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Home lending and overcommitments are of particular concern to this Government. The Consumer Credit Code has not been drafted with the intention of requiring credit providers to make inquiries beyond those ordinarily made by prudent lenders; nor is it intended to place obstacles in the way of lenders giving credit to borrowers who make it clear from the outset that they will have difficulties repaying their loan but nevertheless want to take on the obligation because of the lifestyle they wish to pursue. This often happens with young people when they are buying their first home. I am sure that many of us have been in that position. It is intended to deal with those lenders who consciously lend without making proper inquiries into the debtor’s ability to pay, rather than those lenders and borrowers who have gone down this path and made a conscious decision based on the best available information.

In relation to Territory public housing assistance agencies which are covered by the code, I point out that it is certainly in the public interest that these agencies continue to provide assistance by way of finance to persons who otherwise may not be able to obtain it. I therefore wish to make it abundantly clear that subclause 70(2) should not be read or understood as somehow inhibiting traditional lending practices of Territory housing agencies or be in any way interpreted as preventing people who have suffered from income shortfalls from being deprived of the benefit of socially just and innovative housing schemes.

Important innovations in the code are the provisions relating to consumer credit insurance. Consumer credit insurance has been the subject of justifiable criticism for some years now as being unjust, with excessive premiums in relation to payouts and unacceptably high commissions. Problems with this form of insurance were exposed by the Trade Practices Commission in 1991 and the code, consequently, gives specific protection to persons who have taken out this form of insurance. To deal with the excessive commissions that have been charged in the past, the code provides that a commission must not exceed 20 per cent of the premium and, in addition, on the termination of the credit contract, any relevant consumer credit insurance contract financed under the contract is also terminated. These rights override any contrary statement in a credit contract and will ensure that some of the most basic and telling consumer detriment in this area is rectified.

The code also changes the civil penalty regime. Members will be aware that under the existing legislation, in addition to criminal penalties, credit providers automatically lose all of their interest if they breach certain provisions of the Act. Credit providers have to make reinstatement applications to the Credit Tribunal. Although the Territory would have preferred to retain such automatic civil penalties as a deterrent, it was in the end difficult to succeed on this point. Under the Consumer Credit Code the number of civil penalty triggers has been narrowed and made explicit. The triggers are called “key requirements” and are set out in clause 100. The present open-ended liability of credit providers is modified and a cap of $500,000 for all breaches of a key requirement in Australia is proposed. This capping will deal with concerns of some of the smaller lenders that their prudential standing could otherwise have been jeopardised. In addition, when determining whether to impose a civil penalty, a court is specifically required to have regard primarily to the prudential standing of the credit provider if requested by the credit provider.

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