Australian Consumer Data Right law: what you need to know

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Background information

Introduction - Open Banking and the Data Economy on its way

The Australian Government has released draft legislation which proposes to provide new rights for consumers and small businesses to their data from July 2019. The Treasury Laws Amendment (Consumer Data Right) Bill 2018 (Cth) (Bill) proposes a new “Consumer Data Right” (CDR). The legislation will have a major impact on the banking immediately, but soon also in the energy and telecommunications sectors. And it will have broad extra territorial reach as it will apply to CDR data generated or collected both in and outside Australia.

The regime aims to give more control to customers over data held about them. It will start a new era of Open Banking and reflects that Australia values a data economy and sees that as a way to enhance competition and innovation in banking, energy and telecommunications as it will make it easier for consumers to change suppliers. Consumers will be able to direct their current supplier to provide their data to other suppliers or comparison services.

However there will also be more privacy and data sharing obligations and additional penalties for breach.

Dentons' Australian privacy team explain the implications for the banking, energy and telecommunications sectors.

Why a new Consumer Data Right?

Australia thinks its data is an ‘underutilised resource’1 at the moment – mainly due to risk aversion, culture and suspicion around business use of data. Consumers in Australia traditionally have had weak rights to access the data held by businesses about them as often requests to access are rejected as businesses think that is the best way to minimise risk to the business.

In 2017, the Australian Government’s Productivity Commission reported on issues surrounding Data Availability and Use and called for change to the rules. The Australian Treasury also reviewed Open Banking and considered how a consumer data right could be put into place and how this could promote competition. The result is the release of the Bill which shows the draft law.2

What is a Consumer Data Right?

Consumer data rights are rights of consumers to direct their supplier (such as their bank, utility company or telco) to share with others the supplier’s information held about the consumer.

The Bill defines a ‘CDR consumer’ who will have rights to trade and use their data by requiring certain data holders to transfer it to alternative data holders. The intent is to enable customers to more easily switch providers as they can share their data more easily between them. Transition and transfer will be seamless, thus promoting innovation and competition.

What is a CDR consumer?

A ‘CDR consumer’ in the Bill is defined more expansively than ‘consumer’ under Australian’s main consumer protection legislation, the Competition and Consumer Act 2010 (Cth) (CCA).

The Bill extends coverage to business customers and individual customers who are 'reasonably identifiable' from CDR data.3 So individuals, businesses and trusts will have Consumer Data Rights as will small and medium sized businesses (SMEs).

An unresolved issue is whether former customers will have a CDRs and so a right to access data concerning their prior accounts. It isn’t clear if there will be a process for former customers or the timeframe over which former customers might exercise their Consumer Data Rights once they cease being a customer.

Another unresolved issue is the application of the CDR regime to consumers who do not have access to online services. The CDR regime relies on an assumption that access to and sharing of data will be by digital means alone.

Reach and regulation

Designated Sectors and reach outside Australia

Under the proposed law, the Australian Treasurer can designate industry sectors to which the CDR will apply (Designated Sectors). So far, the Australian Government has confirmed that the banking sector will be the first designated sector and the telecommunications and energy sectors will be next. 4

The current proposals include all Authorised Deposit-Taking Institutions (ADIs) other than foreign bank branches as regulated data holders.

The geographic scope of the CDR is broad as it will apply to CDR data generated or collected both in Australia and outside Australia by or on behalf of a company registered under the Australian Corporations Act 2001 (Cth) or an Australian citizen or permanent resident.

Multiple regulators proposed

The Australian Government intends on a multiple-regulator model, with the ACCC as lead regulator supported by the federal privacy regulator in Australia, the Office of the Australian Information Commissioner (OAIC).

Australia’s consumer regulator, the Australian Competition and Consumer Commission (ACCC) will have an enforcement role and it has developed consumer data rules to provide more detail about how the regime will work. The ACCC’s role will be to promote competition and customer focussed outcomes,5 while the OAIC will be focussed on ensuring privacy protection and overseeing privacy complaints.

The Bill proposes a new power for the ACCC to recognise an external dispute resolution scheme for the resolution of disputes involving the CDR for one or more designated sectors. The draft explanatory materials envisage that the Australian Financial Complaints Authority (AFCA) will be recognised by the ACCC to undertake the external dispute resolution role in relation to Open Banking. Recipients of banking information will therefore need to become a member of AFCA.

These regulators will be supported also by a new Data Standards Body who will be responsible for establishing data standards for how data is to be shared between suppliers in the Designated Sectors.

Privacy and data

New privacy safeguards

The Bill provides for new enhanced 'Privacy Safeguards' and an accreditation process. The Privacy Safeguards will be incorporated under the CCA and will apply irrespective of whether data belongs to an individual or a business. This is a departure from the current approach of the Australian Privacy Principles which are established under the Privacy Act 1988 (Cth) and which regulate ‘personal information’. Breach of the new privacy safeguards will attract civil penalties and the OAIC will have additional powers to enforce them through the courts.

What are the proposed rules for sharing

A Consumer Data Right Rules Framework (Rules Framework) was released by the ACCC in September 2018 for consultation. 6 Under the Rules Framework a data holder will be required to share CDR data with the consumer themselves or accredited data recipients (ADR).

The ACCC proposals provide that a CDR consumer can do any of the following:

  • request their CDR data from a data holder using:
    • an online mechanism such as a website or application if the customer uses that same platform to perform actions on their account; or
    • an open application programming interface (API);
  • nominate specific CDR data in their request; and
  • receive their CDR data in a variety of electronic formats.

How data will be transferred - technical standards and their contractual effect

The legislation does not detail how CDR data will be transferred. Instead the Data Standards Body will develop the technical standards for data sharing.

Data61 (the data arm of CSIRO who is the Australian Government's research organisation) has been appointed as the interim standards body. It has published a ‘working draft’ of the standards which will underpin the new Consumer Data Right regime. Data61 has also posted a set of draft banking and common application program interface (API) standards on GitHub7 which is guided by four ‘outcome principles’8 and eight ‘technical principles’. 9

These principles are the basis for the development of the standards for the Consumer Data Right. These standards may be sector specific or general and mandatory as part of the ACCC's Rules Framework or voluntary. It is likely that the final standards will provide that CDR data can be transferred via APIs (software that allows different applications to communicate).

Once the CDR regime commences, a business in a CDR designated sector will have to make available in a machine-readable format a range of data about a CDR consumer’s use of their services.

Consumers will be able to then choose to share their data with accredited third parties.

Where the standards are mandatory, they will have the effect of a multi-lateral contract between data holders and accredited recipients which can be enforced by the ACCC or CDR consumers and other aggrieved persons on application to a court.

Which data is CDR data

CDR data is defined broadly to minimise the risk of organisations getting around the rules by transforming their data so it falls outside the CDR regulation.

CRD data includes information designated as CDR data for the relevant sector, as well as any information derived from that designated data and any information derived from that derived information. In short, this means any data that the Treasurer specifies as well as data derived from that data.

The Australian Banking Association (ABA) has criticised this scope and its breadth10 , arguing that, for the system of data exchange to be successful, it must protect the intellectual property of data holders. The ABA has advocated that data in scope should be limited to raw directly-captured basic data only rather than any data that ‘draws on the proprietary insights of the institution holding the data — that is data that has been enriched or derived by the institution such as credit scoring models or other forms of intellectual property’. In particular, the ABA has noted that the inclusion of such value-added data means that the CDR is wider in scope than foreign regimes, such as the European Union’s General Data Protection Regulation (GDPR) which applies to data that is ‘provided by’ the data subject to the data controller.

The Bill contemplates that the ACCC's Rules Framework may require disclosure of CDR data which does not relate to any one consumer such as where a person is not specifically identifiable – with the aim to create a product disclosure regime.

Can fees be charged for data transfer

Costs may be high if organisations in Designated Sectors are required to transfer data which is not currently being collected by them. The Bill does not prohibit fees being charged for data transfers.

The draft legislation includes provisions that allow the ACCC to make rules that specify a fee to be charged but they do not mandate the ACCC to do so.

The ACCC has proposed in its first version of the Rules Framework that sharing of certain data should not attract fees.

It remains to be seen whether the final regime implemented will allow, for example, for transfers of value-added data or ‘derived data’ to be charged.

Penalties that will apply for breach

Penalties of up to AUD$420,000 for individuals (or AUD$2.1 million for businesses) may be imposed for misleading conduct relating to the transfer of CDR data or breaches of the new Privacy Safeguards.  

What should banks, utility companies and telcos do now?

Businesses in Designated Sectors should be aware that the regime will be phased in.

  • The new Consumer Data Right will take effect from July 2019 in the banking sector. The four major banks in Australia will need to make data available on credit and debit card, deposit and transaction accounts by 1 July 2019, and mortgages by 1 February 2020, including for joint accounts where digital authorisations to transact on the accounts already exist.
  • All remaining ADIs must implement Open Banking 12 months later.
  • Consumer data on all products recommended by the Open Banking review will need to be available by 1 July 2020. Data relating to the terms of banking products will become available at the same time as transaction data in relation to those products.

Those in the banking, energy and telecommunications sectors should prepare for the new rules by doing the following

  • Consider if, how and when your sector or organisation will be caught by the new law and what data (and where it is held around the world) will be within scope.
  • Plan how to comply. Review your operations and consider the systems or processes needed to comply. For example:
    • Implement functional capability by developing APIs that meet the technical standards.
    • Establish procedures for dealing with consumer requests for CDR data transfers and policies to govern them. Consider the feasibility of making generic product data available via an API in accordance with technical standards – for example, where you have existing obligations to disclose information on products and services such as fees.
    • Train staff on how to comply with the new laws.
  • Consider how your business might be able to take advantage of the CDR regime – if there was more switch-ability of consumers in your sector.
  • Consider how your business might be disadvantaged if there was more switch-ability in your sector and which valuable data sets might be required to transfer.

     


1. As described by the Australian Productivity Commission in its Productivity Commission Inquiry Report Overview & Recommendations on Data Availability and Use No. 82, 31 March 2017 at page 6.

2. Treasury Laws Amendment (Consumer Data Right) Bill 2018 (Cth) at https://treasury.gov.au/consultation/c2018-t316972/

3. The ACCC is seeking views on if the rights to CDR data should be extended to former or offline bank customers.

4. Announced 26 November 2017 – see https://ministers.pmc.gov.au/taylor/2017/australians-own-their-own-banking-energy-phone-and-internet-data

5. See https://www.accc.gov.au/focus-areas/consumer-data-right

6. https://www.accc.gov.au/focus-areas/consumer-data-right/accc-consultation-on-rules-framework

7. See https://consumerdatastandardsaustralia.github.io/standards/#introduction

8. These are that 1. APIs are secure; 2. APIs use open standards; 3. APIs provide a good customer experience; and 4. APIs provide a good developer experience

9. These require APIs to be 1. RESTful – that is, be an API that uses HTTP requests to GET, PUT, POST and DELETE data;

10. See http://www.ausbanking.org.au/submissions/latest-submissions

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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