National Consumer Credit Protection Amendment (Home Loans and Credit Cards) Bill 2011

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.