Deregulation of Debt Collectors

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I speak today on the Government's proposed Fair Trading Amendment (Commercial Agents) Bill 2016. This is an amendment that will repeal Labor's 2004 legislation and introduce protections for consumers and vulnerable people from aggressive and harassing debt collectors.

This amendment will have the effect of abolishing altogether any licensing regime for debt collectors operating in New South Wales. 

Twelve years ago Labor introduced new legislation to regulate and licence the commercial agents and private inquiry agents industry, that is, the industry of process serving, debt collection, repossession of goods, surveillance of persons and investigation of persons. This legislation came about in response to national competition policy reviews and in response to community concerns about industry overreach and exploitative practices by industry against vulnerable people.

In an industry where there is a long history of intimidation, harassment and thuggish behaviour, it is crucial that the character and standing of individuals and businesses engaged in this type of work is checked and double checked against specific licensing criteria.

Today the Baird Government, under the guise of cutting red tape, is busily abolishing what little protection the working poor and vulnerable people have against bullying and harassment by debt collectors.

The Government and all of us in this place should be discussing what extra protections could be extended to consumers and the working poor, rather than smoothing the way for thugs and stalkers to come after young families, workers, single mums and pensioners.

It is worth noting too that this bill represents a transfer of power away from the Minister for Justice and Police—the failed Deputy Premier.

That is a first.

As members would be aware, it has been the practice of this Government to vest undue power in the office of the Minister for Justice and Police and to give him far‑reaching oversight of the Justice, Police and Attorney General's departments.

It is a pity that when the Liberal-Nationals finally realised their mistake, they decided to remedy it by throwing vulnerable people to the wolves, with legislation like this that strips the community of key protections from harassment and exploitation.

We have heard that advocacy groups and legal aid organisations have grave concerns about the impact of this legislation and the deregulation of the debt collection industry.

We can be sure that self-regulation will open up the industry to abuse.

Legal Aid NSW has reiterated its preference for the existing licensing model over the so-called negative licensing scheme that this bill seeks to introduce.

Negative licensing is a system that assumes all people are suitable to hold an imaginary licence but that some people might be excluded after being caught engaging in bad behaviour. This is an absurd failure of logic, given what we know of the history of the industry and some of the people it attracted in the years before Labor cleaned it up. Indeed, it is important to note that Legal Aid NSW has written recently of improvements in the conduct of the industry, which highlights that the existing licensing regime—the one which Labor implemented back in 2004—is effective and is promoting good behaviour.

The opinion of Legal Aid NSW is that New South Wales has made progress toward an ethical, sustainable and cooperative industry. The Government's proposal for a deregulated industry puts this progress at risk.

The Financial Rights Legal Centre, formerly the Consumer Credit Legal Centre, has called for external regulation and oversight of the industry, mandatory standards of conduct, and mandatory compliance regimes, rather than deregulation. It is the opinion of the Financial Rights Legal Centre that oversight by the Australian Securities and Investments Commission [ASIC], or some other body, should be accompanied by investigative and sanctioning powers to discipline rogue operators and revoke licences on an individual level, as well as dealing with systemic or industry-wide malpractice.

In 2013, Legal Aid NSW assisted over 15,000 individuals with debt issues. A significant proportion of Legal Aid civil law grants related to debt recovery matters. This informs us that there are a great many people affected by this area of law who would meet the criterion of vulnerable citizens.

Legal Aid noted in its submission to the Legislative Assembly's Committee on Legal Affairs Inquiry into Debt Recovery in NSW that it is very common for clients who bring debt matters to them to also have housing, mental health and drug or alcohol problems.

The Government is proposing a system that causes people with prevailing pressures in their lives to face the prospect of harassment and intimidation by unscrupulous, unlicensed debt collectors. It is proposing to deregulate debt collection. It is absurd.

As a rule, conservative governments who champion the abolition of red tape are to be treated with caution, as the motive is to benefit big business and big capital.

 Red tape means something is getting in the way of profit-making.

Groups such as the Environmental Protection Authority are considered red tape; industry assistance is red tape; local environment plans are red tape; heritage orders are red tape; the Threatened Species Conservation Act is red tape; likewise, the licensing of debt collectors is red tape.

Anything that stands in the way of business maximising its profits at the expense of the community, the environment or a healthy society is red tape.

That is why members should be skeptical of Minister Dominello's promise to do away with red tape. Doing so will remove key protections for society's voiceless and vulnerable.

The evidence given by Legal Aid NSW to the debt collection inquiry is supported by the Financial Rights Legal Centre evidence to the same inquiry. In its experience, the vast majority of debtors are diligent and honest people that do not wilfully ignore or avoid the payment of their debts. They are most often forced into a position of being unable to pay due to illness, unemployment or other factors beyond their control.

It also notes that New South Wales presently has the lowest level of statutory protections for consumers experiencing debt recovery action by a creditor. The lack of statutory protections places pressure on welfare, community services, health services, and charities. It steers struggling debtors towards bankruptcy, which is a lose-lose situation for all concerned.

The Financial Rights Legal Centre goes on to make a series of recommendations to reform the industry and introduce legislative protections for consumers.

There is also an imperative for this House to debate and consider additional protections or regulations in other industries that will prevent people from accumulating debts they cannot hope to service.

Predatory lending in the form of banks pushing financial services products or retailers selling consumer goods at sky-high interest rates must be curtailed.

Debt collection action on behalf of State-owned corporations or essential infrastructure operators should be eliminated. It is absurd that private tollway operators refer debts of less than $10 to debt collection agencies. It is absurd that energy retailers providing an essential public service should need to engage debt collection agencies when expert testimony to parliamentary inquiries informs Government that the majority of debtors intend and are willing to pay off the amounts owing.

These are the issues members should debate, not this absurd proposal to deregulate an industry that has the potential to ruin the lives of vulnerable people if unscrupulous and unethical people rejoin its ranks.

This bill amounts to an ideological legislative change that will punish the vulnerable and reward unethical lenders.

I note that the Opposition will be moving amendments to this legislation in the Legislative Assembly and in the other place. I will be supporting those amendments.

I implore the crossbench of the Legislative Council to support our amendments and in doing so safeguard vulnerable people from the thuggish behaviour that will flourish if the Baird Government's current bill is passed.

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