Few people would realise that some of Australia’s most important legal protections for borrowers and investors have flowed from policy research and advocacy done by community legal centres.

Dispute resolution schemes in the mortgage broking sector and the ban on home loan exit fees are just two such reforms.

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However, the work of many community legal centres across Australia might soon change, with the Abbott government now demanding that taxpayer funds not be used for policy and advocacy activities.

While there has been no official announcement on the new funding arrangements, Attorney-General George Brandis has amended contracts with 140 legal centres to exclude support for policy advocacy.

National campaign

The centres have launched a national campaign to fight the changes.

Spokesperson Carolyn Bond believes the move will thwart longstanding consultation arrangements that have resulted in legal changes to protect disadvantaged consumers.

“Community legal centres see a lot of problems that other lawyers don’t see,” she said.

“People who are worried that they are going bankrupt are not going to see a private lawyer – they usually seek help at a community legal centre.”

Earlier this year Senator Brandis said he was concerned by examples of legal centres being used by environmentalists to promote “political campaigns” in the courts.

The rewording of the funding agreements appears designed to wipe out such activity.

Ms Bond warned that the new contracts would stifle one of the few channels for community-driven legal reform.

“The new agreements stop legal centres from speaking out in any way that is critical of government,” she said.

“Even if you accept that this is a right way to go, we have to ask where the line is to be drawn.

“If I do a media interview complaining about a law – does that constitute campaigning against the government?”

Inquiry argues against Brandis’ changes

The move to rein in the activities of community legal centres was made even after a Productivity Commission report highlighted the importance of their advocacy work for reducing caseloads in the court system.

The commission, which has been investigating ways to improve access to the civil justice system, stated in an April report “advocacy should be a core activity of Legal Aid Centres and Community Legal Centres”.

If the government refuses to soften its policy stance, the changes will have profound implications for the work of regulators such as the Australian Securities and Investments Commission.

For more than a decade ASIC has worked closely with legal centres through its Consumer Advisory Panel to help develop regulations and policy proposals for overseeing the financial services industry.

Through this panel, ASIC has also commissioned community legal centres to conduct wide-ranging policy research on important consumer issues.

In 2003, ASIC sponsored the Sydney-based Financial Rights Legal Centre to investigate the poorly regulated mortgage broking industry.

A host of legal reforms were implemented as a result of that report which was authored by the centre’s coordinator Karen Cox.

“The Commonwealth has said we’re not allowed to use federal funds for law reform or systemic advocacy,” she said.

“It means we can’t use Commonwealth funds to make submissions to government inquiries.”

The Commonwealth provided $36.7 million to fund 140 legal centres in 2013, many of which also attract state government support.