Financial Sector Reform (Hayne Royal Commission Response) Act 2020 (135 of 2020)
Schedule 11 Breach reporting and remediation
National Consumer Credit Protection Act 2009
15 After section 50
Insert:
50A What are reportable situations ?
(1) There is a reportable situation in relation to a licensee if one of the following paragraphs is satisfied:
(a) the licensee or a representative of the licensee has breached a core obligation and the breach is significant;
(b) the licensee or a representative of the licenseeis no longer able to comply with a core obligation and the breach, if it occurs, will be significant;
(c) the licensee or a representative of the licensee conducts an investigation into whether there is a reportable situation of the kind mentioned in paragraph (a) or (b) and the investigation continues for more than 30 days;
(d) an investigation described in paragraph (c) discloses that there is no reportable situation of the kind mentioned in paragraph (a) or (b).
(2) There is also a reportable situation in relation to a licensee if:
(a) in the course of engaging in a credit activity, the licensee or a representative of the licensee has engaged in conduct constituting gross negligence; or
(b) the licensee or a representative of the licensee has committed serious fraud; or
(c) any other circumstances prescribed by the regulations for the purposes of this paragraph exist.
(3) Each of the following is a core obligation :
(a) an obligation under section 47, other than the obligation under paragraph 47(1)(d);
(b) the obligation under paragraph 47(1)(d), so far as it relates to this Act, the Transitional Act and Division 2 of Part 2 of the ASIC Act and regulations made for the purpose of that Division;
(c) the obligation under paragraph 47(1)(d), so far as it relates to Commonwealth legislation that is covered by paragraph (d) of the definition of credit legislation .
(4) For the purposes of this section, a breach of a core obligation is taken to be significant if:
(a) the breach is constituted by the commission of an offence under any law and the commission of the offence is punishable on conviction by a penalty that may include imprisonment for a maximum period of:
(i) if the offence involves dishonesty - 3 months or more; or
(ii) in any other case - 12 months or more; or
(b) the breach is constituted by a contravention of a civil penalty provision under any law, other than a civil penalty provision prescribed by the regulations for the purposes of this paragraph; or
(c) the breach is constituted by a contravention of a key requirement (as defined for the purposes of the National Credit Code), other than a key requirement prescribed by the regulations for the purposes of this paragraph; or
(d) the breach is constituted by a contravention of subsection 12DA(1) of the ASIC Act (misleading or deceptive conduct in relation to a financial service); or
(e) the breach results, or is likely to result, in material loss or damage to a credit activity client of the licensee; or
(f) any other circumstances prescribed by the regulations for the purposes of this paragraph exist.
(5) Otherwise, for the purposes of this section, a breach of a core obligation is significant having regard to the following:
(a) the number or frequency of similar breaches;
(b) the impact of the breach on the licensee's ability to engage in credit activities covered by the licence;
(c) the extent to which the breach indicates that the licensee's arrangements to ensure compliance with those obligations are inadequate;
(d) any other matters prescribed by regulations made for the purposes of this paragraph.
(6) For the purposes of this section, a person is a credit activity client of a licensee if the person is a consumer who:
(a) is a party to a credit contract, or will be a party to a proposed credit contract, in relation to which the licensee, or a representative of the licensee, performs the obligations, or exercises the rights, of a credit provider; or
(b) is a person to whom the licensee, or a representative of the licensee, provides a credit service; or
(c) is a party to a consumer lease, or will be a party to a proposed consumer lease, in relation to which the licensee, or a representative of the licensee, performs the obligations, or exercises the rights, of a lessor; or
(d) is a mortgagor under a mortgage, or will be the mortgagor under a proposed mortgage, in relation to which the licensee, or a representative of the licensee, performs the obligations, or exercises the rights of a mortgagee; or
(e) is the guarantor under a guarantee, or will be the guarantor under a proposed guarantee, in relation to which the licensee, or a representative of the licensee, performs the obligations, or exercises the rights, of a beneficiary under the guarantee; or
(f) is a person in relation to whom the licensee, or a representative of the licensee, engages in a prescribed activity mentioned in item 6 of the table in subsection 6(1).
50B Obligation to lodge a report - reportable situations in relation to the licensee
Reporting a reportable situation to ASIC
(1) If there are reasonable grounds to believe that a reportable situation has arisen in relation to a licensee:
(a) the licensee must lodge a report in relation to the reportable situation with ASIC; and
(b) the report must be lodged in accordance with this section.
Civil penalty: 5,000 penalty units.
Offence
(2) A person commits an offence if:
(a) the person is subject to a requirement under subsection (1); and
(b) the person engages in conduct; and
(c) the conduct contravenes the requirement.
Criminal penalty: 2 years imprisonment.
Report must be in the approved form
(3) The report must be lodged with ASIC in writing in the approved form.
Period within which report must be lodged
(4) The report must be lodged with ASIC within 30 days after the licensee first knows that, or is reckless with respect to whether, there are reasonable grounds to believe that the reportable situation has arisen.
Strict liability applies in relation to paragraphs (1)(a) and (b)
(5) Strict liability applies in relation to paragraphs (1)(a) and (b).
If report is received by APRA
(6) A report that a licensee is required to lodge with ASIC under this section in relation to a reportable situation is taken to have been lodged with ASIC if:
(a) the licensee is a body regulated by APRA; and
(b) the licensee has given a report to APRA that contains all of the information that is required in a report under this section in relation to the reportable situation.
(7) Subsection (1) does not apply to a licensee in relation to a reportable situation if:
(a) the licensee is a body regulated by APRA; and
(b) the auditor or actuary of the licensee gives APRA a written report about a matter to which the reportable situation relates; and
(c) the report is given before, or within 10 business days after, the licensee first knows that, or is reckless with respect to whether, there are reasonable grounds to believe that the reportable situation has arisen.
50C Obligation to lodge a report - reportable situations in relation to other licensees
Reporting a reportable situation to ASIC
(1) A licensee (the reporting licensee ) must lodge a report with ASIC in accordance with this section if there are reasonable grounds to believe that:
(a) a reportable situation has arisen in relation to another licensee of the kind mentioned in:
(i) paragraph 50A(1)(a) or (b) (significant breach or likely breach of a core obligation); or
(ii) subsection 50A(2) (gross negligence or serious fraud); and
(b) one of the following is an individual who has engaged in conduct that forms part of the reportable situation:
(i) the other licensee;
(ii) an employee of the other licensee or of a related body corporate of the other licensee, acting within the scope of the employee's employment;
(iii) a director of the other licensee or of a related body corporate of the other licensee, acting within the scope of the director's duties as director;
(iv) another representative of the other licensee acting within the scope of the representative's authority given by the licensee; and
(c) the individual is a mortgage broker.
Civil penalty: 5,000 penalty units.
Report must be in the approved form
(2) The report must be lodged with ASIC in writing in the approved form.
Period within which report must be lodged
(3) The report must be lodged with ASIC within 30 days after the reporting licensee first knows of, or is reckless with respect to, the circumstances mentioned in paragraphs (1)(a), (b) and (c).
If the reportable situation already reported to ASIC
(4) Subsection (1) does not apply in relation to a reportable situation if there are reasonable grounds to believe that ASIC is aware of:
(a) the existence of the reportable situation; and
(b) all of the information that is required in a report under this section in relation to the reportable situation.
A copy of the report must be given to the other licensee
(5) The reporting licensee must give a copy of any report that the reporting licensee is required to lodge with ASIC under subsection (1) to the other licensee within 30 days after the reporting licensee first knows of, or is reckless with respect to, the circumstances mentioned in paragraphs (1)(a), (b) and (c).
Civil penalty: 5,000 penalty units.
(6) A licensee has qualified privilege in relation to a copy of a report given under subsection (5).
(7) A licensee who has qualified privilege under subsection (6) in respect of conduct is also not liable for any action based on breach of confidence in relation to that conduct.
50D ASIC must publish details of certain reports
(1) ASIC must, for each financial year, publish information about:
(a) reports lodged with ASIC during the financial year under section 50B in relation to reportable situations of the kind mentioned in paragraphs 50A(1)(a) and (b) (breaches and likely breaches of core obligations); and
(b) reports lodged with APRA during the financial year, as described in subsections 50B(6) and (7), in relation to reportable situations of the kind mentioned in paragraphs 50A(1)(a) and (b) (breaches and likely breaches of core obligations); and
(c) the entities in relation to which those reports are lodged with ASIC or APRA.
(2) The information must:
(a) be published within 4 months after the end of the financial year; and
(b) be published on ASIC's website; and
(c) include the information (if any) prescribed by the regulations, which may include personal information (within the meaning of the Privacy Act 1988) in relation to a licensee who is an individual; and
(d) if the regulations prescribe how the information is to be organised - be organised in accordance with the regulations.
(3) The regulations may prescribe circumstances in which information need not be included in the information published by ASIC under this section.
(4) ASIC may correct any error in, or omission from, information published under this section.