Jenny McAllister (NSW, Australian Labor Party, Shadow Cabinet Secretary) Share this | Hansard source

I move:

That this bill be now read a second time.

I seek leave to table an explanatory memorandum relating to the bill.

Leave granted.

I table an explanatory memorandum and I seek leave to have the second reading speech incorporated in Hansard.

The speech read as follows—

The purpose of the Social Security (Administration) Amendment (Protecting Consumers from Predatory Leasing Practices) Bill 2020 is to amend the SocialSecurity(Administration)Act1999to provide that the department secretary may not make any deductions requested by a person from their social security payments if the deductions relate to goods hired under a consumer lease entered into by the person.

Labor has consistently advocated for greater protections for consumers in this area in response to consistent concerns about improper behaviour by consumer lease providers and payday lenders.

Labor will not stand by whilst low income, vulnerable Australians are exploited.

The Bill is needed to remove the potential for clients in receipt of social security payments from Services Australia to suffer financial harm as a result of entering into one or more consumer leases for household goods for which Centrepay deductions are available.

The main provisions of the Bill remove the power for the department secretary to enable deductions from a person's social security payments in order to pay for a consumer lease.

The service known as Centrepay was established in 1998 as a budgeting and financial capability tool to assist Centrelink (now known as Services Australia) clients by paying rent and utility bills through automatic deductions from their welfare payments.

More than 600,000 people use Centrepay to pay bills, rent and ongoing expenses.

The proliferation of consumer leasing businesses as approved Centrepay service providers is contrary to the policy rationale for Centrepay to enable people to budget and ensure that regular bills and essential living expenses are paid directly from their welfare payment or pension payment.

It indicates that Centrepay is being used for the benefit of commercial interests, rather than the interests of Centrelink clients making the payments.

Centrepay has been open to access by businesses whose products, particularly consumer leases, disadvantage consumers and have the potential to cause financial harm.

Further, the consumer leasing industry actively uses Centrepay to prey on the financially vulnerable.

Far from helping Centrelink recipients to budget, Centrepay deductions for consumer leases can impact an individual's ability to pay for essential goods.

The impact is particularly severe on marginalised groups: Remote Aboriginal communities have been targeted by payday lending and consumer lease companies through the use of Centrelink's Centrepay system.

This Bill follows significant campaigns by non-government organisations and consumer advocates, who have formed the Stop the Debt Trap Alliance and are calling for further action on payday loans and consumer leases, as well as investigation by Senate committees into this issue.

The 2019 report of the Senate Economics References Committee inquiry into Credit and financial services targeted at Australians at risk of financial hardship found that the benefit to consumer lease providers of being registered through Centrelink is clear: automatic deductions reduce the default rate for companies, while also allowing them to continue to charge the consumer for products well above the cost of the product.

The benefits to recipients are less clear.

Centrelink clients are subjected to exorbitant interest charges – in some cases of over 800 per cent – and the Australian Securities and Investments Commission (ASIC) has found the cost of household goods leased from rent-to-buy businesses can cost nearly nine times the retail price of the same goods.

ASIC also found that lessors often charge higher amounts to Centrelink recipients than they advertised to other customers, and at the end of the lease and after all that expense, the consumer does not own the goods.

Despite this, Services Australia has refused to enforce its own Centrepay policy, which is supposed to prohibit products that are financially exploitative and continues to allow the worst consumer lease providers to access vulnerable customers via Centrepay.

This Bill will ensure that Centrepay is prospectively closed to consumer leasing companies, for the same reasons it is closed to payday lenders.

It will apply prospectively, meaning no individual who has entered into a consumer lease agreement using Centrepay will be required to terminate that lease as a result of this legislation.

If this legislation is enacted, there are safer payment options that would still be available to people wanting to purchase household goods.

Senator Doug Cameron first introduced legislation to remove consumer leases from Centrepay in 2015.

The Government has consistently refused to act administratively to address this problem and prevent harm.

As a consequence, Labor is again taking the initiative to ensure this service cannot be used by consumer lease providers to exploit Australians on low incomes.

I seek leave to continue my remarks later.

Leave granted; debate adjourned.