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Thursday, 20 August 2009
Page: 8487


Mr RIPOLL (10:20 AM) —It is a great pleasure to speak on these three bills—the National Consumer Credit Protection Bill 2009, the National Consumer Credit Protection (Transitional and Consequential Provisions) Bill 2009 and the National Consumer Credit Protection (Fees) Bill 2009. It is a pleasure because it is an ‘about time’ collection of bills where a decent government comes in and acknowledges a whole range of problems that have existed in the community, particularly in relation to consumer credit, for a very long time.

These are not new issues or new problems. These are things that have been out in the marketplace. We have all heard it from our constituents. Mr Deputy Speaker, I am sure you are aware of those as much as I am: people who have complained or made representation to you—and I would say to every single member in this House, and senators as well—about having problems with credit facilities, with the people who sell them credit, with how credit works, with unfair clauses, with fees, with termination, and the list goes on and on. But underpinning all that has always been the principle that we needed to approach, and that was about protecting ordinary Australians—consumer protection. To be part of a government that takes the fight upfront and looks at ways that we can seriously have a practical impact out in the community on these issues is a proud moment, and I am very pleased to speak on these bills.

The national consumer credit reform package that we are putting forward will, for the very first time in Australia, put in place a single standard. It will be a national regime for the regulation of consumer credit—no small feat. It takes a lot of work, cooperation and effort and, dare I say it—and I say it in a humble way—a little bit of courage as well. When you are make significant changes, which is what we are talking about, and working with all of the states and territories, you have to bring people to the table; you have to do it in a bipartisan manner and you have to see other people’s point of view. That is what we have striven to do and I am proud of that.

The National Consumer Credit Protection Bill will develop a framework to licence credit providers, brokers and intermediaries and apply responsible lending conduct requirements to licensed parties. I will talk about the detail of that in a moment. It will also provide a robust dispute resolution mechanism supported by appropriate enforcement powers. This is a suite of actions that need to be taken. Not only do you need to provide the right licensing regime and framework but you need to look at how you enforce it; how you ensure that the policeman on the beat has the right powers to deal with these matters. These are long-awaited reforms that go to areas such as court arrangements and remedies for consumers, penalties for licensee misconduct and—of great interest to this parliament and the community—the regulation of margin loans.

The transitional and consequential provisions bill contains specific clauses relating to the rights and liabilities of certain existing credit contracts. Whenever there are these types of legislative changes it is essential that we put in place some transitional arrangements. We will make sure that, where court proceedings arose prior to the commencement of these bills, there is a proper process in place for participants as a precursor to the licensing arrangements.

The fees bill provides a mechanism to support the imposition of fees as are deemed necessary and essential for the proper working of these legislative arrangements, such as for searching a register kept by the Australian Securities and Investments Commission. The package relies in part on a referral of state powers to regulate consumer credit.

The government are committed not just to the words and the framework for making these things actionable but to providing the funding for them to happen. As such, we will provide $70.2 million over four years to ensure that our work with the states and territories through COAG can be achieved properly. The member for Solomon is in the chamber, and I know he is a big supporter of consumer credit, being from the Northern Territory—as are any of us who represent rural or regional areas. We understand just how important it is to ensure that constituents have access to proper credit protection and regulation, and I know the member for Solomon is as supportive of our bills in this area as I am.

The national consumer credit reform bills are a comprehensive package of legislation for a comprehensive licensing regime. For the first time, all providers of consumer credit, including brokers and other intermediaries in the industry, will be captured as one, which is a very important move forward in this area. The bills include industry-wide responsible lending conduct requirements for licensees, something that is desperately needed. The global financial crisis has, in a way, highlighted the cracks in the system, the areas of failure and the abuses that often occur when markets are running hot and people are, let us say, less concerned with procedure and process than they might be when there is a downturn in the market and they are looking closely at every single cent. In saying that, even the boom times we had for a decade did not diminish people’s concerns about the way they were being treated in relation to their credit arrangements.

The legislation will also provide improved sanctions and enhanced enforcement powers for the regulator, the Australian Securities and Investments Commission, making sure that not only do we in this place do our job in terms of the regulatory framework but that ASIC, as the regulator, has the power to ensure enforcement and to make sure that consumers are properly protected.

The bills will also expand the scope of credit contracts to include credit provided to purchase, renovate or improve the value of a residential investment property. This is an important area in which we have seen a growing market. Given that the Rudd Labor government has put in place the nation’s largest building program, in a whole range of areas but specifically in the areas of housing and homeless, it is important that we regulate in that area as well.

These bills will replicate the current state based Uniform Consumer Credit Code as a national code. It is important to understand that, constitutionally, the Commonwealth has insufficient powers to enact a nationally comprehensive regulatory framework for consumer credit. As such, we have worked with the states and territories for a specific referral of state powers to the Commonwealth for consumer credit. That entails an agreement to a text based referral of powers, which will need to be enacted by each state parliament before the proposed laws can commence in those states. We are working through that process. We have the agreement from COAG, which is very much appreciated. It shows the strong working relationship that the Commonwealth government can have with its state partners in providing nationally consistent laws and regulations and working in the national interest and in the best interests of Australian consumers—something that we on this side of the House are very much committed to and something I would suggest members of the Liberal and National parties take a closer look at.

The legislation is supported by intergovernmental agreement, which will provide all of those mechanisms that I spoke about. The implementation of the national consumer credit regime will include other providers or intermediaries such as brokers. For the first time, they will be required to actually be registered with ASIC by 31 December 2009 and to have applied for a licence by 30 June 2010 if they want engage in, or continue to engage in, credit activities. Again, this is a very important mechanism to ensure that everyone who is involved in this sector is caught under these regulations.

The responsible lending conduct obligations will commence 1 January 2011 and will provide the industry time to put in place systems and training and to make sure that people are up to speed in terms of their requirements and their obligations. Licensing, I believe, is very important. It is a very important part of ensuring that those who provide these types of credit or broker and credit facilities are actually properly qualified, properly trained, understand codes of standards and ethics, and provide the best possible service to consumers. As such, these bills do provide a comprehensive licensing requirement. It will mean that there will be a requirement for people in this area to hold an Australian credit licence, an ACL, if they want to be properly authorised to provide credit activities. That will include such areas as: lending or collecting money; acting as an intermediary between the consumer and the lender—for example, credit aggregators; and suggesting a consumer apply for a particular loan—for example, people such as brokers.

The licensing regime will impose certain entry-level requirements—a very important step towards making sure that the quality of advice and service provided in these areas is up to standard. I am very happy to see that we will be regulating in that area. To ensure that it is not just an entry-level requirement and then a self-regulating system, we will also be requiring that people meet ongoing standards of conduct when engaging in credit activities. And, most importantly, ASIC will have the power to either suspend or cancel their licence—a very strong power, a very necessary power and one which I believe will point the way in related matters in terms of the financial services world.

There will be special procedures in place to streamline the licensing to make sure that it works efficiently for banks and credit unions as well as others. We do expect to put in a number of limited exceptions because, as always in these things, from time to time there are exceptions. An example is point of sale staff, particularly in places such as major retailer outlets which offer interest-free periods and where there is some sort of credit line arranged. We will be exempting those particular point of sale staff from having to have an ACL or from meeting particular requirements. Those requirements will not be necessary at that point, but certainly the providers of that credit need to be the ones who actually hold the licence.

Responsible lending is something that we have all talked about quite a bit, particularly given that we have seen some high-profile and spectacular collapses—for example, Storm Financial, Opes Prime and the margin lending debacles throughout the country. It all comes back to this central point about appropriateness and responsible lending—ensuring that the lender understands the capacity of a consumer to repay a loan so that the consumer is not placed under some sort of financial stress created by the loan. So responsible lending requirements will also apply. These will set a standard of expected behaviour for licensees—as I have mentioned previously, not only entry requirements but also requirements for licensing, ongoing standards, proper qualifications and so on.

There also need to be clearly delineated responsibilities and obligations for people such as finance brokers when it comes to lending conduct. They play an essential role in meeting the need of consumers in the community to have a choice—so they do not necessarily just go to their bank to get credit and have to be limited to the offerings of that one institution; but, perhaps, they could go through a broker or some other licensed agent who would be able to seek out or source the very best deal or most appropriate and suitable credit for a consumer’s particular needs. So it is essential that we include people involved in that particular sector as well.

The legislation introduces for consumers some important disclosure requirements in relation to credit costs and commissions, another area which I think is ahead of the game in what we are seeing happening in the sector already. Peak representative bodies across the country, those who represent people working in the financial services world and in brokering, are already seeing the need for peer change, for conduct change and for reform in the areas of how these things work. Disclosure is one of those very important issues. It is important because consumers need to understand upfront in simple plain English exactly what it is that they are buying into and what the terms are. There need to be clear, concise terms in plain English, and I think disclosure can play an important role in that.

I want to make the point that disclosure is not about providing more and more information—it is not about the 100-page disclosure document where you can bury or hide in some critical piece of information that cannot be found unless you are a constitutional lawyer; it is about providing clear and concise information. It is about having upfront, full disclosure so that people truly do understand what it is that they are buying into. I think that is a fair process and it is something that I am very pleased about in these bills. This is about consumer rights. This is about consumer protection. This is about ensuring that people know what they are buying into and ensuring that they are not abused by people who think that they may be cleverer than everybody else.

Importantly, for Australian homeowners who are refinancing—and there would be quite a number; whether it be due to financial difficulty, whether it be to access some of the equity in their home, or whatever it might be—there need to be laws that specifically include a presumption that the refinancing is suitable for those people. Again, there need to be arrangements in place that are appropriate; the correct financial obligations need to be met; and all of this needs to work in line with our national consumer credit legislation. This is about having a national credit code, albeit that it has come out of the state regimes and we will in effect have a state based uniform credit code which will be largely replicated in the legislation as the national credit code. Importantly, it will ensure that we have a consumer focus—a focus on improving the code and protecting ordinary people in terms of their access to credit.

What the scope of the code will be expanded to include is credit where it is predominantly used to purchase, renovate, improve or refinance a residential property. The code is also being amended to reduce several loopholes that could be used by unscrupulous lenders or brokers to avoid the law. We have been careful to make sure we cover those. The bills will also change the monetary thresholds under which consumers can apply to their credit providers for hardship variations. Credit providers will also be prohibited from using essential household goods as security for loans, and they will be required to give consumers information when they default on their contracts or when a direct debit is dishonoured.

I have spoken briefly about penalties, remedies and enforcement powers, and I just want to touch on them again. If you are going to send out a strong and clear signal to the sector about doing the right thing, about adhering to the codes and making sure that people understand what is required of them, it is not just a case of licensing but making sure that you have criminal penalties in place for licensing misconduct. That could include imprisonment of up to two years for really serious breaches, and I think that sends the right signal to say that we are serious about doing the right thing. There are also civil penalties for licensing misconduct which will enable ASIC to seek heavy fines of up to $220,000 for an individual and $1.1 million for a corporation.

These are the right signals in terms of ensuring that providers do the right thing, and for the vast majority this will actually be something they welcome because they do do the right thing and they do understand their obligations. It will make it easier for them, not harder, because it will ensure that the unscrupulous operators are weeded out. There might be only a limited number, but it helps provide a more robust framework and stronger rules for those who are doing the right thing.

All in all, these three bills together provide a complete package. It is more than a step in the right direction; it is a leap in the right direction in terms of providing the right sort of consumer protection balance. It is a balance between an open marketplace, where people can access finance, credit and debt and get on with doing the things that they deem necessary for themselves, and consumer protection. But for me that balance needs to have consumer protection as its primary focus, consumer protection at its heart, and that is what these bills achieve.

While I chair the Parliamentary Joint Committee on Corporations and Financial Services, and we are doing two inquiries at the moment which touch on a lot of these issues, I feel that what these bills do is already moving us in the right direction. They cover many of those areas that we are inquiring into, so I welcome these bills very much. I am very supportive of these bills and I commend them to the House.