House of Representatives
Monday 15 February 2021
I rise to speak tonight on the Financial Sector Reform (Hayne Royal Commission Response No. 2) Bill 2020. As we have heard, the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry was finalised on 1 February 2019. As we know, the government's response was publicly released alongside the final report on 4 February. In August 2019, the government indicated that the vast majority of legislation required to implement the FSRC's findings would be completed and introduced to parliament by the end of 2020. More than half of the recommendations made by the banking royal commissioner, Kenneth Hayne, either have been abandoned or are yet to be fully implemented.
Tonight, I want to spend some time on what that actually means and what the practical implications of that lack of reform have meant to the sector. I will be encouraging all members of the House to support the second reading amendment circulated in the name of the member for Whitlam and moved by the member for Rankin and particularly to recognise that these recommendations of the Hayne royal commission have taken far longer to be implemented than was promised and that the government have failed to establish a compensation scheme of last resort, as recommended by the Hayne royal commission, and have actively rejected the very first recommendation of the royal commission.
Here we have a royal commission which the government—let's be honest—did not want. The inquiry and the royal commission into the banks was fought tooth and nail by every member of the government. The government were dragged kicking and screaming until we finally had justice for victims of the banking system in Australia. Then the very first recommendation has been rejected. In fact, by proposing to repeal the responsible lending obligations in the National Consumer Credit Protection Act 2009 for the vast majority of credit contracts, the government is doing the complete opposite of what Commissioner Hayne recommended. I'll talk about that a little later in my remarks tonight, if time permits.
I want to focus now on what the government should have done—and, in my opinion, what the government still has time to do—in regard to the outrageous scourge of payday lending in this country: of vulnerable Australians being ripped off due to people making profits from those who can least afford it. This takes us to the government and its lack of action when it comes to the recommendations and policies that protect Australians around lending. The reckless behaviour of payday lenders has gone on long enough. I would take a bet that I have spoken more than anyone else about payday lending, in this parliament and the last parliament. I'd have to check the Hansard, but I'd back myself in on that from about the end of 2016, after I visited St Ives Shopping Centre in Goodna. I was approached at Woolworths by about three or four really well-dressed ladies who were wearing badges. They were getting supplies from Woolworths for their op shop, and they came up to me and said, 'Oh, you're Milton Dick, aren't you?' I was newly elected and pretty impressed that they knew who I was. They read the riot act to me and said, 'What are you going to do about payday lending?' I said: 'What can I do? I've just been elected to the parliament.' They said: 'We are sick and tired of people coming to the St Alban's welfare ministries week after week with mounting debts. People are being tricked and conned into taking out payday loans. They are buying fridges, which should cost about $700 or $800, for $4,000 to $5,000. They are taking out loans to fix their cars for around $1,500, which ends up costing them $5,000.'
I vowed from that moment onward that I would do everything I could to give justice to all of those people out in the community. When I looked into this a little further, I recognised that the then Turnbull government had planned to do something about it, and all credit to Kelly O'Dwyer in her former portfolio, as Minister for Revenue and Financial Services. She delivered a review with 20 recommendations, two of which would crack down on payday lending, one specifically to deal with household goods. The now Deputy Prime Minister of Australia, Michael McCormack, stood in this chamber proudly as the then Minister for Small Business and said that he would deliver those reforms. He presented a draft exposure of a bill to do exactly what the government had promised to do with their own review. Then what happened? The 'parliamentary friends of payday lending' in the government got their hands on it and ripped it up, and we've heard nothing since.
Since then the Independents, Labor members of parliament and a whole range of stakeholders and individuals have stood up and said, 'Please take action.' The government have not heard their pleas. Between April 2016 and July 2019, just over 4.7 million individual payday loans have been written, worth approximately $3.09 billion. I realise this is big business, and I know some of those loan sharks will be monitoring this speech. Every time I speak about this they email me about the speech I've made and start trolling me on social media, which I wear as a badge of honour.
Two years ago I did get a letter back from the then Prime Minister of Australia, Malcolm Turnbull—the only letter I've had personally addressed to me by a prime minister of this country—saying: 'Yes, we're going to take action. You've got my solemn commitment. I will take action. It will be delivered, and you can be part of that.' I've got it framed in my electorate office at Forest Lake. As the member for Barton said today, he was not interested in the credit; he was just interested in it actually happening. Two weeks later the members of the government rolled him. It was just that little bit too late. Since then I've written to minister after minister after minister over and over again. Hopefully, a ministerial adviser will be listening to this and adding it to their dart board in their offices yet again.
I know I speak for the people who have been ripped off. Around 15 per cent of payday loan borrowers end up in a debt spiral, which leads to events such as bankruptcy. I also speak tonight for the women who are accessing payday loans, the number of which has jumped by 28 per cent since 2016. Of course, we now know about the cycle of debt addiction that affects a lot of people who are being preyed upon because they are desperately in need of cash—because of insecure work, because of falling wages and because there are a million people unemployed. Eighty-six per cent of loans are now accessed through a website, on a mobile or a tablet. Just over the last couple of weeks, I've seen on my Facebook page—and residents have showed me on their Facebook pages—generous payday lenders offering to help with back-to-school products. They aren't helping with back-to-school products; they are offering a loan. They are offering a get-rich-quick scheme that's too good to be true, over and over again.
While the Morrison government sit and do nothing—while it would be bad enough not to look at the small amount credit contract review, which they promised to do—they are now planning to make it easier for people to have access to unfair credit. They are seeing reforms being watered down—not recommended by the royal commission, not recommended by the royal commissioner himself, but in fact doing the opposite. So what does this all mean? What does it mean if these reforms happen? I refer to a media report in The Guardian on Thursday 4 February entitled 'Australia risks household debt disaster if responsible lending laws scrapped'. It said that Australia's predatory lenders are set to see a household debt disaster—according to an alliance of consumer rights groups which I'm very proud to stand alongside. The media report said responsible lending obligations, as we know, were introduced in 2009 through the National Credit Protection Act, which attempted to stop risky lending by the banks. It said that the alliance—including a whole range of community organisations, financial counsellors and a number of great community advocates—said the inadequate consultation for a change is unacceptable and that 'this bill would only serve to extend the impacts of the economic downturn and it risks prolonging or worsening the financial hardship of Australians through bad debt in the wake of the COVID-19 pandemic, just as government supports such as JobKeeper and JobSeeker come to an end'.
The government's bill will also make significant changes to the laws governing small amount credits, usually referred to as payday loans and consumer leases. What this really means is that a double whammy is coming to vulnerable Australians. We will see a JobKeeper cliff happening in March. We are seeing communities across Australia with record unemployment. We are seeing government ripping away support—rolling back support in March, in a matter of weeks.
I recently travelled to North Queensland and met with a number of businesses. I heard from tourist operators in Cairns just last week, as part of Labor's pandemic recovery job and industry task force, with the Leader of the Opposition. Businesses are crying out for relief. They are worried if JobSeeker goes. All those employers are looking over a cliff in a matter of weeks. The city of Cairns has more people on JobKeeper than any other postcode in Queensland. So you are seeing all these people with government support being ripped apart, and the government is saying it's all Premier Palaszczuk's fault, it's all the border's fault or some nonsense.
The minister for tourism visited Cairns last week on the same day as the Leader of the Opposition, and he promised absolutely nothing for the tourism industry. One operator said they normally have about 570 boats out on the ocean, and they have collapsed right down to only a handful. And we're seeing these credit reforms in the bill and the second reading amendment that we're dealing with tonight to put those people even further behind.
We know that consumer groups have said the changes will weaken the system and make it easier and easier for people to be ripped off. This constitutes a broken promise. A joint submission to the Senate inquiry led by the Consumer Action Law Centre said looser lending would reduce the incentive for banks to comply with lending standards because of the removal of penalties. It said:
Repealing responsible lending obligations in the national credit legislation will remove individual legal rights to challenge lenders about their lending decisions and remove the penalty that can be awarded by the regulator ASIC.
So we're basically saying it's okay to be ripped off; it's okay for the banks to go back to where we were. The recommendations put forward by the royal commission are now going to be weakened. The ironical part of this is that the banks don't even want this; the banks didn't ask for this. All consumers rely on their lender to make assessments and let them know what amounts they can borrow and what is affordable. We now risk lenders going back to being about selling credit rather than ensuring loans are affordable.
I pay credit to Gerard Brody, the chief executive officer of the Consumer Action Law Centre, a fantastic advocate, and his team, who are speaking out every single day and trying to make the government listen—that loosening responsible lending practices will make things worse. The proposed legislation will wind back responsible lending obligations to credit contracts under $2,000 and consumer leases. The current legislation, as I've said, introduced in 2009, requires banks to check the financial situation and objective of each borrower applying for credit. The soaring loan numbers contradict the premise of the legislation that the economy was crippled by a lack of credit flow. The ABS lending data indicates that the growth of new loans is at a record high, and this includes occupier home loans. Commitment to a new dwelling of significant high-end value of total loan commitments, including personal finances, is also rising. So it does seem to be a broken promise by the government—their promise to implement the recommendations. The commissioner was clear that responsible lending provisions should be retained and more adequately enforced. So I say again to the government this evening—to the ministers and the members of the government—you gave a commitment to make sure that we would crack down on payday lenders and to make sure that there was responsible lending in this country. You gave a commitment to make sure that the recommendations of the royal commission would be implemented. For goodness sake, listen to what the experts are saying. Listen to what consumers are saying. Stand up for them just this once instead of standing up for the banks in this country.
