Kate Chaney (Curtin, Independent) Share this | Hansard source

I welcome the introduction of the Financial Sector Reform Bill 2022 as the response to the royal commission that made recommendations in 2019. Efficient financial services regulations are essential to ensure accountability within the sector and to ensure that our financial institutions are acting with honesty, skill and diligence.

Financial regulations are particularly important when they affect people who are already vulnerable. We owe a duty of care to the most vulnerable to ensure that the financial sector is transparent, coherent and truthful. This is why I'm pleased to see more stringent regulations applied under schedule 4 of the bill to small amount credit contracts, which most of us know as buy-now pay-later services. The catchphrase for buy-now pay-later is that it's easy and accessible. Buy-now pay-later is not marketed as credit, and, with no affordability assessment, it can easily get you into debt.

The final review of the small amount credit contract laws review, which was established to consider and report on the effectiveness of these laws, was published in March 2016, so 5½ years ago. Some of the recommendations included enhancing consumer protections for the buy-now pay-later schemes, putting a cap on the cost of consumer leases and making a more robust anti-avoidance provision so that all buy-now pay-later schemes are regulated equally. Each of these recommendations is essential to protect our kids, our elderly and our low-income earners in the community. I'm not convinced by the member for Sturt's argument that the only alternative to buy-now pay-later is loans from criminals. We need to accept the challenge to ensure that we have a safety net that produces other alternatives other than exorbitant interest or loans from organised crime.

I want to tell the parliament about the impact of buy-now pay-later on people in Perth who have sought support from financial counsellors. Earlier this year, Alex and Ash, aged 19 and 20, presented for financial counselling accompanied by their parents. At the initial appointment, a total of 12 buy-now pay-later accounts and four loans were disclosed, amounting to more than $20,000 between them. All these loans were obtained online, with no financial assessment or proof of income required. The credit was accrued largely for retail items like clothing and shoes. These young people were employed, earning under $20,000 per year each, supplemented by Centrelink allowances. As their parents considered them financial dependents, they had paid to clear previous debts, but as it was a recurring issue, they sought help through financial counselling for education.

All buy-now pay-later providers insisted on repayment arrangements, with some matters having to be escalated to internal dispute resolution. The financial counsellor revisited the budget based on the agreed repayments. With the repayments, their expenses exceeded their fortnightly income. These young people were fortunate to be supported by their parents, who would cover the cost of food and housing. While this was a learning experience for these young people, it's an example of the consequences of easily accessible credit online. This is just one of many stories. Data from the Financial Counselling Network in Perth showed that 62 per cent of buy-now pay-later users were on government benefits, 37 per cent were not in the labour force, and many of these clients presented for financial counselling as they were struggling to manage on low or restricted income and many were impacted by mental health.

Financial counsellors and financial coaches told me some of their concerns with buy-now pay-later. Buy-now pay-later services are used to supplement insufficient income. Many clients are reporting purchasing gift cards from buy-now pay-later providers to purchase essentials, including food and petrol. For low-income users, a significant percentage of their income goes towards meeting buy-now pay-later repayment obligations, impacting other financial obligations and leading to higher reliance on emergency relief, as well as contributing to growing utility debt and rent arrears. It's too simple to access buy now pay later, with no safeguards such as income, serviceability or credit checks by various providers. Financial coaches have observed the behavioural change in mindset as buy-now pay-later services become popular. It has prompted a potential decline of long-term saving habits, as buy now pay later enables impulsive spending and overcommitment.

There's heavy advertising of buy now pay later in stores and online, and many counselling clients report having multiple accounts and don't view buy now pay later as credit. Clients were hesitant to seek hardship assistance for buy-now pay-later debts and generally preferred to prioritise these instalments and seek hardship for utilities and essentials. Often, and shrewdly, buy-now pay-later services are marketed as a budgeting tool, and clients view buy-now pay-later as a contingency plan and don't want to risk losing access.

The tightening of the regulations around accessing buy now pay later is overdue, and this bill is a welcome step in the right direction. Promoting fair and transparent marketing of buy-now pay-later services would be a good further step to ensure that people understand they're effectively credit and treat them with appropriate caution.

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