Bert Van Manen (Forde, Liberal Party) Share this | Hansard source

I thank the member for Perth for bringing this motion to the House. I think the most important thing we need to recognise in this space is that we need to get this process right. As the member for Perth has quite rightly pointed out, for those people in our community who access this type of finance because they can't access finance elsewhere, it is critically important we get it right. In accepting any of the recommendations made in the review, it is imperative that we carefully weigh the benefits and risks to consumers and small business operators within this industry.

As the member for Perth has rightly pointed out, the government has accepted the vast majority of the recommendations, either in part or in full, that were made by the review. The review panel stated:

The recommendations seek to strike an appropriate balance between enabling consumers to access emergency finance when required, optimising their opportunity to improve their financial situation over time, and the viability of an efficient industry.

The government shares that view. That's why it's so important that we get this right for consumers who require access to this type of finance, because more often than not they have no other avenue.

It's just as important to ensure that the smaller businesses in this sector have the capacity to continue to provide the services they currently provide. Because of this, we are carefully considering how these changes are implemented. This government understands that the extent of the reforms being proposed will have a significant impact on the sector and must be implemented following careful consideration. The government acknowledges the significant impact that these changes will have on existing industry participants and, importantly, will put in place appropriate grandfathering arrangements for existing contracts. The government will conduct a further review of the small amount credit contract and consumer lease laws within three years from the commencement of the legislative changes, as we understand the ongoing need to ensure that vulnerable consumers are protected while still allowing appropriate access to finance.

In essence, the government supports four key recommendations made by the review: firstly, retaining the existing price caps on small amount credit contracts; secondly, extending the small amount credit contract protected earnings amount requirement to all consumers, lowered to 10 per cent of the consumers' net income—currently, for those consumers who receive 50 per cent or more income through payments from Centrelink, total SACC repayments are capped at 20 per cent of the consumer's gross income; thirdly, introducing a cap on total payments on a consumer lease equal to the base price of the good plus four per cent of that price per month; and, fourthly, introducing a protected earnings amount requirement for consumer lease providers of 10 per cent of net income for all consumers, equivalent but separate to the requirements of the small amount credit contract.

The government recognises that consumers of small amount credit contracts and consumer leases are often Centrelink recipients or those with very low incomes and therefore have limited access to mainstream credit. There are other opportunities, like the no-interest loan schemes, but they have limited financial capacities. Half of all consumer lease payments are provided directly through Centrepay, Centrelink's payment deduction system, with the average gross income of a small amount credit contract consumer being some $35,700 per annum.

The government also understands that repeated borrowing in Australia is high, with the average SACC consumer taking more than three small loans each year and then falling into a debt spiral—a clear indication of the financial difficulty they're in. Therefore, it's important that, as we review this process and look to implement solutions, we do provide the opportunity for emergency finance which will allow the lease of a range of consumer goods to help these people through a very difficult situation but so they don't get trapped in a debt spiral.

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