Thursday, 25 February 2021
National Consumer Credit Protection Amendment (Supporting Economic Recovery) Bill 2020; Second Reading
The original question was that this bill be now read a second time. To this the honourable member for Whitlam has moved as an amendment that all words after 'That' be omitted with a view to substituting other words. The question now is that the words proposed to be omitted stand part of the question.
After everything we saw in the banking royal commission, I am shocked to be standing here defending the current consumer protections from being watered down. Sadly, the National Consumer Credit Protection Amendment (Supporting Economic Recovery) Bill 2020 is yet another case of this coalition government conducting a review and then doing the exact opposite of what that review recommended.
Australia was horrified—I know I certainly was—at what it heard from that royal commission: unscrupulous behaviour by financial institutions that were hurting local people, saddling consumers with debt they knew they couldn't afford and destroying lives. It was more than heartbreaking; it was absolutely devastating, and it should have been a catalyst for strong action to strengthen consumer protections.
Recommendation 1.1 of the royal commission—yes, that's right, recommendation 1.1—said that responsible lending obligations should not be amended:
The NCCP Act should not be amended to alter the obligation to assess unsuitability.
It was the very first recommendation. Treasury's own submission to the royal commission noted that appropriate responsible lending laws could enhance, rather than detract from, macroeconomic outcomes—that they make the system stronger, not weaker. But what does this bill here today do? It is not only attempting to alter responsible lending obligations; it's attempting to remove them from most consumer credit leases.
In a nutshell, this bill will shift the responsibility from lenders to borrowers, reducing protections for borrowers in the event credit decisions are made on the basis of incorrect information. These laws work to ensure loans are affordable, not unsuitable, for the customer. In other words, they make sure that people in desperate financial circumstances don't get themselves into a situation where they have borrowed more than they can possibly afford to repay. This bill is a direct contradiction of the Hayne report's recommendations.
I cannot comprehend why the government is looking to do this after everything we have learned from and seen throughout the royal commission process. It's a betrayal of every witness, of every Australian who has had their life devastated by irresponsible lending. More than that, it is dangerous and will have shocking consequences for so many vulnerable people.
The National Consumer Credit Protection Bill was introduced by Labor in 2009 to ensure lenders had a set of responsible lending obligations to abide by. They mean credit providers have to make reasonable inquiries about a customer and assess whether a credit product will be suitable for them. This applies to things like mortgages, personal loans, payday loans, car loans and credit cards. They are flexible and scalable, depending on the circumstances, and they are vital to ensuring we have a stable financial system. Bad debt is bad for everyone—bad for individuals, bad for the economy. Some academics have even gone so far as to say these changes could lead to financial instability or a debt crisis when interest rates begin to rise, which they inevitably will. It's dangerous.
Household debt is at historic highs. In May 2020 Fitch Ratings reported that household debt in Australia was at 186.8 per cent of disposable income—one of the highest levels among AAA rated countries. It is a threat to our economic and financial stability. What I want to know is: why is the government doing this? House prices are booming. I know they certainly are on the South Coast. Only yesterday our local newspaper, the South Coast Register, posted an article which showed that Callala Beach in Jervis Bay has risen to No. 3 in Australia's fastest price growth for small towns. The median house price rose by 14.1 per cent in the 12 months to December 2020.