Tim Hammond (Perth, Australian Labor Party) Share this | Link to this | Hansard source

I move:

That this House:

(1) notes that:

  (a) the Government established a panel to review the Small Amount Credit Contract (SACC) laws on 7 August 2015, which provided its final report to the Government on 3 March 2016;

  (b) the Government released its response to the SACC review on 28 November 2016, in which it agreed with the vast majority of the recommendations in part or in full;

  (c) the Minister for Revenue and Financial Services said at the time that 'the implementation of these recommendations will ensure that vulnerable consumers are afforded appropriate levels of consumer protection while continuing to access SACCs and leases';

  (d) the Minister claimed in an interview on Lateline on 28 February 2017 that Treasury was drafting legislation to implement the review's recommendations; and

  (e) in response to questioning in Senate Additional Estimates by Senator Gallagher on 1 March 2017, Treasury's head of the Financial System Division confirmed that drafting had not commenced for a bill to enact the SACC review recommendations accepted by the Government;

(2) acknowledges that consumer credit contracts and consumer leases have been shown to cause unnecessary hardship to vulnerable consumers, and that the Parliament should act to protect vulnerable consumers;

(3) recognises that the delay in introducing legislation for consideration by the Parliament, to implement the SACC review recommendations, results in an unnecessary continuation of hardship to vulnerable consumers and their families;

(4) congratulates the consumer advocate groups who attended Parliament House on 27 March 2017 to raise the profile of this important issue; and

(5) calls on the Government to immediately prepare legislation for consideration by the Parliament, to implement the SACC review recommendations.

I don't need a seconder yet? No. I'm glad there are learned heads here, much more learned than I.

Mr Pasin interjecting—

I wasn't referring to the member for Barker in relation to that assessment, I can tell you right now!

Mr Pasin interjecting—

All good things to those who wait, I suggest! In government, Labor enacted the National Consumer Credit Protection Act 2009. That act implemented for the first time in Australia a national regime for the regulation of consumer credit. Labor strengthened the regime in 2012 in response to concerns about improper behaviour by payday lenders, including by strengthening protections for consumers. Part of Labor's plan also mandated a built-in review mechanism of the new national consumer credit protection regime. That review commenced in 2015. The small amount credit contract review was handed to the government in March 2016 and the government published its response last year.

This will not be a motion where one side or, presumably, the other will spend much time being overly critical of the approach taken by respective major political parties in relation to addressing this crucial issue. I think it's fair to say that, when one looks at the way in which both parties went about unanimously backing the recommendations of the review, there appears to be significant uniform community goodwill in relation to making sure meaningful steps are taken to protect vulnerable consumers who may fall prey to small amount credit contracts.

Let me briefly expand what I mean when I talk about small amount credit contracts. Put very simply, they are more colloquially known as payday loans or rent-to-buy schemes. Both of them have real pitfalls for vulnerable consumers who are spending much more time than any of us would like focusing on just meeting day-to-day needs for them and their families. The reality is these payday loans and rent-to-buy schemes are almost exclusively used by people on low or very low incomes to try to keep their heads above water. We've all spoken to those people in our electorates. We know that people on very low incomes often have little capacity to absorb financial shocks—simple things like a washing machine breaking down, ill health leading to worklessness or a parking ticket. With little disposable cash after bills are paid, and with little savings put away for a rainy day, one of the obvious options is often a payday loan. We have all seen those adverts on TV, often late at night or extremely early in the morning, saying, 'Cash while you wait' and 'Loans via apps'. It all looks very warm and fuzzy until such time as the rubber hits the road and these vulnerable consumers are faced with the spectre of having to pay back those loans plus crippling interest which they hardly foresaw.

There are also rent-to-buy consumer leases, where a consumer will enter into an arrangement in which they rent a consumer good, say a vacuum cleaner or a fridge, from a company for a period. At the end of that period, they get to keep the goods. It's also becoming increasingly common with mobile phones. So while the unconventional arrangements have existed in one form or another for many years, and we all recognise that if properly in check they can play a legitimate role in smoothing out the swings and roundabouts of challenges for low-income families, there is still a systemic and regulatory failure in relation to the small amount credit contracts that see some of our lowest income citizens being trapped in a cycle of debt.

I will use my remaining time simply to implore the government—the time is long overdue for us to make some legislative changes to the laws relating to small amount credit contracts. This is the reason why it's such a shame that we are where we are. The government commissioned this review in 2015; it reported in March 2016. The government's response, which was very favourable to the review, was in November 2016, and there was light at the end of the tunnel. The minister indicated in February 2017 that drafting was underway. The problem is that the March 2017 estimates revealed that this was not true. Drafting had not commenced, and we haven't seen any evidence yet that the drafting instructions have even been drafted, let alone the legislation. What I'm hoping we will hear from those on the government side today, through this motion, is that there is some real progress in making sure that all sides can wrap around this issue, protect vulnerable consumers and just make sure that their lives can be improved in some small way.

Melissa Price (Durack, Liberal Party) Share this | Link to this | Hansard source

Do we have a seconder for the motion?

Graham Perrett (Moreton, Australian Labor Party) Share this | Link to this | Hansard source

I second the motion.

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

I thank the member for Perth for bringing this motion to the House. I think the most important thing we need to recognise in this space is that we need to get this process right. As the member for Perth has quite rightly pointed out, for those people in our community who access this type of finance because they can't access finance elsewhere, it is critically important we get it right. In accepting any of the recommendations made in the review, it is imperative that we carefully weigh the benefits and risks to consumers and small business operators within this industry.

As the member for Perth has rightly pointed out, the government has accepted the vast majority of the recommendations, either in part or in full, that were made by the review. The review panel stated:

The recommendations seek to strike an appropriate balance between enabling consumers to access emergency finance when required, optimising their opportunity to improve their financial situation over time, and the viability of an efficient industry.

The government shares that view. That's why it's so important that we get this right for consumers who require access to this type of finance, because more often than not they have no other avenue.

It's just as important to ensure that the smaller businesses in this sector have the capacity to continue to provide the services they currently provide. Because of this, we are carefully considering how these changes are implemented. This government understands that the extent of the reforms being proposed will have a significant impact on the sector and must be implemented following careful consideration. The government acknowledges the significant impact that these changes will have on existing industry participants and, importantly, will put in place appropriate grandfathering arrangements for existing contracts. The government will conduct a further review of the small amount credit contract and consumer lease laws within three years from the commencement of the legislative changes, as we understand the ongoing need to ensure that vulnerable consumers are protected while still allowing appropriate access to finance.

In essence, the government supports four key recommendations made by the review: firstly, retaining the existing price caps on small amount credit contracts; secondly, extending the small amount credit contract protected earnings amount requirement to all consumers, lowered to 10 per cent of the consumers' net income—currently, for those consumers who receive 50 per cent or more income through payments from Centrelink, total SACC repayments are capped at 20 per cent of the consumer's gross income; thirdly, introducing a cap on total payments on a consumer lease equal to the base price of the good plus four per cent of that price per month; and, fourthly, introducing a protected earnings amount requirement for consumer lease providers of 10 per cent of net income for all consumers, equivalent but separate to the requirements of the small amount credit contract.

The government recognises that consumers of small amount credit contracts and consumer leases are often Centrelink recipients or those with very low incomes and therefore have limited access to mainstream credit. There are other opportunities, like the no-interest loan schemes, but they have limited financial capacities. Half of all consumer lease payments are provided directly through Centrepay, Centrelink's payment deduction system, with the average gross income of a small amount credit contract consumer being some $35,700 per annum.

The government also understands that repeated borrowing in Australia is high, with the average SACC consumer taking more than three small loans each year and then falling into a debt spiral—a clear indication of the financial difficulty they're in. Therefore, it's important that, as we review this process and look to implement solutions, we do provide the opportunity for emergency finance which will allow the lease of a range of consumer goods to help these people through a very difficult situation but so they don't get trapped in a debt spiral.

Milton Dick (Oxley, Australian Labor Party) Share this | Link to this | Hansard source

What we just heard from the member for Forde was blah, blah, blah: no action whatsoever from this government, just a lot of waffle without anything in place. I rise to place on the record my strong support for the motion moved by the member for Perth and call on the government to take action on this reckless and out-of-control industry which is ruining the lives of residents not only in my electorate of Oxley but right across this country.

What we have is another case of this government burying its head in the sand and failing vulnerable Australians. We know that this is nothing new for the government, with its cuts to Medicare and schools, and the disastrous rollout of the NBN. It's what we have come to expect. But small amount credit contract providers, or payday loan providers, are ruining lives and running rife through our communities, and they must be reined in.

We've already heard how the government established a panel to review the small amount credit contract laws on 7 August 2015, and it provided its final report on 3 March 2016. Since then 18 months have gone by, and what have the government done? Zero, absolutely nothing—even though in the government's very own response to the review they agreed with the vast majority of the recommendations in part or in full. Yet they have continued to sit on their hands and let the industry run riot. Furthermore, the Minister for Revenue and Financial Services said at the time:

Implementation of these recommendations will ensure that vulnerable consumers are afforded appropriate levels of consumer protection while continuing to access SACCs and leases.

But they are yet to act—all talk, no action.

The government were even caught out this year when the minister claimed in an interview on Lateline on 28 February that Treasury was drafting legislation to implement the review's recommendations. However, just three days later, on 1 March, in response to questioning in Senate estimates by Senator Gallagher, Treasury's head of the Financial System Division confirmed that drafting had not commenced for a bill to enact the SACC review recommendations accepted by the government. I'm not sure what is worse, the outrageous practices that the payday loan sharks employ or the sheer incompetence of the government, who tell Australians they are doing something about it when in fact they are doing absolutely nothing. It's no wonder that we see the government slipping further and further behind with the Australian people, when the people have to put up with this rubbish.

It's absolutely clear that consumer credit contracts and consumer leases have been shown to cause unnecessary hardship to vulnerable consumers. A report commissioned by the Consumer Action Law Centre and compiled by Digital Finance Analytics in October 2015 identified payday-lending hotspots at postcode level. I was informed by the Consumer Action Law Centre earlier this year that my electorate of Oxley was one of the worst areas affected by payday lenders.

I take this issue seriously. I only wish the government would as well. These are vulnerable people who are being taken advantage of every single day, while this government sits back and refuses to act. Next year, they will be entering their fifth year of government.

These are lenders who charge a 20 per cent establishment fee and four per cent monthly fee on the amount loaned. These fees are converted to staggering annual percentage rates of between 112.1 per cent and 407 per cent. This is absolutely outrageous. Furthermore, payday lenders are not subject to the 48 per cent annual percentage rates caps like other lenders. They can charge almost 10 times as much as banks and other lenders—10 times as much as banks! And what's worse is that they take advantage of people who are already struggling financially, who simply cannot afford to make repayments, with many becoming caught in a harmful cycle of repeat borrowing.

The industry has been given long enough to prove they can self-regulate, but they have failed. Rather than responsible lending, the industry has repeatedly shown that it will lend money to pretty much anyone, regardless of whether they can afford repayments. ASIC has repeatedly taken action against big lenders for breaching responsible lending laws, including Cash Converters and Nimble, but we haven't seen any positive changes in the industry. That's why we are here today, calling on the government to immediately prepare legislation for consideration by the parliament to implement the SACC review recommendations and protect vulnerable consumers. Any further delay in introducing legislation for consideration by the parliament to implement the SACC review recommendations will result in unnecessary continuation of hardship to vulnerable consumers and their families.

Earlier this year, I was fortunate to meet with consumer groups who attended Parliament House, and I've met with church leaders, advocacy groups and welfare agencies in my electorate. They all ask me the same thing: 'When will this government get on and actually take action on these practices?' We've got to see action and it's got to happen now.

Graham Perrett (Moreton, Australian Labor Party) Share this | Link to this | Hansard source

I'm proud to support the motion moved by the member for Perth, and I thank the member for Oxley for his fine words on this topic. I'm proud to join the member for Perth in calling on the Turnbull government to immediately prepare legislation to implement the small amount credit contract review recommendations.

Next week, the coalition government starts its fifth year in office, so it's not as if they haven't had enough time. The government commissioned a review of SACC in 2015 which reported to the government in March 2016. The government's own response was released in November last year. So the reform plan already exists and has done for a year. Most of the work has already been done. Now it's time to actually act. In fact, Minister O'Dwyer indicated in February that the drafting of the legislation was already underway to implement the SACC review's recommendations. However, we've now heard that the drafting actually has not commenced. So not only have they been sitting on their hands when it comes to the review's recommendations; they've also misled the Australian people about the progress of these vital reforms.

It's high time the government stopped dithering, stopped focusing on themselves and their interminable division, and started standing up for Australians trapped in these inappropriate small amount credit contracts or payday loans and rent-to-buy schemes.

These small amount credit contracts or payday loans and rent-to-buy schemes are a particular type of loan that is almost exclusively used by people on low or very low incomes who are simply trying to keep their heads above water. They are loans that are not issued by authorised deposit-taking institutions like banks, building societies or credit unions. They are loans for much smaller amounts and shorter durations, and, as the member for Oxley stated, they can have annual interest rates amounting to 100 to 400 per cent or so.

We see the TV ads: get cash in 30 minutes or instant loans on an iPhone app; get your holiday paid for now; go into hock for your wedding. Sadly, with inequality at its highest in 70 years, the number of Australians feeling the squeeze with the rising cost of living and other pressures is rising. This leaves an ever-increasing number of Australians with low disposable incomes and without the capacity to absorb financial shocks like keeping a fridge that's broken down running, repairing a burst pipe or repairing a car so that they can go to work.

In these scenarios, it's easy to see why people turn to the apparent promise of a small loan to relieve this financial stress. In the short term it's attractive, but in the long term you're obviously paying these exorbitant rates. Then there are the rent-to-buy leases where a consumer will rent a product, such as a washing machine or a fridge, from a particular company for a particular period. They appear nice and shiny. They're basically the modern-day version of the old hire-purchase scheme.

Labor remains deeply concerned about the systemic failures and the lack of an adaptive regulatory framework that can respond to these small amount credit contracts, leaving many Australians in a cycle of spiralling debt where they're borrowing to pay the interest on these payday loans. I was proud to be part of a Labor government that enacted the National Consumer Credit Protection Act 2009 in 2010. For the first time in Australia, that act implemented a national regime for the regulation of consumer credit. Labor's record in government on consumer law and securities reform is strong. We work with small and large business to reduce red tape and inhibitors to business confidence. Over our two terms in government, our reforms in this sector received an abundance of support from the commercial and consumer sectors, something you could hardly suggest this Liberal government enjoys. In fact, we've only had one speaker from the Liberal Party on this motion. We strengthened our own consumer credit protection regime in 2012 as a response to growing concern amongst Australians about improper behaviour by payday lenders, including by strengthening protections for consumers of these products. That's our record, Labor's record. I'm proud to stand by our achievement in the consumer law sector and look forward to doing even more under a Shorten Labor government.

Part of Labor's plan also mandated a built-in review mechanism of the new national consumer credit protection regime. That review commenced in 2015, and we've been waiting, with cobwebs blowing around and tumbleweeds rolling down the finance street. As I said earlier, we've heard one thing from the minister over six months ago—that the legislation was being drafted—and then another thing from the relevant department, saying that no such drafting had occurred. I certainly hope those sitting opposite might be able to provide Australia with an update on the drafting at the very least, because we need this legislation. Australians who are trapped in these contracts stand to have their lives improved by this parliament acting to fix the problems, only to have our government too preoccupied with internal divisions—yet another example of the legislative inaction that has become too synonymous with this Turnbull government.

So I thank the member for Perth for his motion, and I wish that those opposite had supported the motion and spoken on this important area of work. I look forward to the member for Perth's contribution in the future.

Mark Coulton (Parkes, Deputy-Speaker) Share this | Link to this | Hansard source

The time allocated for this debate has expired. The debate is adjourned, and the resumption of the debate will be made an order of the day for the next sitting.

Federation Chamber adjourned at 19:08