Craig Thomson (Dobell, Australian Labor Party) Share this | Hansard source

On behalf of the Standing Committee on Economics I present the committee's report entitled Advisory report on the National Consumer Credit Protection Amendment (Home Loans and Credit Cards) Bill 2011 together with the minutes of the proceedings.

Ordered that the report be made a parlia­mentary paper.

by leave—I am very pleased because this is a unanimous report of the committee, which these days is quite a rare event but one that is worth noting and celebrating, almost, in terms of the way in which this parliament has worked, where we have tended to see anything that we put up being opposed just for the sake of opposition. I need to place on record my thanks to all the committee for working so constructively together to come up with this unanimous report.

The National Consumer Credit Protection Amendment (Home Loans and Credit Cards) Bill 2011 makes a number of reforms to lenders' practices for home loans and credit cards. For example, it requires lenders to publish key-facts sheets for both of these products, which will make it easier for consumers to compare products. Additional reforms for credit cards are: preventing lenders from sending unsolicited credit-limit-increase offers to individuals unless they elect to receive them; preventing lenders from charging fees where a consumer goes over their credit limit, unless the consumer elects to be able to go over their credit limit; and, requiring lenders to pay off consumers' debt with the highest interest, unless the consumer elects otherwise.

The most important reform concerns unsolicited credit-limit-increase offers to individuals. The committee heard consistent evidence during the inquiry that the aggressive marketing by banks of limit increases was a key reason why some consumers have credit problems. Credit cards have a number of unique features, two of which are high interest rates and the fact that consumers are only required to pay a very small amount each month. Aggressive marketing by the banks appears to be designed to put consumers at the limits of their credit capacity, whereupon the unique features of credit cards mean that individuals concerned are paying interest with little capacity to reduce the principal. While the debt treadmill may be good for bank profits, it has significant social costs, and this is why the committee supports the bill.

The committee also supports the bill because it will increase competition in the market and make consumers better off. Therefore, while there will probably be transition costs for lenders, the extra compliance should have no impact on prices for consumers, due to increased competition. Costs for lenders should be further reduced because many have already voluntarily adopted some of these reforms.

In addition to recommending the bill's passage, the committee is also recom­mending that the commencement date for the fact sheets for home loans be set back from 1 September 2011 to 1 January 2012. This is because the industry has consistently stated that they need more time to prepare their systems, and Treasury has agreed that in this case more time is needed. The industry has also stated that the end of the year is a busy period, so the committee believes that ASIC should be practical in how it enforces home loan fact sheets in those early weeks of January.

I would like to thank those organisations that assisted the committee during the inquiry through submissions or by participating in the hearing in Canberra. I have already thanked my colleagues on the committee for being able to reach a unanimous position in their contributions. I would particularly like to thank the staff of the secretariat. We are finding that in this parliament we are getting two or three bills referred to committee weekly, and the secretariat have gone above and beyond in their efforts to make sure that we can get our reports out, that they can be presented to parliament and that the business of parliament can continue to operate.

I will use this time to say that we need to be looking at the resources given to these committees, because quite frankly the workload in this parliament, compared to the last, is light years different. If we want this parliament to continue to function in an efficient manner we need to make sure that resources are given to the committee. I again thank the secretariat for the great work they did and the long hours they worked. They should be commended and I am very happy to put that on the record.

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