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Monday, 26 October 2009
Page: 7106

Senator HURLEY (8:34 PM) —The National Consumer Credit Protection Bill 2009 and the related bills will provide a single, standard and uniform regime for consumer credit regulation and oversight. They will replace the current state based consumer credit arrangements, and I believe that will reduce duplication, red tape and compliance costs while increasing consumer protection against irresponsible lending practices and also improve access to timely and affordable dispute resolution processes. The current state laws are roughly aligned but are inconsistent enough to cause compliance problems, particularly for companies that have national operations. Therefore, I think that this will streamline the processes for most companies after the initial introduction period and will reduce the amount of paperwork and red tape that most companies currently encounter.

I am the Chair of the Senate Economics Legislation Committee, which inquired into these bills, and we had a very high standard of submission to this inquiry from businesses and from consumer groups. There was quite some discussion, which Senator Bob Brown has referred to, about the point-of-sale retailers and their involvement in this process. But stores where retail employees are involved with the provision of credit are a small proportion of those retailers that provide credit in store. In fact, what happens in most cases, we were told, is that the sales assistant refers the customer to a credit provider who works in store and the employees of that credit provider will be subject to the provisions of these bills. So in my view there was no harm in having a 12-month delay to assess in what way retail employees were involved in the process so as to give the best protection for consumers while not burdening retailers and retail employees with unnecessary regulation and training. So I commend the government for allowing 12 months for further consultation on this.

The responsible lending requirements were also considerably canvassed. It is very important that people are not pushed to take up credit that they have no hope of repaying. There are a number of unscrupulous credit providers who, for their own reasons, will push credit on people who do not have the means to repay it; they might be in debt on their credit card or in debt to a number of other people. It is critically important to consumers that they get good information and that they are properly assessed for the loan which the provider is recommending to them. I do not think there was any disagreement about that or about the need for proper consumer protection. There are a number of ways in which that is done in this bill.

I will not go through the bill—others have already done that—but I will talk a bit about the major recommendations of the Senate Economics Legislation Committee. The committee acknowledged concerns about the timing of the implementation of the reforms, which were originally targeted for January 2010. We were concerned that this left many small lenders, and possibly some state governments, inadequate time to transition to the new arrangement. The committee therefore recommended a deferral to 1 July 2010 to allow sufficient time for industry to prepare and to ensure that state parliaments could facilitate the necessary referrals. However, the committee strongly noted that the responsible lending provisions outlined in the bills should still operate from their planned start date of 1 January 2011 and not be delayed. This will enable improved consumer protection as quickly as possible.

There was also a recommendation about the exemption of current holders of Australian financial services licences from meeting many of the standards required under the Australian credit licence, which is set up under this bill. That was simply because those AFSLs cover much of the same ground.

There was also a recommendation to amend clause 128 of the National Consumer Credit Protection Bill so that, where the contract involves a mortgage over a residential property, the credit provider should only be required to reassess the suitability of the credit contract if an assessment has not been undertaken within 90 days of the contract being written and if the credit provider has reason to believe that the situation of the consumer has changed such that the credit contract may no longer be suitable. This was to address the situation in which someone applies for a mortgage and then, for whatever reason, it takes longer than the 90 days. We did not want the consumer to have to pay for another assessment.

Linked to this was a broker assessment. Clause 130(3) of the main bill stated that, if a preliminary assessment had been made by a credit assistant, such as a mortgage broker, in the preceding 90 days and the credit contract was found not to be suitable, the credit provider was not required to verify the consumer’s financial situation. We had very strong evidence from consumer groups that having that broker intermediary might provide an excuse for the credit provider not to do a proper assessment and tie up any remedy in the courts, so we recommended that that clause be removed.

There were other recommendations about remedy for loss and that there be no loss of access to the small claims court. Also, the committee noted concerns that, despite improving access to hardship applications for consumers, lenders were not required to state a reason for the rejection of applications under the current legislation. The committee recommended that the lender be required to notify, in writing, the reasons for the rejection of the hardship application, on the grounds that this would assist the borrower to know where they might go next time or what steps they might take, particularly if they wished to seek redress through the court system.

The government accepted those recommendations and we commend the government for addressing those concerns. The package is now, I think, a historic reform that will simplify and clarify consumer credit regulation into a uniform national regime, while also strengthening protections for consumers to prevent irresponsible lending practices and implementing tough sanctions on predatory lenders.

This is a complex and detailed reform, and I commend the government on undertaking a lengthy and thorough consultation process and for its phased approach to implementation. I thank the other committee members, the committee secretariat and all the submitters for their assistance in this process.