Anne Ruston (SA, Liberal Party) Share this | Link to this | Hansard source

It gives me great pleasure to rise today to continue my remarks in relation to this bill. At the end of my previous contribution on this bill I was talking about changes the government has already made to Centrepay which we believe need to have the opportunity to take effect before we start launching into anything new. There is no doubt that Centrepay is an extremely valuable bill paying service that helps very many Centrelink customers manage their ongoing expenses. In May this year the government announced changes to Centrepay which we think are going to go a long way to protecting the most vulnerable Centrelink customers.

The changes that have been put forward mean that Centrepay no longer supports consumer leases that are not regulated by the National Consumer Credit Protection Act 2009. Senator Cameron wanted us to ban all consumer leases from being able to be paid through Centrepay. Instead the government took a more responsible approach and said, 'Let's ensure that any consumer leases that are available are regulated by what would otherwise be a normal regulation that every other consumer in the community would seek to have regulated.' That was instead of a knee-jerk reaction that says anybody who is on Centrelink cannot access their lease payments through Centrepay.

The legislative changes are not required to make changes to Centrepay. The government is looking to change and improve outcomes for customers without taking away the important avenue of support for customers with limited options to obtain necessary credit. There is no doubt that many people on Centrelink would not otherwise have access to payment terms because of their lower income and their lack of a credit rating. It is really important that we as a government make responsible decisions to make sure that people who are on Centrelink still do have access to the kind of payment options that everybody else in the community is able to get and not discriminate against them just because they happen to be on Centrelink.

The government does not support Senator Cameron's private bill because we believe it is fundamentally flawed. By prohibiting consumer leases from Centrepay for all consumer leases, the bill discriminates against people who are currently on Centrelink. The main objective of Centrepay was simply to assist customers in managing expenses, which is consistent with the purposes of their welfare payments, and reduce financial risk by providing a facility to have regular deductions made from welfare payments. This bill overreaches by being overly prescriptive about not just the types of things that these people wish to purchase but also how they are able to access them.

Following a review and a subsequent stakeholder consultation, the Department of Human Services introduced a range of changes to Centrepay to improve its operation and provide greater information for customers. These changes were only introduced in May this year. They have not actually had the opportunity to even filter their way through so we can see whether they are working. I would suggest that Senator Cameron should have delayed the introduction of his more restrictive and prescriptive bill until after we had the opportunity to see whether the new changes had worked or not. As I said, the particular relevant change that occurred in May that relates to Senator Cameron's bill is the change to the National Consumer Credit Protection Act. I think this certainly goes a long way to dealing with many of the issues that Senator Cameron raised about people scamming or taking advantage of those in our community who, possibly, are not in a position to absorb any fluctuations in their expenditure from week to week. The expansion of Centrepay is also to support alternative consumer leases such as low-interest loans, savings plans and lay-by.

The government is seeking to give as much flexibility and opportunity as possible to people on Centrelink to manage their own finances in the way that they would like to manage them and to make their own decisions about their day-to-day expenditure. I think it is incumbent on government not to interfere in people's lives to the extent where we tell them what they can buy or not buy. As I said in my last contribution, to say that somebody on Centrelink is not able to purchase a washing machine or a refrigerator by using the Centrepay opportunity, which may be the only way they are able to get access to these fundamental necessities of life, needs a serious rethink of legislation that would even seek to do that.

For that reason the government are not supporting this private member's bill of Senator Cameron. The house needs to be assured that the government are very mindful of making sure that we protect everybody in our society from organisations that would seek to take advantage, so we have strengthened our credit laws across the board. Those credit laws have been strengthened for the benefit, not just of people on Centrelink, but of all members of our community who would seek to purchase items through some form of credit or alternative consumer lease or activity.

The department is working to build strong assurance practices for consumer-leasing industry groups and to influence their behaviour. We believe that the best way for us to protect consumers is to ensure that the people who are in this particular space in terms of consumer credit and leasing through providing credit to consumers understand their responsibilities and obligations, and are monitored, checked and reviewed to make sure that they are operating within a set of laws and guidelines that the Australian public would deem responsible. To be very, very clear the government do not disagree with the need to have strong consumer credit laws that protect all Australians and obviously take into account those in our society that are more vulnerable because they do not have the extra cash or disposable income to protect them from fluctuations or unexpected expenses. But to go to the extent of the overreach of this bill and to start proscribing what people can spend their money on is not something that the government could support.

Barry O'Sullivan (Queensland, National Party) Share this | Link to this | Hansard source

I rise to make a contribution to the Social Security (Administration) Amendment (Consumer Lease Exclusion) Bill 2015 debate. The point has already been made that the government does not support this private member's bill. The intent of the bill, as we understand it on the part of Senator Cameron, the author of the bill, is that he wants to prohibit all consumer leases from Centrepay, but this bill clearly does not do that. It does not have the capacity to achieve that. Indeed the government through the Department of Human Services has already introduced a range of changes that will address most of what the concerns of Senator Cameron.

The changes have been made to improve the operation of the scheme by providing greater information to its customers. These changes include, but are not limited to, exclusion of consumer leases that are not regulated by the National Consumer Credit Protection Act 2009. So, in effect, the government through the agency had a close look at where some of the vulnerabilities might be and have risen to the occasion to make adjustments in the operation of the scheme to see that the consumers are protected. The legislation also takes on, in excluding the expansion of Centrepay, to support alternatives to consumer leases such as low-interest loans in addition to no-interest loans, savings plans and lay-bys. This, in effect, is providing the people with choice. It allows them to function their household budgets and operate with the necessities of life within the scope of those things that might be of that available to the rest of us in the community when we are trying to manage the affairs of our budgets.

Apart from the strengthening protections we need to go back and have a look at who the people are that are affected by these arrangements, the Centrelink customers. These are people who often find themselves in difficult circumstances. We are talking about difficult economic or budgetary circumstances. The legislation is more inclined towards people who find themselves in lower socio-economic circumstances where this current assistance is valuable. From our life experiences we all know people who have grave difficulties in managing money. I have a number of relatives who fall into that category. When you do not have that ability—when you do not have an ability to budget, to save and to make contingency provision for the essential things in life where you are in more difficult or measured economic circumstances—these difficulties become writ very large in your life. We spoke yesterday about the fact that these programs are meant to help these people manage their circumstances, not to hinder them. We are not here to take away the fundamental and basic right of people to choose what they do with their money, but this process aids them to be much more alert to what they might next do and guides them in ensuring that they have covered the general necessities of life.

Regulated customer leases are not going to be excluded from Centrepay. Welfare recipients are generally unable to access most forms of credit such as credit cards in any event, and regulated consumer leasing is one of the few ways of obtaining essential household goods quickly. As we all know, without security being provided, when you make application for any form of financial assistance where you enter into an otherwise contractual arrangement with a consumer lease, a low-doc loan or a low-interest or no-interest loan, the credit agency or individual or corporation extending the credit has regard not just to your security position but to your capacity to service the loan commitment. This program allows security for those lenders where they know that, through the Centrelink payments, these loans or other financial arrangements will be serviced.

When we look at alternatives to general consumer leases, such as the no-interest loan scheme operated by the Good Shepherd microfinance scheme, this bill of Senator Cameron's would exclude people from having access to these financial facilities, which are particularly designed to help these people who are in otherwise somewhat difficult circumstances. Let's just think for a moment about where they might find themselves. Many people who are on Centrelink support are not receiving it simply because they are unable to get employment. That is one of the main reasons, but there are any number of reasons and we have to remember that we need to think beyond the individual themselves. In some cases, a person whom this bill would seek to exclude from accessing any sort of consumer lease or low-interest loan may well be a parent, and that parent may well be in difficult circumstances.

We heard yesterday in contributions made on a related matter that a lot of these households and homes find themselves with someone or, on occasions, multiple people within the household who have some form of addiction, whether it be a drug addiction or an alcohol addiction. Indeed, it may well be a gambling addiction or they are just people who are completely incapable of managing their own personal finances—exacerbated, as I pointed out earlier, by the very difficult circumstances they might find themselves in through the perils of life. Just think about this for a moment. If this bill were to take effect, it might prevent a parent, even the addicted parent or, indeed, another partner in that household, from being able to, for example, purchase a fridge or a washing machine. Just imagine the circumstances where you have a parent who is financially struggling in any event due to any number of perils, some of which I have mentioned, and there are many others, and is unable to purchase a fridge.

Let's take a household where you are living in the suburbs. You may not even have a car; you might rely upon public transport or some other form of making your way around, and now you find yourself with a young family of four or five school-aged children. Your fridge is broken and beyond repair. You might not even have the capacity to meet the costs of repairs to a fridge, but let us assume for the purpose of this example that the fridge is no longer functioning and you need to get a new fridge. If this bill were to take effect, some of these people would not be able to enter into a consumer lease arrangement, firstly because it would be prohibited by this proposed legislation, but in reality it may be that they cannot enter into an arrangement if they do not have proof—if they cannot convince the consumer lender—that they are able to repay the loan. Entering into arrangements where a loan is serviced by a part of their Centrelink payments, of course, allows that household to replace that fridge. As burdensome as that purchase may be, it puts that family back on a fair footing, as we would all want to see, in relation to the necessities of that household.

In a similar fashion, if the washing machine in the house were to break and you have a family of six or seven who are already in difficult circumstances, in many cases exacerbated by some of the scourges in the household with these addictions, you could be left with a mother of young children who then has no capacity to wash the linen or the clothes of the family unless they are able to access some form of consumer lease, low-interest or no-interest loan or, as I said before, finances operated by schemes such as NILS, which is the Good Shepherd microfinance scheme.

Essentially, the impact of this bill is very clear: either we are prepared to support these people in these difficult circumstances by, in essence, guaranteeing the payment of the lease payments or the interest payments on these loans or we are not. There needs to be no confusion here and no crossover. I do understand the spirit of what Senator Cameron has tried to achieve. None of us want to see any unscrupulous lenders taking advantage of people who are in very difficult circumstances, who otherwise would not have a choice and who, in some cases, are in very desperate circumstances being exploited by lenders and financiers. Nobody wants to see that happen—me in particular.

In a former life, I had a lot to do with families who found themselves in quite tragic circumstances. I understand these stresses of day-to-day life. As a former police officer, I have been in their homes, I have seen their struggles and I have seen the pain of a mother who is a spouse to sometimes an abusive father, who was addicted to either drugs or alcohol. The circumstances in their homes are very pitiful. If this bill were to go ahead, on balance, it would prevent those mothers from being able to enter into any sort of consumer arrangements to bring to them some of the very basic necessities of life.

It may even extend beyond the basic necessities. I am not one of those who is of the school of thought that these people find themselves in these circumstances should be denied the opportunity to have some of those other things in life that we all experience and take the granted. You have got a young family coming through in that household, you want them to have the ability to be introduced to some of the technologies of life, either in an essential form, from an educational perspective or from a social development perspective. Might I say, to the cry of some others, it may be just to allow their children to be able to enjoy some of the functions in life that come with some computer games and the sorts of things that young people seem to be attracted to more and more these days. If this bill was take effect, for those mothers in those households—or a father, before I hear the cry of discrimination come my way from our side of the building—it would prevent them from being able to enter into leases or loan arrangements to bring those things into their family. I think that is completely wrong and, in effect, discriminatory in and of itself.

What this program does is assist them in doing this. Some people, believe it or not, are just not quite financially literature enough or have enough life experience to be able to wade their way through certain regulated lease agreements and the like. That is why the changes of policy—the Centrepay policy terms list and the categories and goods and services eligible for Centrepay deductions—that I indicated earlier have been done. This gives a guide to these households and, along with the consumer protection act, is meant—as best it can, in harness with each other and having a symbiotic impact—to in effect guide them.

Senator Jacinta Collins interjecting—

I will not take the interjection. This guides these families who might not be as fortunate as some in terms of financial literacy to be able to make decisions and, as I have pointed out all the way through, guides them in what they do in making these purchases of things that you and I all fairly well take for granted.

We have also sometimes got the additional situation of the complexity of these agreements, which might involve—along with the lender—a finance institution such as a bank, where these people have to then start to engage in complicated arrangements as to how the periodic payments for these leases or loans may occur. I think we are all familiar with modern banking terms and that there is a cost involved in that, whereas this service provided for Centrelink customers has no cost.

When I talked about no interest loan schemes, we have got areas—like Good Shepherd Microfinance—which I am quite certain Senator Cameron did not mean to catch in this bill but would catch them. We have got areas where even these things are not available. I am instructed that in Normanton, for example, in the far northern part of my state, there is no NILS provider. As a result, an individual in that area who found themselves in these circumstances would have no alternative if it was not for the Centrelink program to be able to, as we have talked about, secure these essentials of life.

During the thin years of 2013-14, the NILS itself—which is, as I have referred to, operated by the Good Shepherd Microfinance—approved 24,378 loans with a total value of $22 million. I want to stay more with the number of loans. Whilst accepting that some people may have taken multiple advantage of the Centrelink program, there are in essence—even allowing for 20 per cent to be duplicate applications—some 20,000 households and 20,000 families who we know already probably in very ordinary or very difficult financial circumstances who have used the scheme to get the necessities of life. Those necessities are quite regulated in terms of what they can do and where they can do it. With that Centrepay for household goods, in just six months from July to September 2014, there were 136,000 customers with a total deduction of some $148 million. Not all of those deductions are for consumer leases, but the comparative volume does tend to indicate a significant demand for household goods—those goods that I referred to as the basics of life.

In closing my contribution, I have recognised Senator Cameron's intent with this legislation. I think we all have great sympathy for any measure that might protect the vulnerable in our society, particularly those who are really disadvantaged—for example, a mother and children in circumstances not necessarily of their making. Every one of us wants to join Senator Cameron in protecting these people so that they are not exploited by unscrupulous lenders of money or those who extend lease and finance arrangements. But because there have been changes which perhaps Senator Cameron was not previously alive to we believe the bill is not necessary. Indeed, limiting people's capacity to do this will just impact on their ability to take on the most basic things in life which we have all become somewhat accustomed to. So I think we should not support the bill. (Time expired)

Ian Macdonald (Queensland, Liberal Party) Share this | Link to this | Hansard source

I congratulate Senator Cameron on bringing to the parliament a bill that at least heads in the right direction and has a concern and a solution for a problem that abounds. Having said that, I think Senator Cameron, whilst meaning well, has got it wrong again. But let that not withdraw from my acknowledgement that this is one of the more sensible contributions that my friend and colleague Senator Cameron has brought to the chamber. It is good that we are having a debate on this.

In reading some of the material about this, it reminded me of when I was a 17-year-old. I had just left school and could not afford to go to university. I started work as an articled clerk on about half the pay an apprentice would get. I studied externally through the University of Queensland at night to get my legal qualifications. I was certainly a poor Australian. Senator Cameron's wish is that his bill be all about harm minimisation for poor Australians. I remember the days when I certainly fitted into that category.

I lived some distance away from my work in the town of Ayr in North Queensland and, somehow, I had to get to work. It was too far to walk. I would rely on friends to give me a lift if they were going in to town at the same time. But because I wanted to be independent I bought myself a Honda 55 motor scooter. I emphasise '55' because it was five cc better than the regular Honda 50 at the time. I bought it on what was then called hire purchase. A lot of the ills that Senator Cameron talks about were, in fact, there in those days of hire purchase. You do not see hire purchase around much these days. I am wondering if it is still relevant. The idea of hire purchase is that you pay a deposit and then pay your purchase off in instalments. In my case, I got the motor scooter. I had to pay some sort of a deposit and then I had to pay it off. As I recall, I used to pay about two pounds—or $4—a month. I had the use of the motor scooter for a couple of years, whilst each month I would go into the hire purchase agency and pay my two pounds to enable me to continue operating the motor scooter.

Whilst I was responsible for maintenance and upkeep, and obviously for fuel and repairs, the actual ownership of the unit, the motor scooter, stayed with the lender all the time. The idea of hire purchase in those days—very similar to the situation that now applies under different bills—was that the lender retained ownership of the goods. At the end of the lease—I think my lease was for three years—the motor scooter effectively went back to the lender because they still had the ownership entitlement to it. But, as with all of those contracts provided at the time, in the goodness of their heart the lender could actually sell you the three-year-old motor scooter for a nominal price. It was very similar to the arrangements that apply in the situation Senator Cameron has highlighted.

As with a lot of the propositions that have been raised in this debate, I remember that the amount I actually ended up paying for the motor scooter was much greater than the purchase price. Adding up all the payments I made over the term of the hire purchase agreement, I paid something like three times the original cost of the motor scooter. But, of course, in those days there was no alternative. I did have the use of the motor scooter from day one and it allowed me to get around. Again, this is very similar to a lot of the situations that are highlighted in Senator Cameron's speech and in other contributions to this debate. Senator Cameron in his introductory speech on this bill said that the government should expedite the broader review of consumer leases that it announced and look at the national credit code and the implications of consumer leases on a broader basis.

On 7 August this year the Hon. Josh Frydenberg MP, the Assistant Treasurer, indicated that the government was establishing a review of the small-amount credit contracts, which I and probably everyone else in this debate have referred to as SACCs, and related provisions of the national Consumer Credit Protection Act 2009. The establishment of that review fulfilled a statutory requirement under the credit act to examine and report on the effectiveness of the law relating to SACCs that was provided in the credit act. In doing this the government recognised that the small-amount lenders can play an important role in the economy by providing credit to consumers who are excluded from mainstream forms of finance. The government wanted to ensure that the regulatory framework strikes the right balance by protecting vulnerable consumers without imposing any undue regulatory burden on the industry. These small-amount credit contracts are loans of less than $2,000 to the consumer, with a maximum term of 12 months. Since 2013 the credit act has placed specific obligations on small-amount credit contract arrangements and on the providers, including a cap on costs and a rebuttal presumption that a loan is unsuitable when the customer is in default under another small-amount loan.

The government's review also provides an appropriate opportunity to consider the laws that apply to regulated consumer leases. A consumer lease allows a customer to lease an item, such as a fridge—perhaps even a motor scooter!—until the term of the lease finishes, when the item is returned to the lease provider. It is similar to what happened in the case I was relating, about buying a motor scooter all those years ago. Consumer leases regulated under the credit act include those that are for a set period of four months or longer. While the customer base for small-amount loans and regulated consumer leases is similar, many of the regulatory requirements for small-amount credit contracts do not apply to consumer leases. The review announced by Mr Frydenberg will consider whether the provisions that apply to small-amount credit contracts should apply to consumer leases as well. While the customer base for small-amount loans and regulated consumer leases are similar, many of the regulatory requirements of these SACCs do not apply to consumer leases. The review, as I indicated, will consider whether the provisions that apply to small-amount credit contracts should also be extended to consumer leases.

I am pleased that, as Mr Frydenberg announced, the review will be chaired by Ms Danielle Press, the CEO of Equipsuper, who will be joined by panel members Ms Catherine Walter, the deputy chair of Funds Management Victoria, and Mr Stephen Cavanagh, a partner in HWL Ebsworth. The minister announced that the consultation process would involve the panel calling for submissions from interested parties. It will consult widely with stakeholders. The terms of review are quite extensive. I will not go through them all, but they include the review to make recommendations about effectiveness and where necessary to recommend any changes to the requirement to obtain and consider a consumer's bank account statements in certain sections of the credit act. The terms of reference also require the inquiry to look into the rebuttable presumption that a loan is unsuitable if the consumer is in default under another small-amount credit contract or has held two other small-amount credit contracts in the past 90 days in accordance with several provisions of the credit act. The inquiry will also look at the prohibitions on entering into and increasing the credit limit of a loan contract that has a term of 15 days or less with a consumer and on suggesting to consumers or assisting them to do all that is required by certain relevant provisions of the credit act.

The review panel is also required to look into the requirement to display a warning statement about alternatives available on small-amount credit contracts in several relevant provisions of the credit act. Also, the inquiry has to look at the cap on fees on charges, including the maximum of a 20 per cent establishment fee and of a monthly four per cent fee that, again, is referred to in several sections of the act. The inquiry will look at the requirement that consumers who do default under a small amount credit contract must not be charged an amount that exceeds twice the amount of the relevant loan in section 39B of the National Credit Code.

I cannot equate these things precisely with what happened 50 or more years ago when I bought my first 'vehicle' under a hire-purchase contract, but clearly these sorts of issues have been around for a long time. One often wonders about all this regulatory work that governments do from time to time. I note this National Consumer Credit Protection Act came into play in 2009 in the term of the previous Labor government. At times I think we should pause and think about whether we should be encouraging individual responsibility rather than having governments—big brother—trying to regulate every aspect of our lives to protect us from ourselves. I am not sure that my instance, where I paid, if I remember correctly, three times the amount of my motor scooter back in those days, was something that really needed regulation by government. I was aware of that as a 17-year-old when I went into it, but to me the convenience and use I got from that motor scooter was worth the extra amount that I paid in total, and it allowed me to pay it off by almost affordable payments every month until I completed the contract.

Whilst there was some legislation and regulation around hire-purchase agreements in those days, one wonders if at times we try, as a parliament, as various governments, just a little bit too hard to save people from themselves. There used to be the old legal principle of caveat emptor—be careful of what of you buy, think about what you buy—but unfortunately in this day and age there has grown up this view that bureaucrats and politicians in Canberra are better able to regulate the lives and responsibilities and obligations of individual Australians than those individual Australians are themselves.

What we have to strive to do in Australia, and what we do obviously do and have done for many years, is to make sure that every Australian has an education that equips them to be able to properly assess whether they should be taking out a small amount credit contract. Back in my days, you took out a hire-purchase agreement. Ensuring Australians are better informed and the better educated is a better way of addressing these things than having governments and bureaucrats in faraway Canberra trying to regulate what they think is in the best interests of the people of Australia.

I often make the same point in relation to Indigenous people. I find it offensive that people in this parliament in Canberra and bureaucrats are always trying to pass laws, to do things, to make special rules for Indigenous people. To me that always seems to suggest that we think Indigenous people are simply incapable of making the decisions that other Australians make. I find that very offensive. I have some caution with some of the things even my government does in relation to Indigenous people. I think that the best thing we can do for Indigenous people is to treat them exactly the same as every other Australian, with the same rights and responsibilities and opportunities and benefits that every other Australian gets. But some of the things we do from this building and from Canberra seem to me to be almost designed to ensure that that paternalistic situation continues to apply for Indigenous people, and I for one totally oppose that. I know a lot of Indigenous people, and they are equally as good as, if not better in most cases, than every other Australian. I think they are as well able to control their own lives and look after themselves as every other Australian. Again, I emphasise that education, training, the ability to participate fully in Australian society applies there, as it applies to every other Australians.

Senator Cameron said in his opening speech this was an attempt to help minimise harm to poor Australians. Of course, if we did not have any poor Australians in the country then perhaps Senator Cameron might not have thought it necessary to bring this bill forward. We, as a government, try our very best to make sure all Australians benefit from living in this lucky country. Having said that, and whilst I again acknowledge the good ideas and good principles behind Senator Cameron's introduction of this bill, I think he has got it wrong. The government is already addressing many of the issues that Senator Cameron indicated concerned him. When the reviews that the government has set up and other actions the government has taken come into play, this bill will be unnecessary. For that reason I intend to oppose it and I urge the Senate similarly to oppose the bill.

David Fawcett (SA, Liberal Party) Share this | Link to this | Hansard source

I also rise to address the Social Security (Administration) Amendment (Consumer Lease Exclusion) Bill 2015. I would like to address this in three key ways. Firstly, I want to talk about what Centrepay actually is, which is the mechanism that is being discussed. Secondly, I want to talk about the problem that the bill seeks to address. Thirdly, I want to talk about what the most effective approach is to actually mitigating the risk and the poor consequences and outcomes that Senator Cameron raises. I do this because my background, as you know, Mr Acting Deputy President Sterle, is that of an experimental test pilot, so I have seen many cases where people identify a problem and launch into what they think is a fix. But, if you do not identify what the crux of the problem is, what system needs rectification and what the possible unintended consequences are, you can spend a lot of time and effort but not address the problem you are seeking to fix. So I think it is important that we look at these factors.

What is Centrepay? It is a deduction service that is offered to customers of Centrelink by the Department of Human Services. It is free for recipients of Centrelink payments. It means that people can have payments for things like bills, utilities and other costs deducted from their Centrelink payments to meet those ongoing expenses, and then the residual Centrelink payments are deposited into their accounts. So it helps people to manage their funds, particularly people who, because of their own life circumstances and their ability to manage, or because in some communities there is an expectation that 'what you have is mine and you should share it', find it very hard to maintain control of their own income. Because of those social or familial pressures, Centrepay can be an invaluable tool to them.

Centrepay was used to transfer more than $2.1 billion deductions last financial year, so it is of substantial size in terms of its transactions. It is widely acknowledged as a very valuable service by the sorts of community organisations that get alongside people who are struggling in this area. It is used by around 600,000 people who are in receipt of Centrelink payments, and they represent about nine per cent of the total Centrelink customer base.

One of the things it does is link businesses who have met the policy and terms of Centrepay with these consumers. It does not operate carte blanche; it has a process whereby businesses have to agree to abide by certain policies and terms, and conditions in some cases, to be linked up and be able to receive those payments. So it is a fairly well-developed system.

The system has been developed over time, particularly in the area of consumer leases. The Department of Human Services has conducted a review of the system to change the way it works and to provide more information to more consumers—and I will get onto that a little bit later—but it has also excluded consumer leases that are not regulated by the National Consumer Protection Act 2009, and that is important. One of the roles of the Parliamentary Joint Committee on Corporations and Financial Services, which I chair, is to oversee ASIC, the corporate regulator, and one of the benefits that a regulated scheme brings is that people have to comply with the requirements of, and get approval from, ASIC in terms of how they run their business. For schemes that are not regulated, there is not that same oversight or that same framework to comply with, so this review has already excluded those kinds of businesses from the Centrepay model.

Importantly, this bill also expands the alternatives to consumer leases, and these are things like low-interest loans or no-interest loans, savings plans and lay-bys. That means that, when people are attracted by one of those lease-to-buy options because they need whitegoods or some service in their house, they know, 'I can buy those goods more cheaply with a low-interest loan or a lay-by plan than through that rental scheme.' There has been a lot of effort put into making those alternatives available and appropriately regulated, and making sure people are aware of them. The changes in the bill to the Consumer Protection Act and to Centrepay are to make more of those alternatives available to people, which then help them to make informed choices about their options when procuring household items they need for day-to-day living in a way that is ethical and fair in terms of the impact on them.

You need to bear in mind, Mr Acting Deputy President Sterle, that many of the people we are speaking about are excluded from normal avenues of credit, whether credit cards or store accounts, because they may be unemployed—and, in some cases, the unemployment is intergenerational. I certainly know from my time as the member for Wakefield in the other place, when I represented some communities in the Peachey Belt area, that there were a lot of long-term unemployed people. The work there of groups such as Anglicare and others who sought to get alongside people and help them with their financial literacy and understanding was critical in helping them to bridge these gaps between what the rest of us take for granted and what is available to them.

The new Centrepay policy and terms categorise goods and services that are eligible deductions and list a number of things that are specifically excluded so that people are only using the system for things that are important. The Centrepay terms do not rely on social security law to exclude particular goods, and I encourage those who have a deep interest in this to go and have a look at the Centrepay policy and terms.

This is where I think we move from looking at what Centrepay is to looking at mechanisms to bring about change. We have described Centrepay, and it is good. The problem with consumer leases, which is fairly well known—and I applaud Senator Cameron for his concern for people—is that somebody can make rental payments over a number of years for an item that might cost $600, but the amount they end up paying can be around the $1,100, $1,200 or $1,300 mark. Clearly, they pay far more for the item because they do not have the option of getting that up-front capital. It is a well-defined problem. But the mechanism to bring about change is not the act, because, if we exclude even regulated consumer lease options from this system, there are a few things that can happen. One is that the leases that are then made available to people will often not be regulated. So people who are under pressure to have a fridge or a washing machine in the house will still go to companies who have no obligations either through ASIC or, indeed, under the policy and terms of Centrepay to provide additional information to these people about alternative credit sources such as the low-interest loans et cetera or to operate in a fair and ethical manner. People will then be using the residual money they have from their Centrelink entitlement to pay for these items. So we are actually reducing the protections for them if we exclude the regulated consumer leases from Centrepay in this legislation.

If we were to try and do things in a different way through Centrepay, as opposed to ASIC—and I will come back to ASIC in a minute—then we would look at Centrepay's policy and terms. Under 7.3 in the policy and terms, any company that has an agreement to use the Centrepay system has to comply with the policy and terms and any additional conditions which are placed on it. So, we are talking about a regulated scheme which already has the calming effect of ASIC requirements and then the additional requirements that can be placed on the policies and terms. If we look at section 8.1.b, it says that Centrepay can approve an application to be part of this scheme either in its standard policy and terms or it can approve it with additional conditions. This is one of the options that would be far more precise in achieving the outcome that Senator Cameron is looking for, if we find that the other mechanisms are not having the desired effect—and, as I say, I will come back to those in a minute. The policy and terms and additional conditions could be a mechanism to say, 'If you want to be part of the Centrepay scheme'—and, for companies, that is obviously an attraction, because there is a lower risk profile for them if they are receiving these payments under agreement where Centrepay is an intermediary—'then Centrepay could use additional conditions to set caps on interest or other options.' So there are ways that those sorts of conditions could be used to deliver more protection to the consumer than just by eliminating these kinds of things from the legislation altogether.

It seems a self-defeating object, to my mind, to say that we are concerned that people are being exploited, therefore, remove these products altogether, as opposed to saying, 'Let's use the system to provide additional protections for people so that what they are asked to sign up to is equitable, fair and ethical for them.' The policy of the Centrepay system itself, under a regulated product, provides the sort of protection that we should be aiming for, as opposed to just excluding it and putting it out in the free market.

Part of the reason I say that is that the people who are responsible for regulating these products are ASIC. ASIC are responsible for the regulation of consumer leases under the National Consumer Credit Protection Act 2009. They undertake a range of research and activities to promote business compliance with the act, and they also provide a number of educational materials for the consumer. When it comes to education, I am very aware, having been the member for Wakefield where I have gone into schools and seen that in the foyer there are no written hand-outs. The schools have given up providing them to parents because they have realised that in some cases some parents cannot actually read. They will not admit it, and they do not get the information. So, for that cohort, no amount of brochures that highlight information is going to protect them. What these schools have done is put information onto an audio—so, it is a video or a power-point presentation with audio. They find that the parents will stand around and have a cup of tea that is provided. The whole object is to provide an environment where you convey information. So there are ways that we can convey information to people.

Part of ASIC's remit is educating consumers. They have their MoneySmart website and system, where they try to provide financial guidance. What we are seeing is that people like Centrepay are linking through to that information. So, in the increasingly online environment, people are being pointed to the fact sheets that are produced by ASIC around MoneySmart. ASIC have a whole section just on consumer leases, which explains how the leases work and the terms. It highlights the fact that, at the end of a lease, you might actually not own the item, despite the sometimes misleading advertising; you can be responsible if the item is damaged or stolen; and the terms and conditions can be complicated and they may need to seek additional support. They highlight the fact that leasing may not be the best way to buy something, the fact that there is often no cooling-off period and the fact that you may be better off with lay-by or low-interest type schemes. They also help people to working whether they can actually afford these repayments—so there is budget planning. They also point people to things like the no-interest loan scheme, which offers specific purpose loans for things like fridges or washing machines. There is the Good Shepherd Youth and Family Service, who can link people up with providers of these low-interest schemes. So there is a range of information available there.

By keeping these schemes within the Centrepay system, we can do things under its terms and conditions. For instance, if you as a business want to attract customers and want to have the security of using the Centrepay system then you need to provide them with this information. ASIC provides links to additional explanation, and advocacy and support groups in the community can use that information to help inform consumers. With the regulated schemes, ASIC takes action to make sure that schemes do comply. I am the first to admit—and it is the whole reason we have ASIC—that there are people who do the wrong thing. I look at ASIC's website and see that in February this year ASIC took action against five different companies—Goldhype, the Smart Link Rentals group, Keep Easy rentals, Rent To Keep, the RentEzi appliance rentals and the Wanted Rented group. They are obviously all aimed at getting people into this scheme as an easy and quick way for them to get something. As a result of ASIC's actions, over $230,000 has been refunded to 115 consumers, the majority of whom were in this cohort. They were people on Centrelink benefits who had entered into contracts with these lease providers.

Under the outcome that ASIC has imposed on these businesses, the businesses have agreed to collect only the cost price of the rented goods and to refund any amount that has already been received from the consumer over that amount. They have also agreed to transfer ownership of the goods to the consumer once the cost price has been paid and to stop offering regulated consumer leases. In other words, ASIC has said, 'Your conduct has been so poor that not only are we going to make you fix up the problem with your existing customers but you are no longer going to be offering leases in this space.' So ASIC is fixing the problem with companies like that but, by then saying, 'You cannot offer regulated products,' it means that Centrepay will no longer be offering the product.

So the whole intent of Senator Cameron's bill in this case does not achieve anything, because the system has already worked to exclude those people. People would get more protection by still coming through Centrepay with Centrepay's terms and conditions and regulated schemes than they would by going into a marketplace where people who have been prevented from providing regulated lease options are operating.

In June this year we saw another action by ASIC against a firm called Amazing Rentals. ASIC required that that company stop operating. The area where they had most noncompliance was in Darwin. ASIC said, 'You have to cease operating in Darwin for a minimum of 12 months.' That company had to terminate all the consumer leases that had been entered into at the Darwin store between October 2011 and May 2015. They had to cancel the payment arrangements in relation to those leases and transfer ownership of the goods to the consumers. They had to refund to consumers all credit charges and the difference between the retail and lease costs and they had to pay a total of $10,000 to some of the advocacy agencies that supported people—the North Australian Aboriginal Justice Agency and the Top End Women's Legal Service, who provided support to consumers in this case. They also had to engage an independent and external compliance expert to conduct an assessment and report to ASIC on Amazing Rentals' policies and procedures to ensure compliance with credit compensation in relation to responsible lending documentation obligations and make any recommendations about required changes.

To come back to my starting point, Centrepay is a useful system. It supports 600,000-odd people, about nine per cent of Centrelink recipients in the country. It has been recognised by ASIC as a useful system. There is a problem with leases that charge people far more than a product is worth, but the answer is not to exclude regulated leases from the Centrepay system, for the simple reason that we want people to be using regulated leases because that allows ASIC to take the kinds of actions I have just outlined that they have taken against six companies this year alone. But also importantly it brings it under the Centrepay system, where there is the policy, the terms and the additional conditions that they can apply, which will provide more protection, not less, to the consumer.

For those reasons, whilst I commend Senator Cameron for his concern for the people involved, I believe that the Centrepay system is worthwhile and that excluding regulated consumer leases is not the best way to provide protection to consumers, and so I will not be supporting the bill.

Cory Bernardi (SA, Liberal Party) Share this | Link to this | Hansard source

It gives me great pleasure to rise today and address some of the measures proposed by Senator Cameron's bill, which is known as the Social Security (Administration) Amendment (Consumer Lease Exclusion) Bill 2015. I am particularly interested in this bill because it relates to a longstanding concern of mine about financial literacy not just amongst those who are on income management or income support but amongst our community generally.

One of the greatest things we as a nation can do is to ensure that young people develop an understanding of finance and money. That is not because they need to pursue money as their life's goal but because the astute management of money can prevent a great deal of misery and hardship in their lives. If they understand what the impacts of consumer credit and the long-term implications of not paying off your debts can be, it can prevent a lifetime of hardship.

I have been interested in this space for a very long time, particularly the benefits of teaching children about financial literacy. I wrote a little children's book, which I entitled The Money Tree, which was designed for parents to help their children understand money management through a fictional tale. I regret to say that it did not meet with widespread acclaim, but it has been distributed to schools and various other bodies for free at my own expense because I passionately believe that this is something that can change the lives of people forever.

I respect Senator Cameron trying to enact a bill which is designed to prevent people from getting in over their heads and facing financial hardship. The intention of Senator Cameron, I have no doubt, is quite sound and solid. But there are some flaws in this bill. We have to consider what the potential implications could be for those most impacted by this. What might sound intuitively like a really good idea can often have some impacts which need to be given consideration.

If this bill were enacted, it would mean that welfare recipients who are benefiting—and I strongly emphasise the word 'benefiting'—from income management would not be able to pay for any consumer lease obligations, whether they are regulated or unregulated, using their income managed money. Let's think about that for a moment. Those on income management would still be able to get involved in regulated or unregulated leases with their non-income-managed money. They could still do it with cash or various other things. But we have to ask ourselves: when people are going into what are generally longer-term obligations to buy whitegoods or merchandise, which is often very important to their lives and wellbeing, isn't it better for them to be in circumstances where their repayment schedules are managed and are not going to be subject to what I would call the weaknesses of indulgence that we all have? Marketers spend enormous amounts of money trying to part us from our cash, and if we have cash we can be vulnerable to those sorts of marketing overtures. That is fair enough, but not if it is going to leave you short for an ongoing repayment. It is not fair enough then.

We are talking about people who are welfare recipients, many of whom are doing it tough, many of whom need to purchase things which they cannot initially afford, so they need to go into a finance arrangement. Rather than risk those people losing their asset because they are vulnerable or their cash management skills are probably on par with most of Australia, we are better off providing them with some certainty and surety. That is what I sense.

This bill does not allow that to happen. As I mentioned, you can go to unregulated or regulated leases, and they can pay for that through their non-income-managed money. The risk here—and I seriously think it is a risk that Senator Cameron has not considered—is that this can cause further financial hardship for people that are already in very difficult circumstances. As I mentioned, for many welfare recipients this sort of surety is the only way that they are going to have a prospect of getting reasonable lease terms or rental arrangements, because there is a certainty that the financier is going to receive the regular payments. It does not mean it is going to be fair; it does not mean it is going to be good. It does not mean any of that, but it does mean that there is access to opportunity for people where otherwise there might not be or there is access to opportunity under terms that are probably much more appropriate and attractive than some of the payday lending terms or other less attractive options that are out there.

It is very clear to me from listening to the previous speaker that the government does want more lower cost options available for people. There are good Samaritans out there, including the Good Shepherd's No Interest Loan Scheme. I have had meetings over the years with members of the National Australia Bank and their social finance organisation, in which they provide no-interest or very-low-interest loans and support other organisations that are doing the same thing. These are very small programs in the scheme of things, but they make a huge difference. I think making a difference in this space is what we are all trying to do to get better outcomes for people and to make sure that government and taxpayers' money is used wisely and to the best effect. I think there is a general consensus that we want to stop predatory lending processes or make them as unattractive as possible, because of the difficulties that they cause.

I have seen it firsthand. I have been involved in the finance industry for a very long time. I understand how money worries can plague people. It does not matter whether you are rich or poor; if you cannot manage money effectively, you end up in a very dark place. If you start borrowing from some of the less-regulated lenders at some of the extortionate interest rates which are payable, or in some of the unregulated areas, it can cause enormous grief for you and your family because a lot of the less salubrious lenders are linked to very unsavoury characters. I know that firsthand because unfortunately I have had friends and clients who have gone down that path.

I think the Department of Human Services has to continue to ensure that people have access to goods using the most reasonable means that are available to them. That means giving some certainty to the vendor—the lender or financier in this case. The best possible way to do that is to allow access to income management. It takes it out of the discretionary hands of the recipient and provides that certainty to the vendor. There are a number of other things that we can do that would be positive in this sense, which I would like Senator Cameron to consider, if he wants to put forward another bill.

In the end, as I have said before, we need to make sure that the government and the taxpayer are getting appropriate value for money. We have to ensure that taxpayers' money is being used as wisely as possible. We also have to acknowledge that the interests of the welfare recipient have to play a significant part in this. It is not enough for us to wash our hands and say, 'You can have this bundle of cash every week'—it is hardly a bundle, I should say—'you can have this taxpayers' funding every week or fortnight and you can spend it on whatever you want.' We know that some people cannot or will not spent it appropriately, and that leads on to greater societal difficulties. It leads on to individual difficulties in health and wellbeing as well. We know that in some instances children are impacted by the choices that their parents make. We need to acknowledge that and we need to put in place measures that will protect the wellbeing of all participants in this process.

We have seen the success of income management in many areas. I know that in the previous government there were calls from the member for Wakefield for income management to be rolled out in his area—against the will of his government at the time. I remember there were calls from other members of parliament saying: 'No, this is a good idea. This will help alleviate suffering. It will help alleviate hardship. It will make things easier for people to make the necessary decisions for themselves because some decision making is actually being taken out of their hands.' It sounds a bit perverse, but limiting choices, even for a section of expenditure, makes for better choices. If people are compelled to provide for their rent and to provide, for their children, food and those sorts of things before some of the other discretionary items, they can be better off. And that was the intention. It has been hailed, I think, by most sides of the chamber—with some exceptions, I would say.

That is what the Centrepay policy and terms effectively do: they list the categories of goods and services that are eligible for these Centrepay deductions. They also list the categories that are explicitly excluded. But I need to be very clear here: the new Centrepay policy and terms do not rely on social security law to exclude particular goods. And that is why I would suggest that, no matter how well-meaning this bill may be, it is actually not needed, because this bill does not actually exclude consumer leases from Centrepay. As part of the transition to the new Centrepay policy and terms, businesses that are actually approved for the household goods categories have been required to specify whether they provide regulated consumer leases or unregulated consumer leases, and unregulated consumer leases are being excluded from Centrepay. The businesses are also required to provide positive agreement to comply with the new policy and terms. I will just state that again: businesses approved for the household goods categories have been required to specify whether they provide regulated consumer leases or unregulated consumer leases, which are being excluded from Centrepay. They are also required to provide positive agreement to comply with the new policy and terms.

We are also obtaining more detailed data on the usage of Centrepay for consumer leases, which was probably an omission because it was not the case previously. That is not in any sense a criticism; it is just one of these things that sometimes slips through the net. That will enable us to monitor much more closely the usage of Centrepay for unregulated consumer leases during the grandfathering period.

I will make a point here on regulation. The Department of Human Services is not a regulatory authority—and I do not think it should be. We have regulatory authorities. We have the Australian Securities and Investments Commission, which is the body responsible for the regulation of consumer leases. That is done under the National Consumer Credit Protection Act 2009, as I am sure you will recall. It undertakes research and activities to promote compliance with the national credit act.

Of course, ASIC has taken a great deal of action over the years. There are some in this chamber who are quite critical of ASIC for not taking action where it needs to take action and for prioritising the wrong agendas, but it has taken action against a number of consumer lease providers for failure to comply with the requirements of the national credit act, and particularly in regard to the responsible lending obligations.

ASIC is our regulator. It is meant to inquire into these sorts of things. The Department of Human Services should not be the regulatory authority in this space. However, the Department of Human Services should have a very close and ongoing relationship with the regulatory agencies, including the Australian Securities and Investments Commission. And I understand that it does. I understand that it has a very strong and close working relationship with the Australian Securities and Investments Commission and that cooperation has led to some businesses actually being removed from Centrepay. That is government as it should be working: the regulator and the department talk, and they come to determinations that are in the best interests of the taxpayer, the welfare recipient and the consumer credit supplier.

In that respect, I understand that the department recently provided information to assist ASIC with its current research to better understand consumer leasing practices and the impact on welfare customers. This is very important work, to establish the impact of consumer leases.

I want to come back to where I started. Understanding how money works and understanding personal finance—budgeting; your obligations; the implications of accepting credit at particular rates and not paying it off, and what that can do to your financial future, and the long-term effects it can have on your health and wellbeing—is one of the most important things we can ever instil in people in this country. If we could get people to think about the consequences of managing their money and the consequences of managing their health, this country would be immeasurably better off.

For many, I have to say, it is a bit too late. It is very difficult to get people to change their habits much later in life. But our responsibility is to instil in the next generation—in the boys and girls who are at school, some of whom I have seen touring this parliament today—the need to learn about and understand the implications of credit. In advance of that generation finally going into adulthood with that information, we now have to implement measures such as income management to assist people in making the right choices.

Once again, I say to Senator Cameron: this is a well-meaning bill; I understand perfectly what you are trying to do here, and I sense that you understand what I am trying to do as well, Senator Cameron. But there are consequences that the government has considered. I have to say that I stand with the government on this because the consequences of, and the omissions from, this bill mean I cannot support it. That may come as a surprise to you, Senator Cameron, but I am unable to support your bill today in its current form because I think the government has a persuasive case as to some of the implications of it—which I do not think are of benefit to those people who deserve our full support.

I will use the brief time I have left to encourage the government to continue its diligence in examining the implications of changes to consumer credit codes and financial management. I would encourage them even more warmly to invest in the next generation. The two best things they can do for the future of this country are, first, to instil in young people an understanding of how money works and how they can live a lifetime of financial independence by adopting some very simple practices and, second, to encourage them to take better care of their health.

Arthur Sinodinos (NSW, Liberal Party) Share this | Link to this | Hansard source

Senator Cameron says he wants to exclude all consumer leases from Centrepay. We in the government believe that his private senator's bill, the Social Security (Administration) Amendment (Consumer Lease Exclusion) Bill 2015, will not do that and is flawed. The objective of Centrepay is to assist customers in managing expenses which are consistent with the purposes of their welfare payments and reducing financial risk by providing a facility to have regular deductions made from their welfare payments. The government has already taken action in this area. Following a review and subsequent stakeholder consultation, the Department of Human Services introduced a range of changes to Centrepay to improve its operation and provide greater information to customers. These changes include the exclusion of consumer leases not regulated by the National Consumer Credit Protection Act 2009—referred to as the National Credit Act— and the expansion of Centrepay to support alternatives to consumer leases such as low-interest loans, no-interest loans, savings plans and lay-by. We argue that it is important to ensure that people who have very limited access to most forms of credit—or to alternatives to consumer leases—are still able to access necessity goods, as we call them, such as refrigerators and washing machines.

The department works to build strong assurance practices for the consumer leasing industry and to influence its behaviours. Centrepay is currently transitioning to a new contract and assurance framework that will provide more options in responding to poor business behaviour and will provide additional dedicated assurance resources. The new Centrepay policy and terms list the categories of goods and services eligible for Centrepay deductions. The policy and terms also list the categories that are explicitly excluded. Let me be clear: the new Centrepay policy and terms do not rely on social security law to exclude particular goods. This bill is not needed and this bill will not exclude consumer leases from Centrepay.

As part of the continuing transition to the new Centrepay policy and terms, businesses approved for the household goods categories have been required to specify whether they provide regulated consumer leases or unregulated consumer leases which are being excluded from Centrepay. They are also required to provide positive agreement to compliance with the new policy and terms. We are also obtaining more detailed data on usage of Centrepay for consumer leases, which was not the case previously. Usage of Centrepay for unregulated consumer leases during that grandparenting period—we do not call it 'grandfathering' or even 'grandmothering' anymore; it is now 'grandparenting'—will be monitored closely.

I turn to the issue of the Australian Securities and Investments Commission, or ASIC. The Department of Human Services is not a regulatory authority, nor should it be. It is a payment authority of the federal government. ASIC are responsible for the regulation of consumer leases under the National Consumer Credit Protection Act 2009. They undertake research and activities to promote compliance with the National Credit Act. ASIC has undertaken enforcement action against a number of consumer lease providers for failing to comply with the requirements of the National Credit Act, particularly for failure to comply with the responsible lending obligations in the act.

The Department of Human Services has a close relationship with the regulatory agencies, including ASIC. This has led to some businesses being removed from Centrepay. So action has been taken. ASIC has been doing its job and the Department of Human Services has been doing its job; they have been working closely together in dealing with businesses that deserve to be removed from Centrepay. I understand the department recently provided information to assist ASIC with its current research aimed at better understanding consumer leasing practices and the impact on welfare customers. That is important work.

We all know there are concerns about the behaviour of some consumer leasing businesses and we are working with ASIC to address that. Some consumers, often welfare recipients, pay far too much for leased goods. It is those providers we need to address. This is something that has recently been acknowledged by Assistant Treasurer Josh Frydenberg. The department is going about addressing this issue in an informed and planned way, the way any good government would. There is no point rushing in with half-baked measures. That is why, at the minister's request, the Department of Human Services is chairing a working group which is consulting with business and non-government organisations about a requirement for Centrepay-approved businesses to disclose to their customers the effective interest that would apply for any consumer lease product. This will help ensure people make informed choices.

It is very easy to say those words, but think about what it means in practice. This is about transparency. This is about saying to someone, before they enter into a contract: 'This is the effective interest rate. This is what you will have to pay over that period. You think you are buying this refrigerator for X. However, because you are paying over time'—depending on the terms they may be able to buy the piece of equipment at the end of the term—'the effective cost to you is X times two.' This is the point. This is transparency at work. This is how you get people to make responsible decisions. They can then say: 'Okay, I cannot afford to do this. The interest rate is too high.' That is transparency, which is very important.

At the same time, the Assistant Treasurer, my friend the Hon. Josh Frydenberg MP, has announced an independent review of the small amount credit contract provisions of the National Consumer Credit Protection Act 2009. The review has been given terms of reference which include consideration of whether the small amount credit contract provisions should also be applied to consumer leases. The government is closely considering consumer leases and will take further steps as appropriate. When the Assistant Treasurer announced the review on 7 August 2015 he indicated that it fulfils a statutory requirement under the credit act to examine and report on the effectiveness of the law relating to small account credit contracts. He acknowledged there:

The Government recognises that small amount lenders can play an important role in the economy by providing credit to consumers who are excluded from mainstream forms of finance.

That is what we are talking about here. We are talking about people who do not qualify for most normal forms of finance. This is an issue for the banking system and for the financial service providers as much as it is for society — finding a way in which we can help those people who do not have access to other more mainstream forms of finance. Mr Frydenberg announced:

The Government wants to ensure that the regulatory framework strikes the right balance by protecting vulnerable consumers without imposing an undue regulatory burden on industry.

This review will have a consultation process. The panel will call for submissions from interested parties and consult widely with stakeholders and will report by the end of this year. We do not have to wait until the middle of next year for the report of this group — we will have it by the end of the year. That will provide us with the opportunity to consider all of these measures that Senator Cameron has rightly raised in the context of full information including a proper structured review by experienced people of the small amount credit contracts. The review will be chaired by Ms Danielle Press, the CEO of Equipsuper, and will include Ms Catherine Walter , Deputy Chair of Funds Management Vict oria, and Mr Stephen Cavanagh, p artner at HWL Ebsworth. So this is a blue-ribbon panel that I think will do an excellent job in looking at this matter.

The government has made it clear that it concedes the point that Senator Cameron has made. Mr Frydenberg conceded that there were issues, and while Senator Cameron was out of the chamber I made the point that we support greater transparency around disclosure of effective interest rates. We need to put consumers in a position to be informed. The other element of this, and it is not covered here, is that we also need to make sure that we are rolling out financial literacy programs to those most vulnerable people. Not everybody may have access to the ASIC website or to some of the programs that the banks and others have rolled out, so it is important for us to supplement what we are doing by having appropriate financial literacy programs.

I want to consider the impact of this bill on income management. If the bill were enacted there would be welfare recipients on income management who would not be able to pay for any consumer lease obligations, regulated or unregulated, using their income managed money. Those on income management would be able to continue to pay for regulated leases using their non-income managed money via Centrepay or unregulated leases via other private payment arrangements. This could place these vulnerable people in financial distress, which is what income management was designed to avoid. Excluding consumer leases from income management has the potential to cause further hardship to already vulnerable people. Some people have existing arrangements to pay consumer leases from income managed funds, and the Department of Human Services would be obliged to end these arrangements. For some people on income management this type of arrangement may be the only option available to them to obtain basic household goods. The government does want more lower cost options available to people, which is why it continues to support the Good Shepherd no-interest loan scheme and why Centrepay is expanding to include low interest loans, savings and layby.

I commend the financial system because over the last few years a number of the banks and others have sought to address issues in this area through mechanisms like no-interest loan schemes. Ironically, these are in part based on the experience in developing countries. In places like Pakistan and Bangladesh, the Grameen Bank provided low- or no-interest loans—very small loans—to people and they found, remarkably, that people were not frittering these loans away. They were either getting basic goods they needed or they were starting small businesses. The repayment rate was very high. If you backed these people, they more than repaid your faith in them by not just repaying the money but often by starting new businesses and getting their lives and their families in order.

I fully support the rollout of these sorts of alternative loan and payment options for lower income people, but that must go hand in hand with continuing to expand financial literacy and putting the Assistant Treasurer in a position by the end of the year, when we have the fruits of that review, to institute small loans. That will give us the chance to have a comprehensive package around this whole area. It will give us just a bit more time. Senator Cameron just has to wait until the end of the year and we can do things in a more comprehensive package, and this private member's bill and the debate on it will help inform the government's further consideration of options. That is very important, and it is a very useful thing that we have been able to do. It is particularly important that we look at how the government can encourage these alternative loan options that I talked about before. We should do whatever we can to link these options to broader strategies within government; to encourage people who are on the fringes of society—Indigenous groups are a particularly large part of that—into the mainstream by linking what we do in this area with workforce participation and other measures. This is not about being punitive; that is not what we are talking about here. We are talking about how we, in a whole-of-government way, can address the sources of disadvantage that people have so that they are in a position where they do not see themselves as passive welfare recipients condemned to a life on the dole or condemned to two or three generations of poverty. The intergenerational transmission of poverty is one of the biggest challenges we face with these groups on the margins of society. It is very important to take a whole-of-government approach to all of this.

In relation to the matters which are being considered in the context of this private member's bill, I think it would be good to have a whole-of-government approach which would take account of what the Assistant Treasurer will be providing to us in the form of a report by the end of this year. That report in part will be informed by work that is being done by ASIC, which released its report into small-amount credit contracts in March. That was focused on compliance. It did not look at policy questions such as whether the existing rules are effective or appropriate. ASIC found that compliance with some regulations was working well, including a requirement to provide a warning about alternative credit options. However, ASIC did find some issues present in the sector, including adequate documentation and record keeping, as I alluded to before. ASIC has put the industry on notice that it needs to improve. Since 2010 its enforcement action has resulted in close to $2 million in refunds to more than 10,000 customers who have been overcharged. The government fully supports ASIC's actions to date in ensuring that all lenders are complying with the law. I look forward to further debate on measures which can strengthen appropriate regulation and compliance in this area.

Nick Xenophon (SA, Independent) Share this | Link to this | Hansard source

This bill introduced by Senator Cameron reminds me of a saying I quite like: 'Just as an oyster needs a grain of sand to grow a pearl, precious ideas might grow from vigorous argument. So we should probably value irritants in public debate, and welcome challenges to accepted norms.' In what Senator Cameron has done here—clearly he has irritated some in this chamber with this idea, saying that there is another way forward—he has actually dealt with an important issue that is affecting many thousands of Australians every day of every week and that has a profound impact on their financial welfare. In the absence of a better alternative, I have no choice but to support the Social Security (Administration) Amendment (Consumer Lease Exclusion) Bill 2015, because what this bill is saying, effectively, is that we need to stop aiding and abetting practices where consumer leases are effectively ripping off some of the most marginal in our community. Senator Cameron's favourite economist, Joseph Stiglitz, in The Price of Inequality talks about these issues: about that entrenched inequality and those traps that people who are vulnerable, who are poor, simply cannot get out of. Senator Sinodinos made a point about the Grameen Bank. Muhummad Yunus won a Nobel Peace Prize for his microloans. What have microloans got to do with peace? If you give people economic security, if you give them economic stability, if you give them jobs and hope, that is one of the best ways to drive away the evil influences of terrorism, extremism and fundamentalism. Poverty is a factor in making people vulnerable to the evil of terrorist influences.

The reason why I support this bill is, I think, contained in a table that Senator Cameron has referred to and that has been provided in very useful briefing material—it comes not from him but from the Consumer Action Law Centre—on the hidden costs of rent-to-own in September 2013. I will give two examples. For a high-definition television with a retail price of $749 to $1,049, the rent-to-own price can be between $3,112 and $3,893. That is between 371 per cent and 415 per cent. For a mid-range stroller—this is what a young family puts their baby in—the retail price is between $100 and $300; the rent-to-own price is between $772 and $1,392—a 464 per cent to 772 per cent mark-up. We need to do something about this. I think that Senator Cameron's bill, being an irritant perhaps to those who think we should just have business as usual, will prompt change. I am not sure whether this bill in its current form will get through both houses of parliament but I can practically guarantee that, as a result of Senator Cameron's very fine work on this, we will see changes in the law that will achieve, if not all of what he wants, a significant amount of what he wants. I still think this bill is the best vehicle forward.

The system of automatic deductions from government payments via Centrepay has been around since 1998. It has been an effective budgeting mechanism whereby the costs of utilities and rent were deducted each fortnight before the balance was paid to the Centrelink client. But since the recent clampdown on unscrupulous payday lending providers there has been a massive expansion in the advertising and take-up of consumer lease agreements. Disturbingly consumer lease providers such as chain stores providing televisions, computers or stereos are approved for deductions from Centrepay. While utility bills account for about one-third of Centrepay deductions for 600,000 Centrelink clients, consumer leases have risen to account for 14 per cent of deductions. But the statistics mask the damage to people's lives brought about by these consumer lease payments, as their meagre government payments get eaten up by high interest payments which can make the price of goods being used more than double their retail price—or in fact seven, almost eight, times the retail price.

I acknowledge the concerns that have been expressed by government senators—including Senator Ruston, who is in the chamber—saying that we should not be treating Centrelink clients any differently to other Australians. I agree with Senator Ruston that Centrepay should not be used as a form of mandatory income management. Centrepay is voluntary and will continue to be so—but with a clear purpose. Centrepay was always designed to be an effective way to ensure that essential items like electricity and rent could be paid for by some of the poorest people in our community. This bill should be seen as a prudent measure to safeguard people's social security benefits—funds that should not be flowing in increasing amounts via exorbitant interest payments to consumer lease providers. I note that Centrepay cannot be used for the repayment of credit card debt or any other kind of consumer credit. But these rent-to-pay agreements are a loophole. They are a rort that is occurring. In the same way, I believe, consumer leases should also be excluded. This bill will ensure that it continues to be used for that purpose. That is why I will be supporting it. I commend Senator Cameron for bringing this bill. We need reform sooner rather than later, and this bill is a very good vehicle for that.

Christopher Back (WA, Liberal Party) Share this | Link to this | Hansard source

I want to comment on the Social Security (Administration) Amendment (Consumer Lease Exclusion) Bill 2015 as proposed by Senator Cameron. And I want to record that I am in absolute lock step with Senator Cameron in his motivation behind presenting this bill before this chamber. I sense that the dialogue in the discussion by others is in accord with that. I say that because in this society people who would try to use their influence, their retail capacity, their expertise or their marketing to prey on those who simply cannot afford the type of product or service that these people are trying to peddle are parasites. If legislation needs to be put into place to exclude these people, to expose them, to out them, then I am absolutely in agreement with that. I am, as many in this chamber have been and maybe still are, associated with organisations such as St Vincent de Paul, Anglicare, the Salvation Army and other non-government organisations associated with people who are in need, often financial need. I say very strongly that the motivation behind Senator Cameron's bill is to be applauded.

However, as has been pointed out by my colleagues, and as I will in the brief time available to me point out, if by passing Senator Cameron's bill we actually place vulnerable people at greater risk rather than less risk, then Senator Cameron's noble objectives will not have been met. That is the concern I have. We know the objective of Centrepay. It is to assist customers in managing their expenses—expenses that are consistent with the purposes of their welfare payments—to reduce the financial risk to them, to provide them with a facility that will allow regular deductions to be made from their welfare payments that will still leave them with adequate resources to lead a fulfilling life, to look after their families and to look after their own wellbeing.

Whether Senator Cameron's bill has been the catalyst or not I do not know. As Senator Xenophon has just said, if the dialogue that we have in this place today leads to further improvements to make the administration of this process better, then I certainly concur that Senator Cameron's time will have been well spent. But, as has been pointed out, some of the elements within the bill will actually put these worthy people at greater risk rather than less risk. For example, if we exclude under the Centrepay arrangements the consumer lease for goods that are regulated now, what will probably happen is that people will go outside the system, where they will be vulnerable to these people whom I refer to as parasites—people who would prey on those whom they very well know are, for whatever reason, unable to afford what it is they are trying to sell them, often at inflated prices. Those who are on income management may use a cash component, for example, to purchase when they could have used, under a properly structured process, the Centrepay mechanism. If it encourages them to go and purchase unregulated goods, then nobody is better for this process.

Why do people often find themselves in these circumstances? I refer back to the comments of my colleague Senator Fawcett, and that is that we know there are instances in which adults are illiterate. Therefore, giving them written information about the risks or the opportunities associated with either lease or purchase or other means of acquiring products is meaningless, because they simply do not understand them. There are other people who, for whatever reason, may at some time in their past have had the necessary skills to manage their money but for various reasons may not now be in that position. I guess that is where the Centrepay system comes into its own.

What are some of the services that are included under the regulated category? Very briefly, they are accommodation services; education and employment; health; finance, particularly that associated with community group loans; legal and professional services, if they are required, such as court fines; travel and transport; motor vehicle registration, associated with the good conduct of their family and often used to obtain and then arrive for work; utilities; and the council services, such as electricity et cetera. And then there are of course these household goods that are more the subject of the consumer lease exclusion about which Senator Cameron spoke. I also want to talk about household goods lease and rental, which is the subject of our discussion, and provision of food, home care and trade services. What is excluded? Rental or lease payments for goods where the consumer lease is not regulated under the national Consumer Credit Protection Act. And then there are payments made to a broker, an arranger—a person who acts as a middleman, who, I say again, parasitises that process—rather than the provider of the Centrepay-approved good or service. Also excluded are short-term loan repayments to cash lenders, payday lenders and pawn brokers. These are excluded and of course unable to be used.

I want to refer for a moment to the relationship between the department that has oversight and ASIC. As we know, ASIC is the party responsible for the regulation of consumer leases. It falls then to ASIC to ensure the good and proper activity of retailers and others under the regulated process. As has been pointed out, it is ASIC's role to enforce compliance, for example. I am pleased to learn that even this year there have been retail organisations that have been named, shamed and, more importantly, excluded from offering the regulated products which in ASIC's view they have abused. They are excluded for periods of time, which are clearly punitive, and put on notice that if they were to continue that activity they would not be able to offer the regulated goods through this process.

It is my view that Senator Cameron's motivations are quite correct. But if his bill is enacted, it will be welfare recipients on income management who would not be able to pay for any consumer lease obligations, whether regulated or unregulated, using their income-managed funds. There is also the associated risk of them using the cash component to engage in the sorts of activities that Senator Cameron is alerting us to, placing vulnerable people in financial distress—which is exactly what income management was designed to avoid.

We know that there are mechanisms other than leasing. There may be no- or low-interest loans through philanthropic and other organisations. There may be lay-by. There may be the opportunity to obtain a necessary product by alternative means. It was interesting to listen to the comments made by Senator Sinodinos and Senator Xenophon in relation to the excellent work of Muhammad Yunus and others who have followed him in relation to microfinancing. It is worth recording that the bad-debt rate from microfinance loans to deserving people, particularly deserving women, in countries like Pakistan, India and Malaysia, is, as I understand it and in my experience, infinitely lower than in the wider banking system. These loans give these people the opportunity to improve their lot, to start a small business and to work their way out of that cycle of poverty.

I applaud Senator Cameron for his motivation in introducing this bill. I concur with him about the concern he raises about the most vulnerable people, who need to be protected from the activities of those who would undo them. But the measures that have been undertaken by the government and the department, with the involvement of ASIC and ACCC, are the way to go. We do not want to throw the baby out with the bathwater.

Doug Cameron (NSW, Australian Labor Party, Shadow Minister for Human Services) Share this | Link to this | Hansard source

I must say that I am still trying to recover from some of the speeches this morning, where those opposite actually praised my motivation! It is a highly unusual approach from those opposite. But when you get the chance, you should take it the way it was meant!

I want to deal with some of the technical issues that have been raised in relation to my private senator's bill, the Social Security (Administration) Amendment (Consumer Lease Exclusion) Bill 2015. One of the issues that this debate has clearly demonstrated is that there is no legislative base for Centrepay. Centrepay is regulated by the policy and terms determined by the Department of Human Services, and those policy and terms can be changed by the secretary—obviously in consultation with the minister. Given that a number of coalition senators who participated in the debate raised this issue, I want to place on record now that the opposition would be amenable and supportive of sitting down with the minister and the government to develop a proper legislative base for what is one of the most successful programs for many years. It is a successful program that does good things. What I am concerned about is the misuse of Centrepay by some of the most unscrupulous business people in the country.

I do not think the policy and terms of such a wide-ranging, important program, that is worth $3 billion—that is the amount of money going through this program—and which is accessed by 600,000 citizens, should simply be left to the secretary of the department to determine in consultation with the minister. There has always been a bipartisan approach to Centrepay, and I think that bipartisan approach should continue by sitting down and looking at the legislative base to see how we can protect all citizens who access Centrepay and make sure that the rip-off merchants do not get their claws into people who are doing it tough.

I might be one of the few sitting in the Senate who have used a consumer lease. Many years ago when I was involved in a pretty tough industrial scene in the Hunter Valley and at the electricity commission I had a single income. For one year I earned $8,000. That was my total income for the year. We were in all sorts of strife trying to pay our mortgage and put food on the table for our kids. We were desperate at the time for a fridge, I think it was. A leaflet came through that made it look so easy. I made a mistake: I got the fridge and I paid through the nose for it.

Again, I am one of the few here who has, from time to time, battled to put food on their family's table, because of having a single income, being a blue-collar worker and doing it really tough, so I know from personal experience what this means. At the end of a three-year or four-year lease, you think, 'Why did I do that? Why didn't someone advise me that this was the wrong thing to do? Why did I, in a moment of weakness, get caught up in this web of business process that leaves me much worse off at the end?' I do come to this from some experience. It would probably have been over 30 years ago when I was in that position. I understand that many people would be in that position.

A company, rent4keeps, sets up their pop-up business in the middle of a shopping centre in Penrith, where I still shop, targeting single mums and low-socioeconomic families. Surely the lessons that individuals like myself learnt all those years ago and the lessons that society should have learnt should be put in place and people should not be hunted down by these jackals in their smart suits who tell people on welfare that everything is okay if you pay four or five times the price for a consumer good. We have an obligation to expose that and we have an obligation to deal with it. I looked at this some time ago. Rent4keeps did not target me because I was not in the age demographic that they were looking for. I asked for the leaflet, got the leaflet and looked up their website. On the website I did the calculation for a couple of the goods that they had. One was, I think, a Hisense flat screen, fairly big television. You could pick it up for about 900 bucks. I did the calculation of what it would cost from rent4keeps over four years and it came to $5,700. This is a TV you could get for 900 bucks at Harvey Norman. You could probably get it cheaper if you went online.

There are a number of options for the young people who are getting caught up in this. Even credit cards, which are regulated, would be cheaper than rent4keeps, and we all know about the problems with getting into the credit card cycle of poverty, so that is even worse. We have regulated payday loans and payday lenders, and yet what we are finding now is that a lot of the payday lenders are moving from payday lending to consumer leasing, because consumer leasing is the next way that is unregulated to rip citizens of this country off, and I think the Senate has an obligation to deal with that.

I looked at the rent4keeps website, as I have indicated, and there were plenty of examples of why nobody should ever go near them. They are also letterboxing the Housing Commission areas in Penrith. Their stuff looks pretty flash. They have a happy, smiling family getting all the consumer goods that wealth brings, yet these people are not wealthy. It is not just in areas like Penrith; they are targeting Indigenous communities. We must say, 'Enough is enough.' We must do that. Why are some people doing this? On their website, rent4keeps say, 'Set a franchise up with us. We've got 100 operating franchises around the country'—and, remember, this is one of the minor players. They have 'numerous exciting and profitable "lifestyle friendly" franchise opportunities'. I will tell you: it is not lifestyle friendly if you are a citizen they have their claws in. There is no friendly lifestyle for them. They say:

If you enjoy being busy and having a business you can run, that does not run you, then maybe R4K is worth a look.

So they are saying, 'Hey, there's a great business opportunity here. Let's do it.' And they say:

No wonder it is very profitable when they are getting four and sometimes five times the price of the consumer good, paid through some poor citizen who is being screwed by the company. They say:

You have no big overheads like we hear in some of the arguments: 'You have to increase the cost of the consumer good because you've got overheads.' This company is saying, 'That ain't an issue. You can run this from home.' They go on to say:

Again, there is the argument: 'If you've got to invest in your business, you've got to get a return.' They are saying it is really affordable and that you could do it easily. Here are the kickers:

So it is all upside for the people who are getting their claws into the poorest people in this country and it is all downside once citizens have rent4keeps and Radio Rentals claws in them. This is a huge issue in my view that has to be dealt with.

Another argument that we have heard is that the government are moving on this issue. The government made an announcement back in May 2015 after this issue was becoming public and Labor had made some comments on it. The government said they would 'restrict the type of consumer leases that consumers can pay for using Centrepay payments.' They went on to say:

... leases that run for an indefinite period, or have a duration of four months or less, will be excluded from Centrepay ...

That did not deal with the fundamental issue that these consumer leases are still readily available under Centrepay. They said that the Department of Human Services would work with Treasury and key stakeholders to review the policy and whether you would disclose the effect of interest rate by Centrepay registered providers. If people in trouble think that Centrepay is available to do this, they will think that there is some government support for this.

I do not think that we should be giving any impression that we support Radio Rentals, rent4keeps or Rent the Roo. Some of these companies have been before ASIC and have been fined in the Federal Court and are then still part of Centrepay. Why should we be allowing that to happen? If there is one thing that this Senate should be doing it is protecting those that cannot protect themselves. That is what we should be doing.

Minister Payne said that there will be 'links to ASIC's MoneySmart website'. I can imagine the poor person down in the housing commission house will be thinking, 'I'd better go and have a look at the ASIC website to see what they say about this mob that are telling me I should pay four times the amount for the consumer goods.' Funeral insurance would be excluded, which has been a rip-off. Minister Payne also said that there would be:

…increased cooperation between the department and consumer protection regulators.

In my view—and I will not be unkind to Senator Payne—that was the smokescreen the government put up to try to avoid dealing with the fundamental issue that citizens in this country were mercilessly being ripped off, and the government at that stage was not prepared to do anything about it. That is why my bill was put forward, and I am glad to say that it was supported within the caucus of the Labor Party. It is an important way forward.

Then the kicker really comes in Senator Payne's press release. She says:

While customers may still use Centrepay for regulated consumer leases—

'regulated consumer leases'—there is no regulation on whether they charge you 400 or 500 or 600 per cent, so I do not know where this regulation comes in—

I would encourage people to carefully read the fine print and consider all of their options.

Senator Payne does recognise that there is a big problem here that should be fixed. That problem could easily have been fixed if the minister and the secretary of the department had sat down and changed the policy and terms to exclude the rip-off merchants using Centrepay—Radio Rentals, Rent the Roos, rent4keeps, and I could go on and on. All these people are making masses of profit at the expense of the poorest citizens in our country.

I say it is important that this bill passes in the Senate. It is important to send the message to the rip-off merchants in our community that this Senate does not support the rip-off of the poorest people in this country, and this bill is the first step. I would call on the government to look at the bill in the House of Representatives and pass the bill in the House of Representatives as well because that will send a clear and unequivocal message to the rip-off merchants in our community that we will not allow them to use a government department to facilitate their rip-offs, because that is what is happening. I have heard the arguments that people should have a choice. This bill does not stop anyone going into rent4keeps or Radio Rentals or Rent the Roo and getting a bank deduction and being ripped off. I say that should be looked at by Mr Frydenberg in the other place to make sure that we put a limit on those rip-offs and we stop these rip-offs, but my view is that we should pass this bill to send a clear message to the rip-off merchants that the game is up.

Radio Rentals run almost half of their consumer lease business through Centrepay. A recent analysis said that Radio Rental's business model was unsustainable because of its rip-off nature. It is a subprime approach to people in this country. When an analysis was done and when Radio Rentals made some comment to the stock exchange about what these Centrepay changes that the government had put in place would mean for them, they said that it would mean nothing to their profits, it would mean nothing for the business model. So the rip-offs continue. With all the arguments that we have heard from those opposite—that the government moved on this, that the government made these changes to stop poor people ripped off—Radio Rentals say that it did not have one effect on them at all. The rip-offs continue.

We need to be clear about what this bill is about: stopping the rip-offs and making sure that people are treated fairly. This is supported. I convened a round table of welfare groups back in March. At that round table there was overwhelming support to do something about this because the welfare groups—the St Vincent de Paul, the Smith Family and the various faith-based support groups—are the ones who are picking up the pieces on this. I did an interview this morning on FIVEaa with Leon Byner. He asked people to ring in after I had said we should stop this. Seven people rang in. Six of them gave practical examples of how their families had been left in a terrible position as a result of using consumer leases. Only one came in and said it was okay, and my view was that they were someone from the industry.

I commend this bill. I ask the Senate to support this bill. It is about protecting the most vulnerable in the community.

Gavin Marshall (Victoria, Deputy-President) Share this | Link to this | Hansard source

The question is that this bill be read a second time.