Madeleine King (Brand, Australian Labor Party, Shadow Minister for Consumer Affairs) Share this | Hansard source

I rise today to introduce this matter of public importance—namely, the government's failure to reform payday lending. It is an undeniable matter of fact that the government have failed to reform payday lending. There are no ifs and no buts. They had the opportunity to reform the payday-lending sector, which preys upon the vulnerable consumers of Australia. They created their own admirable opportunities to introduce payday-lending reform. But it's not like they've crab-walked away. No, they've gone much further than that. They have gone into a full, fast retreat down the road, led by the Liberal 'parliamentary friends of payday lending', convened by their general, the Assistant Treasurer, opposite me here today.

Mr Robert interjecting—

Yes, you run the parliamentary friends of payday lending, and we do know that.

We can just have a quick look back at the history of payday-lending reforms that have been introduced in the interests of consumers in this country. In government, Labor enacted the National Consumer Credit Protection Act 2009. For the first time in Australia, that act implemented a national regime for the regulation of consumer credit. Labor strengthened the regime in 2012 in response to growing concerns about improper behaviour by payday lenders, including by strengthening protections for consumers of these products.

Part of Labor's plans—you might like to know, Assistant Treasurer—also mandated a built-in review mechanism of the new national consumer credit protection regime. That review commenced in 2015 under the Turnbull government. The Review of the small amount credit contract laws was handed to the government in March 2016, and the government published its response in November 2016. Today marks over three years, or 1,173 days, since this reform process started with that credit contract review. And today marks yet another day that this government has failed to protect Australian consumers. It's another shameful day that rests on this government.

We all know on this side of the House that those on very low incomes have little capacity to absorb financial shocks such as your car breaking down—

Mr Bowen interjecting—

yes, an unexpected internet bill, perhaps—or a dentist bill or the like. With little disposable cash after the bills are paid and with few savings put away for a rainy day, one of the obvious options is a payday loan. We've all seen the ads, sadly: 'Just Nimble it.' These loans are often in conjunction with further loans and include crippling interest fees and penalties.

Financial Counselling Australia—I know that many people in this House, I think especially on this side of the House, have gone and visited a financial-counselling service, and I'm yet to see how many from the other side of the House have taken up that opportunity—have shared many case studies that set out what is happening to vulnerable lenders in the Australian community. They get involved in, sadly, multiple contracts for payday loans. These contracts show exorbitant interest rates that take advantage of their vulnerable financial situations. They underestimate their living costs. They miscalculate their financial situation. This leads to overdrawn-account dishonour fees, further entrenching vulnerable Australians into larger and larger debt. It is a vicious cycle. It is a terrible circle of debt that people are unable to climb out of.

There are many harrowing examples of the predatory behaviour seen from these payday loan sharks. We know that, just this week, Cash Converters settled a class action for $16 million due to charging customers interest rates upwards of 600 per cent. It's an absolute disgrace.

There are now over 800,000 Australian households who have fallen victim to the payday-lending rip-off. This number has more than doubled in the past decade, including 150,000 new households in Australia signing up for payday loans in the last 18 months alone.

Then, of course, there are the rent-to-buy consumer leases that we're all well aware of. This is where a consumer can enter into an arrangement by which they rent a consumer good—a vacuum cleaner, a fridge, a dishwasher or whatever—from a company. They rent for a period, and at the end of the period they get to keep that good. It's becoming increasingly common with mobile phones and therefore attractive to younger people. Many popular rent-to-buy schemes involve extreme repayment requirements, with customers often paying far more than face value for the products, up to 884 per cent more than their retail value, let alone their wholesale value. So fridges that may cost $1,000 end up costing a lender $6,000. A dryer worth $345 has reportedly cost someone more than $5,000. It's an absolute shame. This is all going into the pockets of the payday lenders and rent-to-buy rip-off merchants.

Sometimes these things can play a valuable role in helping to smooth out the challenges in people's budgets. But they are not just for essential goods. These have proliferated into covering extra-large TVs. What have we seen in the stories we have heard from Financial Counselling Australia and other organisations that seek to help people in financial distress? Customers are solicited. They may have got a whitegood, an essential good, but then they are solicited by SMS messages for non-essential products, such as gaming consoles, oversized televisions or electronic devices. Consumers are locked into multiple long-term contracts, paying excessive rental repayments at rates well above retail prices and additional personal loan repayments.

Financial counsellors have told us that:

In addition to this rental companies are often only providing clients on a Centrelink income with one option for payment, via Centrepay deductions. The direct implication is that the rental company is receiving their payment as a priority over rent, electricity, food and medications.

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