Wednesday, 2 December 2020
The reckless behaviour of payday lenders has gone on long enough. Data, as we know, from the Consumer Law Action Centre has shown the number of households with a payday loan has continued to skyrocket. The figures need to be told and told again: between April 2016 and 19 July—pre pandemic—just over 4.7 million individual payday loans were written, worth an approximate total of $3.09 billion. That represents around 1.77 million Australian households. Around 15 per cent of payday loan borrowers end up in a debt spiral, which leads to bankruptcy. The number of women accessing payday loans has jumped by 28 per cent, and 86 per cent of loans are now accessed through a website or on mobile or tablet.
While the Morrison government sits by and does nothing, Australian families continue to be ripped off every day by the loan sharks in this out-of-control industry. Examples of people being exploited are endless. This includes heartbreaking stories from my home state in Queensland of sole parents who have been approached by payday lenders and signed up to rent a fridge on the spot. After electronic signatures have been captured, an individual was told that she would pay just $81.44 a fortnight. Two weeks later the full story was revealed with the fridge costing over $6,352 over three years.
With the ongoing economic fallout of COVID-19 and the winding back of support measures by this government, it's critical the Morrison government implements measures to protect people from exploitative lenders seeking to take advantage of their financial vulnerability. It's the difference between families being able to put a meal on their table for Christmas lunch and potentially falling under the poverty line. Payday loans are almost exclusively used by people on low or very low incomes to try to keep their heads above water. However, they often fall into a horrific debt cycle. This is due to the outrageous fees and interest rates of around 900 per cent.
A survey found that 4.7 million Australians are now very concerned about their financial wellbeing. The same survey found young people were three times more likely than the general population to have taken out a payday loan or consumer lease in July 2020 to make ends meet. Payday lenders have been exposed for sending text messages offering 'COVID relief loans'.
It's been more than four years since this lazy government announced a review into the payday loans and rent-to-buy schemes. In 2015, despite repeated promises and supporting the 24 recommendations for the review, we are yet to see any action or clampdown on the loan sharks. As the cost of living rises drastically under this government, 1.77 million households have had to turn to payday loans just to get by. As if this wasn't bad enough, today we know more than 120 consumer legal and other associations, and almost 100 prominent individuals, have signed an open letter to MPs urging them to reject a bill that would axe important borrower protections.
The Treasurer of Australia, Josh Frydenberg's decision to overhaul the National Consumer Credit Protection Act is an attempt at making it easier for consumers to obtain loans and spur growth as the economy is in deep recession. The government's bid to loosen lending laws does a decade of hard-fought consumer protections. In an open letter, which emanated from consumer advocate Choice, the Consumer Action Law Centre and Financial Counselling Australia, among others, it says:
We are calling on you to stand up for Australians and block this harmful law when it is introduced into Parliament.
It also says, these are:
… essential consumer protections designed to protect ordinary people from the sorts of terrible lending practices we saw during the global financial crisis and banking royal commission
If these rules and laws proceed, people will be worse off. Drastically relaxing lending rules in the midst of our worst recession in 30 years is a recipe for national disaster. Higher levels of household debt will slow the economic recovery. This is not economic sense. This is economic vandalism, with vulnerable and weak Australians in this government's sights.
I know the shadow minister at the table, the member for Whitlam; the member for Richmond; and every other Labor member of parliament will fight what the government is trying to do. We will be on the side of consumers. We will stand up to the loan sharks and the banks in this country. The government will not.