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

The Social Security (Administration) Amendment (Protecting Consumers from Predatory Leasing Practices) Bill 2020 is a long overdue reform. Labor Senator Doug Cameron first attempted to legislate a similar proposal in 2015 and he received support from the Senate, only to have it rejected in the House of Representatives. Since that time, calls have only grown louder and louder and the evidence has grown more and more compelling about the damage that is being done by allowing consumer lease providers to access automatic deductions from social security payments through the service known as Centrepay. This bill is timely, because the uptake of the JobSeeker payment caused by unemployment during the pandemic means there are more people now with access to Centrepay and more people in the general community who are under financial pressure and vulnerable to unscrupulous behaviour and sharp practice. Time and time again we find examples of people who are locked into consumer leases that they cannot afford, paying well above market rates for goods that they will never own, yet the government continues to ignore these concerns. Action through legislation would not be necessary if the government used its power to act administratively and enforce the existing rules. We know that this government consistently fails to act when low-income and vulnerable Australians need support. They prefer to do nothing, which again and again exposes the community to predatory lending practices.

The purpose of this bill is to amend the Social Security (Administration) Act 1999, and it would remove the ability for consumer lease providers to sign up recipients of social security payments and access their payments directly through the Centrepay service. The bill removes the ability for the departmental secretary to make any deductions requested by a person from their social security payment if deductions relate to goods hired under a consumer lease entered into by that person. I repeat the point I made earlier: under existing legislation, Centrelink is enabled by section 61A of the act, which provides that if a person asks the department secretary to make deductions from instalments of a social security payment payable to the person and to pay the amounts deducted to a business or an organisation nominated by the person, the secretary may make the deductions requested by that person to that nominated business. So the main provision of this bill removes the power from the department secretary to enable these deductions from a person's social security payments if those payments are about a consumer lease.

It's worth having a think about how Centrepay works. It was established back in 1998 as a budgeting and financial capability tool to assist clients of what was then known as Centrelink, now Services Australia, 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. But the proliferation of consumer-leasing businesses as approved Centrepay service providers is contrary to the rationale of Centrepay, which was to enable people to budget and ensure that regular bills and essential living expenses were paid directly from their welfare payment.

The purpose of Centrepay is to support recipients with payments of their expenses, but we know that these products are exorbitantly expensive. And, given the expensive nature of consumer lease products, in nearly every case they are not suitable for people in these income brackets, and the use of this service is not in line with the purposes of Centrepay. The department actually acknowledges this; Centrepay's terms and conditions are supposed to prevent its users from being exploited by banned products. To quote from the department's own policy, banned products are those which 'have significant potential for high-cost but low-value goods or services' or those which 'expose customers to unacceptable risks of financial stress or exploitation'. You couldn't imagine a descriptor that more closely aligns with the products being offered by some consumer lease providers, and it is hard to understand how Services Australia can possibly claim that many of the consumer lease providers that they have on their books right now could possibly meet this test.

The payment structure of consumer leases can cost consumers so much more in the long run than an ordinary purchase would, and it can further entrench low-income individuals, who are vulnerable, in a spiral of debt. The Salvation Army observed in evidence to the Senate Economics Legislation Committee the following:

This appears contrary to the original principles of Centrepay, which we understand were to help people on low incomes with money management. In our experience a consumer lease payment is more likely to cause money management issues.

In fact, Centrepay is effectively underwriting the business risks, the cash risks, for these consumer lease providers by providing them with a guaranteed payment stream. This money comes out of a Centrelink recipient's benefit as a priority payment. ASIC noted that although Centrepay lowers the risk of such a default on the payments for such providers, the evidence is that these companies charge people who are using Centrepay more than they do the general population. It is disgraceful that this persists, and it's disgraceful that it persists with the government and the department in full knowledge of the harm that it is doing to vulnerable people. By retaining consumer leases in the categories of goods and services eligible for Centrepay deductions, Centrepay is being used for the benefit of commercial interests, rather than in the interests of Services Australia clients who are making these payments.

Centrepay has been open to access by businesses whose products, particularly consumer leases, disadvantage consumers and have the potential to cause very serious financial harm, and there is evidence that some parts of the consumer-leasing industry actively use Centrepay to prey on the financially vulnerable. Not all consumer leases are bad and not all consumer lease providers act unethically, but the government's failure to enforce its own policy means that the dodgy consumer lease providers in the market have a free pass to use Centrepay to target pensioners and welfare recipients with unfair contracts and poor-value services.

Services Australia clients are subject to exorbitant interest charges, in some cases over 800 per cent. The Australian Securities and Investments Commission has found that the cost of household goods leased from rent-to-buy businesses can cost nearly nine times as much as the retail price of those same goods. ASIC also found, as I mentioned, that the lessors often charge higher amounts to recipients of social security payments than they advertise to other customers. And, at the end of the lease and after all that expense, the consumer does not even own the goods. Between 2013 and 2018, ASIC's enforcement against some of these businesses resulted in fines and community benefit payments of $3.4 million, and remediation to consumers through refund and debt write-offs of almost $27 million. If that is not evidence of sharp practice, of exploitative practice, of practice that is not consistent with Services Australia's own policy, it is hard to know what evidence would be necessary to have this hapless department actually act on these harmful products.

The bill follows significant campaigns by the advocates, by the non-government organisations, who are calling for further action on payday loans and consumer leases. It follows investigation after investigation by Senate committees on this issue. The 2019 report of the Senate Economics References Committee's inquiry into credit and financial services targeted at Australians at risk of financial hardship found that the benefit of consumer lease providers being registered with Centrepay is very clear: automatic deductions reduce the default for companies while also allowing them to charge the consumer for products well above the cost of the product.

Thorn Group, the parent company of Radio Rentals, noted that 52 per cent of its customers paid via Centrepay. The damage that occurs through Centrepay's deductions, because they are automatically taken out, is that payments for consumer leases are prioritised for Services Australia clients ahead of paying for things that they really need—basic goods or services like childcare. The Consumer Credit Legal Service of Western Australia told a Senate committee hearing in March 2020 that in Meekatharra community workers told them of issues that the community faces with community leases. The evidence was this, and it is disgusting: many of the sales are unsolicited. They drive around in a grey RAV, park in the street and entice passers-by to sign up. The consumer lease provider charges hundreds of dollars in delivery fees, which are also paid for from Centrepay deductions. In one case, a person mistakenly received brand new furniture meant for somebody else, then the consumer lease provider attempted to deliver that later to the correct person. However, that person no longer wanted the furniture as it had been used, and the consumer lease provider demanded that that person pay $8,000 for the furniture. But despite this, and despite countless other examples, Services Australia refuses to enforce its own policy. That policy is supposed to prohibit products that are financially exploitative. But Services Australia continues to allow the worst consumer lease providers to access vulnerable customers via Centrepay.

There are alternatives. Certain types of household goods, rental or consumer leases and other types of financial products, including short-term loan repayments to cash lenders, payday lenders and pawn brokers are already excluded from Centrepay, and this bill will ensure that Centrepay is prospectively closed to all consumer leasing companies for the same reason it is closed to payday lenders in these products. The prohibition contained in this bill will apply prospectively, meaning no individual who has entered into a consumer lease agreement using Centrepay will be required to terminate their lease as a result of the legislation, and the legislation will only prevent consumer lease agreements using Centrepay from being made in the future. If enacted, there are other payment options that would still be available to people wanting to purchase household goods. People would have the option of paying for their goods by direct credit card, bank transfer or other payment services. And Services Australia clients also have the option of signing up for a fee-free basic bank account that can let them set up and cancel a direct debit with a different service provider, including a consumer lease provider, free of charge. They wouldn't be charged an overdraw fee if they made a payment, transfer or direct debit when there was insufficient or no money in their account. But for many low-income people, the best option may be to utilise microfinance programs such as the no income loan scheme. If you're experiencing hardship and you're listening to this, I would always suggest seeing a financial counsellor who can provide independent and free advice.

I'll conclude now by saying this: Labor first introduced legislation to remove consumer leases from Centrepay in 2015 and our legislation was supported at that time in this place. Since that time, the need for change has only grown. Government members of the Economics Legislation Committee have supported excluding consumer lease providers from Centrepay, so I look forward to them backing up that commitment today by voting for this bill. Labor is once taking the initiative to ensure that this service cannot be used by consumer lease providers to exploit Australians on low incomes and, for these reasons, the bill should be passed.