Bert Van Manen (Forde, Liberal Party) Share this | Hansard source

Before I get into the substance of my contribution today, I would like to touch on a couple of points that the member for La Trobe has made. She quite rightly pointed out the stats from the Parliamentary Joint Committee on Corporations and Financial Services. The interesting thing to note is that those very costs mentioned in that committee report that people typically go to payday lenders to borrow funds for are the costs that are going to be most impacted by the introduction of the carbon tax. There is very limited ability for people in these situations who are already struggling financially to increase their income to offset these cost increases. The question then arises: how many more people are going to seek the services of these so-called payday lenders in order to help make ends meet? On one hand we have a piece of government legislation that seeks to assist people in financial difficulties, yet on the other hand we have government legislation that will do absolutely nothing for the environment and put people in much more difficult financial circumstances. But, as we have come to learn over the past 4½ years, that is not untypical of this government, and the Australian population recognises it.

As the shadow Treasurer pointed out in his speech earlier today, it would have been helpful to have had the 70 or so amendments circulated before commencing this second reading debate. Right now, as we speak, further amendments are still being drafted; it is just beyond belief. But it is an all too familiar occurrence from this government to be skittish and scattered. Only this morning I spoke on changes to the MIT, which were going back and forth like the DeLorean from Back to the Future. Yesterday the minister suggested that the coalition was a bit like Burke and Wills, but I would like to suggest that the government is more like Lost in Space, caught up in some green tardis.

The government has had nine months to consider these bills, and that is nine months of uncertainty for small, payday-lending businesses. Once again, it is another example of the government's inability to provide certainty and direction for small businesses around this nation. Since this legislation was first introduced to the House I have received a number of inquiries in relation to this bill from many people in the industry. As recently as today, I received some documentation that brought the whole focus of this legislation back to its roots. The document stated that the Consumer Credit and Corporations Legislation Amendment (Enhancements) Bill 2011 is first and foremost about borrowers, and I think we in this House all agree that we need to protect people who are in poor or vulnerable situations from loan sharks and people who are looking to do the wrong thing by them.

Borrowers are at risk of losing what in some cases can be their only source of credit, as it has the potential to be legislated out of existence. The credit sources we are talking about here today are payday lenders or microlenders, otherwise known as short-term loan providers. There are many providers in this space. Individuals have mixed feelings towards these operations. However, according to research undertaken by Smiles Turner, there are in excess of 1.5 million payday and microloans a year and there are some 750,000 consumers borrowing on average 2.4 times per year.

Demand has increased at a rate of some 18 per cent per annum over the past three years to 2010-11 and is currently tracking at 4.2 per cent for this financial year. Of these borrowers, 630,000 have nowhere else to go, and there is a concern that amongst these are some of the most vulnerable and underprivileged in our society. There are concerns in relation to their association with these types of lenders. However, at some point it comes down to personal responsibility and the responsibility of the government to ensure that any changes made to these lenders' ability to lend results in the best case scenario for all parties involved.

It is no surprise that the No. 1 reason for borrowing from short-term providers is for the purpose of paying bills. A national survey by Smiles Turner of nearly 2,000 borrowers in May and June this year revealed the following statistics: funds that were borrowed for bills were a bit over 22 per cent; for finance, repaying other loans or cash, nine per cent; for food, four per cent; for household shopping and goods, six per cent; and for vehicle costs, 16 per cent. There is a current theme that indicates that the reason people are borrowing from these short-term lenders in the first place is to pay for general living costs. As I touched on in my opening comments, the policies put forward by this government, particularly in relation to things like the carbon tax, are only going to exacerbate this problem.

This has also been borne out in a Newspoll survey quoted in the Australian today by Dennis Shanahan, which shows that over 36 per cent of voters believe that their standard of living is going to get worse in the next six months and are more pessimistic now than they have been about their standard of living since the global financial crisis in 2008. The government should be doing everything they can to get this legislation right, because they are responsible for these cost-of-living increases increasing so rapidly since 2007. Whether people favour short-term lending operations or not, they do provide an avenue for people who are desperate for financial support. Where would these people turn to if these lenders disappeared? We have already seen a spike in crime, an increase due to a number of economic factors including higher unemployment, underemployment and rising living costs. Recently I held a crime forum in my electorate, and one of the major issues raised was number plate theft. Number plates, the police explained, are stolen and placed on cars which people then take to petrol stations, fill up and then drive off and do not pay for the petrol. In addition, a number of ram raids and robberies have occurred through the Logan and Gold Coast district over the past several months, and residents are concerned that this activity has been more frequent than usual. If you look at the Albert and Logan News online today, five of the top 10 current news stories are about robberies and break-ins.

During the crime forum, I was informed by one of the attendees about a family man who had conducted his first ever crime to help pay the bills. He said he was so desperate he could see no option but to commit a crime to get out of the financial troubles he was in. This is a very sad situation, given that there are a number of community organisations in my electorate who could have assisted this man and his family at that very difficult time, but that is another story for another day. I have used this as an example to highlight my previous point—that we need to ensure that small-amount, short-term lending continues to provide an avenue for people within the community who have nowhere else to turn.

The coalition will not oppose the Consumer Credit and Corporations Legislation Amendment (Enhancements) Bill 2011. The government, with its amendments, has acknowledged the flaws in the bill as originally presented to parliament. That the government was forced to go back to the drawing board by the unanimous recommendations of the Parliamentary Joint Committee on Corporations and Financial Services is telling. The committee, including government members, recommended that the government revisit the payday lending changes and undertake further consultation with industry. Under this pressure, the government has agreed to a number of amendments or changes. It has increased the caps for small-amount credit contracts; shortened the term for small-amount credit contracts from 24 months to 12 months; increased establishment fees, from 10 per cent to 20 per cent, and the interest rate per month, from two per cent to four per cent; allowed an additional $400 fee to be charged for mid-tier loans between $2,000 and $5,000; and removed multiple-contract prohibitions on lenders under certain circumstances. In addition, there is a commitment to prohibit loans with a term of 15 days or less, by regulation.

These changes represent a significant concession to both industry and opposition concerns with the original bill. The original government proposals did not strike the right balance between appropriate consumer protection and making sure that short-term lending remains available, accessible, affordable and as competitive and transparent as possible. The proposed government amendments address many of the concerns raised by stakeholders during the parliamentary committee process.

These included concerns that the proposed caps on fees and interest charged on payday and small-amount loans would be uneconomic and would lead to many current participants withdrawing from the market. Many of the businesses that could close down are small, family owned and operated businesses. The reduction in availability of payday and small-amount loans could result in many people not having access to the existing finance they rely on to meet unexpected expenses. The banks have not participated in payday and small-amount lending for some time, because it is uneconomic for them to do so. I well remember when I started in the bank and you could get personal loans for down to $1,000. Most banks now will not do a personal loan for less than $5,000. It is highly unlikely in the current environment that they will seek to re-enter the market to fill the gap if existing providers go out of business. Stakeholders also mentioned concerns that a reduction in legitimate, licensed payday and small-amount lenders may encourage unlicensed and illegal operators to enter this market, which would in effect reduce consumer protection.

The amendments address these issues, in that the new caps on fees and interest charges will ensure that the vast majority of short-term lenders will remain commercially viable. Small, family owned and operated businesses will not be adversely impacted. People who rely on these type of loans, which are not provided by the banks, will continue to have access to the finance they rely on to meet unexpected expenses. Importantly, the ongoing viability of legitimate, regulated providers will discourage the growth of unlicensed and illegal operators whose entry into the market would reduce consumer protection and transparency.

While some of these provisions might not have been implemented by the coalition in government, the significant concessions obtained by the coalition have achieved a much better balance between the twin aims of providing appropriate consumer protection and ensuring that short-term lending remains available, accessible, affordable, transparent and as competitive as possible. With these amendments, the coalition will not oppose the bill.

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