Slade Brockman (WA, Liberal Party) Share this | Hansard source

Before I get to the substantive matters of the National Consumer Credit Protection Amendment (Small Amount Credit Contract and Consumer Lease Reforms) Bill 2019 (No. 2), I will take the previous speaker, Senator Ayres, to task on a couple of points he raised. I think you really belled the cat, Senator Ayres. You very much revealed, through your speech, that this is nothing more than a Labor Party stunt. You've taken a government bill and reintroduced it as a stunt. That's because things do change, things do move on. The structural frameworks under which we operate, particularly in our financial services sector, are extraordinarily complex. As the environment in which we operate changes, so too does the way that governments and the institutions of civil society, including institutions like banks, need to change. We see that the government is responding.

What Senator Ayres' speech completely failed to acknowledge, which is not particularly surprising, is that there is another piece of legislation in this identical space that has been introduced to parliament. In fact, the Senate economics committee, which he talked about a bit, has just finished considering that bill, and I believe it will be debated in this place shortly. We have a situation where this particular bill, as a government bill, was overtaken by events. We now have a government response, which includes a response to more general circumstances in the economy caused by the pandemic in particular, that will address the issues in this bill and wider issues in the economy to do with the provision of credit by banks and other financial institutions.

The reforms that will come to this place, which cover a lot of the areas also covered by this bill, are designed to enhance financial inclusion and ensure that Australian consumers accessing small-amount credit contracts and consumer leases are better protected. In fact, the government's reforms in the other legislation—again, which covers the broad area that is covered by this bill—strike the right balance between protecting consumers and maintaining a viable sector to provide these products.

I'll just pause briefly here. It is important that these products are not seen merely through the prism of the product itself but also through what other options are available to people in society. Sometimes those options are not good. We heard in committee hearings that people do seek to access credit through non-legal means if no credit is available through legal means. I think that is something that this place has to be cognisant of. The other options are actually very, very negative. When people go and look at non-regulated means of obtaining credit, they're entering a very dark world indeed.

While making it easier for Australians to access credit, the Morrison government will not stand for predatory behaviour by small-amount credit lenders and consumer lease providers. For the first time, consumer leases will be regulated by the Commonwealth to provide greater protections for consumers. The reforms include that a person who receives 50 per cent or more of their net income from Centrelink cannot devote more than 20 per cent of their net income to small-amount credit contracts and consumer lease repayments, with no more than 10 per cent of this being allocated towards SACC repayments; and that a person who receives less than 50 per cent of their net income from Centrelink cannot devote more than 20 per cent of their net income to small-amount consumer contracts or consumer leases. These are separate caps. The reforms also include providing legislative support to ASIC for prescribed information to be disclosed by lessors and clarification of the penalties for imposing prohibited or excessive fees, charges and interest, or breaching lease-cost caps. Responsible lending obligations will continue to apply to both of these products. I think that's a really important point to make, because something that has been lost in the public debate around responsible lending is that responsible lending obligations are disappearing; actually they are not. They are not disappearing for small-amount credit contracts and consumers leases. It's important to note that these products play an important role in many people's lives. The proposal that the government is bringing forward strikes the right balance between protecting consumers and maintaining a viable sector to provide these products. We make our position very clear. The Labor stance and its pointscoring on this issue get us nowhere.

To add more detail on the small-amount credit contracts, as I've talked about, we will implement those reforms to enhance financial inclusion and ensure the consumers of those types of products are better protected. They are a high-cost form of borrowing; there's no doubt about that. They are more typically accessed by some of Australia's most vulnerable consumers. While these products can be useful for consumers—and, in the end, individuals have to be given the right to decide their own financial futures—and can be useful as an emergency source of funding, repeated borrowing can lead to repayments which can consume a great proportion of people's income and become increasingly unaffordable over time. The reforms that we are putting forward are designed to limit consumer harm while maintaining access to small-amount credit contracts and consumers leases. To this end, we'll impose a cap on total payments that can be made under those consumer leases. The permitted cap on costs will be equal to the sum of the base price of the goods hired under the lease, permitted delivery fees, permitted installation fees multiplied by four per cent per month up to a maximum of 48 months. Lessors will additionally be able to charge a one-off establishment fee of 20 per cent of the base price of the goods. As part of those wider reforms the government is introducing, it will also introduce a new protected earnings amount for small-amount credit contracts and consumer leases. Small-amount credit contract providers and consumer leases will be prohibited from providing a contract that would result in a person who receives 50 per cent or more of their net income from Centrelink devoting more than 20 per cent of their net income to small-amount credit contracts and consumer lease repayments, with no more than 10 per cent of their income being allocated towards small-amount credit contract repayments; and, for a person who receives less than 50 per cent of their net income from Centrelink, from devoting more than 20 per cent of their net income to small-amount credit contracts or consumer leases. These protected earning amounts will maintain access to credit while ensuring enhanced protection for the most vulnerable consumers.

Getting back to the broad framework that we have in place, this is an area that has undergone significant change over a long period of time. Going back to 2009, the national credit framework was established, which involved such things as a licensing regime, responsible lending, dispute resolution and a national credit code. In 2011 we saw changes in improved disclosure, restrictions on unsolicited credit and prohibited fees being charged. In 2014 we had comprehensive credit reporting introduced, allowing positive credit information on borrowers to be shared.

In 2018, we had the establishment of AFCA. I think in the future this date will be looked back on as a very important date, because AFCA has provided a forum through which individuals can take complaints in the lending space to an independent authority, at no cost to themselves, which, again is very important. This is not weaponising and forcing people into the courts at extraordinary costs. We all know that that cost barrier of entering the legal system, particularly on small amount credit contracts, but even on larger amount contracts, can be very difficult for average income earners. Going to court is an extraordinarily expensive business, even if you believe you have a very, very good case. The delivery of AFCA as a low cost, independent authority, where disputes can be resolved in a way that is advantageous to consumers, has been a great step forward. From memory, the information coming out of AFCA shows that some 70 per cent of resolutions of claims in AFCA proceedings were found to favour the consumer. I will correct the record if I'm wrong on that, but I'm reasonably sure I'm correct. It's only been in place for three years, since 2018, so we have a relatively new dispute resolution body which is proving to be very advantageous to consumers. It is something that we as a government can be very proud of. But, as a society, we've now got an avenue towards the resolution of disputes for people who are perhaps sold products or enter into arrangements that are not advantageous to them and have some legal problem associated with them. Those disputes can be resolved in a way that is low cost to all parties and result in a fair outcome for consumers. I'll leave my remarks there. Again, putting this bill up in this way is merely a stunt from the Labor Party. We will not be supporting the bill.