Sharon Claydon (Newcastle, Australian Labor Party) Share this | Hansard source

I rise today to contribute to this debate on the National Consumer Credit Protection Amendment (Supporting Economic Recovery) Bill 2020. This is a deeply worrying bill. It continues the Morrison government's ongoing strategy of using COVID-19 as a cover to ram through damaging measures in its Liberal Party agenda. They've used it to try to slash the pay and conditions of some of Australia's lowest paid workers by trying to remove the better off overall test. They also used it to slash service standards and time frames for critical public services like Australia Post, and now, today, they're at it again. This time they're using the coronavirus as a justification to tear down hard-won consumer protections for vulnerable Australians.

This bill will wind back responsible lending obligations—the safeguards that were rolled out to address predatory lending practices. If removed, unscrupulous credit providers will once again be free to pressure customers into taking unmanageably large loans even if they know that their customer won't be able to keep up with the repayments. It will also swing the door wide open for companies to gouge consumers who take up small loans or consumer leases. This is shameful, it's disgraceful and it demonstrates that the Morrison government has learnt nothing from the shocking litany of egregious behaviour we saw time and time again in the banking royal commission.

We shouldn't be surprised, of course. The Liberals never wanted an inquiry into the banks, after all. In fact, they fought it, tooth and nail, right to the bitter end. Indeed, this Prime Minister voted against a royal commission not once, not twice, but 26 times, and this track record says a lot about whose side our Prime Minister is on. Make no mistake, when he voted against the banking royal commission, Mr Morrison voted against vulnerable Australians, and now it's more of the same. This bill is a win for the banks and indeed many companies that offer consumer credit, but it will be a dreadful tragedy if it proceeds. It will be the death of a fair go for mums and dads and the elderly Australians who can't compete with predatory lending tactics.

The Morrison government argues that these changes are necessary to keep credit flowing. I'd argue that, if you need to lumber customers with loans that they can't afford in order to be profitable, then the problem isn't with the law; it is with your business model.

No-one wins when thousands of Australians default on their loans. We learnt this the hard way during the global financial crisis. Indeed, this is the very reason these protections were brought in in the first place. Australia's national peak consumer group, CHOICE, has rightly pointed out that the livelihoods of millions of vulnerable Australians are now hanging in the balance, and it has led a vigorous community campaign against this.

Already, more than 23,000 Australians have signed an open letter to the federal parliament urging us to maintain the current protections, a call that has been backed in by 125 charities, unions, academics and financial counsellors. Now it's time for the parliament to listen. I urge the Morrison government to stop putting the interests of financial services ahead of the interests of the Australian people.

I'd like to go through a few of the specifics of the bill. As I mentioned, it does two main things. Firstly, it removes responsible lending obligations for the majority of consumer credit contacts. These obligations simply require financial services organisations to make reasonable inquiries about a customer and then use this information to assess whether a particular product is right for them. This is a sensible and reasonable provision. Banks have all the data and enough actuaries to know what debt people can comfortably manage. They shouldn't be allowed to sell them products that they cannot afford. If this bill proceeds, this will be allowed and indeed made worse. The burden of risk will be placed squarely on the shoulders of the borrower.

Of course, we know what will happen. We've seen how this story ends. Free from their legal obligation to act ethically, many operators will undoubtedly make choices to benefit themselves and not their vulnerable customers. As Fiona Guthrie from Financial Counselling Australia pointed out:

… 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.

What a disgusting proposition!

The Morrison government say these changes are necessary because the current restrictions are hurting the supply of credit, but even their own department won't support them on this one. Indeed, these changes directly contradict Treasury's own submission to the banking royal commission, which said the responsible lending obligations were working well to protect consumers and safeguard the economy. That's right: they were working well. This is backed up by the Commissioner of the Australian Securities and Investments Commission, Sean Hughes, who flatly rejected claims that responsible lending has had an impact on economic growth. If this bill proceeds, it will free up the banks to aggressively push credit onto their customers.

The second set of measures proposed in the bill relate to small amount credit contracts—more commonly known as payday loans—as well as consumer leases. These changes ostensibly respond to the government's own SACCs review, which it commissioned back in 2016, but they fall unacceptably short of the recommendations in that review. For example, the review recommended capping payments at 10 per cent of a customer's income, with a separate cap for small amount credit contracts and consumer leases. The result of the changes is that as much as 40 per cent of people's pay packets could soon be eaten up in payday lending fees. That is going to be legal with the passage of this bill. The SACCs review also said that fees for consumer leases should be capped at four per cent of the retail price of an item. In contrast, this legislation sets four per cent fees as the base amount that can be charged, plus delivery fees, plus installation fees, plus establishment fees—up to 20 per cent. The end result? Consumers could be paying the equivalent of annual interest rates in excess of 100 per cent. This is horrendous, and it will open the floodgate to egregious price gouging and drowning debt stress for those who can least afford it.

Labor has been alarmed by this bill from the beginning. That is why we sent it to an inquiry in the Senate. While the inquiry won't report until next month, the feedback from the submitters so far has been loud and clear. Indeed, it has received more than 100 submissions to date, with the vast majority rightly panning this legislation and blasting the government for lacking the moral fibre to back the interests of vulnerable Australians over those of the banks.

I've also been contacted by a number of people in my community, in Newcastle, about this bill. I'd specifically like to give a shout-out to Jonathan, who works as a financial literacy project officer for the Salvation Army's Moneycare service in Newcastle. Jonathan wrote to me to warn of the dire circumstances should this legislation pass. He noted the large power imbalance between consumers and the providers of financial products, and he said that many people in the community simply don't have the resources needed to effectively make complex financial decisions. He also warned me of the dire outcomes that can result when people are pressured into taking on financial products that that are unsuitable, unaffordable and leave them worse off.

Jonathan told me the story of a Bien, a 20-year-old Congolese born refugee. When he was 19, with only six months of work under his belt, Bien signed his first significant financial contract, on a ute. Unfortunately, it wasn't fair and it wasn't sustainable. The salesman pressured Bien heavily into taking the loan but didn't explain what it would mean for him. As a result, Bien signed the contract expecting to pay $19,000 for the vehicle. But the terms of the contract meant he would be required to pay a total of $48,000—on a minimum wage. Within six weeks of taking on the loan, Bien defaulted on his repayments. Soon after, understandably, massive stress set in. Bien wasn't eating or sleeping, and he withdrew from his social life. Feeling silly, embarrassed and hopeless, he reached out to a friend who referred him to the Salvation Army. Thankfully, they were able to hold the lending organisation to account and get a good outcome for Bien. How did they do this? By using the very provisions that this bill now seeks to trash. Bien's story shows clearly why we need these responsible lending obligations and what a disaster it would be if this bill was passed.

Debt can have terrible impacts beyond our financial lives. It can hurt our relationships, our work lives, our health and, indeed, our very sense of self. It can quickly drag people down into despair. It can lead to an ever-worsening cycle of debt when people try to stay on top of things by taking out loans in order to pay off other loans. Not everyone has the financial skills to understand the long-term impacts of their financial decisions. But the banks do know how much debt people can manage. They should never, ever be allowed to give people loans that they know the customer simply cannot afford.

Of course, the Morrison government knows very well that this legislation puts people like Bien at risk of falling into desperation and despair. They won't admit that they know. In fact, they deny there's even a problem. But they're not telling the truth. Do you know how I know this? It's because it's not just peak bodies that have been warning the government about this; indeed, Treasury advice uncovered by a freedom of information request shows that the Treasurer was warned in March that dumping responsible lending obligations would harm consumers. Yet, this is exactly what he has proposed four months later. He really should be ashamed of himself.

In summary, this legislation sends a clear message to the financial services sector. It says that, despite the appalling exploitation of Australian consumers revealed by the banking royal commission, the Morrison government will continue to use the federal parliament, this very House and chamber, to do the bidding of bankers. It says they have no qualms with introducing legislation that reduces transparency and shifts the burden of risk from the lender to the consumer. It says that the government simply isn't on the side of Australian borrowers.

Well, let me assure you that Labor is on the side of vulnerable Australians, that we are on the side of justice and that Labor is very much on the side of a fair go in this nation. The government should withdraw this legislation immediately.

(Quorum formed)

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