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Monday, 22 August 2011
Page: 8719


Mr BANDT (Melbourne) (11:04): The Greens are committed to getting a better deal for customers, including small business, from Australia's banking sector. That is why we have been pushing hard for a strong commitment from this parliament for banking reform.

A sustainable banking and financial sector means ensuring a proper balance between effective banking and financial services for consumers and business, and fair rates of return to both the banks and the taxpayers. Up until now the balance has been wrong. Despite the global financial problems, Australia's banking sector is robust and the big four banks have been making record, excessive profits. We have one of the highest concentrations of bank ownership in the developed world, and Australian consumers are paying a premium as a result.

Improved bank competition is a key means of getting that balance right, as is proper regulation and tax regimes for the banking sector. That is why the Greens have moved to abolish $2 ATM fees; that is why we have proposed improved tax arrangements to properly reflect the taxpayers' effective subsidy of stability in the banking sector; that is why we have moved to protect smaller institutions from being swallowed up by the big four; and it is why we pushed hard to abolish mortgage exit fees over a number of years—a policy the government has since adopted. It is also why we have campaigned for account portability, the centrepiece of the bill that I will introduce today, because only when we rein in the banks' desire and ability to unreasonably boost profits at the expense of customers will we get the balance right.

If we saw the big four banks exposed to real competition from the rest of the banking sector we would see fees and charges go down, returns on deposits improved and better services delivered. But the focus needs to be on consumers. Banking is, in today's society, an essential service: one cannot but have a bank account. One's wages or one's allowances, if one is receiving transfer payments, get paid into electronic bank accounts. That is an enormous pool of money that is there available for the banks, and the banks should not be able to use what is in effect a licence to print money as a way of unreasonably and unfairly gouging consumers by charging excessive fees. That is why getting rid of exit fees is so important and why other barriers, such as refunding lenders' mortgage insurance, have to be addressed.

The report of the Fraser review, Banking services: cost-effective switching arrangements, released by the government yesterday, supports our view that we need reform to enable improved account portability and lender mortgage insurance arrangements. I welcome the government's support for these reforms and I indicate that the Greens are open to a discussion on how to progress them. As a starting point, this bill will address these aspects of competition and will also provide encouragement to customers to look around for a better deal before rolling over long-term deposits. Ultimately, we would like to see Australia shift to full account portability, with an account number that customers can take with them from bank to bank in the same way that mobile numbers can move. This must be the ultimate reform goal in this area, and we believe the Treasurer and the government should commit to making this a reality. The Greens will continue to advocate for a portable account number. However, we accept, as does the Fraser review, that such a goal is hard to achieve in the short term. In the meantime, there is no reason why a lesser but significant form of account portability cannot be put in place, and that is what my bill will do.

This bill will make four important improvements to the banking sector designed to get a better deal for consumers. Firstly, it will allow consumers to switch bank accounts more easily. It does this by amending the Banking Act to require banks to offer switching services for new customers. Upon signing with a new bank, consumers will be entitled to advise that bank to switch over all direct debits and credits from existing transaction accounts in their old bank, or banks, for 13 months. The bill will oblige the old banks to provide all the information necessary for the new bank to enable the switch. These provisions will allow switching between bank accounts to occur cleanly and without the hassle that is currently the case. The onus will be on the new bank to do what is currently the burden of consumers, thus removing what has traditionally been one of the greatest barriers to account switching and improving competition in the sector as a result.

Anecdotally, it has certainly been my experience with the small businesses that I have spoken to in my electorate that it is small businesses who suffer the most when customers change over. Often consumers or customers will forget to reroute their direct debits, and a small business that does not necessarily have the capability to follow up will find that a direct debit they have previously enjoyed has been switched off, usually through oversight by the customer rather than through deliberate action.

Secondly, this bill will provide consumers with more transparent information regarding their term deposits. It does this by amending the Banking Act to require a customer's bank to give written notice of the interest rate and the term that will apply if the money in the term deposit is automatically reinvested at the end of the current term. It also requires the bank to outline all special term interest rates and other special offers available from the bank at that time. This is an important principle of transparency which will prompt consumers into checking that they are indeed getting best value for money.

Thirdly, this bill will provide consumers with more transparent information about their rights under credit contracts. It does this by amending the National Credit Code to require any credit contract to expressly advise the debtor of any unjust transactions and unconscionable interest in other charges, as well as their rights in relation to those charges and the contract. This is another important principle of transparency which will empower consumers to enter into loans having their rights clearly spelled out.

Finally, this bill requires lenders mortgage insurance contracts to be terminated when the mortgage itself is terminated, and for a fair proportion of any rebates paid to be returned to the debtor upon termination. It does this by amending the National Credit Code to require the mortgage lender to return an actuarially fair proportion of the lenders mortgage insurance to the debtor and, in turn, to recover that amount from the provider of the lenders mortgage insurance. Lenders mortgage insurance can be a substantial and little understood burden for consumers and as such is often a secondary consideration to the terms of the mortgage itself when consumers decide whether or not to terminate or switch their mortgages. The provisions of this bill will allow consumers to have returned to them a fair proportion of lenders mortgage insurance, which will again have the upshot of removing barriers to switching and considerably removing competition in the mortgage market.

Opposition members interjecting

Mr BANDT: Despite the interjections that are coming from the opposition, I am pleased to say that these four initiatives offering a better deal for consumers have already been given indicative support by government and opposition MPs alike. The Senate Economics References Committee, in the opposition's majority report, conducted an extensive inquiry into competition within the Australian banking sector in 2010-11 and presented its report presented in May of this year. The four initiatives contained in this bill are entirely consistent with the recommendation of those four coalition senators, two Labor senators and Senator Xenophon. I now look forward to their colleagues in this House not only embracing the concepts recommended by their party colleagues in the other place but also having the will to implement them quickly and fully in legislation in the interests of getting a better deal for their constituents.

We have made some progress in the two years since the Greens first proposed to remove mortgage exit fees and scrap $2 ATM fees. The government has agreed to the exit fee ban and established a review of what can be done with ATM fees. We await the results of that review and hope and expect that it includes the removal of fees for on-screen balance inquiries as well. The Fraser review has now reported and makes a strong case for the bill I have put before the House today. I am hopeful that the government's acceptance of the Fraser review recommendations and this bill can form the basis of a discussion between the Greens, the government and others in this parliament on putting in place these important reforms. We will also continue to push for a commitment from this government to move to a system of portable account numbers in the medium term.

Unfortunately, it seems the government is not ready to do what is needed for lenders mortgage insurance. More information in this area is not enough, so we will be pursuing the measures outlined in this bill. Again, we are yet to hear where the government stands on term deposits and ensuring that customers are able to get the best deal when rolling over deposits at the end of the term. There is still much work to be done when it comes to banking reform. We are committed to reining in the excessive profits of the big banks, improving competition and getting a better deal for customers and small businesses. That is what this bill does and it is what we continue to work for. I commend the bill to the House.

Bill read a first time.

The DEPUTY SPEAKER ( Mr S Sidebottom ) (11:14): In accordance with standing order 41, the second reading will be made an order of the day for the next sitting.