Regulations have recently been made to ban exit fees on loan contracts entered into as from 1 July 2011.

 

Rumours abound that there are moves afoot to lobby members of the Senate and seek to persuade them to disallow these regulations – in effect stopping the ban in its tracks.

 

In this email alert Richard Williams,  discusses how delegated legislation (regulations) can be disallowed, with Lisa Sylvester, MacGillivrays Knowledge Manager.

 

Richard Williams:

Good afternoon Lisa.

Lisa Sylvester:

Good afternoon Richard.

RW:

There are a lot of rumours currently that lobbying efforts are being made by various sections of the finance industry with a view to having the Senate disallow the recently made amendment1 to the National Consumer Credit Protection Regulations to ban exit fees. As Knowledge Manager I would like you to give me an overview of how this would work in practice and what the procedures involved would be. But first, could you please explain to our readers your experience and background in the legal/knowledge information industry

LS:

Thank you Richard for this opportunity to inform our readers of the processes involved. As Knowledge Manager for MacGillivrays part of my role is to research legislative change and inform our clients and staff of any potential changes which may affect their organisation. My background in legal research spans 14 years, including 11 with the international publisher LexisNexis. I have a law degree and practising certificate as a Solicitor, and have also been a university lecturer.

RW:

So Lisa, how are regulations scrutinised to be fair, if not fair, what can anyone do to have them disallowed?

LS:

Let me explain, how regulations come into effect. Ministers are given the power under the primary legislation (Acts) to bring into effect Rules and Regulations, known as delegated legislation. Where the Regulations could potentially be controversial, the Minister may issue a Media Release with the proposed Regulations for comment.

 

Further, a Senate Committee may be instructed to produce a report on the proposed legislation, including any recommendations. This is what happened with the NCCP Regulations.

 

The Senate Economics References Committee released a report titled ‘Competition within the Australian banking sector’ in May 2011 after the NCCP Regulations amendment was passed in March

When asked to comment on banning exit fees, the Committee stated that this may lead to higher upfront fees, including for borrowers who currently never incur exit fees.

RW:

So my understanding is they made a recommendation to the Government to reconsider the decision to ban exit fees, was that in the Report?

LS:

Yes, in Recommendation 4

RW:

So tell me Lisa if the finance industry was successful in lobbying Senators to disallow the Regulations, how would that work in practice?

LS:

As stated on the Parliament of Australia web site:

 

         ‘It is the right of any person or organisation to petition Parliament. Petitions generally express views on matters of public policy and ask the Parliament to take—or, in some cases, not to take—a particular course of action.’

 

For a vote to occur in Parliament including the Senate, the issue needs to be tabled by a sitting Senate member or a petition lodged. The process of how to petition is explained on the Parliament of Australia site.

Provision is made in all jurisdictions for the Parliament to disallow delegated legislation by a resolution of either House of Parliament, subject to time limits.

RW:

So Lisa is it a majority vote of the Members which will disallow the regulation?

LS:

Yes, the majority of the particular house of parliament ie the Senate needs to agree to the proposed resolution to disallow the regulations.

 

 

The current constitution of the Senate of 76 members is:

 

 

PRE-30 JUNE 2011

POST-1 JULY 2011

AG

5

9

ALP

32

31

FFP

1

0

IND

1

0

LP

32

29

NAT

5

6

DLP

0

1

 

For example prior to 30 June 2011 a majority of 39 could be met by LP, NATS & AG all agreeing to disallow the regulation.

RW:

So as this is a federal regulation, is there any legislation which gives the right to have the disallowance of the regulations

LS:

Yes, section 42 of the Legislative Instruments Act 2003. Although the regulation has passed, it has not yet commenced which gives the opportunity for further lobbying and debate to disallow it.

RW:

And when does the Senate next sit?

LS:

The Senate next sits on Tuesday the 14th June 2011.

RW:

Thank you Lisa. There is a lot of debate in the finance industry on this hot issue and your comments are most helpful.  I am sure everyone in the finance industry will be watching what happens in the Senate in June.

 

 

 

1 National Consumer Credit Protection Amendment Regulations 2011 (No. 2)

 

Article by Richard Williams - Partner, Banking Services

and Lisa Sylvester - Knowledge Manager

 

 

Link to printable version of this article

 

Link to other articles by MacGillivrays

 

Buying a business?  Talk to one of our professionals about your due diligence 1300 369 581 or tonyn@macgillivrays.com.au.

 

 

PLEASE NOTE:  This article is not legal advice and our comments are of a general nature only.  This document is not to be relied on as substitution for proper detailed legal advice. 

 

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