Katy Gallagher (ACT, Australian Labor Party) Share this | Hansard source

I welcome the opportunity to speak this morning in support of Senator Doug Cameron's bill, the Social Security (Administration) Amendment (Consumer Lease Exclusion) Bill 2015. It is an important bill to provide further protections to those using Centrepay in a rapidly evolving environment of increased choice for the purchase and leasing of products, which we are seeing across the community.

The purpose of the Social Security (Administration) Amendment (Consumer Lease Exclusion) Bill 2015 is to amend subsection 123TI(1) of the Social Security (Administration) Act 1999 to provide that consumer leases are excluded goods for the purposes of part 3B of the act. The bill is needed to remove the potential for Centrelink clients and participants in the income management regime, under part 3B of the act, to suffer financial harm as a result of entering into one or more consumer leases for household goods, which are currently available for people using Centrepay and those participating in income management.

This bill underwent consultation earlier this year with stakeholders and representatives from a number of community organisations with excellent reputations in providing protections for consumers, particularly protection for vulnerable consumers from particular products. These organisations are, for example, the Consumer Action Law Centre, the Financial Rights Legal Centre, the Redfern Legal Centre, the St Vincent de Paul Society National Council, ACOSS, Financial Counselling Australia, UnitingCare Australia, Good Shepherd Microfinance, National Welfare Rights Network and the CPSU. When you see the names of those organisations and the particular expertise that they bring to debates such as this, these are the organisations that are providing the national advocacy on a whole range of supports for those particularly vulnerable Australians who are experiencing financial hardship at the moment. They are also those who work face-to-face every day, day in and day out, with people who are suffering severe financial hardship, either through personal circumstance or indeed through getting themselves involved in contracts or leasing arrangements without fully understanding the ongoing cost for those arrangements. I do not see that, in terms of this bill, being paternalistic in any way. We have a number of laws which are there to provide protections for people, particularly when you see a problem emerging. I think the evidence will show, very clearly, that the prevalence of these types of products being available to people and, in a sense, promoted to people is growing each year.

When you look at information about Centrepay and search what Centrepay is, you can see a very simple outline of what Centrepay does. It is an excellent service and it has done what it was intended to do which was to provide a free service that allows people to allocate payments to certain services, utilities and bills for things that they are engaged in but to pay them over time in an affordable way. When you go to what you can use it for, the instructions are for rent, electricity, gas, water, telecommunications, education fees and expenses, child care, home care services, medical expenses, household goods and services and no-interest loan repayments. Then it goes on to say the bills you cannot pay with Centrepay and they include: credit-card payments and fees; payments to cash lenders, payday lenders, porn brokers or debt collectors; instalments for hampers; vehicle leasing; payments for taxi services; income protection, funeral or life insurance; and unregulated rent or lease arrangements of household goods where the agreement is less than four months or does not have an end date. So there are a range of exemptions and those exemptions exist for good reasons. Senator Cameron's bill simply seeks to add in to that list of exemptions another criteria.

The support is there from stakeholders. The Consumer Action Law Centre summed it up very nicely and said: 'Consumer lease providers should not have access to Centrepay. Centrepay was intended as a budgeting tool to help welfare recipients but got hijacked as a selling point for high-cost products. Rent-try-buy products mean that the poor pay more. These providers should be given priority over the basics like food, transport, rent and utility bills.' The Consumer Action Law Centre welcomes Senator Cameron's bill and would like to see the government take urgent action to keep Centrepay focused to its original purpose. Maintaining the integrity of Centrepay should be a bipartisan issue. The Indigenous Consumer Assistance Network said: 'There is obviously a market need for essential house items in Australia's most disadvantaged homes. Unfortunately high-cost consumer leases just add to the disadvantage and poverty. Government, industry and the community sector need to further develop ethical solutions like no-interest loan schemes to ensure Australia's most disadvantaged have a bed to sleep on, a refrigerator to store their food and a washing machine to clean their clothes.' Both of those comments sum up exactly the intent of Senator Cameron's bill.

It is clear that Labor will not stand by while low-income and vulnerable Australians are able to be exploited through the current arrangements. I think there is acknowledgement that the existing law, as it stands, should protect the poor and the vulnerable and not leave them open to attack from businesses, credit-loaning agencies and leasing agencies. The original intention of Centrepay as a budgeting tool should be maintained. The evidence is that for those clients who use it, it is a very positive service used by over 600,000 Centrelink clients on whose behalf nearly two million deductions are made each month. The annual value of all these deductions is nearly $2 billion.

We also know that, of those clients who use Centrepay, 30 per cent are disability support pensioners; a further 20 per cent are Newstart recipients; and 16 per cent are in receipt of parenting payments. I think the data coming out of Centrepay shows that utility bills have been around a third of all Centrepay deductions. Household goods leases now account for 14 per cent of all deductions, and their share of Centrepay deductions is growing. That is the issue that this bill seeks to progress.

In some of the comments that were made by previous speakers, I think there was a concern about what it would mean for those on existing arrangements. My advice is that the aim of the bill is that Centrepay be prospectively closed to consumer leasing companies for the same reason that other entities such as payday lenders are already excluded, so I think some of the concerns about what it would mean for existing clients on those arrangements could be averted that way.

Protecting vulnerable Australians from getting into arrangements which in the long term cause severe financial hardship and result in poor people often spending two, three, four or five times what it actually costs to lease this equipment is something that the Labor Party have always been strong advocates for. I know that in Canberra we did a whole piece of work around understanding this issue and providing protections to people through targeted assistance to make sure that for people living on low incomes, who are often recipients of Centrelink payments, if an unexpected expense arose, there were ways and means of acquiring funds. No-interest loans are a more common way now of addressing that expense, rather than having no options available and people feeling that they have to enter into these leasing arrangements. Sure, on the surface they look affordable, but over the long term and in the fine print they actually deliver a much worse financial outcome for vulnerable Australians.

This is partly about providing an exemption for these arrangements, but I think we also need to acknowledge and continue the work that is being done across the community sector to provide alternatives for access to cash and credit when it is needed by people who are on fixed and low incomes. There are very good products available, many of them being led by organisations like Good Shepherd Microfinance, but even some of the banks now will offer particular products for people in financially difficult positions. I speak from very close experience of people getting into long-term rental arrangements for products, of how difficult it is to extricate yourself from them and of how much it costs poor people—people who do not actually have the funds to spend—just to enjoy, say, in this example, the household goods that we all rely on to live. Those arrangements are extremely difficult to get out of and extremely costly. People make a lot of money out of those arrangements, and it is not poor people who do well out of them; it is the leasing companies themselves that do very well. The profits that come from these arrangements are substantial.

This bill seeks to ensure that there is not tacit approval by the government of these arrangements. That could be how it is read if you are a person trying to research what you can use Centrepay for. When you look at the list and see that these leasing arrangements for household goods et cetera are allowable under Centrepay and then there is a whole list of things that are not, it does look as if the government has looked at these and believes that they are okay and that they would deliver a good outcome for Centrelink clients. The reality from all the evidence is that they are not. Their being allowed to be included in these arrangements I think sends the wrong message for people about what arrangements they are getting into.

So I am very happy to support Doug Cameron's bill today. I think it makes a lot of sense. For those who are on existing arrangements, those would continue, but for those who are considering it now or in the future, as these products evolve and are encouraged, it would not be seen as an appropriate use of the Centrepay function. I do accept that the government have made a number of changes. I think the fact that they are making a number of changes indicates that there are issues in this space and that they are seeking to address them. But I really think that, in the interests of Centrelink clients, this is something that both the government and the opposition could agree on together. The government have acknowledged that there are issues. This is something that is supported by the stakeholders. There is a lot of work that has been done on it. It is a sensible reform and one which should be supported by the Senate today.