Steve Georganas (Adelaide, Australian Labor Party) Share this | Hansard source

I too rise to speak against the National Consumer Credit Protection Amendment (Supporting Economic Recovery) Bill 2020, because we on this side of the House believe it will be a very damaging bill for Australians and the Australian economy. If there's one thing that the current health and economic crisis has taught us, it has been that it's vital that we focus on long-term reform and not chase short-term gains, as is being done through this particular bill. Chasing short-term gains is precisely what this bill does.

The government wants to remove key responsible lending protections as an attempt to simplify Australia's credit framework, but this will have a disastrous effect in the long term both for the economy and, more importantly, for individuals' livelihoods. The changes proposed by this bill will shift responsibility from where it is, with lenders, to the borrower. It will reduce protections for borrowers if credit decisions are made on the basis of incorrect information, for example. It's important to note that recommendation 1.1 of the Hayne royal commission explicitly warned against amending this framework. So what does the government do? It ignores one of the key findings of its own royal commission. But we shouldn't be surprised by that, because the government always opposed holding a royal commission. It only held one very, very reluctantly following pressure from this side of the House and from media and following a widespread outburst of community support.

The government claims that these reforms will enhance credit supply for businesses and for consumers by removing barriers, but let's not forget that there are a range of other barriers to business like business certainty, investment and credit demand because of government policy uncertainty and economic conditions. We've got one of the lowest rates of wage growth in the history of this country, low productivity and, of course, high unemployment. If you want to remove barriers, those underlying foundations are the things you have to fix to get a good economy going so people can borrow and can pay their loans back.

Responsible lending obligations are a very important part of safeguarding both the individual and the economy. They were introduced as part of the reforms to credit law, which were undertaken by the Rudd government in 2009, which established a nationally consistent framework for consumer credit known as the credit act. The act sets out responsible lending obligations so the lender has obligations and the borrower has obligations which require lenders to assess whether a credit product is unsuitable for a customer before providing that product to the customer. The provisions of the credit act are also enforced by ASIC.

The government is claiming that responsible lending obligations are causing significant constraints to credit supply. But statements that we hear—media announcements and data released publicly by UBS and some other members of the industry, for example—show that there is limited evidence of any problem with credit supply. In fact, Treasury's own submissions to the Hayne royal commission, which was made in 2018, suggested that responsible lending laws actually enhanced, rather than detracted from, macroeconomic outcomes. So it's no surprise that industry groups—the Banking Association, the Customer Owned Banking Association and the Australian Finance Industry Association—are publicly very supportive of these reforms. After all, they're the ones that stand to gain from them. But consumer groups led by Choice, for example, have expressed strong concerns about this bill. They're concerned about the relaxation of lending standards, which will allow lenders to make more loans that are unsuitable for vulnerable borrowers. Consumer groups are also concerned that reforms to payday lending protections don't go far enough. As reported on the ABC this weekend, more than 33,000 Australians and 125 community groups have signed the open letter against this bill.

We share these concerns on this side of the House, and many experts feel that axing safe lending laws during a pandemic is extremely risky and would fuel an already overheating housing market. As Eliza Wu, an associate professor of finance at the University of Sydney, said, 'These reforms could sow the seeds of the next housing boom and'—very importantly—'the next debt crisis.' Have we really learnt nothing from the global financial crisis? If people can easily get unaffordable loans because of the changes, it will have dire consequences in the future.

Australia already has one of the highest levels of consumer debt per capita in the world. This bill will give banks and credit suppliers a licence to entice people into even more debt. This reform would mean that banks and other lenders would not need to do the same degree of verification and checks and balances, for example, to make sure that loans are affordable and suitable for people, depending on their income. According to recent data, at the moment two in five Australians are already struggling to pay their bills during this COVID pandemic crisis. So, if people turn to easy credit to get them through a crisis, it could lead people further and further into financial hardship.

What's worse, the laws are being wound back at a time when Australia's housing market is running hot. Property analyst CoreLogic says the market is in one of its strongest growth phases on record, and experts consistently warn that Australia's high household debt is a big risk in a recession. Low interest rates allow people to borrow big. As long as we have measures in place that assess and verify that people can afford to repay the loans, disaster can be averted. If this bill passes and interest rates increase by the slightest bit—and we can expect that to happen; at some stage in the future, interest rates will increase—people will then find themselves in extreme hardship and will be unable to pay their mortgages.

The coronavirus recession has left 1.4 million Australians in mortgage stress. Almost 100,000 could default after JobKeeper ends. We don't know how many people could lose their jobs when JobKeeper ends, but the number is likely to be high. Now we hear and see that the government wants to make it easier for people to borrow more money than they can afford to pay. Uniting Communities is an organisation located in my electorate in South Australia. I've met with them on a number of occasions. They do amazing work to support very vulnerable people. Uniting Communities contacted me back when this bill went out for public consultation. They were already concerned then. Uniting Communities are deeply concerned about the harm that will be caused to Australians if consumer credit protections are diluted. They said to me that they felt this bill may potentially lead to a whole-economy debt disaster. To illustrate the potential danger, they told me about a case study and the story of one of their clients, a woman called Kelly. Kelly was receiving the DSP, the disability support pension, and living in Adelaide with her husband and three children. Kelly had lived with her disability all her life. She faced family violence in her marriage. Kelly depended on her husband to access financial service providers due to her disability, and, over time, Kelly experienced financial abuse. Kelly had received a settlement sum for a compensation claim before she married. The proceeds were used to pay off his car loan and his credit card. Kelly was told that this was necessary so that they were eligible to get a home loan.

Kelly and her partner then purchased a home. After a few years, Kelly's husband became interested in purchasing a new car. Kelly objected to buying a new car and told her husband that they were struggling to meet their home loan repayments and could not afford a car loan. He insisted, and the finance broker at the car dealership filled in the car loan application. The car loan was later found to be unsuitable, as Kelly and her husband could not make repayments without substantial hardship.

Kelly's family were living below the poverty line and getting assistance from agencies, including the Smith Family. They were getting emergency food relief hampers from them. The car loan came to the end of its term but had a balloon balance that Kelly and her husband just could not afford. The car loan provider again contacted her husband, to enter into a new contract to finance this outstanding balloon balance. Kelly didn't want to sign the new credit contract, as she knew this would mean they would struggle to meet their home loan repayments, which were far more important than the car to Kelly. However, Kelly and her husband still owed money on the car—the car that her husband owned and drove.

Due to the financial pressure that this family felt—and the pressure that Kelly felt and the experience that she had at home, being pressured to sign—Kelly attempted to leave the situation, because it was one of financial abuse. Kelly was afraid for her safety and of what might happen when she protested. When she did protest about the loan, the domestic abuse would escalate. In the end, Kelly signed the credit offer under duress. The matrimonial money was directed to making the car loan repayments. Prioritising the car loan in turn resulted in their home loan going into arrears, as payments were not being made, and Kelly received a notice of default.

There is no doubt that the stress and danger these changes could pose for vulnerable people like Kelly is significant. It can snowball and ruin people's lives—not for a short period but for the long term. There are other examples in my electorate. Karen Cox, CEO of the Financial Rights Legal Centre, has said:

Watering down credit protections will leave individuals and families at severe risk of being pushed into credit arrangements that will hurt in the long term.

This bill proposes to remove the existing responsible lending obligations and replace the current practice of lender responsibility with borrower responsibility. As a result, vulnerable people like Kelly, who have found themselves in an even more vulnerable position since COVID, will suffer. We can't let this happen to vulnerable Australians.

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