Monday, 15 February 2021
Financial Sector Reform (Hayne Royal Commission Response No. 2) Bill 2020; Second Reading
It's a pleasure to be able to stand and speak on the Financial Sector Reform (Hayne Royal Commission Response No. 2) Bill 2020, which is part of the package this government is delivering on the recommendations of the Hayne royal commission since its report was handed down a couple of years ago.
I know there's a lot of colour and light going on on the opposition benches, a bit of ranting and raving because they're saying, 'Why weren't the bills introduced and legislated earlier?' There was this thing called COVID-19. I'm not sure if you're familiar in it. Early last year there was—and we're still getting to the bottom of the origins, but most people think it came from Wuhan in China—a virus and it distracted the political discussion and the priorities of governments, not just in Australia but all around the world. We had this reprioritisation to say, yes, these sorts of urgent reforms matter, but saving human lives, protecting the Australian community, making sure we had the necessary health systems and making sure we provided the economic support measures to make sure people didn't lose jobs all mattered a bit more.
The confected outrage of those members on the opposition benches falls a bit flat because what we're doing—now that the Treasury has the bandwidth, the government has the bandwidth and, frankly, this parliament has the bandwidth—is getting on with the job so that we can make sure that Australian consumers are protected. The role of financial services is to manage and create the wealth of our great nation, but to do it in alignment with those who own that wealth. Of course, we've had reforms already, and there are many reforms to go. But there are other things that we need to focus on as well as a consequence of the Hayne royal commission.
This legislation is relatively straightforward. It's to make sure that financial advisers' interests are aligned with the interests of the people that they're advising. You would have thought this was self-evident for financial advisers and that, when they clip the ticket because they provide a service which is entirely reasonable and fair, they do it on the basis that they are actually helping the people who are gaining a benefit from their services. Their interests should be in alignment and not in contrast. When fees are being charged—as clearly has occurred with some financial advisers—against the interests of their customers, they are being rorted of their savings and investments because people are using it as an opportunity to mine for fees and their own interests. If financial advisers are doing that, they should be held to account. That's what this legislative proposal goes part way to addressing.
We should never turn a blind eye when we find this happening in other places. As you would be aware, Deputy Speaker, I am the chair of the Standing Committee on Economics. We are running a term-long inquiry at the request of the Treasurer into the implementation of the Hayne royal commission. The member for Dunkley probably wasn't on the committee when we discovered some super funds were also charging members fees without providing a service. The only response from the opposition to this fee-for-no-service moment was to run interference and to distract from what was going on, and we wonder why. It might be because it was being done by their friends in the industry super fund ecosystem. They were actually caught red-handed reactivating low balance inactive accounts—which, by law, should have gone to the Australian Taxation Office—so that they could harvest them for fees and insurance people didn't want or need because it could underwrite their profitability. It is the most despicable thing, in exactly the same way financial advisers have been caught out by the Hayne royal commission. Hayne missed this one and we have done something about it despite the efforts of the opposition. In the end, fees for no service is wrong, and it doesn't matter whether it's a financial adviser or an industry super fund. When they're caught red-handed, they're culpable and we need to make sure we change the law to protect people. This shows a fundamental blind spot of the opposition around financial services. Their interest is not in stopping wrongdoing; their interest is what they can gain from it, like the dodgy financial advisers that this bill is stopping. That's what we discovered in the Economics Committee.
We're also seeing it in their behaviour around so many other issues around financial advice and prioritisation. Just before question time, I drew an explicit contrast between the rhetoric of the Labor Party and the opposition and what they do. I'll repeat it just for clarity: when it comes to Labor, it's always 'them first, you last'. At the last election, Labor said negative gearing cost housing affordability. That was their big narrative. That's what they do. They conned millions of Australians into believing this lie, but they knew it wasn't true. Yesterday in the Nine press, Labor MPs backgrounded that by saying in relation to scrapping negative gearing, 'For the amount of money it raises versus the political pain, it's just not worth it.' Clearly, their only priority is not housing affordability and it's not improving the homeownership rate of young Australians; it's merely their take of your money. Either housing affordability matters but they'd rather have votes, or it doesn't and they just want your cash. It's 'Labor first, you last'.
Now they're doing the same thing with super. Since the 1990s, Labor has championed taking workers' wages to stop them saving a deposit to own their own home. Unsurprisingly, homeownership rates amongst young Australians have declined while Labor has been prioritising super ahead of homeownership. The average age to buy a first home has now blown out to 36. Labor's solution is to double down and make it harder for you, the people of Australia, to save. Labor want a nation of renters because homeownership gets in the way of handing moolah to their mates. Liberals want you to own your future—your security for you and your family. Liberals want a nation of homeowners.
This is not the first time we've had this debate. At the end of the Second World War, most people remember the divide between Chifley's Labor Party and Menzies's Liberal Party as being about bank nationalisation, but go back to the speeches and look at one of the other critical divides. Labor wanted to use federal state housing agreements to create a nation of dependent renters where people were denied the dignity of ownership of their own homes. Menzies was committed, and our party has been committed at every point, to the democratisation of wealth creation and distribution through the power of homeownership. We did it in 1949 and we drew a line in the sand. It's hardly a shock that, for many years after that, the Australian people never forgot the Labor Party's and the opposition's betrayal of Australians' aspirations to own their own home.
Liberals want you to own your future. Super matters but homeownership matters more; it should be 'home first, super second'. The only people who want to obsessively argue against it are the people who have their interests in the till of keeping the super system prioritised ahead of homeownership. That's why it's wrong.
I know that a lot of members of the opposition find it outrageous that someone would dare say that homeownership matters more than super. There's such a con at the heart of their argument. They have no issue with your super being used to invest in build-to-rent housing, so super funds will own housing stock with your money and they will say that you must rent it from them. That is a betrayal of the Australian social contract. It is a disgrace, and they sit there on the other side of the chamber and applaud it along. The idea that you would rent off your own super fund, from your own money, is despicable, but that is where the Australian super system is heading: to create a neo-feudalism at the heart of Australian society, where young Australians, new Australians, migrant workers and low-income workers will be denied their own dream, to serve the interests of super funds and be serfs to their own super, rather than having the dignity, the pride and the ownership they'd have not just of their own home but of this great country.
I know there's a mocking dismissal by members of the opposition, but that is where their priorities sit in the financial services sector: Labor first, you last. They've taken that attitude in the economics committee, they take that attitude in this parliament and they continue to mock and deride the opportunity for young Australians to be able to own their own home. It's a disgrace. They can't see it, because they're blind, because at the heart of these debates they see themselves and their interests, not the opportunities for you, the people of Australia.
So in this piece of legislation we are taking sensible action to make sure that financial advisers don't rip off customers. We've already done the same where we found industry super funds ripping off fund members and those with low-balance accounts, sometimes the most underprivileged low-income Australians. But again the member for Dunkley simply shrugs her shoulders at the rip-offs of industry super against nurses and teachers and those people who've made the effort to be able to save for their own dignity. Now give them the choice, the opportunity to empower themselves. Give them the opportunity to be able to use their savings, their money, their effort and their reward to own their own home. Instead we'll get the sneering arrogance of the opposition in opposing it every step of the way. My response is: bring this fight on, because it should be home first, super second.
It's difficult to know where to start when you have such an unhinged, breathless, desperate attempt to distract from the fact that those opposite have been running a protection racket on the rorts and rip-offs in the banking system for some years. Those opposite, time and time again, have been given opportunity after opportunity to say something about the rorts and rip-offs that made this banking royal commission necessary in the first place. There's been not a word from those opposite about cases such as that of a young man with Down syndrome who was forced into purchasing life insurance he could never benefit from, or about charging dead people for financial advice, or about shoving clients into high-risk, low-quality products. There's been not a word about case after case after case which we heard about before the royal commission and during the royal commission and which made the royal commission itself necessary. I think that speaks volumes about those opposite and the fact that they will always side with the big banks and the big financial institutions against the interests of ordinary working people. That's why we had the protection racket for so many years, and I'll come to that in a moment.
This legislation before the House, the Financial Sector Reform (Hayne Royal Commission Response No. 2) Bill 2020, is about the implementation of some of the recommendations of the Hayne royal commission. It contains three schedules, which implement four different recommendations made by Commissioner Hayne in relation to aspects of financial advice. Labor will be supporting the passage of the legislation, but I'm also proud to move the second reading amendment circulated under my colleague the member for Whitlam's name and to speak in favour of that amendment. I move:
That all words after "That" be omitted with a view to substituting the following words:
"whilst not declining to give the bill a second reading, the House notes the Government has:
(1) taken far longer than promised to implement the recommendations of the Hayne Royal Commission;
(2) failed to establish a compensation scheme of last resort, as recommended by the Hayne Royal Commission; and
(3) actively rejected the very first recommendation of the Hayne Royal Commission, by proposing to repeal the responsible lending obligations in the National Consumer Credit Protection Act 2009 for the vast majority of credit contracts."
This legislation goes to the core of the delays that we have seen in the implementation of the Hayne royal commission recommendations. What is says and what it shows is just how little those opposite's heart is really in the implementation of this. The last time this parliament sat we saw the two-year anniversary of the handing over of the Hayne royal commission recommendations and still only something like one-third of the 76 recommendations have been fully implemented by those opposite. That does speak volumes about a government long on announcements but short on delivery. It was two years on that day since that awkward photo-op where the Treasurer was sitting, all grins, begging Commissioner Hayne to smile or shake his hand. There was a look of disdain on the commissioner's face as he handed over this royal commission report. It says everything about the government: they put all the planning in the photo-op. You don't have to scratch the surface of the Treasurer too much before you'll interest him in a photo-op. Here he is with Commissioner Hayne in this awkward hostage situation of the handing over of the report. In the two years since that moment only a third of the recommendations of the royal commission have actually been fully implemented.
This has a history—and I'm pleased the member for McMahon is at the table as well, because it was almost five years ago in April, after listening to and consulting with the victims of misconduct in the financial system, that I, the member for McMahon, the member for Isaacs and the member for Maribyrnong stood up in Melbourne and said: 'Enough is enough. What's necessary here is a royal commission to get to the bottom of these rorts and rip-offs so that we can get justice for the victims of what's gone on here.'
From that moment forward, for two full years, those opposite ran a protection racket against that banking royal commission. Twenty-six times the Prime Minister voted against having a royal commission into the banks. Despite the overwhelming evidence of banking misconduct, despite all of the stories day after day of rorts and rip-offs in the banking system, those opposite ran a protection racket. You know what changed their mind? The member for Whitlam and the member for McMahon will remember this. It wasn't that there'd been a particularly impactful story or case that had come to light; it was because they got a permission slip from the banks. They got a letter from the banks saying, 'Okay, look, you know what, it's probably okay if you agree to a royal commission.' Armed with that little permission slip, they announced a banking royal commission.
Throughout that period, from that moment until the 2019 election, they went all around the country and said: 'We're really serious about this. We will implement quickly the recommendations of the banking royal commission.' They cried crocodile tears for the victims. All over Australia, in every electorate of Australia, they pretended to care about implementing the royal commission recommendations. As soon as they were through that election, we got excuse after excuse for delay, and that's what we're seeing here. It's been more than two years now since the recommendations were handed over and only a third of the recommendations have been put in place, and that shows that, if the people of this country want a federal government, a national government, on their side when it comes to looking after their interests in the financial system of this country, then only Labor will provide that kind of government. What those opposite have shown for the last five years or more—for much longer than that, but in this case for the last five years or so—is that they have absolutely no interest in protecting the welfare of the Australian people in the banking system. Instead, they've spent the bulk of the last five years running that protection racket for the big banks. They will always side with the big banks against the interests of ordinary working people in this country.
Every Australian has an interest in us having a robust, competitive and profitable financial system that works well. It's such an important part of our economy. We want to have a well-functioning financial system. We want the banks to be profitable on the basis of providing good services, not cutting corners. It's really key, as we emerge from the deepest, most damaging recession in almost a century, that we get the financial system working right, but we won't do and we won't give the Australian people the confidence that they need to have in their banks unless and until we implement these recommendations properly so that people can have confidence that the political world, the government here in Canberra, has listened to what's happened, taken the recommendations seriously and implemented them afterwards.
In the absence of that, people will conclude with some justification not just that the government are not on their side when it comes to rorts and rip-offs in the banking system but also that those opposite never intended to take it seriously and, until they do take it seriously, there will be a cloud hanging over the financial system. We don't want that. We as a country want to move forward with confidence. We want finance to flow freely in our economy and in our communities. We want all of that to happen. But, for that to happen, those opposite need to drop the habit of a lifetime and actually care about the welfare of ordinary Australians, ordinary working families, the people of Middle Australia in the banking system, who have been treated in some instances very shabbily in the recent past. Those opposite need to represent their interests and not just the interests of the banks.
In my electorate of Fisher we are fortunate to have a highly professional and engaged local cohort of financial advisers. Even before the report of the financial services royal commission was handed down, these advisers reached out to me to help me understand their sector, the benefits that advisers deliver and the challenges that their industry faces. I've been determined to ensure that these concerns are heard and that, in ensuring that the public are protected from malpractice, the government delivers targeted, effective regulations without adding unnecessary red tape.
In December 2018, I hosted the then Assistant Treasurer in Fisher to meet with 40 Sunshine Coast financial planners to discuss their concerns and gather their experiences. In February 2019, I met with some 50 mortgage brokers in Mooloolaba, while in October 2019 I spoke with another 25 financial advisers. Between those times and now, I've had many further discussions with individual financial planners all over the coast and even presented to the local financial planners association early last year.
I've written to the Treasurer and to the minister for Superannuation, Financial Services and the Digital Economy on these issues, and I'm grateful to both of them for the serious consideration they have given to the concerns of my constituents and their businesses. Indeed, the minister for financial services has met with me many times on these questions and even took the time herself in July 2019 to come to Fisher and speak with local financial planners. I know that they appreciated the opportunity to be heard.
Financial planners have raised with me the question of the tax deductibility of financial advice. They've raised increases in ASIC charges for self-managed superannuation fund auditors and financial advisers. They've expressed disappointment at the new education requirements for experienced financial advisers and made me aware that some in the sector want an extension of grandfathered conflicted remuneration. Sunshine Coast financial advisers spoke to me about increasing regulatory costs, professional indemnity costs and the incongruity of third-party licensing in light of the royal commission's findings. In general, time and again they have highlighted to me the importance of ensuring that small, family owned businesses in this sector do not take the fall for the bad behaviour of large financial institutions.
I think it is really apt at this point to point out that those members opposite, those in the Labor Party, when they talk about the big banks and the Hayne royal commission, are oblivious to the impacts of the Hayne royal commission on small mum-and-dad financial planners. They talk about the terrible ills that the banks have perpetrated on Australians, and they were wrong, but what about the small, independent, mum-and-dad business operations that have worked in this industry for years and years? Without any form of discredit on themselves, those members opposite continuously talk about the big banks but you will never hear them talk about the small businesses that have been impacted. Now, I don't profess to be an expert in this field, but I do understand the importance of business and of the issues we're talking about, and I know that the minister appreciates them as well. Many of these questions have no easy solution. In every case a delicate balance must be struck between preventing a repeat of these bad practices that have gone on before and ensuring a strong sector that can serve those who'll need it most in the future.
The bill before the House today is another important step in striking that critical balance. This government understands there will always be a market for good, professional, sound financial advice. ASIC, after all, found the majority of consumers who seek financial advice do so because they feel advisers could recommend products that they could not find on their own. I know the government also understands that, from its beginnings in the insurance sales industry, in recent years, the financial advice sector has been moving closer to what the public are demanding it become—that is, a more professional sector akin to medicine and the law. I'm pleased to say that not one financial adviser I have met has quibbled with me about that very fundamental need—that is, the need for them to become more professional. However, given the important role these advisers play in our financial sector, self-directed improvement is no longer enough, and it is critical that the industry is held to the highest of standards.
In the light of the royal commission's findings, we must eliminate any misconduct. That's why the government committed to the Australian public to act on every one of Commissioner Hayne's 76 recommendations before the last federal election. It is an important matter of trust that, in this place, we live up to the commitment that we have made to the Australian people. To date, I believe the government has done so, while taking into account financial advisers' legitimate concerns. For example, in keeping with the royal commission's findings, the government has introduced a minimum educational requirement and an exam to ensure that, like doctors and lawyers, everyone in the sector has the same defined body of baseline knowledge, regardless of whether or not they have specialised during their career.
We're ensuring that every adviser in the country has the complete body of knowledge which underpins the profession and the professionals' capacity to competently and ethically practice. However, we have balanced this with the proper recognition that the experience of advisers should also be taken into account. That is why the government has stipulated that existing advisers need only complete an eight-subject graduate diploma rather than a full 24-subject bachelor's degree. In addition, the government has recognised that existing advisers need more time to meet these new standards. With the urging of many members on this side of the House, the government has introduced legislation, which means that existing advisers will have until 1 January 2026—that's two additional years—to meet the qualification requirements and one additional year until 1 January 2022 to complete their exam.
I want to thank Minister Hume for listening to me and my colleagues and stakeholders on these very important issues. The reforms in the bill before the House today are similarly effective in striking that balance. It is vitally important that there is transparency and clarity for consumers around fees when it comes to financial advice. We want to avoid the fee-for-no-service conduct we've seen in the past. However, just as importantly, we must not add unduly to the reams of paper that financial advisers are already required to provide to their clients when delivering any services. I'm sure we have all had the discouraging experience of being handed a thick wad of legal papers to read before purchasing a service we want and need. It is a simple fact of human nature that the greater bulk of fine print we are given to read, the less likely we are to read it and take it all in. How many Australians read the fine print when we're asked to agree to terms and conditions by Apple, for example? They provide reams and reams—in that case, electronic reams—of material. The more you provide and the more complex you make it, the less people will read it, and if people don't read it they will come unstuck. The more complicated we make the compliance for the adviser, the greater the risk for the consumer.
Under the reforms in this bill, financial advisers would be required to provide clients with a fee disclosure statement every year, which would detail the fees to be charged in the following 12 months and the services that the client is entitled to receive during that period. Critically, the bill would also require that clients provide active written consent to those fee arrangements going ahead, before any fees are charged. This will ensure the transparency that consumers need. However, just as important, under this bill these fee disclosure statements would take the form of a single document, delivered annually at a predictable time. The bill also removes the current requirement for financial advisers to provide a renewal notice to their clients. Both the disclosure statement and the request for renewal would be outlined in one straightforward document under this bill, preventing unnecessary duplication.
Equally, this bill provides for critical transparency by requiring financial advisers who are not independent, impartial or unbiased, as defined under the Corporations Act, to declare as much in a written statement to all clients before providing them with any advice. Failure to do so will incur a substantial civil penalty of up to three times the benefit derived or 5,000 penalty units. However, once again the bill prevents duplication by requiring the statement to be provided as part of the existing financial services guide, which is already mandatory in most financial advice arrangements.
Finally, under the reforms in this bill, unnecessary and unwanted ongoing advice fees from MySuper products will be prohibited, stamping out one of the more common fee-for-no-service arrangements identified by the royal commission. However, the government recognises that some members will want to see further financial advice, especially as they are approaching retirement. As such, the bill allows for non-ongoing fees to be charged where the individual gives their explicit consent. In each of its three schedules, this bill delivers on the financial services royal commission's recommendations and ensures that consumers have the protection they need. In each case, the schedules do this while listening to the industry and preventing the unnecessary duplication and bureaucracy which are making it increasingly difficult for advisers to service clients with lower value asset pools. That point was made continually to me by the industry.
The financial advice sector delivers much-needed services to every corner of the country and impacts the lives of every Australian in some way. The government's reforms are not just change for change's sake. They will make our financial system more efficient, more competitive and more trusted, for the benefit of all Australians. I know that many of the financial advisers in Fisher will remain concerned for their lower value portfolio clients. I understand they will remain concerned about their ability to service these clients whilst staying compliant with their new regulatory obligations. However, these changes are necessary to protect the public, and they are very timely. They are the right thing to do for the public and for the industry. In my experience with dealing with financial advisers, I've learnt that as a profession they are excellent at adaptation. They have had to be. This process will be no different. Strengthening the sector will benefit all Australians, as they will be able to access better quality advice that is affordable and helps them make good financial decisions. Strengthening these protections will ensure that Australians are receiving the best possible guidance. Ultimately, the reforms in this bill and all of those in the government's financial sector reform package are going to result in greater consumer confidence in the financial services industry and support the sector's ongoing place in our society in the years to come.
I will continue to work with financial advisers to consult. I will listen to their concerns and ensure that this government gets the balance right between the interests of consumers and those of their financial advisers. Members opposite continually talk about the big banks, but they always forget small business. Members of this government, the Morrison government, never forget small business. Small business runs through our veins. Most of us come from small business. We know what it's like to have to meet payroll on Thursday. We come into this place with that responsibility. We look at bills through that prism. We will continue to do so, and I commend this bill to the House.
The speaker before me made the assertion that Labor never talks about small business. Let me start my contribution on the Financial Sector Reform (Hayne Royal Commission Response No. 2) Bill 2020 by talking about not just a small business but the human beings behind that small business, whose financial interests, health and welfare have been devastated by the action of a bank and the failure of this government to make sure processes are in place so they get proper restitution. It's a shame that the member who spoke before me has walked out as I rise to speak on the subject that he said no-one from Labor ever speaks on.
My constituents Mr and Mrs Furneaux, small-business people, had a business loan from the NAB of about $240,000 in September 2006. They started to struggle. It was an interest-only loan, and they thought that would continue for two years. Something happened. The banks said they weren't meeting their contractual arrangements, and they tried to negotiate with the bank about how to deal with it. They looked at their private properties and they looked at whatever they could do try to service their loan. The bank says they were served with a notice of default, but they never received it. That led to years and years of nightmare in the Supreme Court, trying to negotiate with the bank and trying to keep their heads above water. As a result of the way they were dealt with by the bank, they've lost both of their residential properties and their business. The Furneauxs aren't people who are just complaining because their business has failed; they're people who have been doing everything right to try to get a resolution for this problem with the bank. They haven't had any help from AFCA. The negotiations with the bank, which were supposed to be done in good faith, fell through. They don't know what to do now. They've pleaded with me to raise it in this parliament as an example of victims of bank misconduct who to this day, in 2021, are still struggling for an outcome.
They're not the only constituents of mine who have complained about their dealings with AFCA. Stephen has contacted me a number of times. As he said to me in one of his most recent emails: 'It's very disappointing that a government agency is so unhelpful and unable to do what it is meant to do. It's past time when more action is needed. I've done all I can and I need assistance.' AFCA's caused a lot of extra work for all involved, with significant delays. It's a matter that has been before them for many months, and the delay is entirely due to AFCA, but Stephen said he is given just seven days to reply. He can't get the help he needs.
It's about time this government looked at what is happening at AFCA. It's interesting that the current chair of AFCA is also the chair of Crown. Perhaps it's about time the government took an approach to dealing with institutions and appointments that is something other than jobs for former Liberal politicians or their mates. It's also time this government told the truth about its lack of implementation of the recommendations of the royal commission. After voting against the royal commission 26 times, the government finally bowed to pressure and introduced a royal commission into banking and financial institutions. I don't think anyone in Australia can forget the image of the Treasurer trying to shake Commissioner Hayne's hand when the recommendations were handed down, or his Academy-Award-winning performance of outrage at the way hardworking Australians had been treated by the banks—his scathing assessment of the banks' behaviour. The Treasurer of Australia said the banks were driven by a culture of greed that breached the law and the price paid by the community was immense. The Treasurer spoke of the broken businesses, the emotional stress and the personal pain of thousands of victims, and he promised change. That is what he promised the Australian people.
All you need to do is go to his website and have a look at his press release of 19 August 2019. The Treasurer said:
The need for change is undeniable, and the community expects that the Government's response to the Royal Commission will be implemented swiftly.
According to the Treasurer back in August 2019:
Excluding the reviews that are to be conducted in 2022, under the Implementation Roadmap:
According to the Treasurer:
For measures contained in legislation introduced into the Parliament before 1 July next year—
the Government expects the majority to commence by 1 July 2020 or Royal Assent.
According to the Treasurer:
Given its scale and complexity, this represents an unprecedented response.
I'm not sure how you can have an unprecedented response to a royal commission that had just handed down recommendations, but we'll move on. According to the Treasurer:
It demonstrates the Government's commitment to strengthening consumer protection laws and empowering Australia's financial regulators to enforce the law.
Well, on the government's own measure, on the Treasurer's own measure of the demonstration of the government's commitment, they get a big 'F' for failing, because what would actually demonstrate the government's commitment to strengthening consumer laws and empowering Australia's financial regulators to enforce the law is delivering on it.
I know: 'There was COVID. Doesn't everybody know there was COVID?' According to the member for Goldstein, in his hyperbolic and tremendously loud contribution to this debate, that meant the government was focused on other things. Apart from the things that this parliament supported and that went through, like JobKeeper and JobSeeker and JobMaker, he didn't really say what else the government was focused on. He didn't, for example, highlight that the government was focused on doing the exact opposite of recommendation 1 of the royal commission, which is to keep the responsible lending laws.
Apparently, all of last year, for the times that the government didn't cancel parliament and parliament was actually sitting, the government was able to bring in legislation to establish an integrity commission for cheaters at university, because that was urgent, as opposed to an integrity commission for this parliament and the Public Service. So they could do that. They could bring in legislation which changed the fees for courses at universities, which has the impact of making it harder for students and young people from poorer families to go to university because they can't afford to leave with a $50,000 debt. The government could do that last year. It could introduce substandard environmental protection laws. It could introduce legislation which established a pale alternative to a royal commission into veteran suicides, which is what the defence community would like. It could introduce legislation to extend the racist cashless welfare card system onto more vulnerable Australian people. This parliament could have introduced 181 pieces of legislation last year, including private member's bills, which, fair enough, by the standards of what the previous Labor government was able to do during the global financial crisis, is pretty poor. It could introduce 181 pieces of legislation but couldn't focus on implementing the recommendations of the royal commission into banks and financial institutions. That's the real measure of this government's commitment to making banks follow the law and protecting Australian small businesses and individuals who have been the victims of malpractice.
I just mention the member for Goldstein—and I know he's not in the chamber, but I'm sure he is sitting avidly watching my contribution. I want to put in the Hansard that he noted that at one point, during his contribution, my shoulders were shaking. It's true: they were. But not for the reasons the member for Goldstein suggested. I was just trying to get the ringing out of my ears that was caused by the volume of his contribution. I would suggest that, if it's possible, Hansard records that contribution. I've suggested previous speeches be recorded in capital letters. Maybe they want to put the one delivered today in bold and italics. I don't know how you're going to record the hyperventilating in HansardI'll leave that up to the experts.
This legislation introduces reforms which are needed and which are supported. There is no doubt about that. They are overdue, but it's good that they are happening now. What needs to happen is more of an actual commitment. We heard horrific stories from person after person after person who went before the royal commission and bared their lives with some of the most devastating experiences they have ever had to go through in the hope not only that would they get some recompense but that it wouldn't happen to anyone else. We need to honour what they did for the rest of the community and the work that the royal commissioner and everyone at the royal commission put in with the recommendations and get them implemented. The way to do that is not to strip away responsible lending laws. The way to do that is not to blame having to deal with COVID—which, by the way, the states did a lot of, but that's another speech. The way to do that is for the Treasurer to do his job. There are a lot of recommendations outstanding, and I look forward to the flurry of legislation that must be about to come to implement them. Thank you.
It's interesting listening to the member for Dunkley's contribution and I would agree with her on one point: the behaviour of the banks, particularly during the GFC, that ultimately led to the royal commission was reprehensible. As somebody who spent a career in the banking and financial services sector before coming to this place, it was extraordinarily disappointing that the banks didn't take in a professional manner their social responsibility and social license to look after their customers and assist them through an extraordinarily difficult time. That it had to get to a royal commission for some of those issues to be ventilated and articulated was equally disappointing. But the member for Dunkley's contribution also demonstrates my concern with those opposite and their complete and utter lack or apparent lack of an understanding of the financial services industry, particularly the advice part of that industry. Nothing in the member for Dunkley's contribution spoke to the substantive matters in this legislation, and it didn't demonstrate that she even understands the industry that we're talking about.
What I am pleased to see is, over the last 12 or 18 months since the royal commission, a move by the big banks to divest themselves of their financing planning arms. I've long held the view that if you provide financial planning advice you should not be able to be owned—or you should not be owned, full stop—by a product manufacturer, whether that's a bank, whether that's an insurance company or whether that's a fund manager, and even whether that's an industry super fund because they are also, ultimately, a product manufacturer. Advice should be completely separate from the people who create the products that advisers recommend.
The important part of this equation that gets overlooked is that advisers can only recommend a suite of products as per their approved product list. But there are professional advisers out there—and there are a great many. The vast majority of the industry are professional advisers who have been in the industry for 20 or 30 years or longer and have had clients who have been with them for that whole journey. It's a completely and utterly different model from the sales model that existed within the financial planning arms of the big institutional banks, in particular, and AMP.
Those people, the professional advisers who have run their own businesses for the past 20 or 30 years or longer, who deal with ordinary Australians each and every day and work with them to ensure that their financial goals and objectives are realised, that their wealth is protected and that they are able to achieve their retirement goals, focus not on the product. The most important part of the advice that they provide is the strategic advice that is designed to assist everyday Australians meet their goals and objectives. This is whether it's getting a mortgage paid down, whether it's saving or accumulating X amount for retirement, whether it's accumulating an investment portfolio within super or outside super or a combination of the two, or whether it's ensuring they've got the right mix in structure of insurance policies, both to protect their own personal wealth that has accumulated and their family's wealth should something unfortunate happen to them. But also, if they're in a business and have a business partnership, it's to ensure that they have the right structure of insurance products to fund their buy-sell agreements or their exit strategy should something happen to them. There are a whole range of pieces of strategic advice that professional advisers, outside of the banks, provide each and every day to Australians. They're the people I focus on, each and every day, because the majority of these people are small-business owners.
That is the point the member for Fisher was trying to make, in his contribution, that the member for Dunkley completely missed in her contribution. The member for Fisher was speaking about mum-and-dad Australians who have their own small businesses providing professional financial advice to other mum-and-dad Australians. They're the people who go out there each and every day and, just like the small-business owner the member for Dunkley referred to that the banks treated so shabbily and who has put all of their assets on the line every day, it is the same for these individual advisers and their small businesses. They do exactly the same thing. Their family's wealth is based on the value of the client relationships that they work on, based on the professional advice that they provide in a variety of areas. This is where this piece of legislation is so important, in that it seeks to ensure that we improve the level of disclosure with regard to the fees that advisers are charging their clients. This is critically important because it is important to ensure that there is complete transparency about the fees that an adviser is charging on an upfront basis but also on an ongoing basis.
Again, much of the fee-for-no-service issue that we saw out of the royal commission came from the big institutional players at that point in time. We heard very few if any instances of fees for no service for small to medium-sized financial planning firms that actually take the time and the effort, each and every day, to look after their clients. That's not to say that, within that part of the financial services sector, there aren't people who do the wrong thing. We should have a suite of legislation. And ASIC also, in doing their role, should ensure that those people are removed from the industry. I have no argument with that whatsoever. We do not want people in the industry who are not going to put the best interests of their clients first. They have a legislated responsibility to do that. Even before that, most of the professional advisers did that. Sadly, there are those that didn't.
This legislation is focused on improving that disclosure but also, at the same time, ensuring that what was potentially three documents that you had to give to your client is now a single document. We know, from the research and work done, that the more paperwork we give clients—and this was a piece of work that ASIC did a number of years ago—the less likely it is that clients actually read that paperwork. What we actually want is for clients to read the documentation that they are given so that they understand what they're paying for, what they're receiving and what the services are that they expect to receive as a result of the ongoing fees that they are paying.
Like the member for Fisher, I frequently meet with financial advisers, both in my electorate and more broadly, and we discuss these issues. I accept there's stuff in here that some in the industry would want to go further with. However, the reality is that these protections being put in place are designed to protect consumers, and the reason we need this legislation is that we have seen that there are those who don't put consumers before their own interests.
The important part of this legislation, though, in trying to take three documents and put them into one, is that also it helps mitigate one of the big issues that has faced the industry over the last few years, and that is the cost of the provision of advice. I acknowledge the work that ASIC is doing to try and understand how we can reduce the cost of advice so it's more affordable for a broader range of Australians.
So I commend this bill to the House, in its unamended form—because, as usual, those opposite have chucked in a few pious amendments. This bill, in schedule 1, will improve the disclosure by advisers for the personal advice that they provide to their clients under the ongoing fee arrangement. It also provides a degree of flexibility to the provision of the financial disclosure statement, and that's important because, whilst it sets a fixed anniversary date for their clients, we all know that clients' circumstances are not set in stone and that their circumstances might change or they might need to see advisers at different times of the year. But it's important that, in the totality of the service that is provided over the course of the year, the clients receive the services that the adviser says they're going to provide and that the fees charged are appropriate.
The new requirements will ensure clients are given a more frequent opportunity to opt in. In the current regime it is two years; it will go to an annual opt-in. That can be in hard copy but, importantly, it can also be in electronic form. So it creates some flexibility in how that written consent can be provided to the adviser and, subsequently, by the adviser to the fund manager, so that the fund manager has clear evidentiary documentation that those fees can be charged. These changes come in from 1 July 2021.
Other changes, which are equally important, include the disclosure around independence and any conflicts of interest. If nothing else, that's one of the things that came out of the royal commission—that lack of disclosure of a lack of independence, particularly by advisers within the bank network and their own adviser groups; people not understanding those links; and the consequent impact of the products that were recommended as a result. I think that is a good clarifying schedule in this bill. That makes the disclosure of independence more and more important. The last change relates to advice fees for MySuper products: where there's a specific piece of advice provided on a one-off basis, the fee for that advice can be charged from a MySuper product with the client's explicit consent, but ongoing advice fees cannot be so charged. There are a myriad of other methods by which they can be charged, though other investment accounts or via direct debit or other things.
I firmly believe that the financial advice industry is working towards becoming more professional and more transparent about what it does. It needs to do that to ensure there's the confidence in the Australian community for people to be able to go and get unbiased, independent advice. Importantly, that advice should be focused on the strategic needs of the client: what are their requirements to improve their wealth, protect their wealth or accumulate their wealth for the future? Once we get to an industry that focuses on those core needs and gives that strategic piece of advice properly, in a cost-effective manner that builds the wealth of everyday Australians, then we will have a professional industry. I look forward to seeing that day, but I commend this bill to the House as a step on the road to continuing to work with the industry to build that professional industry to provide professional advice to Australians of all parts of our country—those who have small account balances and those who have large account balances. This is the next step in what I think is a very good suite of legislation to come down the track.
I rise to speak on the Financial Sector Reform (Hayne Royal Commission Response No. 2) Bill 2020. The bill before the House alters the laws which guide professionals when they provide financial services to their customers. The passage of this bill will block banks from some of the pathways to customer mistreatment that they have previously taken. Specifically, this instrument seeks to limit the capacity of banks to charge fees for no service. The practice of charging without providing a service was aggressively highlighted through the banking royal commission. If passed, this draft legislation would require an annual review of fee arrangements and explicit disclosure of a lack of independence or conflict of interest where it exists. The financial sector reform bill also sets stringent demands on the timing of advice fees for superannuation members. These are good things. These changes will protect Australians from unjustifiable and immoral financial malpractice. The Financial Sector Reform (Hayne Royal Commission Response No. 2) Bill is in keeping with recommendations made by the banking royal commission.
But there is a problem: while the bill before this House suggests the government has engaged with the final report of the Hayne royal commission in good faith, the government's behaviour elsewhere shows the exact opposite.
The National Consumer Credit Protection Amendment (Supporting Economic Recovery) Bill 2020 is currently subject to a Senate inquiry due to report on 12 March this year. Schedule 1 of the national consumer protection amendment removes responsible lending obligations for most consumer credit contracts. Recommendation 1 of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry states that the National Consumer Credit Protection Act should not be altered to lessen the safeguards that ensure responsible lending. In simple terms, the first recommendation of the banking royal commission is to retain responsible lending laws. This government has introduced legislation to do just the opposite. It is truly mind-boggling.
We currently have protections in our lending laws to make sure that loans are affordable, suitable and ethical. The Labor government introduced the National Consumer Credit Protection Act in 2009, and there were two key reasons for responsible lending laws. The first is that irresponsible lending leads to extremely personal hardship. This can arise with no fault by the borrower and is frequently linked to domestic abuse or other devastating life challenges.
The second reason is structural. Irresponsible lending introduces weaknesses into the economic system. Irresponsible lending generates bad debt. At low incidence, bad debt generates economic drag and lowers prosperity across the country. At moderate to high incidence, bad debt causes economic collapse and decimates prosperity across the country, the exact opposite of what we want during COVID. This is what we saw through the global financial crisis.
Officials from this government's Treasury department sat before the banking royal commission and very clearly explained that the laws the government is now trying to cancel serve to protect our economy. The Labor government introduced the National Consumer Credit Protection Act in 2009 partly in response to the global financial crisis. It is incomprehensible to suggest that the draft legislation would have a positive impact on wellbeing or prosperity in Australia. It could not and it will not.
Two clients of my community law centre, the Barwon Community Legal Service, clearly show the absolute importance of retaining responsible lending requirements. Sally has two children to her de facto partner, John, who had a gambling problem and was very controlling with money. John wanted a new vehicle but his credit rating was poor and he was unable to get a loan. After several weeks of coercion, including physical and emotional violence, they went to a car dealership and John negotiated a purchase while Sally stayed outside. When it came time to sign the contract, John brought Sally into the store, explained to the car dealer that she would be the borrower and they proceeded to complete the paperwork, with Sally not asked one more question. That lender issued Sally a $25,000 loan at 20 per cent interest per annum via their own finance company. The car was registered in John's name and Sally never drove it. She only had her learner's permit. After they separated due to the ongoing family violence, John took the vehicle and left Sally with the debt. Barwon Community Legal Service assisted Sally to argue that the finance provider had breached responsible lending laws by not making inquiries or verifying information despite clear signs of coercion. Eventually, after making a complaint to the Australian Financial Complaints Authority, the debt was waived. This waiver would not be possible and could not have been achieved without the responsible lending laws that this government intends to remove.
Then there's Ahmed, another client of the Barwon Community Legal Service, who was deep in debt from business and personal loans and looking for a way out. He signed up for a course with a private college on the promise that he would earn an extra $1,000 a week after completing the qualification. When he couldn't afford course payments, they offered to organise finance for him. Ahmed got a phone call from someone who asked for all his bank statements and other details. The caller, a finance broker, connected to the college and applied for a loan on Ahmed's behalf at a rate of 22.9 per cent interest, using extremely inaccurate information. The course wasn't as advertised, and Ahmed was left with a loan of $30,000 to repay on top of all of his other debts.
Barwon Community Legal Service stepped in and helped Ahmed make a complaint to the Australian Financial Complaints Authority on the grounds that both the broker and the lender breached the responsible lending laws. Ahmed eventually accepted a settlement from the finance broker. The lender wiped $22,000 of the debt and allowed him to repay the remainder at a rate he could afford, without interest. Like Sally, Ahmed is extremely thankful that Barwon Community Legal Service was able to advocate on his behalf. Without responsible lending laws, this would not have been possible.
I would like to take this opportunity to pay tribute to the hugely committed team at Barwon Community Legal Service. The work they've done for Ahmed, Sally and thousands of others across my electorate is beyond commendable. They witness and fight the harm brought about by inappropriate lending practices and other social ills on a daily basis. In the last financial year Barwon Community Legal Service saved clients over $350,000 in waived, renegotiated or revoked debts arising from breaches of the very legislation this government is rushing to water down. They run a tanker ship on the smell of an oily rag and make our country a better, fairer and more compassionate place, so my heartfelt thanks go to the Barwon Community Legal Service. The Barwon Community Legal Service bears witness to the harm caused by irresponsible lending.
The Treasury has testified to the significant and negative economic impact of responsible lending, but the Morrison government still has the gall to claim it will do Australians and the Australian economy good. Rubbish! We say no to any effort to strip back responsible lending. We say no to the Morrison government. We say no to the government's dodgy banker mates. Instead, we stand with Treasury and community legal services. We stand for the banking royal commission recommendations. We stand with Sally and Ahmed and every Australian who relies on every MP in this chamber to do the right and decent thing and protect them from harmful and irresponsible lending practices.
Every Australian will rely on some form of financial services during their lifetime. Be it superannuation in their workplace, a life insurance policy, or advice from a bank when they are seeking to get a mortgage or a loan, everyone relies on financial services at some stage in their life. Unfortunately, for the past couple of decades in Australia, many Australians have been ripped off by dodgy practices and unconscionable conduct by people who had a power imbalance in their favour in the relationship between adviser and client in financial services. That, of course, led to the banking royal commission. That commission was resisted at every stage by those opposite in the early days. They didn't want to see the findings that were uncovered in the financial services royal commission come to light in Australia, because they knew that there were some bad practices going on. They were protecting their mates in the banking industry from having some of these insidious practices covered by not only the media but a royal commission.
That royal commission was very thorough and made a number of recommendations, and this bill delivers on some of those recommendations made by the Hayne royal commission. It contains three schedules which implement responses to four different recommendations made by Commissioner Hayne in relation to various aspects of financial advice. Schedule 1 relates to ongoing fee arrangements. This requires financial advisers to annually renew with their clients, through their express consent, the provision of those financial services. This comes about as a result of recommendation 2.1 of the royal commission, in which Commissioner Hayne recommended changes to fee renewal arrangements for financial advisers. Under the current law, these renewals can be taken biannually, and renewals are not required for pre-2013 arrangements.
We saw in the Hayne royal commission the result of that. One of the outcomes was that people were paying fees for no services, because they weren't sitting down on an annual or biannual basis with their financial adviser and going through the fees and commissions that were paid. They weren't seeing where their hard-earned money was going, in terms of those fees and commissions and renewing that advice for the next period of time. This recommendation deals with that, this legislative change deals with that and the proposed new law will require such renewal statements to include information about the service provided in the past year and the services that will be provided over the coming year, to make sure that there is more information and more transparency for people before they take on an advice relationship with a financial adviser in the future. That is a good thing.
Schedule 2 relates to a disclosure of a lack of independence and will require financial advisers to provide written disclosure of a lack of independence to clients. This implements recommendation 2.2 of the royal commission, which recommended:
The law should be amended to require that a financial adviser who would contravene section 923A of the Corporations Act … must, before providing personal advice to a retail client, give to the client a written statement … explaining … why the adviser is not independent …
This, of course, came up in the royal commission on several occasions, these murky arrangements that were in place between financial advisers, some of the platform operators and the companies whose products the financial adviser would recommend to a particular client. The client would not be aware that that financial adviser may be getting a commission from promoting that particular product to them or may be getting some form of financial benefit from that ongoing relationship with a product provider.
What is important in these types of relationships, where there is a fiduciary duty to act in the interests of the client, is transparency, ensuring that those relationships are disclosed to the client and that they go in with open eyes before they sign on the dotted line and give their consent to that adviser acting on their behalf. That hasn't been happening in the industry. It's one of the areas that Hayne recommended in his report needs to be addressed. The current law only prohibits advisers calling themselves independent, unbiased or impartial in certain cases where they receive benefits from financial product providers, commissions, conflicted remuneration and other benefits. It does not require a positive declaration of the lack of independence, and under the proposed law ASIC will be required to determine the specific requirements for this disclosure.
Schedule 3 relates to advice in superannuation. It increases restrictions around charging advice fees to a member of a superannuation fund. This implements the government's response to recommendations 3.2 and 3.3 of the financial services royal commission, which recommended that the government prohibit the deduction of advice fees, other than intrafund advice from MySuper products, and limit the deduction of advice fees from choice products. Many of the fee-for-no-service issues that were identified by Commissioner Hayne in the royal commission were in relation to retail superannuation fund providers—unfortunately, particularly AMP—charging advice fees to members. With many of those fees that were charged to those members, the member wasn't exactly aware that they were being charged. Across a particular platform and across a particular firm, this was happening on a regular basis.
This proposed law would prohibit superannuation trustees from charging members for advice without the express consent of the member. It would also prohibit superannuation trustees from charging ongoing advice fees to members of MySuper products. This doesn't prohibit superannuation trustees from charging one-off advice fees to MySuper members with their consent. It's worth noting that the proposed law differs from the recommendation made by Commissioner Hayne who recommended a strict prohibition on advice fees being charged to MySuper members.
Mr Dick interjecting—
The member for Oxley behind me says, 'It's the complete opposite.' It's worth noting that it differs from what Hayne recommended. Stakeholders in the superannuation sector, including the industry sector, are supportive of this model and it allows funds to provide advice to members in relation to key life events while prohibiting the provision of an ongoing fee for service. It later recommends that supporting this change in the provision of targeted advice at retirement with the consent of the member is likely to be beneficial to that member.
What is important is that we have a retirement income system that provides dignity for workers in retirement. The basis upon which Australia's superannuation system was established was to provide dignity for workers in retirement. It's about government basically saying to workers: 'Over the course of your working life, you've worked hard. You've added to the economic growth of our country as an individual and collectively. And for that we'll support you in your retirement through a tax concession, for you to save during your working life and to enjoy the benefits of that retirement when you reach the preservation age. Then you can pay off your house. You can make sure that you can have a holiday every now and then, and you can look after your kids and your grandkids.'
However, this government is attempting to undermine the notion of that dignity in retirement by attempting to look at cutting the legislated increase in superannuation that this parliament has committed to and this government has committed to on numerous occasions. During the last election campaign the Prime Minister gave a promise and commitment to the Australian people that his government would deliver a legislated increase in superannuation to 12 per cent for Australian workers. Now we see rumblings on their backbench and a number of members of this government starting to try and crab walk away from that commitment. They're even setting up websites, trying to harvest people's data, so they can run campaigns against the increase in superannuation that is legislated to occur for workers in Australia over the coming years. It is disgraceful because it's undermining retirement incomes for Australians but it's also a broken promise by this government to Australians in a very, very difficult time. In a time of a recession and coming out of it, the last thing you want to do is cut the retirement incomes of hardworking Australians and risk that dignity that they all deserve in retirement. That is exactly what this government is attempting to do.
Many members on the government's backbench are attempting to undermine the commitment to increase the superannuation guarantee in Australia. What that will mean over time is that the average Australian worker retires with less in their superannuation account, which will make it more difficult for them to plan for their own retirement, save for their own retirement and fund their own retirement, and it will obviate the need for people to rely on the age pension. Why on earth with an ageing population in Australia would we want to bring in a policy that makes it more likely that more Australians are going to have to rely on the age pension in their retirement to fund their retirement? It will create a bigger impost on the Commonwealth budget at a time when we're now racking up a record debt under this government where debt is going to go through a trillion dollars, where the budget deficit is going to blow out to hundreds of billions of dollars. Why would you want to create and bake in a system that's going to see larger budget deficits into the future because Australians don't have the wherewithal and the necessary minimum superannuation guarantee to plan for their own retirement? It makes no economic sense whatsoever.
Members of this government in the House of Representatives and the Senate—all of us—get 15 per cent superannuation. So it's fine for us to pocket 15 per cent superannuation, but this government's saying: 'No, we don't want to increase the basic rate of superannuation savings to 12 per cent for the average worker over the course of the next few years.' That is hypocritical and despicable, and it is letting Australian workers down. It's breaking an election commitment that this government said was set in stone and that the Prime Minister himself, on numerous occasions during the election campaign, gave to the Australian working people. Well, this Labor Party will campaign against the breaking of that promise. We'll campaign against ensuring that this government can get away with cutting the retirement savings of the average Australian worker and with not meeting the commitment that they gave to Australian workers over the course of the last election campaign to increase their superannuation savings at what is a very, very difficult time for the average Australian worker.
In conclusion, these reforms are important. They deliver on the Hayne royal commission's recommendations, particularly around providing transparency on advice that's given to clients before they sign up to a particular program of financial advice. But what is also important is making sure that Australians have the retirement incomes to be able to engage those financial advisers into the future, to plan for their retirement. If the government do get away with cutting the legislated increase in superannuation from 9½ to 12 per cent, they will be doing a very bad thing by the Australian people—by working Australians. They will again be breaking an election commitment. Labor will hold them to it and Labor will fight them every step of the way.
I rise to speak tonight on the Financial Sector Reform (Hayne Royal Commission Response No. 2) Bill 2020. As we have heard, the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry was finalised on 1 February 2019. As we know, the government's response was publicly released alongside the final report on 4 February. In August 2019, the government indicated that the vast majority of legislation required to implement the FSRC's findings would be completed and introduced to parliament by the end of 2020. More than half of the recommendations made by the banking royal commissioner, Kenneth Hayne, either have been abandoned or are yet to be fully implemented.
Tonight, I want to spend some time on what that actually means and what the practical implications of that lack of reform have meant to the sector. I will be encouraging all members of the House to support the second reading amendment circulated in the name of the member for Whitlam and moved by the member for Rankin and particularly to recognise that these recommendations of the Hayne royal commission have taken far longer to be implemented than was promised and that the government have failed to establish a compensation scheme of last resort, as recommended by the Hayne royal commission, and have actively rejected the very first recommendation of the royal commission.
Here we have a royal commission which the government—let's be honest—did not want. The inquiry and the royal commission into the banks was fought tooth and nail by every member of the government. The government were dragged kicking and screaming until we finally had justice for victims of the banking system in Australia. Then the very first recommendation has been rejected. In fact, by proposing to repeal the responsible lending obligations in the National Consumer Credit Protection Act 2009 for the vast majority of credit contracts, the government is doing the complete opposite of what Commissioner Hayne recommended. I'll talk about that a little later in my remarks tonight, if time permits.
I want to focus now on what the government should have done—and, in my opinion, what the government still has time to do—in regard to the outrageous scourge of payday lending in this country: of vulnerable Australians being ripped off due to people making profits from those who can least afford it. This takes us to the government and its lack of action when it comes to the recommendations and policies that protect Australians around lending. The reckless behaviour of payday lenders has gone on long enough. I would take a bet that I have spoken more than anyone else about payday lending, in this parliament and the last parliament. I'd have to check the Hansard, but I'd back myself in on that from about the end of 2016, after I visited St Ives Shopping Centre in Goodna. I was approached at Woolworths by about three or four really well-dressed ladies who were wearing badges. They were getting supplies from Woolworths for their op shop, and they came up to me and said, 'Oh, you're Milton Dick, aren't you?' I was newly elected and pretty impressed that they knew who I was. They read the riot act to me and said, 'What are you going to do about payday lending?' I said: 'What can I do? I've just been elected to the parliament.' They said: 'We are sick and tired of people coming to the St Alban's welfare ministries week after week with mounting debts. People are being tricked and conned into taking out payday loans. They are buying fridges, which should cost about $700 or $800, for $4,000 to $5,000. They are taking out loans to fix their cars for around $1,500, which ends up costing them $5,000.'
I vowed from that moment onward that I would do everything I could to give justice to all of those people out in the community. When I looked into this a little further, I recognised that the then Turnbull government had planned to do something about it, and all credit to Kelly O'Dwyer in her former portfolio, as Minister for Revenue and Financial Services. She delivered a review with 20 recommendations, two of which would crack down on payday lending, one specifically to deal with household goods. The now Deputy Prime Minister of Australia, Michael McCormack, stood in this chamber proudly as the then Minister for Small Business and said that he would deliver those reforms. He presented a draft exposure of a bill to do exactly what the government had promised to do with their own review. Then what happened? The 'parliamentary friends of payday lending' in the government got their hands on it and ripped it up, and we've heard nothing since.
Since then the Independents, Labor members of parliament and a whole range of stakeholders and individuals have stood up and said, 'Please take action.' The government have not heard their pleas. Between April 2016 and July 2019, just over 4.7 million individual payday loans have been written, worth approximately $3.09 billion. I realise this is big business, and I know some of those loan sharks will be monitoring this speech. Every time I speak about this they email me about the speech I've made and start trolling me on social media, which I wear as a badge of honour.
Two years ago I did get a letter back from the then Prime Minister of Australia, Malcolm Turnbull—the only letter I've had personally addressed to me by a prime minister of this country—saying: 'Yes, we're going to take action. You've got my solemn commitment. I will take action. It will be delivered, and you can be part of that.' I've got it framed in my electorate office at Forest Lake. As the member for Barton said today, he was not interested in the credit; he was just interested in it actually happening. Two weeks later the members of the government rolled him. It was just that little bit too late. Since then I've written to minister after minister after minister over and over again. Hopefully, a ministerial adviser will be listening to this and adding it to their dart board in their offices yet again.
I know I speak for the people who have been ripped off. Around 15 per cent of payday loan borrowers end up in a debt spiral, which leads to events such as bankruptcy. I also speak tonight for the women who are accessing payday loans, the number of which has jumped by 28 per cent since 2016. Of course, we now know about the cycle of debt addiction that affects a lot of people who are being preyed upon because they are desperately in need of cash—because of insecure work, because of falling wages and because there are a million people unemployed. Eighty-six per cent of loans are now accessed through a website, on a mobile or a tablet. Just over the last couple of weeks, I've seen on my Facebook page—and residents have showed me on their Facebook pages—generous payday lenders offering to help with back-to-school products. They aren't helping with back-to-school products; they are offering a loan. They are offering a get-rich-quick scheme that's too good to be true, over and over again.
While the Morrison government sit and do nothing—while it would be bad enough not to look at the small amount credit contract review, which they promised to do—they are now planning to make it easier for people to have access to unfair credit. They are seeing reforms being watered down—not recommended by the royal commission, not recommended by the royal commissioner himself, but in fact doing the opposite. So what does this all mean? What does it mean if these reforms happen? I refer to a media report in The Guardian on Thursday 4 February entitled 'Australia risks household debt disaster if responsible lending laws scrapped'. It said that Australia's predatory lenders are set to see a household debt disaster—according to an alliance of consumer rights groups which I'm very proud to stand alongside. The media report said responsible lending obligations, as we know, were introduced in 2009 through the National Credit Protection Act, which attempted to stop risky lending by the banks. It said that the alliance—including a whole range of community organisations, financial counsellors and a number of great community advocates—said the inadequate consultation for a change is unacceptable and that 'this bill would only serve to extend the impacts of the economic downturn and it risks prolonging or worsening the financial hardship of Australians through bad debt in the wake of the COVID-19 pandemic, just as government supports such as JobKeeper and JobSeeker come to an end'.
The government's bill will also make significant changes to the laws governing small amount credits, usually referred to as payday loans and consumer leases. What this really means is that a double whammy is coming to vulnerable Australians. We will see a JobKeeper cliff happening in March. We are seeing communities across Australia with record unemployment. We are seeing government ripping away support—rolling back support in March, in a matter of weeks.
I recently travelled to North Queensland and met with a number of businesses. I heard from tourist operators in Cairns just last week, as part of Labor's pandemic recovery job and industry task force, with the Leader of the Opposition. Businesses are crying out for relief. They are worried if JobSeeker goes. All those employers are looking over a cliff in a matter of weeks. The city of Cairns has more people on JobKeeper than any other postcode in Queensland. So you are seeing all these people with government support being ripped apart, and the government is saying it's all Premier Palaszczuk's fault, it's all the border's fault or some nonsense.
The minister for tourism visited Cairns last week on the same day as the Leader of the Opposition, and he promised absolutely nothing for the tourism industry. One operator said they normally have about 570 boats out on the ocean, and they have collapsed right down to only a handful. And we're seeing these credit reforms in the bill and the second reading amendment that we're dealing with tonight to put those people even further behind.
We know that consumer groups have said the changes will weaken the system and make it easier and easier for people to be ripped off. This constitutes a broken promise. A joint submission to the Senate inquiry led by the Consumer Action Law Centre said looser lending would reduce the incentive for banks to comply with lending standards because of the removal of penalties. It said:
Repealing responsible lending obligations in the national credit legislation will remove individual legal rights to challenge lenders about their lending decisions and remove the penalty that can be awarded by the regulator ASIC.
So we're basically saying it's okay to be ripped off; it's okay for the banks to go back to where we were. The recommendations put forward by the royal commission are now going to be weakened. The ironical part of this is that the banks don't even want this; the banks didn't ask for this. All consumers rely on their lender to make assessments and let them know what amounts they can borrow and what is affordable. We now risk lenders going back to being about selling credit rather than ensuring loans are affordable.
I pay credit to Gerard Brody, the chief executive officer of the Consumer Action Law Centre, a fantastic advocate, and his team, who are speaking out every single day and trying to make the government listen—that loosening responsible lending practices will make things worse. The proposed legislation will wind back responsible lending obligations to credit contracts under $2,000 and consumer leases. The current legislation, as I've said, introduced in 2009, requires banks to check the financial situation and objective of each borrower applying for credit. The soaring loan numbers contradict the premise of the legislation that the economy was crippled by a lack of credit flow. The ABS lending data indicates that the growth of new loans is at a record high, and this includes occupier home loans. Commitment to a new dwelling of significant high-end value of total loan commitments, including personal finances, is also rising. So it does seem to be a broken promise by the government—their promise to implement the recommendations. The commissioner was clear that responsible lending provisions should be retained and more adequately enforced. So I say again to the government this evening—to the ministers and the members of the government—you gave a commitment to make sure that we would crack down on payday lenders and to make sure that there was responsible lending in this country. You gave a commitment to make sure that the recommendations of the royal commission would be implemented. For goodness sake, listen to what the experts are saying. Listen to what consumers are saying. Stand up for them just this once instead of standing up for the banks in this country.
Firstly, I would like to thank all those members who've contributed to this debate. Schedule 1 of the bill enhances the framework governing the provisions of financial advice to clients under ongoing fair arrangements to prevent fees for no service. Schedule 2 of the bill introduces a new disclosure obligation to ensure that financial advisors who are not independent in relation to the provision of personal advice are required to provide their clients with a clear and concise written disclaimer that outlines that they are not independent and explains the reason why. Schedule 3 to the bill strengthens protections for individuals against paying fees for no service from their superannuation by prohibiting ongoing advice fees in MySuper and increasing the visibility of fees to individuals. I commend this bill to the House.
The original question was that this bill be now read a second time. To this the honourable member for Rankin has moved as an amendment that at all words after 'That' be omitted with a view to substituting other words. The immediate question is that the words proposed to be omitted stand part of the question.
(In division) Mr Speaker, could I observe that the honourable Leader of the Opposition has called for a cover-up on many occasions. Could I suggest that he be a good example of preaching what he actually proposes?
The SPEAKER: Practice makes clear that it's acceptable if you're at the gym to rush to a division, but I wouldn't encourage the member for Kennedy to do it.