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Monday, 26 October 2009
Page: 7103


Senator BOB BROWN (Leader of the Australian Greens) (8:24 PM) —The Greens support and welcome the National Consumer Credit Protection Bill 2009, the National Consumer Credit Protection (Fees) Bill 2009 and the National Consumer Credit Protection (Transitional and Consequential Provisions) Bill 2009. The global financial crisis has shown us the danger of uncontrolled and over-exuberant credit provisions. Before the crisis, increasing amounts of credit were sold by banks, non-bank lenders, credit cards, in-store retail credit providers and the so-called fringe lenders such as pay-day loan providers, as Senator Coonan was pointing out. Data from the Reserve Bank of Australia indicates that we have become a nation of debtors and there has been a massive increase in debt over the last nine years. Mortgages have increased from around $200 billion in 2000 to just over $1 trillion of debt today. Personal debt has almost doubled, from around $70 billion to just over $134 billion today, including about $35 billion in credit card debt.

A well-functioning credit market is a useful and necessary tool for our communities to thrive and develop. For example, it gives access to funds to allow people to purchase their own homes. But credit should not become an unmanageable burden, particularly when the debt is the result of aggressively marketed credit that is sold to vulnerable or misinformed consumers. There is a large and growing number of examples of where credit providers have used increasingly exploitative behaviour to push credit contracts. Of course one only has to watch commercial television at night to see how widespread and how compelling this behaviour is. It is also the case that where people fall into misfortune or experience hardship, such as unexpectedly losing their jobs or becoming ill, credit can turn from being a manageable part of their day-to-day personal finances into an insurmountable and life-ruining burden.

While the decision to enter into debt is a personal one, the government has a role in ensuring that consumers are well informed about credit products and are not exploited by unscrupulous credit providers or brokers—and that, if hardship occurs, processes are in place to manage the situation in a constructive way for both the consumer and the credit provider. Of course I am not entering here into a much-needed debate about the push for consumerism itself.

The National Consumer Credit Protection Bill 2009 is long-overdue reform to develop a national standard for the conduct of the credit industry. It is a strong foundation for a good regime. We recognise that this is part of an ongoing process of credit reform and that the government plans a second round in 2010. The Greens believe the government should strengthen the bill to provide greater protection for consumers now, particularly those experiencing or at risk of experiencing financial hardship. In that regard this bill could be strengthened in three ways. The first way is by ensuring that credit sold in conjunction with retail items in department and other retail stores is covered by the terms of the code. The government has provided a 12-month exclusion for credit that is sold in conjunction with retail sales of cars, domestic household items and store credit cards. The retail industry argued that sales assistance work is clerical in nature and it is unreasonable to expect sales staff to have the same training requirements and legal responsibilities as professional credit intermediaries such as brokers—if you do not mind! So no training requirement or cost will be entered into there by some of the big chains.

However, during the Senate inquiry into these bills, it was pointed out that the so-called point of credit provision is now offered in roughly 20,000 retail outlets. Up to 50 per cent of sales in the household white goods and department store sector is reliant on this concurrent sale of credit. In fact industry sources recognise that many retailers are reliant for their survival on the sale of this credit. Might I add there that I find it quite appalling the way in which big chains push on people who do not have an ability to consider the long term as much as the short term the provision of apparently no-credit purchasing for one, two or three years. Of course the big whammy comes down the line when they not only have to pay the money back but have to pay interest at exorbitant rates. My view is that that practice should not be allowed, and this legislation comes nowhere near to preventing that sort of pushing of debt onto householders in Australia—in particular, householders who cannot discriminate between their ability to pay in the short term and their continuing inability, and sometimes even greater inability, to pay two or three years down the line.

A second way in which the bill should be strengthened is through better hardship provisions. Orderly and transparent processes to deal with situations of financial hardship are a critical component of helping people to help or in some cases save themselves. Hardship provisions help people avoid declaring bankruptcy and the negative consequences of that for both the debtor and the creditor. The increase in thresholds for consumers to access hardship provisions, from a limit of $315,000 to half a million dollars, is a positive reform for consumers, but we are concerned that the new threshold will not apply to existing credit contracts. That leaves a substantial portion of people currently in financial mortgage distress without recourse to hardship remedies.

For example, a recent study by debt collection and credit reporting agency Dun and Bradstreet found that 33 per cent of postcodes had fallen into the high-risk category of financial distress, and that was up 30 per cent on October last year. On 30 August the Sunday Telegraph reported that various banks had extended hardship assistance to over 55,000 borrowers, with 31,000 applications having been received since February this year. The Consumer Credit Legal Centre and Legal Aid in New South Wales have reported that they have commenced a duty roster at the Supreme Court of New South Wales in response to a request from the court because of the record number of home repossession applications being made to that court.

We acknowledge that the government will seek to make amendments to this bill, but we believe these are not adequate because they effectively retain the two-tiered system that was the problem with the original bill—a hardship system for mortgages entered into before the passage of this bill and a system for those mortgages which will be agreed later.

Thirdly, we recommend that there be improved access to financial legal advice. We welcome the development of a comprehensive remedies and sanctions regime under this bill. Improvements to consumer credit protection will mean little if consumers are not empowered to enforce those rights and credit licensees are not held accountable for their actions. In particular, we welcome the concerted effort within the code to ensure that consumers have access to low-cost forms of remedies such as external dispute resolution mechanisms which can help avoid recourse to the costly and time-consuming court system. But the code remains silent on the issue of support for tailored, individual legal advice for consumers who are seeking redress for breaches. That is particularly the case for consumers experiencing financial hardship and who are often vulnerable for other reasons such as unexpected illness.

The government has moved to provide additional funding for financial counsellors over the past year, and we welcome that. However, additional assistance has not been forthcoming to support legal assistance with financial issues. Evidence from the community legal sector, such as from the National Association of Community Legal Centres, has indicated that there is a large unmet need for the provision of legal assistance, particularly in relation to credit advice.

To sum up, the Greens welcome these long-overdue reforms from the Rudd government and we look forward to the implementation of the National Credit Code, which will lead to credit consumers being better informed about their choices and to an end to at least some of the exploitative practices we have seen in the past. We believe that the bill could be further strengthened in the best interests of the consumer and credit industry. We look forward to the further promised legislation from the government in coming months and we will have added input and, if necessary, amendments at that time.