Joe Hockey (North Sydney, Liberal Party, Shadow Treasurer) Share this | Hansard source

I rise to speak on the Consumer Credit and Corporations Legislation Amendment (Enhancements) Bill 2011. This bill has sat before the House of Representatives for nine months, since 21 September last year. The government has finally seen the light and decided to amend the bill at the last minute, with—as I understand it—70 amendments to be tabled this morning, but which have still not been circulated. These amendments will be considered by the House when it comes to consideration in detail. It would be helpful if the 70 amendments were circulated to the House for the purposes of the second reading speech and debate, because even though the coalition does have the amendments, other members should have the opportunity to change their second reading speeches in accordance with the massive number of amendments to be circulated.

For many in the sector, particularly small businesses, the past nine months has been a period of uncertainty. Businesses in the payday lending sector have been unsure whether to prepare to implement the measures or to weigh a compromise solution which is now proposed by the government. The government can hardly claim to have been caught unawares by the reaction. The coalition have long outlined serious issues with particular aspects of this bill, in particular the changes contained in schedules 3 and 4 of the bill relating to small amount credit contracts. The coalition issues constituted such concern that the bill was referred to both the Senate Economics Legislation Committee and the Parliamentary Joint Committee on Corporations and Financial Services on 22 September last year. The report of the Senate Economics Legislation Committee was released on 7 December 2011 and the report of the Parliamentary Joint Committee on Corporations and Financial Services was released on 7 February 2012. Both the report of the Senate Economics Legislation Committee and the report of the Parliamentary Joint Committee on Corporations and Financial Services address substantial issues within this bill and include a recommendation that the government revisit schedules 3 and 4 and associated provisions. The coalition is pleased to see that this has occurred, although it has been with an undue and unwarranted delay of nine months since the bill was introduced and around four months since the last committee reported. But now there is all of a sudden a rush to get this legislation through. Not surprisingly, yet again the government just cannot get the contents of their own bill right in the first place.

The coalition fully endorses the unanimous recommendation 2.1 of the Senate Economics Legislation Committee:

… that the government review the measures proposed in Schedules 3 and 4 of the bill. This review must re-engage with stakeholders to:

The coalition also endorses the unanimous recommendation 12 made by the PJC:

… that the Government revisit the measures proposed in Schedules 3 and 4 of the Enhancements Bill. Further consultation with stakeholders should be undertaken to address the concerns identified throughout the inquiry and to develop measures that will ensure cohesive and consistent national consumer credit legislation and an appropriate balance between consumer protection and industry viability.

We are pleased that the Labor government has finally woken up to these recommendations.

Of course, the bill does not just address payday lending. Some of the other measures in this bill are very worth while. The changes to voting at annual general meetings of public companies, contained in schedule 7 of the bill, were recently passed as a separate bill—the Corporations Amendment (Proxy Voting) Bill 2012—and we welcomed that initiative by the government. The changes to the National Consumer Credit Protection Act 2009 provide for new requirements for reverse mortgages, including a statutory protection against negative equity and improved disclosure requirements. There are also changes to the terms for payday loans and other small-amount credit providers. These include caps on the maximum amount credit providers can charge and restrictions in some circumstances on multiple borrowings and small-amount contracts. There are also some new disclosure requirements. The bill also provides for changes to give greater regulatory consistency between consumer leases and credit contracts by extending the existing protections available for credit contracts to consumer leases and it makes changes to make it easier for debtors to seek a variation of the repayments under their contract due to financial hardship.

The amendments to the National Consumer Credit Protection Act relating to reverse mortgages are sensible initiatives. Consumers deserve more information about reverse mortgages and the potential risk they carry. The introduction of protection against negative equity is intended to prevent a situation where the value of the accumulated debt and interest rates exceeds the market value of the dwelling. This would result in a situation where the owner's equity in the dwelling was completely wiped out. This could occur where a reverse mortgage plus compounding interest was allowed to accumulate over a long period of time or where the market value of a dwelling declined. This would not be in the interests of the owner and would not be in the interests of the lender. The mechanism by which this is achieved is that, if the exit from a reverse mortgage results in the payment of a sum that is greater than the market value of the dwelling, then the credit provider must pay the excess to the debtor.

The more detailed disclosure requirements for reverse mortgages are, in our view, also sensible. These include providing intending mortgagees with projections that relate to the value of the dwelling or land that may become the reverse mortgage property and the consumer's indebtedness. They also include the provision of a reverse mortgage information statement. The regulations may regulate or prohibit the entry by a credit provider into a credit contract for a reverse mortgage if the debtor has not obtained legal advice.

The provisions of the National Consumer Credit Protection Act relating to small-amount credit contracts, or payday lending, are more problematic, because they may restrict access to a legitimate form of finance for many Australians. These provisions cover loans such as those provided by companies like Cash Converters. Both parliamentary committees' inquiries into the bill unanimously recommended that the government revisit the measures proposed in schedules 3 and 4 of the bill. I am pleased that the government will be moving amendments to schedules 3 and 4 and the related measures, although the proposed amendments are yet to appear.

I have been actively involved with my colleague Senator Cormann in the issue of payday lending. In my case, it goes back to my time as Minister for Financial Services and Regulation. The member for Chisholm would remember my days as Minister for Financial Services and Regulation. Back then—more than a decade ago, when I was the minister—microlending was a state responsibility. That was before we had a national consumer credit code. At the time I said:

Payday lending is part of the twilight zone of Australian finance. As such, it needs to be reformed so that Australian men and women get the full picture and don't sign up for a loan that leaves them in financial strife.

I am always wary of quoting myself—that is ultimately the grandest act of hubris, as my colleague the member for Dunkley would appreciate.

See this speech in context