Laura Smyth (La Trobe, Australian Labor Party) Share this | Link to this | Hansard source

Yesterday, I had an opportunity to make some initial remarks in this debate on the National Consumer Credit Protection Amendment (Home Loans and Credit Cards) Bill 2011. I was addressing some of the very practical measures which the bill puts in place to help consumers. The bill endeavours to help people who rely so very heavily on credit cards and who shoulder the burden of personal debt. I mentioned that the measures included in the bill will help those people make much better choices about the kinds of debt arrangements that they enter into—for instance, better choices about mortgage products and credit cards.

This debate sketches out fairly neatly for the public some of the differences between our government and the opposition. I have listened fairly intently to the remarks of the opposition in this debate. They say that they will support the reforms in this bill but that they are effectively being dragged to it. I think that the Hansard of the debate from yesterday will bear that out. They say that they are reluctantly accepting of our legislation to give consumers choice. They particularly mentioned overregulation and intrusion into business. As I said at the time, they made similar noises and mutterings in debates earlier this year, in particular in debates in which they were more concerned with the interests of executives and with standing up for executives and their salaries than with standing up for shareholders and consumers. We saw that very recently in the debate on the Corporations Amendment (Improving Accountability on Director and Executive Remuneration) Bill 2011, which this government pursued and has ultimately had passed in the Senate.

The opposition say that they are terribly concerned about overregulation. They have to be dragged, kicking and screaming, to support very sensible legislation which gives consumers choice. Then they say that they have faith in the market. I say: 'Hearty congratulations to all of them,' because it really is the first time in this term that they have applied that logic to any debate. Indeed, I invite them to apply their faith in markets to some other debates that are affecting our nation at the moment. The carbon price, for instance, might benefit from the application of that logic. Unfortunately, the opposition chop and change and make up the rules as they go. They are happy to talk about markets and their concerns about regulation in the context of this debate on this bill that is looking out for consumers—mums and dads and individuals such as those in my electorate. They are not terribly concerned about applying the same logic of their faith in markets when it comes to things like a carbon price. We have been consistent. We have said that we would act for consumers on banking, credit cards and home loans—all of those products on which so many Australians have come to rely for their everyday existence. I mentioned yesterday that the Reserve Bank's figure on the level of credit card debt in February of this year was a staggering $49.3 billion, of which some $36 billion at that time was accruing interest.

These are issues which touch all Australians in a significant way, and it is for this reason that the Treasurer recognised the need to act. He has taken that opportunity to act by introducing this bill. Our reforms will enable consumers to make a more informed choice about home loan products and credit cards. I spelt out yesterday some of the ways that the bill does that. I imagine that other speakers in this debate will elaborate on that. Our reforms will reduce the risk of consumers being offered credit card limits, the balance on which they are almost certain to be unable to repay in a reasonable period of time.

These are the very real and very practical differences between what we as a government are putting forward against the nothing that the opposition have in mind—because they offer nothing on these issues. They offered nothing in the budget reply. They have offered nothing in relation to the NBN. They offer nothing in relation to carbon pricing. They offered nothing on the floods in Queensland and the means to fund the recovery. They offer nothing to consumers looking for a better deal in banking.

Paul Fletcher (Bradfield, Liberal Party) Share this | Link to this | Hansard source

I rise to speak on the National Consumer Credit Protection Amendment (Home Loans and Credit Cards) Bill 2011. In doing so, I observe that there is nothing that gladdens the heart of the Rudd-Gillard government more than a piece of detailed, prescriptive, intrusive microregulation, as it seeks to get its fingers deep into the entrails of the day-to-day conduct of business. There is nothing that gladdens the heart of the Rudd-Gillard government more than a cartoonish, headline political attack on the business sector—in this case, the banking sector. There appears to be, I regret to note, nothing that gladdens the heart of the Rudd-Gillard government more than rushing out legislation in a furious burst of enthusiasm, well before the critical detail of how the arrangements will work has in fact been sorted out. Is that not all too familiar a pattern from this government? In the bill that is before the House this evening, I regret to note that we are once again seeing this pattern at play.

Let us be clear: the question is not whether some Australians are offered credit card increases which they are ill equipped to deal with—of course that happens all too often—and the question is not whether there are issues in relation to people dealing with credit who may not be well equipped to do so. The question before this House is whether this particular bill is an effective way of dealing with the problem, because this government assumes consistently that all you need is good intentions. If you genuinely think there is a problem, then bring forward any measure, any package, and that ought to be judged as a success. The real question for the House is whether, as a matter of fact, this is an effective and sensible package of measures. I regret to say that there are serious reasons to doubt that it is an effective and sensible package of measures.

I note that the genesis for this legislation was a deeply political exercise, a package of so-called reforms announced on 15 August 2010, a date you will have no hesitation in recalling, Mr Deputy Speaker Scott, which fell during the middle of the last election campaign.

Substantively, there are some six measures contained in this package, which this bill now seeks to pass into law and some, as we have been pleased to acknowledge, have some merit. Others, I regret to say, have very little merit and could fairly be described as merely being meretricious window dressing designed to pad out a press release.

I seek to make three points in the time available to me this evening. Firstly, to too great an extent, this bill gives effect to a package of measures driven largely by politics, not by policy, and by a political desire to have a package on credit cards. Secondly, much of this bill involves detailed, onerous and poorly thought through regulation, the costs of which look very like to considerably exceed the benefits. The third point I wish to make is that the implementation of this package regrettably has been done in this government's usual shoddy, hasty and imprecise way and, indeed, much of the critical detail is still not yet available, because it is contained in regulations.

Let me turn to the first point—a package driven largely by politics, not by policy. Let me quote some of the more fragrant observations from the press release headed 'A competitive and sustainable banking system', issued by the Treasurer on 12 December 2010. According to the Treasurer this package of measures, of which the measures in this bill form part, will 'give every Australian a fairer go'—I note he seems to be troubled by self-doubt because he is not committing to a fair go, merely a fairer go. He goes on to say in another typical flourish of rhetoric that they 'won't let the big banks off the hook'. If there was ever a clear indicator of the deliberate political intent of this legislation, I think that quote gives the game away.

Again, with a little bit of self-doubt from the Treasurer, he goes on to note, 'There's no silver bullet here,' which might as well amount to an admission that quite a number of the measures in this bill are frankly more trouble than they are worth, that the costs they will introduce exceed the benefits. He nevertheless commits to 'keep working hard to give all Australians a fighting chance'. Again, I wonder how giving Australians a fighting chance measures up to the standard he set himself at the start of the press release to give every Australian a fairer go.

The thing that really stands out is a classic non-sequitur. We have come to appreciate the non-sequitur as the favourite rhetorical device of the Treasurer of Australia and there is a fine example of a non-sequitur in this press release. Immediately after the statements I have quoted, he goes on to say 'Vigorous competition is the best way to keep interest rates for borrowers lower over time and create a system that offers real choice.' I am very pleased to say that I agree with that proposition. On this side of the House, we very much agree with the proposition that vigorous competition in the banking sector, as in every sector, is very much to be encouraged.

But we do ask ourselves the question: how much credibility does this Treasurer have about calling for vigorous competition in the banking sector when, on his watch, there were not one but two very significant bank mergers waved through. St George and Westpac were allowed to merge and the Commonwealth Bank and Bank West were allowed to merge, in both cases approved by the Treasurer of Australia, the same man on whose watch this particular piece of legislation is being brought forward.

The Assistant Governor of the Reserve Bank of Australia, Mr Guy Debelle, noted in a speech last year that, as a result of those two mergers, the major banks' combined market share rose from 60 per cent to over 80 per cent between 2007 and 2009. The reality is that this Treasurer, this Rudd-Gillard Labor government, has presided over one of the most dramatic contractions of competition in the banking sector that we have seen for a very long time, and you do not make up for a significant attack on competition, as this government has been party to, by putting some worthy sentences in a press release.

I would suggest to you that what this government is trying to do with this particular package, these detailed controls on credit cards, is to seek to make up for the fact that in reality competition in the banking sector is considerably weaker than it used to be. If we look at some of these measures, they include prescribing rules for approval of the use of credit cards above a credit limit, restricting credit providers from making unsolicited invitations to borrowers to increase the credit limit of their credit card and introducing a requirement for lenders to put out a key facts sheet for credit card contracts.

I want to make the point that much of this package of measures involves detailed, onerous and poorly thought through regulation, the costs of which can be expected to exceed the benefits. Take, for example, the very broad prohibition against written communications to customers regarding a credit limit increase under the proposed section 133BE. This will not only apply to express offers and invitations to use the legal language; it also has, in practical terms, the effect of capturing any communication to a customer which has the purpose of encouraging the customer to consider applying for an increase. It is very broadly drafted indeed and is likely to prevent not only communications which are objectionable but also communications which are highly desirable. A further question which is raised about the measures contained in this legislation is: why are they necessary, in light of the fact that there is already a very tight regulatory regime dealing with credit limit approvals under chapter 3 of the National Consumer Credit Protection Act?

A further question which might be asked is: isn't there a risk that, by imposing detailed restrictions on the capacity of banks to offer increased credit limits to their customers, the banks will in fact be encouraged to start by offering higher credit limits than they might otherwise have proposed? Isn't there a real possibility that this legislation will end up having the very opposite effect to the one which is proposed?

Another serious concern with this package of measures is that some of the critical detail is not obvious on the face of the legislation, because the legislation simply provides that there will be regulations made regarding these matters—for example, the key provision to be added to the National Credit Code, section 30B, which gives the minister the power to make regulations regarding interest charges.

A further question which might very reasonably be asked is: why is it the case that this legislation is rife with strict liability provisions—that is, provisions under which guilt is simply assumed and the mental state of the person charged with the offence is considered to be irrelevant? One reason why it might be rife is that such provisions appear to be rife in every piece of legislation this government brings forward, because they sit very well with this government's preference for detailed, prescriptive and intrusive legislation. But it is a very good policy question. I note that some of those provisions have been removed from the set of amendments which have been put forward by the government at the eleventh hour, but we still face a very serious and obvious question: why is it that there are simply so many measures contained in this bill which seek to impose strict liability?

The third point I wish to make is to note, with considerable regret, that the implementation of this package has been done in a shoddy, hasty and imprecise way. The exposure draft was released on 3 March, and only two working days were allowed for written submissions to be received by Treasury, even though this bill deals with extremely complex business processes involving the provision of services to millions of Australians and the practical day-to-day management consequences of this sweeping set of changes are very, very substantial.

I note further that, when the bill was first introduced, there was a set of provisions which mandated that every customer of a bank would be automatically provided with a 10 per cent buffer facility. That is to say, in practical terms, their credit limit would turn out to be 10 per cent higher than they and their bank had understood it to be. It was pointed out to the government that that was not a particularly good idea in a piece of legislation which is supposed to prevent automatic or unsolicited increase in credit card limit limits, because it has the substantive effect that you effectively give every customer a one-time 10 per cent increase in their credit limit. It is hard to think of a clearer example of the very shoddy way in which this set of rapidly rammed together measures, dreamt up for political purposes, has been put into legislation.

I note that, as a consequence of this rather obvious point being made to the government, the government has at a very late stage chosen to completely remove the provisions that were in the original bill dealing with this buffer mechanism and has introduced a whole new set of provisions in this area by means of amendment. I suppose we ought to at least acknowledge the fact that the government has conceded the self-evident logical problem in the original set of measures dealing with the so-called buffer facility.

In substance, what we have here is a piece of legislation which contains one or two sensible measures and a range of other measures which are difficult to justify, a set of measures which have been thrown together quickly to meet a political imperative to have a package on credit cards and a package on banking which could be taken to the 2010 election. We have a set of measures, which have been drafted in haste, which deal with very complex business processes affecting millions of people—very expensive to organise and administer—and yet these have been put to the banking industry with quite inadequate time for consultation. We subsequently find ourselves considering a piece of legislation which contains some significant drafting errors, some significant problems of logic and, in some cases, the original premise of which has been almost completely changed by late-in-the-day amendments. The key principle is this: a government needs more than good intentions; it needs detailed, well-worked-through policy.

Andrew Leigh (Fraser, Australian Labor Party) Share this | Link to this | Hansard source

The Australian dream of owning your own home is usually only possible through a home loan, yet taking out a home loan can be the biggest financial commitment that most Australians make. Credit cards promise that bit of help to manage the family budget. Whether it is helping to get access to cash in an emergency or helping to pay for those little extras like a holiday, accessing quick and easy credit is an attractive option for most. But, in the excitement of thinking about a first home or a new home, or the possibilities of what can be bought with a credit card or an extended credit limit, the obligations that banks and other credit providers place on consumers can be forgotten.

When you are thinking about moving into your first house, the last thing you want to do is read through the fine print in a dense home loan contract. When you are planning your overseas holiday, you do not read the clause about the additional charges associated with a cash advance. The changes proposed in this amendment are part of a broad suite of reforms that seek to increase fairness for consumers seeking credit, help to better educate consumers about what it is they are signing up for and create a set of uniform laws across Australia.

It can be extremely difficult to work in an area where every day you see people suffering from extreme financial hardship. I would like to use this opportunity to commend the consumer rights advocates in my electorate for their hard work. Some of the groups doing marvellous work include Moneycare, provided through the Salvation Army, Street Law, the ACT Welfare Rights Centre and Care Inc., which includes the financial counselling service and the Consumer Law Centre for the ACT.

My friend Liz Dawson has shown me around Moneycare at their Dickson offices and I have seen how hard they work to provide assistance to people in the community who are under pressure from their debts. Moneycare reminded me that many people suffering from financial difficulty as a result of credit card and home loan stress often end up with depression or anxiety as a result.

Care Inc. is the main consumer law advocacy body in the Australian Capital Territory and also provides advice and assistance to consumers. They wrote a submission on the financial services and credit reform green paper that preceded the range of legislative reforms. They rightly point out that, even though low-income earners carry less debt than high-income earners, the potential for that debt to have a negative impact on their lives, families and general wellbeing was far greater. Here in the ACT we boast some of the highest living standards in the country. But even in a relatively well-off electorate like Fraser there is still disadvantage, and we need to remember that, even though those generalisations about Fraser might be true for many, they are certainly not true for all.

Care Inc. told me that a local elderly woman on a pension was given a mortgage for the exclusive use of her son to purchase a business. The son was unable to repay the mortgage and the elderly pensioner was at risk of losing her home because of the loan, which she clearly could not service and from which she received absolutely no benefit. Care Inc. also told me that they had a client who was a homeless man living off a credit card. The man was unemployed and had a range of financial and other legal difficulties, yet he was still given a credit card.

In addition to low-income earners suffering from mortgage and credit card stress, financial counsellors agree that in the last five years there has been a significant increase in the number of middle-income earners suffering mortgage stress. One way that we can help people, regardless of their level of income, to avoid financial stress due to debt is to assist them to understand what it is that they are signing up for. The Gillard government have introduced a range of measures through the National Financial Literacy Strategy—measures that Tony Abbott included in his 'hit list' to pay for the flood reconstruction. The government are doing this in recognition of the fact that this is an important way of helping Australians to understand and pay their debts.

Requiring banks to provide their information in a simpler and more concise format is one part of how the government are helping consumers. We need to remember that the most vulnerable members of our community are the ones least able to access legal advice to assist them to understand their rights and obligations. The most significant changes—the changes that will provide genuine assistance to vulnerable consumers—are requirements to provide consumers with information that is easy to understand.

The key facts sheets to accompany a home loan will enable consumers to better compare home loans and better compare the loans offered by the big banks with loans offered by credit unions and other smaller providers. Potential credit card borrowers will also be provided with a key facts sheet showing interest rates on purchases, cash advances and promotional offers. These facts sheets will help those who do not have the ability to wade through pages and pages of complex legal and technical terms to understand what they are signing up to.

In the House Economics Committee's inquiry into this bill—ably chaired by the member for Dobell—we heard a range of witnesses support this measure. In fact, research by University of Queensland law lecturer Paul O'Shea, referred to in the explanatory memorandum, has taken an innovative approach to assess the impact of simplified disclosure statements. He has shown that, when a sample of respondents were presented with current disclosure statements, only 37 per cent correctly answered a question about the maximum interest rate. With a redesigned disclosure statement, 80 per cent answered the question correctly. On a question about the time to pay off the credit, only 13 per cent gave the right answer when presented with the current disclosure statement, as compared with 100 per cent when given a redesigned disclosure statement. The research provides empirical support for what many of us would have intuitively thought—better disclosure improves customer knowledge.

It is important for us to encourage banks and other lenders to produce their material in a format that is comprehensive yet easy to understand. This is just as important a part of developing financial literacy as teaching consumers how to read complex credit contracts. We are going to ensure that loans are easy to compare by ensuring that all financial providers—banks, credit unions and building societies—have to put their key facts sheets in the same format. That will mean that consumers can compare like with like.

Care Inc., the local service I mentioned earlier, rightly points out that financial service providers can afford lawyers to draft their standard term contracts, whereas the most vulnerable in our society do not have the capacity to obtain legal advice on their rights and obligations prior to entering into credit contracts. Care Inc. also notes that in their experience their clients do not read the contracts in full and several do not even keep a copy of their contract to refer to if required to challenge any of its terms.

The changes to ban unsolicited offers to borrowers to increase their credit limit are also important to help consumers understand their financial obligations. Credit limit increases are targeted to consumers with outstanding credit card balances who are struggling to maintain their repayments. They target people with an immediate need for credit, and agreeing to the offer is often made very easy. The decision to increase credit is not done in a competitive market with an ability to compare interest rates and card features to take the most financially appropriate option. The people targeted by such offers are often not in a financial position to benefit from a competitive market.

Letters offering increases are presented as marketing or promotional material rather than as an application for additional credit. This is misleading. Many consumers assume that the financial institution has done an assessment of their capacity to repay before sending out the offer and they have an unrealistic expectation of their own capacity to repay. The bank nominates the amount of increase and it does not necessarily reflect the financial capacity of the consumer. This is almost a predatory practice that preys on the most vulnerable members of our community. This bill will stop lenders from placing consumers in further financial hardship. I used to think that it was critical to educate people to understand complex financial documents. I thought we should be encouraging citizens to see the importance of carefully reading each and every document, regardless of how dense and confused these might be. But now I take a different approach. My philosophy now is that, rather than forcing consumers to do the hard work, we should be looking at reducing complexity. Why do we need to have confusing documents rather than easy-to-read tables? Sure, there is still a need to understand contractual terms, but a one-page document will enable consumers to understand the most important points, and they will know where to look if they need more advice, detail or information.

There are so many interesting things to do and to read in life: brilliant literature, trashy fiction as a guilty pleasure, movies to watch, sports to participate in and families to spend time with. Why should people be forced to spend their valuable leisure time wading through complex documents? I would rather we encouraged people to read for pleasure, rather than spending excessive time on financial contracts. Put another way: we should look at financial literacy as an obligation for lenders as well as for consumers. Through this bill and previous changes to the National Consumer Credit Protection Act, Labor has demonstrated a commitment to eradicating predatory lending practices and promoting better information for consumers. As the Treasurer said in his second reading speech, this bill 'is part of our commitment to always stand on the side of consumers'. I commend the bill to the House.

Dan Tehan (Wannon, Liberal Party) Share this | Link to this | Hansard source

With your indulgence, Mr Deputy Speaker Scott, I would like to recognise in the gallery today a delegation from the Catholic Church. I would like to recognise, in particular, Bishop Peter Connors, who looks after the pastoral care in my electorate of Wannon and does so very well. I would also like to recognise some other friends, particularly of the Tehan and O'Brien families, who have known my family for many years; on your indulgence, Mr Deputy Speaker, I welcome them to the gallery this evening.

I rise to speak on the National Consumer Credit Protection Amendment (Home Loans and Credit Cards) Bill 2011. There are five points I would like to make on this bill. One is that the coalition will not be opposing it. Amendments have been made; many which are embarrassing for the government have had to be made at the 11th hour and highlight the deficiencies, sadly, in their approach to decision making.

In many ways, this bill was heading down the path of many others that have come into this chamber in that the unintended consequences had not been thought through. Industry and institutions warned on a number of occasions throughout the legislative process that some of the elements contained in this legislation would have unintended consequences—a fact that the government has chosen at the last minute to recognise but still has not recognised in a comprehensive way. The coalition believes that the government's approach of imposing additional regulation and interfering in the commercial decisions of banks is not the preferred approach to addressing market deficiencies. What we are calling for, and I will take this opportunity to call for now, is a full root-and-branch review of Australia's financial system. This was set out in the coalition's nine-point banking plan, put forward by the shadow Treasurer over eight months ago and which, in many ways, has led to the bill before us today.

I would like to go into some detail about the coalition's nine-point plan because it has set the platform for the bill before us today. In many ways the Treasurer has been dragged, kicking and screaming, to present this legislation as a result of what the coalition put forward. When we hear that the coalition is not setting a positive agenda, I think this issue makes nonsense of that claim. In many ways our nine-point banking plan has led us to see these reforms being introduced today, some of which have merit and some of which do not.

In our nine-point plan, we set out that we wanted the ACCC to have the power to investigate anticompetitive price signalling. We were prepared to, and did, put forward a private member's bill on that. We encouraged APRA to investigate whether the major banks are taking on unnecessary risks in the name of trying to maximise short-term returns that conflict with the preferences of those who backstop the system—namely, the taxpayers. We wanted to mandate the RBA to publish regular, rather than irregular, reporting on bank net interest margins, on returns on equity and on profitability so that we can all determine whether the major banks are extracting monopolistic profits. We wanted to investigate whether we could allow Australia Post to make its 3,800 branches available as distribution channels for small lenders. We wanted to ask the Treasury and the RBA to investigate ways to further improve the liquidity of the residential and commercial mortgage backed securities markets, which are an alternative source of funding for small lenders, including consideration of the coalition's proposal to extend the government's credit rating to AAA rated commercial paper in those markets to improve liquidity to further help the small end of town.

We wanted to explore further simplification of the Financial Services Reform Act to make getting out and doing business easier and simpler, so rather than introducing more red tape, as this bill does in parts, the idea was to reduce it. We wanted to direct APRA to explore whether the risk weightings on business loans secured by residential properties are punitive. The idea would be to ensure that small businesses received sufficient financial benefit from pledging their family homes to secure their borrowings. We wanted to resolve the debate about whether the banks should be able to issue covered bonds, in the same way that other jurisdictions allow their banks to issue them, which would provide a more affordable line of credit. Most importantly, we wanted to have a full review of the financial system.

It is now 13 years since the last major review of banking. The Wallis review brought forward substantial reforms in the banking sector. It is high time that we had another review into the banking sector because reform is necessary, but it needs to be done in a way that we think through sensibly how the banking system needs further reform driven through it and what the policy approach should be, and it needs to be done in a way that makes sure we take into consideration the unintended consequences. As I said, the coalition put forward its nine-point plan. We could talk, as I have highlighted here, about the various merits of points one to eight and whether some were necessary and some were not. But I think the last point, the one about a root-and-branch review of our banking regulations, should be supported by everyone in this House. Two months after the coalition put forward its plan, we had the Treasurer dragged, kicking and screaming, to announce his own policy approach in this area. That is what led to this bill before us.

There are a couple of specific items in this bill we need to discuss. The first is the banning of exit fees on new floating rate mortgages. The coalition has said that the government has not thought through this part of the bill. We are not arguing that there is not an issue with exit fees. What we are saying is that there should be a choice. This is particularly important for small lenders—and we get a lot of these out in regional and rural areas. The only way they can protect themselves from the major banks is to have exit fees; otherwise, the major banks, if they are being successful, have the opportunity to move in and offer better rates for a short period of time and take borrowers from these smaller lenders.

So what we are arguing about here is choice, and choice for smaller lenders in particular—the type of lenders who are found in my electorate of Wannon and out in regional and rural Australia. These smaller lenders are trying to compete with the major banks. Sometimes, in order for them to be able to offer lower interest rates, they need to be able to put exit fees on. It gives them the protection they need as smaller lenders. So that is what we are arguing here; we are arguing about choice, about allowing smaller lenders to remain competitive in the market, about enabling them to compete with the major banks. One of the things that they need to be able to do, in some instances, in order to provide that competition is to put exit fees on. We are not saying that there is not an issue with exit fees; we are saying that, in some instances, smaller lenders in particular should be given the choice of using them. That is the point we are making on this issue.

The second point I raise today is about the introduction of fact sheets. The requirement for these fact sheets will now come into effect two years after problems with competition in the banking sector were first raised. Once again we are seeing the government come up with a solution two years after the problem was first identified. And now they are having to backtrack and put an amendment into this bill at the last minute to give the banking sector and other financial institutions enough time to introduce these fact sheets. The fact sheets are designed to provide simple information to borrowers so that they know exactly what they are getting themselves involved in. These fact sheets could be important in making sure that borrowers have a simple way to choose between lenders. But you also have to take into consideration that, in introducing a bill like this, you are putting requirements on our financial institutions. Those financial institutions have to be given sufficient time to enable them to produce these fact sheets in a timely manner and in a manner which will not lead to them being rushed and will not lead to the fact sheets failing to do the job they are intended to do.

Sadly, the government has had to move back the date on which the requirement for these fact sheets will come into effect. It will now be 1 January 2012. One has to ask why it has taken so long for the government to get these bills before us and why it has taken it so long to undertake the necessary discussions with the financial institutions to get agreement on what these facts sheets should look like and what should be in them. One also has to ask why the fact sheet requirements are to be introduced by regulation rather than in the legislation. Once again we are seeing the government bring forward a bill where most of the detail—it is especially so in this case—is in the regulations and not where it should be. It should be in the bill proper so that we get a chance to fully examine it and, if necessary, pass amendments to make sure that there are no unintended consequences.

When the government came into office, it committed itself to taking a regulation out for every regulation introduced. One of the things that disappoints me, in standing in the House today and delivering this speech, is that we are not seeing regulation being removed as regulation is being put in. From what I can gather, the Gillard government is now operating under a system whereby there are 220 pieces of regulation brought into the House for every one being taken out. I know that some Rudd policies have been dumped—some of the policies he implemented have not worked and we have had to move away from them. But that commitment, made before Prime Minister Rudd was elected in 2011—that might be a Freudian slip there; I mean 2007—that for every piece of regulation that came into this House one would be removed, was very noble in its cause and is one which the coalition has supported. It is one which we would have liked to have seen the government support in the introduction of this bill. This bill is regulatory and we need to keep in mind that the more we regulate, the more business costs we put on all our financial institutions. And any costs we impose on our financial institutions, they have to get back from somewhere. Ultimately, that usually comes from the borrower and can mean increased interest rates.

I will make one final point on this bill, and that goes to the Treasurer. The Treasurer has said that this legislation will not be a silver bullet; but, at the same time, when he introduced these reforms, he said that they would drive interest rates lower. We only have to go to the front page of the Australian on the day that these reforms were introduced to see that they were aimed at driving interest rates lower. It will be very interesting to see, now that the legislation has come into the House, whether in fact that is what they will do. Sadly, given the government's wasteful spending, we are hearing from the financial market that interest rates are likely to rise rather than decrease in the next six months. But let us hope that the Treasurer will work wonders and this bill will do what he is on the record as saying it will do—and that is drive interest rates lower. We on this side of the House will be holding him to that commitment, especially over the next six months. Cost-of-living pressures are going up and the last thing that Australian communities need and the people in the community of Wannon need at this stage is further interest rate rises, especially when they are the direct result of the wasteful spending that this government has engaged in and the fact that the government has not been able to show budgetary discipline and bring the budget back into surplus sooner than forecast for 2012-13.

Stephen Jones (Throsby, Australian Labor Party) Share this | Link to this | Hansard source

Never has there been so much negative carping in the process of saying yes. The National Consumer Credit Protection Amendment (Home Loans and Credit Cards) Bill 2011 is good legislation. This legislation is definitely in the interests of the working people that I represent in the electorate of Throsby, and I would like to take a few moments to explain why. I will start by going to the evidence that was presented to the House of Representatives Standing Committee on Economics—a committee which I sit on. This evidence, given by Ms Karen Cox, the coordinator of the Consumer Credit Legal Centre, outlines why some of the measures in this bill are necessary.

In evidence before the committee, Ms Cox said:

… there is no doubt that credit cards are an enormous cause of pressure on families, and we have seen countless examples over the years of people on very low incomes who have accepted a series of credit limit increases.

She went on to explain that there was indeed a problem, particularly with people on modest incomes who have had considerable credit card debts, and that it was those debts that were leading to financial stress.

This evidence certainly aligns with some of the stories that I have heard in my electorate—even as late as last weekend, when I had the great pleasure of visiting the offices of the St Vincent de Paul Society in Oak Flats in my electorate. I spoke there with one of the managers, Ms Linda O'Rourke. In the process of speaking to her about the $500,000-plus that the Commonwealth government has provided to St Vincent de Paul in Oak Flats to assist with emergency services grants, we had a discussion about the importance of financial literacy. Ms O'Rourke impressed upon me that there was indeed a great need for improved financial literacy amongst the working people in our electorate, particularly those who from time to time have to avail themselves of the services of St Vincent de Paul because they have maxed out their credit cards, they have found themselves in financial stress and they need assistance to pay the bills or to put some food on the table.

This legislation is good legislation. It is good legislation for everyone who has ever walked out to their letterbox and found it chocker-block full of direct marketing mail from a credit card company, offering them an increase in their credit limit. It is good news for consumers, owners of credit cards, who on a week-to-week or monthly basis put additional money on their credit card thinking that in doing so they were going to reduce their interest payments, only to find that the money had not been allocated to the highest interest bearing portion of their loan and that they had been whacked with an interest payment much higher than they had expected. It is good news for the consumers out there who are concerned that they can get all the marketing information that they could ever imagine from banks and financial institutions but not the sort of concrete information which enables them to get a real handle on the cost of the loan and how it compares with that from another institution. So it is good legislation, and it should enjoy the support of all members in this place.

Let us go to a few of the features which address the problems that I have outlined. The first is the home loan key facts sheet. The bill will introduce a requirement for lenders to give borrowers a simple one-page key facts sheet—revolutionary stuff, Mr Deputy Speaker. You have to wonder why this is not happening right now, but it is not. There is a one-page key facts sheet for home loans and for credit cards to enable people to assess the full cost of the loan, to compare it in standard form to those of other financial institutions and to shop around and get a better deal. The aim of this measure is to ensure that, when a potential home borrower is applying for a mortgage, it is easier for them to compare what each lender is offering them. It is very difficult to see why any fair-minded person would oppose such a measure. Indeed, as I have said, it is nothing more than militant good sense. We also believe that the transparency and the uniformity provided in these key facts sheets are going to encourage greater competition between financial institutions because the consumers will be able to compare like with like.

The second component that I would like to talk about in relation to this legislation goes to credit card repayments. This bill delivers on the Gillard government's election commitment to crack down on unfair treatment of Australians with credit cards and to help them get a better deal in the banking system. The bill will give credit card holders more control over the amount that they borrow and will also ensure that they are not charged excessive fees. It will do this by regulating the circumstances in which borrowers can go over their credit limits and abolishing fees when they do so unless the consumer has consented to opt in to a system which extends their credit in this circumstance.

This bill will also mean that credit card providers will be required to allocate repayments—and this is critical—to the higher interest bearing debts first so that families will not need to pay more interest than they otherwise should. Currently consumers do not have any control at all over how their repayments are allocated, meaning that lenders will often use repayments to pay off the part of a loan that is only incurring low or indeed no interest at all. So it is good legislation and it enjoys the support of the House.

This bill will ban unsolicited credit limit extension invitations that encourage borrowers to increase their credit limit. These unsolicited offers of additional credit can result in consumers ending up with high credit limits and often high levels of debt. We know that interest charges on credit cards are quite high. They are good money spinners. I do not take anything away from the financial institutions that offer these products. They are a critical service in our economy. But we believe that where credit is offered it should offered responsibly. That should include the offering of additional credit or the raising of credit extensions.

Another measure in this bill will require application forms for credit cards to include a key facts sheet that clearly provides information about the credit card, including the interest rate on purchases, cash advances, the annual fee and any other relevant fee or charge. Again, this measure is quite simply about increasing transparency and empowering consumers. So it is difficult to see how many of those on the opposite side of the chamber could find a reason to criticise this particular initiative. You have got to wonder why this is not already happening as a matter of good commercial practice.

Let's talk about overlimit fees. It is not hard to exceed your credit limit, and indeed this can often happen inadvertently. In most cases, credit card providers allow accounts to go over the credit limit and then apply a fee for exceeding this limit. The measures in this bill will limit the amount by which the credit limit can be exceeded to 10 per cent above the credit limit at the discretion of the lender. The fee for exceeding the credit limit will be abolished. To ensure that there are no unintended consequences from this measure, consumers can decide to opt out of this default buffer if it helps them to manage their finances better, or they can ask for a larger buffer if that is best for their individual circumstances.

These measures go some way to put in place some sensible regulation on consumer credit in this country. In closing I make the observation that, unlike many of the financial systems around the world, our banks and our financial institutions are incredibly well managed and incredibly well regulated. It is the fact that successive governments in this country have put in place sensible regulation of our financial institutions that has ensured that, unlike in many other countries in our region and around the globe, we did not see the failure of our financial institutions as the world went through the global financial crisis. That does not mean that we should rest on our laurels or that we should not be continuing to review and improve the operation of our banking and financial institutions. The measures in this legislation are a modest addition to that ongoing review and improvement. I commend the legislation to the House.

Debate adjourned.