Sarah Hanson-Young (SA, Australian Greens) Share this | Hansard source

I rise to speak to the Consumer Credit Legislation Amendment (Enhancements) Bill 2012. Thankfully, Senator Cormann has outlined most of the reasons for the Greens' major concerns about this piece of legislation. It is clear that—despite the original intent to try and regulate what has become an industry that sucks the life out of very vulnerable, very poor, very disadvantaged people and exploits them by allowing them to be trapped in cycles of debt—rather than going to the heart of those problems and overcoming them, this bill has been watered down so much because of the government's agreement with the coalition that the bill basically now does nothing to offer the real protections that consumers desperately need.

A moment ago Senator Cormann said he does not believe that the short-term loans run by loan sharks that are designed to capture those who are less fortunate in our communities are as bad as people, particularly in the consumer rights sector, would argue. Let me go to a couple of statistics in the report Caught short that was released by the NAB only last week. More than 80 per cent of payday borrowers were receiving a Centrelink payment or the pension; 80 per cent of those who apply for these loans and are given them are on Centrelink payments or the pension. Borrowers are taking out more than 10 loans in a two-year period, with some taking out even more than 20 loans in that same period. Rather than being able to deal with a one-off loan, these people get caught in a cycle of debt and are trapped there—that is what the statistics continue to show. Borrowers have reported living with significant psychological, physical and emotional health problems that have been linked to their ongoing poor health over the periods of owing extensive debts as a result of being trapped by these short-term loan or payday loan schemes.

Many of those who engage in these types of lending practices are caught in periods of excessive gambling, alcohol consumption or illegal drug taking. These people are already considerably disadvantaged and the loan sharks are out there waiting to snap them up. The majority of borrowers are borrowing less than $300 at a time. You have to be in a pretty desperate situation to borrow less than $300 because you desperately need to pay your essentials day in, day out. The reasons for taking up payday loans, according to the NAB report, were to pay rent and basic essential bills: electricity, gas, petrol, car registration, school fees for kids and putting food on the table for themselves and their families. People are taking a $300 loan just to be able to go to the supermarket and buy the groceries for that week. These are the vulnerable people that we are talking about and that this bill is meant to be helping by addressing that cycle of poverty, that cycle of debt. Yet, unfortunately, the government has lined up side-by-side with the coalition and watered down this legislation in line with what the loan sharks wanted.

Cash Converters was one of the most prolific voices in relation to this bill, and yet since the legislation was first announced the Cash Converters share price has risen, despite the fact that the company went to the government and cried poor. Somehow, putting some proper regulation around these loan practices and making sure we can protect consumers was said to mean that its business practices were under threat. If loan sharks like Cash Converters and others are relying on the misfortune of people who have to borrow $100 or $200 to buy the groceries to feed their families, I do not think that is a very good business model for anyone to be relying on. I suggest that Cash Converters and other loan sharks consider what type of business they are in and stop preying on the very desperate needs of some of our country's most vulnerable people.

We know that borrowers continue to say the loans they take out are used to meet their daily living expenses. These are not one-off loans. The problem is that once they have taken out one of these loans they get caught in a cycle of debt and have to take out another loan in order to pay back the enormous interest, fees and charges that these loans incur. The loan sharks are able to tap straight into their bank accounts. They get paid, but all of a sudden people have no money left and they have to apply for a brand-new loan. That is how they get into this situation, where some people are taking out 10 or 20 loans in two-year period—that is, almost monthly for some people—just to keep up with the debt that they owe and put aside money for the rent, the bills and the groceries to feed themselves and their families.

People caught in this situation continue to say that they feel trapped in a vicious cycle and are continuously indebted to one or more of the short-term lending companies. Borrowers do not like needing to take out these loans in the first place. But we know that, when Centrelink payments are so low and the minimum wage continues to be far less than it should be, very vulnerable people continue to be exploited. Let us not even consider casual workers who, if they do not get shifts in a particular week, do not know what to do to pay their rent. Chances are that a lot of these people have to go to loan sharks, Cash Converters and others, to get the money to pay their rent. That is where the problem is in the beginning.

I want to take us back to when the legislation was first tabled. There was a lot of goodwill across the country from the consumer rights sector. There were a lot of people who thought that Bill Shorten and this government were going to do the right thing and that they were going to tackle this issue, take it with both hands and make sure we looked after the country's most disadvantaged people—those who are being taken for a ride because of the lack of regulation in place. We saw the coalition jump up and say that they would not support that. We saw lobbying campaigns—very well-paid lobbying campaigns from organisations, loan sharks, Cash Converters and others who paid thousands of dollars to organisations like Hawker Britton and others to directly lobby the government to get them to water down these reforms. As a result, this legislation does not have the teeth to really make a difference to Australia's most vulnerable people, who continue to be taken advantage of by these nasty schemes and who do not have the advocacy, the strength and support that this Labor government should be providing.

We have heard Treasurer Swan going on and on about how he wants to tackle this gap between the rich and the poor. This legislation proves that he is all words and no action. The Treasurer has no standing when you consider that, rather than doing the right thing and putting a hard cap on the number of loans that people can take out and putting in place regulation to ensure that people cannot have that money taken straight out of their bank accounts and cannot have their homes secured against loans as little as $5,000, he only talks about tackling the rich and looking after the poor. You have to wonder how serious Mr Wayne Swan is. This would have been the perfect legislation to prove that, yet the government have gone weak at the knees and fallen for the big lobby groups engaged by those who are making hundreds of thousands and millions of dollars of profits off the back of very, very poor, hardworking Australians, who just want to cover their living costs, make sure their kids can go on school camp and put food on the table.

I want to tell you one story about a young fellow from Melbourne who took out his first payday loan to pay for repairs on his car. It was intended to be a one off-loan, but quickly it turned into a pattern of repeat borrowing because one cannot keep up with the excessive interest charged. Somewhere in the vicinity of 200 and 400 per cent is put onto these loans, including the fees and charges. He got caught after just wanting to fix his car so he could continue to get to work to earn some money to pay his bills. He ended up finding himself in a cycle of debt and a cycle of poverty. Initial payments left this young man without enough money to live on. It forced him to choose between taking out another loan or going without food until his next pension day. In order to obtain some quick cash to eat, to feed his dog and to put fuel in his car, this young guy continued to take out loans. These are the stories of people who get caught and get taken advantage of by loan sharks.

I want to tell you another story of a woman with two kids who desperately wanted to make sure her children could attend the school camp. She took out a loan of $170 because that is what she needed. She did not have the money. She was on a pension. She did not have secure work. She is a mum trying to run a household and put her kids through school. In the end, it cost her over $14,000 just because she wanted her two daughters to attend school camp.

I suggest that this bill has become so weak and so far from its purpose that, rather than delivering the security and the protections that the most disadvantaged and vulnerable Australians need, instead we are seeing legislation that could have been written by the loan sharks themselves, helped along of course by the opposition, who have no desire to tackle this issue. For them, it is all about looking after big business; it is not about the vulnerable people who struggle to pay their rent and put food on the table, or send their kids to school camp.

The point here is that the government continue to talk about wanting reform, yet when the hard decision needs to be made, when they need to stand up and take the big lobby groups head-on, they fail. That is what has happened under this legislation. This is the legislation the coalition want. We saw Senator Cormann say he did not like the first bill but he is more than happy to back this one. That is because this bill does nothing for those people who are caught in a cycle of poverty.

The Greens will be moving several amendments to this legislation to try to redeem some aspects. What is the point of saying we know that people get caught in this cycle of debt with payday loan after payday loan if we do not put a hard cap on how many they can take out in a year? What is the purpose of it unless you are going to do that? We will move an amendment to ensure that we cap at four the maximum amount of payday loans that one person can receive in a 12-month period. In addition, we will make sure that there is a proper registration list so that you cannot be forced to go to the next lender down the road because the other lender has already given you four loans—because you are still struggling so you will move on to the next one.

In addition to all of this, the government really need to look at how we can support people so they do not fall into these traps in the first place. Where is the proper support for those who cannot pay their bills at the end of the month because they simply do not earn enough? We know that, for those on Centrelink payments, Newstart is far, far too low. Where is the commitment from this government to increase the levels of Newstart rather than condemning our country's most disadvantaged people, who just want a fair go and to pay for the petrol for the car to drive them to the next job interview or to buy that new jacket because looking good at a job interview is important if you really want it?

Where is the support for those parents on the pension, those single mothers who are about to be cut off, to make sure they can send their kids to school camp rather than having to be sucked in by the empty promises and hollow support from the loan sharks. Many consumer rights organisations across the country have said that the best way to support people is to give them non-interest loans to pay for these essentials, and proper financial support and counselling. You have to teach people ways to get out of cycles of debt, not find ways to get the loan sharks out of their responsibilities of preventing people who are in cycles of debt.

The Greens will move three key amendments: putting a cap on the amount of loans that people can lend; ensuring that loans up to $5,000 cannot be secured against items such as the family home or the family car or others, because we know what happens: those people end up having those items taken from them. And we need a proper way of regulating just how many loans people have. These are all reforms, regulations and workable solutions to this issue that have been taken up in places such as the United States. They have worked well. It obviously took a bit of courage by the government of the day to ensure that they were implemented properly but they have worked.

That is the type of solution-finding, reform-enacting leadership that we should expect from the government here in Australia when it says it cares about Australia's poor. Frankly, you would have to wonder what type of hollow rhetoric that is when, rather than doing what the consumer needs, rather than looking after the rights of the consumer, this government has stood up for the loan sharks and handed them everything they want on a platter.

The loan sharks cried poor when this legislation was announced, when it was actually still intended to tackle these issues. It was a good piece of legislation. They cried poor, despite the fact that some of them had increased their share price in the vicinity of 10 per cent since this legislation was first put on the table. They are not poor. They say, 'We can't put in proper protection for consumers because that will mess with our business model.' Stop preying on those who are most vulnerable, those who are the most desperate, those who are there waiting for the picking, as the loan sharks know, and get a business model that is sustainable, ethical and is one that does not prey on the most disadvantaged and poorest in our community. This legislation is not the legislation that this government should be acting on if it is their will to tackle the gap between the rich and the poor.

Wayne Swan's words are hollow when you look at the details of this legislation. It is all very well and good to bang on about Gina Rinehart. What about the poor young fellow or the mother with two kids who cannot send her children to school camp without getting sucked into a cycle of debt? Where is the government's commitment to increase the Newstart allowance to ensure that essential service providers have to give proper grace periods for people and for those who are seen to be caught in cycles of debt can have proper supportive and empowering financial counselling? They are the things that, if Wayne Swan is serious about tackling the gap between the rich and the poor, he needs to do. He has failed dismally on this piece of legislation.