Mike Symon (Deakin, Australian Labor Party) Share this | Link to this | Hansard source

I welcome the Reserve Bank of Australia's decision to cut interest rates by a quarter of a per cent on Cup day. This is good news for homebuyers and for all those who have a mortgage on a variable rate loan, not in only in the electorate of Deakin but, of course, right throughout Australia. A monthly saving of $49, or around $589 a year, on a $300,000 loan not only helps pay off the loan but also helps with the day-to-day cost of living. Also, the flow-on of confidence in the economy will benefit businesses, especially retailers, of which there are many in my electorate.

Although this 25-basis-point cut in the interest rate to around 7.5 per cent for a home mortgage from the big banks—or less from the smaller lenders—is good news for most people who borrow money, it is not good news for all. I refer in particular to the operation of payday lenders such as Cash Converters, who if they were to pass on the Reserve Bank's interest cut rate in full would cut their effective annual rate from 420 per cent to only 419.75 per cent. As revealed in the Australian Financial Review, Cash Converters charge $35 for every $100 lent per month, an obscene amount that exploits those people who find themselves in circumstances where they may need money in a hurry but without access to regular channels of credit. On top of that figure fees and charges are added.

Companies such as Cash Converters who rip off their customers with the most outrageous interest rates and fees should have no doubt that their time in the spotlight is fast approaching. The Gillard government has introduced the Consumer Credit and Corporations Legislation Amendment (Enhancements) Bill 2011 to the House and I am impatiently waiting for the second reading debate to be brought on, when I will have much more time to expose the operations of this industry and especially those of Cash Converters. To me, the most important benefit in the bill will be the introduction of caps on costs such as fees of 10 per cent of the credit provided plus two per cent per month. In effect, this would set the interest rate at 24 per cent per annum plus fees, for loans of less than $2,000 and of less than two years duration. Loans above $2,000 would be capped at 48 per cent interest, a figure that is similar to state imposed caps that already exist in New South Wales, Queensland and the ACT. The outlawing of repeat borrowing and multiple loans is a great step forward and the requirement to disclose the availability of alternatives, such as the No Interest Loan Scheme or Centrelink benefit advances, to customers who come into the store will be an even bigger one.

Whilst payday lenders such as Cash Converters hold themselves out as offering a community service, they are nothing but a community scourge. The reality is that this is only a huge money-making operation heaped upon the people who can least afford to pay such massive fees and enormous interest rates. As a publicly listed company, it is very informative to look at the annual report of Cash Converters, especially regarding the remuneration paid to the CEO and its other executives. The Chief Executive Officer, Mr Peter Cummins, received a total package of $1,703,631 for the company's 2011 year—triple the amount that he received in 2010. Expressed as a weekly payment that is $32,762 each week—every week of the year. If you contrast that with the customers who walk into those premises, those who may be on a minimum wage and work a full year, for the full year that works out to be $30,463—less than one week's payment to Mr Cummins.

Four other executives at Cash Converters received in excess of $350,000 per year and it is not hard to see where the profits of these massive fees and charges are going.

I will speak about these issues in greater length when the bill comes up for debate. I will refer to the hundreds of cases that have been documented and recorded by various consumer and community groups and that are published and out there for everyone to refer to. In the meantime, it is important that people who use payday lenders understand there are options now. They do not have to wait for the passage of legislation through the parliament, but they do need information. They need it rather quickly because people who expose themselves to those sorts of fees and that rate of interest will not have a very bright financial future. Schemes such as the No Interest Loan Scheme, ringing up Centrelink and asking if you can have an advance on the pension or even the family tax benefit are much better ways of managing your own finances and not paying 420 per cent effective interest per annum.

These schemes have been around for a while. They have improved recently. Unfortunately, a lot of people still do not have the information to be able to use them. I hope to be able to use this parliament to advertise what else is available, to help out people who do not have enough money to get by week to week.