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Wednesday, 22 June 2011
Page: 6875


Mr SHORTEN (MaribyrnongAssistant Treasurer and Minister for Financial Services and Superannuation) (13:09): The National Consumer Credit Protection Amendment (Home Loans and Credit Cards) Bill 2011 delivers on the government's election commitment to crack down on unfair treatment of Australians with credit cards and to help them get a better deal with their credit cards and home loans. The measures in this bill build on the government's first phase of consumer credit reforms and reflect the government's ongoing commitment to empowering consumers. I am indebted to the contributions of the many members of parliament, from all sides, who have spoken in this debate, in particular the most recent address by the member for Makin. As he highlighted, these reforms address the two most common credit products in Australia—credit cards and home loans. In relation to credit cards, the bill delivers on the government's election commitment and implements the most significant reforms in this area in 15 years. It will build on our new national responsible lending credit reforms by giving credit card holders more control over the amount they borrow.

Contrary to the claims of some in the House, these reforms did not appear mysteriously out of nowhere. We have had an extensive consultation process. My predecessor launched the green paper on 7 July 2010. Then we announced, during the 2010 election campaign, that we would implement these very reforms. Since that time, we have worked hard to consult with the banking industry to ensure these reforms were commercially workable while minimising implementation costs for industry. For example, in the lead-up to the Deputy Prime Minister's announcement of the Gillard government's comprehensive banking reform package—in the period prior, from July to December 2010—the Department of the Treasury met with the Australian Bankers' Association in no less than nine highly productive, face-to-face meetings. The government has continued to work closely with industry on implem­entation. The result is a bill that minimises the implementation costs for industry while also meeting our objective to get Australian families a better deal on credit cards.

This bill will give consumers more say over how they use their credit cards and will ensure that they are fully informed about what they are signing up to. The bill prohibits lenders from sending unsolicited invitations to borrowers to increase their credit limit. Currently, consumers who receive tick-a-box offers can end up overindebted; they can end up with credit limits for amounts they cannot easily repay and with arrangements which cost them more over the long term. Consumers will of course still have the opportunity to increase their credit limit if they decide that is what they want, but this bill will put a stop to consumers being bombarded, every time they open the mail, with preapproved tick-and-flick offers to increase their credit limit. The bill prevents lenders charging exorbitant fees to customers who go over their credit limit, unless those customers have expressly asked for this service. This important reform will mean an end to most credit limit overdraw fees and will mean significant savings for Australian families and all consumers. The bill requires lenders to allocate repayments to higher interest debts first so that families do not pay more interest than they should. A cash advance will be paid off before an interest-free purchase, saving consumers money.

In addition, we will also make regulations requiring all lenders to include clear infor­mation on monthly credit card statements warning consumers of the consequences of only making minimum repayments. Consumers will be encouraged to make higher payments rather than carrying debt at credit card interest rates. The bill also delivers on our commitment last year to introduce a compulsory key facts sheet for home loan customers. The Deputy Prime Minister announced in December that the Gillard government would take further action in three broad streams of reform—to empower consumers to get a better deal in the banking system, to support our smaller lenders so they can put more competitive pressure on the big banks and to secure the long-term safety and sustainability of the financial system so it can continue to provide reasonably priced credit to Australian households and small business.

To have a competitive banking system, consumers have to be able to walk down the street and get a better deal for the family. To do that, consumers need two things: firstly, to be rid of unfair exit fees and, secondly, to have the tools and the information to be able to compare the offerings of different lenders. That is why the introduction of the key facts sheet is so important. Families will be able to compare the cost of different home loans by putting facts sheets from different lenders side by side. They will be able to tell at a single glance the savings they could make between different home loans every year and over the life of the loan. This reform is all about forcing banks and other home loan providers to be transparent and honest with Australian families and promoting compet­ition in our banking system. Choosing the wrong loan can be expensive. Half a per cent more interest on a $250,000 loan can cost a borrower $30,000 more over 30 years. It is a very important step in empowering Australians to be able to make the best financial decisions for themselves.

I will shortly introduce some minor amendments to this bill which are the result of feedback from stakeholders. These amendments will make it easier for lenders to comply but do not in any way reduce the effectiveness of the measures we are introd­ucing. The Gillard government is changing the way banks do business and putting power back into the hands of the consumers. These reforms will help Australians with credit cards and home loans manage their debt so that every dollar of a borrower's hard-earned repayments works harder for them.

As the consumer representatives pointed out at the House of Representatives Standing Committee on Economics hearings into this bill, this is an important piece of legislation. This bill is part of our commitment to always stand on the side of consumers. I encourage all members of the House to do the same. I present a supplementary explanatory memorandum to the bill.

Question agreed to.

Bill read a second time.