Maria Vamvakinou (Calwell, Australian Labor Party) Share this | Hansard source

Today I rise to speak on this motion because I feel it is very important that we as a parliament ensure that there are more efficient and responsive regulatory mechanisms in place to address the shortfalls and loopholes which have allowed the practice of what is commonly and quite rightly known as 'dodgy lending' to flourish in the broader Australian community.

I go to the heart of what this motion speaks to, and that is the issue of payday loans. These short-term high interest loans are designed to view people and families in desperate need of money or credit as a lucrative market upon which to feed and make profit. This is a $1 billion industry that has long served to commodify and target people on low incomes and their families by marketing their so-called assistance as emergency short-term loans, often taking merciless advantage of people's desperation.

These loan sharks, as they are often referred to, are known for charging exuberant interest rates and preying on vulnerable people who have no other means of accessing loan funding. It is important that regulatory oversight mechanisms are in place to significantly boost consumer protection, which can be achieved only through a single standard national regulation of consumer credit. It is not enough to talk about consumers without actually outlining who these consumers are. Consumers are actually people and they are those who are essentially very vulnerable—those who are experiencing entrenched disadvantage, those who are unemployed, single mothers and single fathers, vulnerable young adults, students, elderly pensioners and disabled people, all of whom can be found in communities across Australia and, in particular, can be found in great numbers in my electorate of Calwell.

That is why this motion acknowledges and, indeed, congratulates the federal government's National Consumer Credit Action Plan, because people in desperate circumstances need protection from unscrupulous lending. It was a Labor government which enacted the uniform consumer credit code into Commonwealth legislation and established a national licensing regime for providers of consumer credit and credit related brokering services. It was a Labor government that regulated margin lending and enhanced the enforcement powers required to make sure that licensees stick to responsible lending practices. I am also encouraged that it is this Labor government that will seek to implement phase 2 of the National Consumer Credit Action Plan that will include a focus on payday lending. The source of the problem is that the market base for these short-term loans is often people with poor credit due largely to their poor financial literacy. The federal government have supported programs which serve to enhance the financial capacity of the most vulnerable Australians because financial literacy is key to assisting people in such circumstances. One such program is the Saver Plus program developed by the Brotherhood of St Laurence and the ANZ Bank. I am pleased to say that this program operates out of my electorate of Calwell. Since 2007, 235 families have been in contact seeking assistance from this program. The success of this program lies in its ability to directly reach and engage with the community at a grassroots level. I have had an opportunity to speak to the people in my electorate who run this program and they often tell me that their workload has grown significantly and continues to grow. On the one hand that is a problem because it indicates that more and more people are getting into trouble; on the other it gives them an opportunity to reach and assist a group of people.

Nationwide, 7,000 families across 60 sites have benefited from this capacity-building program. This program recognises that it is not about waiting for families to reach crisis point before intervening to appropriate money from them; it is actually about ensuring that families are resilient enough to build and achieve their financial goals, and avoid falling into a cycle of disadvantage. Those who have greater financial literacy and money-saving methods are more likely to avoid having poor credit and, as such, are less likely to be affected by financial exclusion. Importantly, capacity-building programs such as the Saver Plus program increase the knowledge capacity of participants, who acquire the knowledge to identify hidden fees and exorbitant charges relating to a range of financial products, thereby exposing the traps and pitfalls of ultrahigh interest loans.

The government's agenda is to close the loopholes that provide what is known as wiggle room for lenders that all too often cause borrowers to default and be left in a cycle of increasing debt. Our welfare agencies often report severe financial difficulties. There has been an increase in demand from families and individuals in my electorate requiring help to manage their finances. My electorate is a vulnerable electorate, with places such as Broadmeadows experiencing higher than average rates of financial exclusion due to a variety of social and economic factors. The government's policy is designed to mitigate these challenging factors that have a direct impact on the wellbeing of families and the community at large.

The implementation of these reforms is not an isolated initiative put forward by the government. The government's multifaceted approach and commitment to tackling the root cause of financial hardship is clearly visible. In Broadmeadows, I recently had the opportunity, along with the Assistant Treasurer, the member for Maribyrnong, to launch the MoneySmart website developed by the Australian Securities and Investments Commission. This is all part of the federal government's National Financial Literacy Strategy. It is about ensuring that when people want to access credit and finance they do so with the knowledge required to make informed and efficient decisions. Along with the MoneySmart website, the Parliamentary Secretary to the Treasurer, the member for Lindsay, and I launched the 'Your shopping rights' fact sheet, which is about helping people make more informed savings and financial decisions without running the risk of falling victim to the sales pitch and the spin which often lead them to accumulating more debt than they can afford. The federal government are showing leadership on this issue through a comprehensive approach to providing a national policy direction for helping the most vulnerable in our community in a clear, consistent and coordinated fashion—one that reaches communities across Australia. The launch in Broadmeadows was a case in point because it is one of the most diverse electorates in the country. The fact sheet is designed to reach all communities in all their diversity because it is produced in a number of languages. It overcomes the language barrier for a lot of people, which is often the reason that they get into financial difficulty.

I want to quote a case study from the Saver Plus policy briefing by the Brotherhood of St Laurence. It is not a complicated example; rather its simplicity reflects the fact that it serves to address the impediments which ordinary people in my electorate face on a daily basis. It says: 'Sheryl is a single mother of two living in the northern suburbs of Melbourne and working part-time in a nursing home. Sheryl has said that Saver Plus gave her the opportunity to upgrade her family's old computer and to learn saving skills that she had lacked in the past. Sheryl developed a money plan and saved $50 each fortnight to go towards a new computer for her children. When Sheryl completed the program she used the funds to buy her children a new computer. "The most helpful thing I learnt from the program", says Sheryl, "was how to take care of my own financial situation and cut down on where I was wasting money. My children have picked up on my saving habits and instead of spending their weekly allowance immediately are saving it to buy those items they want instead of me buying it for them. It is teaching them the real value of money."'

This is a case in point, but it is reflective of an improvement in financial literacy coupled with the correct knowledge base of consumer rights and shows that that is what empowers families who are doing it tough. It is about intergenerational learning rather than an intergenerational cycle of disadvantage.

I want to finish by drawing the attention of the House to a Consumer Action Law Centre report titled Payday loans: helping hand or quicksand? The report, which was produced in 2010, makes a very important point. The report invites the reader to think about a statement which it quotes from a Cash Converters financial report of June 2006. The Cash Converters report gloats:

The vast bulk of our lending business is conducted with repeat customers who are familiar with the product and use the credit facilities from time to time to meet short term needs.

'Repeat customers' is code for celebrating the fact that the vast bulk of their customer base is made up of people and families consumed in a cycle of debt—a deliberate, calculated and crude strategy for attracting debt and default. It is with this thought in mind that I welcome the government's commitment to protecting families and to improving the operation of the consumer credit market in Australia. I also commend the work of the community organisations determined to work with the government to tackle this blight on our society that is guided by misconduct, exploitation and greed.

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