TONY EASTLEY:
One of the outcomes of yesterday's COAG meeting was a long-awaited scheme for the national regulation of all forms of consumer credit. From June next year, the Federal Government will oversee the regulation of mortgages, margin lending, payday lending and financial advisory services. A national scheme rather than the current state by state regime is particularly important given the financial turmoil around the world at the moment.
The Minister for Superannuation and Corporate Law, Nick Sherry, spoke to our business editor Peter Ryan.
NICK SHERRY:
Well, we're going to see national licensing of providers, particularly brokers and advisors. We're going to see a low-cost disputes resolution system and we're going to see the introduction of much stronger requirements in respect to responsible lending. So areas like credit cards, payday lending, investment properties, mortgages for investment properties, are areas that do need an upgrade.
REPORTER:
In recent years, average Australian households have been loaded up with debt, thanks to the era of easy credit. With the credit crunch now a credit freeze, do you think those days are over?
NICK SHERRY:
Well, I certainly think the global financial crisis - the credit crunch - has impacted on this type of lending. However, we need to, as I say, make a strong system stronger and minimise areas of abuse in areas such as broking, mortgages for investment properties, payday lending and credit cards. I think we can do more.
REPORTER:
Just on credit cards, we all know that a lot of offers arrive in the mail and people are often urged to increase their limit on credit cards. Will there be tighter regulation in that area?
NICK SHERRY:
Well, I certainly think it's time to have a hard look at some of what I would call the push selling that unfortunately some consumers don't understand the implications of - in terms of the debt they can be potentially loaded up with.
REPORTER:
With the sharemarket sinking at the moment, margin loans are being called in as values plummet. Are you concerned that during the sharemarket boom, people got into margin lending deals that they didn't really understand or had those deals pushed onto them?
NICK SHERRY:
Margin lending, in fact, is an area that the states did have responsibility for in respect to credit provision. But there is no regulation or supervision of this area at all. For the first time, in fact, we will have regulation and supervision of margin lending products which will be added to the Corporations Act. This is an area where obviously there's been significant concern given current market conditions. It's an area which has expanded dramatically in sales over the last five to six years, so, for the first time, I'll actually have some regulation and supervision of margin lending.
REPORTER:
One area of growth in recent years has been interest free offers over four or five years for kitchens or bathrooms and the like. Are you concerned that some households who've gone in for these on the never-never might get a rude and expensive shock if they don't pay the lot back during the period.
NICK SHERRY:
Well, you know, I am concerned that there are some consumers who don't understand some of the terms, the interest, the debt that can result as a consequence of these arrangements. So, against this backdrop of a global financial crisis, it's a good time to make a strong system much stronger. Single national standard regulation will bring that.
TONY EASTLEY:
The Minister for Superannuation and Corporate Law Senator Nick Sherry speaking to Peter Ryan.