Rebekha Sharkie (Mayo, Nick Xenophon Team) Share this | Link to this | Hansard source

The payday lending industry in Australia is causing significant harm to Australians on low incomes. A typical payday loan can have a 20 per cent establishment fee plus a four per cent monthly fee. The cost is often increased by exorbitant late payment fees and default fees which are levied on customers already struggling to make repayments. These are very expensive loans and they can have a pernicious effect upon people who are already financially vulnerable.

A particularly worrying trend is in the increasing number of women accessing this high-cost credit. According to a 2016 report by Digital Finance Analytics, called Women and payday lending, there has been a 110 per cent increase in women accessing high-cost credit between 2005 and 2015. This is compared to an overall industry growth of 80 per cent for the same period.

Advertisements for such loans such as Nimble It and Move On make them seem easily affordable. Many are particularly promoted, I believe, to young people. Further, consumer leases, often known as rent to buy, also have grown over the last decade. These leases lock people on low incomes into multi-year contracts and then charge them three to four times the value of the products they are renting. In fact, the ASIC recently found that one contract required a customer to pay over $3,000 for a washing machine that was worth around $489. Both payday lending and consumer lease industries target Australians on low incomes and those people who can least afford to pay a premium for credit.

Some years ago, when I was an adviser in state parliament, I assisted an elderly pensioner who had been locked into a rent-to-buy small television. In the end, from memory, it cost him more than five times the retail price of the television set. This constituent could never get enough money for that one-off last payment and so continued to make $10-a-week payments for a television that was more than five years old.

The final report into the federal government's independent review on small amount credit contract laws, released in March last year, made 24 recommendations, most of which the minister subsequently accepted in November 2016. I echo the calls in this parliament for the government to present legislation that would enact the recommendations as soon as possible. I would like to acknowledge the advocacy of the member of Perth and what he has done in this place on this particular issue. Ideally, new consumer protections in these industries would also be complemented by investment in appropriate alternatives that can help the most vulnerable avoid entering into debt arrangements that they cannot fulfil.

In short, we need to do more to help vulnerable people avoid falling into the inescapable spiral of debt and the profound material and emotional suffering that it brings. I therefore encourage the federal government to increase investment in and promotion of the No Interest Loan Scheme, also known as NILS, as facilitated by organisations such as Good Shepherd Microfinance, Anglicare, The Salvation Army and the St Vincent de Paul Society. Loans between $300 and $1,200 are available from 178 community organisations at 628 locations across Australia. NILS offers low-income people safe, fair and affordable loans for all manner of indispensable goods and services, including washing machines, refrigerators, computers, car registration, and educational and medical expenses.

NILS, I believe, is a great alternative to the high-cost credit providers like payday lenders and consumer lease providers. This particularly affects young people. When I worked in the sector, this was one of the No. 1 reasons why young people were homeless. Trying to make these payments and then the late fees out of their youth allowance while they were looking for work was just impossible. With NILS, a client will only ever repay what they borrow, allowing people with limited financial means to access essential goods and services without facing the added burden of interest. With 98 per cent of NILS clients receiving some level of income support, the program is well set up to support people who would otherwise become vulnerable clientele of payday lenders and consumer lease providers.

These are simple measures that will make a huge difference to our most vulnerable Australians, so I would urge the government to do everything within its power to make them available and expand the NILS, because this would make a profound difference to Australians who are struggling.