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Tuesday, 21 June 2011
Page: 6748

Mr BILLSON (Dunkley) (21:00): It was nice to have that little warm-up before I had a chance to speak for a few minutes on the bill before the House.

Mr Albanese interjecting

Mr Pyne interjecting

Mr BILLSON: The bill before the House, being debated amongst the cacophony of exchanges in the House, is the National Consumer Credit Protection Amendment (Home Loans and Credit Cards) Bill 2011.

The DEPUTY SPEAKER: Order! The Leader of the House and the Manager of Opposition Business will stop shouting across the table. The member for Dunkley has the call. The Leader of the House will cease interjecting across the chamber. If he wants to have a discussion he can go outside.

Mr BILLSON: As I was saying, the debate relates to the National Consumer Credit Protection Amendment (Home Loans and Credit Cards) Bill 2011. The bill is something that the opposition will not oppose. We see some merit in many aspects of the bill and we will be supporting its passage through the parliament. The bill essentially seeks to change the National Consumer Credit Protection Act 2009 to require licensed credit providers to do a number of things. These include providing to customers key facts sheets for standard home loans. These outline not only the scale of the loan but the quantum of payments and the overall costs of the home loan the consumer might be considering entering into. There are also to be key facts sheets for credit card contracts on a similar basis: the costs and responsibilities are outlined there so that consumers can make informed decisions.

The bill will also restrict unsolicited invitations to borrowers to increase the credit limit on their credit cards. This is an interesting measure within this bill. I am sure many of us in this House remember a time, when credit was abundantly available, when we could barely get through a week without having our credit card provider offering some Herculean increase in the credit limit, or even credit card providers with whom we had no association—perhaps they had sourced our names off some database somewhere—very generously offering credit cards with significant credit limits.

I can understand the temptation that those spontaneous offers of credit may represent for some people, particularly those facing some financial distress. You can see the connection between financial hardship and even in some cases the very viability of households when there is this revolving door of credit coming from multiple credit offers, unsolicited, from credit card providers.

The bill also seeks to prescribe rules for the use of credit cards above credit limits where there are transactions that peak out over what is euphemistically known as the 'maxed out' credit card, what occurs when those credit limits are exceeded and the arrangements to be entered into by agreement between the credit card holder and the credit provider. The bill also provides for an order of application of payments made under credit card contracts.

Essentially, these measures came out of some of the Labor Party's comments in the 2010 election. They related to a number of measures, including the regulation of issuance limits, fees and charges and product disclosure requirements of credit cards in order to enhance the protection of consumers. This was spurred on somewhat by a very important public policy comm­itment that the shadow Treasurer, Joe Hockey, made in outlining the coalition's nine-point banking plan. So persuasive were those nine points, despite the government's efforts to ridicule this forward-looking plan for our banking sector, that the Treasurer, Wayne Swan, quickly announced some of the measures that the coalition had outlined. So they clearly were not poor ideas, as Labor tried to outline. They were of such quality that the government tried to make them their own. Some of the measures in this bill carry forward the announcements in the nine-point banking plan of the coalition shadow Treasurer, Joe Hockey.

A couple of them are of particular interest to me, certainly the ones relating to price signalling. Interestingly, the government had never mentioned price signalling and a need to expand the powers available to the ACCC until the coalition started talking about it. In fact, the private member's bill that I introduced on behalf the coalition must have poked the government in the side to such a proportion that they quickly went about trying to create a bill of their own—a 'mine is bigger than yours' routine. I hope the parliament will consider before the week is out that the coalition's price-signalling bill is a product superior to the government's one and we will get the chance to debate that at some time.

Ms King: You're kind of pleased about that.

Mr BILLSON: I am kind of pleased about that. I thank the parliamentary secretary at the table for recognising that I would be heartened by that very objective and balanced appraisal of the two legislative proposals before the parliament. I was very pleased to read that some thought my bill was better than yours. Think of our extensive resources in the opposition compared to the tens of thousands of public servants available. Isn't it remarkable that quality can still emerge in the public policy debate despite that kind of resource imbalance. Needless to say, the bill before us deals with some of those policy announcements. The bill did have some unbecoming features, one of which, as my colleague touched on earlier, was a sort of process of consultation just to tick the box but with no meaningful engagement with key stakeholders. A very rushed consultative process meant that the bill came into the parliament with a number of flaws in it. Even though it is the government's own bill, the government is having to amend it. Having not done the homework properly, and not engaged in a genuine consultative manner, it now has to amend its own bill. I am pleased that those amendments are being made, because a number of those amendments improve the bill, but it does highlight that there were some unsatisfactory provisions. Thankfully, the banking industry engaged and the government has taken some notice of it.

Those elements within the bill that are worthy of consideration are certainly the hierarchy of payments under credit card contracts and other sections relating to credit card reform. Although poorly drafted, I think the ideas were quite reasonable, and the coalition has been constructive through the House Standing Committee on Economics in addressing some of those points. Industry has also, I think, taken its salvation in the House economics committee. At least someone was listening to its concerns and, through that slightly truncated process at the eleventh hour, the government has decided that there was some merit in those points from industry and has put forward some substantial amendments to the bill. It is a tad embarrassing for the government, but I hope it is an insight into proper consultation processes, because there are many stakeholders out there on this perpetual merry-go-round of consultations approaching them with goodwill, lots of resources and plenty of insights, only to feel like there is nobody listening. At least the committee process of the parliament can pick up some of those insights.

The key facts sheets for the standard home loans were originally set to apply from 1 September 2011. Clearly that was a very tight time frame. Following consultations with industry, that time frame has now been stretched out to 1 January 2012, albeit in an eleventh-hour amendment. The proverbial duck's legs were going very quickly as people were preparing for that start-up date. There now is a little more time to make sure that can be done properly, although there is some hope that the minister will finally release the regulations that will prescribe what needs to be in those key facts sheets. That was supposed to be in late June; we are certainly in late June. Let us hope that is not too far away; otherwise, the value of that extension will be undermined by the government's own inactivity. In its amendments, the government has also chosen to remove the strict liability offences which apply to this section. That is a concern that was consistently raised by industry and key institutions.

In the credit card area there are a number of changes to lending terms and prescribed rules for the use of credit cards above the credit limit. Other colleagues in this place on both sides have talked about a default buffer limit of 10 per cent above the approved credit limit as well as an allowance for a supplementary buffer. How these things will work through in practice will be quite interesting. My concern is that consumers might think that all of a sudden their credit limit has simply gone up by 10 per cent rather than it being a buffer designed to guard against punitive fees and the like, or higher interest rates, that are imposed and that may well not be expected by customers if they do happen to exceed their credit limit. We are all interested to see whether that does bring about behavioural change and some better comfort and protection for consumers or whether people will simply adjust to their old credit limit plus 10 per cent, and then we will find that some of the challenges that have motivated this bill are still with us, just slightly differently calibrated.

The hierarchy of payments provision is quite important. That requires credit providers to apply relevant repayments first to the parts of the consumer's balance that attract the highest credit rate. This seems quite reasonable. I know that if you are swapping between credit card providers they will often entice you with a discounted interest rate for whatever balance you transfer. This is designed to make sure that, if you then add to that balance, the most expensive part of the credit that you have called upon is where your payments are applied first.

As I touched on earlier, there are also the unsolicited invitations to borrowers to increase their credit card limits. You can be a little bit vulnerable to that. I heard an example, I think, from a government member talking about Christmas time. Cash flow can always be a bit of a challenge then. Faced with the festive season, the season to be jolly, and not feeling so jolly in the amount of cash available to you, that might be just a little too tantalising. I am pleased to see that that practice will be curtailed by the provisions in this bill, and I think that is a constructive step forward.

I touched on the key facts sheets earlier. They are just to make sure that people are aware of what they are entering into. I mentioned that the House economics committee made some useful recom­mendations recognising the debt treadmill. It might be good for bank profits, but it can come at a significant social cost. On this side of the parliament we are always keen for people to be responsible for their own actions, but, in the support we can provide in making sure that relevant and useful material supports better decision making, we think that is a good move, and there are a number of elements in this bill that go toward that objective.

On competition in the marketplace: hopefully, these key facts sheets will make comparison a more straightforward exercise. Some of the fiscal gymnastics that accompany credit products like credit cards with a whole lot of ins and outs, differential interest rates, special offers and transfers of balances can be quite bewildering. I am hopeful that this will at least give a basis for people to make better comparisons between credit card offers in the marketplace, and that should be good for competition.

I think the delay in the facts sheets is a smart move. I touched on that earlier. That was something that the House economics committee recommended.

There was also an acknowledgement that this is not without costs. This will bring some cost to industry as it gears up to meet these reforms. On balance, the House economics committee thought that those costs should be outweighed by the benefits of these reforms. As I mentioned earlier, we are all very interested in seeing what behavioural change results from the measures in this bill. The overall position was that the House economics committee thought this bill should pass, and that is certainly the disposition of the opposition now that some important, albeit late in the piece, amendments have been made by the government.

I was interested to hear colleagues talk about fees. Even the previous speaker was talking about home loan exit fees. I think this is something we need to be very careful about. A convenient amnesia takes hold of the government benches when they are talking about these things. There is in fact already a statutory power available to ASIC to take action for unreasonable fees—that is, fees applied by financial institutions that bear no relation to the actual cost incurred by the institution for the transactions to which the fees apply. One that is often talked about is home loan exit fees. It is quite interesting. I wonder how many home loan borrowers, how many mortgage holders, would appreciate the fact that what is effectively happening through the government's efforts to ban home loan exit fees is that they are socialising the costs of the decision of people to exit their home loans across everybody in the bank who happens to have a home loan, which I have always found a bit strange. If those home loan exit fees were genuinely a gouge and unreasonable, there is an existing head of power available to ASIC to take decisive action. But instead the Labor Party and its members have gone on this mantra that home loan exit fees are bad. I know when I am trying to make sure I can afford my mortgage, and my electorate is concerned about the cost of their mortgage, they would hate to have them bolstered up by having to cover the costs of other people's decisions to exit a mortgage they may have with that bank or that lending institution which actually incurs real costs. Someone has got to pay it. It is a bit like that balloon full of water. You push down at one place and they will pop up somewhere else. The problem is where they pop up is not where the push began. The push was the person that is accessing the home loan, they are the one that is creating the legitimate cost. Yet the government seems to think it is appropriate to socialise that cost across everybody who happens to be a client of that bank.

I am particularly concerned about what that means for small business. Access to finance for small business has been one of the key public policy challenges that this government has failed to address. Finance is the oxygen of enterprise. Yet too many small businesses, after even offering to mortgage their home and their firstborn, are still being denied finance. They are now getting higher fees and higher margins. Why? Because there is such a focus on home loans when really we should be looking at all those paying the cost for the finance they need to access.