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The Government has not addressed the fundamental fact that bank sales incentives are the root cause of high levels of debt in Australia, according to the Finance Sector Union (FSU).
“It is no surprise that we ended up with the global financial crisis (GFC),” said FSU national secretary Leon Carter. “It was a conscious decision by the banks to sell and push debt, and at this stage we don’t think there’s been anywhere near the level of scrutiny and debate about their business models.”
Carter said the FSU congratulated the Government on the introduction of the new National Consumer Credit laws, which are aimed at improving consumer protection in credit and loan transactions and making financial institutions more responsible
Carter said the reforms are the first step in the right direction but he added that the FSU believes they are missing the fundamental problem.
“Whilst it’s fantastic that they’re talking about not having predatory behaviour around responsible lending, they haven’t addressed the fact that the big four banks have performance reward systems that actually insist on and reward our [FSU] members for pushing debt onto customers,” Carter said.
“You’ve actually got to address the business models of the banks around the world, including Australia, which [are] about sales over service.”
He said the Consumer Credit Code should stipulate that credit provision should go to meeting the consumer’s needs.
“There shouldn’t be incentives that push debt onto people that is more than they can afford,” he said.
Carter said it is frustrating that, coming out of the GFC, the Federal Government and the G20 are prioritising debt as opposed to reforming the banks.
“We think it is a major step backwards,” he said. “Do people really think we’d have these debt levels if the banks weren’t allowed to do whatever the hell they wanted just to make a profit?”
Carter added that the Australian Government is incorrectly finding comfort in the fact that the big four banks have become more profitable through the GFC.
“We think that the Government is wrongly seeing that as a sign that nothing needs to change because our banks survived well. The debate is too often about the odd extreme behaviours rather than looking at the core business model that is being followed by banks around the world.”
