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Tuesday, 5 December 2017
Page: 9753


Senator WILLIAMS (New South WalesNationals Whip in the Senate) (18:52): I will be brief. I'm not going to speak for 20 minutes. In relation to what has been put forward, I totally support the formation of AFCA. I say to everyone who comes into my office, if they've got a dispute with a bank, a credit union—which is very rare, of course—or a financial planner: stay out of court. Why stay out of court? If you get into the commercial division you might have your case heard in two years.

Senator Dodson interjecting

Senator WILLIAMS: That's the fast lane, Senator Dodson—a two-year court case. It'll probably cost you $300,000, $400,000, $500,000. You'll wait six to 12 months for a decision of the court, and then you'll face an appeal, which will be another couple of years. A dispute with a bank or a financial institution could end up being five years in the courtroom and a lot of stress, a huge amount of cost, a lot of worry, a lot of pressure on families et cetera. So my advice to everyone is always: stay out of the courtrooms. I think the only sure winners in a court case are the solicitors involved.

This legislation enables the Australian Financial Complaints Authority to be established from 1 July next year. I know that's not far off. We've just completed an inquiry into lending to primary industries—to farmers—which will report very soon. The problem is that you need somewhere to seek justice when you don't have any money. Even if you think you've been hard done by and you think you have a strong case, you can't go to court. It's really David and Goliath stuff if you think you're going to go to the courtroom on your own and fight the best solicitors, barristers and QCs. The playing field is just not level. However, AFCA establishes that level playing field as a one-stop shop where people can seek justice when they do not have money. Now, people might take a claim: they might be in small business and the bank has sold them up. They might think they've been treated very unfairly and they put a case to AFCA. AFCA might rule: 'Look, yours is a silly, vexatious claim. You have no claim. Don't come back to us.' Or they might say: 'You have a strong argument. We'd encourage the bank to have a mediation with you.' If that doesn't work they might say, 'We are going to make a decision and that decision is binding.' They can award up to $1 million for small business, and small business and farmers who have loans of up to $5 million can go to AFCA. At the moment, it is limited to $2 million for the Financial Ombudsman Service with a limit of $309,000 compensation, from memory. So it widens the scope and gives us a one-stop shop.

Earlier this year, the Carnell report recommended the establishment of an industry-funded, external-dispute-resolution network, which is a one-stop shop to hear disputes related to credit facilities of up to $5 million. Kate Carnell reviewed a number of cases that came before the parliamentary inquiry into the impairment of loans, which I was involved in on the committee. Ms Carnell said that about one-third of these cases were simply poor business decisions where the banks appear to have acted reasonably, a third were a mixture of poor business decisions and poor bank practice, and about a third were very real issues where the bank conduct is unacceptable and possibly unconscionable.

From that report came a recommendation that the banking industry must fund an external dispute-resolution one-stop shop, a dedicated small business unit that has appropriate expertise to resolve disputes relating to a credit facility of up to $5 million. Senators Whish-Wilson and Cameron made points about superannuation and the SCT. Surely if you are going to have the AFCA, the people involved in it, the people investigating the claims and the complaints, are going to be hugely experienced in that field of superannuation. Then you might have people in the specialist fields of financial planning and financial advice where you can take a complaint, then in investments, where you might think you have been dudded with a bank or financial institution, and then in lending. So a broad centre that can handle all complaints is essential. As I said, in a specialist field you've got to actually have specialist people to review the complaint and make a decision or recommendation.

The 2016 report Parliamentary Joint Committee on Corporations and Financial Services: Impairment of Customer Loans said:

The committee has no powers to investigate or resolve individual disputes, however the committee has used the cases presented to it to understand the practices of banks and makes the following observations:

for many failed loans under the 2008 Bankwest commercial loan book, it appears likely that problems arose from irresponsible lending prior to the acquisition of Bankwest by the Commonwealth Bank;

How true that was. However:

for many failed loans with other banks it is also likely that irresponsible lending was the primary or significant cause of loan failure; and

there may be some individual cases for which there are legitimate disputes with banks.

The main allegations raised by submitters and witnesses from the inquiry were the use of non-monetary defaults, including loan-to-value ratios. Philip Ruddock, a very respected person, had many, many years in the House—I think about 41 years. He led this inquiry. He basically pushed it. The report continued with:

charging excessive fees, default interest and penalty interest;

insufficient notice periods for decisions not to roll over term loans leading to difficulty in refinancing loans;

These are just some of the things. Surely, if the bank has lent money to a customer and they are in financial trouble and the bank wants to get them off the books, at least give them some time to renegotiate a loan with another institution. You can't get a loan overnight, especially if you're talking about the upper end of loan-to-value ratios et cetera.

I hope politics doesn't get involved in this because, as I said, my advice to everyone always is to stay out of the courtrooms. I hope this goes ahead. I'm very glad we've got the royal commission. Senator Whish-Wilson knew exactly where I stood on this before he even came to this place. It will do its job. The point is with AFCA, it should take a lot of relief off the court system. I have a friend, John Viscariello, who had a horrible time through the court system in South Australia. He is still waiting for his appeal case. The case was heard years ago—it was a long time back—and the decision hasn't been handed down. We'll leave it to the judges to make that decision. The courts seem to be very clogged up throughout the states, especially in South Australia. This should relieve a lot of pressure from the court system and hopefully take some costs off the state governments running their court systems. It should give that facility the one-stop shop where people can seek justice if they think they've been hard done by. It's not a place to go looking for compensation from vexatious and stupid claims. The people there, no doubt, will have expertise in their various fields. I think it's a good thing for all Australians.

Let's be fair dinkum: if the institutions do the right thing, then in a couple of years time AFCA won't have work to do. There won't be complaints. Perhaps that's a bit of wishful thinking. There will always be some complaints in the financial world, but, hopefully as the culture changes in the financial sector and the banking sector, we will see fewer and fewer disputes in the future. We will see that things are done right and that people are treated fairly. With a bit of luck AFCA might not have a big workload in years to come. It is essential that we have this one-stop shop somewhere—I repeat for the third time—where people can seek justice without having to be a multimillionaire.

In one case I remember a liquidator we dealt with who went to jail for three years. He was a rogue liquidator. He was liquidating a company and the company took him to court. It cost the company $1.8 million to have that liquidator removed. Those changes have been in place from September last year. That won't have to happen again, hopefully.

I hope the parliament supports this. Sure, for anything like this, there will be teething problems. You never get it perfect first up. We spend a lot of time in this place correcting legislation, even from the Howard government and from the Rudd government et cetera, where things don't work out as planned. There's going to be some fine-tuning and some modification, but let's get it underway so that people, come 1 July next year, can seek that justice and get a good, binding decision, hopefully, in a quick period of time without huge costs.