Mark Dreyfus (Isaacs, Australian Labor Party, Shadow Attorney General) Share this | Hansard source

Labor supports the Bankruptcy Amendment (Debt Agreement Reform) Bill 2018 which provides further regulation of the industry administering debt agreements. The bill amends the Bankruptcy Act 1966 by limiting the class of persons who can offer services as registered debt agreement administrators, trustees or official trustees. Limiting who can be a debt agreement administrator by reference to skills and capabilities will provide an additional safeguard against sharp practice, which disproportionately affects disadvantaged, marginalised and vulnerable people who are at higher risk of being damaged if exposed to unscrupulous or iniquitous practices. The nascent debt agreement administration industry as well as any individuals who are administering their own agreement are given six months following the royal assent to this bill to gain the necessary skills and effect transitional requirements. This provides creditors and debtors with the certainty they require to transition any existing arrangements.

Labor support, subject to any necessary amendments arising as recommendations from the ongoing Senate inquiry, the insertion of a provision which requires debt agreement administrators to specify expressly in any debt agreement the expenses which may be charged by the administrator. The repayment of debt, often by disadvantaged people with limited financial literacy, should not be an exercise in profit gouging by debt agreement administrators. We support giving access to both debtors and creditors to the debt agreement administrator's proposed expenses so they can assess the reasonableness of the expenses and, if necessary, seek independent financial or legal advice.

Labor supports the setting of a cap on the percentage of a debtor's after-tax income that can be agreed to be repaid in the repayment schedule of the debt agreement. However, Labor is concerned that the bill, as it currently stands, leaves the setting of the percentage to ministerial discretion. Labor would prefer for the percentage to be given a statutory footing to ensure that debtors are easily able to ascertain the maximum amount that can be set out in the debt repayment schedule. We will await the recommendations of the Senate inquiry in respect of the proper setting of the percentage cap.

Similarly, the bill has inserted a new provision that requires the debt agreement repayment schedule to be time limited to three years. This is a significant issue and Labor reserves its right to seek an amendment in the Senate. The policy basis, as asserted in the explanatory memorandum, is that the provision of three years enables the responsible minister to set a capped percentage rate which will be uniform across all debt agreements. There is no substantive issue with the policy of setting a percentage rate which operates in parallel to an agreed time frame. However, the nominated time of three years may place undue and unnecessary pressure on vulnerable people who are already struggling to get out from underneath debts which have led them to into a debt agreement. Extending the possible repayment time frame to, for example, five years does not unduly burden the rights of creditors to repayment, particularly in circumstances where the great majority of creditors are large credit providers. It does, however, appropriately balance the rights of creditors with those of debtors who should not be placed under undue strain to repay debt. Moreover, it achieves the stated policy aim of giving a temporal framework against which the calculation of the percentage cap can be made.

Labor welcomes the measures in schedule 1 that seek to limit the possibility of conflicts of interest and increase transparency of the corporate arrangements of companies and persons who offer services as registered debt agreement administrators, including the disclosure requirements for related entities. Labor supports, in principle, the amendment set out in schedule 2 of the bill. But, consistent with my comments on the need to provide for a longer time for repayment in debt agreements, Labor will await the Senate inquiry recommendations before considering whether or not to seek an amendment providing for an extension of the repayment schedule time frame. This would allow for vulnerable debtors who enter into overambitious debt repayment schedules to seek a variation of their debt agreement to provide more time for repayment.

Labor supports the measures in schedule 3 of the bill which provide for more rigorous registration requirements, including that the Inspector-General interview applicants after processing their paper applications and that the trustee or registered debt agreement administrator has taken out professional indemnity and fidelity insurance. Labor also supports the further measures in schedule 3 which empower the Inspector-General to obtain information from banks and financial institutions confirming whether or not a separate bank account is being maintained for the purpose of managing the debtor's repayments under the debt agreement. Labor will always support measures that require the proper discharge of statutory duties and safeguard vulnerable people. This is a good measure. It is aimed at preventing the misuse or misappropriation of money held on trust to pay down the debt by registered debt agreement administrators or official trustees. I commend the bill to the House.

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