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Tuesday, 21 June 2011
Page: 6721


Ms GAMBARO (Brisbane) (18:54): I rise to speak on the National Consumer Credit Protection Amendment (Home Loans and Credit Cards) Bill 2011, and particularly mention that the coalition might also be introducing amendments. This amendment bill is a significant action by the government to address the complex regulations relative to the areas of consumer credit, including payday lending, credit cards, store credit, investment and small business lending, and personal loans.

The coalition holds a very strong view that our objective and commitment is to ensure constitutional soundness, particularly that implementation arrangements are in place for the referral of consumer credit powers to the Commonwealth by the states. We must all be assured that the national regulation of consumer credit by the Commonwealth provides a thorough and consistent administration that extinguishes the gaps and conflicts that may have existed under the current regime and that it addresses the shortcomings of the current system in protecting all Australians, especially the most vulnerable in our society.

Protecting consumer rights and meeting the needs of all Australians are essential in building a very strong social fabric. The coalition supports fair, open and competitive markets to provide the very best means of having an open, dynamic, prosperous and equitable society. Government needs to ensure that markets are fair, open and always competitive. We also support a more comprehensive regulatory regime. We support reducing the financial risk and disadvantage to Australian consumers entering into contractual arrangements for credit.

Potentially, the scope and influence of these new laws will affect the majority of this country's adult population. It is currently estimated that in Australia there are over 14 million credit-active individuals. Even people who have utilities—including electricity and gas accounts or mobile phones in their name—are active users of credit. For many people the use of credit is a stark reality in order to survive. They lead a hand-to-mouth existence, with very little margin for error in managing their financial resources. These people are well aware that they are constantly on the brink of, or a pay cheque away from, disaster.

In today's society it is becoming increasingly difficult to conduct day-to-day transactions without the use of a credit card. In the area of credit cards alone, Australians have a collective debt of a staggering $50 billion. More than two-thirds of this debt is accruing interest every day at an average annual rate of interest of 19.7 per cent—a near 20-year high according to the Reserve Bank. That translates to $7 billion a year paid in interest alone on credit cards.

There is very wide competition in the financial industry, with more than 174 banks, building societies and credit unions offering some form of high-street financial product. They are all vying for that very important consumer business. This legislation will no doubt result in significant changes in the way that credit providers and credit assistance providers conduct their business. It will also result in changes to the commercial practices of businesses involved in offering, managing and recovering loans and consumer credit contracts. However, there are some very serious concerns about the length of time that the government has provided industry with to comply with the new laws. They have provided very minimal time for industry to provide feedback and to comply with the new laws, particularly in light of the fact that a great deal of the detail in this bill has been deferred to regulation, which has yet to be released by the government.

This is all the more reason for the government to ensure that this legislation fully and adequately serves the purpose for which it was intended. It is anticipated, and it is absolutely essential, that the introduction of licensing, conduct, advice and disclosure requirements meets the needs of both consumers and businesses alike. This legislation must ensure that consumers are fully protected in their dealings with credit products, and credit providers must ensure that the legislation is clearly communicated and articulated to their customers. We also have an opportunity to liberate the market and encourage more stringent rules on access to credit, but also to cap the rates of interest that can be charged. The coalition holds the view that consumers' interests could be best met by measures which encourage competition within the banking sector, as opposed to the prescriptive regulatory approach for ad hoc issues.

The coalition stands by its call for a full root and branch review into Australia's financial system as part of the nine-point banking plan announced in October last year. There has not been a major review of banking since the Wallis review reported some 13 years ago. This side of the House supports the upgrading of ASIC's enforcement powers to eradicate unscrupulous and misleading practices. Responsible financial industry participants will undoubtedly regard this as an overdue and positive advancement in this area. This will be a challenging and complex undertaking as it covers all major financial institutions and major credit providers, including the banks, the building societies, the credit unions, the finance companies, the retailers and other businesses that offer credit arrangements, as well as the payday lenders.

With many Australians experiencing difficulties in meeting their financial obligations, we must ensure that public education and guidance is available to assist consumers in choosing a course of action when they are having difficulties with payments, which can result in a long-term effect. A consumer's credit history is a foundation of lender decisions and can make the difference between getting a good loan with excellent interest rates and getting a bad loan, declined applications or highly inflated interest rates.

The issue of access to credit for low-income earners is also of great importance. These people continue to require access to available credit and we must ensure that this legislation does not disadvantage this very important sector of the credit market. Often it is the financially disadvantaged in our communities who most need to access short-term financial credit opportunities or products. Within my own electorate of Brisbane, this is also the case for people involved in temporary situations such as those who are recovering from the recent Queensland floods and natural disasters. Some are still waiting for insurance payouts or grants from the government and really need to access these credit facilities desperately.

Whilst we recognise the need to regulate the credit industry to protect consumers from unscrupulous financial credit providers, the coalition is determined to ensure that the providers of the credit are not inhibited by bureaucratic and demonstratively overburdening legislation that denies credit to the people who need it the most. The coalition applauds the advancement of consumer credit reforms in line with the adoption of a national regulatory approach to important social and economic issues. However, we share certain concerns, particularly about ensuring not only that this legislation fully and adequately protects consumers but also that it is not to the detriment of credit service providers.

ASIC must provide the mechanisms for easy access to services such as dispute resolution, where consumers will have access to these services with location, procedural simplicity and affordable costs being absolute priorities. This legislation will have a major impact on any organisation or individual involved in providing, assisting with or enforcing consumer credit, including in areas such as consumer leases and credit for residential property for investment purposes.

Interest rates under the Gillard government have increased seven times since September 2009, increasing repayments on the average mortgage by $477 per month in a little under two years. The truth is the Gillard government has been forced into taking action on financial credit providers and is playing catch-up politics. The best thing that the government could do to provide immediate relief for homeowners and small business is to pursue responsible economic management and wind back its heavy debt fuelled spending to ease the upward pressure on interest rates.

It is our understanding that to implement this COAG decision over $70 million has been allocated over a four-year period and that this funding will be primarily for the establishment of the national licensing regime for providers of credit and credit facilities. ASIC will be the sole national regulator. What has not been identified in the proposed new national regime, however, is the cost associated to providers in procuring these new licences. Perhaps the Treasurer will answer a question at a future time relating to the envisaged costs to credit providers and whether there is a plan to recoup those operating costs over the years ahead with licensing fees. That really needs to be answered.

It would seem logical that whatever increased costs are placed on the financial or credit industry will be passed on to the consumer. We need to ensure that the new legislation does not provide an opportunity for financial businesses to use the legislation as a trigger or a reason to increase lending or credit fees. Australian banks have in the past few years increased the margins that they earn on credit cards, despite following the RBA's lead in other areas of financing. In the world of credit cards, most rate cuts by the central bank were ignored, with additional rate rises instead. Australians are acutely aware of the role of the banks in the escalating cost of credit facilities. Recent media articles and consumer surveys indicate that many Australians are becoming reluctant to increase their credit card debts.

This legislation also encompasses regulation of alternative credit facilities such as payday loans, which are becoming a popular alternative, offering small amounts of credit to those who would normally be ineligible for a credit card. A positive and encouraging trend is emerging with the increased use of debit cards, which are becoming far more popular. In fact, debit card usage has skyrocketed, with most consumers preferring to use their own funds to avoid building up any further debt. This growth in the preference for debit cards is due to the fact that, while they are restricting their credit card potential debt, Australians still owe a fair amount on their credit cards. Credit cards that attract interest rates of around 20 per cent are suggested as being of principle importance to those trying to repay in full, according to financial industry experts, while those on around nine per cent give consumers more room to move.

At a time when this country's tourism industry is working hard to encourage and stimulate our domestic tourism business, some credit card charges, such as those for airfares and taxi trips, incur usage fees by merchants of up to 10 per cent. These charges are further damaging Australia's reputation as an affordable tourism choice both domestically and internationally.

My home state of Queensland was the first state to implement a uniform consumer credit code, which was adopted by other states and territories. It is heartening to witness the coming together of different state and territory legislation and the transfer of financial services into a single, standard national consumer credit law for the benefit of all Australians.

The coalition calls on the government to refer this bill to the House Standing Committee on Economics, because the bill is an unsatisfactory response to perceived issues within the banking industry. We acknowledge that some elements within the bill are worthy of consideration, such as the changes to the hierarchy of payments under credit card contracts. The other sections relating to credit card reform seem to be poorly drafted, and there are industry concerns that have not been addressed. In addition, there are concerns over retrospectivity in relation to the bill applying to existing credit contracts. With further amendments and with properly managed implementation, this legislation has immense potential to have a beneficial effect on the credit and financial industries while ensuring the protection of Australia's consumers.