Wednesday, 3 February 2021
National Consumer Credit Protection Amendment (Mandatory Credit Reporting and Other Measures) Bill 2019; Second Reading
As we've heard, the National Consumer Credit Protection Amendment (Mandatory Credit Reporting and Other Measures) Bill 2019 will require banks to provide more information about the credit history of their customers to credit bureaus. The theory is that credit bureaus will be able to better inform banks about a potential new customer's creditworthiness. Therefore, banks are more likely to provide loans or to not provide loans appropriate to a customer's circumstance. Currently banks are required to report negative data about customers to credit bureaus—that is, payment defaults, bankruptcies and court judgements for example. This bill would require banks, starting with the major banks, to report positive credit data—that is, loan details and repayment history for example.
This bill implements the recommendation of the 2014 Murray financial system inquiry that positive credit reporting should be mandated, if banks don't do it voluntarily. And, completely unsurprisingly, banks haven't done it voluntarily. The Murray inquiry stated that comprehensive credit reporting would reduce information imbalances between lenders and borrowers; facilitate borrowers switching between lenders and greater competition; likely improve credit conditions for borrowers, including small and medium-size businesses; and reduce the likelihood loans will default.
In Australia the promise of comprehensive credit reporting fits within the framework established by the National Consumer Credit Protection Act. By giving banks access to more complete information about a potential customer, comprehensive credit reporting should better enable banks to meet the requirements of the act—namely, that they assess whether a loan would be unsuitable for a customer before providing it. However—and there is so often a 'however' with this government—the trouble is that this government is systematically trying to dismantle the very framework of consumer credit protection that this bill is built onto. At the very same time that the Senate is being asked to mandate the sharing of customer information so that banks can better assess the suitability of a loan, this government is seeking to abolish the requirement that banks must assess the suitability of a loan.
Here's the Treasurer, Mr Frydenberg, on introducing this bill:
Credit providers will have a more complete picture of a consumer's financial situation. This will help them to better price credit and meet their responsible lending obligations.
That's the Treasurer explaining in the other place how this bill will help banks meet their responsible lending obligations.
Those are the very same responsible lending obligations that the Treasurer is now trying to abolish. Those are the responsible lending obligations that the then assistant minister to the Treasurer, Mr Sukkar, when introducing the original version of this bill into the 45th Parliament, said 'are an important part of consumer protection arrangements'. These are the responsible lending obligations that Commissioner Hayne said should not be amended, in recommendation 1.1 of the banking royal commission that the government under former Prime Minister Turnbull was dragged kicking and screaming into proposing and supporting because former Prime Minister Turnbull had lost the numbers on the floor of the House and could not guarantee that the House would not impose that banking royal commission, against the wishes of the Prime Minister and the government.
I can tell you now exactly what the government's going to get up and say. They're going to try and spin recommendation 1.1 to mean something that Commissioner Hayne did not mean it to mean. That's what they're going to do; I've heard it before, and we're all about to hear it again. I counsel people who are listening to this to understand that Commissioner Hayne's primary recommendation out of the banking royal commission that exposed systemic criminal conduct by our banks—a culture of greed, a culture of profit over everything—said, 'Do not change responsible lending obligations.' The ordinary English language meaning of those words is now being ignored by the government, and they are doing exactly what Commissioner Hayne recommended they not do. They couldn't make the banks abide by the law, so they're changing the law to abide by the banks—their corporate mates.
This is a government of shields for big corporate donors. The dirty, corrupting influence of political donations is writ large in so much of what this government does. Those responsible lending obligations that the government is trying to abolish, if they are properly enforced, are what stand between the banks being held to the service of their customers and the broader public, and they are what prevent the banks from basically becoming loan sharks. But this government wants to enable the banks to become loan sharks, because that will increase the profits of the big corporate banking sector in this country. Whatever value there is in introducing comprehensive credit reporting, it is being completely undermined by this government's attempts to repeal responsible lending laws.
This might look like completely incoherent policy making. I'm sure that's how it looks to a lot of people, but it's actually far more cynical than simple incoherence and incompetence. When you understand that this is a government of its mates, by its mates, for its mates, then this apparent incoherence actually makes perfect sense. It makes perfect sense when you see it through the prism of the latest donations data that's just been released this week. It shows that all the major banks are now back in the game. NAB and ANZ both took a hiatus in recent years under the pall of the royal commission and a momentary need to not look like the puppet masters that they are. But they're now back in the game; that facade is gone. In 2019-20, all big four banks donated. In fact, in total they donated $280,000 to the LNP and $260,000 to the ALP. Over half a million dollars was donated by the major banks to the major parties, basically with a fifty-fifty split—that is the very definition of hedging by the big banks. And it's working for them. Whatever needs to be done to keep the banks happy, this government will do. Political donations in this country are nothing more than legalised bribery. For this government to deliver for their corporate puppet masters, their corporate donors, if it means abandoning the first and primary recommendation of the royal commission under the cover of a pandemic, then that's exactly what they're going to do and, in fact, that is exactly what they are doing.
Beyond the interaction with responsible lending obligations, the Greens have concerns with some of the functioning of this bill, namely how information is being portrayed and consumer access to the information. To that end, we'll be supporting the government's amendment that places conditions on the provision of information related to hardship conditions entered into between a customer and their bank and requires credit bureaus to provide customers with their credit rating.
In respect of credit reports, the government's amendment is a watered-down version of an amendment circulated by Senator Whish-Wilson to the original version of this bill. The Greens would have preferred the use of the term 'credit derived information' to be clear that credit bureaus should give customers any and all interpretations of their credit data. It's unclear whether the government's amendment as worded will ensure customers see exactly what the banks see. The importance of providing customers with access to their credit scores was highlighted in 2018 when Equifax was handed a $3.5 million fine by the Federal Court for misleading, deceptive and unconscionable conduct. Equifax told consumers that the credit score that customers paid for was the same credit score used by banks, but that was not always the case. Equifax was not giving the same information to consumers about themselves that they were giving to the banks.
This gets us to a broader issue that the Australian Greens have, which is who this information being given to and who it's not being given to. This bill will require the data on tens of millions of Australians to be given to three multinational credit bureaus—Equifax, Experian and illion—whose business models are to derive credit scores for sale to banks. As was demonstrated by the Federal Court finding against Equifax, these multinationals are not particularly interested in helping consumers; they're simply interested in making obscene profits. Neither have they shown any particular interest in protecting consumers' privacy. In 2017, Equifax suffered a security breach in which the data of up to 143 million US citizens was compromised. In some ways, both of Equifax's transgressions are what you might expect when multinational private entities have a regulated oligopoly from which to profit. They've got the market sewn up around the world, so why would they care about their consumers and the public good?
There is an alternative, of course. A number of European countries have a public credit register. France, Italy, Belgium, Spain, Portugal and Slovenia have public credit registries that play a major role in collecting and collating credit information. These public credit registers are subject to parliamentary oversight and are a source of de-identified data for governments and financial regulators to help inform their understanding of financial markets and of the broader economy.
It's no surprise that the government are advocating a market based solution to a market based problem. That's what they always do and it's what they tell us they stand for. But when considering how to provide a universal system for collecting, storing and sharing consumer banking data we will be much better served by a public provider whose role is to clearly act in the interest of consumers and the wider public.
Faced with a choice between the status quo or this bill the Australian Greens will support this bill, assuming that the government's amendment succeeds. But this support is based on the assumption that this bill will improve the functioning of the existing consumer credit protection framework.
On that basis, I move the Greens second reading amendment on sheet 1190:
At the end of the motion, add: ", but the Senate:
(a) notes that:
(i) when introducing this bill on 5 December 2019, the Treasurer, the Hon Josh Frydenberg MP, said in his second reading speech that with this legislation "credit providers will have a more complete picture of a consumer's financial situation [which] will help them to better price credit and meet their responsible lending obligations",
(ii) with its National Consumer Credit Protection Amendment (Supporting Economic Recovery) Bill 2020, the Government is seeking to repeal legislated responsible lending obligations from the National Consumer Credit Protection Act 2009 (the NCCP Act), and
(iii) in the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry report, which was released on 1 February 2019, Recommendation 1 stated that "the NCCP Act should not be amended to alter the obligation to assess unsuitability", which was accepted by the Government; and
(b) calls on the Government to honour its acceptance of Recommendation 1 of the Royal Commission and withdraw its National Consumer Credit Protection Amendment (Supporting Economic Recovery) Bill 2020".
I thank Senator McAllister for indicating that the Labor Party will be supporting that amendment. That amendment, in brief, highlights the Treasurer's statement that this bill will make it easier for banks to meet their responsible lending obligations and ensure that loans are not unsuitable for customers. It also highlights recommendation 1.1 of the Hayne royal commission into banks that those responsible lending obligations should 'be enforced as they stand'. It highlights the rampant hypocrisy of this government and its flagrant rejection of the primary recommendation of the Hayne royal commission.
I make the point that the government was dragged kicking and screaming into that banking royal commission. I want to acknowledge the work that my friend and colleague Senator Whish-Wilson did on that campaign. If there is one person in this place that the Australian people should be thanking for the banking royal commission that exposed such criminal conduct, rampant greed and toxic culture in the banking sector in this country, it is actually Senator Whish-Wilson. I urge the Senate to support the second reading amendment to highlight to the government that the passage of this bill makes the case for abolition of responsible lending obligations all the more ridiculous.