Thursday, 25 February 2021
National Consumer Credit Protection Amendment (Supporting Economic Recovery) Bill 2020; Second Reading
This government is yet to find a bank or a loan shark that they don't want to help or one that, when it puts its hand out, they don't want to lift up. It's a pity they won't do the same for consumers, customers and vulnerable Australians. I think it's now been almost four years and nine or 10 months—the member for Macquarie might be able to help me out here—since I arrived in this chamber, and I think probably from the second week of parliament when I was sworn in I have been talking about protections for people who are being ripped off by the loan shark industry or by banks in this country. Many people on this side of the chamber are starting to sound—although I hate to use a cliche in a debate—like broken records. But I fear that the record player has completely broken, because this government has gone down the path of a lack of respect and a lack of any protections for Australians.
Even during a pandemic, in legislation before the House today the government is asking the Parliament of Australia to remove responsible lending obligations for a majority of consumer contracts. During a global pandemic, during a national recession and with rising unemployment—a million Australians unemployed, record household debt, terms that are crippling businesses in this country—why would the government want to put people on the scrap heap even further? That's exactly what I believe these laws will do.
Responsible lending obligations were part of the National Consumer Credit Protection Act 2009, which was introduced by the Labor government, partly in response to the global financial crisis. Responsible lending obligations require credit card providers to make reasonable inquiries about a customer and assess whether a credit product will be unsuitable for them. These are commonsense, practical laws that have served our country well. Responsible lending obligations apply only to consumer credit contracts, not commercial credit contracts—for example, small business lending. As we know, that is another jurisdiction. But the remainder of the bill relates to small amount credit contracts and response to the independent 2016 review of the small amount credit contract laws, which I will focus on a little in my remarks. I know the member for Lalor will be champing at the bit to talk about this in today's debate, just as she has every week, it seems, that this parliament has sat.
We know the bill has been discussed quite widely in the media, not because of anything the government's done or any advice or information that the Treasurer has delivered to the people of Australia. I add that not even the banks have requested this. Let's put that on the record. This is not something the Banking Association or the big four have issued public statements about or have written to the Treasurer about, demanding that the Prime Minister take action. I won't speak for the major lending facilities in this country, but I reckon if I were one of them I'd be scratching my head and saying: 'What on earth is the Treasurer on about? We didn't ask for this. We have enough to deal with as far as I'm concerned.'
Just last week, we saw 23,000 Australians call for responsible lending laws to be strengthened, not removed. In the lead-up to the Senate Economics Legislation Committee inquiry, which hosted hearings in Canberra last Friday, which I carefully looked at and followed, we saw more than 23,000 individuals sign a letter to every Australian parliamentarian demanding protections be maintained. The request, as organised by consumer advocacy group Choice, is backed by 125 charities, unions, academics and financial counsellors. Let's put that in perspective: the banks and the Banking Association didn't call for these reforms and 125 charities, financial institutions, financial counsellors and leading consumer advocates didn't ask for these reforms. So I've got a really simple question for the government: Who did? Who came up with this idea? Who possibly thought it was a sane or sensible move to put this into legislation?
These checks and processes that banks and lenders have to abide by when offering consumers loans are critical to ensuring that consumers are protected. The aim is to lend only to those who are in a position to repay debt, rather than see repayments missed and interest and fees incurred, leaving the borrower facing greater financial hardship. As I said, these laws were introduced in 2009 under the National Consumer Credit Protection Act in response to shoddy lending practices which we saw during the global financial crisis. Watering down unfair lending restrictions is unacceptable now and in the future. The government knows doing this will expose people to significant financial harm. The profit is not worth the pain. Without responsible lending obligations in place, a bank could send a pre-approved $5,000 limit credit card to a person in my electorate of Oxley whose only income is a disability pension. The bank could do this even when they know that the person's income is not enough to service a loan.
This bill will leave vulnerable people in our communities open for attack. It will hurt young people, elderly people, people on the disability support pension, people in abusive relationships, Indigenous Australians and people of non-English-speaking backgrounds. Now, of all times, we need to be looking after people, not harming them. As we heard from the Financial Rights Legal Centre in their submission:
Our Government wants free-flowing credit to reign at a time when unprecedented numbers of Australians have had to ask for loan deferrals amidst COVID-19. It simply defies logic.
The last thing people need is inappropriate and unaffordable credit. This is another example of the government's COVID-19 recovery strategy leaving people behind. It's happy for businesses and banks to thrive at the expense of vulnerable Australians.
I want to turn in my remarks to the regulation legislative instruments set by the Treasurer and enforced by ASIC. These are the non-ADI-lender regulations, which I believe are poorly thought out. Consumer lending will be regulated by three separate sets of rules and two different regulators, depending on the nature of the credit provider and the contract. I want to know: why are we making this even more complicated? Why disconnect regulators and make it harder for safeguards to be enforced?
This is another example of the government directly going against recommendations from the royal commission. Treasury's own submission to the banking royal commission noted that the responsible lending laws are better for the economy. That's not Labor saying that. That's not the charities, the academics and the financial counsellors saying that. We've now got Treasury's own submission saying that the responsible lending laws are better for the economy. We need to put our efforts into advancing legislation that ensures the economy is, as the government like to say, built back stronger after COVID-19, so why are the government trying to get in the road of that?
I refer now to some remarks about the irresponsible changes to the small-amount credit contracts law. The bill contains changes to laws governing small-amount credit contracts and consumer leases: a cap on payments for small-amount credit contracts and consumer leases at 20 per cent of a consumer's income, which is separate for SACCs or consumer leases, or at 10 per cent of a consumer's income; setting the maximum cost of four per cent per month for CRNs; requiring that payments be equally spread over the course of a loan; and prohibiting providers from charging monthly fees in relation to the residential term of a loan when it's paid out early. There are problems with these. Some of these details are incorporated in the draft regulations rather than the primary legislation, but the biggest concern I have is that these changes were the government's response to the independent small-amount credit contract review commissioned in 2016 by then minister Kelly O'Dwyer. Once again they fall short of actually what was recommended.
A member of the government came up to me and said: 'You must be happy we're dealing with the SACC reforms. You've been talking about this a lot, Milton.' I said: 'You've got part of the equation right; I have been talking about this non-stop for about four years and 10 months, but it doesn't do what your own reform said. It doesn't do what Minister O'Dwyer recommended. It doesn't actually deliver the legislation that the now Deputy Prime Minister, Mr McCormack, promised when he delivered the explanatory memorandum to this House. It doesn't do that. It waters it down.' I'm not going to give any credit to the government for watering down their own legislation and their own proposals that their recommendation said they would deliver.
All credit to former Prime Minister Malcolm Turnbull—and that is not a name you hear from those opposite any day of the week. He wrote to me in July 2019 and said, 'After a long wait, the exact legislation you've been calling for will be introduced.' The only problem is that the now Prime Minister and Minister Dutton decided to see him off as Prime Minister. So we're seeing a shortfall of the recommendations that were actually promised.
The law this government is proposing doubles the debt repayment cap for people whose income is not predominantly from Centrelink. This bill makes it perfectly legal for people to be charged up to 40 per cent of their monthly income to pay back lending fees. In the Oxley electorate the average household income per month is $3,660. If a family spends 40 per cent of that income on debt repayments, that brings their funds down to $1,464 per month to pay their rent, to pay bills, to get school supplies for kids and to put food on the table. The fact that this government are even entertaining those changes shows once again that they are not on the side of working families; they are simply on the side of big business.
The SACC review recommended that fees for consumer leases be capped at four per cent of the retail price of a leased good. The proposed law allows for four per cent of fees to be calculated on the price plus delivery and installation fees, plus establishment fees of 20 per cent on top of that cost cap. This means that consumers could be paying equivalent annual interest rates of over 100 per cent. As we know, the devil is always in the detail when it comes to the fine print of this legislation that the government is trying to ram through the parliament today. This fine print will, I believe, have devastating impacts on people.
Yet again this government has put forward a bill that doesn't make sense. Under this bill it's easier for banks to saddle working Australians with debt—debt that the banks didn't even ask the government to deliver. It will be harder for those Australians to get out of debt. It will be leaving people behind at a time when we should be building confidence and supporting consumers to grow the economy. This bill appears to be a shameless move by the government to give a big free kick to the banks at the expense of ordinary people. The government, we know, has ignored the first recommendation of the banking royal commission. The very first recommendation has been ignored and blown apart by this government, proving once again that this government can't be trusted to do the right thing by Australians and regulate the financial sector properly.
This bill has enormous consequences for vulnerable and working Australians. It has consequences for the community groups and advocates that I have been working with over the last couple of years to give justice to the people who just want a fair go. It has consequences for the businesses that have been ripped off by the loan sharks in the financial sector. It has consequences for the pensioners and their advocates who have been out there trying to get their money back and make sense of the contracts that they've signed. We're simply asking for a fair go for people who need support.
This bill waters down the lending provisions. It puts vulnerable Australians entering into contracts at risk—and I use those words 'at risk' strongly. It's not good enough for the government to simply say, 'Well, it's a piece of legislation that we've been working on for a while,' without any due explanation. As I said, the Treasurer of Australia can't explain why these laws are required. The members of the government can't explain why these laws are required. Last week, we saw 23,000 Australians, including financial counsellors and people from the non-profit sector, voice their concerns. I know from speaking to them firsthand how fearful they are of this legislation. I simply ask the government to rethink this strategy. Rethink what you're doing. Think of those Australians who need the financial sector to be on their side.