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Industry Knowledge

Topic 1-2: Legislation and


codes of practice
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Topic 1-2: Legislation and codes of practice

Certificate IV in Finance and Mortgage Broking

Contents
Overview ........................................................................................................ 1-2.3

Part 1: Introduction to legislation and compliance........................................... 1-2.4

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1 Important legal terms and concepts ..................................................... 1-2.4

2 Compliance and regulation of the FSI ................................................... 1-2.9

3 Legal compliance ............................................................................... 1-2.10

4 Regulatory compliance ...................................................................... 1-2.12

5 Judicial compliance ............................................................................ 1-2.12

6 Professional compliance .................................................................... 1-2.13

7 Business compliance .......................................................................... 1-2.13

Part 2: FSI legislation .................................................................................... 1-2.14

8 Banking Act ....................................................................................... 1-2.14

9 NCCP Act ........................................................................................... 1-2.16

10 The Corporations Act ......................................................................... 1-2.28

11 Financial Services Reform Act ............................................................ 1-2.29

12 AML/CTF Act ..................................................................................... 1-2.30

13 The Privacy Act .................................................................................. 1-2.30

14 Superannuation ................................................................................. 1-2.36

15 Work health and safety...................................................................... 1-2.37

16 Consumer law.................................................................................... 1-2.40

17 Anti-discrimination legislation ........................................................... 1-2.43

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Part 3: Codes of practice ............................................................................... 1-2.46

18 Code of Banking Practice ................................................................... 1-2.46

19 ePayments Code ................................................................................ 1-2.47

20 Financial Planning Association of Australia


Code of Professional Practice ............................................................. 1-2.48

21 General Insurance Code of Practice .................................................... 1-2.48

22 Insurance Brokers Code of Practice .................................................... 1-2.49

23 Customer Owned Banking Code of Practice ........................................ 1-2.49

24 Basel III ............................................................................................. 1-2.50

Part 4: Regulatory and professional bodies ................................................... 1-2.51

25 FSI regulatory bodies ......................................................................... 1-2.51

26 FSI professional bodies ...................................................................... 1-2.59

27 Financial Ombudsman Service............................................................ 1-2.62

Part 5: Keeping up with legislation changes ................................................... 1-2.64

28 Information sources........................................................................... 1-2.64

29 Activities ........................................................................................... 1-2.65

Part 6: Implementing legislation and codes of practice into


work situations.................................................................................. 1-2.67

30 Internal policy and procedure ............................................................ 1-2.67

31 Record keeping .................................................................................. 1-2.68

32 Customer charter............................................................................... 1-2.69

33 Internal monitoring and audit ............................................................ 1-2.69

References .................................................................................................... 1-2.70

Suggested answers........................................................................................ 1-2.70

1-2.2 CIVMB_IK_T1-2_v3
Topic 1-2: Legislation and codes of practice

Overview
Professionals in the financial services industry (FSI) need to have sound general
knowledge of the industry and specific knowledge of issues related to the regulatory
framework that governs the consumer credit and mortgage industry.
As the finance industry in Australia is highly regulated and breaches of legislation can
result in severe penalties, knowledge of and compliance with the various applicable
laws, Regulations and codes of conduct are essential.
This topic provides an overview of the regulatory framework and environment in which
the industry operates. It looks at the regulators and industry bodies. Privacy protection
and the specific consumer protection under the National Consumer Credit Protection Act

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2009 (Cth) (NCCP Act) are also examined.

Topic learning outcomes


On completing this topic, students should be able to:
• identify the legislation and codes of conduct relevant to practise as a mortgage
broker
• comply with the legislation and codes of conduct relevant to practise as a mortgage
broker, including maintaining appropriate records
• respond to changes in legislation and codes of practice in a timely manner.

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Certificate IV in Finance and Mortgage Broking

Part 1: Introduction to legislation and


compliance

1 Important legal terms and concepts

1.1 Law
The term ‘law’ refers to the set of rules governing a society. According to Enright
(1991, p. 69)
The main primary sources of law are:
• statutes (also called Acts)
• common law (alternatively called case law)
• delegated legislation.
Common law consists of principles of law formulated by judges in cases
(a) in deciding disputes where there are no applicable statutes and
(b) in interpreting statutes and delegated legislation. Delegated legislation
is law made by some person or body to whom parliament has by statue
delegated law making authority. Statute is the superior type of law because
it overrides common law. Because delegated legislation is authorised by
statute it can also override common law.
The function of these laws is to regulate the conduct of governments and citizens.
Laws can be enforced by the courts and by the executive arm of government.

1.2 Act of Parliament


The ComLaw website <http://www.comlaw.gov.au/Content/WhatIsIt> states that:
Acts of Parliament are a form of legislation made by the Australian
Parliament. Under Australia’s Constitution, each draft Act (each Bill) must
pass through both Houses of the Parliament and receive royal assent before
it can become law. Once an Act is in place, it can generally only be amended
or ceased (repealed) by another Act.

1.3 Legislation
Legislation is a law that has been enacted by a parliament. Legislation can have many
purposes. It can, for example, authorise, prohibit or regulate. In Australia, an item of
primary legislation is known as an Act of Parliament after enactment.

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Topic 1-2: Legislation and codes of practice

1.4 Regulation
Regulation is a form of secondary legislation. Regulations are used to set out the detail
that gives effect to the intent and purpose of the primary legislation. Regulations are
used to specify the detail of how legislation will be implemented.
The responsibility for overseeing the implantation of and compliance with Regulations is
normally given to government departments or specific bodies established for the purpose.

1.5 Code of practice


BusinessDictionary.com (2015) defines a code of practice as ‘written guidelines issued by

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an official body or a professional association to its members to help them comply with
its ethical standards’.
Unlike legislation, adoption and adherence to a code of practice may be voluntary and
might be initiated by joining a professional association or business body.
A code of practice may be a practical guide to achieve what is required under the
legislation and can provide duty holders with guidance on effective ways to manage
issues, achieve ethical or practical work standards or provide services.
For example, work health and safety (WHS) codes of practice can provide practical
guidance for people who have WHS duties to achieve the standards required under the
Work Health and Safety Act 2011 (Cth) (WHS Act). In most cases, following an approved
code of practice will achieve compliance with the WHS Act. However, the codes of
practice should not be regarded as exhaustive. Also, a code of practice does not have
the same legal weight as the WHS Act or Regulations, although it may be admissible in
court as evidence.

1.6 Administering legal compliance


Many financial services organisations employ specialist compliance officers to ensure
that they comply with the rules and Regulations that have originated from this
legislation. Intermediaries who represent or interact with these organisations are usually
expected to adopt and comply with the compliance policies of the organisation.

1.7 Commonwealth laws and state/territory laws


Australian Constitution
The Australian Constitution, the set of rules by which Australia is run, was established in
1901. The Constitution:
• established a federal system of government, under which powers are distributed
between the federal government and the states
• defined:
– exclusive powers, investing the federal government with the exclusive power to
make laws on matters such as trade and commerce, taxation, defence,
external affairs, immigration and citizenship
– concurrent powers, where both tiers of government are able to enact laws
– the separation of powers into parliament, the executive and the judiciary.

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Certificate IV in Finance and Mortgage Broking

Federal and state/territory legal systems


In effect, Australia has nine legal systems. They are the:
• eight state and territory systems
• federal system.
However, it is the state and territory criminal laws that mainly affect the daily lives of
most Australians.
The states and territories have independent legislative power in all matters not
specifically assigned to the federal government. Where there is any inconsistency
between federal and state or territory laws, federal laws prevail. Federal laws apply to
the whole of Australia.

1.8 Separation of powers


Each of the federal and state systems incorporates three separate branches of
government: legislative, executive and judicial. Parliaments make the laws,
the executive government administers the laws, and the judiciary independently
interprets and applies them.
Power Role Composition
Parliament Makes and amends laws • The Queen, represented in Australia by the
Governor-General
• The Senate
• The House of Representatives
Executive Puts the law into action The Prime Minister and ministers
Judiciary Makes judgements about the law The High Court and other federal courts
Source: PEO n.d.

1.9 Areas of law relevant to the FSI


The definitions below briefly outline some areas of the law that you may need to be
familiar with in the FSI.

Common law
The common law system, derived from British law, forms the basis of Australian
jurisprudence. Common law, also known as case law or precedent, is law developed by
judges through a series of decisions of courts or similar tribunals. The chief feature of
the common law system is that judges’ decisions in pending cases are informed or
bound by the decisions of previously settled cases. The fundamental principle is that it is
unfair to treat similar cases differently on different occasions.
Enright (1991, p. 69) states that:
Common law consists of principles of law formulated by judges in cases
(a) in deciding disputes where there are no applicable statutes and
(b) in interpreting statutes and delegated legislation.
Mediation, arbitration and litigation processes can be argued within the context of the
common law and is ultimately decided by the courts.

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Topic 1-2: Legislation and codes of practice

Civil law
Civil law is a legal system originating in Europe, intellectualised within the framework of
late Roman law, and whose most prevalent feature is that its core principles are codified
into a referable system that serves as the primary source of law. Civil law proceeds from
abstractions, formulates general principles, and distinguishes substantive rules from
procedural rules.
Civil law does not apply in Australia; however, it applies in a number of European states
with the exception of the UK.

Contract law

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Bird (1983, p. 91) states that a contract is a:
… agreement enforceable by law. An essential feature of a contract is a
promise by one party to another to do or forbear from doing certain
specialised acts. The offer of a promise becomes an offer by acceptance.
Contract is that species of agreement whereby a legal obligation is
constituted and defined by the parties to it.
For a contract to be valid and legally enforceable, there must be:
• capacity to contract (i.e. the persona involved are of sound mind and
legal age)
• intention to contract
• consensus ad idem (agreement as to the same thing)
• valuable consideration (generally supply of money, property or services)
• legality of purpose
• sufficient certainty of terms.

Insurance law
Insurance law is a term that refers to the body of law that regulates the insurance
industry and insurance contracts within Australia.
The main Acts in insurance law are:
• Insurance Act 1973 (Cth)
• Insurance Contracts Act 1984 (Cth)
However, there are other pieces of legislation enacted by the states, private codes and
case law, all of which form this body of law.

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Certificate IV in Finance and Mortgage Broking

Further resources: Australian legal system and law


• For a comprehensive set of links to websites, including state and
territory legislation, court and tribunal decisions, key national bodies
and law research tools, follow the links on the Parliament of Australia’s
website:
Parliament of Australia (POA), n.d, Key internet links on Australian law,
POA, viewed 13 March 2017,
<http://www.aph.gov.au/About_Parliament/Parliamentary_Department
s/Parliamentary_Library/Browse_by_Topic/Auslaw>.
• Attorney-General’s Department website, viewed 13 March 2017,
<http://www.ag.gov.au/LegalSystem/Pages/default.aspx>.
• Australian Government ComLaw website, viewed 13 March 2017,
<http://www.comlaw.gov.au>.
• Insurance Act, viewed 13 March 2017,
<http://www.austlii.edu.au/au/legis/cth/consol_act/ia1973116>.
• Info sheet on the Australian Constitution:
Parliament of Australia (POA), n.d, Infosheet 13 — the constitution, POA,
viewed 13 March 2017,
<http://www.aph.gov.au/About_Parliament/House_of_Representatives
/Powers_practice_and_procedure/00_-_Infosheets/Infosheet_13_-
_The_Constitution>.
• State Library of NSW 2011, Hot topics 79: Australian legal system,
NSW Government, viewed 13 March 2017,
<http://www.legalanswers.sl.nsw.gov.au/guides/hot_topics/australian_l
egal_system/index.html>.

Apply your knowledge 1: Legal concepts and terms


Write answers to the following questions based on your reading.
1. What is the difference between law and a code of practice?

2. Which laws prevail when there is any inconsistency between federal and
state or territory laws?

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Topic 1-2: Legislation and codes of practice

3. Describe the separation of powers.

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Note: You can access ‘Suggested answers’ for this activity at the end of this topic.

2 Compliance and regulation of the FSI


The finance industry is controlled at various levels through parliament, government
offices, courts, professional bodies and the financial services businesses themselves.
Overall, this control is exercised through a compliance framework.
The compliance framework operates in five tiers. Each tier can be regarded as providing
the framework in which the tier below operates. The five tiers of compliance are
summarised in the following table.

Table 1
Compliance tier Institution Function
Legal Commonwealth or Pass laws that create the regulatory environment.
state/territory parliaments

Regulatory Government ministries Interpretation, administration and enforcement of the


and departments law. This includes bodies such as the Australian
Securities and Investments Commission (ASIC) and the
various state or territory departments.

Judicial Courts and tribunals The judiciary operates at two levels — courts and
tribunals are the arena in which:
• government regulators prosecute
• aggrieved clients bring lawsuits.
Court decisions become established as precedents.
Such precedents become standards for practice.

Professional Professional associations Professional associations set standards of practice that


are based on the requirements of all three of the layers
mentioned above. In turn, they become important
influences on the forming of laws, the framing of
Regulations and the decisions of the courts.

Business Product and Product and service providers, in consultation with their
service providers associations, are able to develop business plans and
operational policies that can best ensure their success
and growth in the marketplace.

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3 Legal compliance
The basis for the legal compliance is provided by the various Acts of the Commonwealth
Parliament. The main areas of law affecting the FSI, regulatory bodies or regulators and
the names of the pieces of legislation are listed in the tables below.
For more information, also see:
• ‘Codes of practice’ in Part 3 of this topic.
• ‘Regulatory and professional bodies’ in Part 4 of this topic.

3.1 Finance
Relevant body/regulator Main legislation
Australian Transactions and Reports • Financial Transactions Reports Act 1988 (Cth)
Analysis Centre (AUSTRAC): • Anti-Money Laundering and Counter-Terrorism Financing Act
<www.austrac.gov.au> 2006 (Cth) (AML/CTF Act)

Australian Prudential Regulation Banking Act 1959 (Cth)


Authority (APRA): <www.apra.gov.au>

Foreign Investment Review Board (FIRB): Foreign Acquisitions and Takeovers Act 1975 (Cth)
<www.firb.gov.au>

Australian Bankers’ Association (ABA): • Code of Banking Practice


<www.bankers.asn.au> • ePayments Code
ASIC: <www.asic.gov.au> • Electronic Funds Transfer Code of Conduct (EFT Code)

3.2 Consumer protection and privacy


Relevant body/regulator Main legislation
ASIC: <www.asic.gov.au> • Corporations Act 2001 (Cth)
• Australian Securities and Investments Commission Act 2001
(Cth) (ASIC Act)
• NCCP Act

Australian Competition and Consumer Competition and Consumer Act 2010 (Cth) (CCA) (formerly the
Commission (ACCC): <www.accc.gov.au> Trade Practices Act 1974 (Cth))

Office of the Australian Information • Privacy Act 1988 (Cth)


Commissioner (OAIC): • Freedom of Information Act 1982 (Cth) (FOI Act)
<www.oaic.gov.au>
• Privacy Amendment (Enhancing Privacy Protection) Act 2012
(Cth)

3.3 Anti-discrimination
Relevant body/regulator Main legislation
Australian Human Rights Commission: • Disability Discrimination Act 1992 (Cth)
<www.humanrights.gov.au> • Australian Human Rights Commission Act 1986 (Cth)

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Topic 1-2: Legislation and codes of practice

3.4 Work health and safety


For details of regulators for each Australian jurisdiction, see ‘State and territory
WHS regulators and legislation’ in section 25.8.
Relevant body Main legislation
Safe Work Australia: • Model Work Health and Safety Act 2011
<www.safeworkaustralia.gov.au> • Model Work Health and Safety Regulations 2011
The Model Work Health and Safety Act forms the basis of the
WHS Acts being enacted across Australia to harmonise work health
and safety law. For the Act to be legally binding it needs to be enacted
or passed by parliament in each jurisdiction. As at 2014, all Australian
states and territories, apart from Victoria and Western Australia, had
adopted this model legislation.

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3.5 Taxation
Relevant body Main legislation
Australian Taxation Office (ATO): The ATO regulates and administers a number of pieces of legislation in
<www.ato.gov.au> the areas of:
• income tax
• fringe benefits tax
• superannuation
• goods and services tax (GST)
• excise.
For full details, see <http://law.ato.gov.au/atolaw/index.htm>.

3.6 Workplace relations


Relevant body Main legislation
Australian Government Department of Employment: • Fair Work Act 2009 (Cth)
<www.employment.gov.au/workplace-relations> • Fair Work Regulations 2009 (Cth)
Fair Work Commission: <www.fwc.gov.au>

Further resources: Legislative framework


• The ATO’s legal database, viewed 13 March 2017,
<http://law.ato.gov.au/atolaw/index.htm>.
• Australian Consumer Law, viewed 13 March 2017,
<http://consumerlaw.gov.au/the-australian-consumer-law>.
• Resources for Australia’s national workplace relations system,
viewed 13 March 2017, <http://employment.gov.au/australias-national-
workplace-relations-system?resource>.
• Suggested group of links for consumer protection websites,
viewed 13 March 2017, <http://australia.gov.au/topics/economy-
money-and-tax/consumer-protection>.

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Certificate IV in Finance and Mortgage Broking

4 Regulatory compliance
The regulatory tier of compliance comprises:
• Commonwealth and state/territory parliaments
• regulators.
Regulations are made by parliament in line with the requirements of the laws they pass.
Different Acts require different degrees of Regulation.
Regulatory bodies have a wide range of duties to perform to ensure implementation of
relevant Acts and Regulations. Industry regulators, such as ASIC, often provide
guidelines for the industry. Regulatory bodies are also responsible for investigating
breaches of the Regulations and unlawful activities, and for prosecuting offenders.
Regulators such as ASIC and the ACCC may seek to impose severe penalties for
deliberate and major breaches of laws and Regulations.
Information on federal regulators can be found in Part 4, section 25, and includes the
following:
• ACCC
• APRA
• ASIC
• AUSTRAC
• FIRB
• Australian Human Rights Commission.
Previous state-based legislation controlling sections of the finance industry has largely
been replaced by the new national credit regime, the NCCP Act.
For more information, see ‘NCCP Act’ in Part 2, section 9.

5 Judicial compliance
Judicial compliance is enforced through the courts at federal and state levels.
There are two types of activity:
• criminal sanctions — government regulators prosecute for breaches of the
respective laws and Regulations
• civil litigation — clients may seek monetary compensation from the courts for
various reasons.
In the case of civil litigation, court decisions become precedents for future possible
litigation. As such, they form another basis for standards of practice.
Legal decisions can be complex and are best interpreted by legal professionals.
Exposure to potential litigation means that practitioners need to have professional
indemnity insurance for protection against significant financial loss.

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Topic 1-2: Legislation and codes of practice

6 Professional compliance
The professional tier of compliance is exercised through the various professional bodies
that have been established within the finance industry. Some are industry-specific while
others provide a much broader coverage. Relevant professional associations include:
• the ABA
• The Finance Brokers Association of Australia (FBAA)
• The Mortgage & Finance Association of Australia (MFAA)
• National Insurance Brokers Association of Australia (NIBA)
• The Australian Finance Conference (AFC)
• The Australian Equipment Lessors Association (AELA)

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• The Commercial Asset Finance Brokers Association of Australia (CAFBA).
An important part of the work of professional associations is to work in consultation
with the other levels of compliance to set and uphold standards of practice that are
based on the requirements of the law and the Regulations. Consequently, they can be
influential in lobbying governments and regulators with regard to the forming of laws,
the framing of Regulations and the decisions of the courts.
Professional associations contribute as industry bodies, including establishing ethical
work standards that are expressed through codes of conduct. For example, the banking
industry is represented by the ABA, which has established the Code of Banking Practice.
This Code has been adopted by the majority of banks operating in Australia and by some
non-banking financial institutions.
The FBAA and the MFAA are particularly concerned with consumer protection and
practice issues. The FBAA has an extensive Code of Practice that addresses these issues.
The MFAA’s Code of Practice incorporates consumer protection principles with which all
members must comply.

7 Business compliance
Almost all financial intermediaries, whether they are independent or work within a
larger organisation, are required to address compliance issues at the business level.
Intermediaries include:
• financial institutions employing their own sales teams
• aggregators, such as AFG, PLAN and FAST
• franchises, such as Aussie, Express Mortgage Market and Mortgage Choice
• independent individual operators.
All the above operate within their own sets of guidelines. For the larger organisations,
compliance officers may be appointed to assist practitioners to meet compliance
standards. For individual operators, the standards with which they must comply may be
the code of practice of the professional association to which they belong. Regardless of
the size and level of sophistication, there is an expectation that all practitioners will
conduct their business activities ethically and with regard to the rights of others.

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Part 2: FSI legislation


This section covers some of the important legislation affecting the FSI.

8 Banking Act
The Banking Act governs the operations of authorised deposit-taking Institutions (ADIs),
which include banks, building societies and credit unions. All ADIs are subject to the
same prudential standards but the use of ‘bank’, ‘building society’ and ‘credit union’ are
subject to the organisations meeting certain criteria.
APRA is responsible for bank supervision. APRA has adopted the prudential statements
previously issued by the RBA in relation to the supervision of banks. The prudential
statements establish the minimum prudential standards that banks are required to
observe. They were formulated after consultation with banks and after taking
supervisory policies that existed overseas into consideration.
APRA’s approach to the prudential supervision of banks is based on the view that the
prime responsibility for the prudent management of a bank’s business lies with the
board and management of the bank. It is their function to assess the risks in the
activities the bank undertakes, and to continually monitor and control these risks.

Further resources: The Banking Act


The Banking Act 1959, viewed 13 March 2017,
<http://www.comlaw.gov.au/Series/C1959A00006>.

Apply your knowledge 2: Banking law and practice


Download a presentation by Elisabeth Wentworth, Special Counsel to the
Banking and Financial Services Ombudsman, by clicking the following link:
Elisabeth Wentworth, Special Counsel to the Banking and Financial Services
Ombudsman, 2007, Essential Banking Law and Practice,
Elisabeth Wentworth, viewed 13 March 2017,
<www.fos.org.au/public/download.jsp?id=2793>.
Answer the following questions.
1. What is the modern Australian definition of a bank?

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Topic 1-2: Legislation and codes of practice

2. What are the three (3) main regulatory agencies for the
Australian financial system and their responsibilities?

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3. What is the Banking and Financial Services Ombudsman?

4. What are the normal incidents of a banker–customer relationship?

5. What are a customer’s duties in the banking relationship?

Note: You can access ‘Suggested answers’ for this activity at the end of this topic.

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9 NCCP Act

9.1 Consumer credit regulation prior to July 2010


In 1993, each state of Australia agreed to standardise its credit laws to formally
implement truth in lending principles across Australia. Prior, each state had its own
consumer credit regulation and protection laws.
The Uniform Consumer Credit Code (UCCC) became law in each state in 1996.
The purpose of the UCCC was to standardise credit information in a clear and
easy-to-understand format. It also became mandatory for credit providers to disclose:
• borrowers’ rights and obligations in any credit arrangement
• all relevant information in a written contract, including interest rates, fees,
commissions and other information.
The UCCC regulated the supply of credit by lenders to individual consumers (that is,
natural persons) and strata corporations in situations where more than 50% of the loan
proceeds were for personal, domestic or household purposes. This definition excluded
many common consumer lending scenarios, such as loans by private investors to
purchase investment properties.
Loans that were subject to the UCCC were referred to as regulated loans, with those
outside the definition of the UCCC being unregulated. The distinction is important
because of the additional requirements and obligations placed on lenders because of a
loan being regulated.
In the years following its introduction, there had been criticism of the largely
state-based approach of consumer credit legislation, despite the efforts of the UCCC to
standardise the approach across the country. Concerns over certain lending practices
and the failure to include consumer credit products in the Corporations Act also
encouraged calls for reform. Complaints about predatory lending practices,
increasing levels of consumer debt and the increasing complexity of lending products
added to the need for government intervention in the area of consumer lending.
In October 2008, the Commonwealth Government released a plan for reform,
including the acceptance by the Commonwealth of responsibility for all consumer
credit regulation.

9.2 Enactment of the NCCP Act


In 2009, the federal government enacted changes to the way credit is regulated
in Australia.
The primary vehicle for the changes is the NCCP Act, which includes the National Credit
Code (NCC) as Schedule 1 of the Act. The Act came into force on 1 July 2010. It provides
national uniform regulation for the Australian credit industry and replaced the previous
state-based credit licensing legislation systems that existed in the states.

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Topic 1-2: Legislation and codes of practice

This regulatory system controls who may lend and how they behave as a lender through
licensing. Three of the key features imposed by the regulatory system with regard to
lending decisions are:
• Consumers should have all the required information they need to make a borrowing
decision.
• Implementing the concept of responsible lending with an emphasis on lenders
viewing lending decisions from the borrower’s point of view — gaining an
understanding of the borrower’s objective as well as their capacity to repay the loan.
• Lenders are required to have both internal and external dispute resolution (EDR)
processes and procedures.
There is an obligation on the credit assistant (i.e. the loan originator or broker), as well
as the lender to make a suitability assessment. This means that the lender cannot simply

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rely on an initial assessment and must make its own.
The new regime calls for a suitability assessment to be made based not only on the
consumer’s ability to repay the loan, but must also take into account their objectives
and other factors. The assessment of the consumer’s ability to repay the loan extends to
being able to do so without financial hardship.

9.3 Status of the NCC


Despite being named a code, the NCC is in fact legislation. It must not be regarded as
voluntary, as some of the industry codes of practice are. Breaches of the NCC may incur
severe penalties.

9.4 Phase one of implementation of the NCCP Act


The requirements set out in the NCCP Act have been introduced in two phases.
Phase one elements of the NCCP Act (effective 1 July 2010) involved:
• enacting the existing state credit code legislations into Commonwealth legislation
• establishing a national licensing regime to require providers of consumer credit and
credit-related brokering services to have a licence originating from ASIC
• requiring licensees to observe a number of general conduct requirements,
including responsible lending practices
• extending ASIC’s powers to be the sole regulator of the new national credit
framework with enhanced policing scope
• requiring mandatory membership of an EDR body by all providers of consumer credit
and credit-related brokering services and advice
• extending the scope of credit products previously covered by the UCCC to regulate
residential investment properties
• extending the operation of the Corporations Act to regulate margin lending
• regulating trustee corporations.
The NCCP Act was applicable to mortgage brokers in phase one and brokers were
required to be compliant from 1 July 2010.

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9.5 Phase two implementation of the NCCP Act


A decision was taken in April 2010 that phase two would be introduced in two stages.
There was recognition that a longer time frame would be required for some of the more
complex topics such as:
• regulating the provision of credit for small businesses
• regulation of investment loans other than margin loans and mortgages for residential
investment properties.
In June 2012, the first stage of phase two commenced with the tabling of 14 proposed
amendments to the NCCP into Federal Parliament. Most were scheduled for
commencement in 2013 and they include the following:
• enhancements to specific conduct obligations to stop unfavourable lending practices.
This may include a review of credit card extension offers and other lending issues
that arise.
• changes to the guidelines for hardship relief
• creation of a new regime for ‘small amount credit contracts’ of $2,000 or less or
terms less than two years
• reform of mandatory comparison rates and default notices
• further regulation of and new requirements for reverse mortgages.

9.6 The National Credit Code


The NCC applies to credit contracts entered into on or after 1 July 2010 where:
• the lender is in the business of providing credit
• a charge is made for providing the credit
• the debtor is a natural person or strata corporation
• the credit is provided:
– for personal, domestic or household purposes, or
– to purchase, renovate or improve residential property for investment purposes,
or to refinance credit previously provided for this purpose.
The NCC does not apply to certain loans, including: low-cost short-term credit (less than
62 days), insurance premiums paid by instalments, bill facilities and staff loans.

Transitional provisions
The date that determines whether a loan falls under the UCCC provisions or the new
NCC and is therefore classified as regulated or unregulated is the date of the credit
contract.
Loans previously regulated by the UCCC have now become subject to the NCC.
Residential investment loans that were unregulated loans under the UCCC and where the
loan contract was dated prior to 1 July 2010 are not subject to the NCC. However, where
an unregulated loan arrangement is changed, it is possible for it to become a regulated
loan under the NCC. Where additional advances are made on an unregulated loan, the
loan will remain unregulated providing the loan product does not change and the:
• advance does not exceed 50% of the total loan, or
• portion used for residential property does not exceed 50%.

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Topic 1-2: Legislation and codes of practice

Purpose test
There is a presumption on the part of the NCC that it will apply to a loan. However,
this presumption can be overridden by a declaration from the borrower that the loan
being applied for is to be used primarily for ‘non-code’ purposes. That is, business or
non-residential investment purposes.
The declaration must be in a form prescribed by the NCC Regulations.
However, under the NCC, the presentation of a declaration only leads to another
presumption — that the loan is for the purpose stated. This is in contrast with the
UCCC where such a declaration was definitive.
If a matter went to court, the court would apply an objective test. This test would

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involve determining what a reasonable person, in the position of the credit provider,
would understand the purpose of the loan to be. Therefore, simply accepting a
declaration from a borrower that the loan is for a non-code purpose is not sufficient if
there is evidence that this might be untrue.

Products and transactions covered by the NCC


The NCC governs all transactions where consumer credit has been provided, including:
• personal loans
• credit cards
• overdrafts
• housing loans
• mortgages
• the hire of goods
• guarantees
• continuing credit accounts.

Products and transactions not covered by the NCC


Following is a list of some of the main products and transactions that are not covered by
the NCC:
• loans between friends and family members, where the lender is not in the business
of lending money
• loans where no interest or other charges are applicable
• short-term loans of 62 days or less, but only where the fees and charges are less than
5% of the amount of credit and the interest rate is less than 24%
• investment loans (other than to purchase residential real estate)
• margin loans (margin loans are regulated under the Corporations Act)
• credit provided without prior agreement (for example, a cheque account becomes
overdrawn without a previously arranged overdraft facility)
• loans provided by pawnbrokers and trustees of estates
• loans, including leases, to employees made under concessional terms
• bill facilities
• insurance premiums that are payable by instalments.

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9.7 The key areas of the NCC


The NCC covers these key areas:
• interaction with members
• unjust transactions
• correspondence with borrowers
• documentation
• liabilities and penalties.
Following is a brief summary of compliance implications and obligations in relation to
each of the key areas listed above. In practice, each organisation will have policies,
procedures and guidelines in place to help ensure compliance with the requirements of
the NCC and other legislation, Regulation and codes.

Interaction with members


All employees of credit providers may be held personally liable if they are in some
way connected with or responsible for a breach of the NCC. All actions of contractors,
intermediaries and employees will be deemed as the actions of the credit provider.
In the event that a breach is confirmed, the courts will determine which party
bears liability.

Unjust transactions
A credit contract, mortgage or guarantee may be declared invalid if a court decides that
the conduct of the credit provider or its representatives was unjust around the time that
the contract was entered into by the borrower.
A court may also review a loan and can invalidate a loan agreement where it is found to
be an unjust transaction because of the borrower’s:
• age
• mental or physical condition
• lack of both understanding and access to independent advice
• having had unfair tactics used against them
• capacity to repay the loan
• understanding of the English language.
It is the representative’s responsibility to ensure that correct and complete credit
information is analysed, and that the borrower has the capacity to repay the loan.
In particular, the lender or its representative must ensure that all reasonable enquiries
into the purpose of a loan have been undertaken.

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Topic 1-2: Legislation and codes of practice

Correspondence with borrowers


The NCC has very specific requirements regarding corresponding with borrowers.
Some of the key issues dealt with by the NCC are:
• Notification of changes and variations
Changes to a regulated loan must be specified in a notice sent to borrowers
as follows:
– change by agreement (other than principal increases)
– change by agreement (principal increases)
– unilateral changes (other than changes to interest rates).
The written consent of any guarantor should be obtained for any change to a regulated

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loan.
• Changes to interest rates
Changes to interest rates will affect minimum repayment amounts. Lenders are
required to disclose interest rate changes in an advertisement in a newspaper
circulating throughout each state and territory. Borrowers must receive notice in
writing at least 20 days before the new repayment amount becomes effective.
• Statements of accounts
The NCC requires statements of accounts to be provided:
– at least every six months for term loans and every 40 days for continuing credit
accounts (e.g. credit cards)
– within seven days of the borrower’s request if they are one-off statements.
A statement of account is not required if the interest rate on the loan is fixed for the
whole term of the loan.
• Statement of payout figure
The NCC requires that a statement of payout figure must be provided within seven days
of the borrower’s request.

Documentation
The NCC specifies certain Regulations regarding documentation, including:
• Application form
Lenders’ application forms must include:
– A declaration as to the purpose of credit needs to be signed if the loan is to be
used predominantly for business or investment purposes, and therefore not
subject to the NCC.
– Joint borrower nomination — the NCC requires that correspondence be sent to all
borrowers. However, borrowers living at the same address may nominate one of
the borrowers to receive documents and correspondence by completing the joint
borrower nomination form.
• Ongoing mortgage information
All borrowers and guarantors, if applicable, must be issued with a loan contract that
sets out the terms and conditions of the loan.
• Repayments
The NCC requires that full details of loan repayments are set out clearly in the loan
documentation.

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• Credit fees and charges


All credit fees and charges, including those that may apply in the future, are required
to appear in the contract.
• Amendments
A new contract is required to be printed for a change in:
– loan type or product
– regulated/unregulated status
– the loan amount
– borrowers
– primary security
– any collateral security, such as adding or deleting a guarantor.
Note: Minor correctional amendments, including changes to the borrower’s name,
address and/or security address, can be initialled by the borrower without a new
contract being prepared.
• Collections
The NCC makes provision for borrowers to apply for hardship relief. Hardship relief is
discussed in Topic 3 of this subject.
• Enforcement
Before enforcing any mortgagee possession, the credit provider must provide a
written notice as specified by the NCC to the borrower.
• Debt recovery
Before taking any debt recovery action, such as taking possession of any security
property, the lender must provide notice in writing, as specified by the NCC,
to the borrower.

Liabilities and penalties


Breaches of the NCC are subject to both civil and criminal penalties and the
consequences of a breach can be severe. Any person involved in any way with the
breach can attract criminal liability, which can result in fines and other penalties,
depending on the severity of the breach.
A lender may also potentially lose its Australian credit licence issued by ASIC.
Areas in which the NCC may be breached include the following:
• Making false or misleading representations: It is an offence under the NCC to make
false or misleading statements to induce a borrower to enter into a loan contract,
mortgage or guarantee.
• Answering borrower queries without a reasonable basis: Statements regarding the
performance of products should not be made unless there is a reasonable basis for
making the statement. Generally, intermediaries are not licensed to give financial,
taxation or legal advice. They should refer members to their accountant,
financial adviser or lawyer as appropriate.
• Predicting interest rates: Interest rates quoted or stated in offer documents are
indicative only. The actual rate will be applied at settlement of the loan.

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Topic 1-2: Legislation and codes of practice

• Documentation: It is the responsibility of the credit provider and/or its


representatives to ensure that documentation is fully and accurately completed.
They must ensure that all borrowers and guarantors have correctly completed the
application form and other documents, and that appropriate supporting documents
accompany the application.
• Canvassing members: No credit provider, nor its employees, nor an agent of a credit
provider may visit a member’s home without a prior appointment or induce that
person to apply for or obtain credit. To avoid breaching the NCC, appointments must
be made with the client before visiting the client’s home.
• Harassment: Persistent approaches by an introducer after a request has been made
to stop could amount to harassment. Single acts that are sufficiently annoying or
troublesome are also prohibited.

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• Advertising and marketing: Any advertisement stating or implying the availability of
credit is regulated by the NCC. The NCC is primarily concerned with any statement
regarding the cost of credit and the interest rate. If an advertisement refers to cost,
it can only contain the annual interest rate or rates. It must also contain a statement
that fees and charges are payable.

9.8 Credit contracts


The NCC sets out the minimum information a credit contract must contain and how it
can be executed. Following is a summary of the requirements in relation to the credit
contract.
The credit contract:
• must be in writing and signed by the borrower and the lender
• can be signed only by the lender if the offer can be accepted by the borrower by
drawing down or accessing the credit provided, or in some other way meeting
conditions that legally indicate acceptance of the offer.

Information in the credit contract


The contract document must contain the following information:
• The credit provider’s name.
• The amount of credit to be provided or if this is not known at the time, the maximum
amount to be made available.
• The persons, bodies or agents to whom it is to be paid and the amounts payable to
each of them — in certain limited circumstances a description of land and its price if
this is the purpose of the loan, or a description of goods and their cash price.
• The annual percentage rate or rates under the contract. If there is more than one
rate, how each rate applies.
• How the interest rate is calculated and the frequency with which interest charges are
to be debited under the contract.
• The total amount of interest charges payable if the contract is for a period of seven
years or less.
• The total amount or method of calculating repayments and the total number of
repayments to be made, if ascertainable.

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• A statement of the credit fees and charges that are or may become payable under
the contract, and when each fee or charge is payable. If this information is not
ascertainable, the method of calculation of the fee or charge.
• Information as to whether conditions, such as the interest rate, amount or frequency
of payment of credit fees, or charge or instalments payable under the contract may
be changed, or a new credit fee or charge may be imposed. The contract must state
how the borrower will be advised of any such changes.
• The frequency with which statements of account are to be provided (except where
the annual percentage rate is fixed for the whole term of the contract and there is no
provision for varying the rate).
• The default rate of interest which may be charged when payments are in default.
• The current default rate.
• A statement that enforcement expenses may be payable under the credit contract in
the event of a breach.
• Whether a mortgage or guarantee is to be or has been taken by the credit provider
and details of the guarantee.
• If a commission is to be paid by or to the credit provider in relation to the loan,
the amount of the commission and to whom it will be paid must be included in
the contract.
• If the credit provider knows that the debtor is to enter into a credit-related insurance
contract and that the insurance is to be financed under the credit contract, details of
that insurance.
• Any other information or warning required by the Regulations.

Amendments to the contract


According to the NCC, any alteration made by a credit provider to a signed contract is
ineffective unless the debtor has agreed in writing to the changes.
Minor corrections or amendments to a contract can be initialled by the borrower but it
is considered industry best practice to print a new contract for the debtor’s signature if
changes are made to:
• loan type or product
• regulated/unregulated status
• loan amount
• specified borrowers
• primary loan security
• any collateral security, such as adding or deleting a guarantor.

Pre-contract disclosure
Before a borrower offers to accept a credit contract or signs the credit contract under
the NCC, the credit provider must give the borrower:
• a pre-contractual statement setting out the matter that will be included in
the contract
• an information statement setting out the borrower’s rights and obligations.

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Topic 1-2: Legislation and codes of practice

Pre-contractual statement
The pre-contractual statement essentially contains the information that will be
contained in the credit contract, however, the financial information must be in a table
format and shown separately from the rest of the information.

Information statement
The information statement, or statement of borrower’s statutory rights and obligations,
consists of 25 questions and answers which are specified in the National Consumer
Credit Protection Regulations 2010 (NCCP Regulations). The questions are:
• How can I get details of my proposed credit contract?

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• How can I get a copy of the final contract?
• Can I terminate the contract?
• Can I pay my credit contract out early?
• How can I find out the payout figure?
• Will I pay less interest if I pay out my contract early?
• Can my contract be changed by my credit provider?
• Will I be told in advance if my credit provider is going to make a change in
the contract?
• Is there anything I can do if I think that my contract is unjust?
• Do I have to take out insurance?
• Will I get details of my insurance cover?
• If the insurer does not accept my proposal, will I be told?
• In that case, what happens to the premiums?
• What happens if my credit contract ends before any insurance contract on
mortgaged property?
• If my contract says I have to give a mortgage, what does this mean?
• Should I get a copy of my mortgage?
• Is there anything that I am not allowed to do with the property I have mortgaged?
• What can I do if I find that I cannot afford my repayments and there is a mortgage
over property?
• Can my credit provider take or sell the mortgaged property?
• If my credit provider writes asking me where the mortgaged goods are, do I have to
say where they are?
• When can my credit provider or its agent come into a residence to take possession of
mortgaged goods?
• What do I do if I cannot make a repayment?
• What if my credit provider and I cannot agree on a suitable arrangement?
• Can my credit provider take action against me?
• Do I have any other rights and obligations?

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9.9 Credit assessment under the NCCP Act


The NCCP Act imposes responsible lending obligations that require a credit provider to
ensure a credit facility is suitable for the borrower. It is the credit provider's
responsibility to make an honest and fair assessment that results in a decision they are
able to defend.
There are two key elements that can affect the assessment of loan suitability:
• The obligation to act efficiently, honestly and fairly. This means that a credit provider
must put the borrower’s needs above their own commercial interests. An efficient,
honest and fair lender might advise a borrower to go to another credit provider that
has a better product, or a product more suitable to that borrower’s needs.
• The obligation to ensure clients are not disadvantaged by any conflict of interest.
The fact that a lender receives more commission from one credit provider than from
another does not in itself mean a borrower is being disadvantaged by a
recommendation of the higher-earning product. However, if the lender recommends
a less suitable loan because of the increased commission payable, they will be in
breach of the NCCP Act.
Although the NCCP Act does not prescribe a specific method for keeping records of loan
assessments, credit providers will nonetheless be required to demonstrate compliance
with the NCCP Act using records retained for each client. This may include:
• records of loan product eligibility and selection according to a client’s credit
requirements and objectives
• an accurate serviceability assessment
• a loan comparative cost analysis
• completion of all relevant documentation.

Unsuitable loans requirement


The NCC states that a credit provider must not enter into a contract with a person that is
unsuitable, such as a loan where:
• the customer cannot repay without suffering hardship, or
• a contract that does not meet the customer’s requirements and objectives.
A credit provider must:
• make reasonable enquiries about the customer’s financial situation, requirements
and objectives
• take reasonable steps to verify the customer’s financial situation
• decide whether the credit contract the customer is requesting is ‘not unsuitable’ for
that customer.
Credit assistance providers must make a preliminary assessment and credit providers
must make a final assessment of the credit contract before credit is offered.
What is meant by ‘reasonable’ will depend on the borrower’s individual situation.
The degree of enquiry into the borrower’s objectives, requirements and financial
situation must be greater where the:
• impact on the borrower is greater
• borrower has limited capacity to borrow
• borrower is confused or has conflicting objectives.

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Topic 1-2: Legislation and codes of practice

Some of the reasonable enquiries that can be made to determine the borrower’s
objectives and requirements include determining:
• the amount of credit required
• the time frame for repayment
• the purpose of the credit and the benefit to the borrower
• whether the desired product has appropriate features and flexibility.
Some of the reasonable enquiries that can be made to determine a borrower’s financial
situation include the following:
• PAYG applicants: Standard evidence of income, such as pay slips, must be collected
and efforts made to confirm employment with the employer.
• Self-employed applicants: Standard evidence of income, such as tax returns,

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BAS statements and/or documentation from an accountant, must be collected.
Additional verification may be required where the information provided is:
• inconsistent with information already held, or
• outside the range of acceptable benchmarks, for example, a shop assistant who
presents evidence of income far in excess of what might be expected.
Other reasonable enquiries that can be made relate to the borrower’s:
• appreciation of the risks associated with the features of a particular credit product,
given their circumstances
• domestic situation
• previous credit history
• income-producing activity, age and language skills
• savings history and expenditure patterns.
The principles of responsible lending also apply to refinances and loan variations,
for example, switching from a variable rate to a fixed rate.

Responsible lending and non-standard loan products


Low-doc and no-doc lending, which normally require minimal or no evidence of income,
may present difficulties when applying the responsible lending principle. This is because
the NCCP Act imposes an obligation to make reasonable enquiries about a borrower’s
financial situation and take reasonable steps to verify that situation.
The question therefore arises whether is it reasonable to make no enquiries about a
borrower’s financial situation, as is sometimes the case with non-standard loan
products. In some cases, minimal enquiries and verification will be sufficient when all of
the circumstances of the borrower’s case are taken into account, such as the availability
of guarantors or extra collateral.
The rules regarding this type of lending remain subject to revision at the time of writing,
however, it is important to remember that even if a loan is not regulated by the NCC,
the loan agreement can still be varied or set aside by a court of law. Therefore, it is
advisable that sufficient enquiries are made to satisfy the ‘not unsuitable’ test even for
non-standard loans.

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Certificate IV in Finance and Mortgage Broking

Further resources: NCCP Act


• The NCCP Act, viewed 13 March 2017,
<http://www.comlaw.gov.au/Details/C2012C00083>.
• MoneySmart website — consumer credit regulation,
viewed 13 March 2017, <https://www.moneysmart.gov.au/borrowing-
and-credit/consumer-credit-regulation>.
• MoneySmart website — resources and publications,
viewed 13 March 2017,
<https://www.moneysmart.gov.au/tools-and-resources/publications>.
• State Library of NSW 2010, Hot topics 72: consumer credit,
NSW Government, viewed 13 March 2017,
<https://hsclegal.wikispaces.com/file/view/consumer_credit.pdf>.

10 The Corporations Act


The Corporations Act is the principle legislation regulating companies in Australia and
sets out the laws dealing with business entities in Australia at federal and interstate
level. While the law focuses primarily on companies, it also covers some laws relating to
other entities such as partnerships and managed investment schemes.
The Corporations Act affects the activities of finance intermediaries, which overlap with
financial advising and are involved with what are now defined in the Corporations Act as
‘financial products’.
The main objective of the relevant chapters of the Corporations Act is to promote:
• confident and informed decision making by consumers of financial products and
services, while facilitating efficiency, flexibility and innovation in the provision of
these products and services
• fairness, honesty and professionalism by those who provide financial services
• fair, orderly and transparent markets for financial products
• the reduction of systemic risk and the provision of fair and effective services by
clearing and settlement facilities.
Corporate Law Economic Reform Program (Audit Reform and Corporate Disclosure) Act
2004 (Cth), commonly called CLERP 9, modified the Corporations Act and was enacted in
July 2004.

The Corporations Act and the provision of a financial service


The Corporations Act states that a person is providing a financial service if they:
• provide financial product advice
• deal in a financial product
• make a market for a financial product
• operate a registered scheme
• provide a custodial or depository service
• engage in conduct of a kind prescribed by Regulations made for the purposes of
this paragraph.

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Topic 1-2: Legislation and codes of practice

Credit facilities are specifically excluded from the definition of financial products in the
Financial Services Reform Act 2001 (Cth) (FSRA). However, advice about loans together
with advice about a financial product, may be covered. This may include things such as
comparisons between the merits of borrowing to invest in securities and borrowing to
invest in real estate.

Further resources: Corporations Act


• The Corporations Act 2001, viewed 13 March 2017,
<http://www.comlaw.gov.au/Series/C2004A00818>.
• CLERP 9, viewed 13 March 2017,
<http://archive.treasury.gov.au/documents/403/PDF/Clerp9.pdf>.

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11 Financial Services Reform Act
The FSRA commenced on 11 March 2002. The FSRA:
• repealed the Insurance (Agents and Brokers) Act 1984 (Cth)
• amended the:
– Insurance Act
– Life Insurance Act 1995 (Cth)
– Insurance Contracts Act.
The FSRA, which amended the Corporations Act, imposes:
• a single licensing regime for financial sales, advice and dealings in relation to financial
products
• consistent and comparable financial product disclosure.
An Australian financial services licence (AFSL) must be obtained by those looking to
provide financial services to clients, regardless of whether they are retail or wholesale
clients.
ASIC regulate the industry through the AFSL.

Further resources: Financial Services Reform Act


• Financial Services Reform Act 2001, viewed 13 March 2017,
<http://www.comlaw.gov.au/Details/C2005C00498>.

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Certificate IV in Finance and Mortgage Broking

12 AML/CTF Act
The AML/CTF Act is Australia’s regulating legislation for the detection of money
laundering and terrorism financing. The AML/CTF Act brings Australia’s prevention and
reporting regime for money laundering and terrorism financing into line with
international standards.
The AML/CTF Act compliance relies on a risk-based approach for reporting entities and
their agents. Any risk that a credit provider might facilitate money laundering or
terrorism financing must be identified, mitigated and managed. This includes an
obligation for ongoing client due diligence.

Further resources: Anti-money laundering and counter-terrorism


• AML/CTF Rules, viewed 13 March 2017,
<http://www.austrac.gov.au/aml_ctf_rules.html>.
• AML/CTF Act, viewed 13 March 2017,
<http://www.comlaw.gov.au/Series/F2007L01000>.

13 The Privacy Act


The Privacy Act regulates how private and public entities collect, store, use and disclose
personal information.
The Privacy Act includes:
• privacy principles that apply to the handling of personal information by most
Australian government agencies and some private sector organisations
• credit reporting provisions that apply to the handling of credit-related personal
information that credit providers are permitted to disclose to credit reporting bodies
for inclusion on individuals’ credit reports.
The Privacy Act also:
• regulates the collection, storage, use, disclosure, security and disposal of individuals’
tax file numbers
• permits the handling of health information for health and medical research purposes
in certain circumstances, where researchers are unable to seek individuals’ consent
• allows the Information Commissioner to approve and register enforceable
Australian Privacy Principles (APPs) codes
• permits a small business operator, who would otherwise not be subject to the APPs
and any relevant privacy code, to opt in to being covered by the APPs and any
relevant APP code
• allows for privacy Regulations to be made.

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Topic 1-2: Legislation and codes of practice

13.1 Use of private information in financial planning


The collection and use of personal information is vital to the financial planning process.
Compliance with privacy legislation within the industry was considered best practice
even before the extension of the law to cover smaller business operations.
Basic requirements of the legislation are the documentation of compliance policies
and procedures, and training for financial planners and staff who handle personal
information.
Important considerations for financial planners include:
• the need to disclose the use of personal information to all involved parties,
particularly spouses

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• allowing clients access to all personal information held about them
• referral procedures that ensure client approval has been obtained for referral.

13.2 Privacy Commissioner


A Privacy Commissioner was appointed to ensure organisations comply with their
obligations under the Privacy Act. The Privacy Commissioner’s role is to investigate and,
if necessary, act on complaints from individuals.

13.3 Privacy Amendment (Enhancing Privacy Protection) Act


On 29 November 2012, the Privacy Amendment (Enhancing Privacy Protection) Act was
passed into legislation. This new Act includes a number of changes to the original Act
that come into effect on 12 March 2014.
The changes are:
• A set of new harmonised privacy principles that will regulate the handling of personal
information by both Australian government agencies and businesses. For more
information, see ‘Australian Privacy Principles (effective from 12 March 2014)’
in section 13.4.
• Enhanced powers for the OAIC (the Information Commissioner), generally exercised
by the Privacy Commissioner, to:
– accept enforceable undertakings
– seek civil penalties in the case of serious or repeated breaches of privacy
– conduct assessments of privacy performance for both Australian government
agencies and businesses
– recognise EDR schemes to handle privacy-related complaints.
• New laws on codes of practice about information privacy (APP codes) and a code of
practice for credit reporting (the CR code), including enabling the Information
Commissioner to develop and register binding codes that are in the public interest.

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• Changes to credit reporting laws, including:


– the introduction of more comprehensive credit reporting, which will allow the
reporting of information about an individual’s current credit commitments and
their repayment history information over the previous two years
– a simplified and enhanced correction and complaints process
– a prohibition on the reporting of credit-related information about children
– a prohibition on the reporting of defaults of less than $150
– the introduction of specific rules to deal with pre-screening of credit offers
– the introduction of specific provisions that allow an individual to freeze access
to their credit-related personal information in cases of suspected identity theft
or fraud
– the introduction of civil penalties for breaches of certain credit
reporting provisions
– a requirement for credit providers to be a member of an EDR scheme,
recognised under the Privacy Act, to be able to participate in the credit
reporting system.

13.4 Transition to APPs


From 12 March 2014, the APPs replaced the National Privacy Principles (NPPs) and
Information Privacy Principles (IPPs) and apply to organisations and Australian
Government (and Norfolk Island Government) agencies. Previously the NPPs applied to
business and the IPPs applied to government agencies.

National Privacy Principles (effective to 12 March 2014)


The Privacy Act included 10 NPPs that private sector organisations adhered to in
order to comply. Alternatively, organisations chose to adopt their own privacy code,
which had to be approved by the Privacy Commissioner. Alternatively, organisations
may choose to adopt their own privacy code, which must be approved by the
Privacy Commissioner.
National Privacy Principles, viewed 13 March 2017,
<https://www.oaic.gov.au/privacy-law/privacy-archive/privacy-resources-
archive/privacy-fact-sheet-2-national-privacy-principles>.

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Australian Privacy Principles (effective from 12 March 2014)


The APPs relate to the collection, handling and accuracy of information as well as the
protection of privacy. The following are the new APPs:
• Open and transparent management of personal information to ensure personal
information is managed in an open and transparent way.
• Anonymity and pseudonymity to enable individuals to remain anonymous or use a
pseudonym for some matters.
• Collection of solicited personal information to limit the collection of information to
what is reasonable (see below regarding sensitive information).
• Dealing with unsolicited personal information to ensure entities deal with
information that they receive in an appropriate manner.

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• Notification of the collection of personal information to ensure individuals are aware
that information has been collected and by whom.
• Use or disclosure of personal information to restrict the use and disclosure of
information held by an entity.
• Direct marketing to limit the use of sensitive information.
• Cross-border disclosure of personal information to ensure as much as possible that
foreign entities treat information disclosed to them in line with APPs.
• Adoption, use or disclosure of government-related identifiers to limit the use of
government identifiers by other entities.
• Quality of personal information requires the collecting entity to check that
information is accurate, up to date and complete.
• Security of personal information requires an entity to protect the personal
information held by an entity.
• Access to personal information generally requires the entity to give the individual
access to the information it holds.
• Correction of personal information — the entity must correct information that is
inaccurate, out of date, incomplete, irrelevant or misleading or that has been
requested by the individual to be changed.

Protection of personal and sensitive information


Many of the privacy principles distinguish between personal information and sensitive
information. Sensitive information has much stricter requirements regarding collection,
use and disclosure.
• Personal information is information or an opinion about an individual whose identity
is apparent, or can reasonably be ascertained from the information. It is irrelevant
whether the information is true or not, or whether it is recorded in a material form
or not.
• Sensitive information is health or genetic information, or an opinion about a person’s
racial or ethnic origin, political opinions, membership of a political association,
religious beliefs or affiliations, philosophical beliefs, membership of a professional or
trade association or trade union, sexual preferences or practices, or criminal record.
Generally, this information must only be collected if the individual has given their
consent, if required by law, or if there is a threat to life or health. There are some
exceptions for non-profit organisations and when acquiring health information.

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Exemptions under the private sector provisions


Any small business with a turnover of less than $3 million is exempted from the
provisions of the Privacy Act unless it:
• is related to another business that is not exempted
• trades in personal information
• is a contracted service provider for a Commonwealth agency
• provides a health service and holds health records because separate provisions
already exist, or
• is a reporting entity as defined in the AML/CTF Act (see below).
In addition, registered political parties, Commonwealth agencies and state or territory
authorities are excluded as existing laws apply. Some actions or practices of
organisations are also excluded. These include the handling of employee records,
media organisations’ journalistic practices and certain political activities.

Further resources: Privacy law


• APPs, viewed 13 March 2017, <http://www.oaic.gov.au/privacy/privacy-
act/australian-privacy-principles>.
• NPPs fact sheet (phased out March 2014), viewed 13 March 2017,
<http://www.oaic.gov.au/privacy/privacy-resources/privacy-fact-
sheets/other/privacy-fact-sheet-2-national-privacy-principles>.
• The Privacy Act, viewed 13 March 2017,
<http://www.comlaw.gov.au/Series/C2004A03712>.
• Privacy law reform, viewed 13 March 2017,
<http://www.oaic.gov.au/privacy/privacy-act/privacy-law-reform>.

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Topic 1-2: Legislation and codes of practice

Apply your knowledge 3: Privacy law


Read the information provided on privacy at the following link:
Office of the Australian Information Commissioner (OAIC) n.d.,
Rights and responsibilities, OAIC, viewed 13 March 2017,
<http://www.oaic.gov.au/privacy/who-is-covered-by-privacy>.
1. Who has rights under the Privacy Act and what are those rights?

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2. Who has responsibilities under the Privacy Act?

3. List the government agencies or bodies not covered by the Privacy Act.

Note: You can access ‘Suggested answers’ for this activity at the end of this topic.

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14 Superannuation

14.1 Legislation
There are a number of pieces of legislation and subordinate legislation which govern the
operation of the superannuation system.
The key pieces of legislation relevance are the:
• Superannuation Act 1976 (Cth)
• Superannuation (Resolution of Complaints) Act 1993 (Cth) (SRC Act),
which establishes the Superannuation Complaints Tribunal (SCT)
• Superannuation Industry (Supervision) Act 1993 (Cth) (SIS Act), which makes provision
for the prudent management of certain superannuation funds and supervision by
APRA, ASIC and the Commissioner of Taxation
• Superannuation Industry (Supervision) Regulations 1994 (Cth) (SIS Regulations).

14.2 Regulation
The superannuation system is regulated by several key federal government agencies:
• ATO:
– administers the relevant legislation for self-managed superannuation funds
(SMSFs)
– assists SMSF trustees to comply with their obligations
– ensures that the right amount of tax is taken from the superannuation savings of
all Australians.
• ASIC:
– regulates financial services to protect consumers, including monitoring
compliance with the FSRA
– ensures that trustees of superannuation funds comply with their obligations
regarding the provision of information to fund members during their membership
– is responsible for consumer protection in the financial services area,
including superannuation
– manages the MoneySmart website to help people make smart choices about their
personal finances, including superannuation.
• APRA:
– is responsible for ensuring that superannuation funds behave in a prudent
manner
– regulates superannuation funds other than SMSFs
– reviews compliance with the SIS Act
– provides guidance to trustees in relation to the early release of superannuation
entitlements on the basis of severe financial hardship
• Department of Human Services (DHS), in particular Medicare, which is responsible for
the administration of applications for early release on compassionate grounds.
Individual superannuation funds also have internal regulatory mechanisms and there are
superannuation peak bodies that while not necessarily serving a regulatory function,
provide funds with guidance and training.

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Topic 1-2: Legislation and codes of practice

14.3 Superannuation Complaints Tribunal


The SCT administers the SRC Act, providing the formal process for the resolution of
complaints in the superannuation area.
The SCT was established under the SRC Act to deal with complaints about
superannuation, specifically in the areas of regulated superannuation funds, annuities
and deferred annuities, and retirement savings accounts. The SCT’s jurisdiction does not,
however, extend to complaints concerning SMSFs.

14.4 Financial Services Reform Act

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The FSRA is designed to provide standardisation within the FSI. It is governed and
administered by ASIC. It provides a new regime for the regulation of financial products
and services and aims to enhance consumer protection by adding to financial safety and
market integrity.
The FSRA commenced on 11 March 2002. The FSR amendments to the Corporations Act
introduced a single licensing regime for financial advice and dealings in relation to
financial products. An entity that operates a financial services business must now hold
an AFSL or be authorised by a licensee.
The Corporations Act also seeks to provide consistent and comparable disclosure in
relation to financial products and services (including) advice, and a single authorisation
procedure for financial markets and clearing and settlement facilities.
The regulatory framework covers a wide range of financial products, including securities,
derivatives, general and life insurance, superannuation, managed investments,
deposit accounts, non-cash payments and foreign exchange contracts.

15 Work health and safety


The term ‘occupational health and safety’ (OHS) is gradually being replaced with the
term ‘work health and safety’. WHS legislation applies to all Australian:
• industries sectors
• businesses regardless of size — businesses are referred to as a ‘person conducting a
business or undertaking (PCBU) and a PCBU is a person or entity conducting a
business or undertaking alone or with others, whether or not for profit or gain,
including a sole trader or self-employed person
• workplaces
• workers including employees, contractors and subcontractors, outworkers,
volunteers, apprentices and trainees.

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15.1 Harmonisation of WHS laws


At a Council of Australian Governments (COAG) meeting in July 2008, all Australian
governments agreed to develop a harmonised set of WHS laws to ensure that all
working Australians are protected consistently across the country and to reduce the
costs of compliance with WHS requirements. As a result, Safe Work Australia was
established as a statutory agency under the Safe Work Australia Act 2008 (Cth).
The Model Work Health and Safety Act and Regulations forms the basis of the WHS Acts
and WHS Regulations enacted across Australia by most of the states and territories to
harmonise WHS law.
The model or ‘harmonised’ WHS legislation had been enacted in New South Wales,
the ACT, Queensland, Northern Territory, Tasmania and South Australia. As of July 2015
neither Victoria nor Western Australia has yet adopted the model WHS laws.
Although model laws have been adopted in each jurisdiction, there are slight variances
between the states and territories.
For more information on the progress towards implementation of new WHS laws across
the various states and territories of Australia, see the Safe Work Australia
‘Jurisdictional progress on the model work and health and safety laws’,
viewed 13 March 2017, <www.safeworkaustralia.gov.au/sites/swa/model-whs-
laws/pages/jurisdictional-progress-whs-laws>.

15.2 Primary duty of care


The model WHS Act defines the primary duty of care as:
A person conducting a business or undertaking must ensure, so far as is
reasonably practicable, the health and safety of:
• workers engaged, or caused to be engaged by the person; and
• workers whose activities in carrying out work are influenced or directed
by the person, while the workers are at work in the business or
undertaking.
A person conducting a business or undertaking must ensure, so far as is
reasonably practicable, that the health and safety of other persons is not
put at risk from work carried out as part of the conduct of the business
or undertaking.

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Topic 1-2: Legislation and codes of practice

Further resources: Useful WHS links


• Model codes of practice, viewed 13 March 2017,
<http://www.safeworkaustralia.gov.au/sites/swa/model-whs-
laws/model-cop/pages/model-cop>.
• Model Work Health and Safety ACT, viewed 13 March 2017,
<http://www.safeworkaustralia.gov.au/sites/swa/model-whs-
laws/model-whs-act/pages/model-whs-act>.
• Model Work Health and Safety Regulations, viewed 13 March 2017,
<http://www.safeworkaustralia.gov.au/sites/swa/model-whs-
laws/model-whs-regulations/pages/regulations>.
• State and territory WHS regulators, viewed 13 March 2017,
<http://www.safeworkaustralia.gov.au/sites/swa/about/who-we-work-

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with/regulators/pages/whs-regulators>.
• WHS guidance material and fact sheets, viewed 13 March 2017,
<http://www.safeworkaustralia.gov.au/sites/swa/model-whs-
laws/guidance/pages/guidance-material>.

Apply your knowledge 4: WHS in the FSI workplace


WHS awareness applies to office workers as much as for manual workers.
For example, review the following link:
Safe Work Australia, 2011, Hazardous Manual Tasks Code of Practice,
Safe Work Australia, viewed 13 March 2017,
<http://www.safeworkaustralia.gov.au/sites/swa/about/publications/pages
/hazardous-manual-tasks-cop>.
1. Nominate some of the workplace hazards you might find in a
FSI workplace.

2. What are the ways you can eliminate or mitigate these hazards?

Note: You can access ‘Suggested answers’ for this activity at the end of this topic.

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Certificate IV in Finance and Mortgage Broking

16 Consumer law

16.1 The Competition and Consumer Act


The CCA was formerly known as the Trade Practices Act. It prohibits certain actions by
corporations that are deemed in the CCA to be anti-competitive. Normally, such conduct
will involve an arrangement or agreement between the suppliers of a financial service
but may also include conditions of supply designed to compel certain consumer
behaviours.
The range of prohibited conduct is extensive and includes:
• Collusion: Entering into a contract, arrangement or understanding with a competitor
that has the effect of substantially lessening competition. Collusion can include:
– price fixing — arrangements in which competitors agree to supply goods or
services only at agreed prices or agreements
– not to compete in certain geographical areas
– not to poach, or only to supply, certain clients.
• Exclusive dealing: Engaging in the practice of only supplying goods and services on
certain restrictions or obligations being met, normally to compel a client to acquire
goods or services from a supplier that they may under normal circumstances have
sourced from another supplier.
• Restrictive trade practices: Where a company with substantial power in a market
abuses its power to eliminate or damage a competitor, prevent a competitor from
entering the market or deter or prevent competitive conduct in a market.
This includes monopolistic behaviour.
Where a borrower, mortgagor, guarantor or any other person has suffered a loss as a
result of a breach of the CCA, the credit provider may be ordered to compensate that
person or entity.
The CCA is administered by the ACCC and applies to the conduct of corporations and
their employees, agents or officers.

16.2 Australian Consumer Law


On 1 January 2011, the Australian Consumer Law (ACL) commenced. The ACL
harmonised the consumer protection provisions in the Trade Practices Act and in state
and territory fair trading laws, and replaced consumer protection provisions in at least
20 different Commonwealth, state and territory laws with this one law. The ACL is a
cooperative reform of the Australian Government and the states and territories,
through the COAG.
The ACL is a national, generic law that applies in the same way to all sectors and in all
Australian jurisdictions. This means that all consumers in Australia enjoy the same rights
and all businesses have the same obligations, irrespective of which state or territory
they engage in transactions.

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Topic 1-2: Legislation and codes of practice

Legislation
The full text of the ACL is set out in Schedule 2 of the CCA.

Coverage
The ACL includes:
• a national unfair contract terms law covering standard-form consumer contracts
• a national law guaranteeing consumer rights when buying goods and services
• a national product safety law and enforcement system
• a national law for unsolicited consumer agreements covering door-to-door sales and

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telephone sales
• simple national rules for lay-by agreements
• new penalties, enforcement powers and consumer redress options.

Further resources: Australian Consumer Law


• Australian Consumer Law guidance, viewed 13 March 2017,
<http://consumerlaw.gov.au/business-and-the-acl>.
• The CCA, viewed 13 March 2017,
<http://www.comlaw.gov.au/Details/C2011C00003>.
• State Library of NSW 2012, Hot topics 83: consumer law,
NSW Government, viewed 13 March 2017,
<http://www.legalanswers.sl.nsw.gov.au/guides/hot_topics/consumer_l
aw/index.html>.

Apply your knowledge 5: The Competition and Consumer Act


Download the ACCC publication from the following link:
Australian Competition and Consumer Commission (ACCC) 2012, Small business
and the Competition and Consumer Act, ACCC, viewed 8 February 2016,
<http://www.accc.gov.au/publications/small-business-the-competition-and-
consumer-act>.
Answer the questions below.
1. What are the consumer guarantees provided under ACL?

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Certificate IV in Finance and Mortgage Broking

2. Under the consumer guarantees, what must a business do when


providing services to customers?

3. What happens if a product or service fails to meet a guarantee?

4. Outline appropriate sales practices for a business under ACL.

5. Outline appropriate advertising and promotion practices for a business


under ACL.

Note: You can access ‘Suggested answers’ for this activity at the end of this topic.

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Topic 1-2: Legislation and codes of practice

17 Anti-discrimination legislation
Discrimination occurs when a person is treated unfairly or unequally due to their:
• disability
• race
• religion
• gender
• sexuality and sexual preference.
The Commonwealth Government and the Australian state and territory governments
have enacted anti-discrimination law to help protect people from discrimination
and harassment.

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Discrimination can be both direct and indirect:
• Direct discrimination occurs when a person is treated differently, unfairly or
unequally because of their membership of one of the relevant groups.
• Indirect discrimination occurs when there is a requirement that is nominally the
same for all persons, but which has an unequal or disproportionate effect on certain
groups as compared to other groups.
For example, discrimination in lending could occur in the process of approving a loan.
Anti-discrimination legislation is designed to prevent this kind of discrimination.

Anti-discrimination laws
As it stands, there are at least 14 different federal, state and territory anti-discrimination
and equal opportunity laws that are in operation throughout Australia. However, the
laws that are most substantial at the federal level are listed below and the Australian
Human Rights Commission has statutory responsibilities under them:
• Age Discrimination Act 2004 (Cth)
• Australian Human Rights Commission Act 1986 (Cth)
• Disability Discrimination Act
• Racial Discrimination Act 1975 (Cth)
• Sex Discrimination Act 1984 (Cth).
Commonwealth laws and the state and territory laws generally cover the same grounds
and areas of discrimination. However, there are some gaps in the protection offered
between different states and territories and at a Commonwealth level.
In addition, there are circumstances where only the Commonwealth law would apply or
where only the state law would apply.

Age Discrimination Act


The Age Discrimination Act helps to ensure that people are not treated less favourably
on the ground of age in various areas of public life including:
• employment
• provision of goods and services
• education
• administration of Commonwealth laws and programs.

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Australian Human Rights Commission Act


The Australian Human Rights Commission Act (formerly called the Human Rights and
Equal Opportunity Commission Act 1986) established the Human Rights and Equal
Opportunity Commission (now known as the Australian Human Rights Commission)
and gives it functions in relation to the following international instruments:
• International Covenant on Civil and Political Rights (ICCPR)
• Convention concerning Discrimination in Respect of Employment and Occupation
(ILO 111)
• Convention on the Rights of Persons with Disabilities
• Convention on the Rights of the Child
• Declaration of the Rights of the Child
• Declaration on the Rights of Disabled Persons
• Declaration on the Rights of Mentally Retarded Persons
• Declaration on the Elimination of All Forms of Intolerance and of Discrimination
Based on Religion or Belief.

Disability Discrimination Act


The Disability Discrimination Act major objectives are to:
• eliminate discrimination against people with disabilities
• promote community acceptance of the principle that people with disabilities have
the same fundamental rights as all members of the community
• ensure as far as practicable that people with disabilities have the same rights to
equality before the law as other people in the community.

Racial Discrimination Act


The Racial Discrimination Act gives effect to Australia’s obligations under the
International Convention on the Elimination of All Forms of Racial Discrimination.
Its major objectives are to:
• promote equality before the law for all persons, regardless of their race, colour or
national or ethnic origin
• make discrimination against people on the basis of their race, colour, descent or
national or ethnic origin unlawful.

Sex Discrimination Act


The Sex Discrimination Act gives effect to Australia’s obligations under the Convention
on the Elimination of All Forms of Discrimination Against Women and certain aspects of
the International Labour Organisation (ILO) Convention 156. Its major objectives are to:
• promote equality between men and women
• eliminate discrimination on the basis of sex, marital status or pregnancy and,
with respect to dismissals, family responsibilities
• eliminate sexual harassment at work, in educational institutions, in the provision of
goods and services, in the provision of accommodation and the delivery of
Commonwealth programs.

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Topic 1-2: Legislation and codes of practice

Further resources: Anti-discrimination legislation and information


• For a comprehensive list of links to resources on discrimination law,
viewed 13 March 2017,
<http://www.aph.gov.au/About_Parliament/Parliamentary_Department
s/Parliamentary_Library/Browse_by_Topic/Discrimination>.
• Age discrimination, viewed 13 March 2017,
<https://www.humanrights.gov.au/our-work/age-discrimination>.
• Australian Human Rights Commission, viewed 13 March 2017,
<https://www.humanrights.gov.au>.
• Disability rights, viewed 13 March 2017,
<https://www.humanrights.gov.au/our-work/disability-rights>.
• Race discrimination, viewed 13 March 2017,

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<https://www.humanrights.gov.au/our-work/race-discrimination>.
• Sex discrimination, viewed 13 March 2017,
<https://www.humanrights.gov.au/our-work/sex-discrimination>.
• State Library of NSW 2010, Hot topics 75: discrimination,
NSW Government, viewed 13 March 2017,
<http://legalanswers.sl.nsw.gov.au/discrimination-hot-topics-series-no-
75>.

Apply your knowledge 6: Anti-discrimination in the FSI


1. How might discrimination apply to customers of the FSI?

2. How might discrimination apply to workers within the FSI?

Note: You can access ‘Suggested answers’ for this activity at the end of this topic.

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Certificate IV in Finance and Mortgage Broking

Part 3: Codes of practice


This section covers some of the important codes of practice affecting the FSI.

18 Code of Banking Practice


The Code of Banking Practice is an initiative of the ABA. However, any retail bank can
subscribe to the Code, irrespective of whether it is an ABA member.
The Code of Banking Practice objectives are to:
• describe standards of good practice and service
• promote disclosure of information relevant and useful to clients
• promote informed and effective relationships between banks and clients
• require banks to have procedures for resolutions of disputes between banks and
clients.
The Code gives clients of subscribing banks important legal rights, and confirms their
existing rights, in a number of areas. These include:
• disclosure of fees and charges, and other terms and conditions
• changes to terms and conditions, and fees and charges
• disclosure of general information about banking services
• privacy and confidentiality
• statements of account
• copies of documents
• direct debits
• chargebacks on credit cards
• debt collection
• complaint handling.
The Code gives loan guarantors important disclosure and other rights. In addition,
there is a general commitment to act fairly and reasonably towards clients and
guarantors in a consistent and ethical manner.
The Code requires banks to have dispute resolution procedures in place to assist in
resolving consumers’ complaints. The Financial Ombudsman Service (FOS) is the banking
industry’s resolution scheme. FOS considers complaints about banks and their affiliates
operating in Australia. FOS is able to investigate disputes and make decisions that are
binding on the service provider. FOS will consider disputes if:
• they are about a financial service provided by a member bank or an affiliate
• they are lodged by an individual or a small business, or
• the amount of loss claimed is less than $500,000.

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Topic 1-2: Legislation and codes of practice

Further resources: Code of Banking Practice


• Code of Banking Practice (ABA website), viewed 13 March 2017,
<http://www.bankers.asn.au/Industry-Standards/ABAs-Code-of-
Banking-Practice/1993-Code-of-Banking-Practice>.
• Code of Banking Practice (ASIC website), viewed 13 March 2017,
<http://www.asic.gov.au/for-consumers/codes-of-practice>.
• Fact sheet on the Code of Banking Practice, viewed 13 March 2017,
<http://www.bankers.asn.au/Consumers/Fact-Sheets>.
• Review of the Code of Banking Practice, viewed 13 March 2017,
<http://www.reviewbankcode2.com.au>.

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19 ePayments Code
The ePayments Code commenced on 20 September 2011. It regulates consumer
electronic payment transactions, including:
• ATM
• EFTPOS
• credit card transactions
• online payments
• internet
• mobile banking
• BPAY.
It was formerly known as the EFT Code that has existed since 1986.
ASIC is responsible for the administration of the ePayments Code, including compliance
monitoring and reviewing it regularly.
Virtually all banks, credit unions and building societies currently subscribe to the
ePayments along with a number of non-banking subscribers. The ePayments Code
continues to be a voluntary code of practice.

Further resources: ePayments Code


• ePayments Code, viewed 13 March 2017,
<http://www.asic.gov.au/for-consumers/codes-of-practice>.

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Certificate IV in Finance and Mortgage Broking

20 Financial Planning Association of Australia


Code of Professional Practice
The Financial Planning Association of Australia (FPA) Code of Professional Practice
include rules on:
• disclosure statements to prospective clients
• financial plan preparation
• explanation of financial plan
• client service
• complaints
• education, competency and supervision.
The code was developed and is owned by the FPA.

Further resources: Financial Planning Association of Australia


Code of Professional Practice
• FPA Code of Professional Practice, viewed 13 March 2017,
<http://fpa.asn.au/standards/fpacode>.
• FPA website, viewed 13 March 2017, <http://fpa.asn.au>.

21 General Insurance Code of Practice


The General Insurance Code of Practice was first developed and launched by the
Insurance Council of Australia in 1994. In 2005, a revised Code was developed and it
took effect in July 2006. The Code is monitored and enforced by the FOS.
The General Insurance Code of Practice covers all general insurance products except:
• workers compensation
• marine insurance
• medical indemnity insurance
• compulsory third party insurance (even if driver protection cover is linked to it)
• reinsurance
• life and health insurance products issued by life insurers or registered health
insurers.
The Code is designed to raise the insurer’s service standards for consumers when they
are selling insurance, dealing with insurance claims, responding to disasters and
catastrophes, and handling complaints.

Further resources: General Insurance Code of Practice


• General Insurance Code of Practice, viewed 13 March 2017,
<http://codeofpractice.com.au>.
• General Insurance Code of Practice (ASIC), viewed 13 March 2017,
<http://www.asic.gov.au/for-consumers/codes-of-practice>.

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Topic 1-2: Legislation and codes of practice

22 Insurance Brokers Code of Practice


The Insurance Brokers Code of Practice applies mainly to general insurance and life risk
insurance. It also applies, to a lesser extent, to associated services such as risk
management, arrangement of premium funding and valuation.
It sets out standards of good practice for brokers when dealing with customers,
including the requirements to:
• inform customers of conflict of interest and remuneration arrangements
• establish an internal dispute resolution process.
The Insurance Brokers Code was developed by NIBA.

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Further resources: Insurance Brokers Code of Practice
• Insurance Brokers Code of Practice (ASIC), viewed 13 March 2017,
<http://www.asic.gov.au/for-consumers/codes-of-practice>.
• NIBA website, viewed 13 March 2017, <http://www.niba.com.au>.

23 Customer Owned Banking Code of Practice


The Customer Owned Banking Code of Practice (previously the Mutual Banking Code of
Practice) is a code of practice for Australia’s credit unions, mutual banks and mutual
building societies.
The Code contains general principles applicable to its members and customers, such as
fair and ethical dealings, clarity in product disclosure, responsible lending and fairness in
complaints handling, including:
• information about products, interest rates, fees and charges
• fair terms and conditions
• responsible lending
• credit limit increase offers
• reverse mortgages
• account statements and balances
• stopping direct debit and recurring payment arrangements
• chargebacks on credit cards
• debt collection and legal actions
• complaints handling process.
The Code was developed by the Customer Owned Banking Association (COBA),
the industry association for credit unions, mutual banks and mutual building societies
in Australia.

Further resources: Customer Owned Banking Code of Practice


• COBA, viewed 13 March 2017,
http://www.customerownedbanking.asn.au/consumers/cobcop>.
• Customer Owned Banking Code of Practice (ASIC),
viewed 13 March 2017,
<http://www.asic.gov.au/for-consumers/codes-of-practice>.

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Certificate IV in Finance and Mortgage Broking

24 Basel III
Basel III (or the Third Basel Accord) is a global, voluntary regulatory standard on bank
capital adequacy, stress testing and market liquidity risk. It was agreed on by the
members of the Basel Committee on Banking Supervision in 2010–11 and was scheduled
to be introduced from 2013 until 2015. However, changes from 1 April 2013 extended
implementation until 31 March 2018 and then again was extended to 31 March 2019.
The third instalment of the Basel Accords (see Basel I, Basel II) was developed in
response to the deficiencies in financial regulation revealed by the late-2000s financial
crisis. Basel III was supposed to strengthen bank capital requirements by increasing bank
liquidity and decreasing bank leverage.

Further resources: BASEL III


• Implementing Basel III reforms in Australia, viewed 13 March 2017,
<http://www.apra.gov.au/adi/PrudentialFramework/Pages/Basel-III-
Capital-response-paper-HTML.aspx>.

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Part 4: Regulatory and professional bodies


This section provides details of regulatory and professional bodies that apply to the FSI.
In each case, the role of the body, its composition and any legislation administered or
regulated by the body is listed.

25 FSI regulatory bodies

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25.1 Australian Prudential Regulation Authority

Role
APRA is the prudential regulator of the Australian FSI.
APRA oversees:
• banks
• credit unions
• building societies
• general insurance
• reinsurance companies
• life insurance
• friendly societies
• most members of the superannuation industry.
APRA is funded largely by the industries that it supervises. It was established on
1 July 1998.

Legislation
Legislation relating to ADIs:
• Banking Act
• Banking Regulations 1966 (Cth)
• Financial Sector (Shareholdings) Act 1998 (Cth)
• Financial Sector (Business Transfer and Group Restructure) Act 1999 (Cth)
• Transfer Rules No. 1 of 2004
• Transfer Rules No. 1 of 2007
• Financial Sector (Collection of Data) Act 2001 (Cth)
• Financial Sector (Collection of Data — Consequential and Transitional Provisions)
Act 2001 (Cth)
• Authorised Deposit-Taking Institutions Supervisory Levy Imposition Act 1998 (Cth).

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Legislation relating to general insurance:


• Legislation prescribing APRA’s powers in respect of the authorisation and prudential
supervision of general insurers:
– Insurance Act (current)
– Insurance Regulations 2002 (current)
– Insurance Act (as in force before 1 July 2002)
– Insurance Regulations 1974 (as in force before 1 July 2002)
– General Insurance Supervisory Levy Imposition Act 1998 (Cth)
• Legislation on shareholdings, changes in control and transfers of business:
– Financial Sector (Shareholdings) Act
– Insurance Acquisitions and Takeovers Act 1991 (Cth)
– Financial Sector (Business Transfer and Group Restructure) Act
– Transfer Rules No. 1 of 2007
• Legislation on data collection
– Financial Sector (Collection of Data) Act
– Information on the prudential reporting framework for general insurers
Superannuation legislation:
• SIS Act
• SIS Regulations
• Retirement Savings Accounts Act 1997 (Cth)
• Retirement Savings Accounts Regulations 1997 (Cth)
• Superannuation Supervisory Levy Imposition Act 1998 (Cth)
• Retirement Savings Account Providers Supervisory Levy Imposition Act 1998 (Cth).
In addition, there are a number of statutory instruments. For more information, click the
link below.
• APRA Superannuation Legislation, viewed 13 March 2017,
<http://www.apra.gov.au/super/pages/superannuation-legislation.aspx>.
Legislation relating to life insurance and friendly societies:
• Life Insurance Act
• Life Insurance Regulations 1995 (Cth)
• Financial Sector (Shareholdings) Act
• Insurance Acquisitions and Takeovers Act
• Insurance Acquisitions and Takeovers (Notices) Regulations 1992 (Cth)
• Insurance Acquisitions and Takeovers Act — Decision-making principles
• Financial Sector (Business Transfer and Group Restructure) Act
• Financial Sector (Transfers of Business) Regulations 1999 (Cth)
• Transfer Rules No. 1 of 2004 (applicable on and after 1 February 2005)
• Financial Sector (Collection of Data) Act
• Financial Sector (Collection of Data-Consequential and Transitional Provisions)
Act 2001 (Cth)
• Life Insurance Supervisory Levy Imposition Act 1998 (Cth).

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25.2 The Australian Securities and Investments Commission


ASIC is Australia’s corporate, markets and financial services regulator. ASIC is an
independent Commonwealth Government body established by the ASIC Act.
ASIC works to ensure that Australia’s financial markets are fair and transparent,
supported by confident and informed investors and consumers.
ASIC is an independent Commonwealth Government body, set up under and
administered by the ASIC Act. Most ASIC work is carried out under the Corporations Act.

Legislation

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ASIC administers the following legislation or relevant parts of it, as well as relevant
Regulations made under it:
• ASIC Act
• Corporations Act
• Business Names Registration Act 2011 (Cth)
• Business Names Registration (Transitional and Consequential Provisions) Act 2011
(Cth)
• Insurance Contracts Act
• SRC Act
• SIS Act
• Retirement Savings Accounts Act
• Life Insurance Act
• NCCP Act
• Medical Indemnity (Prudential Supervision and Product Standards) Act 2003 (Cth).

25.3 Australian Competition and Consumer Commission


The ACCC’s primary responsibility is to ensure that individuals and businesses comply
with the Commonwealth competition, fair trading and consumer protection laws,
in particular the CCA.

Role
The ACCC is an independent statutory authority that:
• promotes competition and fair trade in markets to benefit consumers,
businesses and the community
• regulates national infrastructure services.

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Legislation
The ACCC regulates the CCA.
This legislation covers most areas of the market, including:
• product safety and labelling
• unfair market practices
• price monitoring
• industry codes
• industry regulation — airports, electricity, gas, telecommunications
• mergers and acquisitions.

25.4 Australian Transaction Reports and Analysis Centre


AUSTRAC is Australia’s anti-money laundering and counter-terrorism financing regulator
and specialist financial intelligence unit.

Role
AUSTRAC’s purpose is to protect the integrity of Australia’s financial system and
contribute to the administration of justice through its expertise in countering money
laundering and the financing of terrorism. AUSTRAC’s role is to:
• oversee the compliance of Australian businesses and their compliance requirements
• provide financial information to state, territory and Australian law enforcement,
security, social justice and revenue agencies and certain international counterparts.

Legislation
• AML/CTF Act
• Financial Transaction Reports Act 1988 (Cth)
• Australian Transaction Reports and Analysis Centre Supervisory Cost Recovery Levy
Act 2011 (Cth)
• Australian Transaction Reports and Analysis Centre Supervisory Cost Recovery Levy
(Collection) Act 2011 (Cth).

25.5 Office of the Australian Information Commissioner


The OAIC is an independent statutory agency within the Attorney General’s portfolio.
The OAIC was established under the Australian Information Commissioner Act 2010 (Cth)
(AIC Act), which came into effect on 1 November 2010. The AIC Act provides that the
OAIC is responsible for freedom of information (FOI) functions, privacy functions and
information policy functions.
The OAIC currently has three commissioners:
• Information Commissioner
• Privacy Commissioner
• FOI Commissioner.

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Topic 1-2: Legislation and codes of practice

Role

Freedom of information
The OAIC has FOI functions, including the:
• oversight of the operation of the FOI Act
• review of decisions made by agencies and ministers under the FOI Act
• provision of information and advice on FOI to individuals and agencies.

Privacy
The OAIC is responsible for privacy functions that are conferred by the Privacy Act and

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other laws. Under the Privacy Act, a person can make a complaint about the handling of
their personal information by Australian government agencies or private sector
organisations covered by the Privacy Act.
The OAIC has the power to:
• conduct an assessment of whether an entity is maintaining and handling personal
information in accordance with the Privacy Act
• request an entity to develop an enforceable code
• direct an agency to give the OAIC a privacy impact assessment about a proposed
activity or function
• recognise EDR schemes to handle particular privacy-related complaints.
The OAIC has a range of responsibilities under other laws, including laws relating to
data matching, e-health, spent convictions and tax file numbers.
The OAIC provides information and advice on privacy to individuals,
businesses and agencies.

Information policy
The OAIC oversees government information policy functions.

Legislation
• FOI Act
• Freedom of Information (Charges) Regulations 1982 (Cth)
• Freedom of Information (Miscellaneous Provisions) Regulations 1982 (Cth)
• Privacy Act.

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25.6 Australian Human Rights Commission

Role
Human rights recognise the inherent value of each person, regardless of background,
location, appearance, beliefs or ideas. Human rights are based on principles of dignity,
equality and mutual respect, which are shared across cultures, religions and
philosophies. They are about being treated fairly, treating others fairly and having the
ability to make genuine choices in our daily lives.
The Universal Declaration of Human Rights, adopted by the United Nations on
10 December 1948, sets out the basic rights and freedoms that apply to all people. It is a
foundation document that has prompted many legally binding international human
rights laws.
The Australian Human Rights Commission has a responsibility to monitor Australia’s
performance in meeting its international human rights commitments.
The Commission has a president and seven commissioners:
• Aboriginal and Torres Strait Islander Social Justice Commissioner
• Age Discrimination Commissioner and Acting Disability Discrimination Commissioner
• Children’s Commissioner
• Human Rights Commissioner
• Race Discrimination Commissioner
• Sex Discrimination Commissioner.

Legislation
• Australian Human Rights Commission Act
• Age Discrimination Act
• Disability Discrimination Act
• Racial Discrimination Act
• Sex Discrimination Act.

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25.7 Foreign Investment Review Board


The FIRB is a non-statutory body established in 1976 to advise the Treasurer and the
government on Australia’s foreign investment policy and its administration. The FIRB’s
functions are advisory only. Responsibility for making decisions rests with the Treasurer.

Role
The role of the FIRB is to:
• examine proposed investments in Australia that are subject to the policy,
the Foreign Acquisitions and Takeovers Act and supporting legislation, and to make
recommendations to the Treasurer and other Treasury portfolio ministers on

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these proposals
• advise the Treasurer on the operation of the policy and the Act
• foster an awareness and understanding, both in Australia and abroad, of the policy
and the Act
• provide guidance to foreign persons and their representatives or agents on the policy
and the Act
• monitor and ensure compliance with the policy and the Act
• provide advice to the Treasurer on the policy and related matters.

Legislation
• Foreign Acquisitions and Takeovers Act
• Foreign Acquisitions and Takeovers Regulations 1989 (Cth).

25.8 WHS regulators


Although policy and model WHS legislation is developed by the central WHS body,
Safe Work Australia, each Australian state and territory has its own WHS legislation and
regulatory body.

Role
The WHS regulator in each jurisdiction can provide information and advice on:
• complying with WHS laws
• reporting a workplace incident
• renewing or applying for licences
• workers compensation claims
• registering plant and plant designs.

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State and territory WHS regulators and legislation


The table below shows the regulator and legislation for WHS for each Australian
jurisdiction.

Table 2 WHS regulators and legislation


Jurisdiction Regulator Legislation
Commonwealth of Australia Comcare • WHS Act
• Work Health and Safety Regulations 2011 (Cth)
Australian Capital Territory WorkSafe ACT • WHS Act
• Work Health and Safety Regulation 2011
New South Wales WorkCover NSW • WHS Act
• Work Health and Safety Regulation 2011
Northern Territory NT WorkSafe • Work Health and Safety (National Uniform
Legislation) Act 2011
• Work Health and Safety (National Uniform
Legislation) Regulations 2011
Queensland Workplace • WHS Act
Health and Safety • Work Health and Safety Regulation 2011
Queensland
South Australia SafeWork SA • WHS Act
• Work Health and Safety Regulations 2012
Tasmania WorkCover • WHS Act
Tasmania • Work Health and Safety Regulations 2012
Victoria WorkSafe Victoria • Occupational Health and Safety Act 2004
• Occupational Health and Safety Regulations 2007
Western Australia WorkSafe Western • Occupational Safety and Health Act 1984
Australia • Occupational Safety and Health Regulations 1996
Source: Safe Work Australia n.d.

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26 FSI professional bodies

26.1 Australian Bankers’ Association


The ABA:
• works with its members to provide analysis, advice and advocacy
• contributes to the development of public policy on banking and other financial
services.

Role

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The ABA works to:
• address a range of public policy issues
• build a regulatory environment that promotes growth in the banking industry and
the wider economy through, for example:
– development of industry codes and standards, the continuing development of the
Code of Banking Practice and other standards
– prudential and payments system reform to ensure a safe financial system
– working with banks, government sector representatives, private sector, police and
card schemes to look at ways of preventing fraud, improving bank services and
taxation reform.

Codes of conduct/industry standards


The ABA (2011) promotes a number of industry standards, guidelines and protocols,
including:
• ABA’s Code of Banking Practice — the banking industry's customer charter on best
banking practice standards.
• ePayments Code — a voluntary code that protects consumers when transferring
funds electronically. The code is administered by ASIC.
• ABA-ATO information request protocol — arrangements between the ATO and the
ABA for the issuing of third-party information notices on banks under section 264 of
the Income Tax Assessment Act 1936 (Cth) (ITAA 36).
• ABA’s guiding principles for accessible authentication — consideration of
authentication technologies to ensure that people with disabilities and older people
are not disadvantaged.
• ABA’s Indigenous statement of commitment — an industry statement that outlines
how banks may make a difference for Indigenous people and their communities.
• ABA’s industry standards on accessibility of electronic banking — an industry
statement on improving the accessibility of electronic banking for older Australians
and people with disabilities.
• ABA’s transaction services and branch closure protocol — a protocol on providing
rural and remote areas with ongoing face-to-face banking services.
• Financial abuse guidelines — an industry guideline designed to protect vulnerable
customers from potential financial abuse.
• Personal properties securities — a set of industry model priority and release
documents as a way of improving efficiency of operations and reducing costs.

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• Promoting understanding about banks’ hardship programs — this industry guideline


has been developed to provide guidance to banks on how to meet, and in some cases
exceed, existing legal obligations and industry standards; however, this guideline
does not have legal force or prescribe binding obligations on individual banks.
• Sanctions: ABA guidelines for the financial services sector — these guidelines are
intended for ABA member banks, but are not legally binding. They aim to set out
good industry practice for ABA members and their staff in relation to sanctions
requirements.
• Information on the US Foreign Account Tax Compliance Act (FATCA) and Australian
banks — in March 2010, the US enacted the FATCA, which will impose significant
reporting requirements on foreign financial institutions (FFIs) from 1 January 2013.

26.2 The Finance Brokers Association of Australia


The FBAA is a national association representing finance and mortgage loan writers
throughout Australia. FBAA monitors legislation and makes representations to
regulators, Commonwealth Government departments, and members of parliament,
both state and federal as appropriate.
The FBAA has:
• established measurable standards of proper professional practice in sourcing
domestic and commercial funding
• established complaints and disciplinary procedures designed to eliminate
unacceptable working practices among its members
• an internal disputes resolution process
• worked to safeguard both its members and their clients against restrictive practices
within the industry.

26.3 The Mortgage & Finance Association of Australia


The MFAA is the peak national body providing service and representation to over
10,000 professional credit advisers (mortgage and finance brokers, mortgage managers
and aggregators) to assist them to develop, foster and promote the mortgage and
finance industry in Australia.
The MFAA represents and lobbies for professional credit advisers, delivers services that
support their career paths, and positions them as the professionals of choice in the
mortgage and finance industry for both consumers and regulators.

MFAA objectives
The MFAA aims to:
• support and represent professional credit advisers
• develop and deliver services that enhance the professional skills and careers of
professional credit advisers
• promote MFAA professional credit advisers to consumers
• lobby for the interests of professional credit advisers
• facilitate stakeholder engagement.

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Topic 1-2: Legislation and codes of practice

The association has previously been known as the Mortgage Industry Association of
Australia (MIAA), the Mortgage Industry Association of Australasia and the
Mortgage Bankers Association.

26.4 National Insurance Brokers Association of Australia


NIBA is the national trade association for licensed life and general insurance brokers
in Australia. It is a not-for-profit organisation and neither sells insurance products or
represents insurance companies. NIBA is the national voice of insurance brokers and
an advocate for insurance consumers. NIBA:
• publishes the Insurance Brokers Code of Practice

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• fosters members’ professionalism and supports brokers’ roles in the insurance
transaction
• lobbies government, regulators, consumers and business
• offers a wide variety of professional services.

26.5 The Australian Finance Conference


Established in 1958, the AFC is Australia’s national finance industry association. The AFC
represents the interests and views of its members to government and provides a variety
of other member services. AFC membership is open to companies in the business of
credit, finance or financiers.
AFC membership is clustered around different institutional types including:
• banks
• vendor financiers
• manufacturers
• traditional finance companies
• general financiers
• building societies
• motoring organisations.
AFC member company representatives meet four times each year to consider progress
with AFC lobbying objectives.

26.6 The Australian Equipment Lessors Association


AELA is the national association for the equipment leasing and financing industry.
AELA’s members encompass more than 90% of equipment finance activity in Australia.

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26.7 The Commercial Asset Finance Brokers Association of


Australia
The CAFBA emanated from a merger in February 2008 between the Australian Asset
Finance Association (AAFA) based in Victoria and the Australian Equipment Finance
Association (AEFA) based in New South Wales.
The result was the first national peak professional body representing commercial asset
finance brokers. CAFBA is an industry body of professional leasing/finance brokers.
Members conduct the majority of their business in the fields of equipment and vehicle
financing.

27 Financial Ombudsman Service

27.1 Dispute resolution


Regulation of the finance industry occurs to ensure that practitioners conduct their
business ethically and in the best interests of the consumer. Independent client dispute
resolution schemes play a vital role in effective industry self-regulation. The advantages
of having an independent client dispute resolution scheme are that they:
• provide an alternative to expensive legal action for both consumers and industry
• enable industry to identify the problems faced by their clients and take steps to
rectify them, negating the need for government intervention
• enhance business practices and the quality of goods and services offered to clients.
The Commonwealth Government has drawn up benchmarks for dispute resolution
schemes. The benchmarks relate to:
• accessibility
• independence
• fairness
• accountability
• efficiency
• effectiveness.
Schemes established under these benchmarks reflect an informal and inquisitorial style
of dispute resolution, rather than a formal and adversarial style. They aim to achieve
early resolution by consensus.
However, dispute resolution schemes do not alleviate the need for businesses to have
their own internal dispute resolution mechanisms in place. EDR schemes should only be
used when resolution between the parties cannot be reached.
The FOS and the Credit and Investments Ombudsman (CIO) are described in more
detail below.

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Topic 1-2: Legislation and codes of practice

27.2 Credit and Investments Ombudsman


The CIO, formerly known as the Credit Ombudsman Service Limited (COSL), is an
independent industry dispute resolution scheme. It facilitates dispute resolution
between scheme members and clients, and between its members. No charge is made to
access the scheme.
CIO’s role is to provide an independent and prompt resolution of disputes against the
criteria of law and fairness, and industry best practice. CIO can mediate disputes
involving sums of up to $250,000, not limited to direct losses.
Clients referred to CIO are not bound by CIO’s decision and retain any legal rights they
have to refer the matter to a court or tribunal. However, if a client accepts
CIO’s decision, the decision will be binding on the member involved in the dispute.

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CIO is an incorporated company with an independent chair and an equal number of
consumer and industry representatives on the board. It has also been approved by
ASIC as an EDR service. The day-to-day management of the scheme is conducted by the
Australian Commercial Disputes Centre (ACDC).

27.3 Financial Ombudsman Service


The FOS independently resolves disputes between consumers — including some
small businesses — and member financial services providers. FOS’s dispute resolution
processes cover financial services disputes, including banking, credit, loans,
general insurance, life insurance, financial planning, investments, stockbroking,
managed funds and pooled superannuation trusts. FOS also covers estate planning,
estate management and trustee services.
The FOS provides a national service that is free to consumers and is an alternative
to going to court. If a consumer is unhappy with a financial, insurance or investment
product or service, they can complain to the financial services provider and ask to
resolve their dispute in accordance with the provider’s internal dispute resolution
process. All financial services providers who are members of the FOS have internal
dispute resolution processes.
If the consumer is not happy with the response they receive, they can contact FOS
who can offer conciliation processes or may investigate the dispute and issue a written
decision on the case, which is binding on the financial services provider.

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Part 5: Keeping up with legislation changes


Change is a constant in the modern business world and it is very important that the FSI
keep abreast of these changes. This section gives you some hints on how to keep your
knowledge of changes in the FSI current.

28 Information sources

28.1 Financial news sources


Financial news sources include newspapers, business news websites, specialist analysis
websites, blogs and other updates.
Websites such as Banking Day provide complete, concise, and convenient daily
briefing on what is happening in banking and finance as well as notices on upcoming
FSI conferences.

28.2 Reviewing regulator websites


Regulators within various industry sectors may provide information, guidance, support,
professional training opportunities, codes of conduct and ways to settle disputes.
For a list of regulators, see ‘FSI regulatory bodies’ in Part 4, section 25.

28.3 Reviewing legislation on websites


Legislation can be dynamic with amendments being made regularly. Information
regarding amendments can be obtained by reviewing websites such as:
• ComLaw’s website for Commonwealth legislation and Regulations,
viewed 13 March 2017, <www.comlaw.gov.au>.
• The Australian Legal Information Institute website, administered by the University of
Technology Sydney and the University of New South Wales, viewed 13 March 2017,
<www.austlii.edu.au>.

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29 Activities

29.1 Joining a professional body or association


Professional bodies or associations within your area of expertise may offer information,
training and support as well as providing codes of professional ethics.
For a list of professional bodies, see ‘FSI professional bodies’ in Part 4, section 26.

29.2 Face-to-face networking

1-2
Networking with people within the FSI industry in person remains an important way to
keep informed and remain up to date. Not only does it provide an opportunity to meet
new people within the industry, hear their opinions and share stories, it provides an
opportunity to ask questions, gain insights and understand how other people in the
industry may be approaching implementing changes.

29.3 Social networking


Social networks are also an important way to keep in touch. Professional networking
websites such as LinkedIn at <www.linkedin.com/home> are useful for staying in contact
with colleagues and industry thought leaders as well as providing articles, ideas,
opinions, news and updates.

29.4 Conferences
Conferences in the FSI are an important way of networking, meeting people within the
industry and staying informed on current topics.
Apart from professional associations, websites such as Banking Day
<www.bankingday.com/nl06_about.php> or Financial Standard
<www.financialstandard.com.au/events> provide banking and finance news as well as
notices on upcoming FSI conferences.

29.5 Professional training


Continuing professional training in the FSI is recognised as an important method of
ensuring all people working in the industry have the appropriate skills and knowledge to
do their jobs.

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Apply your knowledge 7: Keeping up with legislative change


Read the following article:
Mind Tools n.d., ‘Keeping up-to-date on your industry’ Mind Tools,
viewed 13 March 2017,
<http://www.mindtools.com/pages/article/keeping-up-to-date.htm>.
1. What are some of the key methods for a person in the FSI to keep up
with legislative change?

2. Name some practical methods of informing and updating FSI colleagues


about legislative change.

3. What are the methods used to ensure that any literature complies with
current legislation?

Note: You can access ‘Suggested answers’ for this activity at the end of this topic.

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Topic 1-2: Legislation and codes of practice

Part 6: Implementing legislation and codes


of practice into work situations
This section provides some practical advice on implementing legislative change into
work situations within the FSI.

30 Internal policy and procedure

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30.1 Policy
Policies are statements of principles, guidelines or rules about how things are done in an
organisation. Policy may:
• establish clear standards for acceptable behaviour
• provide goals and objectives
• acknowledge legal and regulatory responsibilities
• contribute to the culture of the workplace, reinforcing norms and values.
Examples of internal business policies include safety policy or human resources policy.

30.2 Procedure
Procedures are a set of steps that are performed to obtain a specified outcome.
The words procedure and process are often used interchangeably or may have specific
meanings within the context of an organisation.
All organisations have operational policies and procedures documentation of some kind,
but there various levels of comprehensiveness, quality or currency across organisations.

30.3 Update of documentation


It is important that internal policies and procedures are regularly reviewed and updated
to ensure compliance with the current legislative requirements.

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31 Record keeping
In the FSI, keeping records is important for legislative, ethical and accountancy reasons.
It is required by law and it is good business practice.
It is important for an organisation to establish procedures for records management to
ensure records are:
• easily located, legible, identifiable and traceable
• stored and maintained in line with privacy legislation, for more information,
see ‘The Privacy Act’ in Part 2, section 13.
• current, while obsolete records are archived.
Anti-money laundering and other legislation require that a financial services operator to
know their customer. This includes keeping adequate records about the financial
services business, and if financial services are provided to retail clients, records:
• personal circumstances of the client
• enquiries made into the personal circumstances
• consideration and investigation in relation to the subject matter of the advice
• the advice, including why you think it was appropriate.
Records must be kept for the required statutory period, whether in a material,
electronic or other form.
Records may include statutory records, tax records and training records.
ASIC sees keeping proper records of advice as a key component of ensuring
financial services are provided ‘efficiently, honestly and fairly’ and will take action
against businesses who fail in this regard.

Further resources: Record keeping obligations


• ASIC and record keeping obligations, viewed 13 March 2017,
<http://asic.gov.au/about-asic/media-centre/find-a-media-
release/2014-releases/14-240mr-record-keeping-obligations-updated/>.
• ATO — record keeping requirements for small business,
viewed 13 March 2017,
<https://www.ato.gov.au/General/Other-languages/In-
detail/Information-in-other-languages/Record-keeping-for-small-
businesses>.

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32 Customer charter
A customer charter details the level and type of service that a customer can expect from
the organisation. A customer charter may:
• outline the organisation’s values and beliefs
• describe the organisation’s commitment to the customer
• specify how the organisation aims to deliver the specified level and type of
customer service.

Further resources: Customer charters


Sample customer charters:

1-2
• Business.gov.au: Customer Service Charter, viewed 13 March 2017,
<http://www.business.gov.au/about-businessgovau/Pages/customer-
service-charter.aspx>.
• Customer Service Institute of Australia: Customer Charter,
viewed 13 March 2017,
<http://www.csia.com.au/customer_charter.php>.

33 Internal monitoring and audit


An internal audit is an independent, objective assurance and consulting activity designed
to add value and improve an organisation’s operations. It helps an organisation
accomplish its objectives by bringing a systematic, disciplined approach to evaluate and
improve the effectiveness of risk management, control, and governance processes.
Internal audits can identify:
• potential gaps in or breaches of legislative compliance
• opportunities to update policy and procedure to ensure compliance
• training requirements
• operational risks and ways to mitigate them.

Apply your knowledge 8: Implementing legislative change


What are some of the practical ways to implement legislative change in the FSI?

Note: You can access ‘Suggested answers’ for this activity at the end of this topic.

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References
Australian Bankers’ Association Inc. (ABA) 2011, Industry standards, ABA,
viewed 13 March 2017,
<http://www.bankers.asn.au/Banks-of-Australia/Industry-Standards>.
Bird, R 1983, Osborn’s concise law dictionary, 7th edn, Sweet & Maxwell, London.
BusinessDictionary.com 2015, viewed 13 March 2017,
<http://www.businessdictionary.com>.
ComLaw n.d., Acts, Australian Government, viewed 13 March 2017,
<https://www.comlaw.gov.au/Content/WhatIsIt>.
Enright, C 1991, Studying law, 4th edn, Branxton Press, Acton, ACT.
Parliamentary Education Office (PEO) n.d., Fact sheet — separation of powers:
parliament, executive and judiciary, PEO, viewed 13 March 2017,
<http://www.peo.gov.au/learning/fact-sheets/separation-of-powers.html>.

Suggested answers

Apply your knowledge 1: Legal concepts and terms


1. A code of practice is not enforceable by law. It is a written guideline, often issued by
an official body or a professional association to its members to help them comply
with ethical standards.
2. Federal laws
3. Defined by the first three chapters of the Constitution, the separation of powers
defines three separate groups and the roles they play in Australian governance.
These are the:
• parliament
• executive
• judiciary.
Under this principle, the power to govern is distributed between the parliament,
the executive and the judiciary to avoid one group having all the power. Each group
works within defined areas of responsibility so that each keeps a check on the actions
of the others.

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Apply your knowledge 2: Banking law and practice


1. What we would readily identify as a bank is now, in legislative terms, is an ADI which
has the consent of APRA under section 66 of the Banking Act to call itself a bank.
2. • RBA: Monetary and banking policy and the stability of the Australian economy.
The RBA includes within its structure the Payments System Board, which is
responsible for payments system policy.
• APRA: Prudential regulation of a range of financial institutions including banks,
credit unions, insurance companies and superannuation funds. The aim of
prudential regulation is, essentially, to ensure sound practices and
financial stability.
• ASIC: Consumer protection and market integrity. It has responsibility for
monitoring and reviewing financial industry codes of practice such as the EFT

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Code. ASIC also has responsibility for enforcing company law and the licensing and
conduct of corporations.
3. The Banking and Financial Services Ombudsman (BFSO) is not a regulator as such,
nor is it a government agency — it is a dispute resolution scheme that is part of the
regulatory framework.
4. The bank undertakes to receive money and to collect bills for its customer’s account.
The bank borrows the money and proceeds from the customer and undertakes to
repay them:
• on demand
• at the branch of the bank where the account is kept, during ordinary working
hours.
The bank promises to repay any part of the amount due against the unambiguous
written order of the customer addressed to the branch of the bank where the
account is kept.
Conversely, the bank will not pay away any part of the amount due to the customer
without such order or other compulsion recognised by law.
Any written order by the customer which requires the bank to pay a greater amount
than the balance standing to the credit of the customer or an agreed overdraft limit
may be wholly declined.
The bank will not cease to do business with the customer except on
reasonable notice.
The bank undertakes to observe secrecy with respect to the customer’s account,
information acquired from the account, and other information acquired in the
character of the customer’s banker (subject to certain exceptions).
The custom and usage of bankers is implied into the contract (if known
and accepted).
Both parties are bound by any statutory responsibilities or rights.
5. Under common law, the customer has only two duties:
• To use reasonable care in drawing cheques so as not to mislead the bank or
facilitate forgery.
• To notify the bank of known forgeries or misuse of the account.

© Kaplan Education Pty Ltd 1-2.71


Certificate IV in Finance and Mortgage Broking

Apply your knowledge 3: Privacy law


1. All Australian individuals have rights under the Privacy Act. The Privacy Act entitles
you to:
• know why your personal information is being collected, how it will be used and
who it will be disclosed to
• have the option of not identifying yourself, or of using a pseudonym in certain
circumstances
• ask for access to your personal information (including your health information)
• stop receiving unwanted direct marketing
• ask for your personal information that is incorrect to be corrected
• make a complaint about an entity covered by the Privacy Act, if you consider that
they have mishandled your personal information.
2. Australian and Norfolk Island Government agencies and all businesses and
not-for-profit organisations with an annual turnover greater than $3 million have
responsibilities under the Privacy Act subject to some exceptions.
As well, some small business operators (organisations with a turnover of $3 million
or less) are covered by the Privacy Act, including:
• private sector health service providers, including child care centres,
private schools and private tertiary educational institutions
• businesses that sell or purchase personal information
• credit reporting bodies
• contracted service providers for a Commonwealth contract
• employee associations registered or recognised under the Fair Work
(Registered Organisations) Act 2009 (Cth)
• businesses that have opted in to the Privacy Act
• businesses prescribed by the Regulations.
In addition, particular Acts and practices of some other small business operators are
covered by the Privacy Act, including:
• activities of reporting entities or authorised agents relating to the AML/CTF Act
and its Regulations and Rules
• Acts and practices concerning the operation of a residential tenancy database
• activities related to the conduct of a protection action ballot.
The Privacy Act also covers specified persons handling:
• credit reporting information — including credit reporting bodies, credit providers
(which includes energy and water utilities and telecommunication providers)
and certain other third parties
• tax file numbers under the tax file number guidelines
• personal information contained on the Personal Property Securities Register
• old conviction information under the Commonwealth spent convictions scheme
• e-health record information under the Personally Controlled Electronic Health
Records Act 2012 (Cth) and individual healthcare identifiers under the
Healthcare Identifiers Act 2010 (Cth).

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Topic 1-2: Legislation and codes of practice

3. The Privacy Act does not cover:


• state or Northern Territory Government agencies, including state and territory
public hospitals and health care facilities (which are covered under state and
territory legislation) except:
– certain Acts and practices related to personally controlled electronic health
records and individual healthcare identifiers
– entities prescribed by the Regulations
• ACT Government agencies handling health information or health records
• individuals acting in their own capacity, including your neighbours
• universities, other than private and ACT universities and the
Australian National University

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• public schools (except ACT public schools)
• in some circumstances, the handling of employee records by an organisation in
relation to current and former employment relationships
• small business operators, unless an exception applies (see above)
• media organisations acting in the course of journalism if the organisation is
publicly committed to observing published privacy standards
• registered political parties and political representatives.

Apply your knowledge 4: WHS in the FSI workplace


1. • Manual handling risks from moving furniture, or other heavy objects such as
reams of paper.
• Repetitive strain risks such as from poor workstation set-up, non-ergonomic
furniture or keyboard overuse.
• Eye strain from extended computer use or poor lighting conditions.
• Health risks from sedentary work.
• Travel risks, particularly for those involved in road travel to see clients.
2. • Automate or mechanise manual handling tasks where possible.
• Provide trolleys and hydraulic lifts for moving heavy objects.
• Buy items such as paper in smaller quantities so that there is no need to move
large loads.
• Implement workplace policies enabling workers move around the office or change
tasks frequently.
• Replace any faulty lighting, maintain lighting appropriately.
• Replace computer equipment and desk with furniture that has been designed for
ergonomic use, provide height adjustable workstations and chairs.
• Avoid road travel by making use of communications technologies such as mobile
phones, video conferencing or Skype.

© Kaplan Education Pty Ltd 1-2.73


Certificate IV in Finance and Mortgage Broking

Apply your knowledge 5: The Competition and Consumer Act


1. Your business automatically provides your customers with a basic set of consumer
guarantees when they purchase your goods or services. Consumer guarantees are
intended to ensure your customers have rights if they buy a product that breaks
easily, does not work or does not perform as generally expected.
The consumer guarantees cannot be excluded, modified or limited by contract.
If consumers have a problem with a good or service they have bought and believe
that it does not meet one or more of the consumer guarantees, they are free to
approach the seller, manufacturer or importer to obtain a remedy and businesses
cannot tell them otherwise.
The type of remedy will depend on the circumstances but may include a repair,
replacement, refund or having the service performed again.
2. Under the consumer guarantees, when a business provides services the:
• business must provide the services with due care and skill
• services must be fit for any disclosed purpose
• services must be provided within a reasonable time of being purchased, if there is
no agreed time frame.
3. If a product or service fails to meet a guarantee, a customer has a right to obtain a
remedy. The type of remedy, and who must provide it, will depend on the extent of
the problem.
4. • Businesses are required to provide a proof of transaction to customers for goods
or services valued at $75 or more.
• It is illegal to request payment for goods or services that the customer has not
agreed to buy.
• It illegal for a business to persuade a consumer to buy goods or services by
promising benefits if they help the business supply goods or services to
other customers.
• It is illegal to participate in, or to persuade someone to participate in,
a pyramid scheme.
• Unconscionable conduct in connection with the supply and acquisition of goods
and services is prohibited.
• It is illegal to use physical force, coerce or unduly harass someone about the
supply of, or payment for, goods or services.
5. • It is illegal for a business to make statements to their customers that are not
correct or are likely to create a false impression.
• Businesses cannot rely on small print and disclaimers as an excuse for a
misleading overall message.
• It is illegal to make false and misleading claims about the country of origin
of goods.
• Bait advertising is the illegal practice of advertising low prices on goods that are
not actually available or are available only in very limited quantities.
• When supplying or promoting goods or services, it is illegal to offer rebates, gifts,
prizes or other free items without intending to provide them.
• When you present prices to your customers, you must state the total price.
• When promoting your business give current, correct and relevant information,
ensure the overall impression is accurate, avoid ambiguous statements,
support claims with facts and documented evidence where appropriate,
note important limitations or exemptions and correct any misunderstandings.

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Topic 1-2: Legislation and codes of practice

Apply your knowledge 6: Anti-discrimination in the FSI


1. Discrimination based on disability, ethnicity, age, gender or sexuality might be
experienced by FSI customers when, for example, applying for credit or housing
loans, applying for insurance, opening accounts etc. It may be experienced in
something simple like the positioning of ATMs so that wheelchair-bound persons
cannot access the terminal, or the lack of provision of materials, such as product
disclosure statements in Braille or multiple languages.
2. Discrimination based on disability, ethnicity, age, gender or sexuality might be
experienced by FSI workers when applying for jobs within the FSI, or for those
seeking career advancement within the FSI. For example, discrimination against
women attaining senior roles or attaining salary equivalence with male colleagues is
endemic across many industries and the FSI is no different.

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Apply your knowledge 7: Keeping up with legislative change
1. Some of the methods of keeping up to date with legislative changes in the
FSI include:
• joining a professional body or association within the FSI
• reviewing websites of regulators such as APRA or ASIC
• reading financial services news on newspapers or websites regularly
• face-to-face networking within your industry
• working with a mentor
• attending conferences within the FSI
• reviewing trusted websites and blogs in the FSI
• using social networking sites such as Twitter or LinkedIn
• professional training on related FSI topics.
2. • Presentations and training sessions on impending changes.
• Sharing useful websites, blogs or social networking sites.
• Encouraging others to join professional associations.
• Encouraging attendance at professional conferences or trade fairs.
• Mentoring programs.
• Networking with others in the industry.
3. Some methods include:
• regular auditing and updating of policy, procedure and training materials to
ensure legislative compliance
• regular updates of websites and customer materials in line with any
legislative change
• planning for any legislative change in advance to ensure that documentation
is updated.

Apply your knowledge 8: Implementing legislative change


Some of the ways to implement legislative change in the FSI include:
• vigilance in record keeping
• constant monitoring of materials and documentation
• regular updates of policy, procedure and internal organisational documentation
• keeping abreast of legislative and regulatory change.

© Kaplan Education Pty Ltd 1-2.75