comply’ paper trail
APP Checklist For periodic review of compliance with APPs
Credit Reporting Checklist
For periodic review for compliance with Part IIIA of Privacy Act & CR Code
Privacy Impact Assessment questionnaire
Short form checklist for projects with personal information risks / new products or services
Privacy Act Compliance Manual
Manual setting out obligations under Privacy Act, Spam Act and Do Not Call Register Act
IT Security Policy Policy for staff IT security privacy obligations
HR Privacy Policy
Policy for collecting, using & disclosing staff personal information
© Copyright 2014 by K&L Gates. All rights reserved.
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Commercial credit providers & EDR
Care! Privacy rules
are sPll developing
36
Statutory tort of privacy
Mandatory data breach reporPng
V. PRIVACY HOT SPOTS CONT.
2. PRIVACY HOT SPOTS
COSL and credit repair
PRDE industry agreement
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Can you iden4fy the gentlemen in the corner?
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graphic: courtesy of www.gocomics.com/nonsequitur
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V. PRIVACY HOT SPOTS CONT.
3. PRIVACY WAR STORIES
Care! ASIC & ACCC may ini4ate ac4on for privacy breaches – & Privacy Commissioner!!
© Copyright 2014 by K&L Gates. All rights reserved.
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Australian Financial Review – Pg 47 – 17 September 2014
© Copyright 2014 by K&L Gates. All rights reserved.
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VI. PAYMENTS ACTIVITY
Today 2015 2016
Establishment of Australian Payments Council
Chip & PIN
New Payments Plaqorm: vendors shortlisted to develop real Pme payment transfers
Nov
Apple Pay Bitcoin & Espos
Inconsistent global posiPon?
© Copyright 2014 by K&L Gates. All rights reserved.
42 klgates.com
VII. AML UPDATE
Customer ID changes commenced 1 June 2014 – must create a transiPon plan by 1 November 2014 to take advantage of AUSTRAC’s non-‐enforcement policy
AML update
Statutory Review of AML/CTF regime to coincide with mutual evaluaPon by FATF – report to be released in February 2015
Updates to AML/CTF Program to reflect changes to the AML/CTF Rules
External audits of AML/CTF compliance – check your AML/CTF Program for review Pmeframes
© Copyright 2014 by K&L Gates. All rights reserved.
CompePPon law review – March 2015
Care! Personal Property SecuriPes reform
conPnues -‐ lenders are making mistakes in their PPSR
registraPons!
Late payment fees – class acPon
Crowd funding -‐ ASIC guidance & CAMAC Report
‘Peer-‐to-‐peer’ – lending growth -‐ regulatory response
UCT for small business??
Financial services keep changing
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VIII. WHAT’S ON THE HORIZON?
graphic: courtesy of firstdogonthemoon.com.au/
© Copyright 2014 by K&L Gates. All rights reserved.
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PART B – USA
See our K&L Gates blog at hXp://www.klgates.com/blogs/
Regulatory landscape in the US
Myriad of Federal & State laws
FATCA – global impact
Ongoing regula4on.. Consumer Financial ProtecPon Bureau (CFPB) – primary regulatory body supervising depository insPtuPons
Tax & mulP-‐naPonals
ATO sharing tax informaPon globally
© Copyright 2014 by K&L Gates. All rights reserved.
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PART C – EUROPE/UK
The global plaqorm …
Rise of the regulator & penalPes
Google – Right to be forgoXen (R2BF)
Financial Conduct Authority (FCA) – from 1 April 2014 regulates consumer credit
FCA – credit firms must comply with rules in Consumer Credit Sourcebook – 28 Feb 2014
© Copyright 2014 by K&L Gates. All rights reserved.
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Penalty Organisation Reason
£14.5m RBS & NatWest Providing unsuitable mortgage recommendations to consumers
£2.39m Credit Suisse International
Failing to ensure products promotions were clear, fair & not misleading
£1.4m Yorkshire Building Society
Failing to ensure products promotions were clear, fair & not misleading
£12.3m Santader Failing to ensure suitable advice provided to consumers
£30.6m HomeServe Membership Ltd
Mis-selling insurance policies, the Board insufficiently engaged with compliance
PART C – EUROPE/UK CONT. FCA Enforcement – 2014 – £270 million in fines
© Copyright 2014 by K&L Gates. All rights reserved.