Luke Gosling (Solomon, Australian Labor Party) Share this | Link to this | Hansard source

I'd like to start by commending the member for Perth and his staff for championing the small-amount credit contract and consumer lease reforms. The National Consumer Credit Protection Amendment (Small Amount Credit Contract and Consumer Lease Reforms) Bill will improve the lives of some of our most vulnerable Australians and may very well prevent others becoming trapped in dodgy and shady small-amount credit contracts, or SACCs.

In the Territory, we have had many instances of individuals being ripped off by payday lenders and rent-to-buy operators. In one instance, a payday loan client who borrowed $150 was told within six weeks by a payday lender to repay over $1,000. We also had a Centrelink recipient who had four rent-to-buy payments deducted from her Centrelink payment each fortnight, leaving her with only $50 to feed her family. On top of that, she had a payday lender attempting to withdraw a further $66 repayment each fortnight by direct debit. We've had a case of an age pensioner paying $1,500 for a set of drawers worth $600, and we even had a ridiculous case where a lender charged a $50 dishonour letter fee on top of a $49 payment dishonour fee. We also had the case of Amazing Rentals Pty Ltd in the Northern Territory. In one disturbing instance, a man on Newstart allowance, with English as a third language, could not afford to pay for electricity or food because his lease payments to Amazing Rentals were so high. But for the great work of ASIC and the North Australian Aboriginal Justice Agency—NAAJA—this organisation would still be operating and ripping off Territorians.

In the Territory, there are 72 remote Indigenous communities where services are coordinated by the NT government, and we also have about 500 homelands in the Territory. The final report of the Review of the small amount credit contracts laws in 2016 noted:

The issue of unsolicited sales (of any products or services) in Indigenous communities has been long recognised as causing significant harm, with these communities targeted as suppliers can make multiple sales in a short period of time with little effort or outlay of capital.

Officers from ASIC's Indigenous Outreach Program have been told of instances where businesses, including rental companies, have given inducements to senior or respected community members to obtain introductions to individuals in the community so that they can make as many sales as possible. That is shameful. They have heard, both firsthand when visiting a community and second-hand through financial counsellors and consumer advocates, of regular instances of this practice being used in numerous communities around Australia. In some instances, unscrupulous lenders are able to operate in these remote communities due to loopholes in current regulations. So, I am very pleased that this bill will prevent door-to-door selling of consumer leases at residential homes and introduces broad anti-avoidance protections to prevent SACC loans and consumer lease providers from circumventing the rules and protections contained in the credit act.

The reforms in this bill aren't groundbreaking or revolutionary. We know that members opposite support the measures—or at least they should, because this bill implements the government's own policy in relation to SACC reforms. I'm sure that we can all agree that strengthening penalties will increase the incentive for SACC providers and lessors to comply with the law and that imposing a cap on the amount that can be paid will protect consumers.

ASIC agrees with the changes. The bill adequately balances the need to protect consumers from harm whilst ensuring that the useful parts of the industry remain viable. We know that there are times when those on low incomes need quick access to cash, and we are not—not!—advocating the total elimination of payday lending. Instead, we are protecting those people from exploitation by predatory lenders. Needless to say, it would be a disgrace if members opposite voted against its implementation when we all know they agree with the changes being proposed. We have a chance to help vulnerable Australians, some of whom are suffering because of payday lenders and small-amount credit contracts, so I urge the government to accept the member for Perth's proposals and pass their own legislation.

Jim Chalmers (Rankin, Australian Labor Party, Shadow Special Minister of State (House)) Share this | Link to this | Hansard source

This issue is one that is pretty close to my own heart. There are something like seven different payday lenders within 450 metres of the front door of my electorate office. Two of them are in fact right next door to each other. So in great communities like mine, which have a lot of disadvantage, we see a concentration of payday lenders.

I want to commend the work of the member for Perth and the member for Oxley. It's an honour to speak after the member for Solomon, who made some very good points a moment ago in his characteristically eloquent way. This is an important issue. It touches communities like mine and communities right around the country. It treats vulnerable people very poorly, so I appreciate the work not only of the members for Perth and Oxley but of all of my colleagues here. It is disappointing that there aren't any speakers from the other side.

The payday lending industry makes a lot of promises about fast cash, giving everyone a fair go, and being there when they are needed, so it is not surprising that people who are doing it tough, including people in my community, turn to payday lenders or rent-to-buy schemes to get through those tough times. I do understand that in some cases these loans can play a legitimate role for low-income families in smoothing out some of those unforeseen financial pitfalls. But in the main I think it is true their promises don't always match up with reality. There are a lot of rip-offs and a lot of damage is inflicted on communities like mine. There are leases and loans going to people already crippled with the debt of existing loans. You have rent-to-buy contracts, where families are paying more than $3,000 for a clothes dryer that would normally cost $345, which is equivalent to an interest rate of 884 per cent. You have leases where an item isn't replaced when it's faulty. You have credit providers using rent alone to calculate people's living costs, but not all of the other costs associated with life. I could go on and on, unfortunately.

I want to make it really clear that when we talk about the concerns we have with payday lending and consumer leases we are not in any way reflecting on the good people who work in these businesses, a lot of them being in those seven outlets near the front door of my electorate office. We're in no way reflecting on the people who work there, but we are reflecting on a system that allows this sort of behaviour to go on. We need to fix it, to change it, and that is what this private member's bill is about. It is about protecting consumers and not demonising the workers who sit at the front counters of those businesses.

All we are trying to do here is to implement the key recommendations from the small-amount credit contract laws review. We want a cap on the total payments that can be made under a consumer lease. We want small-amount credit contracts to have equal repayments and equal payment intervals. We want to remove the ability for providers to charge monthly fees on the leftover length of a loan when the loan is paid off early. As the member for Solomon said, we want to prevent the door-to-door selling of leases at residential homes. We want to introduce broad anti-avoidance protections and strengthen the penalties for people who do the wrong thing. These asks that we have of the government are not that ambitious, frankly. They simply reflect what the government said they were interested in doing in the first place. We are seeking a bipartisan outcome, where the government would introduce its legislation and we would support it. Unfortunately, for reasons that are really beyond comprehension, it is left to us on this side of the House to move the government's own legislation to implement the recommendations of the government's own review. That's a pretty unfortunate, pretty shameful outcome, really, and we would prefer that it were otherwise.

There are all kinds of other elements to it, including the proportion of people's incomes that can be paid on loans and all of these sorts of things. We want to adopt, for example, the same 10 per cent income cap for lease payments on rent-to-buy schemes that we are proposing for payday lenders as well, to get that cap on how much you have to pay out of your income down to 10 per cent.

As I said, we've introduced this private member's bill because the government has failed to act. There hasn't been the action that has been promised, and so we are once again stepping into the leadership void left by those opposite. We just want to implement the government's own policy, and we think that enough is enough. We think that the government needs to realise this is about helping people trapped in a vicious cycle of debt and dependence on these schemes, whose lives can only be improved by this parliament standing up for them in the way that we've outlined in this private member's bill.

Susan Lamb (Longman, Australian Labor Party) Share this | Link to this | Hansard source

It's not often that I eagerly await legislation from this government. Actually, I usually dread it, but that's because usually legislation from this government hurts people who don't deserve it, as with cuts to TAFE and cuts to university—I've just come from the chamber downstairs, where I spoke against the cuts to universities—or maybe the attacks on hospitals or the public health system. But I've been waiting for their promised small-amount credit contract, or SACC, legislation for some time now—too long, in fact. I've been waiting because this legislation should provide protections to vulnerable consumers who've been ripped off by unscrupulous payday lenders and rent-to-buy schemes.

Just to go through a quick time line of what has led us up to today, when Labor was in government we enacted the National Consumer Credit Protection Act, a national regime for regulation of consumer credit, with some additional protections. This legislation included a mandated review of the legislation, which was commissioned by the then Assistant Treasurer Josh Frydenberg back in 2015. When the government received the review in March of 2016, they waited eight months before noting, in November 2016, that they supported the vast majority of recommendations in part or in full. So, a year later, in October of 2017, the then minister, Michael McCormack, gave us a promise that the government would introduce the legislation later that year.

Well, here we are, still waiting, months after yet another government promise has been broken. We are still waiting despite Labor repeatedly calling upon the government to introduce this legislation. We are still waiting despite the member for Perth doing the government's job for them and bringing forward this private member's bill, the National Consumer Credit Protection Amendment (Small Amount Credit Contract and Consumer Lease Reforms) Bill 2018, which replicates, word for word, the exposure draft legislation that the government released in October last year.

This bill that we're speaking about today is consistent with the small-amount credit contract review recommendations. It seeks an imposition of a cap on the total payments that can be made under a consumer lease, it removes the ability for an SACC provider to charge a monthly fee in respect of the residual term of a loan when a consumer is able to repay the loan early, and it strengthens the penalties to increase incentives for providers and lessors to comply with the law, amongst other measures.

These are all critical reforms that are vital to protect vulnerable consumers. You see, some small-amount credit contract providers prey on people with low incomes. They know that 40 per cent of people who enter into an SACC loan are unemployed, and they know that 25 per cent of those people receive more than 50 per cent of their income from Centrelink. They know that these people are struggling and are looking to SACC loans as a way to smooth out some unforeseen swings and roundabouts that affect low-income families. Yet some providers are locking these vulnerable people into contracts that end up costing three or four times the retail price of the good that they're purchasing. They use rent alone to calculate an applicant's expenses, not taking into account the cost-of-living bills, even for things as simple as groceries.

I'm not saying that all providers are bad. I'm not saying that there's no place for small-amount credit loan contracts; I'm not saying that at all. What I'm saying is that we need protections in place to ensure that vulnerable Australians don't fall victim to unscrupulous lenders who are taking advantage of their situation. There are people in places like Caboolture in my electorate of Longman who are being trapped in cycles of debt by exploitative lenders. Without proper regulation, this is going to keep happening time and time again. It's time the government took charge and introduced the legislation that they promised all those months ago. It's time to do it.

So I say to the government that this is something that Labor will work with you on. We will work with you to pass this through parliament as quickly as we can, because we know just how important this is. We say to the government: quit stalling and introduce this legislation. There are people in my community who are counting on this legislation moving through. I say to this government: once and for all, do your job.

Joanne Ryan (Lalor, Australian Labor Party) Share this | Link to this | Hansard source

In their current form, the small-amount credit contracts have become a blight on our community and on my community in particular. Payday lenders are preying on vulnerable low-income earners who are trying to keep their heads above water, with leases and loans that are causing them to spiral further into debt. We've all seen or heard the flashy advertisements in the media where payday lenders are promising quick and easy loans. We don't need to detail them, but the most affronting of those for me is the one that suggests that if your child's having a birthday party it might be a good idea to take out a loan. It all looks like a quick and easy fix to help in circumstances where the finances are tough. But these loans are ripping off vulnerable consumers and causing them further financial strain in the long term.

And it doesn't stop there. When I sat with the Victorian Consumer Action Law Centre more than two years ago, they told me that one of their major concerns was that people didn't have one of these loans or one of these contracts or one of these leases; people had three or four of them. In those circumstances you've got to wonder about the impacts on the anxiety levels in households and the flow-on effect of that anxiety to their children. As someone who worked in schools, let me tell you: for a child coming from a home filled with anxiety and financial stress, it comes into those children's lives in very detrimental ways.

So it's important that this parliament and this government do something about this. Labor knows this, and in fact the government knows this too, because this bill, the National Consumer Credit Protection Amendment (Small Amount Credit Contract and Consumer Lease Reforms) Bill 2018, is identical to Treasury's exposure draft in every way—word for word. Others here have highlighted the sorry tale in which the member for Higgins did the work in this space and the now Deputy Prime Minister, Michael McCormack, completed the work—had the bill drafted. But what happened after that? Beyond reason, this bill has not been brought into the parliament. I believe the member for Deakin is the person who failed to do that—failed to bring it into this parliament to protect vulnerable people from seeking loans that they cannot afford.

In my electorate of Lalor we have three payday lending shopfronts within a 500-metre radius of the Werribee train station. Further to this, Digital Finance Analytics, in the report The stressed finance landscape data analysis, commissioned by the Consumer Action Law Centre, identified payday lending hotspots and indicated that the postcode 3030, including Point Cook, Werribee and Werribee South, was the ninth highest hotspot for small-amount credit contracts. This is the same area that last year was identified as having the highest mortgage stress and mortgage default rates and for many years had been in the top 10 for people being evicted from their rental properties.

So what we're seeing is layer upon layer of financial stress. You've got to start to understand that these payday lenders are acting with full knowledge of the stress these people are under, yet they're giving loans. They are providing loans when they know. Digital Finance Analytics recently estimated that over $1 billion in small-account credit loans would be written in 2018—that is, this year—and that there will be an increase of about 10 per cent in overall loans taken out this year. They know that families can't afford these loans. This legislation takes some small steps to make sure that, in situations where the loans are becoming easier to apply for, with 75 per cent estimated to be online, we need to take action now.

Amongst other important measures, reforms in this bill will prevent payday lenders from facilitating loans with consumers that exceed 10 per cent of the individual's net income and, further, these reforms will prevent lenders from offering loans for household goods that exceed more than 10 per cent of their net income. I welcome the bill into the House because it will crack down on unfair deals which are exploiting vulnerable people. I go further and suggest that we need a national database so that these lenders can be held to account when they give a loan to someone who is already in deep financial stress because they have a payday loan with somebody else.

Lucy Wicks (Robertson, Liberal Party) Share this | Link to this | Hansard source

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