Monday, 22 October 2018
National Consumer Credit Protection Amendment (Small Amount Credit Contract and Consumer Lease Reforms) Bill 2018; Second Reading
That this bill be now read a second time.
Colleagues, while this bill has a very long title, the National Consumer Credit Protection Amendment (Small Amount Credit Contract and Consumer Lease Reforms) Bill, we refer to it as 'the payday lending bill'. It's an effort by us on the cross bench to bring to the attention of the government that we want things done about the many, many people who are being exploited by what we call 'payday lenders'.
This bill replicates word for word the government's draft legislation which was released on 23 October 2017—a year ago. The government has done nothing, so I'm bringing it to parliament today to say, 'We need to act on this very important issue.' It also follows work from the opposition side of parliament, from the former member for Perth. He brought it to the parliament and wanted to debate it as well. We've also had a debate in notice of motion, so we know how important this legislation is, but what we need is the government to bring it on and to act on its own legislation.
I will say a few words about what's proposed by this bill. This bill would impose a cap on the total payments that can be made under a consumer lease. Currently, there's no cap on the total amount of payments that can be made, so it requires small-amount credit contracts that are made by payday lenders to have equal repayments and equal payment intervals. It removes the ability of small-amount credit contract providers—those people who do payday lending—to charge monthly fees in respect of the residual term of the loan when a consumer fully repays the loan early. So, if you've paid it all off, that should be the end of it. It prevents leasers and credit assistance providers from undertaking door-to-door selling of leases at residential homes. Door-to-door selling of leases—how bad is that practice? It introduces broad antiavoidance protections to prevent small-amount credit contract loans and consumer lease providers from circumnavigating the rules and protections already in the National Consumer Credit Protection Act and the code, and it strengthens penalties to increase incentives for small-amount credit contract providers and leasers to comply with the law. This bill would also facilitate the making of regulations establishing a protected earnings account for all consumers of small-amount credit contracts and also for consumer leases. There are a number of other aspects of the legislation that I just won't bore you with today.
I want to say: there are hundreds and thousands of vulnerable people who are trapped in a debt cycle as a result of being caught by the endless cycle of payday loans or rent-to-buy schemes. These small-amount credit contracts have a significant impact across the whole country. In 2015-16 there were almost 620,000 new payday loans, with almost $500 million advanced. Two in five of these people who entered into a small-amount credit contract loan during this period were unemployed, one in four small-amount credit contract loans were given to people receiving more than 50 per cent of their income from Centrelink, and one in six loans were entered into with a customer using an existing loan. So there's a whole lot of reasons why this needs to be fixed up.
As we do, we wrote to the Prime Minister saying, 'Prime Minister, we need you to act on it,' and we've written to the Hon. Stuart Robert MP, the Assistant Treasurer. I had a meeting with him and had a letter back from him, which I acknowledge and say thank you. He said: 'Cathy, we're going to wait on this. We're going to wait until the outcome of the royal commission.' While I understand the royal commission into banks is happening, I think this particular bit of legislation is important enough to bring on. We don't need to wait until the royal commission findings are heard before we actually get a result from it. The time is now and the urgency is now, and I call on the government to act. With those comments, I'll now hand over to the member for Mayo, who will second this legislation, and invite her to make a few closing comments.
I second the motion, and I strongly support the National Consumer Credit Protection Amendment (Small Amount Credit Contract and Consumer Lease Reforms) Bill 2018, from the member for Indi. It's been 1,172 days since the review of the small-amount credit contract laws started and 692 days since the government accepted the recommendations of the review. What are we waiting for? The longer the government ignores this issue, the more Australians will sink deeper into debt. We can no longer 'Nimble it and move on'.
The Consumer Action Law Centre reports that, since the government released the small-amount credit contract review back in April 2016, at least three million—three million—additional payday loans, estimated to be $1.8 billion worth, have been taken out by more than 1.6 million households. This has generated around $250 million in net profits for lenders. They are profits from the misfortune of some of our most vulnerable Australians.
Too often, the people who are taking out these loans are doing so because they are desperate. They are facing unexpected financial costs such as medical expenses for themselves or their family, and they have no other income source available to them. Or, too often, it is everyday pressures like the quarterly power bill that prompt them to this desperate need for credit. No, it is not a sensible financial decision, but, when the alternative is to live in darkness, the payday loan seems like the only option. It is simply deferring the payment and adding crippling interest for the benefit of a little breathing space. When I say 'crippling interest', I'm talking about up to 200 per cent interest in real terms.
But, if these families cannot afford to pay the power bill, how will their financial situation improve with the added burden of yet another financial repayment? The short answer is that for many families the situation gets worse, and you get sucked into a vortex of payday loans paying off payday loans. Research commissioned by the Consumer Action Law Centre shows that, over a five-year period, about 15 per cent of payday borrowers will fall into a spiral of debt that has significant ongoing economic and social consequences for the nation.
The member for Indi mentioned the former member for Perth, who was instrumental in pushing for this in the parliament, but I'd also like to acknowledge the work of the member for Oxley. The member for Oxley and I have had many conversations where he has talked about the volume of payday lenders in his electorate preying on the most vulnerable people in his community.
In conclusion, I'd like to commend the member for Indi on her work and her determination to see this issue given the attention that it deserves. May I just repeat: it has been 1,172 days since the review of these small credit contracts. What on earth are we waiting for? That is over three years. I commend the bill to the House, and I strongly urge the government to act now. You do not need to wait for the findings of the royal commission. Let's not kick this can any further down the road.