Melissa Parke (Fremantle, Australian Labor Party, Shadow Assistant Minister for Health) Share this | Hansard source

I move:

That this House:

(1) notes that:

(a) there is considerable evidence that payday lending and consumer leases are not properly regulated and that both financial practices are causing serious harm to low income Australians;

(b) irresponsible and immoral lending is endemic in the payday lending industry, which is growing rapidly and developing new online opportunities to encourage people to borrow with insufficient consideration of their capacity to bear the exorbitant and poorly regulated interest costs that payday lending involves;

(c) the Australian Securities and Investment Commission review of payday lending found that 24 per cent of loans were taken out by Centrelink customers and 54 per cent were taken out by customers who had two or more payday loans in the previous 90 days, a clear indication that they are caught in a cycle of repeat borrowing;

(d) consumer leases can involve an effective annualised interest rate of 240 per cent, and generally mean that vulnerable consumers pay three or four times the value of basic household items like refrigerators or washing machines;

(e) consumer leases operate with lower consumer protection standards under the National Credit Code, though such agreements are not materially different in effect from credit contracts;

(f) in 2013-14 nearly half of Radio Rentals’ $197 million revenue was received through the Centrepay system which allows payments to be directly debited from a consumer’s Centrelink account; and

(g) Senator Cameron has brought a Private Senators’ Bill that seeks to remove consumer leases from access to the Centrepay system; and

(2) calls on the Government to:

(a) ensure that the recently announced review into the 2013 reforms to payday lending focuses on securing the wellbeing and protection of low income Australians irrespective of the effect this has on the profits of companies that practice this kind of often predatory lending;

(b) act quickly to stop consumer leases being used to prey on vulnerable and low income Australian households by ensuring that consumer leases are subject to the same standards and controls as credit contracts, and by introducing stricter controls on the currently outrageous and indefensible costs involved in such arrangements, including the requirement to prominently disclose the total cost of all contracts; and

(c) support Senator Cameron’s initiative in removing access to Centrepay for consumer lease companies and amend section 123TC of the Social Security (Administration) Act 1999 to include a definition of consumer leases for this purpose.

I am very pleased to bring this motion forward for debate, and I want to start by acknowledging the work that has been done by my colleague and friend Senator Doug Cameron to lead the consideration of this issue and to push for change.

The essence of this motion is simple: no responsible government should allow, let alone enable, practices by companies that seek to prey on those who are financially vulnerable. There is ample evidence to show that payday lending and consumer leases are forms of credit that are targeted irresponsibly at people who are experiencing financial hardship in order to extract a cynical and unfair profit from those who are least able to suffer that kind of gouging. As the motion makes clear, the review by the Australian Securities and Investment Commission found that 24 per cent of payday loans were taken out by Centrelink clients and 54 per cent were taken out by people who had had two or more such loans in the course of the previous 90 days. In other words, payday loans are not being used by people who are in relatively stable financial circumstances to bridge an out-of-the-ordinary shortage of cash; they are being used by desperate people who are caught in a cycle of repeated borrowing, who are punished with borrowing costs that will inevitably deepen their already difficult circumstances.

This deeply immoral practice is expanding as a result of the ability to provide credit through online portals. That will only lessen the already insufficient care with which this kind of credit is extended, with exorbitant costs for people who do not have the capacity to meet them. In the case of so-called consumer leases, people who are at the very bottom of the income scale are being encouraged to acquire the use of household goods through a financing arrangement that involves an effective annual interest rate of up to 240 per cent. While the emphasis in the marketing material is on the weekly rental of, say, a television or a refrigerator, the truth is that desperate people are paying three or four times as much as it would cost to actually buy such household goods. It is, frankly, scandalous that the companies that operate in this sector are able to co-opt the Centrepay system to secure their profits in this vulture-like way.

Nearly half of Radio Rentals's 2013-14 revenue of $197 million was received through the Centrepay facility. It is bad enough that proper regulation does not prevent this kind of usurious practice, but it is outrageous that a social welfare framework like Centrepay, which is designed to ensure that essential costs like rent and power bills can be prioritised within a tight budget, can be misused to enable the exploitation of people who are reliant on welfare assistance. We can be sure that the additional costs that arise when consumer leases push a family or individual who is already struggling over the edge are ultimately met by other parts of the publicly funded safety net, while the consumer lease companies laugh all the way to the bank.

I note that the Western Australian government recently made the bizarre, counterproductive decision to strip funding from financial counselling services that support people who are on the brink of financial disaster. The Western Australian Council of Social Service made the point that every dollar invested in those services saves a cost of $5 that would otherwise be incurred. In the case of consumer leases, not only are welfare payments being siphoned away through arrangements that cruelly prey on people who have very little money, who are under very great stress and who are often at a clear disadvantage in terms of their financial literacy, but the impact of this practice, in aggravating or pushing over the edge a person's susceptibility to total financial collapse, then results in further costs to government.

I applaud Senator Cameron for his work to highlight the importance of this issue and to craft a sensible legislative fix to a regulatory blind spot that should never have been allowed to develop in the first place. I also want to thank those who prepared and supported the motion to better regulate payday lending that was passed at the WA Labor conference earlier this year. I acknowledge the very helpful input from Gerard Brody, CEO at the Consumer Action Law Centre. Gerard, his colleagues and all the people who work in the community legal and financial counselling sector know firsthand just how pernicious and damaging payday lending and consumer leases can be.

In parliamentary life and public administration, there are many vexed issues that can be difficult to balance or navigate. This is not one of them. It can be hard sometimes to properly define the problem before working out an appropriately effective solution. That is not the case here. These financial practices have nothing to recommend them and they are promoted through the use of misleading material to people who need financial help, not financial trickery. They deliberately cover up the outrageous scale of the impost they levy on vulnerable people and they make improper use of Australia's welfare framework in order to do so. They should be subject to urgent and sharply restrictive regulatory change in the best interests of people dealing with serious disadvantage and for the effective and proper functioning of Australia's social safety net.

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