Thursday, 25 February 2021
National Consumer Credit Protection Amendment (Supporting Economic Recovery) Bill 2020; Second Reading
Late last year when the Treasurer announced this policy in the National Consumer Credit Protection Amendment (Supporting Economic Recovery) Bill 2020 some commentators who were sceptical of it and were opposed to it said that this is a solution looking for a problem. On reflection, I actually think that that characterisation of this policy is far too generous. It is true to say that there is no problem, but it is far too generous to call this policy a solution to anything. It is not a solution; it is a massive retrograde ideological step backwards in our regulatory framework. It is a step backwards that is going to put at risk many of the most vulnerable in our community. So, please, let's not at any point in this debate mischaracterise what we're seeing here today as a solution. It is a highly risky step backwards to a time long ago when the financial services sector contained many more risks for the most vulnerable. It is an unwinding of some of the most important protections in our financial regulatory structure.
What is the context in which this absurd bill is being brought to this chamber? The context of course is that we are now two years down the track from having received a very hefty, rigorous and well-received royal commission report from Commissioner Hayne. That's two years where only a third of the recommendations have been acted on in any meaningful way. That's far, far too long, when so many substantive recommendations are sitting idle. And yet in this chamber now today, we're being asked to support a bill from the government that is actually going to fly in the face of the very first recommendation of that royal commission. So at a time when two-thirds of the recommendations from that royal commission stand idle and when so much of the poor behaviour, so much of the malfeasance that shocked the public and so much of that behaviour which generated the public policy recommendations, stand idle we're being asked to unwind, to fly in the face of and to contradict recommendation 1.1. As earlier speakers on this side have noted, recommendation 1.1 was that the national consumer credit protection laws not be changed. And now we're being asked to gut them, to totally weaken consumer protections that have proved to be so vital.
This bill is a remarkable act of maladministration. As other speakers have noted, the National Consumer Credit Protection Act was brought in by the Gillard government in response to the GFC. What we're being asked to consider in this bill is a structure in which the protections in that act are going to be materially wound back. We're going to have an arrangement where lending decisions by ADIs—by authorised deposit-taking institutions—will be regulated by APRA, a body which is very expert in prudential regulation but does not have a consumer-facing expertise. And non-ADI lenders will be regulated by legislative instruments by the Treasurer and will be enforced by ASIC. So rather than the strong current arrangements, we're going to end up with consumer lending being regulated by three separate sets of rules and two different regulators. The remarkable achievement of this government is that they're going to simultaneously water down provisions and make them more complicated. This will become a case study for public policy departments around the country in how not to undertake regulatory change. Of course, as speakers on this side have noted on numerous occasions, this watering down and overcomplication of current arrangements flies in the face, not surprisingly, of one of the key recommendations of the Hayne royal commission.
This is a very disingenuous proposal being put by the government. Speakers opposite, to the extent that they've been able to mount any kind of rationale for it, claim that it's based on insufficient credit growth when, as speakers on this side—the shadow Treasurer and other speakers—have pointed out, credit growth is strong and many areas of credit are at record levels. It is a completely specious argument. Other speakers mount the argument that it's critical for the protection of individual rights, that people should be able to borrow absolutely whatever they want in any circumstances. That's a hollow rhetorical flourish. Let's be clear: it's a highly disingenuous flourish by those opposite. If they genuinely believe that—if they're genuinely so wedded to individual rights above anything else, then why don't we get rid of consumer protection altogether? If it's such a great thing to water down these provisions then let's get rid of them altogether.
Let's look at what the experts say in relation to this proposal from the government and the Treasurer. Karen Cox, the CEO of the Financial Rights Legal Centre, who was the opening witness to the banking royal commission, said:
The problem people are having right now is too much debt and not enough income. @ausgov solution is to take on more debt with fewer protections.
Watering down credit protections will leave individuals and families at severe risk of being pushed into credit arrangements that will hurt them in the long term.
Fiona Guthrie, the CEO of Financial Counselling Australia, an organisation that represents the people at the coalface of having to help vulnerable people who have been abused by the system, said:
As we learnt to our cost during the GFC, weaker lending standards mean people will be loaded up with as much debt as possible. There is significant profit to be made in pushing borrowers to the edge.
Financial Counselling Australia undertook a very important survey of financial counsellors. Ninety-seven per cent of those surveyed said that responsible lending laws should remain. So they agree with Commissioner Hayne; they agree with the Commonwealth Treasury; they agree with the experts—97 per cent. And 94 per cent of financial counsellors either strongly agreed or agreed with the proposition that responsible lending laws are an important component of consumer protection.
Alan Kirkland, the CEO of CHOICE, said:
We got rid of the idea of 'buyer beware' in consumer law decades ago.
This is a completely retrograde step. As Alan Kirkland points out, this is going back decades to a completely old mindset in terms of how the regulatory system should be structured.
Gerard Brody, the CEO of the Consumer Action Law Centre, said:
The Hayne Royal Commission was a 'watershed moment'.
He also said:
The Commonwealth Bank recently said that the flow of credit is above pre-COVID levels and that lending is growing at a strong pace. And none of the big banks opposed the responsible lending laws at the recent House of Representatives Economics Committee hearings
As Gerard Brody rightly points out, all big four bank CEOs gave evidence over the last few months to the House economics committee. None of them argued that these laws should be gutted. None of them contradicted recommendation 1.1 of the royal commission. The big four bank CEOs are also instrumental in the credit system, and they all supported the notion that suitable protections should remain in place.
Kevin Davis, one of the most distinguished independent academic experts on financial regulation and the macroeconomy in Australia, said:
The axing of responsible lending obligations … is particularly egregious … This is the triumph of ideology and vested interests over logic and evidence.
Kevin Davis's comments had great foresight. It is a triumph of ideology, because all that we've heard from those opposite are these hollow rhetorical flourishes on individual rights, with very little intellectual content behind them. If they truly believe some of those rhetorical flourishes, as I said, why not get rid of consumer protection altogether? As Kevin Davis said, it flies in the face of logic and evidence, because, as multiple speakers on this side have indicated, credit growth is strong and some components of credit are at record levels.
It is absolutely absurd to come in here and to assert that this is necessary for the economic recovery. It is clearly not. Economic experts say it's not. Treasury says it's not, the big banks say it's not, and even a superficial reading of basic ABS statistics says it's not. Treasury has said that responsible lending laws are providing stability to the finance system overall. They have said that they are not impeding the flow of credit and that scrapping them will lead to 'more instances of consumer harm'. Josh Mennen, from the Australian Lawyers Alliance, said that axing banks' responsible lending obligations is 'a recipe for financial hardship'.
Importantly, APRA and ASIC weren't properly consulted. Sean Hughes, ASIC's commissioner with responsibility for credit, had no input. He told the House economics committee late last year that he was first advised about these plans when he read the Treasurer's media statement. Now he's going to have to be responsible for an important part of regulating this new dog's breakfast, this more complex but watered-down set of arrangements. The banking regulator only got notice in early August. The process was rushed and lacked consultation.
So there are all these experts. We have experts across consumer advocacy. We have experts from financial counselling—the people who are actually seeing these complex cases of financial abuse. We have macroeconomists in Treasury and macroeconomists in academia. We have commercial experts. We have big four bank CEOs. We have lawyers. We have regulators. We have the government's own advisers in Treasury. None of these people support contradicting the royal commission. So this government sits on two-thirds of the royal commission's recommendations but comes in here with the most specious of arguments to overturn the royal commission's first recommendation, which is one of its most important.
This, of course, is going to be absolutely disastrous in many communities around Australia—communities like mine, in Fraser. I hear many harrowing cases of Australians dealing with situations of financial abuse, financial distress and insecurity. Brimbank Melton Community Legal Centre has told me harrowing examples of many residents of Fraser who have been financially abused. They shared examples like that of Sarah, whose lack of fluency with written English was exploited by an unscrupulous lender to saddle her with unsustainable debt, culminating in repossession and severe hardship. Some of those opposite might come in and say that individual rights trump all, but, as I say, it's a hollow rhetorical flourish. If they genuinely believe that I want those same people to come in here and say, 'Be gone with all consumer protection,' I think it's a very disingenuous ideological argument for a sham piece of legislation.
What about Laura—of course, not the person's real name—who applied for a credit card? She's another vulnerable, low-income person. She applied for a zero per cent credit card. When the credit card was approved and provided to her, she found out later that she was actually paying interest. Without her ever finding out, she was given a different credit card to the one that she was offered. The onus is on those opposite to explain how these new laws will be sufficient to provide protection for people in Sarah's situation or Laura's situation. The lawyers and the financial counsellors and the other experts—the commercial experts and macroeconomic experts—are very concerned that watering down these laws will mean that people like Sarah and Laura will have far less recourse to remedies. Those opposite have to justify why putting people like Sarah and Laura in harm's way is justified, and they have no arguments—no justification whatsoever.
Let's be very clear what we're facing in this chamber today. It is an absolutely reprehensible bill that we're facing. We have a government that resisted a royal commission 26 times. They did not want the royal commission to happen. It shouldn't be a surprise that when they begrudgingly received the royal commission's findings they dragged their feet to implement those recommendations. Two years later, two-thirds of them still sit on the shelf. What's even more galling than the fact that two-thirds of the royal commission's recommendations sit unattended to when they're so important, when people continue to be vulnerable, when people continue to be abused, is that the government is now coming into this place and arguing that we should unwind what has been done.
As I've said, it's a highly, highly disingenuous set of arguments that they're running. It flies in the face of evidence. There is no argument possible to be made that the economic recovery relies on watering down consumer credit protections. Consumer credit growth is strong, and all of the experts—experts at Treasury, experts at the big four banks, expert macroeconomists in academia—point to the fact that we do not need this bill today to support the economic recovery. Other experts in financial counselling, experts in the law and experts in consumer advocacy groups point to the fact that there is real vulnerability. So this is not a solution looking for a problem; this is a massive, detrimental step backwards with a disingenuous argument in its support.