David Johnston (WA, Liberal Party, Shadow Minister for Defence) Share this | Link to this | Hansard source

asked the Minister representing the Minister for Financial Services and Superannuation, upon notice, on 28 September 2011:

Given that most people faced with a problem under a guarantee have little recourse other than the legal process, and that most cannot afford to pay for this: what assistance or help is provided for persons affected by recovery procedures by banks.

Nick Sherry (Tasmania, Australian Labor Party, Minister Assisting the Minister for Tourism) Share this | Link to this | Hansard source

The Minister for Financial Services and Superannuation has provided the following answer to the honourable senator's question:

A decision by a person to become a guarantor is a private commercial decision. The Australian Bankers Association’s Code of Banking Practice (Code) sets out the obligations of the banks regarding guarantees. A guarantee must include a statement that the Code applies to the guarantee. The Code requires banks to inform individuals that they can refuse to enter into a guarantee, there are financial risks involved and that a person has the ability to limit their liability.

If a bank seeks to enforce a guarantee, a person may seek free legal advice from community legal centres and no win no fee solicitors. A person may also be able to make a complaint to the Financial Ombudsman Service.

The Commonwealth also provides funding to organisations which assist people affected by recovery procedures. The Commonwealth funds legal aid and community legal centres in each state including, in most jurisdictions, a consumer credit legal centre. These legal centres were provided with increased funding as part of the 2011-12 Budget process. The Government will provide $194.8 million in funding to the states for legal aid commissions under the National Partnership Agreement on Legal Assistance Services. This amount is an increase of $4 million from last year, and forward estimates show this funding increasing by a total of $11 million over the next three years. A further $10.4 million will be provided to legal aid commissions under the Attorney-General's Department Program 1.3: Justice Services. This represents a significant increase from the $3.3 million originally allocated in the 2010–11 Budget. In addition, under the Attorney-General's Department Program 1.3: Justice Services, $34 325 million ($31 483 million in 2010–11) in payments will be made for the provision of community legal services across Australia.