Cathy McGowan (Indi, Independent) Share this | Link to this | Hansard source

I move:

In moving this motion, I give notice that in the current sitting period I will bring forward a series of measures to address the emerging cracks and compounding impact of failures in the social service legislation. For many of my constituents, an increasing reliance on social services puts those already in a vulnerable position in a more vulnerable position, makes them more marginalised and, ultimately, makes them less valued members of our society. Ideally, social service payments should act as a safety net, providing enough resources for movement off welfare and out of the welfare system. But in many cases it is doing exactly the opposite. Low payment levels leave little room to move out of the welfare system, and an increasing reliance limits the ability to break through.

I raise these issues because I know that these are the issues that are important in my electorate. Colleagues, for every year I have been in parliament I have asked my community for feedback post-budget—for advice and for solutions. This budget impact survey is one of the ways I investigate, measure and report back to parliament. In this year's budget impact survey, social security was identified in the top of Indi's five concerns: 24 per cent of respondents raised social services as one of the top three issues and 80 per cent of respondents ranked social services as either very important or fairly important. Comments included: 'It's not adequate for the needs of many who are in the lower income brackets'; 'We are treated as numbers with little bits of money attached to us'; 'We are attended by a different Centrelink employee every single time, so it's often the case they don't understand our unique situation—nor do they care'; 'Centrelink forms could be made much more accessible for us doddering old people to alleviate some of the anxiety involved in getting the thing right'; and 'We have a moral obligation, if we have a social conscience, to ensure we assist those who do not have the same advantages as others.'

Next Monday I will table in parliament the social security commission bill 2018. The objective of this bill is to establish a social security commission to provide the parliament with independent and considered advice on a fair and reasonable social safety net for those who are dependent—in whole or in part—on social security payments. This commission will ensure an acceptable standard of living for recipients of social security payments and whether the current level of payment provides adequate support.

However, today I want to talk about payday loans. For those reliant on social service payments to meet everyday living costs, a payday loan is an attractive and quick solution. Loans allow quick access to cash to meet everyday living costs and to pay unexpected bills, but increasingly they are being used to pay other payday loans. A number of constituents have contacted my office about the problems experienced by borrowers of these products and the targeting of the most vulnerable. Today in parliament, I'd like to acknowledge Sandra Blake. Sandra is a financial counsellor. She works with St Stephens UnitingCare in Wodonga and she is chair of the Hume Region's Financial and Consumer Rights Council of Victoria. I acknowledge her work in bringing this motion to the parliament.

My constituents support the government's proposed legislation to address the recommendations in the 2016 review of the small amounts credit contract law, as do many community advocates within my electorate. We know that without this legislation the high-interest, high-fee cash advances continue to trap people in the cycle of debt. My constituents are concerned that payday loans will continue to be inappropriately handed to low-income and vulnerable Australians while the delay in presenting this legislation to parliament continues. A loan of, for example, $120 in October 2017 has resulted in a debt of $1,159 in February 2018. There are many, many more statistics. So I call on the government to bring the draft legislation before the parliament as soon as possible in order to give consumer advocates an assurance that legislative change will be considered to address the increasing number of vulnerable people with loans impacted by these lending practices. I thank my colleagues opposite and members of the opposition for being part of this debate, but let's get this legislation before the parliament, let's get it voted on and let's get the changes we know need to be made.

Maria Vamvakinou (Calwell, Australian Labor Party) Share this | Link to this | Hansard source

Is the motion seconded?

Matt Keogh (Burt, Australian Labor Party) Share this | Link to this | Hansard source

I second the motion and reserve my right to speak.

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

I thank the member for Indi for bringing this motion to the House. It's important when considering topics such as this to consider the effect of debt on families, singles, the elderly and everyone in between and, importantly, what can be done to protect them from going further and further into debt. That's where I agree with the sentiments echoed by the member for Indi in her contribution. There is no doubt that being in debt, particularly when it involves high-interest rates, can have a devastating effect on people, especially families who are already struggling. Often we see those people seeking to borrow more money to get them out of that particular situation. But, sadly, that's rarely, if ever, the right answer.

Borrowing has become a way of life for many of these people. Unexpected bills, increased living expenses and overspending can often lead people to make decisions that they would otherwise never make—such as going to visit a payday lender, who is offering fast and easy money, or renting a piece of household equipment such as a big-screen TV. A 2012 study estimated that 1.1 million Australians were, on average, taking out three to five loans per year and about 40 per cent of payday loan customers take out more than 10 loans a year. Lenders often schedule repayment dates to coincide with the borrower's wage or benefits payments, leaving people without adequate money to cover rent, food or other basic living expenses.

What we know for sure is that fast money, like that offered by payday lenders, is almost guaranteed to lead to a debt cycle. This is why the government established a small amount credit contracts review—to ensure consumers were protected and that lenders were acting within the law and not ripping people off. Currently, we are seeing examples of interest rates of up to 884 per cent on consumer leases and loans. The government wants to ensure that the regulatory framework strikes the right balance between protecting vulnerable consumers and minimising the regulatory burden on industry.

It is also evident that some of these services, particularly in the consumer lease space, are for some people their only access to finance to obtain goods that they need. That, in part, is because of some of the things they have gone through and the circumstances in their life. But one of the problems that I have seen in the hearings and the meetings that we've had is the issue of disclosure. Many of these people sign up to these contracts with little or no understanding of what they're actually signing up for, because the interest rates, fees and charges are not properly disclosed. For a personal loan contract with a bank or a major financial institution, there is a requirement that they properly disclose all fees, charges and interest rates in a clearly identifiable and easy-to-understand format. That requirement does not exist with consumer leases or payday loans. I've read a few of these consumer lease or payday loan contracts. You can't understand and properly identify what you are paying for. I have made that very clear to the minister in the consideration that is being given to how we deal with these particular issues.

The recommendations in the report include extending the contract's protected earnings amount, introducing a cap on total repayments and introducing a protected earnings requirement for consumer leases, as well as for payday loans. Implementing these recommendations to ensure protection for vulnerable consumers is what we are seeking to do. We want to ensure that we get the legislation correct so that not only consumers are protected but also those businesses that provide the service are protected.

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

What a cop-out we've just heard from the member for Forde. There were all the weasel words in the world: 'We're looking into it. We are taking time.' I'm going to put on the record today, as the member for Forde leaves the chamber, that it has been 1,102 days since the government initiated a review into the shonky payday loans sector. I am not going to listen to one member of the government with any more excuses, because today is the day when you've got the chance to acknowledge that there are 650,000 Australians being exploited and being taken advantage of by this reckless and out-of-control payday loans industry.

I thank the member for Indi for her fierce advocacy on this and other issues, because she is in touch with her electorate, just as every member on this side of the chamber understands what's going on in the real world. This government sits by and does nothing. Despite repeated promises made by the government, we've just heard the member for Forde say: 'We know there are problems. We know there's an anomaly out in the industry.' He also said: 'We're going to do nothing. We're just going to sit by and talk about it.'

I know from talking to people in my community and right across Australia that they don't want a government bereft of ideas, just floating in the wind. They actually want to see some concrete outcomes. We know that the government has the evidence. The facts speak for themselves. Families are paying interest rates as high as 884 per cent for household goods. Fridges and washing machines, which would normally cost $350, end up costing almost $4,000 from loan sharks looking to rip off vulnerable Australian families. Some 1.8 million Australian families are now financially distressed. It is a number which has almost doubled under this government's watch. As we know, inequality is at an all-time high, with stagnating wages and people struggling to get by, which has resulted in 650,000 Australian households turning to payday loans just to make ends meet. The time has come to clamp down on this out-of-control payday loans industry and to stop the loan sharks taking advantage of vulnerable consumers.

It doesn't stop there. These shonky payday loan sharks prey upon the most vulnerable—with 40 per cent of loan holders unemployed and a quarter of loan holders receiving more than half of their income from Centrelink—yet the loan sharks go unchecked by this government. We know that back in 2015 the government established a committee to look into this issue. The recommendations were handed down in March the following year, with 24 recommendations on how we can clean up the industry. To even my surprise, the government announced soon after that they supported the vast majority of the recommendations in part or in full. The Minister for Revenue and Financial Services said at the time:

The final report has made a number of recommendations designed to increase financial inclusion and reduce the risk that consumers may be unable to meet their basic needs or may default on other necessary commitments.

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

Despite receiving this report almost two years ago and the government announcing they supported the recommendations, what's been done? Nothing. It has been 1,102 days—and counting. Here we are some two years later and consumers are still being ripped off and being taken advantage of, because of this hopeless government's inaction and disregard for those who have been financially driven into the ground.

I congratulate Gerard Brody and the Consumer Law Action Centre for their leadership to see the full, proper and original legislation brought forward. The action centre is just one of many organisations working hard at the coalface to address issues. They are joined by Good Shepherd Microfinance, St Vinnies, the Salvation Army, local churches and many other organisations working hard to tirelessly clean up the mess left by the loan sharks. I know this because I've seen it firsthand, with over 50 local community groups and organisations joining me for a payday crisis meeting in Goodna, in my local community, earlier this year. We heard story after story about how loan sharks go after vulnerable people, ripping them off every day.

There is something we can do to address this problem, but it requires the government to have some backbone—to have a spine—to get the job done. Members of the Labor Party, with the Leader of the Opposition, Bill Shorten, are committed to reforming this sector. We know that the parliamentary friends of payday lending under this government have tried to wind back the way the loan sharks operate and that the lobbyists who have seen this legislation are fighting it tooth and nail, but I am proud to say that Labor members have stood shoulder to shoulder with the community sector to make sure we see real reform. Time and time again we hear of victims being ripped off, so again I call on the government to bring forward legislation so that we can implement protection for consumers, not a watered-down version. Enough is enough. It's time for action. (Time expired)

Craig Kelly (Hughes, Liberal Party) Share this | Link to this | Hansard source

I am pleased to rise to speak on this motion on payday lending moved by the member for Indi. I can appreciate the concerns of the member for Indi on this. There is no doubt that many people in our society get trapped in payday lending, and there is no doubt that some of the interest rates are completely outrageous and, in fact, are a complete rip-off. I agree 100 per cent with that, and I respect the member's concerns. But we need to be very careful when we legislate in this place. Ultimately, no-one forces a person to sign that contract. What we need to be careful of when making legislation is not to deny credit to people who need it in emergency circumstances. There are many times when people in our society need credit in emergency circumstances. When we put restrictions on that, all we do is to create adverse and unintended consequences of policy, even though it may be very well intentioned and even though it may be done in the belief that we are helping people. If you reduce the limits of credit available to people you will simply deny people access, perhaps at times when they need it.

I agree that the high rates of interest are quite outrageous, but the reason that those rates of interest are often so high is that those loans have high rates of default. We've had some of the credit providers in the parliament, and we've had discussions with them. We've asked them: 'What is your biggest cost of doing business?' Their biggest cost of doing business is the bad loans that they have to write off. Sure, we could mandate a maximum rate of, say, 10 per cent across the board and say they can't charge more than 10 per cent. That would be wonderful in an ideal world, but all that would mean—

Cathy McGowan (Indi, Independent) Share this | Link to this | Hansard source

Easy.

Craig Kelly (Hughes, Liberal Party) Share this | Link to this | Hansard source

Yes, of course it's easy—a maximum of 10 per cent, but all that would do is dry up the ability of many people to obtain credit at a time that they desperately need it.

Those opposite live, unfortunately, in an ideal, utopian world, not in the real world where people actually have to survive and make hard decisions. No-one in this parliament wants to see high rates of interest on credit. As I said, I respect absolutely the position of the member for Indi on that, but we need to be very careful and think through the unintended consequences of any legislation that we bring into this parliament. When we put price caps on anything, no matter what that good or service may be, we simply limit the supply of that good or that service. It is no different with credit and finance. If we put a limit on what interest rate can be charged we will deny certain people finance, especially at times when they desperately need it. I wish there was an easy solution. We need to help people in this situation. The best thing we can do is to try to get the cost of living down for vulnerable people in our community. The best thing that we can do is make sure that there are plenty of job opportunities for people in our community. That is what this government has been concentrating on. We've seen, since the election of the coalition government, over one million new jobs. One million new jobs have been created under this government—not created by government but created by entrepreneurs who are prepared to take a risk to employ people. That's what we need to encourage to make sure we can raise the living standards of people. We need to make sure we get the cost of living down, especially in the energy space.

But so many of my friends who sit on the other side of the parliament don't care about that. They would rather virtue-signal to the Greens than affect the cost of living. We see that the cost of the subsidies that continually pay for renewable energy are borne by the most vulnerable people in our community. They are the most regressive policies that we have. The costs of those go straight on the top of everyone's electricity bill—$3.6 billion gets added to everyone's electricity bill. If you are concerned about the cost of living, get rid of those subsidies. (Time expired)

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

I am absolutely thrilled to be speaking on this motion brought by the member for Indi today. I'm pleased she has joined this call. This has seriously been a bipartisan position. This parliament has seen a review and, today, I call on the member for Deakin, Michael Sukkar, to bring the draft legislation that we know has been written into the parliament so that we as a parliament can act to protect some of the most vulnerable people in our communities from shonky payday lenders who are there to maximise their profits at the expense of often the most vulnerable and those under considerable hardship.

The member for Hughes made some interesting points, but he clearly needs a history lesson here. This review was conducted by those sitting opposite. The draft legislation was drafted by those sitting opposite. Those sitting opposite at one point agreed that this legislation should go forward. We stand here today to call on that to happen this week in our parliament. It has now been over 1,000 days since the initial review into the payday lending industry was commissioned by then Assistant Treasurer Josh Frydenberg in August 2015. In November 2016, then Assistant Treasurer Kelly O'Dwyer released the government's review. She said 'the government supported the vast majority of the recommendations, in part or in full', and went on to promise that:

Legislation will be developed subject to the Government’s other legislative priorities, but at this stage is expected to be progressed during 2017.

Well, it's August 2018. Despite these promises, we are yet to see any legislation brought before the parliament by this government.

Labor has led the charge now for some time in bringing forward a private member's bill which is word for word the government's own legislation. Reform could happen right now. The legislation is ready to go. But this government is refusing to act. Instead, those opposite are sitting on their hands or, as we just saw from the member for Hughes, standing up to suggest that somehow what has bipartisan support, what went through a review, will stop people accessing money in times of emergency. That is not what the legislation does. The legislation puts a cap on what can be repaid, not on what can be offered. The legislation puts in place penalties for those operators who seek to give a second loan when someone already has a loan. It puts in place penalties for those operators who would contact people without being asked to try to sell them a loan. It is a sensible piece of legislation. Instead, those opposite are choosing to do nothing.

In my community in the city of Wyndham we know how much this is impacting on people. We have four such payday lenders operating within a 500-metre radius of our railway station. They are there with their doors open and with cups of coffee for people as the vulnerable walk past to tempt them into taking out another loan.

This is what people need to understand. Our CLC often does work in one of our mental health institutions. They found that, on one day, 23 per cent of the clients in our mental health unit had a payday loan and that 25 per cent of those had more than one. These are people who are incredibly vulnerable and who would meet any hardship claim. I would also say that there are already laws in place that protect people and limit them to paying 20 per cent if 50 per cent or more of their income is from Centrelink. I would suggest that, since that legislation was introduced, the notion of hardship has changed in this country. There are many people working full-time and earning what we would consider in this place to be a minimal income, and they need protecting in this situation as well.

Over the winter recess, I experienced a day in the life of financial counsellors locally. I was alarmed, but not surprised, at the copious number of payday loans locals have undertaken. I call on this government to do the right thing—to put aside their friendship with this sector and to protect the vulnerable in my community and across this country.

Madeleine King (Brand, Australian Labor Party) Share this | Link to this | Hansard source

I thought there might be a Liberal member willing to speak on this motion, but, no!

I want to start by thanking the Independent member for Indi for bringing forward her motion on payday lending and small amount credit contracts. I would like to acknowledge the good work she is doing in her community to help the vulnerable who fall prey to such outrageous practices in the community. Today I stand here somewhat ashamed that our national government has turned its back on the most vulnerable members of our community. It is now 1,102 days since the government pledged to review the small amount credit contract laws. It is 622 days since the government itself accepted the recommendations of the review, and last year they even went so far as to draft, prepare and release legislation that addressed the dreadful practices in payday lending in this country.

Since then, what has the government done? The Liberal-National government has done nothing to protect vulnerable Australians from payday loan sharks and unscrupulous rent-to-buy operators. Only a few days ago, my local newspaper screamed a headline that one of the suburbs in my electorate, Baldivis, had the highest number of personal bankruptcies in Australia for a second successive year. It's a dreadful thing that's happening to people across the country, but particularly, of course, it means a lot for me and my people in Baldivis. It is just more evidence of people doing it tough in this country. Many of the people in Baldivis have been caught by the resources downturn and left to their own means. There are thousands in WA and all over the country accessing short-term loans just to make ends meet.

Earlier this year, we heard the report that 1.8 million households are now financially distressed and that over 650,000 families have turned to payday loans just to get by. We heard of a mother of two young children with a weekly income of $488 being signed up to contracts for whitegoods worth $1,600, with a total repayment of a whopping $5,824. We also heard stories of an elderly gentleman on a disability support pension of $456 per week duped into a contract for $2,041 on a consumer lease, with repayments going to a grand total of nearly $8,000. It's an outrage!

And it's not as if both sides of the House are unaware of the problem of payday lending sharks or the appropriate response to it. The Turnbull government baulked on the independent review of the small amount credit contract laws. It reported in March 2016. They accepted the recommendations, they drafted the legislation and government ministers supported the need for this legislation. So what's gone wrong and why won't the government act? It appears that the hard Right of the Liberal and National parties rolled the assistant minister instead of rolling over the payday loan sharks in this country. The 'parliamentary friends of payday lenders' came out strong and showed the nation just who runs the country, and I can tell you that it's not the Prime Minister.

The Turnbull government's 1,100-day-plus disregard for the out-of-control payday loan industry is contemptible. In the meantime, while they dilly-dally and do absolutely nothing, households are forced into payday loans and face skyrocketing fees and interest rates as high as 884 per cent. The Liberals have a disgraceful record in helping consumers who are being taken advantage of by payday loan sharks.

A review commissioned by the Australian Consumer Law Centre found that the number of Australian households with a payday loan has almost doubled in the last 10 years, to 650,000 people. The report also found that the average number of loans per borrower had jumped 45 per cent in the past five years, to 3.64 loans per borrower, and 40 per cent of borrowers have more than one loan. So instead of waiting around for the government to act, on 26 February this year, federal Labor took action—where the government would not—and introduced legislation in the form of a private member's bill to reform payday lending and rent-to-buy laws after it became clear the government was just going to walk away from this problem.

I want to acknowledge here, in particular, the extraordinary efforts of the member for Oxley, Milton Dick, in bringing forward the private member's bill, along with the former member for Perth. The member for Oxley has not rested in his fight against unscrupulous payday lenders and dodgy rent-to-buy businesses that prey upon the vulnerable in this country.

The bill was debated in this chamber on 26 March. However, the Turnbull government and its members again demonstrated their contempt when not even a single Liberal or National MP bothered to turn up to debate the bill in the chamber. This bill is a word-for-word copy of the government's own exposure draft of legislation to reform payday loans and rent-to-buy schemes. which they released last year. Yes, we re-released the government's legislation—and they failed to support the very bill they had produced themselves. So I call upon the Liberals to get their act together, do the right thing by consumers who've been ripped off in this country and reintroduce the legislation.

Sharon Bird (Cunningham, Australian Labor Party) Share this | Link to this | Hansard source

There being no further speakers the debate is adjourned, and the resumption of the debate will be made an order of the day for the next sitting.