Andrew Bragg (NSW, Liberal Party) Share this | Hansard source

I rise to address this National Consumer Credit Protection Amendment (Small Amount Credit Contract and Consumer Lease Reforms) Bill 2019 (No. 2). There has been a lot happen with small accounts and the provision of credit over the past few months. That is not surprising, because we are in the midst of a once-in-a-century pandemic, perhaps the worst economic shock in more than 100 years. So you would imagine, given the nature of our market economy, that there would be changes and these issues would be considered by this parliament as appropriate.

Our policy on small account credit contracts is to put in place a lot of the measures contained in this bill. We are looking to keep the responsible lending obligations in place, in relation to these small credit accounts, even though we note our very significant reservations about the rest of the regime. More importantly, our reservation with responsible-lending obligations for the broader economy goes to duplication and the maladministration of it by the corporate regulator, ASIC, which has a number of other issues I'll come back to. Our policy is to put in place caps so that lower-income Australians are not caught in difficult situations by small account credit products. We are also linking Centrelink payments to these caps so that people can't get into these difficult arrangements. There'll be a lot more transparency so that people can see what they're up for when they undertake some of these small account credit contracts.

As my colleague Senator Scarr noted, there are many cases where lower-income Australians do need access to these sorts of facilities, to this sort of money. Where it does not take an unreasonable portion of their income, particularly when it's been provided by Centrelink, they can be appropriate products. But I note the significant concerns, and I note in this debate that there have been sincerely held views, expressed by people like Senator McAllister and Senator Griff, that there is still a place for these products within an environment where there are more belts and braces. This bill is quite similar to the policy the Treasurer restated when he announced the abolition of the very poor responsible-lending obligation regime. It does put in place those caps. It does link Centrelink payments to this regime.

This bill is not going to be supported by this parliament, because it would be a small part of a bigger issue. There are two reasons for the Treasurer announcing that we would undertake wholesale reform into the provision of credit. Firstly, the responsible lending obligations imposed 10 years ago by this parliament, following the global financial crisis, have not worked particularly well. They are duplicative. They are, in many ways, quite confusing in that they impose over and beyond what the Australian Prudential Regulation Authority, APRA, has in place for banks, in terms of its lending standards. So the responsible lending obligations have not been effective. The way they've been put in place by ASIC, I think, has been well documented as very poor. ASIC has taken these matters through the courts, most famously, in the Wagyu and shiraz case.

The point here is that there is not a great deal of confidence in ASIC. They are dealing with enormous internal problems. Frankly, who would trust a corporate regulator that can't even get its own remuneration in order? We've seen very troubling allegations come out of the commission of ASIC, where it's been noted that the chair and the former deputy chair were paid money, in different forms, which was way out of the expectations that society would have for these sorts of roles. In particular—I come to this as a former internal auditor—you've got to have confidence in the controls that are put in place by regulators. In the case of ASIC, it had a risk and control framework that dealt with remuneration, but it wasn't followed. The confidence we have in ASIC is fairly low at the moment, you'd have to say. These issues of the provision of credit, the flow of credit and the provision of credit to people who can generally afford to pay it back should, in any event, go more into the prudential regime, which is run by APRA. In summary, on these questions of where the responsibilities for regulation fall, this really isn't a matter that ASIC should have been involved in, given that APRA has very detailed and quite onerous and rigorous lending standards, as you would expect.

The issue of the flow of credit is very important in the midst of a very significant recession. The RBA governor, Mr Lowe, has blamed responsible lending laws for hindering credit growth. Mr Lowe said, 'We can't have a world where a person can't pay off the loan, then it's the bank's fault.' Mr Lowe went on to say that the RBA actually wants some of the loans to 'go bad, because if a bank never makes a loan that goes bad, it means it’s not extending enough credit'. The broader issue here is responsible lending obligations and the laws. This is a very important thing for us to get right as a government and as an economy, because if you don't have the flow of credit, then you won't have businesses being able to invest and create jobs. That is something that I think the responsible lending obligations have also caused. So you've got a regulator that really isn't running a particularly good show, you've got horribly complex obligations which are duplicative and go above and beyond what the prudential regulator, APRA, already has in place for loans, and then you have, of course, a significant pandemic where you really have to make sure that every law and every regulation that we have in place is really needed. Because if you have laws and regulations that are impeding the economy and its recovery from a significant pandemic and recession—as responsible lending obligations have been doing—then we have to act.

I am certain that in time we will be able to reform ASIC. I'm certain that ASIC will be a better regulator in time. But it's not a good strategy for us to leave laws in the statute books that do not work or are undermining the economy. Sure, we should definitely make sure that lower income people are protected in the way that this bill envisages. That is why the guts of this bill is our policy, but we're going to enact this policy as part of a broader change to the regime of credit flow. For example, the responsible lending obligations for higher income earners have been shown not to work. The Wagyu and shiraz case was shown to be a disaster. I'm very pleased that others in this place have great confidence in ASIC. I just don't. I think the proper place for credit quality to be assessed, from a governance perspective and from an institutions perspective, is APRA. That is APRA's job. We want these regulators' feet to the flame. One of the problems we have too often in Australia is that you have too many people doing too many things, and accountability just slips away. I seek leave to continue my remarks later.

Leave granted; debate adjourned.