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Tuesday, 21 June 2011
Page: 6713


Mr PERRETT (Moreton) (18:15): I rise to speak in support of the National Consumer Credit Protection Amendment (Home Loans and Credit Cards) Bill 2011 and note the support, broadly speaking, of the member for Moncrieff. I commend him on his contribution. I am sure that when the Turnbull tide returns he will be promoted to the front bench.

Mr Bowen: Shadow Treasurer.

Mr PERRETT: Yes, shadow Treasurer perhaps. This bill delivers on our election commitment to get a better deal for consumers with credit cards. Any Labor member or anyone representing any seat knows that this is a huge issue. Whilst it is very easy for the member for Moncrieff to talk about pure markets and ability to say no to advertisements, the reality is that with credit it is a slightly different market. It is a bit like the carbon price: there are some times when the market does achieve the best things and occasionally we need to have the hand of government in there.

I note that in April this year there were 14.8 million credit cards in circulation in Australia, with a total credit limit of almost $135 billion. In April the credit card debt of Australians was $49.3 billion and Australians made many millions of purchases on their credit cards. I would like to go on the record and note that less than half of those purchases in April were from my wife!

Mr Bowen: Is she listening?

Mr PERRETT: I am hoping not. And in April we had the Easter holidays, so there was at least one day when most of the shops were closed down. But still there were all those purchases. That credit card debt in April was $49.3 billion and if you go back to December you have that Christmas spike when it was up to $158.9 billion. So obviously credit cards are an important part of their daily lives for many people.

The legislation before the House is not about bashing the banks but is about ensuring that we have a regulatory framework in place to protect consumers from excessive fees. It also gives them greater control over how much they borrow. Rather than just let the market rip, it is important to have controls and some checks and balances. This is in response to growing community concerns about some bank behaviours and this bill therefore amends the National Consumer Credit Protection Act 2009. Firstly, the bill changes the way banks apply credit limits. Currently banks allow credit accounts to exceed credit limits and then charge an over-limit free. These fees alone cost consumers $225 million a year. With about 22 million Australians, that is about $10 each just in the over-limit fees. This bill limits the amount credit accounts can go over to 10 per cent above the credit limit and abolishes the fee when they do. Consumers can also opt out of this buffer if that is best for them or they can negotiate a larger buffer, which would be subject to a fee. This measure strikes the right balance. It prevents banks from slugging consumers with excessive over-limit fees and empowers consumers to choose whether they can go over their limit. As I said, at the moment there is about $10 in fees for every man, woman and child in Australia. Hopefully not everyone in Australia has a credit card, but still it is a significant amount. This bill also requires credit card lenders to allocate repayments to a consumer's higher interest bearing debts first. As we know, that stops the compounding effect to a slight extent. It overturns the practice of lenders allocating repayments first to debts with the lowest rate. It is expected that this could save consumers around $360 a year, depending on their spending habits.

This bill also includes measures to help protect consumers from excessive debt. It does so by banning unsolicited credit limit extension offers being sent to credit card holders. I did a bit of a survey today, knowing that I was going to deliver this speech, to find someone that had not been given a credit card offer. Irrespective of your income, how many people have been made these offers? This is just my little snap survey, admittedly—I did not wander into the Liberal Party room today and talk to them—but the norm seemed to be that people's credit limit was doubled as a matter of course. They were able to immediately double what they were able to rack up. Now lenders will not be able to send offers to extend credit limits unless consumers have already agreed to receive these offers. To placate the concerns of the member for Moncrieff, you will still be able to tick the box and be sent offers if you are comfortable with that.

We all know it is quite enticing the way these offers are sent out. In Catcher in the Rye Holden Caulfield talked about the fact that everyone wants to be in a club and the more exclusive the club the better people feel about themselves—so the bronze club, the silver club, the gold club, the platinum club—and sometimes it is a case of offering to change you from a gold to a platinum, yet it does not really change anything except the colour of the card, but people mistakenly feel they are in a more exclusive club. I am not sure what sorts of colours and metals they progress on to, but everyone likes an exclusive club and the people who offer credit cards understand that. It is a bit like Calvin in Calvin and Hobbes offering to build a cubbyhouse only for boys. This will provide some protection for consumers, who can easily end up with a credit limit they cannot afford. We all know that if someone receives a credit card offer at the same time as losing their job or their circumstances change they may make a short-term decision that will get them out of trouble for a few payments but obviously, in the long term, at the higher interest rates that are attached to the credit cards, the debt chases hardship and ends up compounding the problems.

This bill also introduces a new requirement for lenders to include on credit card application forms a facts sheet with a clear summary of key account features. This is a long overdue measure that will give consumers important information including the annual fee; the interest rates on purchases, cash advances and promotional offers; and other relevant fees. We have all been sent the product disclosure statements, but if we did a survey I wonder how many people, including lawyers, would have actually read all of the product disclosure statements they receive in the mail. It would be a very small percentage I would suggest. It should be incumbent upon banks to ensure that their customers are fully informed about this kind of information so they can make an informed choice when selecting a credit product. The clear summaries are a great feature. This information should not be buried in complex terms and conditions booklets but should be made obvious to consumers as part of the application process. In the past I have gone through the PDS and crossed out the odd paragraph every now and then and returned it. I have done it a couple of times and never actually received any comment back from the people. So, maybe consumers are not reading it and the people who send out the information are also not reading it. The key facts sheet mandated by this bill will ensure more appropriate disclosure to consumers. (Quorum formed)

I promise I will not say nice things about the member for Moncrieff again, if that was the reason for the quorum call!

The bill requires lenders to provide a key facts sheet to set out the costs of home loans to allow consumers to more easily compare home loan products.

It is no surprise the banking sector is not overwhelmingly behind this bill. The Australian Bankers Association have come out swinging, but I do not think we need worry too much about our banks or lose too much sleep over them. The 'big four' have reported first-half-yearly profits—so, just six months—of $11.9 billion, which is about $540.91 for every Australian. The Commonwealth Bank posted $3.3 billion profit to December 2010, NAB earned $2.67 billion, Westpac a cool $3.16 billion and ANZ's six-month profit was up a massive 38 percent to $2.66 billion. No-one is suggesting the banks should not be profitable, and I think most of us would agree that the strength of the Australian banking sector played a part in shielding Australia from the full impact of the global financial crisis. When we saw banks around the world tumbling, we saw that our 'big four' were consistently in the top 15 banks in the world. I commend the opposition for their contribution to making sure that we have had a strong banking sector. It is something that there has been bipartisan support for. As well, there were government measures during the GFC, such as the bank deposit guarantee.

Banks answer to their shareholders and most are no doubt very happy with the half-yearly profit reports. But the banks also have a social licence to provide financial credit and enable measured economic growth and fiscal stability throughout Australia. The Gillard Labor government believes that with this social licence comes an obligation on the part of the banks to protect consumers and not lure them into unaffordable and unreasonable credit deals. We should acknowledge that banks such as NAB are actually leading the way when it comes to some of these reforms, and I do commend the banks that have taken these initiatives. They have already scrapped some over-limit fees and now allocate repayments to the highest interest debts first. These are terrific initiatives for consumers and also prove that the sky will not fall in for Australian lenders when these reforms come into force. I commend the bill to the House.