24 November 2020

SUBJECT: The Liberals debt disaster.
STEPHEN JONES, SHADOW ASSISTANT TREASURER: It’s great to be here at the IIllawarra Legal Centre with Maroun and the staff, the financial counsellors. The Illawarra Legal Centre is one of 90 organisations nationally who signed a letter calling on the Government to withdraw its plan to axe responsible lending laws. We support them.
The number one recommendation of the Hayne Royal Commission was to keep the responsible lending laws in place. They set a very low bar for banks and lenders. If you’re going to offer credit to somebody you must ensure that that credit product is both affordable and suitable. You’d think that that was just good business sense, but it hasn't been.
We know the Royal Commission received over 10,000 submissions from consumers who’d somehow been damaged because of poor lending practices and poor behaviour of our financial institutions. If the Government gets away with its plan to dump the responsible lending laws, we can set the date for the next banking and financial industry Royal Commission.
It's a pretty simple prospect. Implement the recommendations of the Royal Commission in full. Keep the responsible lending laws in place. If there really is an issue with the flow of credit, happy to work with the Government on some sensible changes. But every piece of evidence, including evidence that the Treasury themselves gave to the Royal Commission, makes it pretty clear that the responsible lending laws are helping good lending, they are providing stability to our financial system and ensuring that we have smooth running of credit in our economy. If anything, they're helping the flow of credit, not hindering it. Happy to take some questions.
JOURNALIST: Do you think the banks would be really willing to risk everything again after the Royal Commission? Don’t you think they’ve learnt their lesson and are unlikely to push these boundaries?
JONES: I find it extraordinary. I have had a lot of conversations with a lot of bank CEOs and bank employees over the last four weeks. Not one of them has said, we asked for this. This is a solution in search of a problem, a problem that does not exist. I think the banks do want to do the right thing. I think the banks themselves acknowledge that these laws have been a good brake on bad behaviour.
JOURNALIST: The age-old adage is borrower beware. Do you agree with that?
JONES: I think we need both borrowers and lenders to do the right thing. Of course, borrowers have got to provide honest information to their banks when they're seeking a loan. But it's also incumbent upon the banks to do the right things. A lot of the people who are applying for loans with banks, maybe English is their second, third or fourth language. We've seen lots of examples in the Royal Commission of people with mental health problems, with learning disabilities, with language problems who simply did not understand and could not afford the credit products that they were being offered. So there's an obligation both ways.
You might think that this only applies to people who, I don't know, perhaps didn't finish school and maybe aren't the sharpest tool in the box. But a good mate of mine by the name of John Williams, you probably better know him as Wakka Williams, was a senator in the Australian Parliament. He lost the family farm because a salesman came knocking on his door and said I've got a great deal for you, a foreign denominated loan over your farm. It all went south. He lost the farm, but he didn't lose his passion to ensure we got a Royal Commission and we got the right sort of changes in place. I'm on a different side of politics to John Wakka Williams, but I'm 100 percent on his side when he says we've got to keep these laws in place.
JOURNALIST: Give us a snapshot of what the Illawarra community looks like if these changes come into effect post March when all the support, the COVID support, is gone. If anyone is caught up in this kind of trouble, what's your scenario for the economy of households around the region?
JONES: I'm going to ask Maroun to say a few words on some local issues in a moment. But one thing I know is this, that within the Illawarra there's a lot of households, a lot of businesses, doing it tough. We want to ensure they have access to the credit that they need. We don't want people getting in above their head. An obligation on households, an obligation on banks, I think the balance is right to keep the laws in place.
MAROUN GERMANOS, ILLAWARRA LEGAL CENTRE: My full name is Maroun Germanos. I'm a financial counsellor here at the Legal Centre. I've been here for 30 years.
JOURNALIST: What's your reaction to I guess this push to relax lending laws?
GERMANOS: Well as a financial counsellors, we fought for years to try and assist clients who basically having financial difficulties. And many of them have borrowed money, but they can't afford to repay. And then it took us years until 2009 to get the responsible lending laws introduced in Parliament. And since then we started to see some light at the end of the tunnel. Lenders started to behave, started to make sure that they don't lend money unless people can afford to pay it back. Now we have the issue of reversing all of that. And now we will have people like gamblers, who go online and borrow money. Our books are full of people with $10, $20, they go online borrow money without any assessment and they come to us to try and sort it out for them. What's just with the solution for them? In many ways, bankruptcies. So we're not against people borrowing money. We're not against banks lending money, as long as it is responsible and you can afford to pay back.
People tell me when they apply for a loan, and I just say they didn’t realise you can't pay? They said, listen, well I thought the bank knew if I can or can't when I made the application. I told them everything I know. And then still people get overcommitted and end up in trouble.
JOURNALIST: What would you say to the federal government then about this?
GERMANOS: I’d say reverse your decision and abandon this attempt to basically reverse responsible lending laws. Keep it as it is and improve it, and support and implement the recommendation of the Royal Commission into banking.
JOURNALIST: What are the implications for the Illawarra? What happens to this community?
GERMANOS: The implications for the Illawarra basically is the implications for our clients and fun and lots of vulnerable people around here. Like they borrow a lot of money that they can't afford to repay, which means more bankruptcies which means lots of people can't sleep at night. People tell us that this is the last time I'm going to borrow money. I didn't know it's going to happen to me.
Like some people with mental illness, they sometimes consider contemplate suicide. Sometimes they basically contemplate going to the loan sharks. You know, borrow money to pay off another loan. And just borrow money to pay for food because they paid the credit card because somebody called them and said, pay or else. People still think they can go to jail if they don't pay their debts, which is not true, but they still believe it.
JOURNALIST: Who are the biggest predators in this sort of market? It’s the banks who have come under intense scrutiny from the Royal Commission. But what about other lending practitioners?
GERMANOS: There are lots of smaller lending practitioners than big companies. We call them fringe lenders or payday lenders. And we've been calling for years for these companies to be regulated. And there are laws already, like pieces of legislation, already sitting somewhere in Parliament. On ministers’ desks or in their drawers, waiting to be introduced to Parliament, about two three years now. I can't remember exactly how many years. And we want those laws to be introduced so vulnerable people who goes to the Cash Converters of this world to be protected so they don't get charged a hundred percent, a thousand percent interest, and lots of fees and charges.
JOURNALIST: A change like this as we recover from COVID, I mean what are your greatest fears about a change like this?
GERMANOS: Well, my greatest fear is just like people. If these proposed legislations are implemented, the people who are suffering will suffer more. And then they'll be in more debt. And we will be working a lot harder to try and solve it for them. But we'll do what we can. We will be calling on the Government to give us for funding then, if they did.