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

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

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

It's worth having a think about how Centrepay works. It was established back in 1998 as a budgeting and financial capability tool to assist clients of what was then known as Centrelink, now Services Australia, by paying rent and utility bills through automatic deductions from their welfare payments. More than 600,000 people use Centrepay to pay bills, rent and ongoing expenses. But the proliferation of consumer-leasing businesses as approved Centrepay service providers is contrary to the rationale of Centrepay, which was to enable people to budget and ensure that regular bills and essential living expenses were paid directly from their welfare payment.

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

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

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

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

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

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

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

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

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

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

Rachel Siewert (WA, Australian Greens) Share this | Link to this | Hansard source

I rise to make a contribution to the Social Security (Administration) Amendment (Protecting Consumers from Predatory Leasing Practices) Bill 2020. This bill is necessary because the government have failed to act. They have failed to take the necessary measures to protect low-income and financially vulnerable Australians from these predatory practices. This bill provides that the secretary may not make any deductions requested by a person from their social security payments if the deductions relate to goods hired under a consumer lease entered into by that person.

Centrepay was set up to help people receiving income support payments to pay their rent and essential bills through automatic deductions from their payments. This has clearly been abused by consumer lease providers in predatory lending practices. It has been reported on in this place, in committee inquiries and through a range of community service organisations who see their clients impacted, or adversely affected, by these predatory practices. The government won't act. In this case, it's up to Labor, which has brought this bill, to act. We have also raised this issue many, many times. It's absolutely outrageous that Services Australia—and, before that, the Department of Human Services—have not used their powers to ensure that these practices are not continued. It's very, very clear that these predatory companies are deliberately targeting vulnerable Australians on income support knowing very well that Centrepay will prioritise their payment. So it's a guaranteed source of income at absolutely outrageous interest rates. Centrepay should not be used to facilitate these appalling practices.

We know that there are many Australians on income support payments who suffer financial harm after entering into consumer leases that deduct payments through Centrepay. When consumer lease providers are able to access individuals' income support payments via Centrepay, this often results in significant financial harm. People are locked into high-cost, low-value products, which expose consumers to an unacceptable risk of financial stress or exploitation. Consumer lease providers often employ predatory tactics to target vulnerable Australians who are doing it tough, particularly financially. Consumer leases come with huge fees and interest rates that often exacerbate financial hardship. For example, a consumer lease for a baby cot and mattress from Direct Appliance Rentals costs $4,368 over 24 months, compared to only $1,487 if purchased direct from the retailer. That's nearly three times the cash price of goods—all payable via Centrepay, apparently with no questions asked by Services Australia. That's fine—no questions asked. This means that payments are made before income reaches the person's bank account. Nobody should be forced to prioritise repayments for expensive consumer leases ahead of paying for essentials like food and housing.

The Consumer Action Law Centre have witnessed consumer lease providers restart Centrepay deductions after consumers have cancelled payments without obtaining the customer's consent. They have also assisted consumers who have suffered harassment as a result of cancelling deductions, or who have had consumer lease providers continue to deduct payments through Centrepay after the relevant contracts have finished. How is that possible? Where is Services Australia? They are negligent in regard to this issue. It's been raised time and time again in this chamber and, as I said, in committee inquiries and in estimates. We were told this wasn't happening anymore; they were going to take care of it. Clearly, they have not taken care of it. The Commonwealth Ombudsman recently agreed with complaints brought forward by the Consumer Action Law Centre that Services Australia weren't adequately enforcing their own policies against consumer lease providers.

You have to ask why. Is it just because they haven't got enough staff that are able to do this—to provide this sort of oversight and to ensure that the rip-offs of people aren't happening? Or is it because they're turning a blind eye to these sorts of outrageous lending practices? This bill is necessary because Services Australia has failed—again and again and again—to respond to breaches of its own policies by consumer lease providers, therefore leaving vulnerable Australians open to exploitation. In other words, a government department is basically facilitating these rip-offs. By failing to implement their own policies, they are facilitating the rip-off, on a massive scale, of vulnerable Australians trying to survive on income support, and we all know how poor—outside of the COVID supplement—these payments are.

Centrepay access is not needed by people to obtain household goods through consumer leases, as there are other payment options available that enable people to make regular payments. If consumer leases were removed from Centrepay, people would still have the option of paying for their goods by direct debit, credit card, bank transfer, POLi or signing for fee-free basic bank accounts that do not charge default or overdraft fees. They can also apply for an interest-free loan. These are options that are obviously not explained by these consumer lease providers when they are trying to flog people these products. Because they know that if they go through Centrepay, they're not going to get pinged by Services Australia, and they can simply rip these customers off by three times—or, as we heard earlier from Senator McAllister—up to eight times the fees. These are appalling practices, and, if the government were doing the right thing, we wouldn't need to be standing in this chamber talking about it time and time again—if Services Australia were doing the job it's supposed to be doing. I think they forget that, actually, their job is to help vulnerable Australians, not to facilitate rip-offs.

The Greens support this bill. We think it's way past time that people on income support were protected from these predatory practices. It is appalling that action has not been taken earlier on this issue.

Tim Ayres (NSW, Australian Labor Party) Share this | Link to this | Hansard source

I'm very happy to support the Social Security (Administration) Amendment (Protecting Consumers from Predatory Leasing Practices) Bill 2020. I'm very pleased that Senator McAllister has introduced it into this place, and I only wish that the government would either support the bill or act to deal with the exploitation that Services Australia is facilitating.

Centrepay is designed and was originally set up to help low-income people manage their finances, not to facilitate the mining of profits from the household incomes of some of the most vulnerable people in Australia. More than 600,000 Australians use Centrepay to pay bills, rent and ongoing expenses through automatic deductions. It's a sound proposition, but it has been open to access by businesses whose products—particularly consumer leases—disadvantage consumers and have the potential to cause great harm to Australian families who should have the government's support. About 10 per cent of payments made through Centrepay are for consumer leases. One dollar in every $10 goes to these operations, which largely exploit vulnerable Australians. Consumer leases are an underacknowledged, underregulated and misunderstood cousin of payday loans. They're marketed to the same people—poor people struggling to get by—and they make their money from the same ruthless exploitation. Consumer leases are subject to responsible lending obligations, but there's no maximum cost of a consumer lease. Almost every time, the consumer will pay far more than the cash value of the goods.

Services Australia clients are sometimes subject to exorbitant interest charges—in some cases over 800 per cent—and Services Australia says, 'There's nothing to see here.' They sign off on these propositions and allow the money to be deducted out of people's accounts without a second look. ASIC has found that household goods leased from rent-to-buy businesses can cost nearly nine times the retail price of the same goods. With every consumer lease payment arranged through Centrepay, the government effectively endorses these practices. Our social security system should be supporting people, not endorsing a business model that creates poverty traps that many ordinary Australians can't find their way out of. The government is facilitating predatory lending and leasing practices that rip away money and take food off the kitchen tables of some of our most vulnerable families.

This bill would ensure that Centrepay is prospectively closed to consumer leasing companies for the same reasons that Centrepay is closed to payday lenders. There are safer payment options. They include no-interest loans from microfinance organisations. There are other payment services that are better regulated to avoid poverty traps, direct debit arrangements, credit card arrangements and bank transfer arrangements, all designed to support people making large purchases from a low-income base without being ripped off by predatory interest rates.

A similar bill to ban Centrepay for consumer leases, which was introduced by my predecessor Senator Doug Cameron in 2015, was the only private member's bill to pass the Senate in the 44th Parliament, with every crossbench vote. During that debate, coalition senators consistently said that there was no need for such a bill because their government was working with regulators and the Department of Human Services to stop exploitative consumer leases. Five years later, contracts continue to be signed and they continue to get the stamp of approval from the Morrison government. Five years later, the government simply haven't done enough. They are always on the side of big banks, not on the side of ordinary people. In this case, they are always on the side of some of the most predatory, unscrupulous operators in the market and never on the side of low-income families.

We have consistently advocated on this side for greater protections for consumers in response to consistent concerns about improper behaviour by consumer lease providers and payday lenders. I want to congratulate Senator Jenny McAllister for bringing this bill to this place and for doing the work that's required: talking to the advocacy organisations, talking to ordinary Australians and talking to people in the finance sector to develop a bill that's capable of resolving the problem that is so manifest for so many hundreds of thousands of Australians.

During debate on the 2015 private member's bill to close the Centrepay loophole, Senator Ruston, now a minister, said this:

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.

What a hypocrite! That's exactly what the government does when it comes to other legislation that's before this house this week. In government senators' dissenting report to the Senate Economics References Committee report Credit and financial services targeted at Australians at risk of financial hardship, Senator Hume said:

Coalition Senators wish to emphasise that Centrepay is free and voluntary. It helps individuals to budget, and people can start, change or cancel their Centrepay deductions at any time.

Well, choices don't exist in a vacuum. Desperate people and low-income families are not free to choose between feeding their children or buying their children's school uniforms and paying off a predatory consumer lease arrangement.

Consider that, when the coronavirus pandemic hit, the payday lenders were certainly ready. By April, they were sending text messages to potential customers. One of the text messages said:

Need a COVID-19 relief loan? Fast cash loan paid in 15 Min*. No Credit Check!

In testimony to the Senate COVID committee, ASIC commissioner Sean Hughes said:

… when we get to what is being referred to colloquially as 'the cliff' at the end of the various support programs, we think there will likely be an increase in utilisation of those payday lending programs.

So it goes for these consumer lease programs. There are already millions of Australians in deep financial trouble on this government's watch. A million Australians are unemployed—we'll peak at eight per cent next year; 2.4 million Australians are unemployed or underemployed; wage growth has stalled for the life of this government, not just this year but at historic lows for the life of this government; and the wage share of national income is at record lows. Last week, an ANU study found:

Australian workers lost a total of $47bn in wages in the first eight months of the Covid-19 recession …

In particular, the recession has hurt those who completed year 12 but who do not have a university degree, workers born in non-English-speaking countries and older Australians. Are these people really free to make voluntary financial decisions? Look at the early access superannuation scheme, much trumpeted by the government in their vain effort to undermine industry superannuation. APRA's data from 22 November shows that 3.4 million Australians applied to the government's early release super scheme—their average release was $8,400—and 1.4 million Australians applied for a repeat amount, and their average release was $7,400. The total amount of money released was $35½ billion. Treasury estimates that this will rise to $42 billion by the end of the year. Note for comparison that the 2020-21 budget has only $25 billion in direct COVID-19 support measures, according to KPMG.

After taking into account inflation and the cost of living, a 25-year-old who withdraws $20,000 will be between $80,000 and $100,000 worse off in retirement. A 35-year-old who withdraws $20,000 will be at least $65,000 worse off. A total of 590,000 superannuation accounts have been drained to zero. Almost all were those of workers under 35. Senator Hume said, 'For many people who've made that decision, they know that there's a trade off, but they have made the decision to take that money today because they need to pay bills and pay down their mortgages.' It's a choice she will never have to make, a choice she is incapable of understanding. She went on to say, 'That might be a better financial decision for their personal balance sheet to take that money today rather than lock it up for the future.' It's free, it's voluntary but it's robbing Australians, especially young Australians, of a decent retirement to serve the ideological interests of those opposite.

The Liberal Party is incapable of understanding the position that low-income families are in and incapable of understanding the choices that they must make day to day, and what those opposite are doing every step of the way is making those choices harder and pushing people on a sort of 'path determinacy' towards more poverty, less resources, fewer choices and more misery for low-income families.

The people opposite only understand the economy from the perspective of financial services that prey upon poor people, and that's what they're here to represent in this chamber. That's why they voted 26 times to oppose the banking royal commission. Always on the side of the big banks, never on the side of ordinary people, in this case they are on the side of some of the worst creatures in Australian financial services, the people who make ordinary working-class low-income Australians pay eight times the value of a consumer good and rip that money out of people's pockets, facilitated by the government. When confronted with the banking royal commission, the then Treasurer, now Prime Minister, said it was nothing more than a populist whinge. He went on to say that the Labor Party was playing reckless political games with one of the core pillars of our economy. He said the only product of that approach could be to undermine confidence in the banking and financial system. What hypocrisy from the guy who was out there after the banking royal commission waving his finger and tut-tutting. The real approach of this government has never been to be on the side of ordinary Australians. It's why they are so determined to abolish responsible lending obligation laws, introduced by Labor after the GFC, which will free up banks to aggressively push credit onto their customers.

As I said before, what Minister Ruston had to say about the Centrepay loophole was:

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.

What hypocrisy! The coalition believes that vulnerable people deserve the right to be targeted by banks, to be ripped off by consumer loans and to be forced to drain their superannuation accounts in order to get through the recession, but not to conduct the basic transactions of everyday life.

There's robodebt—a project that Scott Morrison introduced as social services minister, made a centrepiece of in his budgets as Treasurer and has failed to take responsibility for as Prime Minister. Total debts are $721 million, with 470,000 of them and 370,000 people affected. Not only do the coalition support dodgy financial schemes that prey on the poorest Australians; they created one, and it was illegal. The current line that income averaging was the issue is a fig leaf for a system that forced Centrelink recipients to prove they didn't have a debt, not the other way round. It caused immense suffering family by family—370,000 families—immense suffering.

In Steinbeck's TheGrapes of Wrath two tenant farmers debate the nature of the bank that is about to kick them off their farms. How can an institution designed by and maintained by people perform such inhuman acts? They say:

The bank is something else than men. It happens that every man in a bank hates what the bank does, and yet the bank does it. The bank is something more than men, I tell you. It's the monster. Men made it, but they can't control it.

There is something similarly cruel in the logic of this government's approach to low-income families and, in this case, consumer leasing arrangements. They have made an arrangement that makes poor people poorer and reduces their choices. What they should do is unmake it. They should support this legislation or do something to remove this cruel practice from Australian financial life.

Sarah Henderson (Victoria, Liberal Party) Share this | Link to this | Hansard source

It's my pleasure to rise and speak on the Social Security (Administration) Amendment (Protecting Consumers from Predatory Leasing Practices) Bill 2020. Before I speak about this bill, I just want to make some general responses to Senator Ayres's contribution, which I found to be highly offensive and which wholly misrepresented the government's actions that it has taken in so many respects to protect low-income earners across this country. We actually, in this country, have one of the most generous welfare systems in the world. Senator Ayres's attempts to misrepresent the fine work of our government in caring for those who most need our help is most offensive. There was even a ridiculous comment about 'draining superannuation accounts' when we have given Australians the ability to take some of their superannuation during this shocking year, the year of the coronavirus pandemic—and this has been highly welcomed by so many Australians. I'm not going to stand here and accept Labor's attempts to set up some sort of class warfare. I am incredibly proud of our government's work to support low-income earners, particularly when I look at the work of this government this year: JobSeeker, JobKeeper, JobTrainer—the most massive amount of investment in Australians to get them through the coronavirus pandemic, in excess of $500 billion. We have stepped up, and we have stood side by side with all Australians during this very difficult year. It is quite telling that Senator Ayres never actually mentioned any of this in his contribution.

I want to explain the reasons why the government does not support this private member's bill that is before the Senate this morning. If this bill were passed, it would impact Centrelink customers who want to use consumer leases and who want to use Centrepay as their preferred method of payment. To give a couple of facts, currently there are 94,000 customers, or 14 per cent of customers, who use Centrepay to manage the purchase of goods using consumer leases. The value of Centrepay deductions for consumer leases represents nine per cent of all deductions made. It's really important to reiterate that entering into any consumer lease arrangement is voluntary. Using Centrepay to pay for a consumer lease is an important right of all Centrelink recipients. Deductions from a customer's payment via Centrepay can cease at any time, although this does not cease any obligations, of course, under the consumer lease that has been signed. Customers have to provide informed consent before a deduction arrangement using Centrepay can be put in place. So there are a whole range of safeguards in relation to attempts to utilise Centrepay in some sort of improper way.

All consumer lease businesses currently accessing Centrepay must have other payment options available, such as BPAY, cash or credit card. To help protect customers and not unduly restrict their access to finance, Centrepay only allows consumer leases covered by the regulatory framework under the National Consumer Credit Protection Act 2009, and that is a point that's not been made properly by those opposite. The regulatory framework is a very important safeguard which requires consumer lease businesses to be licensed and comply with responsible lending obligations overseen by the Australian Securities and Investments Commission, ASIC. Businesses that use Centrepay need to comply and act in accordance with the Centrepay policy and terms, and consumer protection laws.

In 2015, Services Australia made changes to protect customers by removing unregulated consumer lease businesses from Centrepay. Services Australia employs a range of measures to further protect Centrepay customers and ensure businesses meet their obligations under Centrepay terms and conditions, such as ongoing compliance activity and regular monitoring. It's also important to point out that many Centrelink customers have limited access to microfinance. So, if there is an emergency, such as the need to replace a fridge, a Centrelink customer can use consumer leases to address that issue quickly. They can then choose whether and how to make those regular payments using, of course, Centrepay.

The government takes its responsibility to consumers very seriously. Centrepay is a free and voluntary service which allows people to pay bills and expenses as regular deductions from their Centrelink payments. People can start, change or cancel their Centrepay deductions at any time. To help protect customers and not unduly restrict their access to finance, as I've made very clear, there are very important safeguards included in access to Centrepay arrangements. It is a very important bill-paying service to support income support customers. Mostly, the Centrepay mechanism is used for housing and utilities costs, so obviously this is a very, very important scheme.

Since it was introduced in 1999, Centrepay has grown and expanded into more than just a means of paying a bill. In the last five years, 46 per cent of all Centrelink customers have used Centrepay for more than one service reason, suggesting it is actually used as a financial management tool. It's used actively by government and non-government entities, including the likes of state governments for court fine repayments or not-for-profits offering low- and no-interest loans. The categories of goods and services approved for Centrepay include a cost for accommodation, education and employment, health, utilities, household goods, travel and transport, social and recreational purposes, legal and professional services and financial products. So Centrepay is a very important mechanism to assist customers in managing expenses which are consistent with the purpose of welfare payments and which have the effect of reducing financial risk and also supporting financial management.

In the 2019-20 year an average of 648,000 customers per month used the service to make 26 million Centrepay deductions worth $2.76 billion to approximately 14,000 approved businesses. Around 75 per cent of the moneys disbursed through Centrepay are for accommodation and utilities. This is the core foundation of Centrepay—that it is voluntary and designed for regular ongoing deductions. I will also make the very important point that it is since 2001 that consumer leases for household goods have been allowed under Centrepay. It is only in the last couple of years that Labor has decided that this is an issue. For all those years Labor was in power, it never took any appropriate action—one can only assume because it didn't see that there was the need.

In 2015 the then Department of Human Services introduced the new Centrepay policy and terms that excluded unregulated consumer leases for household goods and also funeral insurance. So we understood where Australians were being improperly targeted and we took that action. Unregulated leases are those exempt under the National Consumer Credit Protection Act and are less than four months or indefinite in their duration. Due to the gap in accessibility for some customers to access microfinance and money for emergency, regulated consumer leases remained on Centrepay as a viable option. I think that's really important. This is not necessarily the first port of call. Anyone engaging in any sort of consumer lease does need to be properly informed, and there are appropriate mechanisms to ensure that that happens. But payday lenders, short-term loan repayments to cash lenders, pawnbrokers and buy-now pay-later schemes like Afterpay are excluded from Centrepay and have never had access to Centrepay. That's a really important safeguard. We understand that there are some operators in the market which are predatory and which will try to take advantage of more vulnerable Australians. That's why the likes of payday lenders, short-term loan repayments to cash lenders and pawnbrokers do not have access to Centrepay.

But I'll tell you who does have access to Centrepay: the Good Shepherd Microfinance no-interest loan scheme. It commenced using Centrepay for repayment of these loans in 2001. The Good Shepherd Microfinance scheme is a wonderful scheme. There are also no-interest loans provided by other welfare or not-for-profit organisations like the Salvos or St Vincent de Paul, and they also use Centrepay. So anyone who does need to access low-interest or no-interest loans because of an emergency or because of a dire need should absolutely look to these very credible providers to ensure that they get the best deal in the market.

It's also important to reiterate that Services Australia undertakes assessment of business applications for Centrepay and compliance audits of approved businesses. That's why that category of lenders is excluded. It's because the compliance work is done and we make sure that those safeguards are put in place. Approved businesses must meet and maintain essential criteria. And they're tough; the criteria are tough. The assessment process needs to consider whether the business conducts its operations in a manner that is lawful, ethical and does not take unfair advantage of customers. It needs to consider the past behaviour of the business and the business representatives; information provided by regulatory bodies, consumers, consumer groups or law enforcement agencies; previous dealings with the business; and complaints made against the business. So the bottom line is that where there is a provider which has a poor or dubious record or has engaged in improper conduct—including conduct which may have given rise to issues under the law—then Centrepay will not approve them. But, if there is a credible organisation, why should Australians be denied access to consumer leases and using Centrepay to manage their repayments for those emergency items? Otherwise, many Australians could be placed in a position that is even more vulnerable.

I also want to make the point that, where a business breaches Centrepay policies—including other laws and regulations—the agency will review the business and reconsider its ongoing approval for Centrepay. So, once a Centrepay provider is approved, it doesn't stop there. There is an ongoing obligation to ensure that all businesses which provide a Centrepay option are acting in the best interests of consumers. In the 2019-20 financial year, 326 compliance audits were completed. The Centrepay policy and terms retain the discretion for Services Australia to not approve or to suspend or withdraw the approval of a business if, in its opinion, the business or representatives have not conducted or are not likely to conduct themselves in a lawful manner, have failed to comply with the Centrepay framework or are, obviously, subject to investigation or where other enforcement proceedings are brought against them. They're just some of the reasons. So Services Australia is playing a very important role to safeguard consumers. Those are many of the reasons why the government does not support this bill.

Alex Gallacher (SA, Australian Labor Party) Share this | Link to this | Hansard source

I too would like to make a contribution to the debate on the Social Security (Administration) Amendment (Protecting Consumers from Predatory Leasing Practices) Bill 2020. To take a leaf out of Senator Henderson's book, I'll take exception to some of the comments that have been made from the other side in the same way that she made them about Senator Ayres.

She did manage to reference ASIC. ASIC has found that household goods leased from rent-to-buy businesses can cost nearly nine times the retail price of the same goods. So, in that environment, where you pointed to the regulator and said, 'They're over it; they're across it; people can't go astray here,' the contribution from ASIC is that it's probably going to cost you 800 per cent more if you go down this path of rent to buy.

I think it's really instructive that the other comment was about superannuation and how the government has done everybody an enormous favour by allowing them to access their superannuation early. To be fair, it has given them cash in their pockets today, this week or this month, but it has taken a substantial chunk out of their pockets at retirement. It has reduced the potential lump sum exponentially. It has reduced their retirement expectation exponentially. And, if you're a welfare recipient, it may well have compromised your ability to actually get welfare. If you have a remaining amount in your bank account, that would be listed as an asset and may well complicate your access to Centrelink and the like.

This is a government that had an algorithm and that went out there and punished enormous numbers of people. Indeed, there may even have been some suicides and the like from the pressure that was put on people with the government's algorithm. They backed off and paid $1.2 billion in compensation. Why haven't they got an algorithm to have a bit of a tickle around here and see who is providing the best value for money in this space? I accept that, if it's 40 degrees and you haven't got a fridge, you're going to get one somehow. You're going to rent, borrow or buy one, or perhaps use an untoward means of getting it. If your children haven't got a cold drink of water or milk, you're going to get a fridge. You're not going to sit back and say: 'What is the best way of doing that? Will I get three quotes?' No, you'll get a fridge within a day.

Let's be fair. I have had little experience in this space. I've been encouraged by the contributions of Senator Siewert, Senator McAllister and Senator Pratt to go out and do a bit of digging. If you go and get a briefing from a Centrelink social worker, they'll tell you some really interesting things. I have had briefings in areas of Adelaide which are chronically underprivileged, where there are three generations of unemployed people. One contribution has never, ever gone out of my head. A social worker told me, 'Senator, we're really worried about the grandmothers.' I said 'The grandmothers?' They said, 'Yes, because 16 and 16 makes 32, and we have people here on welfare who are 33 years old and are already grandmothers.' Some of them made a bad decision once, or not a bad decision but a decision that affected their whole life: they had a child at 16. That precluded them from continuing their education or entering into useful work, and sometimes that goes on and on generationally. The social worker said: 'We really worry about the people that are facing another 30 years of Centrelink. They don't make good decisions; they need education.'

I came across a constituent who had had a successful career in business and ended up doing some good work at a bank and at an air services company. When he retired he went and volunteered for the Good Shepherd organisation. He went into homes, examined budgets, gave counselling and pointed the way forward. The no-interest loan scheme is incredibly good. He explained it by saying, 'We look at people's finances and tell them that there are other ways of doing it.' He tells them: 'We need to clear that debt and then you can go and buy the washing machine of your choice, the fridge of your choice and the TV of your choice. But we need to do some really hard work first and we need to get you in a position where you can get a thousand dollars to go out and do a bit of shopping.' He would then say to them: 'Go out into the marketplace but don't commit. Come back to me and we'll have a look at your circumstances, your budget and your situation and we'll try and get you on a path to success.' Some people are very successful at this. They appreciate the experience of learning from their budget, going into the marketplace and getting quotes. There is a great organisation, The Good Guys, that looks at this space and says, 'What everybody else does we'll do better.' They have a relationship with no-interest loan providers. People actually learnt from the experience. They learnt that it was expensive to rent to buy. They learnt that it was expensive in these other areas and they became much more successful and very proud of their own achievements, because they are actually budgeting and making decisions about their life instead of reacting to what was happening in their life.

Full credit to the not-for-profits in this no-interest loan area. This government should be giving them more money. If you are really serious about getting people off welfare, you need to let them control their life, and the key to controlling your life is being able to budget. Even on a meagre subsistence allowance like a Centrelink payment, being able to budget is the key to re-entry to the workforce, re-entry to education and a better life. Let's be fair: these people don't have a lot of support. If they had the family support that I'm fortunate enough to be able to provide or that my son and daughter are fortunate enough to be able to provide, people wouldn't get too far away from education, contribution to the economy and success. But these people are not in that situation. There are areas in Australia, well known, well documented, where people are subsisting.

If this government could take a robodebt attitude and try and bang out big bills all around the country, if it could take a slightly less adventurous but perhaps a more private equity approach and put a small amount of money, even $100 million, into no-interest loans and run an algorithm and see that it is successful, then perhaps it could even rejuvenate some of these areas. What we do know is that, worldwide, women, in particular, are incredibly good and successful at managing small loans. It's been proven in Pakistan, India and many developing countries that, if you give women who have responsibility for children and the family a small amount of money, they will become productive. They can articulate it, work it out and go forward with a reasonable degree of success. Unfortunately, there are many areas in Australia where underprivilege is embedded.

I thought Senator Henderson's contribution, when she referred to ASIC, was hilarious. Isn't it Telstra that's just been found to have used predatory pricing in Indigenous communities? Isn't it Telstra that has been found to have sold mobile phone plans that were incredibly overpriced and disadvantageous to Indigenous Australia? Where's ASIC in that space? Are they having a look? I think it's a free-for-all. I don't accept Senator Henderson's contribution that these people are on the job, looking at protecting Indigenous communities and looking at protecting welfare recipients from predatory behaviour. If it's the case that ASIC has found that these rent-to-buy businesses can charge nearly nine times the retail price for the cost of goods, then the only people who would enter that space are those who are completely vulnerable or completely desperate. No-one would knowingly go and pay nine times the price of an article in the marketplace.

What we've got here is a party that is opposing what I think is quite a sensible proposal to look carefully at who has access to Services Australia clients to make sure that they're not being preyed upon. It's pretty straightforward. It's not rocket science. I'm struggling to understand how anybody could actually support rent-to-buy schemes. It's incredible. If we were really serious about Centrelink and social security recipients, we would be giving them some free financial advice. We would be encouraging more not-for-profits. We should be stacking this area with more finance. We should measure it very carefully to work out exactly what does work: what contribution in what area is capable of moving people onto a better pathway? One of my constituents told me: 'This is really good work. You can get a great deal of satisfaction out of moving people incrementally towards an education pathway or into the workforce through a proper budget in the home. These people want no less than anybody else. I don't blame them for making poor decisions, because, if I didn't have a TV and I was on Centrelink payments and someone said, 'You can have one for seven bucks a week,' I'd be there, just like anybody else would be, and I'd count the cost later.

I think the contribution from the other side is thin. When you look at the superannuation area, people are being told, 'You can have 20,000 grand now,' and those most in need of it will take it. I accept that. But they kick themselves an own goal on a lower lump sum or a lower retirement future. If they do it in as a Centrelink recipient and it reduces their ability to claim a payment—which is a bit of a contest at the moment—they've doubly kicked an own goal. The government doesn't tell them any of that.

In summation, I really do think that everybody should support this area. When you meet social workers at Centrelink and get briefings, you see that people are struggling and they need more help. The help they need is not just another handout; they need to be lifted up the ladder. The help they need is to have a proper household budget, to be able to identify previous mistakes and not make them again, and to be offered no-interest loans to get them into a space that will allow them to take pride in their home, their children and their education. I cannot get the contribution from that social worker in the northern suburbs of Adelaide out of my head. They said: 'We're really worried about the grandmothers, because they face a lifetime on Centrelink payments, never having had a decent education and never having had the opportunity to contribute in a decent job, and all because they arguably made a poor decision when they were very young and vulnerable, or someone made that decision and then abandoned them.'

We've really got to do better in this space, and I don't know why we would argue about a product that can cost nine times an item's value being unsuitable for people who can barely afford to pay for their food, clothing and rent. Why would we argue about that? But we are. We hear the contributions from those on the other side, including Senator Henderson, from whom, frankly, I expected a more considered and more meaningful contribution, because her public persona and reputation is that she's a fair-minded person. The defence of this stuff really intrigues me. To defend it when their own policeman on the job, ASIC, found it can cost nine times an item's value is completely mystifying. I suppose that's politics and that's what keeps this place going round and round, but, if we're going to make a difference in this space, I think we have to be completely innovative.

I'm probably a heretic on my side too, because I don't accept that people should be allowed to live their lives on Centrelink payments. I think there should be some strong responsibilities to the community. I know that if we took a more private equity approach to this space, where we became more adventurous and less risk averse, we would probably move a lot of people off Centrelink payments, and we should move a lot of people off them. We do know, from worldwide experience, that small loans, particularly to women with families, are a very successful way of creating empowerment and creating better educational opportunities and better outcomes financially, because people are intrinsically smart enough and determined enough to feed their families and be successful. My advice to any government would be that you do no-interest loans to get people back to square. You fund that area and get people back on the books, and then you look at moving them, through proper financial advice, proper advice about education and proper advice about how to get into the job market. You'd do that exponentially, because it is no life on Centrelink payments. It isn't a life where you can take a trip away. You're stuck in a repeating cycle of debt and bills to pay from the next contribution. Welfare recipients have fewer decisions in respect of their autonomy and the life that they should be able to lead, because there are no funds to do it.

So my contribution would be: pass this bill and then get to work on making the whole thing better by taking more of a private equity approach. Do some innovative projects in this space, measure how many people you get back into education and back into work, and work at reducing the taxpayer bill in this area, because we can do it if we work collegiately and responsibly together.

Claire Chandler (Tasmania, Liberal Party) Share this | Link to this | Hansard source

I rise to address the Social Security (Administration) Amendment (Protecting Consumers from Predatory Leasing Practices) Bill 2020, which the government will not be supporting today. If passed, this bill would adversely impact Centrelink customers wanting to engage in a consumer lease and prevent them from using Centrepay as their preferred payment method.

As my colleague Senator Henderson has outlined, Centrepay was introduced in 1999 as a bill-paying service to help Australians on income support to pay for housing and utilities costs. Centrepay helps welfare recipients to manage their expenses for priority services and goods and reduces financial risk for clients by allowing for regular deductions to be made from their welfare payments. During 2019-20, an average of 648,000 customers per month used the service to make deductions from their welfare payments to pay their bills. It is important to note that Centrepay can only be used to pay for approved services and to approved businesses. Bill expenses range from accommodation, education and training expenses to health, household utility expenses, transport, legal services and household goods. The vast majority, around 75 per cent, of the deductions made through Centrepay are for accommodation and utilities expenses.

Since 2001, consumer leases for household goods have been allowed under Centrepay. Many Centrelink customers have limited access to microfinance, and the provision since 2001 gives them greater options to make essential household purchases. For example, if an essential household item, such as a fridge or washing machine, breaks down, a Centrelink customer can use consumer leases to purchase a new appliance quickly and easily. The option is available for them to engage in a consumer lease. The Centrelink customer has a choice whether they want to arrange for regular payments for the lease, including if they want to use Centrepay as a way of making payments on their purchase. Deductions for a customer's payment via Centrepay can cease at any time, although this does not cease any obligations under the consumer lease that they have signed.

The inclusion of consumer leases since 2001 has given consumers a viable option to purchase essential household goods when access to microfinance and money may be difficult to secure. There are 94,000 customers who are making use of Centrepay to manage the purchase of their goods using consumer leases, but, as I've said, if passed, this bill we are debating here today would impact those Centrelink customers who want to use consumer leases and who want to use Centrepay as their preferred payment method.

It is important to note that a number of changes have been adopted since 2001 to better protect Centrelink customers using Centrepay. In 2015 new Centrepay policies and terms were introduced by the then Department of Human Services to exclude unregulated consumer leases for household goods and funeral insurance. In early 2017 all unregulated leases were removed from Centrepay. To help protect consumers and not unduly restrict their access to finance, Centrepay only allows consumer leases covered by the regulatory framework under the National Consumer Credit Protection Act 2009.

The regulatory framework requires consumer lease businesses to be licensed and to comply with responsible lending obligations overseen by the Australian Securities and Investments Commission, or ASIC. Businesses that use Centrepay need to comply and act in accordance with the Centrepay policy and terms and consumer protection laws. As my colleague Senator Henderson said earlier, these are incredibly important safeguards for those Centrelink customers using Centrepay, contrary to what those on the opposition benches might have been contributing in debate this morning.

Services Australia undertakes assessment of business applications for Centrepay and compliance audits of approved businesses. This is another safeguard that is in place regarding this policy. Approved businesses must meet and maintain essential criteria. The assessment process may consider whether the business conducts its operations in a manner that is lawful, ethical and does not take unfair advantage of customers; the past behaviour of the business and business representatives; information provided by regulatory bodies, consumers, consumer groups and law enforcement agencies; previous dealings with the business; and any complaints made against the business. Most identified noncompliance is remedied as part of the review process. If a business is unable to remedy the identified non-compliance concerns in addressing the criteria I've just outlined, they are either partially or fully suspended from the Centrepay program until they comply or until a decision is made by the agency to withdraw their Centrepay approval.

Whilst businesses are required to meet the Centrepay policy and terms they are also regulated through their industry's legislation and relevant regulators, such as ASIC and the Australian Competition and Consumer Commission, or the ACCC, as it is usually known. The agency considers any noncompliance or active investigations with these regulatory bodies and, where notified, will review the business's ongoing approval. Where a business breaches Centrepay policies, including other laws and regulations, the agency will review the business and reconsider its ongoing approval for Centrepay. So again there are some important safeguards in place to ensure that the businesses that Centrelink customers are dealing with under Centrepay are behaving appropriately and are not taking advantage of their customers.

In conclusion, the government takes its responsibilities to consumers very seriously, but this bill proposed by Labor today would only reduce the payment options available to Centrelink customers to pay for household items. This would have an adverse impact on customers where an essential item, such as a fridge or washing machine, needs to be replaced as a matter of urgency. The option to engage in a consumer lease has given consumers a viable option to purchase essential household goods when access to microfinance and other financial money streams may be difficult to secure. The Centrelink customer has a choice as to whether they want to arrange for regular payments for the lease, including if they want to use Centrepay as a way of making payments on their purchase.

As I said, in 2015 new Centrepay policy and terms were introduced which excluded unregulated consumer leases. To help protect customers and not unduly restrict their access to finance, Centrepay only allows consumer leases covered by the regulatory framework under the National Consumer Credit Protection Act 2009. The regulatory framework requires consumer lease businesses to be licensed and comply with responsible lending obligations overseen by ASIC. Services Australia undertakes assessments of business applications for Centrepay and compliance audits of approved businesses. Like I said, the government takes its responsibilities to consumers very seriously, none more so than in the space of Centrepay, where, as I've outlined today and as my colleague Senator Henderson has outlined and as I suspect other colleagues will also detail, there is a strong framework of safeguards in place to ensure that consumers are not taken advantage of and to ensure that this policy process operates in a fair and reasonable way.

But this bill that we're debating here today, the Social Security (Administration) Amendment (Protecting Consumers from Predatory Leasing Practices) Bill 2020, would only reduce the payment options available to Centrelink customers to pay for household items. In effect, it removes choice, and that is something that we, as Liberals, should always be incredibly cognisant of and, I believe, should always seek to protect. So, on that basis, I urge the Senate not to support the bill.

Alex Antic (SA, Liberal Party) Share this | Link to this | Hansard source

I rise to speak in relation the Social Security (Administration) Amendment (Protecting Consumers from Predatory Leasing Practices) Bill 2020. This is a bill that the government does not support. The purpose of this private member's bill, as described in the explanatory memorandum, is purported to be amending:

… the Social Security (Administration) Act 1999 to provide that the department secretary may not make any deductions requested by a person from their social security payments if the deductions relate to goods hired under a consumer lease entered into by the person

But, if passed, the bill would impact Centrelink customers who want to use consumer leases and who want to use Centrepay as their preferred payment method. This bill, in my respectful submission, fits comfortably in the remit of the statement: if it ain't broke, don't fix it.

Centrepay is a free and voluntary service that allows people to pay their bills and expenses as regular deductions from their Centrelink payment to approved businesses. People can start, change or cancel their Centrepay deductions at any time. As we heard earlier this morning, it was introduced in 1999, effectively as a bill-paying service to support customers in paying household and utility costs. As the deduction is taken out before the income support payment is made, the program is designed to reduce the default risk for the customers as well the businesses themselves. It's unique in this respect, compared to other financial products such as, for example, direct debit. Since this time, Centrepay has grown and expanded into more than just a means to pay a bill. In fact, in the last five years, 46 per cent of all Centrepay customers have used the service for more than one service reason, suggesting that it's actually being used as a financial management tool. The categories of goods and services that are approved for Centrepay use include, but are not necessarily limited to: accommodation, education and employment, health, utility costs, household goods, travel and transport costs, social and recreational costs, sometimes legal and professional services costs, and, indeed, the costs of financial products. Around 75 per cent of the monies dispersed through Centrepay are actually for accommodation and utilities.

Payday lenders, short-term repayments and schemes known as buy-now pay-later schemes are actually excluded from Centrepay and have never had access to the scheme. It's important to note that all consumer lease businesses which are actually accessing Centrepay must have other payment options available, such as cash or credit card. Those using Centrepay are not forced to do so. It's actively used by government and non-government entities, such as state governments for matters that include court fine repayments, and sometimes by not-for-profit organisations offering low- and no-interest loans.

We know that there are presently 94,000 customers, or 14 per cent of customers, who use Centrepay to manage the purchase of goods using consumer leases. The value of Centrepay deductions for consumer leases actually represents nine per cent of all of the deductions made under this scheme. Entering into any consumer lease and using Centrepay to make payments due under a consumer lease are, as we've said, voluntary. Deductions from the customer's payment can cease at any time, although this doesn't necessarily cease obligations pursuant to the consumer lease itself. Customers must provide informed consent before a deduction arrangement using Centrepay can actually be put in place. To help protect customers and so as not to unduly restrict access to their finance, Centrepay only allows consumer leases which are covered by the regulatory framework under the National Consumer Credit Protection Act 2009. It requires consumer lease businesses to be properly licensed and to properly comply with responsible lending obligations as overseen by the regulatory body, ASIC, the Australian Securities and Investments Commission.

The history of accessing consumer leases is now 20 years old. Since 2001, consumer leases for household goods have been allowed. On 1 July 2015 the then Department of Human Services introduced a new Centrepay policy and terms which excluded unregulated consumer leases for household goods and funeral insurance. Unregulated leases are those which are exempt from the National Consumer Credit Protection Act and are less than four months or indefinite in duration. By 17 February 2017, all leases that were not regulated were removed from the scheme. Due to the gap in accessibility for some consumers to access microfinance and money for emergencies, regulated consumer leases now remain on Centrepay as a viable option to acquire household goods.

The government takes its responsibility to consumers very, very seriously. While Labor will tell you that this bill helps protect consumers and ensures low-income, vulnerable Australians are not exploited, they seem to have missed the crucial outcome of this bill were it to be passed; that is, the bill would allow for discrimination against people who are currently on Centrelink—individuals who may not otherwise have access to payment terms because of this predicament—or people on lower incomes who may lack a credit rating or have a low credit rating. I'll remind this chamber that, unfortunately, many of those who are recipients of welfare may actually be unable to access some forms of credit, such as credit cards. For many, regulated consumer leasing is one of the very, very few ways to obtain essential household goods in an expedient manner. Often we're talking about very basic, fundamental items like a fridge, a washing machine, a freezer—something of that nature. Any bill that would seek to discriminate and result in the unfair and detrimental treatment of those in our society who are most in need, purely because of their financial predicament, shouldn't be supported.

Labor argues in support of the bill by alleging that Centrepay is being used for the benefit of consumer leases or commercial contracts rather than in the interests of Services Australia customers, but this, of course, ignores the careful scrutiny of businesses taking part in the Centrepay program. Services Australia undertakes an assessment of business applications for Centrepay and compliance audits of approved businesses. Approved businesses have to meet and maintain essential criteria, and the assessment process may, in fact, consider items such as whether the business conducts its operations in a manner that is lawful and ethical and does not take advantage of customers. It must take into consideration the past behaviour of the business and the business's representatives. It has to take into account information provided by regulatory bodies, consumers or consumer groups, or law enforcement agencies, and it has to take into account previous dealings with the business and any complaints that have been made against the business. So this process is beyond rigorous. In the 2019-20 financial year, 326 compliance audits were completed, and most identified that noncompliance is actually remedied as part of the review process. If a business is unable to remedy the identified noncompliance concerns, it is either partially or fully suspended from the program, up to the point at which it complies or a decision is made by the agency to withdraw its approval.

Whilst businesses are required to meet the policy and the terms, they're also regulated through the industry's legislation and relevant regulators such as ASIC or the ACCC. These agencies will consider any noncompliance or active investigations with these regulatory bodies and, when notified, they'll review the business's ongoing approval. Where a business breaches Centrepay policy, including other laws and regulations, the agency reviews the business and, as I've said earlier, reconsiders its ongoing approval for Centrepay.

The policy terms and conditions of Centrepay retain the discretion for Services Australia:

… to not approve, or to withdraw or suspend the approval of a Business if, in the Agency's opinion, any of the following apply:

a. the Business (or its Business Representative) has not conducted, or is unlikely to conduct, its operations in a lawful manner

b. the Business (or its Business Representative) has conducted, or may potentially conduct, its operations in a manner that is unethical, inconsistent with the Centrepay objective or takes unfair advantage of Customers

c. the Business (or its Business Representative) fails to, or is unlikely to, fully comply with the Centrepay Framework

d. making payments to the Business through Centrepay would adversely affect the reputation of the Agency or the Australian Government

e. the Business (or its Business Representative):

i. is under investigation by a Regulatory Body or law enforcement agency

…   …   …

iii. has had enforcement proceedings brought against it …

So there are a range of different approaches and matters to be taken into account by Services Australia. The process is clearly extraordinarily rigorous. Services Australia will refer customers to programs such as the NILS, the No Interest Loan Scheme, or to set up other payment options to purchase. Services Australia staff also refer customers to the relevant support services for financial assistance and counselling.

I remind those in this place that entering any consumer lease arrangement is, as we have said and as some of my colleagues have said earlier today, a voluntary matter, and it wouldn't be for government to interfere unduly with one's personal choice. To do so would not be fitting in a society like ours. There can be little doubt that Centrepay has a proven track record of being a valuable bill-paying service that assists many Centrelink recipients with their ongoing expenses and their ongoing financial management, and as a government it's our view that we should aim to have as little interference in people's lives as possible.

Services Australia has provided targeted messages to Centrepay businesses to remind them of their obligations under this scheme. They remind customers to check their Centrepay deductions regularly. Particularly when there may not be a service at the moment to provide links to manage your money, Services Australia provides useful tools and information. In addition to this, Services Australia operates the Financial Information Service, or FIS, which is there to help Australians make informed decisions about their finances. The FIS, the Financial Information Service, helps people to understand a range of implications, including how financial products work and how they affect government payments. It helps them to understand the results of their decisions in the short term and in the longer term; to prepare for their retirement even while they're still working, which, of course, we know is critical; to access other resources; and to access the details of other groups that can assist.

In conclusion, it is my view—it's the government's view—that the Centrepay scheme must maintain its core features, including the voluntary nature of the program, the issue of consumer consent and the strong focus on the need for essential items in a timely manner in low-income households, such as utilities, essential household goods, as I've said earlier, and white goods. For these reasons and more, the government does not support this bill.

Malcolm Roberts (Queensland, Pauline Hanson's One Nation Party) Share this | Link to this | Hansard source

As a servant to the people of Queensland and Australia, I want to discuss this Social Security (Administration) Amendment (Protecting Consumers from Predatory Leasing Practices) Bill 2020 that aims to put a stop to some predatory lenders. It's a topic new to me and I'm not familiar with it, and on the surface it seems a laudable aim to protect people with disability or cognitive impairment, or who are otherwise disadvantaged. I feel disappointed and sad about predators who lend, taking advantage of vulnerable people. It doesn't meet my need for integrity, fairness and compassion. Yet, while One Nation support the intent of this bill, we do not support the solution. Our office called Senator McAllister's office, and apparently there's been no research regarding the number of predatory lenders; the bill is apparently based on an unsighted ASIC report some years ago, lacking data.

This bill, as other speakers have pointed out, would stop all arrangements in a way that means some worthy and capable people may miss out altogether on necessary goods such as fridges. This bill would therefore disadvantage the people it is designed to protect unless there's a better solution in place. High-risk borrowers—people on low incomes, disadvantaged—mean high risk to lenders. That means high interest rates. In fact, these lenders may be the only alternative some people have. This bill impinges on a person's right to make those arrangements. There are some lenders in these circumstances who are decent people. There are alternatives to funding, and these need to be understood.

In short, this bill is too blunt an instrument. We believe that the issue that this bill attempts to address needs to be addressed through the Treasury, through consumer law. We're expecting that the responsible lending law that the government has circulated in draft form will address this in a better way for all Australians, not just those on Centrelink payments. So we won't be supporting this bill, and we look forward to the government addressing this through the Treasury, with a proper bill based on consumer protection.

Amanda Stoker (Queensland, Liberal Party) Share this | Link to this | Hansard source

I rise to speak in the debate on the Social Security (Administration) Amendment (Protecting Consumers from Predatory Leasing Practices) Bill 2020 that has been put forward by Senator McAllister and her team. The purpose of their bill, as is stated, is to amend the Social Security Act to prevent Centrepay deductions from being made in relation to consumer leases. For those people in the gallery who may not be familiar with consumer leases, they don't relate to property in the real sense. It's not about your house or your apartment. It's about taking out a lease to get yourself a refrigerator or a washing machine—the kinds of appliances that can be really important for people's lives going to plan. They relate to generally smaller sums than the kinds of leases that we associate with real property.

The government doesn't support this bill and, I would suggest, with good reason. It brings into sharp focus the approaches of different parties to some really fundamental issues. We have on the one hand some people in our community who can be vulnerable and who, by reason of their being a recipient of Centrelink payments rather than somebody who is in work, can face some real challenges in meeting all of the expenses they might incur or wish to make in their lives. On the other hand, however, we face the important value that is the right of individuals to choose what they do with their money and to do so without governments telling them what they are and aren't entitled to spend their money on. They are entitled to the opportunity to learn from participation and from experience how to, and whether they wish to, interact with all the different types of items for sale and all the different types of products in the financial space that are available to them.

When we think of financial literacy as being one of the real problems, where people find themselves in something of a cycle of hardship, financial literacy is a really big part of both the problem and the way out. One is more likely to end up in circumstances where they need assistance if they have lower financial literacy, but, at the same time, if we take away the right of all individuals to make choices about what they want to do with their money they are denied the opportunity to build their financial literacy by gradual experience. So we need to make sure that the way we handle this area of law takes into account the need to balance the risk that a person might be exploited by an unscrupulous provider against the really important value that a person should be able to choose and should be able to learn by participation. They are both really important things.

This government has done what I would suggest is a good job of balancing those considerations. Rather than taking away the ability of people to engage in leases or enter into different financial products that might suit their individual needs, despite the fact that they are in receipt of social security assistance, we instead took the step of conducting a detailed review from 2013 to 2015 of the way that these types of products are offered and assisted in their delivery by payment using the Centrepay service. In doing so it was this government, importantly, for the record—not those opposite, who did nothing about it when they were in government, but this government—that knocked off hundreds and hundreds of loan shark like businesses that were indeed unscrupulous in the way they operated in this field. One example that was quite confronting to see was that some of the unscrupulous vendors who have since been pushed out of this system—they have not been able to participate since 2015—would go into Aboriginal communities and sell insurance products, like funeral insurance, to 10-year-old kids. It isn't fair, it isn't sensible and it's not the kind of thing that meets what I would suggest is our sense of right and wrong. The consequence of that review and that process, which I understand was led by both now Minister Payne and now Minister Robert, was that over 1,000 providers that were at that time registered to deliver services that were paid for through Centrepay were kicked out of the system. I think that says something about the rigour that has been applied to this sector.

It is worth turning our minds to this: what exactly is Centrepay? Those people who haven't had the experience of being in receipt of social security benefits may not have come into contact with it. For those listening from home, Centrepay is a free service. It is offered as part of the suite of tools offered by Services Australia, formerly known as the Department of Human Services, to help people who are in receipt of a welfare benefit to manage their money as they grow their financial literacy. The way it works is it allows a person to set up a whole series of direct debits, if they wish—they can use it as many or as few times as they want to. It means that they can set it up so that bills, utilities, rent and the like come out of their Centrelink payment, and then what remains, once all of those important and core expenses of life are taken care of, is deposited into their bank account for use.

Centrepay was created in 1999 and in the last five years it was used, at some point, by 46 per cent of all people who are Centrelink customers. That speaks to something of the need for it and it speaks to its usefulness as people are going through a phase in their lives when they are getting hold of their financial situation and doing what they can to build financial literacy. It means, for those people who use it, that all of the essentials of life are covered before the remainder of the payment is deposited into their account. It's really important for making sure that a person in receipt of social security benefits is able to manage their household budget well.

The categories of goods and services that are covered by Centrepay are quite broad. It can cover accommodation, education and employment, health services, utilities, household goods, travel and transport, even some social and recreational type activities, legal and professional services in some circumstances, and a range of financial products. In the financial year just gone, there was an average of 648,000 customers a month who used the service, and they used it to make 26 million Centrepay deductions worth over $2.76 billion to approximately 14,000 approved businesses. So you can see that it is really quite a widely used service that is important in the lives of many Australians.

Now we're coming up to Christmas, and I think it's worth acknowledging that, for people who are on social security benefits, it can be a time when it's tough to manage your money. Controlling and staying on top of managing your income, particularly when you've got dependants, too, can be really difficult. But Centrepay gives control back to people so that they never miss the fundamentals. They never miss paying rent. They never lose the roof over their heads.

It is the kind of responsible approach to managing money that this government tries to bring to everything. We want to empower people who are in receipt of government assistance—and of course we hope that that will be short-lived; we hope that people will be able to make the transition back into work as soon as possible, as soon as their life circumstances and the job market permits. But we take the approach that it is important to empower people as individuals to make the best possible choices for their own future, because what the best choice is for you to do with your money, Madam Acting Deputy President, might well be different from what is right for me or, indeed, right for every other Australian. We'll all have different priorities and different values, and different things we want to achieve, and it would really be quite arrogant for any government to think that it knows and it should decide what a person is allowed to do with their money. Instead, this voluntary, free service helps people manage the pressure of their competing priorities so that not only do the fundamentals get paid—the rent gets paid, the lights stay on; all that can happen—but also they're able to make some choices for themselves about what they want to do with the rest of their money. The success of Centrepay is really about the fact that it's voluntary.

When we strengthen the help that's available to individuals who are receiving government assistance, who are developing their financial literacy, we are also strengthening that help on the other side by making sure that the system is only able to be accessed by those who participate according to clear and defined rules of the game, which means that the suppliers who receive payments through Centrepay have to comply with quite rigorous standards of auditing. They have to sign up to a code about how they interact with and treat the people from whom they are receiving payments through Centrepay. Importantly, they have to work with them to hear on a regular basis how they can continually deliver better outcomes for customers.

So this is really a program of consumer consent with a focus on the basics. It's entirely consistent with that that a person who finds themselves in a situation where one of the basics they need to operate is on the blink—whether that's a washing machine that they must have as a matter of urgency to get the kids' school uniforms clean and for them to get on with their education, for instance—is able to make decisions for themselves about what works best. Some people will be able to just go down to Harvey Norman and pick up a new machine, but that's not the case for everyone. For someone who can't access microfinance, for instance—that's part of one of the really low- or no-interest programs that already exist—the existence of consumer leases can be a really important resource. And, provided it's done within the bounds of ethics, as this government has sought to make sure is the case by all of the different types of regulated leases that are available, it gets the balance right between giving people choice and making sure they're not exploited. Who are we as a parliament to tell the mother who needs to get uniforms washed for their kids for school so that they can participate in their education for the coming week that, no, they can't go down and get themselves a washing machine on a plan? This isn't a buy-now pay-later arrangement; this is the rental of an item, but it can be just what's needed to fill a hole in a person's laundry, shall we say, but also to help them get through a hole in their budget for the short term. And that is only right.

When a company who is a participant in the Centrepay scheme is found to do the wrong thing, of course this government steps in and boots them off it until they fix whatever it is that's causing problems. The regulatory framework means these types of businesses have to be licensed; they have to comply with responsible lending obligations; they are overseen by a regulator; and this isn't a service that's offered to cash lenders, pawnbrokers or buy-now pay-later schemes. This is really an important part of the services that are available to people who are in receipt of government assistance, and using Centrepay to help them get on top of their expenses is not only a sensible thing but it is the right thing to do, as we—to bring it back to where I began—balance their need to be protected from vulnerability with their need to develop the skills they need for financial literacy through participation and experience in the market as the capable individuals they are.

Scott Ryan (President) Share this | Link to this | Hansard source

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

Scott Ryan (President) Share this | Link to this | Hansard source

As no amendments have been circulated to this bill, unless a senator requests a committee stage, I will progress to calling on the mover of the bill to move the third reading.

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

I move:

That this bill be now read a third time.

Dean Smith (WA, Liberal Party) Share this | Link to this | Hansard source

Mr President, I think there might have been an error in the pairing. Senator Urquhart or Senator Polley might be able to ask that the vote be recommitted.

Scott Ryan (President) Share this | Link to this | Hansard source

I understand practice is that I just need to state a reason and then I can seek leave of the Senate to put a division again, given it was a second reading. Does one of the whips want to make a contribution so I can then seek leave of the Senate to recommit the vote? I understand this is common practice. Senator Bilyk?

Catryna Bilyk (Tasmania, Australian Labor Party) Share this | Link to this | Hansard source

Mr President, if we could, can we recommit the vote?

Scott Ryan (President) Share this | Link to this | Hansard source

I've got consent from both whips to recommit the vote. With the leave of the Senate, I'll put the motion again on the voices. The question is that the bill be read a second time.

Question negatived.