12 November 2020

SUBJECT: Consumer credit protections.
ELYSSE MORGAN, HOST: We asked the Treasurer on to the program. We didn't hear back. Shadow Finance Minister Stephen Jones join me. Stephen Jones, what's your issue with the draft legislation as it stands?
STEPHEN JONES, SHADOW ASSISTANT TREASURER: We think the laws have been working well for over ten years now. They do two simple things. They require a bank to make inquiries of a customer before issuing them with a loan to ensure that that loan is both appropriate and affordable. We don't think that's a very high bar to get over. And for the life of us, we can't understand why the Treasurer wants to backflip on a promise he gave to implement the recommendations of the Royal Commission and backflip on a law that has been serving Australians very, very well for over a decade.
MORGAN: Before we get into that what's your understanding of the motivation for the changing of these laws?
JONES: For the life of us we can't understand it.
MORGAN: The Treasurer says that it's to increase the flow of credit to businesses and households, which is obviously critical at this time in the economy.
JONES: Absolutely no argument about the need to get credit flowing to households and to businesses. We can separate the two. The National Consumer Credit Act as the name suggests applies to household consumption, not to businesses. So flow of credit is not impaired by the fact that the responsible lending laws are in place. But I think more importantly than this, the evidence that the Treasurer’s own department gave the Royal Commission was pretty clear. There is no impairment on the flow of credit as a result of these laws. And in fact, if anything they've had a very positive effect on the culture of lending, the way money is flowing in ensuring that money goes to businesses and households that can afford to repay in an appropriate way.
MORGAN: You mentioned that these laws of have served Australians well over the last 10 years. We've just had a very famous case, Westpac the wagyu and Shiraz lending case which ASIC failed to prosecute in the courts. So you could argue in that sense, it failed borrowers on that front. However, I mean the major banks that I've spoken to in researching this believe there isn't so much an issue with having the laws there, but it's just the complexity of understanding them. You know, it's a hundred pages or more of definitions around what exactly responsible lending laws is. Do you think that there is perhaps an argument to simplify these or define it better?
JONES:  Look a couple of things. I think the Federal Court got it right in the Westpac case. I think the full Federal Court got it right, and I was pleased that that was the outcome. I think the interpretation that ASIC was pushing was a very, very restrictive one which was out of step with the commercial realities of lending within, inside the banks. So with that clarification, I think some of the guidelines can be written. If there's a need to sort out some of those guidelines then that should occur. If they need a push from the Parliament to do that, then we're willing to do it. If the Government wants to codify, that is to introduce into law, the decision of the Federal Court in Westpac, willing to work with the government to do that. But let's not throw the baby out with the bathwater. We need to ensure that these consumer protection laws are in place, particularly when the economy is in such a precarious state and many households are some of their most vulnerable positions that have been in for decades.
MORGAN: The Treasurer's office has said to us that the Consumer Act will still, as they'd like to reform it, will still require institutions to show that they have the systems, policies and processes in place to ensure customers can meet their obligations without substantial hardship. The Treasurer says this isn't a watering down now.
JONES: It's absolutely a watering down. He’s just mincing with words here. ASIC has got a role. APRA has got a role. APRA is about governance, is about prudential standards. But ASIC is the cop on the boat that enforces individual rights and obligations.
MORGAN: In what way is it a watering down then do you think?
JONES: Under the new law, APRA will have a role of ensuring that governance standards and prudential standards are in place, but ASIC will not have a role of enforcing the responsible lending obligations on banks, because those obligations won't exist. They won't exist as they currently do and ASIC will have no role in enforcing them.
MORGAN: Why do you think ASIC’s been cut out?
JONES: Look I for the life of me can't understand. That's a question probably best put to the Treasurer. His own department has said the laws are working well. For life of us, we can't understand why the Treasurer wants to do this and fly in the face of clear recommendations from the Banking Industry Royal Commission.
MORGAN: Have you spoken to the treasurer or will you be speaking to him or writing to him?
JONES: Not yet. Look, the draft legislation only popped out last week. It was announced in the budget, but the details of the legislation only popped out last week. We’ll take the opportunity of this week in Parliament and the coming weeks ahead to talk to the Treasurer and his office.
MORGAN: And do you think if it comes to it that you have the numbers to block this change?
JONES: Look I think it would be extraordinary that One Nation would support these laws. I think it would be extraordinary if the National Party, given that this is the party of John Wakka Williams who did so much to get the Royal Commission up and running and has been a true champion of consumers and farmers rights ensuring that responsible lending occurs, he himself a victim of irresponsible lending practices by the banks, it would be extraordinary of the National Party, the party of John Wakka Williams allowed these laws to get through.