Paul Fletcher (Bradfield, Liberal Party) Share this | Hansard source

I am pleased to make some comments in relation to the presentation of the report on the Consumer Credit and Corporations Legislation Amendment (Enhancements) Bill 2011. The issue of so-called payday lending is a complex one. The very use of the term 'payday lending' suggests unattractive images of people being forced to turn to a lender who charges very high rates and the people needing to do so to cope with their cash-flow difficulties, being unable to get from one payday to the next without having to turn to lenders who are putting them in a difficult position. But, like many complex issues, the reality is somewhat different from that assumption which can be made.

The committee heard extensive evidence from a range of interested parties, including members of the short-term lending industry who described their business methods and their charges. We also learnt about the regulatory approach imposed by the disastrous New South Wales Labor government in its dying days, including a notional cap on the amount of interest that may be charged by short-term lenders. In fact, the way the formula works tends to overlook the reality. If you have a loan of a relatively small nominal amount, a few hundred dollars, but flat administrative charges which need to be incurred—charges dealing with such matters as credit assessment and so on—the application of a formula can lead to the charges being presumed to exceed that formulaic limit. That is really because the formula is simply not appropriate to deal with the reality that there are certain costs which need to be incurred and those costs tend not to vary whether the amount which is being lent is a few hundred dollars or a few thousand dollars.

We also heard from groups such as many of the consumer credit legal services around Australia. The coalition wants to commend the important work done by the people in those services. It is important and difficult work. Nevertheless, the coalition members of the committee are in agreement with the conclusion of the majority report that some of the provisions in the bill as it currently stands would have an undesirably deleterious impact on the short-term lending industry. They would make it more difficult for loans of relatively small amounts for short terms to be provided than is possible today. That would leave Australians who rely on this sector with fewer options to meet their needs for short-term finance. The committee process has been a constructive one as to understanding in some detail the business practices of the short-term lending sector.

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