Legislative Council Fifty-First Parliament, Third Session (51-3) 51 3 Parliament of South Australia Legislative Council published Question Time Mortgage Broking MORTGAGE BROKING The Hon. J.M.A. LENSINK Legislative Council MORTGAGE BROKING The Hon. J.M.A. LENSINK (14:39): I seek leave to make an explanation before asking the Minister for Consumer Affairs a question about mortgage broking. Leave granted. The Hon. J.M.A. LENSINK Legislative Council The Hon. J.M.A. LENSINK: I have been contacted by concerned constituents in relation to proposals being floated through COAG and, in particular, the draft from COAG and the government which suggests that mortgage broking err on the side of shifting the risk to mortgage brokers rather than banks. A fairly standard letter, which has been drafted on behalf of the industry, states: ...home buyers will be adversely affected by three major defects...major housing affordability [problems would occur]...as brokers originate almost 40 per cent of the value of all home loans. The defects outlined are, first, that brokers, as opposed to the lender, would be required to determine independently a borrower's capacity to make repayments; secondly, that borrowers may seek a stay of enforcement of their mortgage against the lender if the borrower has a dispute with their broker; and, thirdly, that a substantial increase in documentation would be required on behalf of brokers. An article appearing in The Australian some 12 months ago, entitled 'Rudd to slice red tape—national streamlining on the way—COAG agenda', refers to the fact that a number of additional issues are being placed on the agenda which is squeezing out the timetable in terms of reform. My questions to the minister are: 1.	Does she support those proposals as reported in the green paper? 2.	Is she aware of the concerns of the mortgage broking industry, and what does she intend to do about it? The Hon. G.E. GAGO Legislative Council Minister for State/Local Government Relations, Minister for the Status of Women, Minister for Consumer Affairs, Minister for Government Enterprises, Minister Assisting the Minister for Transport, Infrastructure and Energy The Hon. G.E. GAGO (Minister for State/Local Government Relations, Minister for the Status of Women, Minister for Consumer Affairs, Minister for Government Enterprises, Minister Assisting the Minister for Transport, Infrastructure and Energy) (14:41): All credit and consumer laws are undergoing a complete review and reform process in line with attempts to develop a nationally consistent approach with that legislation. The principle is very sound and will eventually result in improved efficiencies right throughout the nation where quite arbitrary rules around licensing, credit rules and a range of other things differ between states for not necessarily apparent reasons. An enormous COAG program is presently being undertaken to bring about national consumer legislation and also nationally consistent credit legislation. As part of those national reforms to the credit industry, the Ministerial Council on Consumer Affairs has been looking at improving legislative controls, particularly in the finance broking industry. That council drafted and released a consultation package in November 2007 which outlined proposals for national regulation for finance brokers. Since that time a review by the Productivity Commission has recommended that the commonwealth government take over the regulation of consumer credit. Then, in July 2008, in its communiqué the Council of Australian Governments agreed that the commonwealth should take over responsibility for the regulation of mortgage broking, margin lending and non-deposit lending institutions, as well as remaining areas of consumer credit. Some of the key elements of the regulation of credit include: enact and extend a uniform consumer credit code as commonwealth legislation; license all industry participants; establish ASIC as the national credit regulator; require industry participants to be members of an approved external disputes resolution (EDR) scheme; regulate credit-related advice; impose general conduct requirements, including responsible lending; and regulate marginal lending. One can see that quite a comprehensive program has been undertaken. All parties that lend or broker finance, or advise on debt finance for consumers under the UCCC, will be required to be licensed. The commonwealth has indicated that aspects of the licensing framework are to include things such as training and competence obligations, organisational competence, insurance requirements, accountability for a range of services offered, requirement to observe general conduct obligations (including some aspects of responsible lending) and compulsory membership of an EDR scheme. To the best of my knowledge, this has not been finalised and discussions are still underway. I am aware that a range of stakeholders are or will be potentially affected by these changes. The aim of these new schemes is overall to reduce red tape and, as I said, make the credit rules more consistent, efficient and effective, while still preserving basic protection. So, the work is underway and discussions are continuing, and it is important that those industry stakeholders who are or will be potentially affected continue to contribute to the debate and the considerations.