VIRGINIA TRIOLI:
Returning now to the Rudd Government's plan to help out people struggling to pay mortgages of up to $500,000 if they get into economic difficulty. Senator Nick Sherry is the minister responsible for superannuation and corporate law and he joins us now from Canberra.
Senator Sherry, good morning, thank you for joining us.
NICK SHERRY:
Good morning, Virginia.
VIRGINIA TRIOLI:
First of all, so take us through this proposal that I think is going to be announced today. If someone loses their job or gets into financial difficulty, if they have a mortgage of a certain level they can apply to the banks for leniency.
NICK SHERRY:
Well, this will be a key change, one of the changes we announced today and moving the regulation of consumer credit from the states to the Commonwealth, single standard national regulation of financial services for the first time.
Presently, if you are experiencing hardship, you can go to a financial institution not necessarily just a bank, and argue hardship up to just over $312,000. We're increasing that limit to half a million dollars and if the financial institution says no to your hardship then again for the first time we're introducing an independent low-cost independent dispute tribunal which will be able to hear and determine your argument if the financial institution doesn't agree.
VIRGINIA TRIOLI:
So what hardship do you have to be in, what do you have to demonstrate?
NICK SHERRY:
Well, typically, hardship would be perhaps, you become unemployed and you're starting to fall behind on your repayments and then the option solutions are some level of suspension of either the interest or the primary debt.
VIRGINIA TRIOLI:
And what does the bank want to see usually in this circumstance. I guess they need some evidence that you can repay but if you've lost your job, you can't really show that evidence, can you?
NICK SHERRY:
Yes, but I think they take into account all of the circumstances. If you are re-employed say six months or a year down the track, they will determine your current level of sayings, your record, what your record of repayments has been like, whether someone else has got a job. There are a whole range of circumstances they'll take into account.
VIRGINIA TRIOLI:
But the banks aren't obliged to necessarily sign off for this, are they. If you lift the ceiling, more people are able to make application for there to be some sort of reconsideration of the credit contract but the banks don't have to go through with it.
NICK SHERRY:
Well, what will happen is, if the bank doesn't agree, obviously you go to the bank and put your case. There is an appeals process. The new laws, and I'll be outlying this in greater detail later today.
The new laws for the first time require a credit provider to be a member of an independent low-cost independent dispute resolution. And they have to sign up to that and they have to agree to the decisions of the new tribunal process that we're introducing as a result of the overhaul of financial credit laws in Australia.
VIRGINIA TRIOLI:
Now what else comes into place as part of that, that single standard that you're speaking about?
NICK SHERRY:
Well, a key change, key major new change to these laws and what we call responsible lending, for the first time in Australia, the lender or the agent of the lender, a broker, will have to ensure that the product that they sell you is suitable and importantly you have a capacity to pay for that particular product and this is the first time in law in Australia where we will have a responsible lending provision introduced.
VIRGINIA TRIOLI:
And also, national consumer protection laws.
NICK SHERRY:
Yes. What will happen is, I've already mentioned a national low-cost independent...
VIRGINIA TRIOLI:
Yes...
NICK SHERRY:
...tribunal, national licensing of providers and brokers, proper education standards, a sweeping overhaul to ensure single standard national regulation in Australia of all financial services.
VIRGINIA TRIOLI:
Senator Nick Sherry, we only have a minute left but I do want to get your response to the news that the independent remuneration tribunal has handed you and all your fellow federal MPs an increase in your electorate allowance which amounts to about $90 a week, three times what aged pensioners are calling for in terms of an increase to their pension. Will you keep the money, will you give it back, do you think you deserve it?
NICK SHERRY:
Well, I don't keep the money because it's the electoral allowance it doesn't go into my pay, doesn't go into my pocket. It's for expenditure in the electorate and typically I would spend, and I spent all of mine on things like donations to sporting and community organisations, raffles, donations to individuals.
They're the sorts of expenditures, that's what it's - that is what it's for, it's not pay, as such.
VIRGINIA TRIOLI:
Oh, but it gets rolled over into, sort of, general revenue that an electorate office has to work with which includes the MP salary.
NICK SHERRY:
Well, it doesn't come into my pay, I don't take it home, I don't spend it on myself. It is meant for and is used for electoral purposes...
VIRGINIA TRIOLI:
Okay.
NICK SHERRY:
...and as I've said, I spend all mine and community organisations, sporting organisations, organisations of that type, that's where the money goes.
VIRGINIA TRIOLI:
All right, Nick Sherry, good to have you on the program, thanks so much.
NICK SHERRY:
Good morning.