Thursday, 25 February 2021
National Consumer Credit Protection Amendment (Supporting Economic Recovery) Bill 2020; Second Reading
I rise to speak on the National Consumer Credit Protection Amendment (Supporting Economic Recovery) Bill 2020. The primary purpose of this bill, as we now know from the earlier speakers, is to unwind the responsible lending obligations which apply to most consumer credit contracts. The reason that we are opposed to this is that it is an attempt to unwind or ignore the very first recommendation of the Hayne royal commission: that the responsible lending obligations shouldn't be amended. It beggars belief in lots of ways that those opposite, who opposed the royal commission for two years, voting against it 26 times, and dragged their feet on implementing the recommendations—only a third of them have been implemented and are in force, two years after the report was received—are now in here arguing that the government should be allowed to contradict the very first recommendations, on responsible lending laws, which act as consumer protections in the banking system.
Our view is that the government should not be using the pandemic or the recession and its aftermath as an excuse to do what they always want to do, which is to unwind important consumer protections in the financial system. It's like they weren't paying attention to the Hayne royal commission and the rorts and rip-offs that it uncovered. Those opposite get given a big report about all the rorts and rip-offs in the banking system, and their first inclination is: 'How can we unwind these protections, which the royal commission advised in its first recommendation that we should keep?' That is ridiculous. It really is next level to use this pandemic as an excuse to go after consumers. We won't be supporting that effort. We won't be supporting it for a range of reasons that I'm happy to take the House through.
In addition to that major change, the bill contains a number of other changes to the law relating to small amount credit contracts, or SACCs, and consumer leases. It sets a cap on payments for small amount credit contracts and leases: 20 per cent of a consumer's income, or 10 per cent if it's another arrangement. It sets a maximum cost of four per cent per month for consumer leases, requires that payments be equally spread and prohibits providers from charging monthly fees on the residual term if it is paid off early. Others have gone through the detail of the bill as it relates to those small amount credit contracts.
But we need to remember that this is primarily about unwinding those responsible lending laws. The responsible lending laws were introduced in 2009—as you may recall, Deputy Speaker—by the Rudd Labor government. They introduced the National Consumer Credit Protection Act, which put in place a range of directives around the conduct of credit providers, including requiring them to abide by a set of responsible lending obligations. What those obligations require is that credit providers make reasonable inquiries about a customer and assess whether a credit product will be unsuitable for a customer. In other words, these responsible lending laws are about making sure that people don't get in over their head, that people aren't caught signing up to loans that they can't repay, with all of the damage that that might do to their financial situation.
There's a big issue here, a big set of facts. If the government doesn't want to take our word for it that this is not necessary and not wise and not well motivated, just consider what's actually happening to credit access in this economy. We are all for the free flow of finance. We understand how crucial that is to this recovery from the recession, obviously. We want people to be able to access funds and access loans and borrow and pay for homes and pay for cars and all of that sort of thing. We want that to work as efficiently as possible. Those opposite—including the speaker before me, unfortunately—were going on about how there'd been some kind of choking of credit, that the laws are responsible for that, and that's why we need to change it. But, respectfully to that member, that is complete and utter rubbish.
This bill is a solution looking for a problem. If you listen to Kevin Davis from the University of Melbourne, he says:
… it is difficult to discern evidence in public statistics that responsible lending obligations have adversely affected loan growth or the cost of household-sector borrowing.
It's just absolute rubbish to suggest that we need to remove these consumer protections because there's been this chokehold on lending. The facts tell a very different story. Just look at the recent ABS data, the lending indicators for December 2020—they were released earlier this month—showing the total value of new loan commitments for new housing and the value of owner-occupied home loan commitments each reached record highs in December 2020—record highs! Yet still those characters over there will jump up, one after another, and say, 'We've got a big problem here: we're not getting enough loan commitments.' We had record highs in December 2020, the highest ever.
Another stat: the total value of new loan commitments for housing rose 8.6 per cent to $26 billion in 2020. That's a 31.2 per cent increase on December in the year before. It is laughable that they're pretending that there's been a choking off of credit because of these responsible lending laws. The responsible lending laws are about making sure that lending is appropriate, that people don't get in over their heads. They say there's been a choking off, but the facts show it's at record levels. Lending is at record levels.
A third and final fact is that the number of owner-occupied first home buyer loan commitments rose 9.3 per cent to reach 15,205. That's a 56.6 per increase cent since December 2019. This is the highest level since June 2009.
All of those facts absolutely torpedo the central premise of those opposite arguing for the removal of consumer protections. If it's not about removing obstacles to lending, which is at record highs, we know what it's really about: it's about unwinding consumer protections. They've never seen consumer protections that they haven't wanted to junk. They always side with the big banks against the interests of ordinary working people.
The people of Australia are doing what they can to work hard and get ahead. They're trying to borrow responsibly. You can see from that data that people are doing their best to sign up for loans and to service those loans. That lending is at record highs. Those opposite say, 'The problem we want to address here is there's not enough lending,' when lending is at record highs, and that exposes the complete and utter farcical rubbish at the core of what those opposite are trying to do.
Treasury's own submission to the banking royal commission said that appropriate responsible lending laws could enhance rather than detract from macroeconomic outcomes. Those opposite want to get up—and no doubt the next speaker will—and say, 'We've got a big problem here, and it's holding back the economy,' and all the rest of it, but we would save a lot of time if they just got up and said: 'We want to unwind protections for people in the banking system. We want to ignore recommendation 1 of the Hayne royal commission. We never wanted the royal commission in the first place. We want to junk it as soon as possible. We're using the pandemic as an excuse to do that.' That's what is really happening here.
I said it before, and I say it again: if there are legitimate issues that need to be addressed here, then let's have a conversation about that. If there are legitimate issues that need to be addressed, let's refine the system, let's speak with the financial institutions, as I do, let's speak to the consumer groups, as I do—if there's a legitimate problem here. But there's nothing in the data, nothing in the expert independent academic opinion, nothing in the Treasury's submission to the royal commission in the first place that suggest these responsible lending laws are anything other than important. They're certainly not holding back lending when you look at those astronomical numbers that I just quoted. They should stop using this pandemic as an excuse to unwind important consumer protections that are adding to the robustness of our financial system, rather than detracting from it.
Now, again, you don't want to believe the data, you don't want to believe the Treasury, you don't want to believe the University of Melbourne academic and you don't want to believe us. But, a decade after these laws were put in place, laws introduced by Labor in 2009, there was a survey of financial counsellors, and what they found was that 97 per cent of financial counsellors said that responsible lending laws should remain in place. Ninety-three per cent of them had used responsible lending laws to advocate for their clients. These guys are doing really important work looking after people in the financial system. They want those protections to stay in place, and so do we.
Even with these responsible lending laws in place, we've still seen some heartbreaking examples of irresponsible and predatory practices in the banking and financial services industry. Think about Financial Counselling Australia's survey of their members. Just think about it. The Financial Counselling Australia survey asked counsellors, 'What's the worst example of irresponsible lending that you've seen?' In my home state of Queensland, which is the home state of the minister at the table, the Minister for Industry, Science and Technology, an elderly man with mental health issues who was on the DSP was given three loans within a very short period because he'd been a good client. He was in severe financial distress over a long period. He was too embarrassed to see anyone as he felt ashamed of it. He said he walked past the front door of a financial counsellor six times before he could even go in. The FCA wants to leave these laws in place for people like that.
In a second case study a company gave an elderly man who was close to retirement a $60,000 car loan. After owning the car for a year he was forced into retirement because of poor health. He moved onto the aged pension and couldn't pay the car loan. The company made no inquiries regarding his ability to pay, and should have identified that the man was close to retirement age.
Unfortunately, these are not isolated cases; they're not one-offs. We saw from the Hayne royal commission that, even with these laws in place, there are still practices which are indefensible, there are still practices where people are encouraged to get in over their heads. We should be looking for ways to support them, not looking for ways to leave those people on their own, to leave them in the lurch and to leave them behind, as those opposite would do if and when this bill is passed.
What makes this bill even more galling is that, four years after the government announced they'd do a review into payday loans and rent-to-buy schemes, they've barely lifted a finger to clamp down on loan sharks and payday lending, despite repeated promises to support the 24 recommendations of the review
Here I want to commend my colleague the member for Oxley for his tireless and powerful advocacy in this area. Payday loans are almost exclusively used by people on low incomes in communities like his and communities like mine, next door. People who are trying to keep their heads above water are often preyed upon by these companies, who trap them in horrific debt cycles as a result of outrageous fees and interest rates which are hard to believe.
Even before the pandemic, the Consumer Law Action Centre said over 4.7 million payday loans worth an approximate total of $3.09 billion were written between April 2016 and July 2019, which represents around 1.77 million Australian households. Too many of those people end up in a debt spiral. A 2018 report examining financial literacy in my part of the world, where I grew up, where I live and where I represent now, Logan City, found there were 43 banks and credit union shopfronts and 45 high-cost credit businesses clustered in suburbs with low socioeconomic indexes like Woodridge and Logan Central, where my electorate office is. Obviously a lot of those businesses are targeting people who cannot afford to repay.
I think it's reprehensible that those opposite want to rewind responsible lending protections for consumers. They don't want to do anything meaningful on payday lenders and loan sharks, and that has diabolical consequences for the people I represent, the people the member for Oxley represents and people represented by so many members of the House. This is a solution looking for a problem. It's badly motivated, it's not supported by the data and it's not supported by expert opinion. Instead, as I've said again and again because I believe it, this is nothing more than an opportunistic attempt to use the pandemic to come after people and to unwind the protections which are necessary to make sure that people don't get in over their head.
We're on the side of people who want to work hard and take loans they can afford to repay to provide for their loved ones and put a roof over their head and all the rest of it. We are on the side of those people. Those opposite are on the side of the loan sharks and the payday lenders. They want to make it easier for the financial institutions of this country to do more of the kind of rorts and rip-offs the Hayne royal commission uncovered. They want to deliberately ignore, if not contradict, the Hayne royal commission recommendations with this legislation. We will continue to fight for the interests of ordinary working people in the banking system who deserve better. We want the banking system to be strong and profitable, but we also want it to be fair.