CREDIT (TRANSITIONAL ARRANGEMENTS) BILL

Second Reading

Adjourned debate on second reading.

(Continued from 11 May 2010.)

The Hon. J.M.A. LENSINK (17:40): I rise to indicate Liberal support for these bills, which represent phase 1 of further nationalisation of consumer credit laws as recommended by the Productivity Commission in May 2008 and Treasury in June 2008. The rationale for nationalisation beyond merely harmonising laws is that, in the interests of consumer protection and enforcement, it is easier for one national law to keep pace with new products, particularly with the resources of the Australian Securities and Investment Commission (ASIC) to enforce them.

COAG agreed to a package of reforms in July 2008 and an intergovernmental agreement between the commonwealth, states and territories, the National Credit Law Agreement 2009, has been signed off. I note that the commonwealth parliament passed the National Consumer Credit Protection Act 2009 and the National Consumer Credit Protection (Transitional and Consequential Provisions) Act 2009, and the effect of the bills before us in this parliament is to refer South Australia's credit laws to those commonwealth acts.

By way of background, I point out that the states and territories agreed to nationally uniform consumer credit laws in 1993 through the Uniform Consumer Credit Code, which in South Australia was enacted through the Consumer Credit (South Australia) Act 1995. This act refers our state's consumer credit powers to the Consumer Credit (Queensland) Act 1994, which is to be repealed. The new bills will replace this referral in favour of the commonwealth National Consumer Credit Protection Act and the National Consumer Credit Protection (Transitional and Consequential Provisions) Act. The existing regulatory role of OCBA and other state and territory based fair trade offices will transfer to ASIC, which already has a significant role in consumer credit regulation.

The national agreement between commonwealth, states and territories requires the commonwealth to consult prior to amending those acts as referred to. Since the signing of the agreement the parties have also agreed on exemptions, or what is being called 'carve outs', from the amendment reference, and these stipulate that the commonwealth cannot override state legislative authority in respect of state taxes, the recording of a state's interest in land, the priority of interests in real property and state laws regarding statutory rights.

It was originally expected that phase 1 of these reforms would be completed by mid-2009; however, delays have occurred. In some of the publications that were provided by the commonwealth, such as the National Consumer Credit Protection Bill 2009, the dates are not up to date because of those delays. I understand that phase 2 will include matters such as fringe lending, interest rate caps and small business credit.

In relation to the two specific acts, and I state that I am speaking to both of these cognate bills simultaneously, the Credit (Transitional Arrangements) Bill sets out definitions and powers which refer to the national legislation and codes, etc., and provides for linkages between the Commissioner for Consumer Affairs and ASIC, and repeals redundant references to consumer credit provisions within our South Australian statutes. The Credit (Commonwealth Powers) Bill adopts the national credit legislation and includes the exclusions, as I have referred to.

The new commonwealth regime largely mirrors the existing regime, as set out in the Queensland act. The new provisions are that there will be national licensing of all credit providers, which will impose a fitness and propriety test in order for them to become Australian credit licence holders. It will also become mandatory for providers to be members of an external dispute resolution scheme, the rationale of which is to provide a lower cost alternative to legal remedies through the court system. There are also new responsible lending requirements, which impose that those who provide credit are to assess the suitability of their clients to repay loans.

I had some correspondence in relation to the mortgage brokering industry—and it was the subject of questions in this parliament in, I think, April last year—and it had considerable concerns with the legislation as it was to be introduced into the New South Wales parliament. I have sought the views of the Mortgage and Finance Association of Australia, and they have written to let me know that the concerns they held with this bill at that time have been dealt with through consultation. I have also had email correspondence from the National Financial Services Federation, which fully supports the bills in their current form and which asks for parliament to pass them posthaste.

I have a few questions for the committee stage, but one I will place on the record to which the minister may be able to obtain a response is in regard to claims which were made in the Sunday Mail, and which I understand relate to the bill that was passed in the federal parliament. The Sunday Mail of 25 April this year outlines a number of personal matters and privacy breaches that it claims may take place as a result of these acts coming into operation. It states:

The new National Consumer Credit Protection Act laws will apply to all forms of credit—mortgages, personal loans and credit cards. Some banks are already...insisting on more bank statements with credit applications and quizzing customers about large cash withdrawals.

The article is making the point that making large cash withdrawals, betting or being pregnant may lead to people being refused credit. It also quotes a spokesperson from Aussie Home Loans, who says:

...the increased level of prying into consumer spending was "terrible". If a broker meets a couple and the woman looks large, it is now down to the broker to ask: 'Are you pregnant or are you just fat?'

I think we would agree that, if these claims are part of what is going to be in place as of 1 July, it would be quite disturbing, so I ask the minister to provide some evidence that that is not the case. I confess that I have not read the federal legislation but, given that through consultation various organisations have expressed their support for the bill, I will be supporting it, but I will have some questions at the committee stage.

The Hon. T.A. JENNINGS (17:48): The Greens rise today to support the Credit (Transitional Arrangements) Bill 2010 and as a corollary, the following bill, the Credit (Commonwealth Powers) Bill 2010.

The global financial crisis has shown us the danger of uncontrolled and unbridled credit provisions. Our society is one of 'buy now, pay later'. Before the global financial crisis, increasing amounts of credit were being sold by: banks, non-bank lenders, credit cards, in-store retail credit providers and so-called fringe lenders, such as payday loan providers. In fact, the Reserve Bank of Australia says that in the last decade we have become such a nation of debtors that there has been an increase in mortgages from around $20 billion in 2000 to just over $1 trillion in debt today.

Personal debt has almost doubled, from around $70 billion to just over $134 billion today, including about $35 billion in credit card debt. A well-functioning credit market is, of course, a welcome thing, and people need credit to buy houses and to ensure that our society continues to tick over. While the Greens are cautious about consumerism, we understand that credit is a necessary part of our economy.

However, we have some concerns, and we welcome these bills today because we think that there have been increasingly exploitative behaviours by credit providers. When people fall upon bad times and hard times, unexpectedly lose their job or fall ill, our credit society puts them in a very precarious position that need not happen if we had a better managed system.

As the Hon. Michelle Lensink and the minister mentioned, the recommendations have come about as a result of a recommendation by the Productivity Commission in 2008. We support that recommendation and, in particular, the recommendation to transfer the responsibility for the regulation of consumer credit to the commonwealth government, and we particularly welcome the role of the regulator of the Australian Securities and Investment Commission in this new legislation.

The recommendation to overcome shortcomings in the state-based uniform consumer credit codes is again welcomed by the Greens. As we know, the national credit regime is due to start soon, but, unfortunately, with the lack of sitting days in this place, we are in a position where we are not necessarily able to give the bill as much scrutiny as we would like. However, at this stage, the Greens are happy to support the bill. We will take on notice the concerns raised by the Hon. Michelle Lensink and, indeed, if situations arise as reported by the Sunday Mail where pregnancy and other matters such as that will be matters for lenders to raise with people, we would have concerns, too, and so we look forward to the committee stage.

The Greens have raised the issue of improving access to financial legal advice and also comprehensive remedy in the Senate. We welcome the role of the tribunals here and the improvements to consumer credit protection, particularly the reduction in the need to resort to expensive legal remedies. We would like to see better legal assistance across the board, of course, and access to recourse in relation to financial matters is something for which we will continue to push.

To sum up, the Greens welcome these long overdue reforms and we look forward to credit consumers being better informed in the future. This reform is just one part of what we expect to be greater progress in the near future and we look forward to supporting those as well.

The Hon. A. BRESSINGTON (17:52): I rise briefly to speak to the Credit (Commonwealth Powers) Bill 2010 and, in doing so, I speak to the Credit (Transitional Arrangements) Bill 2010, as it is complementary. I begin by indicating my support for the increased consumer protection provisions; namely, the responsible lending conduct and disclosure regimes, and I sincerely hope they will be as effective as is promised. I also recognise that there are significant benefits for lenders in terms of reducing red tape and national consistency. However, I make the point that I remain unconvinced that these benefits could not have been derived from cooperation between the states and the commonwealth, rather than further whittling away this parliament's legislative jurisdiction by referring it to the commonwealth.

I do not deny that problems exist within the Uniform Consumer Credit Code regime—and I quote the minister when introducing this bill—namely, the legislative gaps and jurisdictional variations, and some difficulty in efficiently responding to changes in financial service industry practice. These were initially identified by the Productivity Commission in April 2008, and it is on the basis of the Productivity Commission's recommendation that this bill is before us today.

However, I make the point that, if each state has been able to agree to refer the relevant legislative powers to the commonwealth, could not each state have agreed to address these identified shortfalls instead? Could the commonwealth not have been involved and agreements made between the state regulators and the Australian Securities and Investment Commission so that greater efficiency, consistency and expertise could result? Could our state regulator not have had its funding increased so that it could effectively discharge its responsibilities and true cooperation between the state regulators and the involvement of ASIC would reduce any delay in responding to changes in lending practices?

It has long been a concern of mine that it is seemingly becoming the preferred solution to difficult problems for the states to refer and consolidate their power in the commonwealth rather than invest in their own institutions and take responsibility for addressing any failings. I have come to suspect that there is perhaps an agenda running to erode these parliamentary statutory powers. From my reading on this topic, it would seem that I am not alone in coming to that conclusion. However, in saying that, I support the second reading of the bill and look forward to the committee stage.

The Hon. R.L. BROKENSHIRE (17:56): I support the second reading of this bill and record gratitude to the minister's office for liaising on this bill and for answering our questions. This reform has been slow, but it needs to progress. The process started under minister Rankine's tenure as consumer affairs minister, and I am pleased to see the minister getting the matter through to a conclusion. There are concerns that also arise in the national health practitioner regulation bill before us: it is the way we are legislating without tabling the legislation in this parliament. There are issues about state sovereignty, suffering death by a thousand cuts, and deals set up at ministerial council level and jammed down the throats of all other jurisdictions, and I have concerns about that. I have a couple of points that I want to put on the record on clause 1, so I will raise them then.

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 for the City of Adelaide) (17:57): There being no other speakers, I wish to make a few brief concluding remarks in relation to the second reading of this bill. This legislation involves two bills that have the cumulative effect of repealing existing South Australian consumer credit laws and implementing a new national consumer credit regime in their place. The new regime was developed by COAG and agreed in July 2008, and the responsibility for the regulation of consumer credit would be transferred to the commonwealth. It includes a range of provisions around a national licensing regime, enhancing powers of ASIC to be the national regulator, requiring licensees to observe a number of general conduct requirements, and requiring mandatory membership of an external disputes resolution body. We believe these provisions improve and enhance protections for consumers while bringing greater clarity to the industry generally.

A considerable level of consultation has occurred. In relation to these bills, ASIC hosted a national credit roadshow to help credit providers and businesses to assist consumers to obtain a better understanding of their requirements in relation to the proposed act. The roadshow visited every state and territory capital and 24 regional centres from 15 February through to the beginning of April 2010, so considerable effort has gone into informing the industry of these proposed changes.

I thank members for their contributions to the second reading stage and for their indicated support thus far. I will attempt to provide answers in committee to those questions asked during the second reading debate. I appreciate most sincerely the level of cooperation by all members around this bill, which members have worked very hard to expedite.

The national regime is planned to commence on 1 July, and the changes will mean that, if South Australia has not put this legislation through by that time, we could be left without consumer protection relating to credit and, obviously, we would not like to see that. The commonwealth's time frame has been extremely tight, and that has helped to contribute to the very tight frame we now face. I appreciate the cooperation of members. I commend the bill to them, and I look forward to the committee stage.

Bill read a second time.

At 18:02 the council adjourned until Wednesday 26 May 2010 at 14:15.