SUBJECTS: Launch of National Consumer Credit Law, unfair mortgage exit fees, Victorian enforcement of unfair contract terms, Cabinet positions
JOURNALIST:
Could you just explain to us exactly what this means for consumers in Australia?
BOWEN:
Well, what it means is that consumers in Sydney, Perth, Melbourne, Adelaide will have the same set of protections for the first time and those protections will be enhanced. ASIC will have the power, for example, to take action when it comes to unfair exit fees. They'll have the power to take action on any unfair contract or any unconscionable contract when it comes to financial services. So consumers will have that extra peace of mind when they come to dealing with credit that the protections are there and they're consistent across the country.
JOURNALIST:
So what kind of penalties will operate [inaudible] if they breach these dot points in your press release?
BOWEN:
The same penalties that currently apply under the Corporations Act and they range across the various penalties. But of course, I think that holders of financial services licences and other providers will be doing their best to avoid any sort of penalties.
JOURNALIST:
Are these reforms targeting the banks?
BOWEN:
Well, any reforms in the financial services space obviously impact on banks, but banks aren't targeted in particular. Of course, there are a range of financial services providers across the country which aren't banks and which aren't authorised [inaudible] institutions, and these provide a level playing field across the board to ensure adequate consumer protections.
JOURNALIST:
How varied are these guidelines across different states?
BOWEN:
Well, there is a uniform consumer code, but of course states and territories have the power to act outside of that. Now, for the first time, we'll have a national set of rules which can't be varied between states and territories.
JOURNALIST:
So how varied were they originally, before this?
BOWEN:
Well, there's a range of variations across states and territories. Some states, for example, have interest rate caps; others don't. So there are substantial variations across states and territories.
JOURNALIST:
Minister, is the Government also working on a broader package of reforms to increase competition [inaudible]?
BOWEN:
We always have a mind to competitive pressures in banks, in particular. We've said all along that we're open minded about that. We've had, for example, our [inaudible] at the Australian Office of Financial Management; the issue of various types of bonds to ensure that there's competition through the global financial crisis. The steps that we're talking about today in terms of exit fees will play a particular role in terms of promoting banking competition. We're always open minded about what further steps might be necessary.
JOURNALIST:
So what's the real difference between today and July 1? What's the real difference for a consumer?
BOWEN:
Well, the real difference is that a consumer, no matter where they are across Australia, will know that they have the same protections and they'll know that those protections are enhanced, that any unfair term in their contract can be struck out. I think that's the key difference, that they know that they can rely on fairness.
JOURNALIST:
In terms of the banks [inaudible] mortgages, how would you describe the conduct of banks [inaudible]?
BOWEN:
Well, look, banks have been complying with the law, and so I'm not particularly critical of their conduct. But what I am saying is that it's necessary to change the law to ensure that fees are appropriate, that fees don't have an anti-competitive impact and that fees don't gouge consumers. There are some banks and financial institutions which have lower exit fees than others. I welcome, for example, the support of NAB on the weekend, Cameron Clyne's contribution yesterday supporting the Government's intervention. I think that's a positive contribution from NAB, which I welcome.
JOURNALIST:
[inaudible]
BOWEN:
I think there's no question that some exit fees have been too high and have been anti-competitive.
JOURNALIST:
Minister Bowen, are there a couple of things that you can identify that'll change on July 1 that you would say would be most advantageous to consumers?
BOWEN:
Well, I think across the board the removal of unfair contract terms from financial services contracts in particular, which is what we're talking about today, are substantial. The increase in availability of hardship provisions to mortgages of up to half a million dollars, I think, is a very substantial step forward. So it's very difficult to single one out when they are such broad ranging reforms, but I think the removal of unfair contract terms is probably the most substantial.
TONY ROBINSON:
Can I just say on that, we've had in Victoria, in our Fair Trading Act, unfair contract terms provisions for several years. We're the only state to have had that. The Commonwealth has seen the benefit of those provisions and is now including those into the national consumer law. Over the past few years, Consumer Affairs in Victoria has used that power quite wisely. It's been very, very useful in taking on institutions that have put into their contracts unfair arrangements. It's been used [inaudible] telecommunications providers. It'll be put to good use, I'm sure, in the credit field.
JOURNALIST:
Minister Bowen, have you had any chats with Ms Gillard in the last few days about your position or future position?
BOWEN:
I'm not in the habit of revealing my discussions with the Prime Minister. She'll be making her announcements when she's ready.
JOURNALIST:
[inaudible]
BOWEN:
I'm perfectly happy in the job I have at the moment.
JOURNALIST:
What about Mr Rudd? Do you think he should be given a role?
BOWEN:
This is a matter between Kevin and Julia, and Julia has said that she sees a future for Kevin in terms of contributions to the party, but what that contribution is is a matter between her and him.
JOURNALIST:
Would you like to see him on the frontbench?
BOWEN:
That's a matter for her and him.
JOURNALIST:
[inaudible]
BOWEN:
We remain focused on the job at hand. The job at hand is doing things like we're doing today, delivering things like paid parental leave, delivering welfare reform, delivering the NBN. We remain focused on that.
And, of course, the election will be in the not too distant future, and we remain committed to pointing out vigorously the difference between our approach and the approach of the alternative.
JOURNALIST:
Mr Robinson, can I just ask you, I can't remember who said it but it was said earlier today that Victoria was the benchmark, so in practice will these changes on July 1 be much different in Victoria?
ROBINSON:
I think they will. A few years ago, as I said, the law was such a hodge podge that we saw too many predatory lenders, too many payday lenders, too many people out there confident enough that they could escape the eye of the law and the law wouldn't catch up with them. The fact that we've now moved to a uniform law, with conduct provisions and [inaudible], the fact that right around the country unfair contract terms used against people who are doing the wrong thing by consumers, I think it really does create an entirely new environment and you'll see standards of conduct across [inaudible].
JOURNALIST:
Will there be more vigorous [inaudible]?
ROBINSON:
Well, the fact that we're now able to work with a federal agency on a common set of laws will ensure, I'm very confident, that the scrutiny applied, whether it's the top end of town or in a suburban setting [inaudible], you will see standards improving, you will see it's much easier for agencies to pick up [inaudible] someone who's doing the wrong thing by consumers.
JOURNALIST:
Chris, why has it taken so long to see these reforms [inaudible]?
BOWEN:
Well, as Tony and I both said in our remarks, this has been something talked about for decades, and I think frankly that everybody can take responsibility for that. Commonwealth governments haven't been consultative enough; state and territory governments may have taken a parochial approach, not the approach in the national interest. Over the last two-and-a-half years, we've been able to knock that down. The Commonwealth's taken a very open and conciliatory and consultative approach to our colleagues in the states and territories, and the states and territories in return have acted in the national interest.
And as I said in my remarks, I thank each of them – Tony in particular, who took a leadership role in promoting the national approach – but all of the state and territory Ministers for their constructive approach. This is something we first started working on in November and December 2007, but it takes, as I say, a lot of consultation, a lot of work, to get to this point and you do need to give time for banks and financial institutions to adjust to new national arrangements. So we did give that an appropriate amount of time.
JOURNALIST:
Is one problem, Minister Bowen, with the current regime that dodgy operators base themselves in states where the laws are weakest?
BOWEN:
No –
JOURNALIST:
[inaudible] customers from interstate?
BOWEN:
Well, no, I don't think that's a particular problem, in fairness, because laws do apply not only where the financial service is provided; they operate strongly where the resident lives. So I'm not particularly concerned about that, but I think any disconnect of any state and territory regulation across the board does allow some opportunity for arbitrage, and any opportunity we can provide to minimise that through a nationally consistent approach is welcome, and that's exactly what we're doing.