David Gillespie (Lyne, National Party) Share this | Link to this | Hansard source

The original question was that the 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. If it suits the House, I will state the question in the form that the words proposed to be omitted stand part of the question.

Fiona Phillips (Gilmore, Australian Labor Party) Share this | Link to this | Hansard source

I rise in continuation on the National Consumer Credit Protection Amendment (Supporting Economic Recovery) Bill 2020. Across Australia lending is up 10 percentage points. Where is the problem that responsible lending laws are causing? Perhaps that's the wrong question to ask. Perhaps the better question to ask is: what problems are responsible lending laws solving? I have that answer.

A couple of months ago, after the government made this announcement, a group of local financial counsellors came to see me. They were genuinely and seriously concerned about the consequences of this legislation. Among others were representatives from the Shoalhaven Women's Health Centre and Lifeline South Coast, who deal with vulnerable locals on a daily basis. They all told me about the work they do to help people who have gotten into desperate financial situations because of irresponsible lending. What they were most concerned about was the impact on the mental health of their clients. The Shoalhaven Women's Health Centre helps women in a range of vulnerable circumstances, including domestic and family violence, financial abuse, relationship breakdowns, disability, mental health and chronic health issues. This means they often have very little, if any, disposable income, and many of them are overwhelmed with debt. That is with these laws in place, where financial counsellors can help these women hold creditors accountable when that's needed. They have recourse if creditors behave badly, and they can work with these women to get their heads back above water.

I just want to share some of the case studies that the health centre spoke with me about so you can see the real human face of what these laws do and what the harm will be if they are removed. One client they are working with has an intellectual disability and has been diagnosed with a mental illness. This client was coerced by a so-called friend into going into a local store to take out a cash loan as a favour for them. Once they had left, the client handed the money from the loan over to the friend, who has not been heard from since—heartbreaking actions of one friend taking advantage of another, yes, but where was the responsible lending from this institution? Where have they fulfilled their obligations under the responsible lending laws to make sure this loan was suitable for that person? Did the customer even have the capacity to understand the contract that was in front of them? Could they afford to repay it? Their only income is the disability support pension. They were already in arrears on their electricity and phone bills. They had no capacity to repay this loan. What will happen to this lady now? What would happen without responsible lending obligations?

Another client, who fled domestic violence and left all her belongings behind 10 years ago, used a 60-month interest-free option to purchase whitegoods to set up her new home. Even now, 10 years later, she is sent unsolicited credit cards in the mail by the same lender. These can be activated at any time with no inquiries and no checks to see if she can afford it.

In yet another case, the client's son took out a $5,000 loan with an interest rate of 43 per cent per annum. His mother, who is on an age pension, was put down as a guarantor. When her son stopped making payments, the lender started to direct-debit money from his mother. She couldn't afford it. With the help of the Financial Rights Legal Centre, the women's health centre was able to argue that, had the lender made proper inquiries, they would have known she could not afford those repayments. They managed to get her taken off as guarantor. But what would have happened without these protections?

Lifeline also told me about one of their clients who was experiencing both financial and emotional hardship due to an unmanageable level of debt. Lifeline's financial counsellors deal with people who are totally overwhelmed by debt every day. They spend time helping their clients deal with unscrupulous lenders, which the current laws allow them to do. They told me about one of their clients who was unemployed, has mental health issues and is on the disability support pension. The client went to a retail store to buy a laptop on a payment plan. She had a budget of $1,000 and she was sticking to it, until the salesperson told her she had been approved for $10,000 on the payment plan. The client, sadly, experienced an episodic period of mania and spent the money that she couldn't afford to repay. By the time she sought help from Lifeline, she couldn't meet the repayments and was experiencing high levels of stress and anxiety over the debt. She should never have been given such a high level of credit. Yes, she also acknowledges that she shouldn't have spent it. But, as you can see in each of these cases, the people involved were not coming from strong positions of clarity and consideration. They were vulnerable, and they were taken advantage of and left in terrible situations.

Lifeline told me how many of their clients have identified with suicidal ideation because of their despair over unaffordable debt. As Lifeline rightly pointed out, the South Coast has a high level of unemployment and low income levels. In fact, 27.9 per cent of households in the Shoalhaven reported their gross income as $650 or less, compared with the national average of 20 per cent. This makes our community especially vulnerable to financial harm. The consequences of these reforms will put people at risk of homelessness, repossessions and bankruptcies. We know that financial strain can harm people's mental health and, as Lifeline said, can lead to suicide. Vulnerable people in our community are already experiencing this under the current framework. The royal commission showed this. It proved it.

Tony in my electorate has been dealing with the unscrupulous conduct of a bank for 30 years. In 1985, he was given a simulated foreign currency loan and agreed to pay five to six per cent interest to build his factory near Nowra. What he didn't realise was that this was in the middle of Australia's foreign currency loan scandal. Before long, he was paying 50 per cent interest on something he had agreed to pay five per cent for. Tony says he didn't know about the risks. It ruined his business and has had a profound impact on his life and that of his family. He is still dealing with that.

William from Milton also says his bank so badly mismanaged his superannuation that it cost him and his wife over $800,000. They too are still seeking appropriate recourse many years later. They too have experienced undue harm to their health and mental health, because financial matters have strong impacts on consumers. Where is the help for people like Tony and William? It was meant to be in the royal commission, but the government has squandered it. Removing these protections puts people at more risk of harm and is exactly the opposite of what we should be doing. It won't help to protect our financial system. It puts the whole system at risk and is completely counterintuitive.

The Treasurer is also proposing changes to small-amount credit contracts and consumer leases. Once again, the government is ignoring the recommendations of their own review from 2016, which recommended capping payments at 10 per cent of a consumer's income. The proposed laws would double this for employed people, meaning that consumers could be paying up to 40 per cent of their monthly income in payday lending fees. The proposed laws would also see enforcements spread across two different regulators, ASIC and APRA, but APRA does not have a consumer-facing mandate. Their role is to make sure banks don't make lending decisions that destabilise the bank or the financial system.

Another concerning change in this bill is the way it deals with business loans. The changes will exempt any business lending from protections, regardless of the proportion of the loan that is for business purposes. Right now, a loan would have to have the predominant purpose as the business, but that bar has been removed. This just opens the door for even more exploitation of families through sham business loans.

I share the concerns of consumer groups and financial counsellors like those at the Shoalhaven Women's Health Centre. Without these laws in place, there is no deterrent for lenders to give loans to people in precarious financial situations. There will not be adequate avenues for consumers to take action when a lender has acted against their obligations. It risks leaving people in my electorate with a lifetime of debt they cannot repay or, worse, homeless, distressed and suicidal. This bill will harm local people. It will harm vulnerable Australians. It will hurt our economy and hurt our financial system. It goes against the recommendations of the banking royal commission. It goes against the government's own review of small-amount credit contracts. It goes against common sense. I hope the government can take another look at this. I hope they will look at it from the point of view of those locals I mentioned earlier—from the point of view of those who are most vulnerable in our community and who are most at risk from these changes. I will always be standing up for them and doing all I can to make sure their voice is heard.

I want to thank all the financial counsellors and other advocates who have contacted me with their concerns about these changes, not only for bringing some of these issues to my attention but for everything they do every day to help and protect those who are most vulnerable in our community. The work you do is so tough, but it is so important and it is making a difference to the lives of local people.

James Stevens (Sturt, Liberal Party) Share this | Link to this | Hansard source

I rise to make some brief comments in support of the second reading of the National Consumer Credit Protection Amendment (Supporting Economic Recovery) Bill 2020. Obviously, the flow of credit in our economy is vital for economic growth: getting capital through the arteries and veins of the economy to the businesses and the households that need it. If we're a society that doesn't support people being able to borrow money, then we're limited to our equity capacity. That's obviously a spectacular handbrake on economic growth and creating jobs and a better life for all Australians. It's equally important that there be a balance in place not only so that we have mature, flowing credit and capital markets but also so that people are protected from potential exploitation. I think these amendments are sensible and are going to make sure that the balance between those two objectives is right.

During my adult life, there have been two major economic shocks or challenges that we've faced in this country, but of course both were global. One was the global financial crisis and the other is what we've faced in the last 12 months because of the coronavirus pandemic. Both times we have seen how surprisingly robust the financial sector is in this country. It is actually something to proud of. There is bad conduct and behaviour that occurs, and we should be making sure that we find that when it happens and that appropriate punishments are in place so that there is a disincentive to seek to take advantage of people. But, by and large, I would say that we're very well served by the mature financial sector that we have in this country. We certainly saw during the global financial crisis our four major banks become four of the largest by market capitalisation for a period of time there, because they were able to stand strongly, with some balance-sheet-underwriting support from the Commonwealth, of course. But they didn't need to be bailed out. They were protected and they survived and they were strengthened through that process. Equally, in the last 12 months, we've seen the resilience of our financial sector.

So the reforms in this bill are quite timely because it is important that we encourage our financial sector to support lending and provide lending, and I think there is reasonable evidence that, in certain categories of lending, things have become too restrictive, and that's leading to people who might have been able to access finance and capital not being able to do so and subsequently limiting how they can grow their businesses and grow our economy and create jobs. Clearly, the amendments here are designed to apply these restrictions back to the small amount credit contracts and consumer leases and other credit products. Banks will continue to be regulated by APRA, as we heard from the previous speaker, and new lending standards for non-bank lenders will be introduced that will maintain consumer protections while reducing the compliance burden for both lenders and borrowers. High compliance burdens only lead to higher costs, and we in the Liberal Party know that we need appropriate levels of regulation, not unnecessary levels of regulation, and, if they are preventing banks and institutions from lending money when they otherwise would have, then we should strongly consider why that regulation is in place. Why is it necessary and why are we preventing people from accessing the capital that they need?

There are some key reforms here that extend to small amount credit contracts and consumer leases. We're introducing a cap on costs that will limit what a lessor can charge. We're facilitating the introduction of a cap on the amount consumers can devote to leases. We're requiring the SACCs to have equal repayments and equal-repayment intervals in order to prevent SACC providers from artificially extending a loan. We're prohibiting SACC providers making unsolicited SACC invitations to current and former customers, prohibiting door-to-door selling of consumer leases and introducing broad anti-avoidance provisions to prevent SACC and consumer lease providers from circumventing the law.

I also make the point that the Australian Financial Complaints Authority is one of the key institutions that the government has to provide consumers with protections and avenues to address issues that might arise for them in dealing with financial institutions. To briefly digress, I had an experience with them recently, with a constituent who had had money—a substantial amount of money—transacted out of their account without their authorisation or knowledge. We were able to work with the Australian Financial Complaints Authority to achieve a complete resolution of that matter, and the entirety of the funds that had been removed were restored to the gentleman's account. That, to me, was an excellent example of the institutions that we've got that protect consumers, and particularly the smaller parties in the relationship between a big financial institution and an individual borrower. That was an excellent experience for me, and I'm glad that we've got AFCA in place to help ensure that consumers are protected and that financial institutions are following the laws. That is the case with APRA as well, and ASIC and all of the government integrity institutions that we've got this country.

As I said at the outset, this is about making sure we get the balance right between protecting vulnerable people and ensuring that credit is flowing to the maximum capability, safely and fairly, within a rules based structure, so that we've got mature financial markets that are supporting businesses to grow and create jobs. For those reasons, I commend the bill to the House.

Steve Georganas (Adelaide, Australian Labor Party) Share this | Link to 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.

Andrew Leigh (Fenner, Australian Labor Party, Shadow Assistant Minister for Treasury) Share this | Link to this | Hansard source

Credit for the most awkward photo opportunity of recent years must go to Treasurer Josh Frydenberg and that moment when he was accepting the Hayne royal commission report. It was very clear that Treasurer Frydenberg wanted to wrap his arms around Kenneth Hayne and get a full endorsement for his economic policies. He didn't get that, and he hasn't returned it. Despite the government saying at the time that they received the royal commission report that they would act on all its recommendations, there's now a bill before the House—the National Consumer Credit Protection Amendment (Supporting Economic Recovery) Bill 2020—which sees the Morrison government going against recommendation 1.1. That's it. The first recommendation of the Hayne royal commission—don't water down responsible lending laws. What are we doing today? We're debating the Morrison government's attempt to water down responsible lending laws.

Did the big banks ask for it? No. It doesn't look as though they did. From all accounts, it appears to be an ideological frolic from the Morrison government in reducing consumer protections. This is the very same coalition that fought against sensible reforms to protect consumers against financial misfeasance, put in place by the Rudd and Gillard governments. I remember being here in this place while then shadow Treasurer Hockey railed against the responsible lending changes that were being put in place by Labor. What do responsible lending laws do? They ensure that lenders assess whether a credit product is suitable for a customer before providing that product to the customer. Those provisions are enforced by ASIC and have not caused a great choking off of credit supply. Indeed, if you look at what's happening with credit at the moment, we have an Australia in which the level of household debt is among the highest in the world.

Is Australia really in need of more irresponsible lending? Do we need to further increase the debt ratios of Australian households? Right now, we have some of the highest auction clearance rates on record. Housing markets, particularly in our big cities, are going gangbusters, making it more difficult than ever for young people to get into the housing market, yet this government says the answer to all that is more irresponsible lending, watering down the standards, and taking the responsibility away from the borrower and putting it on the lender. It's always the way with the Liberals. Give them a chance, and they will resort to that old 'caveat emptor' approach. They think the job of deciding whether lending is responsible shouldn't fall on the multibillion-dollar institution that is extending the funds. No, they say it should fall on the mums and dads—the same mums and dads who were victims of Storm Financial's collapse, leaving them not only with no savings but sometimes with debts that lingered for decades.

The very behaviour of big financial institutions that led to the Hayne royal commission—and, indeed, in the United States, the sort of poor behaviour that preceded the global financial crisis—is now being encouraged by the coalition. The watering down of financial protections that we see from the US Republicans that caused so much damage to the United States' financial system is now playing out here in Australia. For lack of any clear economic agenda and for lack of a plan for boosting productivity and increasing wages, we have instead the coalition dipping into their ideological top drawer, looking to do the bidding of the big financial institutions against the interests of regular Australians.

What do the consumer groups say about this? A letter from 122 organisations and 97 prominent Australians last year urged the federal government not to go ahead with its watering down of safe lending laws. Supporters of that letter included the Australian Council of Trade Unions, the Australian Council of Social Service, Anglicare, religious groups, community groups, and legal and family violence associations from across Australia. As Alan Kirkland, the CEO of CHOICE, has said:

Without safe lending protections many Australians will be exposed to the terrible lending practices we saw in the lead-up to the global financial crisis.

Fiona Guthrie, CEO of Financial Counselling Australia, said:

Many people are struggling financially at the moment and the last thing they need is to be loaded up with more debt. Financial counsellors see at first hand the harm caused to people and families when they struggle to make repayments.

She went on:

We cannot in good conscience sit by and let these laws go through without doing what we can to stop them. That's also why financial counsellors from around Australia are writing to their local politicians …

Karen Cox, the CEO of the Financial Rights Legal Centre, said:

Before safe laws were introduced, lenders regularly sold unaffordable loans to people, including pensioners, people on Centrelink payments and casual workers, who they knew would never be able to repay the loans.

As she pointed out:

It's beyond belief that less than two years after the royal commission made this its first recommendation that the Government wants to go directly against it.

The real risk is that we change the incentives for lenders: we remove or weaken penalties for breaching safe lending laws, and then we see an increase in irresponsible lending.

These changes will reduce verification requirements for lenders, replacing the current practice of lender responsibility with borrower responsibility. There will be two separate enforcement regimes, with enforcement of lending standards staying with APRA for authorised deposit-taking institution lenders but moving to ASIC for lenders that are not authorised deposit-taking institutions, separating the enforcement regimes and again creating a risk of multiple standards and the watering down of protections for consumers.

There's going to be an exemption of business lending from protections, regardless of the proportion of the loan that is for a business purpose. That replaces the existing predominant purpose test designed to prevent avoidance. So, if you just ensure that a small share of the loan is for business purposes, you've taken yourself out of the financial protection regime. But we know that many small businesses operate as family businesses. Indeed, if anyone knows that, it should be the coalition, because they put the word 'family' in next to 'small business' in their portfolio and in the title of the ombudsman. They ought to know the way in which these loans can be intertwined. They ought to be standing on the side of small and family businesses. But yet again the coalition have found themselves—as when they voted 26 times against a banking royal commission—standing on the side of the big banks, not on the side of mums and dads, and standing on the side of large financial institutions, not on the side of Australians who need protection.

Academics have warned about the risk posed by these changes. Eliza Wu from the University of Sydney says these reforms could 'sow the seeds of the next housing boom and the next debt crisis'. Treasury's own submission to the banking royal commission said:

There is little evidence to suggest that the recent tightening in credit standards … has materially affected the overall availability of credit.

So there's no case being made for it by Treasury. There's no case being made for it by consumer groups. We're in an economy in which lending for housing has increased, house prices are booming, consumer credit is broadly available and many economists are warning of the danger to the economy of a crushing household debt burden, the risk that too many Australian households could be exposed to excessive debt.

The Treasurer said that the events that preceded the royal commission were, in his words, 'appalling'. Indeed, as the member for Whitlam pointed out, the Treasurer confected concerns about a teenager with Down syndrome who was sold life insurance by an unscrupulous, commission-hungry bank salesman. Yet, when that young man's father wrote to Treasurer Frydenberg and begged him not to scrap responsible lending laws, he never even got a response. Treasurer Frydenberg is willing to cry crocodile tears for past victims of banking misconduct, but he's not willing to listen to those victims when they say, 'Don't water down responsible lending laws.'

The industry will, of course, accept it. They'll take anything that reduces their responsibilities to do lending checks. But they're not out there demanding it. This is not a core demand from the industry. And consumer groups, such as the Consumer Action Law Centre, have told stories about the clients that they assessed. The Consumer Action Law Centre give a case study of a woman whom they call Silvia, whose only source of income is the pension, who has no savings, who suffers from depression and has had past issues with addiction, and who has done all her banking for the last 20 years with the same big four bank. The case study says:

Earlier this year, Silvia went into her bank branch in the outer suburbs of Melbourne and took out a $25,000 loan, which was secured over her home (which she previously owned outright). Silvia says that she had originally asked for $20,000 and told the bank representative that she wanted it to pay off $5,000 she owed on her credit card, and to do some home improvements.

Silvia recounted that the bank representative asked her some questions about her finances, and then the representative told her she was going to receive a $25,000 loan—$5,000 more than she asked for. She felt that they didn't really give her a choice about getting a loan for a lower amount.

Silva needed to pay $133 a fortnight, 14 per cent of her pension, at a time when she was already having troubles making ends meet with her groceries, home and contents insurance and health insurance, when she was already living from one cheque to another. The case study goes on:

While Silvia managed to make the repayments, the loan was causing her a great deal of stress. She has attempted suicide because of stress. The loan repayments were direct debited from her account a few days after her pension is paid each fortnight. The real reason Silvia didn't miss any repayments is because she still had the loan funds to pay for things. She spent most of the loan funds already, and she only has $7,000 left.

Silvia complained to the bank, claiming the loan was provided in breach of responsible lending laws as it was larger than the loan she requested and the repayments were causing her financial hardship. The bank acknowledged that it could have been more prudent in advancing the funds, and offered to waive all future interest on the loan, and refund any interest already paid.

What would have happened to Silvia without responsible lending laws? Without responsible lending laws, the bank could have simply told her to go away. They wouldn't have had any obligations. Silvia, a pensioner who suffers from depression and who attempted to take her own life, would not have had the protection of responsible lending laws.

This bill before the House, mark my words, is the kind of bill brought before the parliament by a government with no agenda. They have no plan for rapidly vaccinating Australia. At a time when the vaccine rollout is occurring apace in countries like Britain and the United States, it is falling behind in Australia. The Treasurer told us last year that the state lockdowns of the economy were costing $4 billion a week, but, now, as a delayed vaccine rollout prevents a full reopening of the economy, the government is refusing to take responsibility for the economic cost that it is inflicting, not to mention the health risk that exists for vulnerable Australians.

Over the weekend, we saw fresh outbreaks of COVID, and it points to the urgency of moving ahead with the vaccination. But, at the same time, Australia needs a government with ambition, a government that acts, as the governments of Curtin and Chifley did at the end of World War II with the full employment white paper that said: 'Let's not just put the place back the way it was in 1939. Let's do better and aspire to full employment and aspire to increasing homeownership.' The Morrison government stands for nothing. It has no agenda, it is lacklustre and this bill before the House reflects all that is rotten with the government today. (Time expired)

Matt Keogh (Burt, Australian Labor Party, Shadow Minister for Defence Industry) Share this | Link to this | Hansard source

It's often said by observers of federal politics in Australia for some reason—reasons that I clearly can't understand—that the government parties here are the parties of good economic management, that somehow they have a better approach, a sounder approach, to economic management. This bill, the National Consumer Credit Protection Amendment (Supporting Economic Recovery) Bill 2020, demonstrates everything that is wrong about this government's approach to economic management and in particular that intersection of economic management and consumer protection, because, if there is one topic that has been discussed time and time again in this place since I was elected in 2016, it would have to be the need for a banking royal commission—a banking royal commission that was called for for years and years, a banking royal commission that the Labor side of the parliament voted for time and time again, a banking royal commission that the government voted against time and time again. But eventually they were dragged kicking and screaming by Labor and the baying masses of the Australian people saying: 'It is time. We need this royal commission.' And the royal commission was finally held. Then, of course, it was all too hard for the government to bring about the legislation to implement the recommendations of that royal commission before the 2019 election, despite offers of cooperation from our side of the House to make that happen.

One of the key recommendations out of that royal commission is about making sure that we have appropriate consumer protection and responsible lending obligations on our banks. It's a key recommendation, right up there: 1.1, right at the top. Here today, we have legislation before this parliament. It's not implementing the recommendations, no; it's doing the precise opposite. Two years after we got this recommendation from the royal commission, the government is now legislating the opposite thing to what that royal commission recommended. The government likes to fall back and say, 'Oh, well, there are protections that will be applied through APRA regulation,' but that fundamentally misses the point, because there's something else government likes to talk about, and the banks mentioned this too. They said: 'Well, we're not going to lend money irresponsibly. We're not going to give money to people who can't repay it and in a way that may cause them financial detriment, because, of course, it's our money that we're lending them. We don't want to do that. That would be against our own interests.' Of course, in making that statement the government and the banks seem to completely overlook all of the behaviour that had occurred for the decades leading up to the royal commission and why we held the royal commission in the first place. Amazingly, it would appear the government now thinks that the banks will not do the same thing that they did before when these requirements are removed.

There is a critical and important distinction—I know it's somewhat difficult for the government to understand this distinction, but it is a distinction nonetheless—between APRA regulation and ASIC regulation of responsible lending laws. The distinction is this: the purpose of the responsible lending regulations in the APRA regulation is to make sure that the bank doesn't lend money in such a way that the bank can't get back its own money. Notice I didn't mention 'consumer' or 'borrower' in that statement. That's because it's got nothing to do with the consumer or the borrower. This means that, if the bank is confident that if the borrower does default and can't repay then the bank will get the money back by selling that person's house, that meets the APRA requirement. That's fine, because the bank got its money back. It's about prudential regulation. It's about the stability of the financial system and the bank. The ASIC consumer protection element of responsible lending is about making sure that the borrower is not put under such financial stress by taking out the loan that they would not only be unable to repay it but also be unable to properly live whilst repaying that loan. It's to make sure that the borrower is not put in an extortionate position of not being able to put food on their and their children's tables because of having to repay that loan, and that they don't end up losing their house, which is the house that their family is living in. That is what the government is trying to unwind in the name of economic recovery. Well, just explain to me this, government: how much of an economic recovery are you going to get when people start losing their houses? That is not an economic recovery; that is literally undermining the foundation of the Australian economy. It's hard enough as it is. Why would you go about making it worse?

The government also says that this is going to help credit supply to business. This is curious for a number of reasons. One of these reasons is that, as part of the government's economic support package in response to the coronavirus pandemic, it is now—and has been in some other guises—offering low-interest or deferred-interest loans to business. But what business tells us—and, in fact, what business was telling us back at the time of the bushfires when a similar scheme was introduced—is that business isn't interested in taking on yet more debt in an economically uncertain time. All the government is actually doing through this legislation is creating even more uncertainty in the area of credit supply to the nation. It's creating more uncertainty. It's already got the uncertainty that is the coronavirus pandemic, and now it's making it worse at a time when business isn't saying, 'We want to borrow money.' Businesses are finding it hard enough as it is. The last thing they want is more debt. Where they do want to borrow and get access to credit, the government has now put in place many different schemes to do so. It announced a new scheme just recently. Why does it now want to put the owners of those small businesses, their families and their homes at risk by enabling them to borrow money when it would be inappropriate to do so? I just want the government to think about that for a minute. I want all Australians to think about that.

As I said, we spent years in this place trying to get a royal commission up. Going directly to this point, the royal commission came out with recommendation 1.1: make sure that we've got appropriate protections and make sure that we don't have unfair lending practices. We saw what happened in the decades leading up to this, in the government's response during the coronavirus pandemic and in the government's response when it was elected in 2013. How could it unwind all of Labor's reforms, which were designed to protect consumers and strengthen—and I say strengthen, not make harder—the regulation of the financial system in Australia? Our financial system is actually, overall, a pretty good one. We have the benefit of Labor's great superannuation policy, another policy the government is trying to dismantle before our very eyes. The government is undermining confidence in the superannuation system and trying to convince people that there shouldn't be increases in the amount of compulsory superannuation. It's all consistent. Since they were elected in 2013, those opposite have wound back the protections that Labor tried to put into the system.

That's only one part of this legislation. There are some other interesting protections in this legislation. They go to the issue of payday lending. This is a really important part of what we are discussing here today, not only because of the way in which payday lenders—for those who don't know—effectively use extortionate interest rates over a short period to capture people in desperate need of financial assistance. They get them locked into a cycle of financial reliance on one payday loan after the other and then ramp it up to pay the interest costs. It looks like a small cost because you're only going to borrow it for a month. But, lo and behold, when you can't repay it, wham, that interest is capitalised. Now you've got to borrow the principal plus the interest and pay it within one month. Another month goes by and, wham, the interest is capitalised again. Now you've got to repay that, along with the principal, and on it goes. Quite frankly, it's unconscionable. I say that because it is unconscionable! Under the existing protections for borrowing, if you were to go into a bank and say, 'I want a personal loan, as a consumer,' the bank would not be allowed to capitalise the interest. That's actually unconscionable under the ASIC legislation. They're not allowed to do that. But, with short-term or separate loans, they can get away with it. This legislation is designed to fix that, in part, just a little bit. It's not really a great job, but they're getting there. They're learning slowly. They're getting somewhere.

What's quite interesting is this: the government had actually already prepared legislation on this for the last parliament. They prepared it, sent it out for consultation and got feedback on it. Labor said: 'This is a great idea. We've been saying you should do this for quite a while.' Then it just got slipped into a pocket somewhere. It sort of disappeared. The Senate has looked at this legislation and—this may surprise some—Labor members of that Senate inquiry said: 'Look, this legislation is not great, but we're not going to let the perfect be the enemy of the good. We support this legislation. We think it's a good idea. We think you should go further, government, like your original legislation, but we'll support this.' On the other hand, the government members of that committee—remember, this is government legislation—said they didn't support it. They didn't support their own government's legislation, even though it had support from Labor. The executive proposed the legislation, the opposition said, 'We'll support you,' but the government's own senators didn't support it. That probably tells you everything you need to know about this government. So here we've got similar provisions dropped into this bill to provide some protections to consumers, some caps on the nature of this payday lending that can go on. I think there's a very strong argument to say that those protections are not strong enough; however, we will support them because we're not going to let the perfect be the enemy of the good. We welcome their inclusion in this legislation today.

I mentioned before some curious rhetoric coming from the government about how removing some of the regulatory responses to ensure appropriate consumer protection is going to free up capital for business and credit lending for business, and that the government's already got some other programs. I mentioned one of those programs, where they're going to allow for low-interest deferred repayment loans. They will, fortunately, unlike their policy response during the bushfires, allow these loans to be used to consolidate existing debt. That is a good thing for our small business community. But let's just put that in the full context. The full context of this announcement is that in just 13 days time the JobKeeper payment will cease under this government. On 28 March there will be no more JobKeeper under this government. Meanwhile, across Australia, thousands of businesses relying on JobKeeper and the 1.1 million employees that they employ will miss out. They will be left high and dry. We've had varying reports from Treasury that over 100,000 people—others estimate up to 250,000—will lose their job as a consequence of the removal of JobKeeper.

We're going to see a situation where businesses, with only 13 days to go until JobKeeper comes to an end and with no clarity from government—they've announced a loan scheme and they've announced a scheme to fly you to a handful of places you might not want to go to anyway or, in the case of Western Australia, are already full. That scheme supports aviation, and that's good, but it's not actually going to support any of the businesses in those areas. They've announced those schemes and they've sort of left it open that they might look at some other stuff. Well, with 13 days to go, those businesses relying on JobKeeper need to get some serious advice now. They're in a situation where they won't be able to provide sufficient notice to any employees that they may need to make redundant as a consequence of them not getting JobKeeper or any other support from this government come the end of March.

We need to look at that in this context because when those employees are made redundant—those employees who are also financial consumers—they're the ones who are going to need protection from the banks to make sure they also don't get in over their heads, that they don't those put up their house as collateral at risk of losing it. When we had proper protections in place, those protections would have made sure that that couldn't happen. But under this legislation that the government is bringing forward right now, when many Australians—over 100,000 of them—and business owners are going to find themselves at their most financially vulnerable, they're not going to have any protection when it comes to borrowing in Australia.

Brian Mitchell (Lyons, Australian Labor Party) Share this | Link to this | Hansard source

I thank the member for Burt for his insightful contribution. I am pleased to have the opportunity to put on record my concerns about this bill, the National Consumer Credit Protection Amendment (Supporting Economic Recovery) Bill 2020. This bill makes several changes to existing consumer credit legislation, but the headline here is the amendments remove responsible lending obligations for most consumer credit contracts and potentially expose consumers to significant harm. This is in direct contradiction of the first recommendation of the banking royal commission. It really takes something for a government to go to the expense—very reluctantly, I must say—of actually setting up a royal commission, promising to implement the recommendations and then, at the first opportunity, seeking to unwind the very first recommendation of that royal commission. This essentially represents a massive gift to the big banks from the government, who cannot be trusted. They show us time and again that they cannot be trusted when it comes to financial sector regulation.

Labor are referring this bill to a Senate inquiry once it goes through the House and will settle a final position on the bill following that inquiry, but our overwhelming disposition, from the tenor of the debate on this side of the House, is to stand with Australian consumers in opposing this bill as it stands. It really says something that we've had Labor member after Labor member standing up to speak on this bill in this place on behalf of consumers, on behalf of Australians, and the government members are nowhere to be seen. They're so eager to support this legislation that they're nowhere to be seen.

Anglicare Tasmania in its submission to the Senate inquiry into the bill stated:

… there should be no weakening of current consumer protections and the Parliament should vote against this Bill in its entirety.

Anglicare has the largest team of financial counsellors in Tasmania. They support people to avoid and manage debt, they negotiate with creditors and they understand their legal rights and responsibilities. This is an organisation that knows what it's talking about. It has people in the field every single day dealing with vulnerable Tasmanians who are in debt up to their neck, and they are saying: 'Don't do this. It will hurt people.' Anglicare Tasmania works every day with people who will be most impacted by this legislation, and they should be listened to. It has warned that passing this bill will result in more Australians being pressured into loans that they are unable to repay.

I understand, like many on this side of the House. We come from fairly modest upbringings. My parents would take short-term loans—enter rental agreements for a new fridge or whatever—and then they'd have to try and pay them off. It always costs more in the long run, but they were so desperate to get the appliance that they went into these loans. I understand the appeal of these things, especially when salespeople are out there saying: 'Do this. You can have a new appliance—a new fridge, a new TV, a new whatever. Give your family what they deserve.' It's a very seductive proposition. When you're hoping for a better life and somebody's there saying: 'It's there, right in front of you. It's just a few short dollars a week,' it's very easy to grab onto it. A drowning man will grab onto anything, and he'll bring the next person down as well. It's our job as legislators in this place to ensure that we put protections in law to ensure that vulnerable people don't get into those positions.

This legislation will remove many of the tools that financial counsellors use to assist people affected by inappropriate lending conduct. The Tasmanian Council of Social Service, TasCOSS, also strongly opposes this bill. TasCOSS is the peak body for the community services sector in Tasmania. It advocates on behalf of Tasmanians on low incomes, especially those who experience vulnerability and disadvantage. TasCOSS argue that weakening consumers will lead to greater financial hardship that will hamper rather than support Australia's economic recovery. I know the argument on the government benches is that this will see investment flow into business. That's what they're saying this will do. Well, it won't. It will exacerbate vulnerable people and vulnerable businesses getting into more debt than they currently have.

The CEO of consumer rights group CHOICE, Alan Kirkland, has raised similar concerns to those of TasCOSS, saying that the timing of these changes is way off. He says:

Australia already has the second highest level of personal household debt in the world. Loading people up with even more debt will make it even more challenging for households already doing it tough.

It so happens that the member for Bruce on this side of the House has prepared a report. He's used his, I think, Christmas holidays to write this very detailed report. He's done a lot of research. It's all proper research. It's not a political document in terms of rhetoric. I'll briefly go through some bullet points. One is that household debt as a share of GDP in Australia is 119.4 per cent; we have the second-highest rate of 43 countries studied by the Bank for International Settlements. Another is that 37 per cent of Australians, more than one in three, admit to struggling to pay off personal debt, and this government wants to make it even easier to get into debt. Finally, as of 2016, Australians owed $2 trillion in private debt. I quote Richard Yetsenga, the ANZ chief economist:

… this pandemic has dialled up the risk profile of the economy because the most indebted sector — households — no longer have the buffer provided by future interest rate cuts."

That's where we are at the moment.

We are already massively in debt, at both the private and the public level, and this government wants to make it even easier for vulnerable people to get into debt. This has the potential to cause real harm, and not in an abstract sense. I'm talking about real people in real homes, in our neighbourhoods and in our communities, who will be harmed by this. It will affect children. It will affect pensioners. It will affect people who are least able to look after themselves.

As the member for Whitlam pointed out in his contribution to this debate, almost every Australian either is now or has been a bank customer. When things go wrong in that relationship, the effects can be devastating and life-changing for the customer. And it's never the banks that suffer. They have the power in the relationship. They always have the power in the relationship. The ordinary customer must rely on the law to protect them, and this legislation rolls those protections right back.

This is what I don't understand. We know what happens when consumers are not properly protected when dealing with the financial services industry. We know because we've just had a royal commission to tell us. We've just had witness after witness—more than 10,000 submissions to the Hayne royal commission—tell us about the costs to consumers, about what happens when the industry gets it wrong. That's 10,000 ordinary Australians who put their trust in a bank or a financial services institution and came out poorer for it at the other end.

Many years ago, when I was a journalist, we dealt with a gentleman who had buildings. He was a small developer. He was servicing his loans. His business was going well. The bank that he did business with was sold to a big bank. The big bank did a profile and decided: 'We don't want to do loans to small development businesses anymore. Call in those loans.' So they called in his loans. He was surprised; he'd been meeting all his obligations with no trouble at all. He said: 'Okay. Fair enough. Things happen.' He said, 'I'll need to sell one of those properties in order to release the capital so I can pay the loan.' They said: 'No, you can't do that. We put caveats over your properties. You can't sell them.' So he had no access to the properties in order to be able to sell them to meet the loans that had been called in. In the end, the bank sold those properties under him for an absolute song. He was massively into debt and, of course, went bankrupt. He was a successful businessman; he had done nothing wrong. And just because of the conduct of a bank, he went bankrupt like that.

That's one of the sorts of stories—one of 10,000 stories—that went to the Hayne royal commission, and this government seems to have learnt nothing from that. It's the first recommendation from the royal commissioner. The banking, superannuation and financial services royal commission identified the need for stronger, not weaker, rules and oversight of financial services. It's hardly surprising, because we know just how little weight this government really gave to the banking royal commission. It was absolutely dragged into that royal commission. They voted against it 26 times. There were votes in this place 26 times about setting up a banking royal commission, which Labor had called for consistently. On that side, the government side, they voted against it 26 times. They absolutely did not want a banking royal commission until they were dragged into it, until they just could not get out of it anymore. They've been reluctant about it ever since. They said it was 'a waste of time'.

And now they're walking back from Commissioner Hayne's first recommendation: to leave responsible lending obligations alone. It took bravery and courage for victims of bank misconduct to come forward to the royal commission. They did so because they wanted to protect their fellow Australians from experiencing what they went through. It was too late for them. They've lost their homes; they've lost their businesses. They've been through it all, but they presented evidence to the royal commission to help other people. What a slap in the face for the government to say to those brave Australians who fronted that royal commission, 'We're going to ignore the very first recommendation from that royal commission.'

Barely one-third of the 76 recommendations of the royal commission have been fully implemented two years after the government received the report. What an absolute crawl! They've failed to introduce the compensation scheme, which would provide relief to the victims of financial crime. When it comes to rorts and rip-offs in the banking system, this government has never been on the side of ordinary Australians. Those opposite were dragged kicking and screaming to the royal commission. They've done hardly anything over the two years since to really implement its recommendations, and they're ripping away the very first recommendation in this legislation. They've never cared about looking after Australians. They've never cared about really tackling bank misconduct. They believe that if you let the banks do what they want it's good for business. It doesn't matter if there's human collateral damage down the road. It doesn't matter if people lose their homes and businesses. That's just collateral damage. That's just the cost of doing business. The human wreckage that is left behind from this sort of legislation is just the cost of doing business.

After years of inaction, this government is using the pandemic as an excuse for everything. Those opposite have used it as an excuse to cut Australians' pay and to cut superannuation and now are using it as an excuse to undermine protections in the banking sector. In the current environment of high levels of unemployment, reduced income and the winding back of COVID-19 support measures, which come to an end on 31 March, introducing weaker consumer protections will result in more Australians being saddled with harmful debt or experiencing significant financial hardship. It will not support our economic recovery.

Supporting families, supporting small businesses and supporting workers should be the highest priority for this government, particularly at a time of greater community vulnerability due to the impacts of the pandemic and the winding back of the support measures. Instead, this government is leaving hardworking Australians exposed and vulnerable. Imagine what it's going to be like when JobKeeper comes to an end at the end of this month and people who are currently getting a certain level of income drop back to a JobSeeker rate. They'll still have bills to manage and repayments to make. Imagine, in those circumstances, being told by some spiv on the high street: 'You can get an easy loan. We'll wind back the protections.' In your heart of hearts, you'd think, 'Yes, I'll pay that back.' You'd be so desperate to do it. At the end of this month we're going to have a lot of people in this country suddenly bringing a lot less income into their households, at the same time as this government wants to bring in legislation which makes it easier for them to access credit which could harm them significantly. It's a recipe for disaster.

Unaffordable debt has a detrimental effect on physical and mental health, family wellbeing and the ability to pay for essentials such as groceries and electricity. People struggling with debt have been found to suffer from depression and suicidal ideation more often than those without financial problems. This legislation threatens to make harm worse and make Australians worse off, not better. I certainly do not commend this bill to the House.

Graham Perrett (Moreton, Australian Labor Party, Shadow Assistant Minister for Education) Share this | Link to this | Hansard source

I rise to speak on the National Consumer Credit Protection Amendment (Supporting Economic Recovery) Bill 2020, but I should say that my heart is not in this speech. My heart—probably like the member for Griffith's, I would imagine—is outside this chamber right now, marching for justice around Parliament House. But, nevertheless, some of us do have a job to do, albeit for a short time.

Sadly, this bill removes responsible lending obligations for the majority of consumer credit contracts. Let me just remind the House that in 2009, partially in response to the global financial crisis, the Labor government introduced the National Consumer Credit Protection Act 2009. That bill introduced a range of measures around the conduct of credit providers, including requiring them to abide by a set of responsible lending obligations. It's bizarre to think that that legislation took until 2009. These responsible lending obligations require that credit providers make reasonable inquiries about a customer and assess whether a credit product will be unsuitable for a consumer. The obligations were designed to protect the consumer, and I was very proud that Labor brought them in.

Llew O'Brien (Wide Bay, National Party) Share this | Link to this | Hansard source

Order! The debate is interrupted in accordance with standing order 43. The debate may be resumed at a later hour. The member will have leave to continue speaking when the debate is resumed.