House debates

Wednesday, 5 February 2020

Bills

Financial Sector Reform (Hayne Royal Commission Response — Protecting Consumers (2019 Measures)) Bill 2019; Second Reading

11:38 am

Photo of Joanne RyanJoanne Ryan (Lalor, Australian Labor Party) Share this | Hansard source

I'm pleased to rise after the member for Mackellar's short contribution, as he prefaced, in the debate on the Financial Sector Reform (Hayne Royal Commission Response-Protecting Consumers (2019 Measures)) Bill 2019.

Labor supports this bill because Labor is always on the side of consumers and Australians. Unlike the coalition, which had to be dragged kicking and screaming to have a royal commission into banking and financial services, Labor led from the front to end the rorts and the rip-offs that were being identified as our residents and communities came to us with what they saw as an unfair system. We'll continue to push to implement the recommendations of that royal commission.

The Liberals and Nationals never wanted a royal commission into banking misconduct and now they continue to drag their feet in implementing the recommendations. We don't really need to remind those members in this House—but perhaps after the member for Mackellar's contribution it is worth noting that the Prime Minister himself voted 26 times against the Hayne royal commission. One year after receiving the final report—until this piece of legislation passes this House—only six of those recommendations have been implemented by this government. When this piece of legislation passes, that will take it to 10 of the 76 recommendations being implemented. On Saturday, it was the anniversary of those recommendations coming down. This government continues to drag its feet. There was a commitment that parts of the schedules of this legislation were going to be passed before the end of 2019, and, despite us sitting at the end of 2019, we had to wait until now for this bill to be before us. Not even the full horror of the banking royal commission, which revealed a culture of appalling rorts and rip-offs, was enough to spur this government into fast-enough action.

Schedule 1 of this bill goes to impact of unfair contract. It will bring insurance contracts from the Insurance Contracts Act into the unfair contracts regime under the ASIC Act. In 2010, Labor introduced the unfair contract terms regime to protect consumers from exploitation and unfairness. Under the regime, terms in standard contract terms are nullified if they are found to be unfair. A government report in 2012 told us that, from the data they had on insurance claims, there could be an up to $10 million a year hit for consumers in detriments in this space. And, because consumers were unlikely to report the issues, that detriment was unlikely to be reported and unlikely to be challenged. This is becoming increasingly important. With the effects of climate change worsening, the intensity and the number of natural disasters, like floods and bushfires, have increased since 2012 when this report was handed down and that creates more impetus for why this schedule is important and why Labor supports it today.

But the government has adopted this go-slow approach, despite being told by report after report that Australian insurance customers are suffering by now at least an estimated $20 million worth of detriments per annum in unfair contract terms. Perhaps the government should be more focused on fighting for a better deal for Australians rather than, as we've seen this week, fighting one another. This affects Australians affected by floods and fire—that's the bush! Instead, the National Party, members of the coalition, would rather fight over the deputy prime ministership.

The new law that we're talking about today will bring insurance contracts into that unfair contract terms regime, and this is welcomed. But there are some further sensible refinements needed to address the unique issues related to insurance contracts. These refinements will ensure that insurers can offer insurance contracts with the knowledge necessary to set prices and assess risks while consumers are protected by the new features of the regime.

Schedule 2 of the bill goes to funeral insurance—and it goes to the amendment that is before us now. Schedule 2 makes sure that funeral expenses policies are covered by the Australian Securities and Investments Commission Act, and the amendment does not change prepaid funeral arrangements which continue to operate as funeral benefits and, as most of us here across the chamber hear from our communities about, are seen to have benefit and are seen to deliver that benefit. We welcome that change. As the shadow minister told us, in the Hayne royal commission we heard the dreadful story of the Aboriginal Community Benefit Fund, which this schedule will change. This fund was neither Indigenous nor run for the benefit of communities. It is a for-profit company now rebranded as Youpla Group. This fund sold expensive funeral expenses policies to Indigenous Australians like Ms Tracey Walsh, an Indigenous woman from Mooroopna, in Victoria. These policies were marketed in a misleading way, leading to men and women like Tracey Walsh paying far more in premiums than their families could ever receive in funeral benefits. Until recently the fund even had an arrangement with Centrelink which let them deduct payments automatically from Centrelink recipients.

This amendment calls on the government to ensure that the 19,000 Australians who have these policies are protected and looked after beyond this legislation, that the government ensure that these Indigenous Australians and their families are protected and their interests seen to. Labor will be working closely with these communities to ensure that their voices are heard here in the parliament and around Australia if this amendment does not pass this parliament. So schedule 2 is welcome, but there are 19,000 Australians who already have policies in this space that need the government's attention and we need to ensure that they suffer no further negative impacts.

The third schedule goes to mortgage brokerage. Schedule 3 of the bill introduces a 'best interests' duty for mortgage brokers that will ensure that consumers interests are prioritised when a mortgage broker provides credit assistance. The draft regulations set out by the government require that the value of up-front commissions be linked to the amount drawn down by borrowers rather than the loan amount. It bans campaign and volume based commissions and payments and caps 'soft-dollar' benefits.

We support these reforms and note that the Productivity Commission has found the competitiveness of Australia's home loan market is now dependent on mortgage brokers. I know colleagues who have sat with local mortgage brokers and I know that, like others in this chamber, I spend a considerable amount of time with the mortgage brokers in my electorate hearing stories of opportunities where my local people are working diligently to assist people, particularly those on the margins, to enter the housing market. They are strong advocates for ensuring that, in this space, people behave in an honest and a responsible manner. We must, however, ensure that the reforms that are in this schedule work as they are meant to.

Despite promising a review of the mortgage broker reforms in three years, this appears nowhere in this legislation. I would further call on the government to ensure that that review happens so that we can have confidence that my local mortgage brokers, operating in a community that is in a growth corridor—we are building thousands of houses a year, and there are thousands of mortgage contracts being drawn up in a year. My community needs to know that they can, in all confidence, use a mortgage broker if that is their choice and know that they are going to be treated fairly in the longer term. The opposition will not be blocking any part of this legislation, but it is not a blank cheque. Labor will work tirelessly to make sure that this review occurs in three years.

In conclusion, it's a year on and the government haven't done enough to implement the royal commission's recommendations. At this moment, in this parliament, only six of the 76 recommendations have been implemented. When this bill passes the parliament there will be 10 of the 76 recommendations implemented. I know that I speak for those on this side of the House, who heard the harrowing stories and saw the rorts and the rip-offs, and I know that in my community we want to be able to know that our banking and financial services sector is operating in a fiscally and morally responsible way. The inaction coming from those opposite is not giving us comfort.

Their inaction means that families who suffer claims-handling issues from the devastating bushfires, hail storms or other extreme weather events this summer are still left without protection. The Morrison government missed their own deadline to introduce this legislation by the end of 2019, and I know that's going to reverberate in communities in Victoria who've been impacted dreadfully by the bushfires. No compensation scheme of last resort is in place for distraught customers. No new disciplinary system is in place to punish unscrupulous financial advisers. Mortgage brokers have no legislated duty to act in the best interest of their customers. Unscrupulous operators will be able to hawk junk insurance over the phone, and car dealers will still be able to claim commissions on dodgy add-on insurance products. ASIC still lacks essential enforcement powers, and industry codes of conduct remain completely unenforceable.

The Morrison government has a dismal record when it comes to going soft after this royal commission. The Prime Minister and the Treasurer pretended to care about the recommendations of the banking royal commission but their actions since tell us another story. While the coalition continues to ignore those recommendations, Labor will always push to fight for consumers, to protect the Australian people and to ensure that this parliament delivers on its promises.

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