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

I rise to support the bill before the Senate, the National Consumer Credit Protection Amendment (Small Amount Credit Contract and Consumer Lease Reforms) Bill 2019 (No. 2). While this particular piece of legislation is moved by Senator McAllister, it's very important to understand that this is the government's bill—the bill that it hasn't brought forward to this place. It was commissioned by then Assistant Treasurer Mr Frydenberg in August 2015. It was later developed by then Assistant Treasurer Kelly O'Dwyer. She said at the time:

Legislation will be developed subject to the Government's other legislative priorities, but at this stage is expected to be progressed during 2017.

They were heady days indeed. The legislation she developed imposed a ceiling on the total payments that could be made under rent-to-buy schemes. It restricted the amount rental companies and payday lenders could charge customers.

On 23 October 2017 the then Minister for Small Business, Michael McCormack, released the exposure draft, promising:

The Government will introduce legislation this year to implement the SACC and consumer lease reforms.

More than three years later, here it is—the government's bill, word for word. Disgracefully, it's not part of the government's own legislative agenda.

What has taken the government three years to fail to introduce legislation in this area? There is confusion on the other side about whether they are for the shonks or the chancers or the sleazebags in the payday lending area, whether they are for the interests of the banking industry or whether they are for the interests of the high-fee, low-return retail funds. They are completely confused. The one thing we know is that the people who claim to form the government of Australia are never on the side of ordinary people in the area of finance regulation; they are always on the other side of the ledger.

What has the relevant minister been up to that was too important to do this bill? In December 2017 the member for Deakin, Mr Sukkar, took responsibility for this portfolio, and the new Assistant Treasurer was very busy indeed. If media reports are to be believed, Minister Sukkar's staff had previously taken a very close interest in Minister O'Dwyer's affairs, and the affairs of the Liberal Party, in her seat. There was even a Department of Finance investigation into exactly how interested the electorate offices of Mr Sukkar were in the branch affairs of the Liberal Party. Mr Sukkar is the biggest stacker in Victoria. However, the investigation conducted, indeed, by Mr Sukkar's old firm, ultimately found that he'd done no wrong. One could say that the Morrison government's narrow definition of 'the rule of law' prevailed there too.

Despite the member for Deakin's considerable interest in local Liberal Party affairs, he failed to introduce this legislation to the parliament for ideological reasons. As The Australian reported in December 2018:

… the changes have run into opposition from some Liberal backbenchers, who have raised concerns the crackdown imposes too many restrictions on the operation of the free market.

They weren't alone. The Institute of Public Affairs sent a research note—a generous term—to all parliamentarians, criticising the proposed law as 'just more red tape' and 'based on paternalistic assumptions'. And of course there was all of the lobbying by the appliance rental industry and payday loan providers. And the Treasurer was just too busy. The misery that payday loans have created has simply become more entrenched over that period.

Why was the Liberal government prepared to legislate then but not now? In 2017 ASIC had reported instances where some consumers had been charged lease fees equivalent to an interest rate of 884 per cent per annum. One company, Cigno, was particularly notorious. It used a complex company structure to avoid regulators, it charged up to 1,000 per cent interest on the loans that it wrote and it aggressively marketed loans to vulnerable people: single mothers, Indigenous Australians, welfare recipients. There is an important relationship, indeed, between the failures of our welfare system and the payday lending industry.

For Cigno, one opportunity was the introduction of income maintenance in remote Indigenous communities in Western Australia. A community manager in the remote town of Warburton described how it would work. 'The government gives people these key cards to control how much these people spend of their social security payments, but they're rubbish', she said. 'It's hard to pay the bills with them, and they don't work when they need to. Then suddenly you have someone promising to transfer $200 in a couple of hours. That's powerful. So word gets around.'

Here are examples cited by ASIC when they finally shut Cigno down. First is a borrower who was an unemployed Newstart recipient. The loan began at $120 and became a $263 advance because of handling fees. For some people in this place, that's lunch, but for this person $263 is a very significant amount of money indeed. Repayments were set at four fortnightly payments of $66. The borrower immediately defaulted. The total amount owed became $1,189. Another borrower, a DSP recipient living on $850 a fortnight, got loans of $200 and $150. Combined fortnightly payments were $265—completely unconscionable. When he defaulted, the amount owed jumped to $2,630. When ASIC finally announced that they were cracking down, Cigno rebranded. They are still in business, trading as MyFi, completely brazenly, completely without any action from this government.

Normally, economic distress leads to an increase in payday lending, but so far the pandemic has been bad for payday lending. Some estimates have put Cash Converters at 70 per cent of the Australian market share for payday lending. In 2018 alone, they reported a $104 million revenue stream from their loan books, but the pandemic has slowed those rivers of gold mostly coming out of the pockets of poorer Australians. The CEO of Cash Converters said:

Our loan books, the engine room of the Company, finished a combined 24.2% below 30 June 2019 …

ASIC Commissioner Hughes has speculated:

… the reason for that is that borrowers from payday lenders are accessing support from other avenues such as government support programs.

It turns out that, when you make the welfare system livable, people don't take out payday loans. Mr Hughes then told the COVID committee:

… 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.

Of course, the payday lenders are all out there for the cliff. They want to see the end of JobKeeper and JobSeeker, because poverty pays for that industry. And the government is, at best, a bystander.

At the end of this month, the JobSeeker rate will return to below-poverty levels. JobKeeper will end entirely. Not all sectors, industries and communities have been part of the recovery. In December there were still 1½ million workers relying on JobKeeper—10 per cent of the workforce. They are about to be left behind by the Morrison government. The Commonwealth Bank estimates that 110,000 workers will lose their jobs by the end of March; two-thirds will be in what the bank calls high-risk industries: transport, 22,400 job losses; accommodation, 31,000 job losses; arts and recreation, 15,400 job losses. Those workers will now be forced by this government to live on $44 a day and will become victim and prey to exactly the payday lending industry that this government supports and props up.

That economic pain will be concentrated in the regions, which rely on those high-risk sectors for employment. It will be felt in the local businesses that rely on that income being spent in their communities. That means too many Australian families will go back to a position where they cannot afford the basic necessities of life, with no support from this government, no plan for jobs. And, when Australian families are forced to make desperate financial decisions, they will be left at the mercy of an unscrupulous industry that preys upon them. The Morrison government is trapping Australians into poverty.

The Senate inquiry into this bill led to a strange conclusion. Despite the inquiry hearing clear evidence that the current regulation of payday lending is deeply flawed, that the bill's proposed reforms would directly address those challenges and that there are alternatives to consumer leases that allow low-income people to have access to credit at competitive and conscionable rates, government senators advocated not passing the bill, which was written by their own team. It's an extraordinary proposition: the opportunity to help, the opportunity to provide a regulatory framework that supports the interests of low-income Australians, with the only people on the other side of the argument being the payday lenders, and this government chose to support the payday lenders and leave ordinary Australians in poverty and at the mercy of this industry. On a bill they drafted in response to their own inquiry into exploitation, they wrote:

The committee acknowledges the commercial reality that those with higher credit-risk ratings are charged more to access credit. The committee considers it appropriate that regulations are commensurate with this risk and that, at the same time, the regulation is sufficient to ensure consumers are appropriately protected.

What is the 'commercial reality' for the 110,000 additional workers who are going to lose their jobs and be on $44 a day, prey to the payday lending industry? They have the heart of a pea, on the other side, in terms of these issues.

Are the decisions that those families have to make commensurate with the risk they face? There was a brief moment in 2017 when members of the Liberal government—I've lost track of whether it was Abbott, Morrison or Turnbull at the time—were prepared to do the bare minimum to protect vulnerable people: the heady days of 2017 and 2018, when they actually understood what their responsibility in government was. But when Minister Sukkar decided to reverse course, he chose a side alright. He chose to ignore the suffering of Australia's most vulnerable people. He chose to support the worst elements of this industry that profit from the misery of ordinary people.

The government members of the Senate Economics Legislation Committee made the same choice. Government members who failed to stand up for vulnerable Australians in their caucus room are complicit in that choice. Government senators who vote against this bill and do nothing to deliver accountability from what passes for their finance and economics team are complicit in the government's failures in this area.

The simple fact is that people like Minister Sukkar, and plenty of people on the other side of this chamber, simply do not understand the decisions that desperate people have to make because they will never have to make them themselves. They fail to imagine the lives of the poorest Australians, whether they are long-term unemployed people or families or people who have been displaced by the government's failures to deal with the end of the JobKeeper program and the 110,000 additional people who will be thrown onto the ranks of the unemployed. It's the failure of those on the other side of this chamber to imagine those lives that means they will continue to fail in this area; they'll continue to create additional misery and poverty in our communities. It's that kind of failure of leadership and failure of economic capacity that continues to hold this country back.

Slade Brockman (WA, Liberal Party) Share this | Link to this | Hansard source

Before I get to the substantive matters of the National Consumer Credit Protection Amendment (Small Amount Credit Contract and Consumer Lease Reforms) Bill 2019 (No. 2), I will take the previous speaker, Senator Ayres, to task on a couple of points he raised. I think you really belled the cat, Senator Ayres. You very much revealed, through your speech, that this is nothing more than a Labor Party stunt. You've taken a government bill and reintroduced it as a stunt. That's because things do change, things do move on. The structural frameworks under which we operate, particularly in our financial services sector, are extraordinarily complex. As the environment in which we operate changes, so too does the way that governments and the institutions of civil society, including institutions like banks, need to change. We see that the government is responding.

What Senator Ayres' speech completely failed to acknowledge, which is not particularly surprising, is that there is another piece of legislation in this identical space that has been introduced to parliament. In fact, the Senate economics committee, which he talked about a bit, has just finished considering that bill, and I believe it will be debated in this place shortly. We have a situation where this particular bill, as a government bill, was overtaken by events. We now have a government response, which includes a response to more general circumstances in the economy caused by the pandemic in particular, that will address the issues in this bill and wider issues in the economy to do with the provision of credit by banks and other financial institutions.

The reforms that will come to this place, which cover a lot of the areas also covered by this bill, are designed to enhance financial inclusion and ensure that Australian consumers accessing small-amount credit contracts and consumer leases are better protected. In fact, the government's reforms in the other legislation—again, which covers the broad area that is covered by this bill—strike the right balance between protecting consumers and maintaining a viable sector to provide these products.

I'll just pause briefly here. It is important that these products are not seen merely through the prism of the product itself but also through what other options are available to people in society. Sometimes those options are not good. We heard in committee hearings that people do seek to access credit through non-legal means if no credit is available through legal means. I think that is something that this place has to be cognisant of. The other options are actually very, very negative. When people go and look at non-regulated means of obtaining credit, they're entering a very dark world indeed.

While making it easier for Australians to access credit, the Morrison government will not stand for predatory behaviour by small-amount credit lenders and consumer lease providers. For the first time, consumer leases will be regulated by the Commonwealth to provide greater protections for consumers. The reforms include that a person who receives 50 per cent or more of their net income from Centrelink cannot devote more than 20 per cent of their net income to small-amount credit contracts and consumer lease repayments, with no more than 10 per cent of this being allocated towards SACC repayments; and that a person who receives less than 50 per cent of their net income from Centrelink cannot devote more than 20 per cent of their net income to small-amount consumer contracts or consumer leases. These are separate caps. The reforms also include providing legislative support to ASIC for prescribed information to be disclosed by lessors and clarification of the penalties for imposing prohibited or excessive fees, charges and interest, or breaching lease-cost caps. Responsible lending obligations will continue to apply to both of these products. I think that's a really important point to make, because something that has been lost in the public debate around responsible lending is that responsible lending obligations are disappearing; actually they are not. They are not disappearing for small-amount credit contracts and consumers leases. It's important to note that these products play an important role in many people's lives. The proposal that the government is bringing forward strikes the right balance between protecting consumers and maintaining a viable sector to provide these products. We make our position very clear. The Labor stance and its pointscoring on this issue get us nowhere.

To add more detail on the small-amount credit contracts, as I've talked about, we will implement those reforms to enhance financial inclusion and ensure the consumers of those types of products are better protected. They are a high-cost form of borrowing; there's no doubt about that. They are more typically accessed by some of Australia's most vulnerable consumers. While these products can be useful for consumers—and, in the end, individuals have to be given the right to decide their own financial futures—and can be useful as an emergency source of funding, repeated borrowing can lead to repayments which can consume a great proportion of people's income and become increasingly unaffordable over time. The reforms that we are putting forward are designed to limit consumer harm while maintaining access to small-amount credit contracts and consumers leases. To this end, we'll impose a cap on total payments that can be made under those consumer leases. The permitted cap on costs will be equal to the sum of the base price of the goods hired under the lease, permitted delivery fees, permitted installation fees multiplied by four per cent per month up to a maximum of 48 months. Lessors will additionally be able to charge a one-off establishment fee of 20 per cent of the base price of the goods. As part of those wider reforms the government is introducing, it will also introduce a new protected earnings amount for small-amount credit contracts and consumer leases. Small-amount credit contract providers and consumer leases will be prohibited from providing a contract that would result in a person who receives 50 per cent or more of their net income from Centrelink devoting more than 20 per cent of their net income to small-amount credit contracts and consumer lease repayments, with no more than 10 per cent of their income being allocated towards small-amount credit contract repayments; and, for a person who receives less than 50 per cent of their net income from Centrelink, from devoting more than 20 per cent of their net income to small-amount credit contracts or consumer leases. These protected earning amounts will maintain access to credit while ensuring enhanced protection for the most vulnerable consumers.

Getting back to the broad framework that we have in place, this is an area that has undergone significant change over a long period of time. Going back to 2009, the national credit framework was established, which involved such things as a licensing regime, responsible lending, dispute resolution and a national credit code. In 2011 we saw changes in improved disclosure, restrictions on unsolicited credit and prohibited fees being charged. In 2014 we had comprehensive credit reporting introduced, allowing positive credit information on borrowers to be shared.

In 2018, we had the establishment of AFCA. I think in the future this date will be looked back on as a very important date, because AFCA has provided a forum through which individuals can take complaints in the lending space to an independent authority, at no cost to themselves, which, again is very important. This is not weaponising and forcing people into the courts at extraordinary costs. We all know that that cost barrier of entering the legal system, particularly on small amount credit contracts, but even on larger amount contracts, can be very difficult for average income earners. Going to court is an extraordinarily expensive business, even if you believe you have a very, very good case. The delivery of AFCA as a low cost, independent authority, where disputes can be resolved in a way that is advantageous to consumers, has been a great step forward. From memory, the information coming out of AFCA shows that some 70 per cent of resolutions of claims in AFCA proceedings were found to favour the consumer. I will correct the record if I'm wrong on that, but I'm reasonably sure I'm correct. It's only been in place for three years, since 2018, so we have a relatively new dispute resolution body which is proving to be very advantageous to consumers. It is something that we as a government can be very proud of. But, as a society, we've now got an avenue towards the resolution of disputes for people who are perhaps sold products or enter into arrangements that are not advantageous to them and have some legal problem associated with them. Those disputes can be resolved in a way that is low cost to all parties and result in a fair outcome for consumers. I'll leave my remarks there. Again, putting this bill up in this way is merely a stunt from the Labor Party. We will not be supporting the bill.

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

I listened with great interest to my colleague Senator Brockman's comments. But, fundamentally, this issue is quite distinct from mere politics. I just want to put a couple of pieces of evidence on the record before I get into more substantive issues. The Consumer Action Law Centre noted the lure of these products:

I think people will often act in the most simple, convenient way to deal with the hardship in front of them ... when someone is faced with a stressful situation, when they're experiencing some form of desperation, they'll be attracted to what seems to be the easy option.

I think that that would be generally accepted as a proposition. When people face a calamity, an illness, the loss of a job or the inability to put milk in the fridge because the fridge is blown up, I think people will look for a solution immediately. We do live in a society where you can't not have a TV, fridge and the like. I think that's quite an instructive piece of evidence. It's also important to go back to Commissioner Kenneth Hayne's final report, where he said:

My conclusions about issues relating to the NCCP Act can be summed up as "apply the law as it stands".

Commissioner Hayne made a clear recommendation relating to the NCCP Act:

The NCCP Act should not be amended to alter the obligation to assess unsuitability.

These are very clear pieces of evidence that point us in the right direction. When people get into trouble, they're going to look for the solution, and the solution is a loan. They're not going to read the fine print; they're not going to examine the punitive interest rates; they're going to deal with the immediacy of their situation. I think it is incumbent on the government to take action.

I think Senator Brockman's contribution about the limitations on how much a Centrelink recipient can borrow was very good, and those should be in place. My experience in that area, dealing with a friend of mine, is that, once they get to that stage where they're getting a deduction from Centrelink, they quite often have access to a no-interest loan run by one of the various not-for-profits, which are really good. He has told me ad infinitum that, once people have been through the mill a couple of times and they get to the stage where they have to make decisions about how they afford the normal necessities of life, they become very skilled at it. But it's an inordinate journey to there. Quite often they're under tremendous stress and strain through punitive interest rates and penalties.

I think the royal commission did point to a period where there was substantial redress for people who were given money when it was clearly unsuitable for them and they couldn't repay it. The situation there hasn't really improved much. I don't think that weakening the standards is simply going to improve the lot of people who are very vulnerable to predatory loans. I saw an ad on the TV the other day which said: 'Don't worry about payday. Payday could be today.' I don't know what that's about. Do you hand over your income to a third party and you can just withdraw it early? How does that help you? Payday is Thursday, and you can take your money out on Monday? You're still broke by Saturday. There are all sorts of things going on in this space which I think we should be cautious about.

If we look at the end of JobKeeper—a great program that can't go on forever—it may well be that we're going to see more people moving to JobSeeker, which, although it has had a slight increase, is still a very, very meagre amount. People will borrow when faced with a crisis in their life. I'm not sure that this is the way to go forward with it. The government has been failing to act since 2017, delivering more business to payday lenders and to consumer lease providers, at the expense of ordinary Australians. I don't know what we do in terms of people having access to credit when they desperately need it, other than that we should go and fund the no-interest loan providers to the maximum we possibly can, because there is a proven track record there of people coming to terms with their financial budget, making plans which work and going on to make smart, commercial decisions.

It has been explained to me how they work. A no-interest loans adviser will sit down with the consumer, go through their budget and say: 'Here is the amount that you can spend'—it might be $1,300—'That's the amount that you would qualify for under a no-interest loan. We want you to go out into the consumer world and get a deal. Get three deals, but don't make any commitments until you come back to us, and we'll see how you went.' And people do. They're very proud to go out and get three quotes. What normally happens is that the adviser will say: 'Fine. You've done good work here. This is how the world actually works. But what I want you to do now is go and see this provider, because I'm pretty sure he can beat the three loans you've got.' The lesson learned is: get quotes. Check the market, see what you've been offered and count the cost of the loan. The no-interest loan situation with the Good Guys is a great deal, and invariably they match whatever is available and undercut what's in the marketplace. The consumer—and it's usually a woman, a single mother, who for whatever reason is in a precarious circumstance—will learn through that process to take power and take control of her own budgeting, and grows exponentially during this process. This is what people tell me.

So, rather than making it easy for payday lenders to prey on people, we as a national parliament, and the government particularly, should be helping to increase financial literacy in this sector, where perhaps we don't need so much regulation or legislation. Clearly at the moment it's desperation versus opportunity, desperation versus the need for that fridge or computer and the need to keep the household going. In that environment, people are not making great decisions. I know there are two sides to the story. If the credit provider discloses the terms of the credit and someone takes it, it's not a great decision by the consumer, but often it's driven by desperation. We do know that those who have part-time employment, those who are on the minimum wage and those who are on JobSeeker, disability payments and the like are not in a position to make too many discretionary decisions about expenditure. It's virtually a case of: 'It's happened. I need to fix it. Let's go and do it.'

Some of the things that are currently at odds with what we would call the norm is that payday lenders can charge interest rates equivalent to more than 200 per cent per annum, and there is no cap at all on the costs that can be charged by these lease providers. Lenders continue to sign people up to loans and leases with unaffordable repayments, which causes people to wind up in a debt spiral and leaves struggling families in debt or poverty. Surely the federal government is not in favour of that? Surely the federal government is not in favour of a predatory system where people end up entrenched in debt and poverty?

This bill directly addresses these challenges. It provides for a cap on the total repayments that can be made under a consumer lease. There's better regulation of repayment and of repayment intervals, removal of fees for loans that have been fully paid, prohibition of door-to-door selling, anti-avoidance protections and stronger penalties for wrongdoing. And regarding penalties for wrongdoing, right across the whole financial area I don't see too many penalties being applied. The royal commission pointed to some success, but this bill removes some of that protection. I know Senator Brockman referred to ACFA, but I don't see that there's any particular trail of evidence that they've been the good cop on the beat. I don't see the evidence of that. All we are seeing is evidence of perhaps a lack of protection for people, and this bill would make it better for consumers.

The 2019-20 summer bushfires and the COVID-19 pandemic have increased financial vulnerability and rendered more Australians vulnerable to the promises of small-amount credit contracts and consumer leases. Also, young people are increasingly concerned about their financial security and are more likely to be taking on debt as a means of relieving immediate financial stress. Consumer protections are needed more than ever. I think that's a very important point. Consumer protections are needed now more than ever, as we move into the uncertainty of the post pandemic—if we get vaccinated, if we can start moving around this country again, if people get back to reasonable amounts of employment, if 100,000 people don't drop onto the Centrelink/JobSeeker market. We need to be cautious.

This bill should be supported because it's not doing anything particularly untoward. We know that in certain areas the economy is actually overheating. We know that the housing sector has blown out of the water. It is exponentially overheating. There will be other bills that will come before the parliament with discretionary limitations for the purposes of driving the economy. I'm not sure how we can drive the economy from this point. These are the most vulnerable consumers in the economy. They are those who are going to face stress and immediate problems which are going to require some borrowed money. I'm not sure that we can clearly see that this is going to drive the economy forward. It may well just drive another bubble along the way, which is a bubble of disaster, despair, poverty and debt.

Low-income families are disproportionately going to find themselves in an awkward predicament in the not-too-distant future if the economy doesn't improve and they don't have full employment and slip onto JobSeeker. If they have one of these payday loans, with up to 200 per cent interest and predatory fees, it's going to be tough. They're only one dose of COVID away from disaster. If their income dries up altogether, if they're casual and get sick or if there's an illness or accident in the family, they will wind up with a predatory debt that will push them further down at a time of their most vulnerability.

I support Senator McAllister's efforts here to bring fairness and equity back into this sector and keep prudent regulation in place that would limit the ability of people to prey on the most vulnerable section of our community. I finish up by saying that, if the government wanted to do something smart, it would put a whole lot more money into interest-free loans and not-for-profit groups that administer those schemes so very well across this country, because they improve the financial literacy of the recipients exponentially and will go some way to relieving the need for any of this legislation.

Susan McDonald (Queensland, National Party) Share this | Link to this | Hansard source

I rise to speak against this private senator's bill—the National Consumer Credit Protection Amendment (Small Amount Credit Contract and Consumer Lease Reforms) Bill 2019 (No. 2). I do acknowledge that it has been brought with good intentions, but there's a lack of understanding of both the financial environment and the existing additional changes that are being made by this government. I listened very carefully to Senator Gallacher. He is a very significant contributor to the Senate Economics Legislation Committee. Under the steady hand of the chair, Senator Brockman, we had a very good investigation of the government's proposed changes to SACC lending, so I have a very good understanding of the environment that is in place and the changes proposed by the government and this bill. We heard a great deal of evidence from a huge number of community groups, lenders and consumer representative organisations. So much detail was useful to the committee. I reflect on a number of the things raised today that have already been discussed.

I remind the opposition about the reality in regional Australia, particularly in my part of the world of Far North and western Queensland, where access to small credit is sometimes difficult, particularly given that the large banking institutions are withdrawing from that part of the world. Customer owned banks are so important to the successful financial environment in north and western Queensland. They have a huge amount of regulation, which makes it difficult for them to compete, but they do provide a terrific service.

But as far as other sorts of lending go, it is critical that there be an environment that allows for easier access to finance which still remains well regulated and overseen for people who are in difficult circumstances. Senator Gallagher used the example of the fridge going, and that's a very good example of a requirement for finance where people urgently need access to something that otherwise would be a difficult and long process to go through.

I also want to draw the chamber's attention to AFCA. AFCA is a free, fair and independent authority which manages complaints and claims. We heard evidence from them about the speed and success they have in attending to complaints that consumers have around any poor practice that may exist in the financial industry. I also acknowledge contributions made about the lack of financial literacy in the community. This is something that disturbs me enormously and it's something where I think we would be well served by providing education to young people, particularly as they leave school and start working. I remember that when I started working as an accountant I would receive my pay in cash in a little envelope on Friday afternoons. You can imagine just how difficult a temptation that was, managing not to spend that over the weekend. Fortunately, with the reduction of cash in the economy that's less of a challenge to young people today, who generally receive a direct deposit or other form of payment.

The government is on the record, making its position on these reforms clear: we will not support Labor's—and others'—political pointscoring on this important issue. The purpose of the legislation is to reduce the risk to SACC consumers, who are often on lower incomes and in potentially precarious financial positions, or at risk of becoming unable to fund their basic needs or other necessary commitments as a consequence of entering into a SACC. It will also make it easier, in some respects, to obtain credit, ensuring the sector's viability and allowing people to continue to utilise such lending as a regular part of their lives. The reforms also include providing legislative support for ASIC to prescribe important information to be disclosed by lessors to customers, and a clarification of the penalties for imposing prohibited or excessive fees, charges and interest in breaching cost caps.

Whilst making it easier for Australians to access credit, the Morrison government will not stand for predatory behaviour by small-amount credit lenders and consumer lease providers. The bill amends the National Credit Act to establish a mechanism for restricting the payments that are allowed under a SACC for all consumers and will cap repayments at a maximum of 10 per cent of a customer's net income. There are some terrible stories of people on supported incomes being trapped in a never-ending debt cycle after being lured into unsuitable credit arrangements. Recent news reports highlighted a woman who borrowed $75 but had to pay back $110 with interest and fees. Another woman on Centrelink payments borrowed $250, but her total debt repayment was $880. And another woman claimed that she borrowed $100 to buy food and ended up repaying over a thousand dollars due to late fees and interest. For this very reason, the reforms also include that a person who receives 50 per cent or more of their net income from Centrelink cannot devote more than 20 per cent of that to consumer lease repayments, with no more than 10 per cent of this being allocated towards SACC repayments. Additionally, a person who receives less than 50 per cent of their net income from Centrelink cannot devote more than 20 per cent of their net income to SACCs or consumer leases. These are separate caps. The permitted cap on costs will be equal to the sum of the base price of the goods hired under the lease, permitted delivery fees and permitted installation fees multiplied by four per cent per month, up to a maximum of 48 months. Lessors will additionally be able to charge a one-off establishment fee of 20 per cent of the good's base price.

SACCs and consumer leases are high-cost forms of borrowing and are more typically accessed by some of Australia's most vulnerable consumers. While these products can be useful for consumers as an emergency source of funding, repeat borrowing can lead to repayments consuming a greater portion of income, becoming increasingly unaffordable. This proposal strikes the right balance between protecting consumers and maintaining a viable sector to provide these products.

I think it is also important that we understand the cost of regulation on this industry. This cap of four per cent per month up to 48 months will mean that there will be a number of credit providers who will no longer be able to afford to provide credit in this space. These are people who previously were able to provide credit to customers who were in urgent need of finance, but the cost of regulation will mean that that cap on the interest rate will not allow them to cover the cost of doing business. That is of some concern to me because currently they are providing a service to Australians who, for one reason or another, urgently need to access finance in a regulated market. I think that is the critical part. If we do not provide a regulated market for credit lending then people will be forced to go outside of the market. They will be forced to move outside of the regulated market, where you can have very, very bad outcomes, indeed. I don't need to go further into that. I'm sure we all understand what some of the criminal activity has been in the past. That is why it is important that this government provides a strong, regulated environment and a safe environment for Australians to access credit as they require it.

Anthony Chisholm (Queensland, Australian Labor Party) Share this | Link to this | Hansard source

Just observing what Senator McDonald said then about this bill, the National Consumer Credit Protection Amendment (Small Amount Credit Contract and Consumer Lease Reforms) Bill 2019 (No. 2), being misguided, I think we've got to actually have a look at the basis of this bill, which was actually the exposure draft legislation that this government put out for consultation. So that is the actual substance of what we're putting forward here and which we have done so continuously since the government failed to act on this back in 2017. I want to commend the work Senator McAllister has been doing and also my good friend the member for Oxley, Milton Dick, who's also been highlighting government inaction on this.

The consequences of inaction are issues that are being felt by the community right across the country. It is unfortunate that these challenges have been accentuated by the pandemic and what Australians are dealing with at the moment. There are a lot of people out there who are feeling the pain of the economic challenge that Australians are confronting. The reality is that the inaction of this government is actually making that challenge worse for so many Australians.

We saw that with what the government have done in regard to superannuation and allowing early access for people. That has accentuated this problem. We are also going to see in it a couple of weeks time when the government end JobKeeper as well. I certainly know from my travels through regional Queensland last week that that is going to have a devastating impact on so many people across Queensland and no doubt across the country at the same time.

So it is disappointing that the government haven't used the opportunity that we've presented to them today with this bill to actually tackle one of those challenges head on, and that is in regard to the consumer credit protection amendment. As I said, this replicates the exposure draft legislation that was released for consultation by the government in 2017. The bill was a response to a review the government commissioned in 2015 to tackle the increasing exploitation of people who entered into small amount credit contracts and consumer leases. Stakeholders in the broader community responded to the draft legislation, but the government have so far failed to act.

Debate interrupted.