Queensland Regulatory Impact Statement for SL No. 311 Fair Trading Act 1978 FAIR TRADING (FEES) AMENDMENT REGULATION (No. 1) 1. TITLE 2. BACKGROUND The Office of Fair Trading administers a number of Acts which impose occupational licensing requirements. These licensing requirements are designed for the protection of both consumers and industry alike in ensuring reputable business practices across a wide range of industries. It is proposed to increase the initial license application s under the Security Providers Act 1993, the Second-hand Dealers and Collectors Act 1984, the Pawnbrokers Act 1984, the Travel Agents Act 1988 and the Property Agents and Motor Dealers Act 2000 ( the Licensing Acts ). It is also proposed to increase s payable for the registration of encumbrances, the searching of the register and other services provided under the Motor Vehicles Securities Act 1986. The Security Providers Act licenses and regulates the following occupations which are collectively defined as security providers : private investigators, crowd controllers, security officers, and security firms. Private investigators typically investigate missing persons, conduct covert surveillance operations and factual investigations, obtain photographic evidence and conduct background checks on behalf of their clients. Crowd controllers or bouncers are employed to keep order around public places such as nightclubs and hotels. Security officers provide services such as
2 mobile and dog patrols, act as armed and unarmed guards and respond to alarms. The Second-hand Dealers and Collectors Act licenses and regulates second-hand dealers and collectors and the Pawnbrokers Act performs a similar function in the pawnbroking industry. A second-hand dealer carries on the business of dealing in or buying, selling or exchanging second-hand goods. A pawnbroker carries on the business of advancing money on articles taken as a pawn or pledge in return for interest. Second-hand dealing and pawnbroking are related businesses in that both involve the resale of pre-owned goods. The Travel Agents Act provides for the licensing of travel agents in Queensland and the regulation of travel agency conduct. It also provides access to a national compensation scheme and regulates conduct to prevent dishonesty and insolvent trading. The Property Agents and Motor Dealers Act licenses and otherwise regulates real estate agents, restricted letting agents, pastoral houses, auctioneers, property developers, motor dealers and commercial agents. It includes conduct restrictions such as: placing caps on commission rates; trust account requirements and provisions to prevent conflicts of interest and fraud. It also establishes the Property Agents and Motor Dealers Tribunal. This tribunal has jurisdiction to take disciplinary action, review the department s licensing and registration decisions, to determine large consumer claims against traders and to review the Department s minor claims decisions. It can also issue orders to a person for reimbursement of the Claim Fund established under the Act. In establishing a system of registration of encumbrances over motor vehicles, the Motor Vehicles Securities Act provides certainty for financiers by prescribing a priority system for encumbrances. It also provides benefits for consumers who can search the Register of Encumbered Vehicles (REVS) prior to buying a vehicle to check that it is unencumbered. The REVS register is linked to similar registers in other states. However, registration, searching and associated s are established separately by the different states. It is proposed to increase the REVS s in Queensland, but to a level which will still be comparable with those in other states. The REVS register can be accessed electronically in Queensland through information brokers, who provide services mainly to financiers and used motor dealers. The register can also be accessed directly from the Office of Fair Trading.
3 3. STAKEHOLDERS 3.1 Licensing Acts Stakeholders affected by the increases in initial application s for licenses are: industry participants, especially new entrants to the various regulated industries applying for licences; the government in regulating industry to ensure that operators are suitable people and that compliance with the regulatory regimes is enforced; consumers and the general public who may be indirectly affected by licensees services. 3.2 Motor Vehicles Securities Act Stakeholders affected by the increase in REVS s are: industry participants, ie: financiers, motor dealers and information brokers; the government, in providing registration and searching services and also in enforcing requirements under the Property Agents and Motor Dealers Act for the provision of security interest certificates to consumers; and consumers who purchase motor vehicles. 4. AUTHORISING LAW The following legislative provisions allow for the making of regulations imposing s under the various Acts: Security Providers Act section 54(2)(c) Second-hand Dealers and Collectors Act section 72(2)(d) Pawnbrokers Act section 67(1)(d) Travel Agents Act section 57(2)(c)
4 Property Agents and Motor Dealers Act section 600(2)(a); and Motor Vehicles Securities Act section 39(2)(a). 5. POLICY OBJECTIVE 5.1 Licensing Acts The s payable under the Licensing Acts fund the cost to government of administering the licensing and registration schemes. However, the licensing and registration components comprise just one aspect of the legislative regimes. Integral to the regulation of the various industries are associated restrictions on conduct which must be enforced through government compliance activity including warning mechanisms and prosecutions. Also integral to the success of this legislation is a robust community education scheme targeted at both industry and consumers. The objectives of the Security Providers Act are to ensure that: the community is protected from unacceptable behaviour of security providers; only persons of an acceptable character operate as security providers; operators possess a minimum level of competency in the delivery of services to the public; and industry participants behave according to community expectations. The licensing requirements are the primary means of securing these objectives. The Second-hand Dealers and Collectors Act and the Pawnbrokers Act impose similar licensing and business conduct requirements on operators. The objectives of the legislation are to lessen the risk to consumers of purchasing stolen goods, but more significantly, their focus is on crime detection, investigation and prosecution. These objectives are achieved through licensing, law enforcement and detection mechanisms which seek to maximise the interception of stolen goods, identify persons involved in the theft of goods, and identify persons and businesses which may be used in the disposal of stolen goods. The objectives are achieved by licensing dealers, regulating conduct to protect consumers from exposure to the risk of purchasing stolen goods
5 and investigating and prosecuting breaches of the Acts. Licensing restrictions provide a filter mechanism and prevent those persons who have criminal convictions from being licensed and in turn participating in pawnbroking, second-hand dealing or collecting businesses. The objective of the Travel Agents Act is to protect consumers against financial losses caused by the travel industry. This is achieved by requiring the person in charge of a travel agency to be licensed according to standards set for qualifications and experience and also by providing access to the national compensation scheme. Fitness and propriety tests are conducted on all persons involved in the management of the agency. The entry qualifications for licences under the Property Agents and Motor Dealers Act are based on competency and suitability criteria. The objectives of the Act are to protect consumers while maintaining a large degree of free market activity. The Property Agents and Motor Dealers Act complements the system of registration of encumbrances established under the Motor Vehicles Securities Act by requiring used motor dealers must guarantee clear title to a vehicle prior to sale, and issue a REVS certificate to buyers to verify that the vehicle is unencumbered. Motor Vehicles Securities Act 1986 The objective of this Act is to provide certainty and security for financiers who wish to lend money for the purchase of motor vehicles. The Act ensures that the priority of a financier s mortgage is maintained against any later mortgages. It also ensures that once a mortgage is included on the register it cannot be extinguished through sale or other dealing with the vehicle. The existence of such a register facilitates the provision of credit to the community at large and therefore stimulates business in both the financial services and motor dealing industries. The availability of a searching facility means that consumers and financiers can ensure that a vehicle is unencumbered prior to purchase. 6. LEGISLATIVE INTENT It is proposed that increases will be introduced to support the regulatory regimes as set out in the Schedule.
6 6.1 Licensing Acts In the case of one year licences the increases amount to a doubling of s payable on the application and issue of a new licence. These new s will apply to initial applications for licences only and not to renewals. As such, they will affect the one-off cost of setting up business in the future. Under the Property Agents and Motor Dealers Act, three year licences may currently be issued. In the case of three year licences, only that part of the licence issue referable to the first year of the licence will be increased. This means that the licence issue will be increased by one third (see Schedule for further details). All of these s are an integral part of the licensing system, which enables government to enforce and maintain commercial standards of operators and to protect consumers. Motor Vehicles Securities Act A wide range of s under this Act will be increased, as set out in the Schedule. 7. CONSISTENCY WITH THE AUTHORISING LAW The proposed regulation is consistent with the authorising law. 8. CONSISTENCY WITH OTHER LEGISLATION The proposed regulation does not conflict with any other legislation. 9. OPTIONS AND ALTERNATIVES The RIS evaluates two possible alternatives under both the Licensing Acts and the Motor Vehicles Securities Act. The first considers the costs and benefits of the proposed increase in s. The second considers the costs and benefits of not implementing the proposed increase.
7 Licensing Acts 9.1.1 Option 1 Fee increases 9.1.1.1 Impact on Industry Occupational licensing, together with the associated training requirements and conduct regulation create benefits to industry generally in ensuring a level playing field for all Queensland participants. Appropriate training benefits industry by ensuring that the services provided are of a high standard, thereby increasing the efficiency and reputation of service providers. Industry will benefit from increases by enabling the Office of Fair Trading to more effectively monitor compliance, handle consumer and industry complaints and prosecute serious breaches of both the licensing requirements and conduct provisions more generally. Occupations such as second-hand dealing, pawnbroking, used car sales and real estate sales can suffer from a poor image in the wider community. Licensing, with adequate regulatory support, promotes confidence in the integrity of the industry both from a consumer and industry perspective. Potential flow-on effects of achieving greater probity and integrity in these industries include the containment of associated professional liability insurance. In the security industry there are additional benefits to training since not only financial, but personal safety issues are at stake. Security providers operate in a hazardous environment, and adequate training seeks to reduce substantial risks to their personal safety as well as to the safety of the public at large. Once again, there are secondary benefits in the potential containment of medical and insurance costs for industry and in improving consumer confidence. Similarly in the travel agency industry, illegal or unethical behaviour can have wide negative effects on business beyond the particular agency involved. Such behaviour could lead to financial losses and injury to reputations of associated businesses in the accommodation, retail and travel sectors. The costs to industry of licensing include the initial application, the annual s and the costs of training courses for potential applicants. It is noted that of these costs, only the initial application s will be increased
8 under the proposed regulation, as set out above. Ongoing costs of running a business will remain the same. However, the increases will have a negative impact on industry as there will be higher start-up costs for the businesses affected. 9.1.1.2 Impact on Consumers Licensing of occupational groups gives consumers an indication that a potential supplier has been examined and assessed as having the character and skills required to undertake the work covered by the licence. This helps consumers choose between good and poor quality providers and promotes competition. The benefits for consumers are in the immediate sense financial ones, i.e. they are more likely to get value for money in any individual transaction. But the financial benefits can be wider. For example, unethical practices in the property development industry have in the past led to artificial inflation of real estate prices in some sectors. Licensing and regulation therefore benefits not just individual consumers in specific transactions, but purchasers of real estate across markets. Non-financial benefits are also significant. For instance, in the residential home buying sector where consumers purchases are often heavily financed, emotional and family stability can be at stake should consumers borrow more money than the house is ultimately worth at sale. In the security industry sector, as pointed out above, the effects of greater personal safety and security flow on not just to the purchasers of these services, but to the broader community. In the case of private investigators, licensing ensures that confidential information is used in a way that does not breach privacy laws. Protection is afforded to consumers through the Office s compliance activities which identify and prosecute private investigators who do not comply with the Act. Inquiries made by private investigators can also contribute towards the peace of mind of clients in sensitive domestic situations. The costs to consumers of increasing the licensing s will be felt to the extent that they are passed on to the end user. However, if the industry is sufficiently competitive, it may be that some of these costs are absorbed into profit margins. Once again it is noted that only the initial application s are being increased, and that ongoing costs for business will remain the same under the proposed regulation.
9 9.1.1.3 Impact on Government In the 2001 to financial year, 3037 new licences and 5,577 certificates were granted under the Property Agents and Motor Dealers Act and 4,781 licences under the remainder of the Licensing Acts. It is estimated that the proposed increases would lead to an additional $2.29 million per annum being collected by the Office of Fair Trading in the years immediately following the increases. The key benefit of the increases is that they will add to the financial resources available to the Office of Fair Trading which monitors and enforces the Licensing Acts. The Office administers and enforces other key consumer protection legislation which applies across industries, namely the Fair Trading Act 1988. Increased resources by way of increases will enable the Office to provide a greater level of protection to consumers by: educating industry on compliance with legislation; educating consumers as to their rights; identifying and dealing with service providers who do not comply with the legislation; and developing and updating legislation in order to maintain a desirable balance between regulation and free market activities. The direct costs of licensing for the Office of Fair Trading include: administrative costs for wages; leasing and equipment costs; the maintenance of database systems; conducting fitness checks on applicants; production and other incidental costs such as purchasing identification card sleeves and production of licenses. The Office of Fair Trading also pays Queensland Police a to conduct Queensland criminal history checks on applicants. Legal costs are incurred in administering and enforcing the legislation. 9.1.2 Option 2 No increases 9.1.2.1 Impact on Industry The benefits to industry of this option are that, with no increases, the cost of establishing a new business in any of the relevant occupational areas will remain at current levels. The amount of the increased is set out in
10 the Schedule. As pointed out above, this cost will only be felt by industry to the extent that it is not be passed on to consumers. The costs of this option to industry are found in the risk that it will result in unacceptable low levels of monitoring compliance with and enforcement of the regulatory regimes. With less resources, there would be a greater risk that unlicensed operators would be allowed to flourish. Such illegal operators, offering lower prices, potentially take business away from the legitimate ones. There would also be greater risk that licensed operators would conduct business in illegal and unethical ways and thus bring the industries into disrepute. 9.1.2.2 Impact on Consumers The benefits of the increase would be evident in the capacity of the Office of Fair Trading to maintain and potentially increase regulatory activity, as explained in section 9.1.1.3 above. Negative impacts of this option therefore include unacceptably low enforcement activities; greater risks of operators practising without licences, and resulting reductions in market and consumer confidence. To the extent that the costs of any increase would be passed on to consumers, the benefits in not increasing the s would be felt by consumers since current prices for land, good and services would remain unaffected. 9.1.2.3 Impact on Government If s are not increased, government funding for regulatory activities in the fair trading area will remain at current levels. The Office of Fair Trading is the primary agency in the Queensland Government responsible for marketplace regulation. Economic and social change and the inadequacies of current regulatory responses to many existing and emerging marketplace issues are driving a growing community expectation that government will provide more effective regulation. There is a risk that these expectations will not be met.
11 9.2 Motor Vehicles Securities Act 9.2.1 Option 1 Fee increases 9.2.1.1 Impact on Industry The REVS s for certificates and searches are in nearly all cases passed on by the motor dealers and financiers to consumers. It is clear that the cost of the increased s will not be enough to deter consumers from buying used vehicles. It is therefore considered that there is no direct cost to these industries in increasing the s. There may be some costs to the information brokers in the form of increased bad debts. The information brokers collect s under the Motor Vehicles Securities Regulation for the Office of Fair Trading and also charge a commercial service to end users for access to their facilities. The lower the regulated s, the less money the brokers will need to collect from their clients and pass on to the Office of Fair Trading. Therefore, the lower the regulated s, the less risk to the brokers in the amount of the bad debts acquired. 9.2.1.2 Impact on Consumers The purchase of a motor vehicle is not a high frequency transaction for the individual consumer. The REVS s themselves are low and under the proposed regulation will still be low, compared with the average cost of a used motor vehicle. A for an online search certificate is currently $4.70 and would rise to $8.70. Where a vehicle is bought from a dealer, in most cases, the certificate will be obtained online. Where certificates are obtained directly from the Office of Fair Trading, as in the case of a private sale, the is $7.10 and would increase to $8.90. The current charge for the registration of a security interest online is $5.70 and under the proposed increase would be $6.50. Most financiers register their interests online. There will be some increased costs to consumers under the proposed regulation. However, it is noted that the low frequency of transactions by individual consumers and the relatively low level of the proposed s
12 mean that the increased costs in individual cases will not be great. The aggregate community cost will be spread over a very wide constituency. The benefits to consumers will be in the increased resources of the Office of Fair Trading allowing it to maintain and increase the scope of its regulatory, compliance and educational mandate, as set out in paragraph 9.2.1.3 below. 9.2.1.3 Impact on Government There would be no costs to government as a result of the proposed increases. The benefit of the increase is that it will add to the financial resources available to the Office of Fair Trading in administering the REVS register as well as associated compliance, regulatory and educational activities. Direct administrative costs comprise personnel, office space, systems administration and maintenance. Increased resourcing would mean that the Office could provide a greater level of protection to consumers, motor dealers and financiers by: increasing legislative review and development; enforcing compliance with associated legislation such as the Property Agents and Motor Dealers Act and the Consumer Credit Code; educating the public on the benefits of searching the register in the case of private sales; and developing systems to increase data integrity on the REVS register. Queensland currently lags behind other states in the assurance of the integrity of data it places on the register. Other states cross-check vehicle identification numbers against vehicle owner registration data. To date, due to inadequate systems development, Queensland has not been able to offer this safeguard.
13 9.2.2 Option 2 No Fee increases 9.2.2.1 Impact on Industry The benefits for industry of not having a increase will mainly be felt by the information brokers. As explained above, this option should lead to lower amounts of bad debts, in the form of unpaid regulated s by their clients. The costs to industry more generally of this option are in the risk of underdeveloped information systems in the Office of Fair Trading including unacceptable levels of data integrity. It could also lead to unacceptably low levels of compliance and enforcement activity in the financial services and motor dealing industries more generally. 9.2.2.2 Impact on Consumers The benefits for consumers of not increasing the s will be felt in lower costs for them in purchasing a REVS certificate and in registration of a security interest. These costs are nearly always passed on by business to the consumers. The costs for consumers of this option would be in the risk of unacceptably low levels of regulatory and educational activities by the Office of Fair Trading in the area of consumer protection. The specific activities to be affected are set out in section 9.2.1.3 above and section 9.2.2.3 below. 9.2.2.3 Impact on Government This option has substantial costs for government in lower resources being available to the Office of Fair Trading for its regulatory and enforcement activities. The Office s activities would be adversely affected in the areas of: legislative review and development; compliance with associated legislation such as the Property Agents and Motor Dealers Act and the Consumer Credit Code;
14 consumer education, especially in the area of private motor vehicle sales; and development of information systems promoting data integrity on REVS. 10. CONSISTENCY WITH FUNDAMENTAL LEGISLATIVE PRINCIPLES The legislation is consistent with fundamental legislative principles. 11. NATIONAL COMPETITION POLICY The information contained in this RIS and the information derived from the resulting consultation will be used to inform the preparation of a public benefit test report to satisfy Queensland s obligations under National Competition Policy.
15 SCHEDULE PROPERTY AGENTS AND MOTOR DEALERS ACT Type of Length Existing Proposed Application payable for all licences $51.00 $102.00 Corporate licence, issue : 1 year licence 1 year 3 years $196.00 $589.00 $392.00 $785.00 Personal Licence, issue - pastoral house auctioneer 1 year 3 years $271.00 $813.00 $542.00 $1084.00 Personal Licence, issue - pastoral house manager 1 year 3 years $140.00 $420.00 $280.00 $560.00 Personal licence, issue - restricted letting agent, real estate agent, pastoral house director, auctioneer, motor dealer, commercial agent, property developer, property developer director Application for certificate of registration for employees 1 year 3 years $382.00 $1145.00 $764.00 $1527.00 $30.70 $61.40 Certificate of registration for employees, issue 1 year 3 years $71.00 $213.00 $142.00 $284.00 Renewals and licences s payable in subsequent years Will remain the same in all cases
16 SECURITY PROVIDERS ACT Type of Existing Proposed Application for security firm s licence Application for individual licence (single) Application for Individual licence (dual) (i.e. licence for two occupations under the Act) Renewals and licence s payable in subsequent years $470.00 $940.00 $93.50 $187.00 $118.00 $236.00 Will remain the same in all cases SECOND-HAND DEALERS AND COLLECTORS ACT Type of Existing Proposed Application for dealer s licence $236.00 $472.00 Renewals and licence s payable in subsequent years Will remain the same in all cases
17 PAWNBROKERS ACT Type of Existing Proposed Application for licence $395.00 $790.00 Renewals and licence s payable in subsequent years Will remain the same in all cases TRAVEL AGENTS ACT Type of Existing Proposed Application for licence $47.00 $94.00 Initial annual licence - individual one place of business Initial annual licence corporation one place of business Renewals and licence s payable in subsequent years $190.00 $380.00 $457.00 $914.00 Will remain the same in all cases
18 MOTOR VEHICLES SECURITIES ACT Type of Existing Proposed Approved account holder, certificate online Approved account holder, certificate other means $4.70 $8.70 $7.10 $8.90 Certificate other person $8.10 $10.00 Application to register on paper $12.80 $14.00 Application to register online $5.70 $6.50 Application for assignment of security interest $16.30 $18.00 Change particulars on register $5.70 $7.40 Change particulars online $3.40 $3.80 Renewal on paper $5.70 $7.40 Renewal online $3.40 $3.80 Correction on paper $5.70 $7.00 Correction online $3.40 $3.80 Application for approval for a person to hold an account for s payable under the Act $17.30 $18.00 List of security interests $16.30 $18.00
19 ENDNOTES 1. Laid before the Legislative Assembly on... 2. The administering agency is the Department of Tourism, Racing and Fair Trading. State of Queensland Authorised by the Parliamentary Counsel and printed by the Government Printer