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Monday, 26 October 2009
Page: 7109


Senator PRATT (8:50 PM) —Tonight I rise to speak on the National Consumer Credit Protection Bill 2009 and related bills. This bill is the first phase in the Rudd government’s reforms to create a new uniform national regulatory framework for credit and credit related services. In these troubled economic times, it is vital that Australia has a well-regulated credit market. These reforms will enhance the stability of our financial sector by bolstering confidence in the integrity of the Australian credit market. They will also ensure that Australians are protected from unscrupulous lending practices and will enable more Australians to get help when they struggle to meet credit repayments. The bill will enact a new and enhanced national credit code. It will impose responsible lending obligations on Australian consumer credit providers. It will introduce a rigorous tiered sanctions regime to discourage misconduct by credit providers. It will provide a new tiered dispute resolution system for consumer credit issues, and it will establish a national licensing regime for credit providers.

Future reforms in this area include credit limit extensions, reverse mortgages and small business and investment loans that are going to form phase 2 of this package. Consumer protection, importantly, will be enhanced in the new code. For example, it will substantially increase the threshold under which consumers can access hardship provisions. Access to hardship provisions is of particular importance to working families in these difficult economic times. They allow consumers to request changes to their credit contracts or a postponement of enforcement proceedings based on financial hardship if their loan is under a specified threshold. Under the new code this threshold will be substantially increased to $500,000. The government recognises that the current threshold is simply too low. Given the average metropolitan mortgage and credit debts, the existing threshold effectively excludes many homeowners in capital cities where property prices are high. The high threshold is critical to ensure that ordinary Australian families do not miss out on financial relief when they need it most. Better access to hardship provisions can help families to keep their homes in these times of economic uncertainty.

The new threshold has been welcomed by consumer advocacy groups because it will cover a larger proportion of people on average incomes. The changes will ease the pain of households hit by the current economic downturn. It will enable households to legally request changes to the terms of credit contracts, including those governing credit cards, car loans, in-store credit cards and mortgages. The relief requested may take the form of an extension in the loan period that reduces regular repayments, a repayment holiday or a postponement of enforcement proceedings. Importantly, if a credit provider refuses a request for relief the consumer can seek further assistance from the Financial Ombudsman Service. These dispute resolution procedures are available at no cost to the consumer. These new laws will provide an avenue of relief for those who lose their jobs through no fault of their own, as well as those who face financial difficulties due to sickness or other unforeseen circumstances.

The bill will also establish for the first time a comprehensive national licensing regime for people engaging in credit activities. To date, licensing arrangements have varied markedly between states and territories. Some jurisdictions have not required all providers to be registered and in many instances registration has been little more than a formality. In contrast, my home state of Western Australia already has a rigorous licensing regime in place, involving the proper assessment of applicants and regular audits to ensure compliance. The effectiveness of the Western Australian licensing regime was acknowledged by the National Financial Services Federation at the hearings of the Senate Standing Committee on Economics on this bill. I am pleased that the Rudd government has recognised that credit brokers who hold an A or B class licence in WA already satisfy the requirements for entry into the new national system and has provided a streamlined application process for these WA brokers.

Australia has weathered the recent global financial crisis remarkably well. Effective regulation of our financial sector has contributed to this favourable outcome, but we cannot afford to be complacent. Consumer advocates have long argued that the existing systems of credit regulation are insufficient, and they should be commended for their cogent and consistent advocacy of reform in this area. The recent crisis reminds us of the need to heed their warnings. We need to be ever vigilant in this regard. We must continue to set the world’s best practice standards in the regulation of credit markets and this is exactly what this bill is designed to do. We must also continue to protect consumers from unscrupulous lending practices. And we must ensure that ordinary Australians have legally sanctioned avenues that enable them to seek relief when they struggle to meet repayments, especially in difficult economic times. Whether it is bank fees, credit practices, unfair contracts, product labelling, unit pricing or any of the other consumer protection measures that this government has pursued, we know how critical it is for ordinary Australians that we set best practice standards in these areas of law.

People often take their rights for granted and assume that things will always work out as they should. They do not expect to be treated badly. It is only when something goes wrong that we realise how important these areas of law are. The unscrupulous few can make life difficult for the majority of both consumers and businesses who do the right thing as a matter of course. Keeping standards high benefits all those who want a fair go for both consumers and businesses. It makes sure our consumer markets are both stable and competitive and it ensures that those who are treated unfairly have ready access to avenues of redress. As this bill and other bills that have come into this place demonstrate, the Rudd government is 100 per cent committed to defending the interests of consumers and reputable businesses. I commend the bill to the Senate.