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Thursday, 20 August 2009
Page: 8502


Mr ZAPPIA (11:30 AM) —I rise to speak in support of 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. These are very important and very welcome bills. The three bills comprise the federal government’s national credit reform package, which will see responsibility for the regulation of consumer credit move from the states to the Commonwealth. These reforms were agreed upon with the states at the October 2008 meeting of the Council of Australian Governments. The National Consumer Credit Protection Bill 2009 develops a framework to license credit providers, brokers and intermediaries. Once licensed, these parties will need to adhere to responsible lending conduct requirements.

The National Consumer Credit Protection Bill 2009 also provides appropriate enforcement power to the Australian Securities and Investment Commission, which will be the regulator of the new national credit regime. It also puts in place court arrangements, remedies for consumers, penalties for licensing misconduct and the regulation of margin loans. The National Consumer Credit Protection (Transitional and Consequential Provisions) Bill 2009 ensures a smooth changeover of the national credit regime for existing credit contracts and disputes. The National Consumer Credit Protection (Fees) Bill 2009 provides the mechanism to support administrative fees for various matters—for example, the lodging of documents with ASIC.

There are two key issues covered in this legislation that I will focus on. The first of these is the importance of a national consumer credit regime. The Rudd government was elected with a promise to cut red tape within Australia to make doing business across state lines easier. To deliver this promise, the COAG Business Regulation and Competition Working Group was established at the first COAG meeting after the election of the Rudd government in 2007. The working group is co-chaired by ministers Tanner and Emerson. It identified 27 priority reforms to break down red tape barriers between states and move Australia to a seamless national economy. Related to that particular issue, we now live in a global economy. We now have a number of measures in place, as we recently saw with the G20 meeting in London, where we need not only consistency in national laws but consistency in international laws. To think that in 2009 we in Australia are still operating under a system where each of the six states and the two territories have independent laws relating to the same matter is totally absurd and is certainly making life for business and consumers very difficult. That is why these bills are indeed welcome.

The reforms create nationwide consistency in areas such as occupational health and safety laws. I recall the debate in this place only in recent weeks referring and relating to workplace safety, a matter on which there ought to be consistency across the country. Licensing of tradespeople is something that I see time and time again as contractors win contracts between states. A contractor from one state may well win a contract in another state. They find continuous difficulty in many of their tradespeople not being licensed in the other state; therefore, it creates all kinds of barriers and problems. It seems to me that we need to overcome those problems, and this is the kind of move that goes a long way towards doing that. This bill addresses the registering of business names, maritime regulation, food regulation and, of course, the implementation of a national consumer credit regime.

The progress report of the working group at the July 2009 COAG meeting in Darwin showed that, of the 27 priority reforms, two are already in place, 23 of the remaining 25 reforms are on schedule as laid out in the working group’s implementation plan and the remaining two areas, where reform has been slower than anticipated, will go to COAG to ensure they are advanced. Through this legislation the national consumer credit regime is one of those 23 reforms on track to be implemented as planned. This progress shows that the Rudd government is not just a government that talks about reform but a government that delivers on reform and implements the measures needed to make it easier for small business to do business across Australia. The Howard government talked a lot about cooperative federalism and what was being accomplished through COAG, but we did not see many results. Whether it be the management of the Murray River, a national consumer credit regime or any one of the other reforms being implemented through the COAG working group, it is the Rudd government that achieves results in making it easier to do business across the nation. In doing that, it highlights the support that this government has for the business sector in Australia. Time and time again I hear in this chamber members opposite talking about how they are the friends of business in this country—how they are the ones who support business. Regrettably, their words are not matched with action. When it comes to supportive action for the business community of Australia, this government is acting.

A national consumer credit regime is very important because business does not stop at state lines, as I said earlier on. It makes sense for national and international credit providers to be working under one standard regime throughout Australia. Many of the businesses that exist in this country now operate with offices and branches across the country; it is common business practice. If they do not have offices, they might have agents working in other parts of the country. We need to have that consistency. But we also need to have a reduction in the regulatory burden that is being placed on businesses. To have to register the same business in each state and perhaps the two territories is not only costly but time consuming and, quite frankly, in today’s modern era should be unnecessary. That is what we should aim for and this bill goes a long way to achieving that.

The bill also provides greater clarity and convenience for consumers. Consumers who move interstate or purchase from interstate providers will know they are dealing with one standard set of consumer credit laws. It will also provide them with easier mechanisms through which they can lodge a complaint. Regardless of which state the credit provider is located within, they will have the option of lodging a complaint through the ASIC office in their own state. On several occasions I have been contacted by my constituents in Makin seeking assistance with consumer issues arising from their dealing with interstate companies, which are of course covered under that particular state’s consumer laws. It is always difficult trying to provide real assistance to them because of that and because you are dealing with a company that is based interstate. Therefore, having consistency will be of great benefit to consumers wherever they might be located in Australia.

I also note that, as part of its implementation of all these changes, ASIC will be employing about 100 new staff. I welcome the advice that some of these staff will be based in Adelaide. Given the impact of the global financial crisis on employment in the financial services sector, I welcome the move by ASIC to hire new staff and to regulate the new consumer credit regime.

The second aspect of this bill I would like to address in detail is responsible lending. Credit providers licensed under this regime will need to engage in responsible lending conduct and must not provide credit products and services that are unsuitable to consumers’ needs and that the consumer does not have the capacity to repay. If there is one specific action that has led to the global economic crisis, it would have to be irresponsible lending. The crisis began as a crisis in the US home mortgage sector, where consumers were offered loans that were unsuitable to their needs and that the consumer obviously did not have the capacity to repay. These loans were based on the premise that, when the unsuitable lender did eventually default, the mortgage provider was covered either by the increase in the property’s value since the loan was made or by the fact that the liability for the loan had been packaged into a financial product and on-sold to another institution, thus spreading the risk of the bad loan.

The crisis that began in the US housing sector spread throughout the financial industry and then to the broader economy. It all began with irresponsible lending practices. The crisis began because in both housing and consumer credit consumers were offered loans they had no capacity to repay. Sadly, this is often done by agents who act on commission and have no regard for the long-term consequences of the loan that they might be encouraging or facilitating for consumers.

The Australian financial services industry has not been hit as hard by the global economic crisis as its counterparts in nations like the USA, Great Britain, Ireland and Iceland. It would be fair to say that one of the reasons for this is the lending practices within Australia have been better regulated than those in other countries. In fact, the Prime Minister and Treasurer both had positive responses when holding up the regulation of Australia’s financial system as a model for the rest of the world at G20 meetings earlier this year. Just because our industry is better off than most does not however mean that we should be complacent or assume that it does not need reform. This national consumer credit regime is certainly a positive step. There are other measures in this bill that I also welcome such as the regulation of margin lending loans, which played such a significant role in the demise of firms such as ABC Learning and Babcock and Brown, which no longer exist in the form they did before the global economic crisis.

The national consumer credit regime will be good for business, it will be good for consumers, it will help restore the confidence that Australians have in their financial system and it will be another significant step in the Rudd government’s reform package that will, in partnership with the states, truly create a new era in federal-state relations in Australia. I commend the bill to the House.