The Council of Australian Governments ("COAG") yesterday agreed that the Federal Government would assume responsibility for regulation of all consumer credit. This closes the debate as to whether federal regulation in the area would be limited to mortgage lending and related matters. The decision was made two days after submissions closed in relation to the Green Paper issued by Treasury in June where federal regulation of all consumer credit was raised as an option. Consumer credit includes personal loans, credit cards, payday lending and micro loans.

Nick Sherry, Minister for Superannuation and Corporate Law, in announcing this decision described the current consumer credit regulation as "duplicated, patchy, very hard to change or even non-existent" which "does very little to protect Australians, whilst imposing unnecessary red tape on business". He indicated that the new regulatory structure would include "simple, standard national regulation, replacing regulation in 6 states and 2 territories".

The Business Regulation and Competition Working Group of COAG is to report to COAG in October 2008 with a detailed Implementation Plan.

We understand that over the next few months, consideration will be given as to which of the following broad approaches to be adopted:

  • including consumer credit regulation within the framework of the existing financial services regulation under the Corporations Act; or
  • regulating consumer credit consistently with its current regulation under the Uniform Consumer Credit Code but with changes aimed making the nature of this regulation and, in particular, disclosures more simplified and meaningful.

However, irrespective of the approach that is adopted, it seems clear that all credit providers will be required to be subject to an Alternative Dispute Resolution Scheme.

Additionally, COAG agreed that the Federal Government would assume responsibility for regulating mortgage broking, trustee companies, non bank lenders and margin loans. No details of how this regulation would work were released, but various proposals were canvassed in the June Treasury Green Paper.

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