Steve Irons (Swan, Liberal Party) Share this | Hansard source

I rise today to speak on the National Consumer Credit Protection Amendment (Home Loans and Credit Cards) Bill 2011. When the Treasurer introduced this bill, on 24 March this year, he stated early in his speech that the government was introducing three broad streams of reform: to empower consumers, to support smaller lenders and to secure the flow of credit to our economy. If you dissect those words you will see that the emphasis on the reform to empower consumers to support smaller lenders gives the perception of a government introducing a bill that gives a commercial advantage to one part of a business sector over another, which just reeks of legislative bungling.

Australia has an economic structure that enforces level playing fields right throughout the business sector, which some refer to as the Trade Practices Act. Many companies and businesses have been prosecuted under this act for creating, or through collusion forcing, a commercial advantage over competitors or fixing prices to customers. It is illegal to do so and is now a criminal offence. But here we have the Treasurer openly stating that he wants to introduce legislation that gives an advantage to a particular part of the banking sector so that customers will leave one part of the industry and go to another. This is typical of this Treasurer and this government. Every time they try to legislate for business they get it wrong, and this is just another example. It reminds me of the Brian Burke days in WA, and we saw what happened when Labor went anywhere near business in those days.

If this bill does achieve a fairer and simpler banking policy that does not contravene the Trade Practices Act then it should be supported. The bill comes before the House in the context of Australians using credit cards more and more, year after year—to be precise 428 per cent more, according to Euromonitor International, between the years 1998 and 2009. This growth in use has translated into a significant national credit card debt. In April 2011 the Reserve Bank of Australia estimated that there was $49.4 billion of credit and charge card debt in Australia, almost $36 billion of which was accruing interest. The actual liability, including credit and charge card limit, was estimated at $134.9 billion. Australians could borrow that amount of money if they needed to, just as this government borrows money.

Australia's credit card expenditure ranks high among nations. In 2009 our per capita expenditure was higher than countries such as the US, Canada and Hong Kong. We overtook the US in 2004 and have not looked back. But what does that mean for the country? I do not take the view that credit cards are a necessarily evil. The majority of Australians use them wisely and credit cards can assist with meeting day-to-day expenditure. However, the administration of these cards by banks has come in for criticism in recent times, and the charge has been levelled at banks that they are siphoning money off consumers at unacceptable rates. High interest rates and harsh penalties for breaching credit limits are two mechanisms which have been criticised by consumers, including many people in my electorate of Swan.

I am pleased that we are finally in a position where the government has introduced some legislation to be debated in the parliament. However, it is shameful that it has taken the government so long to consider this matter in detail. It has taken the persistent campaigning of the coalition and the shadow Treasurer to get to this point today where there is legislation before the House. The resulting legislation is an unsatisfactory response to the perceived issues within the banking industry. The requirement in the legislation for lenders to provide a one-page facts sheet stems from a policy that was announced by the Treasurer during a heated debate about the practices of the big banks towards the end of last year. The coalition had announced its nine-point plan for banking reform. The Treasurer was caught out, his inaction exposed and he quickly announced that he would solve the problem by requiring lenders to provide a key facts sheet for standard home loans.

These facts sheets may well be a good idea. Allowing consumers comparison between home loans is a worthwhile step. However, can a facts sheet really be considered a serious response to issues in the banking industry? And as usually is the case with policy on the run, this has created problems at the legislative stage and the government has had to remove the strict liability offences applying to the section of the amendments on the advice of the industry. I could go on to highlight these amendments but enough of my colleagues on this side of the House have already taken the Treasurer to task on this issue. To accommodate changes, this measure that was initially set to apply from 1 September 2011 has been extended to 1 January 2012. This does appear to be another example of a government that announces things before it has worked out any of the details.

As the Treasurer outlined in his speech, this bill also deals with issues relating to credit cards and I want to discuss the potential impact of these measures now. The bill provides for the introduction of a 10 per cent credit limit buffer, which can be broached without incurring fees. Consumers will be able to opt out and will be given the opportunity to request a larger buffer if they are prepared to pay for it. We note that the government has chosen to remove sections relating to the default buffer limit at 10 per cent of the credit limit, as well as the allowance for a supplementary buffer. There was some concern from industry bodies and institutions that the bill would send a message to consumers that they have a 10 per cent higher credit limit than previously stated.

The government has replaced this with a requirement for consumers to be notified if a credit card breaches the limit. The bill also provides for warnings on statements to consumers about the dangers of only paying the minimum repayment. It combines this with a requirement for an allocation hierarchy of payments, whereby lenders will allocate higher repayments to higher interest debts first. These seem reasonable. There is some concern however that the provision to restrict unsolicited offers to consumers to increase their credit limit will have the unintended consequence of forcing credit providers to push borrowers towards higher initial credit limits than they would have otherwise been offered. It is these sorts of concerns which demonstrate that the government is only scratching the surface of this issue, in typical knee-jerk reaction to public opinion. Contrast this approach with the coalition's nine-point plan on banking reform, which is:

1. Investigate anti-competitive banking practices

2. Investigate unnecessary banking risks

3. Ensure regular reporting of bank interest margins

4. Ensure more Government support for small lenders

5. Improve the liquidity of mortgage-backed securities markets

6. Simplify the Financial Services Reform Act

7. Commission an investigation of banking loan practices for small business

8. Commission a resolution to the debate about whether banks should be able to issue covered bonds, and

9. Conduct a full review of the financial system.

This is a serious strategy for dealing with these matters, unlike this government's rather shallow so-called reforms. In conclusion, I will not oppose this legislation as there are a couple of sensible suggestions in there.

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