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Tuesday, 21 June 2011
Page: 6704

Mr STEPHEN JONES (Throsby) (17:38): Never has there been so much negative carping in the process of saying yes. The National Consumer Credit Protection Amendment (Home Loans and Credit Cards) Bill 2011 is good legislation. This legislation is definitely in the interests of the working people that I represent in the electorate of Throsby, and I would like to take a few moments to explain why. I will start by going to the evidence that was presented to the House of Representatives Standing Committee on Economics—a committee which I sit on. This evidence, given by Ms Karen Cox, the coordinator of the Consumer Credit Legal Centre, outlines why some of the measures in this bill are necessary.

In evidence before the committee, Ms Cox said:

… there is no doubt that credit cards are an enormous cause of pressure on families, and we have seen countless examples over the years of people on very low incomes who have accepted a series of credit limit increases.

She went on to explain that there was indeed a problem, particularly with people on modest incomes who have had considerable credit card debts, and that it was those debts that were leading to financial stress.

This evidence certainly aligns with some of the stories that I have heard in my electorate—even as late as last weekend, when I had the great pleasure of visiting the offices of the St Vincent de Paul Society in Oak Flats in my electorate. I spoke there with one of the managers, Ms Linda O'Rourke. In the process of speaking to her about the $500,000-plus that the Commonwealth government has provided to St Vincent de Paul in Oak Flats to assist with emergency services grants, we had a discussion about the importance of financial literacy. Ms O'Rourke impressed upon me that there was indeed a great need for improved financial literacy amongst the working people in our electorate, particularly those who from time to time have to avail themselves of the services of St Vincent de Paul because they have maxed out their credit cards, they have found themselves in financial stress and they need assistance to pay the bills or to put some food on the table.

This legislation is good legislation. It is good legislation for everyone who has ever walked out to their letterbox and found it chocker-block full of direct marketing mail from a credit card company, offering them an increase in their credit limit. It is good news for consumers, owners of credit cards, who on a week-to-week or monthly basis put additional money on their credit card thinking that in doing so they were going to reduce their interest payments, only to find that the money had not been allocated to the highest interest bearing portion of their loan and that they had been whacked with an interest payment much higher than they had expected. It is good news for the consumers out there who are concerned that they can get all the marketing information that they could ever imagine from banks and financial institutions but not the sort of concrete information which enables them to get a real handle on the cost of the loan and how it compares with that from another institution. So it is good legislation, and it should enjoy the support of all members in this place.

Let us go to a few of the features which address the problems that I have outlined. The first is the home loan key facts sheet. The bill will introduce a requirement for lenders to give borrowers a simple one-page key facts sheet—revolutionary stuff, Mr Deputy Speaker. You have to wonder why this is not happening right now, but it is not. There is a one-page key facts sheet for home loans and for credit cards to enable people to assess the full cost of the loan, to compare it in standard form to those of other financial institutions and to shop around and get a better deal. The aim of this measure is to ensure that, when a potential home borrower is applying for a mortgage, it is easier for them to compare what each lender is offering them. It is very difficult to see why any fair-minded person would oppose such a measure. Indeed, as I have said, it is nothing more than militant good sense. We also believe that the transparency and the uniformity provided in these key facts sheets are going to encourage greater competition between financial institutions because the consumers will be able to compare like with like.

The second component that I would like to talk about in relation to this legislation goes to credit card repayments. This bill delivers on the Gillard government's election commitment to crack down on unfair treatment of Australians with credit cards and to help them get a better deal in the banking system. The bill will give credit card holders more control over the amount that they borrow and will also ensure that they are not charged excessive fees. It will do this by regulating the circumstances in which borrowers can go over their credit limits and abolishing fees when they do so unless the consumer has consented to opt in to a system which extends their credit in this circumstance.

This bill will also mean that credit card providers will be required to allocate repayments—and this is critical—to the higher interest bearing debts first so that families will not need to pay more interest than they otherwise should. Currently consumers do not have any control at all over how their repayments are allocated, meaning that lenders will often use repayments to pay off the part of a loan that is only incurring low or indeed no interest at all. So it is good legislation and it enjoys the support of the House.

This bill will ban unsolicited credit limit extension invitations that encourage borrowers to increase their credit limit. These unsolicited offers of additional credit can result in consumers ending up with high credit limits and often high levels of debt. We know that interest charges on credit cards are quite high. They are good money spinners. I do not take anything away from the financial institutions that offer these products. They are a critical service in our economy. But we believe that where credit is offered it should offered responsibly. That should include the offering of additional credit or the raising of credit extensions.

Another measure in this bill will require application forms for credit cards to include a key facts sheet that clearly provides information about the credit card, including the interest rate on purchases, cash advances, the annual fee and any other relevant fee or charge. Again, this measure is quite simply about increasing transparency and empowering consumers. So it is difficult to see how many of those on the opposite side of the chamber could find a reason to criticise this particular initiative. You have got to wonder why this is not already happening as a matter of good commercial practice.

Let's talk about overlimit fees. It is not hard to exceed your credit limit, and indeed this can often happen inadvertently. In most cases, credit card providers allow accounts to go over the credit limit and then apply a fee for exceeding this limit. The measures in this bill will limit the amount by which the credit limit can be exceeded to 10 per cent above the credit limit at the discretion of the lender. The fee for exceeding the credit limit will be abolished. To ensure that there are no unintended consequences from this measure, consumers can decide to opt out of this default buffer if it helps them to manage their finances better, or they can ask for a larger buffer if that is best for their individual circumstances.

These measures go some way to put in place some sensible regulation on consumer credit in this country. In closing I make the observation that, unlike many of the financial systems around the world, our banks and our financial institutions are incredibly well managed and incredibly well regulated. It is the fact that successive governments in this country have put in place sensible regulation of our financial institutions that has ensured that, unlike in many other countries in our region and around the globe, we did not see the failure of our financial institutions as the world went through the global financial crisis. That does not mean that we should rest on our laurels or that we should not be continuing to review and improve the operation of our banking and financial institutions. The measures in this legislation are a modest addition to that ongoing review and improvement. I commend the legislation to the House.

Debate adjourned.