BANKING AMENDMENT (DELIVERING ESSENTIAL FINANCIAL SERVICES FOR THE COMMUNITY) BILL 2010

i Banking Amendment (Delivering Essential Financial Services for the Community) Bill 2010

No. , 2010

Contents

1 Short

title

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2 Commencement

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3 Schedule(s)

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Schedule 1--Amendment of the Banking Act 1959

Part 1--Conditions on banks' authorities

Part 2--Fixed interest gap mortgages

Part 3--Exit fees on mortgages

Banking Amendment (Delivering Essential Financial Services for the Community) Bill 2010

No. , 2010 1

A Bill for an Act to deliver essential financial

services at reasonable cost, fair mortgages for

families and increased competition for the

community, and for related purposes

The Parliament of Australia enacts:

1 Short title

This Act may be cited as the Banking Amendment (Delivering

Essential Financial Services for the Community) Act 2010.

2 Commencement

This Act commences on the day after it receives the Royal Assent.

Amendment of the Banking Act 1959 Schedule 1

Conditions on banks' authorities Part 1

Banking Amendment (Delivering Essential Financial Services for the Community) Bill 2010

No. , 2010 3

Schedule 1--Amendment of the Banking Act

1959

Part 1--Conditions on banks' authorities

1 After section 9

Insert:

9AA Variation of conditions of banks' authorities--accounts

(1) APRA must, within 30 days of the commencement of the Banking

Amendment (Delivering Essential Financial Services for the

Community) Act 2010, vary the conditions of all existing section 9

authorities of banks to give effect to this section and any new

section 9 authority granted to a bank after the commencement of

that Act must include conditions that give effect to this section.

Basic accounts

(2) A bank's section 9 authority must require the bank:

(a) to offer to account-holders and prospective account-holders a

basic account with the minimum features listed in

subsection (3); and

(b) to make account-holders and prospective account-holders

aware of the existence of that type of basic account.

Features of basic accounts

(3) A basic account must have the following minimum features:

(a) the basic transaction services of deposit, withdrawal and

transfer;

(b) Internet access to the account;

suitable for use in ATM and EFTPOS transactions;

(d) a debit card linked to the account suitable for use in credit

card transactions;

(e) the account is to be free of:

(i) ongoing service fees such as monthly account service

fees; and

Schedule 1 Amendment of the Banking Act 1959

Part 1 Conditions on banks' authorities

4 Banking Amendment (Delivering Essential Financial Services for the Community) Bill

2010 No. , 2010

(ii) penalty fees for actions and transgressions of third

parties;

(f) a real-time warning that a proposed Internet, electronic or

face-to-face transaction may result in the imposition of a fee

under subsection (5) or (8) and the opportunity to discontinue

the proposed transaction.

(4) The regulations must prescribe the actions and transgressions of

third parties covered by subparagraph (3)(e)(ii).

Penalty fees

(5) A bank's section 9 authority must require a basic account offered

to account-holders and prospective account-holders by the bank to

be free of any penalty fee for a breach of a term of the contract by

the account-holder, unless the bank has applied in the prescribed

form for approval of the fee by APRA and the fee has been

approved by APRA.

(6) In deciding whether to approve a fee under subsection (5), APRA:

(a) must not approve a fee covered by subparagraph (3)(e)(ii);

and

(b) must be satisfied that the fee is not greater than the

reasonable costs incurred by the bank in relation to the

breach.

ATM fees--own-branded ATMs

(7) A bank's section 9 authority must require any account offered to

account-holders and prospective account-holders by the bank to be

free of any access fees for use of the bank's own-branded ATMs

by the account-holder.

ATM fees--foreign ATMs

(8) A bank's section 9 authority must require the bank (the relevant

bank) not to impose either of the following fees:

(a) in the case of any account of an account-holder of the

relevant bank--an access fee if the account-holder uses a

foreign ATM;

Amendment of the Banking Act 1959 Schedule 1

Conditions on banks' authorities Part 1

Banking Amendment (Delivering Essential Financial Services for the Community) Bill 2010

No. , 2010 5

(b) in the case of any account of an account-holder of another

ADI--an access fee if the account-holder uses one of the

relevant bank's own-branded ATMs;

unless the relevant bank has applied in the prescribed form for

approval of the fee by APRA and the fee has been approved by

APRA.

(9) In deciding whether to approve a fee under subsection (8), APRA

must be satisfied that the fee is not greater than the reasonable

costs incurred by the bank in providing the relevant service.

(10) The regulations must provide for:

(a) the collection of cost information and data from banks; and

(b) the period of review of the cost structures of banks; and

purposes of this paragraph;

to facilitate the calculation by APRA of the reasonable costs

incurred by banks for the purposes of paragraph (6)(b) and

subsection (9).

Definitions

(11) In this section:

ATM card means any magnetic stripe card or smart chip card

issued by an ADI to a customer of the ADI, which enables that

customer, as an ATM cardholder, to effect ATM transactions.

ATM cardholder means a customer of an ADI who is issued an

ATM card and who has a PIN for use with it.

ATM transaction means a cash deposit, a cash withdrawal or a

balance enquiry effected by an ATM cardholder's use of an ATM

card and the keying in by the cardholder of the cardholder's PIN at

an ATM.

automatic teller machine or ATM means an electronic hardware

device, owned or operated by or on behalf of an ADI, a

constitutional corporation, or a person, body corporate or

corporation that uses an eligible communications service to provide

a cash facility, that is capable of automatically dispensing cash in

response to a cash withdrawal transaction initiated by an ATM

Schedule 1 Amendment of the Banking Act 1959

Part 1 Conditions on banks' authorities

6 Banking Amendment (Delivering Essential Financial Services for the Community) Bill

2010 No. , 2010

cardholder, to be debited against or charged to an account of the

cardholder, through the use of an ATM card issued by an ADI that

is a member of the Consumer Electronic Clearing System (CS3)

and the keying in by the cardholder of the cardholder's PIN, and

includes limited service devices (cash dispensers) that only allow

for cash withdrawals, although other transactions such as balance

enquiries may also be supported by an automatic teller machine.

bank means an ADI listed on the APRA web site as a bank.

cardholder means an ATM cardholder, an EFTPOS cardholder or

a credit cardholder.

cash facility means:

(a) an ATM; or

(b) an EFTPOS terminal; or

access to the funds in his or her account or to a cash advance

through a credit card.

constitutional corporation means a corporation to which

paragraph 51(xx) of the Constitution applies.

Consumer Electronic Clearing System (CS3) means the standards,

policies and procedures coordinated by the Australian Payments

Clearing Association for the purpose of settlement of obligations

incurred between ADIs that arise from the operation of the national

automatic teller machine and EFTPOS networks.

credit card means any magnetic stripe card or smart chip card

issued by an ADI, a credit card company or a charge card company

to a customer of the ADI, the credit card company or the charge

card company, which enables that customer, as a credit cardholder,

to effect credit card and charge card transactions, including

obtaining cash advances.

credit card company or charge card company means a company

that issues a card that allows the cardholder to purchase goods or

services or to obtain a cash advance against the card at multiple

locations and with entities that are not related to the company

issuing the card.

Amendment of the Banking Act 1959 Schedule 1

Conditions on banks' authorities Part 1

Banking Amendment (Delivering Essential Financial Services for the Community) Bill 2010

No. , 2010 7

credit cardholder means a customer of an ADI, a credit card

company or a charge card company who is issued with a credit

card or a charge card and who may have a PIN for use with that

card.

credit card terminal means an electronic hardware device used to

put into effect a credit card transaction.

credit card transaction means a transaction initiated by a credit

cardholder to be charged to an account of the cardholder, through

the use at point of sale of a credit card issued by an ADI, a credit

card company or a charge card company at a credit card terminal,

to purchase goods or services or to obtain a cash advance.

debit card means any magnetic stripe card or smart chip card

issued by an ADI to a customer of the ADI, which enables that

customer to withdraw money or to have payment for goods or

services made directly from the customer's account with the ADI.

eligible communications service means a communications service

to which paragraph 51(v) of the Constitution applies.

EFTPOS means an electronic funds transfer at the point of sale.

EFTPOS card means any magnetic stripe card or smart chip card

issued by an ADI to a customer of the ADI, which enables that

customer, as an EFTPOS cardholder, to effect EFTPOS

transactions.

EFTPOS cardholder means a customer of an ADI who is issued

with an EFTPOS card and who has a PIN for use with that card.

EFTPOS terminal means an electronic hardware device used to

put into effect an EFTPOS transaction.

EFTPOS transaction means an electronic funds transfer initiated

by an EFTPOS cardholder, to be debited against or charged to an

account of the cardholder, through the use at point of sale of an

EFTPOS card issued by an ADI that is a member of the Consumer

Electronic Clearing System (CS3), and in the normal course, the

keying in by the cardholder of the cardholder's PIN, at an EFTPOS

terminal, and includes any cash withdrawal, refund and reversal of

any such transfer.

Schedule 1 Amendment of the Banking Act 1959

Part 1 Conditions on banks' authorities

8 Banking Amendment (Delivering Essential Financial Services for the Community) Bill

2010 No. , 2010

foreign ATM means an ATM not owned by the relevant bank.

own-branded ATM means an ATM owned by the relevant bank.

personal identification number or PIN means the number that is

either issued by an ADI, a credit card company or a charge card

company, or selected by the cardholder, for authenticating the use

by the cardholder of the ATM card, EFTPOS card or credit card, as

the case may be.

Amendment of the Banking Act 1959 Schedule 1

Fixed interest gap mortgages Part 2

Banking Amendment (Delivering Essential Financial Services for the Community) Bill 2010

No. , 2010 9

Part 2--Fixed interest gap mortgages

2 After section 9

Insert:

9AB Variation of conditions of authorities--fixed interest gap

mortgages

(1) APRA must, within 30 days of the commencement of the Banking

Amendment (Delivering Essential Financial Services for the

Community) Act 2010, vary the conditions of all existing section 9

authorities to give effect to this section and any new section 9

authorities granted after the commencement of that Act must

include conditions that give effect to this section.

(2) A section 9 authority must require an ADI that offers mortgage

products, including mortgages offered through or packaged by

third parties:

(a) to offer fixed interest gap mortgages to existing and

prospective customers; and

(b) to develop its own formula for the benchmark base rate that it

will offer to customers under a fixed interest gap mortgage.

(3) An ADI must apply in the prescribed form for approval of a

formula developed under paragraph (2)(b) and the formula must be

approved by APRA before the ADI offers the relevant fixed

interest gap mortgage to customers.

(4) In deciding whether to approve a formula under subsection (3),

APRA must be satisfied that the formula does not produce a result

that is greater than the costs incurred by the ADI to borrow funds.

(5) APRA may, in writing, determine guidelines in relation to:

(a) the obligation on an ADI periodically to recalculate its

benchmark base rate and vary its existing and prospective

fixed interest gap mortgages; and

(b) the calculation by an ADI of its net interest margin or

margins.

(6) In this section:

Schedule 1 Amendment of the Banking Act 1959

Part 2 Fixed interest gap mortgages

10 Banking Amendment (Delivering Essential Financial Services for the Community) Bill

2010 No. , 2010

benchmark base rate means the basic interest rate, calculated by

an ADI using the formula approved under subsection (3) and that

reflects the actual costs incurred by the ADI to borrow funds, to be

offered to customers as part of a fixed interest gap mortgage.

fixed interest gap mortgage means a mortgage the interest rate of

which is the total of the benchmark base rate of an ADI and the net

interest margin which that ADI offers to an individual customer.

net interest margin means the additional interest rate negotiated by

an ADI with a customer, based on competitive pressures, reserve

requirements, the customer's financial history and any other

matters considered relevant by the ADI or included in guidelines

under paragraph (5)(b), to be offered to that customer as part of a

fixed interest gap mortgage.

(7) The regulations must provide for:

(a) the collection of cost information and data from ADIs; and

(b) any other matter identified in regulations made for the

purposes of this paragraph;

to facilitate the making of a decision by APRA under

subsection (3).

Amendment of the Banking Act 1959 Schedule 1

Exit fees on mortgages Part 3

Banking Amendment (Delivering Essential Financial Services for the Community) Bill 2010

No. , 2010 11

Part 3--Exit fees on mortgages

3 After section 9

Insert:

9AC Variation of conditions of authorities--mortgage products

(1) APRA must, within 30 days of the commencement of the Banking

Amendment (Delivering Essential Financial Services for the

Community) Act 2010, vary the conditions of all existing section 9

authorities to give effect to this section and any new section 9

authorities granted after the commencement of that Act must

include conditions that give effect to this section.

(2) A section 9 authority must require an ADI that offers variable

interest rate mortgage products and fixed interest gap mortgages,

including mortgages offered through or packaged by third parties:

(a) to submit to APRA for approval, and receive approval of, a

formula that links the level of its early termination fees

charged in conjunction with a mortgage product with the

actual and reasonable costs of the early termination of the

relevant mortgage; and

(b) to include as part of the mortgage contract the costs of the

early termination of the relevant mortgage, under the heading

"Early Repayment Charges"; and

to the existence of an early termination fee in relation to the

relevant mortgage.

(3) A section 9 authority must require an ADI that offers fixed interest

rate mortgage products, including mortgages offered through or

packaged by third parties:

(a) to submit to APRA for approval, and receive approval of, a

formula that links the level of its early termination fees

charged in conjunction with a mortgage product with the

actual and reasonable costs of the early termination of the

relevant mortgage; and

(b) to include as part of the mortgage contract a plain English

explanation of its formula for the calculation of the early

Schedule 1 Amendment of the Banking Act 1959

Part 3 Exit fees on mortgages

12 Banking Amendment (Delivering Essential Financial Services for the Community) Bill

2010 No. , 2010

termination fee in relation to the relevant mortgage, under the

heading "Early Repayment Charges"; and

to the existence of an early termination fee in relation to the

relevant mortgage.

(4) APRA must, within 30 days of the commencement of the Banking

Amendment (Delivering Essential Financial Services for the

Community) Act 2010, prescribe guidelines in relation to the ability

of an ADI to vary its formula for the calculation of its early

termination fees.

(5) In this section:

early termination fee means any additional charge imposed on a

mortgagor in any situation in which the mortgagor choses to pay

out the mortgage contract ahead of the time specified in the

mortgage contract.

(6) The regulations must provide for:

(a) the collection of cost information and data from ADIs; and

(b) any other matter identified in regulations made for the

purposes of this paragraph;

to facilitate the making of a decision by APRA under

paragraph (2)(a) or (3)(a).

Commonwealth of Australia Bills

BANKING AMENDMENT (DELIVERING ESSENTIAL FINANCIAL SERVICES FOR THE COMMUNITY) BILL 2010