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1645 LEGISLATIVE ASSEMBLY Wednesday 1 June 2011 __________ The Speaker (The Hon. Shelley Elizabeth Hancock) took the chair at 10.00 a.m. The Speaker read the Prayer and acknowledgement of country. BUSINESS OF THE HOUSE Suspension of Standing and Sessional Orders: Bills Motion by Mr Brad Hazzard agreed to: That standing and sessional orders be suspended to permit the resumption of the adjourned debate and passage through all remaining stages at this or any subsequent sitting of the Credit (Commonwealth Powers) Amendment (Maximum Annual Percentage Rate) Bill 2011. BUSINESS OF THE HOUSE Suspension of Standing and Sessional Orders: Inaugural Speeches Motion by Mr Brad Hazzard agreed to: That the business before the House be interrupted: (1) at 11.30 a.m. to permit the presentation of an inaugural speech by the member for Smithfield; and (2) at 6.20 p.m. to permit the presentation of inaugural speeches by the member for Wollondilly, the member for Heathcote and the member for Drummoyne. BUSINESS OF THE HOUSE Suspension of Standing and Sessional Orders: Routine of Business Motion by Mr Brad Hazzard agreed to: That standing and sessional orders be suspended at this sitting to provide for the following routine of business after the conclusion of the motion accorded priority: (1) Government business; (2) Notices of Motions (General Notices); (3) order of the day (petitions); (4) private members' statements; (5) at 6.20 p.m. inaugural speeches; and (6) the House to adjourn without motion moved at the conclusion of inaugural speeches. CREDIT (COMMONWEALTH POWERS) AMENDMENT (MAXIMUM ANNUAL PERCENTAGE RATE) BILL 2011 Agreement in Principle Debate resumed from 27 May 2011. Ms CHERIE BURTON (Kogarah) [10.07 a.m.]: The Opposition will not oppose the Credit (Commonwealth Powers) Amendment (Maximum Annual Percentage Rate) Bill 2011. The object of the bill is 1646 LEGISLATIVE ASSEMBLY 1 June 2011 to amend the Credit (Commonwealth Powers) Act 2010 to allow for the repeal of provisions of that Act that provide for the maximum annual percentage rate for credit contracts when appropriate legislation has been enacted by the Commonwealth to address that matter. This morning I was informed that the Commonwealth had indicated it would enact this legislation in its spring session later this year. Accordingly, this bill removes the current expiry date of 1 July 2011 for provisions that specify a maximum annual percentage rate for credit contracts and enables those provisions to be repealed by the Governor by proclamation. Essentially, as the Minister said in his agreement in principle speech, last year when Labor was in government the Parliament passed legislation to transfer regulatory responsibility for consumer credit from New South Wales to the Commonwealth. In her speech the Minister of the day commented on the importance of allowing a single regulator to act quickly and decisively to protect consumers as the need arose. A streamlined approach is important also when dealing with credit and lending. Dating back to 1994 there has been a maximum annual percentage rate in New South Wales; however, not all States adopted it. New South Wales has also the most inclusive cap, which includes fees and charges and fees paid to third parties such as brokers, and it protects those most vulnerable in the community from short-term lenders who often are referred to as shonks. This morning I was advised that not all short-term lenders are shonks; that some of them run reputable businesses to help those who are experiencing short-term financial strife. However, there will always be lenders in the community who choose to exploit those who are vulnerable and desperate. The aim of this legislation is to protect those disadvantaged and vulnerable consumers from excessive costs. The Opposition recognises the urgency of this legislation and, as such, will not oppose it. The Act provides a deadline of 1 July 2011, and unless the legislation is amended the 48 per cent cap would not apply beyond that date, which would expose vulnerable people to shonks in the industry. The Government proposes to extend the operation of the annual percentage rate beyond 12 months, which will maintain consumer protection and certainty in New South Wales, whilst awaiting the Commonwealth's regulatory enforcement measures. The Opposition believes that this legislation does protect those in our community who are vulnerable and desperate. I commend the Government for dealing with this matter expeditiously. When the Commonwealth legislation is enacted by proclamation by the Governor—which I understand will be in its spring session—the State legislation will fall into line with Commonwealth legislation. The Opposition supports the bill because people need to be protected. Opposition members are proud of the fact that consumers in New South Wales enjoy the best protection, and we support the continuance of that protection. I commend the bill to the House. Mr DAVID ELLIOTT (Baulkham Hills) [10.13 a.m.]: I support the Credit (Commonwealth Powers) Amendment (Maximum Annual Percentage Rate) Bill 2011. It is refreshing to see the Opposition take such a proactive response to this important piece of legislation, which was introduced by the Minister for Fair Trading. Credit and credit powers are an important part of our Federal Constitution. At a State level government departments and State-based charities normally pick up the pieces when credit laws allow for such pain and suffering in our community and when consumers have no option other than to resort to the short-term lending industry. The Credit (Commonwealth Powers) Act 2010 provided for the maximum annual percentage rate to sunset 12 months after 1 July 2010—one month from today—in the expectation that Commonwealth laws would be in place. However, the Commonwealth Government is still consulting with stakeholders and developing options for the increased regulation of payday and other short-term small amount lenders. Whatever is decided, it is not likely to commence until 2012. The short-term lending industry has three main arguments against the interest rate cap: it cannot recover costs and will go out of business, low-income consumers will then be denied access to credit, and the national credit laws provide sufficient protection as it is. We can debate these claims, but there are strong counter arguments. Despite the cap some short-term small amount lenders operate lawfully in New South Wales—a matter to which I will return later—and others continue to operate but use avoidance techniques, which is common in the financial services industry. A quick scan of the internet or suburban shopping centres shows there is no shortage of offers to vulnerable consumers. National credit laws require lenders to have an Australian credit licence, importantly, to belong to an external dispute resolution body, and to engage in responsible lending. Some payday lenders admit to structuring their businesses so they operate outside the National Credit Code and its associated protections. Community legal centres and financial counsellors who see clients caught up in the debt spiral and other negative effects of high-cost lending maintain that despite the avoidance mechanisms the New South Wales the interest rate cap is an effective consumer-protection mechanism. The 48 per cent maximum annual percentage rate, inclusive of fees and charges, sends a clear signal to the market about what constitutes lawful or 1 June 2011 LEGISLATIVE ASSEMBLY 1647 unlawful lending. Advocates are able to negotiate remedies for their clients on the basis of an alleged breach of the cap. I do not think many members in this place would not have seen at some stage in their lives people who have been caught up in a debt spiral. Growing up in western Sydney I was exposed to many people who unfortunately had been let down by employers or business operators and who were unable able to get access to cash that they were either rightfully owed, or that they expected to be in receipt of. In my former role I was the Chief Executive Officer of the Civil Contractors Federation, which was responsible for an organisation called Gold Buckets—an industry association that had as its members a number of micro businesses: mums and dads who might have owned one bobcat and a few shovels and whose main clients were small businesses, local councils, principal contractors or even subcontractors. There is nothing wrong with that. As micro businesses they operated quite well but if a local council, a principal contractor, a subcontractor or any client did not pay on the day—there was an expectation for these operators to be paid— they would find themselves in dire straits. They could not even afford to pay for petrol to fill the bobcats, which could have resulted in dire consequences to their businesses if they were under contract to complete some work. The Acting-Speaker, Mr Gareth Ward, who is a solicitor, would appreciate that those two considerations were not interdependent. They could not rely on the fact that they had insufficient money to maintain their plant and machinery because they had not been paid by another contractor, subcontractor or private client. Consequently, we would see those small businesses borrow extraordinary amounts from payday lenders. For example, they might borrow $100 to fill their bobcats with petrol so the operations of their businesses could continue. That was not an uncommon practice. In the early days of the global financial crisis in particular, when these businesses were working for principal contractors that had major overnight cash-flow problems, unfortunately they would resort to borrowing from these unscrupulous payday lenders. It was a tragic time. In my electorate of Baulkham Hills and in the area in which I grew up, Bankstown, a few unscrupulous payday lenders are operating outside the realms of industry norms.