Tim Hammond (Perth, Australian Labor Party, Shadow Minister for Consumer Affairs) Share this | Hansard source

It is a pleasure to speak on this bill and I will keep my comments relatively brief. I'd like to focus on the part of the bill that seeks to improve consumer protections for banking customers and credit card holders. A government bill, purporting to strengthen consumer protections for financial services for consumers, is, indeed, very welcome, although, I have to confess, a little surprising. I regret if that sounds jaded or cynical but, in my brief time in this place, I haven't seen much evidence of them really putting the rubber to the road and caring terribly much in this area before.

Let's have a look at the time line in relation to that. Firstly, we had a Senate inquiry into credit cards in 2015, which the government finally responded to in May 2016 with a commitment to progress changes to credit card reforms. In May 2016, the government then promised to bring forward draft legislation 'in the near term', although the near term in this case took until August 2017, more than 12 months. Actually, let's go to the nearest number rounding up: it was more than a year and a half after they said they would that we actually saw the ink dry on the draft legislation, and almost three years after the Senate inquiry referral. Let's put this into context, almost three years after the initial referral—we know that many of the consumer protections that are spoken about in this bill won't come into force until 2019.

I was reflecting today that this has an eerily familiar ring to it, in relation to a glacier-like level of progress, insofar as consumer protections actually go. One doesn't need to look any further than the proposed or attempted reforms, in relation to the small amount credit contracts, to see evidence of a snail's pace approach to actually getting something meaningful done to ensure that vulnerable consumers are protected. It's a very similar time line.

The small amount credit reforms or reviews, commonly known as the SACC reforms, are more frequently known in lay terms as payday lenders or rent-to-buy scheme reforms. Whilst building upon the very good work of a former Labor government, there were still, clearly, further improvements that needed to be made as a result of an industry which is fundamentally at risk of not nearly enough regulation in order to protect vulnerable consumers. To their credit, in 2015, the federal government announced a review into the small amount credit contract industry to report back to the government in March 2016, which it did. It was then another six months before—in November 2016—the government came out with its responses in relation to the small amount credit contract review. Its responses were very measured, practical and reasonable. Credit where credit is due, pardon the pun. It just so happened that the government was very content with the recommendations that were contained within the small amount credit contract review.

The reforms went to two things. What we know in relation to payday loans is that, in the financial year 2015-16, over 650,000 people in this country were given payday loans when they could barely afford them. Over two in five of those who were in receipt of payday loans or rent-to-buy schemes were also on the welfare system. There is no doubt that the worst excesses of the onerous interest-free payments and the never-ending story in relation to repayments were hurting those who could ill afford it.

The reforms suggested in the SACC review were to put a cap on the amount that could be taken out of a pay packet or a welfare cheque at any one time and put another cap on the amount they could actually borrow to make sure that these weren't some sort of tragic, never-ending stories resulting in an inevitable debt spiral. They are very sensible, measured and pragmatic approaches to reform to protect vulnerable Australians. You might ask, 'What happened then?' If it sounds too good to be true, it normally is, and this was no exception. Quite frankly, what we saw from November 2016 until almost the present day was a big, fat nothing from this government in relation to progressing these reforms. The reforms had the approval, in principle, of the advocacy groups. The reforms weren't excessive and they represented a reasonable compromise in relation to the various interests of the various stakeholders in this area.

It was left sitting on the desk of the Minister for Revenue and Financial Services for many, many months—around 12 months. There were some very concerning public comments made by her where she said that draft legislation was being prepared, only to be found out by Senator Gallagher, in the other place. According to the department, not a single word had been committed to any draft legislation throughout the course of 2016 and early 2017. What we finally saw in October 2017, under the then Minister for Small Business, Minister McCormack, was some proposed legislation. Again, the proposed legislation was measured. It was put out for consultation with a commitment that it would be introduced before the end of the year. That was not done and we still see, as every day goes by, vulnerable consumers being left in limbo as a result of being trapped in rent-to-buy schemes which have no ending or payday loans which they can ill afford. We see situations where consumers have entered into a contract to buy a fridge for the cost of $350 to keep the household running, only for it to cost them, in a rent-to-buy scheme, over $3,500, repaid over the course of many months, if not years. What we really see are vulnerable consumers being charged up to 800 per cent of the cost of a good in order to pay it off over time.

Just like the SACC reforms—and there'll be more said about those at a different time and in a different place—these consumer protection improvements for credit card holders are also important. Schedule 5 makes changes to credit card laws to improve consumer protections. The changes include tightening responsible lending obligations, prohibiting credit card providers from offering unsolicited credit limit increases, simplifying the calculation of interest charges and requiring credit card contracts to allow consumers to reduce credit limits and terminate credit card contracts, including by online means. I must say that, if anyone has actually attempted to go through the process of cancelling a credit card, I think they would agree—and, boy, do we need instances where we can all agree on something in this place these days—that it is a thousand times harder to cancel a credit card than it is to get one. The hoops that are required to be jumped through at the moment to simply cancel a credit card and not take up another offer really are, in our view, unreasonably burdensome. I'm pleased to say that the changes in this bill do allow consumers a much easier path to make sure that their attempts to break free from the shackle of credit leading into a debt spiral are actually rewarded.

Schedules 1 and 2 of the bill will give APRA the ability to respond to future developments in non-ADI lending, should they pose a risk to financial stability. To protect deposit takers, APRA currently regulates lenders that take in deposits, and this bill gives APRA powers to act in relation to other lenders, should practices or the size on the non-ADI lending sector pose a risk to financial stability in the future. It is important that APRA have appropriate powers to ensure that the stability of the financial system is maintained. We acknowledge the important role that non-bank lenders can also play in terms of competition, including in relation to lending to small businesses, provided those non-bank lenders are subject to appropriate regulatory restraint in order to ensure that those vulnerable businesses and consumers are not otherwise at risk of falling prey to predatory lending practices.

In relation to the credit card reforms and in response to a 2015 Labor-led Senate inquiry, the Treasurer promised in May 2016 to progress changes to credit card laws. Unfortunately, the Treasurer appeared, clearly, to forget about this promise, and it took Labor publicly pushing for these reforms to force him to re-announce the measures in the 2017 budget. We welcome the measures, which will improve consumer protections in relation to credit cards. They are clearly long overdue, and it is disappointing that consumers will have to wait even longer, until 2019, for most of these protections to come into play. What we really see—and what underpins all of the conversations in relation to the banking sector, and what we saw again as recently as today with the release of the draft report of the Productivity Commission in relation to the banking sector—is that it is completely clear that, if we form the view that the best type of disinfectant is a ray of sunshine, what we need more than ever is a robust and effective royal commission in relation to the banking sector.

In order to take the opportunity to focus on the positive parts of 2017, as opposed to those parts where we had our battlelines drawn, let's be frank. A positive part of 2017 was seeing that a royal commission into the banking sector was now up and running. Now, we can have a very robust and heated—and appropriately robust and heated—debate about the terms of reference, in relation to how wide we can cast the net to examine the practices of the banking sector and industry and the practices of the lending sector and industry. It's also an appropriate time to echo the needs of those smaller lenders who provide small amounts of credit to make sure that they are also captured by this commission of inquiry. So it is a good start.

But, quite frankly, two things remain to be seen. Firstly, one can't help but wonder, given the clear, public statements made by this Prime Minister disregarding the need for a royal commission before deciding that political expediency justified actually setting one up, whether it is going to do what it ought to do and what it has the potential to do. That's the first thing. Secondly, we need to make sure it happens as quickly as possible and that all consumers get a chance to put their case to the royal commission. The rubber looks likely to hit the road in 2018. We should be optimistic that progress will be made in relation to protecting consumers in the finance and credit sectors. There is no doubt that, while this is taking much longer than it should, it is nevertheless a good start.

Question agreed to.

Bill read a second time.

Ordered that this bill be reported to the House without amendment.

Sitting suspended from 11:10 to 11:33

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