Wednesday, 3 February 2021
National Consumer Credit Protection Amendment (Mandatory Credit Reporting and Other Measures) Bill 2019; Second Reading
Firstly I would like to thank those senators that have contributed to this debate. The National Consumer Credit Protection Amendment (Mandatory Credit Reporting and Other Measures) Bill 2019 will implement the government's mandatory and comprehensive credit reporting regime, delivering benefits to lenders and borrowers alike. This important reform will require our largest banks to participate fully in the credit reporting system and provide clarity on the treatment of financial hardship information. The mandatory credit reporting regime will provide more Australians with better access to credit, will enable credit providers to make better informed lending decisions and will drive more competition in the lending market. The bill will deliver these benefits while also maintaining and strengthening important security and consumer protection.
Schedule 1 of this bill requires the largest banks to provide comprehensive credit information on all accounts to credit reporting bodies by September 2022. It includes provisions to ensure the security of consumer credit information and obliges credit reporting bodies to share credit score ranges and methodologies when requested by consumers, who will now also be able to seek this information more frequently.
Schedule 2 addresses concerns raised regarding the treatment of financial hardship information. It provides the legal certainty for credit providers to disclose this information and ensures that consumers will not be unfairly disadvantaged by this change by placing restrictions on the use of hardship information. With the implementation of this regime, customers with a good credit history will be better placed to shop around and to be able to obtain lower rates because their credit history will be available to all credit providers. Consumers who may have poor credit ratings will get a better chance to demonstrate their creditworthiness through their future reliability. Credit providers will also see benefits, having access to a more complete picture of a consumer's financial situation, and this will help them to better price credit for the consumer. The regime will drive competition in the lending market. With access to this data, smaller providers, including new entrants and innovative fintech firms, will be much better able to access creditworthiness and compete for customers.
Just on the second reading amendment moved by the Greens, from a government perspective, this second reading amendment is little more than a pious amendment. It would have no practical effect on the legislation if passed. In fact, the amendment that has been moved is criticising a completely unrelated piece of government legislation, which is the National Consumer Credit Protection Amendment (Supporting Economic Recovery) Bill 2020, which will simplify Australia's credit framework and support the flow of credit to the Australian economy. So the amendment doesn't go to the substance of the bill; rather it goes to a bill that is currently before the Senate economics legislation committee.
Despite the rather noisy assertions of Senator McKim, the government has certainly not reneged on its acceptance of the recommendation of the financial services royal commission. Recommendation 1.1, Senator McKim, states that the NCCP Act should not be amended to alter the obligation to assess unsuitability. This relates specifically to representations that were put to Commissioner Hayne that the relevant test under responsible lending laws should be amended so that it requires lenders to determine that a loan is suitable, as opposed to the current test, which requires lenders to determine that a loan is not suitable. With respect to the recommendation, Commissioner Hayne noted:
Consumer advocacy groups urged me to recommend that the NCCP Act be amended to require lenders to determine whether a loan contract (or credit limit increase) was 'suitable' for the consumer (as distinct from 'not unsuitable'). I do not favour that proposal.
That was said in the Final report of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry on page 59. You have cherrypicked your information. The government remains wholly committed to implementing all of the financial services royal commission's recommendations. The National Consumer Credit Protection Amendment (Supporting Economic Recovery) Bill 2020 will simplify Australia's credit framework and support the flow of credit to the Australian economy, and that bill will appropriately be considered by this chamber at the appropriate time when the committee has reported. This bill before us today is about mandatory credit reporting, not the framework and the flow of credit. I commend the bill to the Senate.