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Tuesday, 21 June 2011
Page: 6718


Mr HAYES (FowlerGovernment Whip) (18:41): I rise to speak in favour of the National Consumer Credit Protection Amendment (Home Loans and Credit Cards) Bill 2011. As an amendment to the National Consumer Credit Protection Act 2009, which includes the National Credit Code, the National Consumer Credit Protection Amendment (Home Loans and Credit Cards) Bill 2011 gives effect to the government's election commitment in relation to fairer and simpler banking policy. This amendment delivers on the government's election commitment to reduce the information asymmetry—the very one-sided information flow from lenders to consumers—that we have in the industry at the moment.

Mr Acting Deputy Speaker Adams, I know you are well aware of my electorate. As such, you are aware of the issue of housing stress that is currently of significant proportions there. It is not only housing stress that is of concern to people in my electorate. There is also the burden of genuine financial stress. People get in over their heads. Some will take the view that everyone is entitled to make their own decisions, and hopefully they make the best decisions. With this piece of legislation we are trying to ensure that people are provided with the information they need to make decisions—cutting through all the hype, the glamour and the glossy brochures that encourage them to borrow more—that are in their own interest and that of their families and that give them a debt they are able to manage.

It is a simple fact that currently in Australia there are approximately 15 million credit card account holders. Therefore we must strive to have the most efficient, streamlined credit card system to ensure that consumers are not left behind and left vulnerable. We must also aim to improve the consumer relationship, particularly with the banking system, through the elimination of excessive fees. This amendment introduces the requirement that lenders give borrowers a one-page key facts sheet for home loans. The aim of this facts sheet is to ensure that the borrower will have the best possible information when making that home loan decision. Australian families should be able to easily compare the deals offered by the big banks with those of their local credit unions and building societies. This is about transparency.

I must say, it was a vastly different situation when I went to get my first home loan. I recall going to one of the big banks, only to be knocked back. That is how I and my wife, Bernadette, ended up at the building society. Things have not changed that much. Therefore, we are trying to reduce the market capture of the big banks, allowing competition in the system and allowing people to know and understand the true position being offered by the respective financial institutions as well as the consequences and effects of that. As I said, this amendment is about transparency. It is about ensuring that there is clear and concise information available to the consumer. It is our objective to ensure that the consumers are not paying more interest than they should be.

It goes without saying that a home mortgage is one of the biggest financial commitments that most Australians will enter into in their adult lives. It is our responsibility to ensure that they are given the fairest possible deal or arrangement in coming to that decision. We understand that banks must make a profit and must remain profitable. That certainly underpins our economic system. But, at the same time, it is our responsibility to protect everyday families. They are not approaching this as bank executives. They are not sitting as equals at a negotiating table. They are, to some extent, taking what is on offer. We are just going to try to ensure through this piece of legislation that what they are shown as being on offer is written in common-sense language that is understandable such that a family can make a decision as to what is good for them.

The bill provides a balance between making banks and other financial institutions competitive and helping borrowers make the best decisions for themselves and their families. There is no doubt that consumers have a responsibility to be prudent. This does not absolve them of that. But, in short, we are trying through this legislation to give them more access to understandable information to help prudent decision making. We must ensure that they are informed not only about all the opportunities available through the various financial institutions but also, more importantly, about the financial consequences and obligations of entering into various contracts or mortgages.

In recent years the government has successfully streamlined and updated consumer credit laws. Australians now have uniform credit laws applying throughout all states and territories. That provides protection for consumers against unfair treatment. Now it is time to address the national credit laws. Under the proposed changes outlined by the amendment, lenders will be prohibited from sending invitations to borrowers offering increased credit limits. I have received those on many occasions. Anyone who on any occasion has taken out an interest-free loan or something like that knows that if you are disciplined and make the repayments there is no downside. However, if you are slightly less than disciplined—and by 'slightly' I mean missing one repayment or not paying on the exact day—you then incur a significant penalty at a higher interest rate.

One of the things that I have always found so terribly loathsome is the amount of material that you are targeted with by the lending institution in question by simply signing up for one commercial transaction. This seeks to discourage that practice but also to discourage Australian credit card holders from accepting such offers that encourage frivolous spending and mounting up a debt that unfortunately becomes unmanageable. I have been through that with my own kids. I am sure, with the number of credit cards out there—and I have already indicated the number of them—that many members in this place have experienced that too. At one stage one of my children decided to make purchases, and it was fine until they had to be paid back on a given day. I guess it does then fall to mums and dads to come in and help. Maybe this goes to helping mums and dads out a little bit in that process too. My child took this loan out. At the time she approached it from being a knowledgeable university graduate. But when you take these things out, unless there is self-discipline, it is very easy to be caught up in a situation where managing that debt eventually becomes more and more difficult.

As I said, this is trying to give consumers the information they need when they are making those decisions and also drawing their attention to how to make suitable judgment calls about the debt that they are going to have to try to manage. I spoke about being bombarded with the amount of literature you get on these matters. It is bad when you are being bombarded with what is effectively a sales pitch to take on more debt. They gloss it up and make it look more attractive but, at the end of the day, we need people to make decisions as to the management of their debt.

Under the terms of this legislation, lenders will not able to charge fees to customers who go over their credit limit. That is something that used to apply. You would get that in the mail and most people would just pay it. You might complain but mostly you would just pay it. This will now prohibit that from occurring. However, it can be reversed upon the express request of the credit card holder. This is actually transferring a bit of that power. It is putting the consumer in a position to say, 'I want to go above that credit limit,' as opposed to simply going above it and being caught after the event.

With this in mind, lenders will still be able to practise discretion when approving some payments above the credit limit, but this discretion will only be able to be exercised up to a buffer limit of 10 per cent of the consumer's credit card limit. This change to the system signifies an end to most credit limit overdraw fees. That will be a significant change for a lot of people. I understand that nationally it will mean a saving of $225 million annually. That is $225 million that will stay in the pockets of hardworking Australians. In addition to these changes, the government is moving to increase the regulation of lenders in relation to the warning to consumers about making only minimum repayments on their credit card accounts. Consumers need to be kept well informed about the consequences of making only minimum repayments and must be encouraged to make additional monthly contributions. More importantly, lenders will be forced to allocate the additional payments that are being made, in the first instance, to the credit card holder's highest interest debt.

For far too long the banks have had the upper hand. There has been a clear lack of transparency in the information flow between banking institutions and consumers, which has seen too many Australian families get trapped in bad loans and lumped with excessive credit card fees. This initiative gives some power back to individuals, helping them to make the best decisions with their hard-earned money.

I represent an electorate which is very much governed by the number of families who live there. A mortgage is, without doubt, the biggest financial arrangement that people in my electorate enter into. This bill will go a long way towards helping hardworking families make prudent decisions about their finances and helping them take all steps possible to ensure that they do not enter into a bad financial arrangement. I commend this bill to the House.