Tony Zappia (Makin, Australian Labor Party) Share this | Hansard source

This legislation, the National Consumer Credit Protection Amendment (Supporting Economic Recovery) Bill 2020, effectively reverses legislation introduced by Labor over a decade ago. That legislation was enacted in response to the very concerns that consumer groups are now raising about this legislation, consumer groups who have seen the problems in the past and know what to expect if this legislation is adopted by parliament.

The legislation, as other speakers on this side have made clear time and time again, even flies in the face of the banking royal commission recommendation that the National Consumer Credit Protection Act 'should not be amended to alter the obligation to assess unsuitability'. It is fiercely opposed by the very community groups that every day are left to deal with the consequences, and, not surprisingly, it is the subject of a dissenting Senate report from both Labor and the Greens. Indeed, I suspect the only reason that the Senate committee recommended adoption of this legislation was that the government had the numbers on that committee.

At a time when COVID-19 has shattered the Australian economy, when there are two million unemployed or underemployed people throughout the country, when JobKeeper is nearing an end, when other government COVID support measures are being phased out, when credit card debt in January was at $21 billion and when unemployment conditions are less secure than ever before, lending laws should not be relaxed. Indeed, they should be tightened because irresponsible lending ultimately will cause additional financial harm to people already struggling to make ends meet.

In a media release issued jointly by CHOICE, the Consumer Action Law Centre, the Financial Rights Legal Centre and Financial Counselling Australia, the authors make this absolutely clear. In that media release, which was issued only on Friday. Alan Kirkland, CEO of CHOICE, says:

This report ignores the clear economic evidence: that the housing market is already overheating and removing safe lending laws will push home ownership out of reach for many more Australians.

We already see high levels of mortgage stress in states like Queensland, South Australia and Tasmania. Giving more power to the banks in these circumstances will be bad for people who are already struggling to repay their mortgage and bad for people trying to get into the housing market.

Gerard Brody, CEO of the Consumer Action Law Centre, says:

One bad loan won't break the bank, but it can definitely break the borrower. That's why we need to keep our safe lending laws – without them, the regulator focus will be on the stability of banks, not the protection of borrowers.

He goes on to say:

The Government's plans will dismantle our effective and sound financial services regulatory framework. The reality is that the prudential regulator, APRA, does not provide individual consumer protection. It focuses on whether loans cause a credit risk to the bank, not on whether loans are affordable to individual borrowers.

The same press release goes on to quote Karen Cox, the CEO of Financial Rights Legal Centre:

This plan to roll back responsible lending was concocted as a knee jerk response to the pandemic related recession. Now we are facing record lending levels and runaway property prices. It's time to drop this crazy plan and avert a potential debt disaster.

It then lastly quotes Fiona Guthrie, the CEO of Financial Counselling Australia:

The effect of irresponsible lending on everyday people is enormous; it sends too many people into debt spirals which often leads to financial stress, family breakdown, mental health issues and even homelessness.

Indeed, Fiona Guthrie issued a press release today on this very subject. Attached to the press release were several case studies from around Australia highlighting the impacts of what poor lending does to consumers. The press release says:

Financial counsellors are at the front line, witnessing the harm that is caused by irresponsible lending. This bill will exacerbate financial stress, family breakdown, mental health issues and homelessness.

Rather than refer to one of the examples provided by Fiona Guthrie, I'll provide my own example of a recent case in my own electorate.

Several weeks ago I was contacted by a relatively new arrival to this country who had a wife and, from memory, four children to support. This person had a stable job and was on basic pay, but he couldn't make ends meet, with a mortgage to pay, with a motor vehicle lease purchase contract that he had committed to and with normal living expenses for himself and his family. He simply wasn't earning enough to pay his everyday bills. He was behind in his payments and was facing repossession of his car and, even worse, losing his home. His motor vehicle repayments, in particular, were dragging him down. I asked this question: where was the responsible lending and the scrutiny in respect of his case, where the motor vehicle dealership could have looked more carefully at his financial situation before allowing him to commit to the repayments that he made? I referred this person to a friend, a former financial counsellor and adviser, who looked at his case exhaustively. They were not able to help but made it clear that he should never, ever have been allowed to get into the situation he did. But he did so because, in my view, he was vulnerable to the fact he was a new arrival, didn't necessarily know the laws of this country well and perhaps didn't understand Australian life as well as he might have thought he did, which ultimately got him into the mess that he's now in.

What is the government's justification for this legislation, particularly given that the banking royal commission didn't recommend it—in other words, there's no call from the royal commission; in fact, as I said earlier, it recommended the opposite—and that so many experts have already argued against this legislation as well? It is that the changes will simplify lending laws, make credit easier to get and increase credit supply throughout the country. However, that particular view is not supported by all.

In their submission to the Senate inquiry, the Law Council—and I'm referring to laws being made simpler and easier to understand—said of the legislation:

… the Law Council submits that this does not represent a simplification of RLOs, but rather makes enforcement of the standards complex and difficult. It would also make it highly difficult for a consumer to assess whether or not their own lender has breached the non-ADI standards.

That's what the Law Council said in respect of supposedly making it easier. It actually makes it more complex. With respect to it being a measure to help release more money into society, Maurice Blackburn in their submission pointed out to the committee that there is not a need for this bill as it is seeking to solve an issue that simply doesn't exist. Maurice Blackburn point to some data. I quote the data that they refer to:

The total value of new loan commitments for housing and the value of owner occupier home loan commitments each reached record highs in October 2020.

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The government is saying that we need to have more money out there in society because it will help stimulate the economy. It is saying that people cannot get credit and this is restricting the ability of the economy to grow. But the stats simply don't support that argument. In fact, the reverse is happening.

What is notable about this legislation is that the underlying argument for it is to speed up economic recovery by releasing more private money through loans and extending credit. Unsurprisingly, therefore, this legislation is being backed by many of the business associations, whose members will obviously benefit from the easing of credit. If the government wants to boost the economy, it should continue to do what has been proven to work and what it has been doing over recent months with respect to the COVID stimulus package—that is, ensure that people on low incomes have money in their pockets to spend. If they have money in their pockets to spend, they won't need to resort to credit. If they don't have the money in their pocket, then they will be forced to try to secure credit which they simply cannot afford. This will slowly take them further down in terms of their ability to survive financially.

What was the Morrison government's response to that argument? It was to cut the JobSeeker supplementary payment. Now it comes back with a proposition that it will increase JobSeeker permanently by a measly $25 a week. It is simply not enough. It will not lift people out of poverty. It will ensure that they continue to struggle through life, and it will ensure that, because they are struggling, they will try to access money through credit that they simply cannot afford.

Of course we want people to have money for the things that they need to get on with their life, but this is not the way to do it. The reality is that there are better ways for the government to manage the economy and support people on low incomes than to simply make access to credit much easier. The arguments in favour of this legislation—and I believe it was initially intended to boost the economy during COVID-19—simply don't stack up, and they will not stack up in the months ahead as the economy reverts to a more normal economy.

As I said earlier, unsurprisingly, the Labor members on the Senate committee that looked at this bill did not support the recommendation that it be passed. Indeed, they moved a recommendation that the bill not be passed. They also made the very sensible point that the Senate should immediately pass the National Consumer Credit Protection Amendment (Small Amount Credit Contract and Consumer Lease Reforms) Bill 2019 (No. 2), which probably would make a difference to people's ability to manage their financial affairs. It is clear that this legislation does not have the support of the broader community. It is clear that this legislation will only cause more hardship and suffering for people who are already doing it tough. As we on this side of the House have said, it should not be supported.

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