Thursday, 20 August 2015
Social Security (Administration) Amendment (Consumer Lease Exclusion) Bill 2015; Second Reading
I am pleased to bring this private senator's bill before the Senate. This is a simple proposition to exclude consumer leases from the Centrepay under DHS. This brings Centrepay back to its original purpose—that is, as a budgeting tool for basic consumer goods and for paying utilities. Consumer lease companies are targeting and preying on vulnerable Australian in low socioeconomic regions in cities and towns. Consumer lease companies are disguising this predatory behaviour in glossy brochures and advertising. Predatory business behaviour under consumer leases is causing massive financial hardship to poor and vulnerable Australians. This predatory business model is growing; however, in my view it should be, and is, unsustainable. There are massive mark-ups in profits at the expense of the disadvantaged, and this should be unacceptable to the Senate. Consumer and welfare support groups are alarmed at the social implications and the practical application to individuals and their families of these consumer leases. Alternatives to consumer leasing are available, and the Department of Human Services and Centrepay must stop facilitating predatory and unconscionable business practices.
This bill should be supported by all senators, as it is about harm minimisation for poor Australians. The government should expedite the broader review of consumer leases that it has announced and look at the National Credit Code and the implications of consumer leases on a broader basis. This bill does not deny anyone access to a consumer lease, even though I would caution and advise against consumer leases, but it does stop the Department of Human Services and Centrepay facilitating consumer rip-offs in Centrepay.
The purpose of this bill, as I have indicated, is to amend the Social Security (Administration) Act 1999 to provide that consumer leases are excluded goods for the purpose of part 3B of the act. The bill is needed to remove the potential for Centrelink clients utilising Centrepay services and participants in the income management regime under part 3B of the act to suffer financial harm as a result of entering into one or more consumer leases for household goods for which income management measures, including Centrepay deductions, are available. The main provisions of the bill will make consumer leases an excluded good for the purposes of part 3B of the act. What this does is very simple. Item 1 of schedule 1 amends section 123TC of the act to provide a definition of 'consumer lease'. It simply says:
consumer lease means a contract for the hire of goods by a natural person or strata corporation under which that person or corporation does not have a right or obligation to purchase the goods.
Item 2 amends section 123TI(1) of the act to provide that consumer leases are excluded goods for the purposes of part 3B of the act.
Centrepay was established in 1998 as a simple budgeting tool to help Centrelink clients budget by paying rent and utility bills through automatic deductions from their welfare payments. Centrepay effectively prioritises payments made this way ahead of other living expenses. I think everyone would agree that Centrepay has been an outstanding success and is strongly supported by Centrelink clients, community services and welfare agencies. It is used by over 600,000 Centrelink clients, on whose behalf nearly two million deductions are made each month. The annual value of deductions is nearly $2 billion. Thirty per cent of Centrepay users are disability support pensioners, a further 20 percent are Newstart recipients and 16 per cent are in receipt of parenting payments. These are the same groups who are disproportionately represented as financially excluded payday lending customers and Centrelink advance and urgent pay recipients.
We all know the problems of payday lending. The problem we have here is that many of the operatives who were in payday lending when some checks and balances were put on payday lending have migrated into consumer leasing. As I have indicated, consumer leasing is growing because of the advertising and the actions of these companies. Centrepay's reputation as a simple, well-regarded budgeting tool is under threat from the presence of service providers whose businesses provide household goods, whitegoods and electronics under consumer leases While Centrepay excludes repayment of a credit card debt or any other kind of consumer credit, it can be used to pay for consumer leases. While utility bills still account for a third of Centrepay deductions, household goods leases now account for 14 per cent and their share of Centrepay deductions is growing. As the 2013 Independent Review of Centrepay pointed out, when consumer lease payments are being made through Centrepay, the arrangement between the Centrelink client and the leasing business is often seen by the client to have 'tacit government endorsement of those same arrangements'. So Centrepay facilitates the payment, and the clients—the citizens who use it—are of the view that it is approved by government. There is evidence that consumer leasing businesses foster this belief in their sales pitches.
Consumer leases are contracts for the lease of goods under which the hire is for domestic or household purposes, the hirer does not have a right to purchase the rented goods, and the amount paid by the consumer is more than the value of the goods, often by a very, very large factor. The Consumer Action Law Centre report The hidden cost of 'rent to own' found consumer leases cost at least twice the normal retail price, usually three times more, and often even more than that. Consumers might be able to find a better deal by shopping around, but inquiries usually find the consumer lease cost to be at least twice retail price and often much more. Consumer leasing is expensive even when compared to buying on credit at 20 per cent per annum. Consumer leasing is the most expensive way anyone can obtain a new household good.
Look at some of the prices that are being charged by these consumer lease companies. For a high-definition television, which you can pick up for a retail price of about $749 to about $1,049 depending on where you buy, the rent-to-own price, when it is worked out over the three or four years that the consumer lease is laid out, becomes $3,112 to $3,893, a mark-up of 371 per cent to 415 per cent. These are some of the lowest paid people in the country. Some are on welfare, and this is the type of mark-up that these consumer lease companies are forcing on them.
They target single mums. Many single mums need a stroller for their kids. A mid-range stroller costs between $100 and $300 depending on where you buy it. The rent-to-own price is between $772 and $1,392 for a stroller that can be bought for $100. The mark-up is between 464 per cent and 772 per cent. A cot—again targeting single mums—has a retail price between $270 and $1,000 depending on where you buy it. The rent-to-own price is between $1,552 and $2,488, a mark-up of between 249 per cent and 575 per cent. I can go on, but I do not think there is any justification for any business to be targeting some of the poorest paid in our country with rip-offs and mark-ups to that extent. These prices were looked at by the Consumer Action Law Centre, and this is part of the prices that they have found in their report called The hidden cost of 'rent to own'. That was published in September 2013.
I was concerned again in my local area. I live in the lower Blue Mountains. I do a lot of shopping in the Penrith area. Many areas of Penrith are quite well off, but many areas of Penrith are low-socioeconomic areas. When I had a look at where these rent to own stores were, it was clear that they were targeting the lower socioeconomic areas in our country. I was doing some shopping with my wife, and we were in the Centro Nepean shopping centre. In the middle of the Centro Nepean shopping centre a pop-up retail area had been established, and it was a mob called Rent 4 Keeps. They were handing out leaflets and targeting young families. If a woman was on her own with a young kid, they were being targeted for the leaflets. I know that leaflet drops have been done around some of the lower income and wealth areas that have a high density of welfare recipients in the Penrith areas.
They were handing out this leaflet that I have before me. It says: 'Dealing with R4K is easy. There's an easy application process. R4K comes to you. It's got a great new product range. There's no up-front fees. Flexibility. Six- to 36-month terms. Quick, personal R4K service. You are very important to us at R4K.' I am not surprised that they are very important given they are getting rip-offs and profits on the basis that they have. They say: 'All renters welcome. Government benefits okay. Easy debit okay. Direct debit okay. Low-income earners? Tick. Single parents? Tick. Poor credit? Tick. Carers? Tick.' Then it goes on and shows you some of the goods that you can pick up, and it has this happy, smiling family looking so happy that Rent 4 Keeps have got their claws into them. It is a really slick sales approach.
I went over and asked for one of the leaflets. I went back and had a look at what they were offering. I looked at two of the offers that they had for these consumers that they want to get their claws into in Penrith. There was a Hisense 55-inch high-definition television. I went to look at the model. I went online to Harvey Norman and looked at the price you could get it at Harvey Norman, which was $1,195. You could have got it cheaper if you had done it online somewhere other than Harvey Norman, but Harvey Norman is a good benchmark. Over the 36-month lease period that Rent 4 Keeps were offering, this Hisense 55-inch high-definition television would cost that consumer in Penrith $7,449. I just cannot understand why Centrepay and the Department of Human Services would provide any succour to this type of rip-off. I just do not understand it.
The other television they were offering was a Samsung 40-inch television. At Harvey Norman it was $845. Under Rent 4 Keeps it was $5,608. I cannot understand why anyone would defend this type of predatory behaviour against low socioeconomic communities in this country. That is the type of rip-off that is going on.
If you look at where the rental store locations are, you do not find any of them in the North Shore of Sydney. You do not find any of them in the leafy suburbs of Melbourne. You find them in regional Australia. You find them in low socioeconomic areas in the cities: Blacktown, Campbelltown, Mount Druitt, Parramatta and Penrith—areas where the average income is $49,000 to $50,000 a year. If you look at where the stores are set up, they are targeted there. It is Radio Rentals, Mr Rental, Rent 4 Keeps—all those companies—that are in there.
I was so concerned about it that I convened a round table of a number of welfare and consumer action groups on 20 April in Sydney. Overwhelmingly they indicated that this was unacceptable and should be stopped. As I said, I am not arguing that no-one should have access to this, but I am arguing that the government should very quickly do what it said it would do, and that is to have a look at these consumer leases. In the meantime, we should bring Centrepay back to doing what it was designed to do: to provide a forum or a tool so that low-socioeconomic workers or people on welfare have access to Centrepay to pay for goods that are absolutely needed. As I said, this is supported by many of the welfare and consumer action groups. In fact, the Consumer Action Law Centre put out a press release this morning supporting the proposition we are putting.
The argument we might hear from some of these rent-to-buy companies is that there is no option of doing a community service. Well, that is nonsense. The No Interest Loan Scheme, or NILS, is a community based program that provides access to fair and safe credit of up to $1,200. The StepUP loans scheme provides low-interest loans of between $800 and $3,000. The Good Money scheme is available, and there is a pilot program in Victoria. The AddsUP matched savings scheme provides matched savings incentives of $500 to help people save. There is a Good Energy scheme. There is a Good Insurance scheme. There is a Good Shepherd Microfinance scheme. These schemes operate in 650 sites around the country. There are 1,300 microfinance workers out there trying to help people to get microfinance and to keep them out of the clutches of these Radio-Rentals type mobs. They are engaging with 100,000 people each year, and they had 27,000 loans out in 2013-14 worth $29 million.
We should be ensuring that the alternative is promoted through Centrepay; that the alternative provides fair and reasonable access to consumer goods for low-income and welfare recipients; that we implement the independent review of Centrepay by Anna Buduls and John Falzon; and that the rip-offs stop. The first thing to do is to make sure that Centrepay is not used by these rapacious companies that are ripping off poor people. (Time expired)
I want to speak on the Social Security (Administration) Amendment (Consumer Lease Exclusion) Bill 2015 and say up-front that the government does not support it. And that is not because we do not support the intention behind this bill. I understand much of what Senator Cameron is saying about some of these rip-off merchants, and we agree with that; I do not disagree with many of the points Senator Cameron has made. But what I want to speak to today is the practicalities of this bill—why we think it is misguided, why we think it would not achieve what Senator Cameron no doubt genuinely wants it to achieve. So, I will go through some of those. We need to make sure that any changes to the system are well-targeted and actually do what we need them to do. Unfortunately, this bill, while it would exclude consumer leases from income management, would not stop Centrepay deductions for consumer leases.
Firstly, let's be clear about what we are discussing here. Centrepay is a valuable bill-paying service that helps many Centrelink customers manage their ongoing expenses. Welfare recipients are usually unable to access most forms of credit, such as credit cards. Regulated consumer leasing is one of the few ways of obtaining essential household goods quickly. Centrepay is voluntary and free for the customer. Deductions are made to elected businesses before the customer receives their welfare payment, which reduces the potential costs of bank fees from overdrawn accounts. Businesses pay a fee for each customer deduction. They generally appreciate how it helps customers to meet their obligations. For example, a person on welfare may need a fridge for their home. They pick up the fridge on consumer lease with monthly or weekly payments. They can then use the Centrepay system to have their repayments deducted automatically from their social security payment before it reaches their bank account. This is an important protection for people so that they are not stung with extra fees for late payments. Importantly, Centrepay is not a legislated program. The Department of Human Services is responsible for it.
I want to go to some of the issues the government has with this bill. The first is that excluding all consumer leases from Centrepay would interfere unduly with existing means of urgent access to necessity goods. The recent changes to Centrepay announced by the Minister for Human Services strike a balance between strengthening protections for customers and not interfering unduly with existing means of facilitating access to necessity goods, such as refrigerators and washing machines. These changes mean that unregulated consumer leases—that is, consumer leases that are not regulated by the National Consumer Credit Protection Act 2009—are no longer supported by Centrepay. Regulated consumer leases are not being excluded from Centrepay. Remember, though, that there are alternatives to consumer leases, such as the No Interest Loan Scheme, or NILS, operated by Good Shepherd Microfinance, and low-interest loans. We are expanding Centrepay to support these options and other microfinance approaches. But until these alternatives are available on a much broader and larger scale, many people will depend on consumer leases, so the use of Centrepay for regulated consumer leases should remain open.
I know that not every Centrelink customer is able to access a local NILS provider. For example, in some places in Far North Queensland there is no local NILS provider, so the Centrepay system remains vital for people. There are also differences of scale. In 2013-14 NILS approved 24,378 loans with a total value of $22 million. Compare that with the usage of Centrepay for household goods: in just the six months from July to December 2014, a total of 136,000 customers, with total deduction value over $148 million. Not all those deductions were for consumer leases, but the comparative volume indicates significant demand for household goods.
The second issue is that Centrepay is already being improved. With this in mind, I know that the intention of Senator Cameron's bill is to make sure that Centrepay is improved. That is something we agree on. But as I have already mentioned, major changes to Centrepay were already announced in May this year. I have spoken about how consumer leases that are not regulated by the National Consumer Credit Protection Act 2009 have been excluded. Funeral insurance has also been excluded, though Centrepay is still available for scheduled repayments of funeral expenses and prepaid funeral plans. Customers who have been using Centrepay for household goods or funeral insurance have been advised in writing of these changes. They have also been advised of alternatives to consumer leases.
These changes built on other changes following the independent review of Centrepay. Customer complaint mechanisms have been improved to ensure prompt and relevant responses by the department. There has been a full review of the Centrepay policy contract framework and assurance and compliance frameworks. Additional resources have been provided for assurance reviews of participating businesses and the Department of Human Services has reviewed and built on the information provided to customers about their Centrepay deductions by developing a customer deduction statement, which assists customers to better understand and manage their deductions.
The Department of Human Services has also added a link to the Australian Securities and Investments Commission's money manager on its website to help raise awareness of good financial management. The department has strengthened its relationships with ASIC, the Australian Competition and Consumer Commission and the Australian Energy Regulator. Agreements with these regulators allow for the exchange of information in relation to entities of mutual interest, including businesses seeking approval to use Centrepay or who are approved to use Centrepay.
These relationships have led to the exposing of businesses that may not have appropriate licensing, are operating illegally, are not complying with consumer law or are operating unscrupulously towards customers. The department has established a working group with Treasury that will consult on options to use Centrepay policy settings to improve disclosure of effective interest rates by Centrepay-approved businesses when offering consumer leases. No decision has been taken on a preferred approach, but this is an issue that is being explored. The Assistant Treasurer, Josh Frydenberg, announced on 7 August 2015 that there will be a review of the small-amount credit contract laws. He also announced that this review will also consider whether those laws should be extended to apply to regulated consumer leases. Any changes resulting from this review would potentially apply to consumer leases generally, not only to consumer leases under Centrepay or under income management. The government looks forward to the results of the review and is not pre-empting the outcome of that review.
The third issue is that the bill as introduced would not impact on Centrepay, but only on people supported by income management. I think this is a really important point. It is sensible and reasonable to consider further changes to the Centrepay system, including possible caps on or disclosure of effective interest rates. But that does not mean that all consumer leases should be excluded from Centrepay. It is important to note that the Centrepay scheme is not established by social security law. However, the legislation allows for Centrepay deductions through section 55 of the Social Security Administration Act 1999, which addresses how social security payments are paid into bank accounts. Subsection 55(4) of the act enables the secretary of the Department of Social Services or a delegate to direct that the whole or part of a relevant amount to be paid to a person in a way other than a bank account nominated and maintained by the person. Senator Cameron's bill seeks to amend two sections in the part of the Social Security Administration Act that is concerned with income management. It would prevent expenditure under income management on certain consumer leases, but it would not affect payment of deductions under Centrepay.
The fourth issue, excluding rent-to-buy contracts from income management, is not supported. I will go through why. It is the view of the government that if Senator Cameron's bill were enacted it would mean that people on income management would not be able to pay for any consumer lease obligations, regulated or unregulated, using their income managed money, regardless of whether they have existing obligations.
That is a critical point. The purpose of income management is to ensure that the priority needs of welfare recipients are met and that they are protected from the things that would undermine them, their families and their communities. These are things like alcohol and gambling. Income management was not designed to stop people from getting access to a refrigerator to store their food or a washing machine to clean their clothes, if they need to rent those because it is the only way they can acquire them or because it is the way that they choose.
The important point is that they have access to the information that would help inform their choice. That is why the department's customer service officers will only set up these deductions following a discussion with the customer about possible alternatives. These include Centrelink advance payments, no- and low-interest loans from community organisations, lay-by or savings accounts for the goods. Customers are also referred to the ASIC-developed rent versus buy consumer lease calculator on the department's website to assist them in understanding the true cost of a possible lease arrangement.
The addition of consumer leases to the list of excluded goods for income management is not supported, as many people would have existing obligations of this type at the time they enter the program. For many people, these types of arrangements continue to be a practical option for obtaining basic household goods. I think that this is actually the strongest point against Senator Cameron's bill: people who have existing obligations could be severely undermined by this legislation. I know that that is not the intent of it, but we believe that that would be the effect if it were to pass through the parliament.
Let's again return to the ultimate purpose. People on social security payments still need to occasionally purchase goods such as fridges and washing machines that contribute to an acceptable standard of living. The Centrepay system helps people do that through consumer leases or short-term loans, while ensuring there is less risk of being hit with bank fees or fines for late payments. We do not want people who are already doing it tough to face further problems, so we have changed Centrepay so that consumer leases that are not regulated are no longer part of the scheme. But people still sometimes purchase these goods or enter into some of these arrangements. The government is not excluding regulated consumer leases from Centrepay, so people can still get these necessary household goods. In this context, the government does not agree with Senator Cameron's rationale.
Centrepay is already being improved without legislative changes. The bill as introduced would not actually have the impact its proponent purports to want on Centrepay. Instead, it would restrict people who are supported by income management by adding rent-to-buy contracts to the categories of goods and services excluded for income management purposes. It would not restrict the use of consumer leases under Centrepay.
This change to income management arrangements is not supported by the government. Customers may have existing consumer lease obligations when they enter income management and they may need to continue to meet those obligations. The key point is that people on income management are aware of the alternatives. Departmental officers are providing and will continue to provide such advice to them.
Because the fine print can sometimes have unintended consequences, this is a clear case of why changes to our welfare system must be worked through carefully and methodically. The minister and this government are going to keep working with the Department of Human Services and the relevant consumer protection regulators to make sure people are not being ripped off by lease providers. We are going to make sure the Australian Securities and Investments Commission takes action against these providers and we will work towards making sure people in need get the goods they need in the most appropriate way. This bill is not the way to protect these people and does not do what it claims to do. For all of those reasons the coalition will not be supporting the bill.
I rise today to make a contribution to this debate about the Social Security (Administration) Amendment (Consumer Lease Exclusion) Bill 2015. This is an incredibly important issue and I welcome the opportunity to have this debate in the chamber. I think that many people were incredibly surprised and dismayed to learn that Radio Rentals derives close to half of its revenue via automatic deduction payments channelled through Centrepay. This is an extraordinary niche market that does not really reflect the policy intent behind Centrepay, which is to help those on government payments manage their cash flow by putting aside money for quarterly, annual or big bills. The effective interest rate on these goods is as high as 70 per cent a year, and that is almost four times that of an ordinary credit card.
I do agree with the broad intent of this bill to take steps to address predatory loans. However, before we start looking at controlling how people spend their money and looking at this particular issue, I want to look at the important issue that this brings up, which is both the cause and the effect of debt on those who are on Centrelink payments. I have been looking very closely at New Zealand social services and their approach. Given the other debates we are having in this chamber about the changes the government wishes to make to many social services and social security payments, I took the opportunity to have a look at what is happening there. Aside from the fact that I think that although the government is trying to take some of the approaches from New Zealand and implement them here they are misquoting what is happening in New Zealand, there are many things that we can learn from what is happening in New Zealand. But I will save some of the more in-depth comments on some of those approaches till we get back to debating the Social Services Legislation Amendment (Youth Employment and Other Measures) Bill 2015 that is currently before this place.
As part of looking at what is happening in New Zealand, I came across some excellent research in New Zealand and a particular project called the Family 100 project and a report called Speaking for ourselves. The goal of this project was to understand what factors are keeping some families in poverty while other families are able to move forward and live more secure lives. It was a joint initiative between the Auckland City Mission and three New Zealand universities that aimed to document and explore the everyday experiences of people in poverty over the course of a year by actually talking to the people that are living in poverty. The project involved fortnightly interviews with 100 families that resulted in 339 hours of transcribed interviews. Once the project was finished the report showed that debt was No. 1 of eight clearly defined drivers of poverty in New Zealand. Debt, justice, housing, employment, health, food insecurity, services and education were clearly identified as those eight drivers of poverty, and of those debt was No. 1.
I have not seen a project of similar nature or scope undertaken in Australia, although there are many that have looked at poverty. Dropping off the edge 2015 from the Jesuit Social Services by Tony Vinson was the latest one. However, these two reports do reflect the types of findings that we see through reports that have been carried out in Australia by ACOSS, Uniting Care, Salvation Army, Anglicare and a huge number of other social service providers who are working in this place.
I want to share some of the findings from the Family 100 report because I think it is very relevant to the matter that we are discussing here. One of the key conclusions that we can draw from the analysis of debt is that low-income families are paying a poverty premium. They can only source expensive credit, and this is keeping them in poverty. In other words, those that can least afford it are paying the highest interest rates and they are forced into going to what some would say are the more dodgy credit extenders because they cannot get loans from banks. In the words of one participant:
Debt causes debt. The worst thing about having debt is when you really need something you have to use the most expensive options…
The report shows really clearly that people do understand how to budget effectively but that they have no option but to incur increasing levels of personal debt to cover their day-to-day expenses because they simply do not have enough money. I think this is reflected in the Australian experience. We saw it in the debate around income management where people said that they knew how to manage their money; they just did not have enough of it.
What the Radio Rentals story highlighted is that this cycle is exacerbated by not being able to access major financial institutions and having to take highly inflated interest rates. We saw this clearly in the analysis of the Radio Rentals loans. The individuals who took up these offers to lease goods through them ended up paying up to seven times what they would have paid if they had bought the items outright. It is worth thinking about how the inadequacy of social security payments themselves is an underlying cause of this issue. The Credit Suisse report notes that the biggest proportion of Centrepay users are on the disability pension, 30 per cent, Newstart allowance, 20 per cent, and parenting payments, 14 per cent. These groups are clearly overrepresented as Centrepay users compared with their proportion of Centrelink payments. It is probably also worth noting that Centrepay has identified that disability support pensioners were disproportionately represented in payday lending, Centrelink advance payments and urgent payments. The adequacy of the payments has been considered in this chamber. In fact I chaired a Centrelink inquiry, and the government senators who were on that inquiry—they were not in government at the time—agreed with the weight of the evidence. The committee questioned 'whether Newstart allowance provides recipients a standard of living that is acceptable in the Australian context for anything but the shortest period of time'. So even those senators who are now on the government benches acknowledged at the time that Newstart payments were inadequate. When you are starting with a completely inadequate payment, what hope do you really have of being able to stay out of debt?
The other thing that the Family 100 report found was that living with debt leads to social exclusion and self-imposed isolation. This in turn leads to a range of other problems such as physical and mental illness. This prevents people from moving forward with their life. It is incredibly hard to go out and compete for a job interview when you are so isolated and under such stress. It is hard to make good long-term decisions when there is a day-to-day struggle to keep your head above water. Debt is a psychological burden, particularly when it seems inescapable and unmanageable without incurring yet more debt. The report also touches on the interconnection between debt and health. Families talked about taking on debt for health reasons such as dental work, glasses or to pay for unexpected illnesses, doctor visits and medicine. This is a reality for many Australian families too. ACOSS has reported in its 2014 poverty report that, despite seeing good health as an essential, families will neglect their health rather than incur yet another debt. I think these effects are really important to understand because we also need to understand why people sign up for unfair loan arrangements.
It is also worth noting that education was another driver of poverty identified in the Family 100 report. Without a high level of financial literacy and the ability to fully understand the contracts, it is easy to see how people sign up to unfair contracts and fall into debt traps that they cannot find their way out of. Debt is clearly a wicked problem that leads to a lifetime of disadvantage. It is well worth our time to think about how we can reduce its impacts on low-income families. It is absolutely essential that we address its impact. But as we consider legislating against lend-lease programs for Centrelink recipients, we also need to consider other alternative credit options. We do need to address the debt issue. Addressing consumer lend-lease programs is absolutely essential. We do need to do that, but we also need to be addressing the wider issues of debt for those on low incomes and particularly those on currently inadequate income security payments.
While I support the intent of this bill in drawing attention to the predatory nature of consumer leases, I want to highlight that we cannot simply deal with one issue without dealing with these other issues. This is one step that we need to be taking, and it will not solve the overall problem. I acknowledge that, but we do need to start somewhere. I know that a number of community workers and those working in the community services space have concerns that if we pass legislation in a vacuum without broader reforms we are missing an opportunity. For those who are working with clients in the community who are under incredible stress and at risk of slipping further into poverty it is often the case that imperfect access to lend-lease credit to purchase whitegoods is better than no access at all. So we need to realise that and we need to be making sure that we replace people's ability to access high-interest credit with a much fairer process. I agree with this perspective. We need to be looking at how we can help low-income households replace broken whitegoods and meet the debts that they inevitably need to face because they are on such a low income. And how do we help them obtain a standard of living that those around people living in poverty take for granted? The impact of not being able to access a replacement is also a contributor to debt. Just think about it: if you do not have a washing machine you have to go to a laundromat and pay to use those machines. If you do not have a fridge, you end up eating more pre-prepared food.
I want to take a moment to reflect my serious concerns about income management. I have expressed those concerns in this place many times. Income management does not produce the results the government claims that it does or that the supporters of income management claim that it does. It is a paternalistic approach that is punitive and unfair and it takes control of people's personal decision making and takes their dignity away from them. I had a number of emails about that around the healthy welfare card, and that legislation will be dealt with in this place at another time.
We do support the use of Centrepay because it is optional. People can choose their level of participation rather than having it dictated to them like income management does. I have got to say it does make me uncomfortable that we are talking about shutting down people's options when it comes to the use of Centrepay. However, having said that, the government is not taking enough action to address the issues around debt or to address these absolutely outrageous levels of interest that those on low incomes are paying. They are paying, as the New Zealand report said, 'premium interest rates'. They are paying the most expensive interest rates.
We need to be looking at this in the context of a range of other actions that need to be taken. Affordable credit should be provided, whether it is through government-sponsored microcredit schemes or, importantly, capping interest rates that are charged by lenders such as this. We also need to be looking at a very strong suggestion that was made in New Zealand: that there is a role for helping consolidate debts and ensuring that there is a lower interest rate for those consolidated debts. What we see from this report and what I have heard from talking to people is that people borrow money to pay back money. Because they are trying to get out of one debt, they will borrow more. So it is a constant round of borrowing money, which only leads to more debt—lifelong debt. People, as I said, talked about the crippling nature of the burden and the psychological impact of that debt.
We need to see some leadership from government to demonstrate not just stopgap measures but long-term measures to assist low-income families. Obviously, one of those measures for those who are living on income support payments is to increase income support. I will note: while we are busy copying New Zealand, we seem to be only taking some of the bad bits, not the good bits, and one of those is, surprise, surprise, that they actually increased income support payments as part of this package. I have not heard that from the government yet. Maybe we should be looking at that before we put in place health and welfare cards.
So far the government has been primarily focused on making life harder for those on low incomes, and particularly those on income support. We have seen attempts to reduce payments by freezing indexation; attempts to deny those under 30 income support for six months at a time; lifting the age of eligibility for Newstart to 25; and now attempts to force people to wait for income support for four weeks—in fact, it is five weeks when you add the week of waiting.
We have also seen big cuts to important programs that actually help low-income households. Millions have been pulled out of the discretionary grant program in the Department of Social Services, and that has seriously affected Australia's ability to address the causes of poverty. We have seen millions—half a billion—pulled out of programs for Aboriginal and Torres Strait Islander peoples. A number of programs have been shutting their doors over the past six weeks. They were the so-called lucky services that had their funding extended for six to 12 months; however, they are closing now. In my home state of Western Australia we have seen the rolling back of financial assistance support.
We are not just losing services; we are also losing an incredible amount of knowledge about how individual communities are coping with the pressures of living with debt. We are losing institutional knowledge about what has been tried and what has worked. We see pilot programs constantly started and then not continued. We are also losing passionate and committed people who are motivated to find solutions that will work at an individual level and who can provide advice and support, and create the change that is needed at local levels.
We need to think very carefully about a holistic approach to how to improve the situation, how we tighten the rules but also how we work with financial institutions to make sure that those on the lowest incomes are not paying the premium interest rates. How can we let this occur in a society where those who are the most vulnerable are the ones who cannot access cheaper credit, who are paying the highest interest rates which leads to an increasing spiral of debt that keeps people in debt and makes it harder to find work? Living in poverty, we know from the evidence, is yet another barrier to employment. Debt is part of that. We should not be standing back and letting Centrepay pay the loans at some of the highest interest rates in this country. We need to address this particular issue.
As I said, we need a more holistic approach to this problem. The NILS program is fantastic, but we need more programs like that. We need to enable people to consolidate their debts and get their head above water. If we can do this, we know that—and, as I said, the evidence shows—people are actually very good at being able to manage their money. They just do not have enough of it. So if we enable people to consolidate their debts and manage their finance without having to be constantly chasing new loans to pay back the other loans, we know that they will get their head above water and deal with one of the barriers to employment.
I urge everybody in this place to look at the excellent research about poverty and not just the examples that I am quoting from New Zealand—the family 100 report—but also the excellent work that has been done here. We know that poverty is a huge issue for low-income families, particularly those living on income support. We need to acknowledge that. We need to look at the work that has just been completed, the latest Dropping off the edgereport. When you look at the priority areas, you know what? They are not that much different from seven years ago. Unfortunately, they are not that much different from the programs that we are addressing—even though we have learnt so much we are still not addressing those fundamental drivers.
It makes my blood boil when, instead of dealing with these issues, we see some of the state governments and the Commonwealth government withdrawing more services—withdrawing more funding and financial advice services is not the way to go. Please read the report. Please look at this debt issue. It is absolutely critical that we address it.
I wish to congratulate Senator Cameron for drawing the attention of so many in this place and also in the wider community to how the horror—and I use the term quite deliberately—of the situation of those who are most vulnerable in our community can be made worse by the actions of people with a completely profit driven motive.
The bill that Senator Cameron has put before us not only looks at the area of consumer leases which have been considered over a period of time; it particularly asks whether our Centrepay system—which works through the Department of Social Services with the Centrelink network to support people with their budgeting and coping strategies—is the right model for those who have such a profit driven impost on them. That is the background to the bill.
The bill is a stimulant to look at wider issues. This argument that Senator Siewert has put before us is one element of a much wider discussion. It does not pretend to be the answer to all the ills of poverty in our society, it does not pretend to identify all the many impacts that cause people—through desperation, illness or isolation—to make decisions about which they have no real knowledge or power. But it does take one step forward and I think it needs to be considered. Already it has raised awareness in this place, in the department and in the wider community about the issues of which we are speaking. That is in itself a result.
I acknowledge the work that Senator Cameron has done over the last couple of months within the community and also within the department to ensure that change does occur. I also want to acknowledge the work that has been done by the minister. She has responded by looking at how the Centrelink process could operate better, but we do not think it goes far enough. I know that Senator Seselja, in his contribution, worked through the department's responses, but the actions that were taken in June this year by the minister, through the department, to restrict the way the process operates, do not stop it happening. Basically we are saying: with respect to the extent of interest payments that are linked to the process of people being caught up in extended consumer lease payments for things that they need in their lives, that should not be paid for through the social welfare system.
This is not a new discussion. I know that for many years people in the community have been asking questions about whether the system of consumer lease should be able to operate in a largely unregulated market. There does not seem to be any real restriction on the conditions around consumer leases and the amount of extra interest that consumers must pay if they are caught up in one of these leases. And it covers a wide range of areas. So far in the discussion we have concentrated on white goods, but it is not limited to white goods. If you look at the brochures and the consumer advertising, you see that just about any consumable—from computers to household goods—is available through a range of firms which operate in the Australian market. They are all legal and they are all public. I share Senator Siewert's discomfort about restricting choice. Often I am up here saying that we should encourage choice and provide a wide range of choices, and that is my dilemma in this whole debate: on the one hand allowing everybody in our community to have open choice and, on the other hand, saying through this bill that there should be a limit for the social security system in paying in that way.
I have agonised about this and I have listened to so many people, including Senator Cameron, about the point. But when I actually look at the evidence which has come out from consumer groups, consumer legal groups and ACOSS, I am troubled by the predatory nature of the marketing that can cause people to make decisions and then be caught up in a system over which they have no control. So I have come down on the side of supporting Senator Cameron's push that we should have restrictions in the Centrepay system which say, 'this is one element that should not be supported in this way.' I say that because I believe that the circle of poverty that Senator Siewert described in her contribution links into this whole area.
We have also had discussions in this place over many years about the need for financial literacy and for acknowledgement and transparency of processes. I have looked at some of the contracts and I see that there is detail provided in many of them about the terms of the rental processes and the amount of money that is involved; but when you see information that says that you can buy a fridge for $1,148 at an outlet but, through a consumer lease process, it can cost $4,602 over three years, I see a problem. Or when I see a laptop that can be bought for $898 but someone who takes up a consumer lease pays $2,644, I cannot accept that that is a fair system. I cannot accept that the process that says, 'this is what you can get for immediate ownership of a product but this is the kind of added cost that you would have.' I have trouble with that. I also have trouble with the fact that someone who takes on such a contract may not be fully aware of what they are doing and they do not have any opportunity, without further financial impost, to get out of that process. That is on the one side in terms of the products about which we are speaking.
The other element is that we are supporting that process through the Department of Social Security, through a system which was set up to support. We are actually supporting a market share of businesses through the most vulnerable people, who have the most reduced incomes, who are often completely reliant on social welfare. The discussion about the wider impact of consumer leases, how they operate and how they are regulated—and we have already seen issues around payday lenders in the same discussion—is one issue. This bill is saying that that should not be an allowable deduction through the Centrepay system which is in place already.
I am fully aware that the intent of the Centrepay system was to support people with their financial needs, and I well remember the focus at the time when it was introduced, because I was working in the area, and I remember how we promoted the system in the community. It was looking at people being able to balance things like energy expenses and rent—processes that they already had in their budget. The system would ensure that there would be a regular process through which they would have security that they would be able to have those things paid. Over the years, as Centrepay has developed, guidelines have been put in place which point out what can be funded through this process and what cannot be. And there has been an evolution to respond to people's needs. Through that process, this area where people have had their consumer leases paid in this way has fallen in as one of the allowable aspects. When people are caught up in these contracts, they know and the businesses certainly know that they will have absolute security of payment because it will go through someone's Centrelink payment.
The figures for the percentage of Centrepay that goes to businesses that are involved in the consumer lease market have grown, to the extent that it is now one of the highest payment areas. That in itself should be cause to question why this is happening and how many people are involved in this way, and to see whether there are any links with the consumer about their knowledge and about their consumer awareness and consumer literacy in the process.
Over the years, I have worked with consumer advocates and with the Consumer Action Law Centre, who have done a lot of work in this area. As always, we can talk in theory and in generalities but the real issue is that it comes down to individuals and the impact on them. One of the Consumer Action Law Centre's newsletters actually put the issue out there about the way Centrepay operates. It had a heading which attracted my attention, 'It's the human cost of rent to buy.' It is a public document. The article was about a Fitzroy resident who was a customer of Radio Rentals and how she was signed up for a product. She said that it was the normal practice when she signed up and gave her details that the options for a Centrepay payment was part of the transaction. It was not a request, not an add-on; it was an automatic part of the transaction. That was how the process operated. There was no alternative offered to Centrepay; it was automatic.
She said that from the time she signed her contract in 2013 for the product, she received constant communication offering her more products to rent. As she was a customer of good standing because she had a secure way of paying because it was through Centrelink, she was offered more and more attractive options. We all fall into that, when we are offered something that is attractive. For some people, though, that can develop into a spiral of debt and a spiral of commitment which can get out of control. It was hard for her to keep control and it got to the stage where she could not pay any other bills because the amount of money that had to be put into the Centrepay process for her consumer leases took so much of her payment.
Whilst that is a personal example and only one, and there could be reasons in her particular circumstances, I think it highlights the issue that if you have a business model which is based on security of payment through the social welfare system, questions should be asked about the way that operates. In fact, there must be questions asked about the way that operates. This is what this bill is all about.
One of the other things that must be put in place is to ensure that there are options for people who have emergency need. That has always been an issue and it was certainly one of the issues that was raised by the welfare rights centre, who do strong work in the community for people who are linked into our social welfare scheme. The welfare rights organisation did raise issues around giving people options for choice. One of the things that has come through the discussions over the last few months on this issue is the need for a secure way of financing people who are in need. One of those must be the Good Shepherd Microfinance centre, which our government introduced when we were in government and has been supported throughout.
Good Shepherd Microfinance provides certainty and a guaranteed process for people in the social welfare area for loans of up to $1,200 for particular purposes. They have over 690 outlets across the country. I want to see more of these centres made available. They work very closely with people who are seeking financial support who have limited income and who are often reliant on social welfare but need an option for immediate purposes. The Good Shepherd offer NILS, the No Interest Loan Scheme, which works with individuals to build up their strength and knowledge of the system. They provide the financial literacy which is so necessary for dealing with people's ability to budget and their financial security.
In providing the loan, they work with people to ensure they know about the strictures that surround repayment and how to budget. They have a personal relationship with the process. This is a very strong system. It has been in place now for a number of years. There are fantastic audit reports about how it operates. It is also supported by some of the larger financial institutions in our country which is a good thing and shows these financial institutions understand the need to provide financial security and knowledge for these people.
The bill before us offers one element of discussion about how we handle the overwhelming issues of people in need and people who are disadvantaged. This is a form of protection and it is a necessary intervention, I think, by government. My background is that I worked with the then Department of Social Security. At that time, there was a concern about how vulnerable people can be taken advantage of by businesses in different ways and how they can keep these people ignorant of their financial circumstances and force them into choices over which they have not control. There were terrible stories of businesses and organisations that would even keep people's payments for a period of time rather than allowing them to have ownership of their entitlements. We stopped that. There was organised research and organised intervention by the government to ensure that we had rules that ensured that people would have ownership of their own payment—that they would not have anybody else being able to take that and profit by their disadvantage. That was in the 1980s and early 1990s, and we do not have that overt operation any longer.
What we have are much more sophisticated financial business processes. We have seen the way the Centrepay system has been able to be used effectively by business to ensure that their business is secure, that their payments are secure, without any regard for the needs or the pressures on the people who are taking out their consumer leases. To me that shows a more sophisticated model of people being able to perceive disadvantage and profit by it, and that is offensive. We should not allow our government systems to be able to be used in such a way.
I respect the fact that the government has looked at the range of information and the lobbying that has gone on over the last few years and there have been changes made. As I have said, the minister put out a process in July which has limited some aspects of consumer leases. What is most worrying is that the day after the minister made that announcement some of the largest businesses who are involved in this process publicly announced it would have little impact on their business. That is not only concerning but also, for me, almost a challenge. If their business will not be impacted by the changes that have already been made, I believe there should be information and acknowledgement that there needs to be more change. Senator Cameron's bill puts that challenge to all of us to acknowledge that this, we believe, is a misuse of a system that was set up to be supportive. This does not acknowledge that the real need is for the people who are already having financial difficulty and who are already in the social welfare system. Their needs and their concerns should be the priority concern rather than ensuring that businesses are able to make the best use of the Centrepay system.
It is really important that the Senate consider this work. It is important that we work with the organisations that I have already named that have been working in this field for many years, and continue to work together so that we can not only come up with a response to the issue of consumer leases but also take on board the wider concerns we have about people who need to have effective support in our community. We need to have a social welfare system that does provide realistic support. We need to truly consider how we as a community ensure that there is not the kind of vulnerability, or business practice, that causes people to be damaged rather than supported.
When the government announced it will restrict the type of consumer leases customers can pay for using Centrelink it was to ensure that low-income consumers are protected. The number of low-cost finance options supported through the service will also increase. The Minister for Human Services, Senator the Hon. Marise Payne, said:
The new criteria for consumer leases will mean those leases that run for an indefinite period, or have a duration of four months or less, will be excluded from Centrepay and only those which are regulated under the National Consumer Credit Protection Act 2009 will be allowed.
Minister Payne said:
These leases provide better protection for vulnerable customers as businesses must comply with the responsible lending obligations overseen by the Australian Securities and Investments Commission …
She went on to say:
A Department of Human Services working group with Treasury and key stakeholders will review Centrepay policy to promote the disclosure of effective interest rates by Centrepay registered providers.
Vulnerable families often find themselves in positions where the necessary items they require to manage their households are simply out of reach. To have schoolkids' clothes washed and ready for school on a weekday is perhaps sometimes not in the realm of those who are struggling to make ends meet and who cannot afford to go out and purchase whitegoods for their homes, particularly washing machines and refrigerators. What do you do if your refrigerator does not work or your washing machine is not working? You use a consumer lease and you use Centrepay to pay back that lease. Currently in Queensland, Centrepay—the voluntary bill-paying service—includes businesses that align themselves as companies that will allow social inclusions such as paying for sporting fees.
Excluding all consumer leases from Centrepay would interfere unduly with existing means of urgent access to necessary goods. The recent changes to Centrepay announced by the minister strike a balance between strengthening protections for consumers and not interfering unduly with existing means of facilitating access to necessary goods. We have just heard Senator Cameron say that Centrepay has been an outstanding success. This government seeks to enhance that, not detract from it. It is a simple budget tool that is free, and Centrepay deductions are easy to do. Deductions cannot start without permission—this is a very good point that they make. The government strongly encourages people to carefully read the fine print and research all available options before signing on the dotted line. This means that these families, with the knowledge that they have increased protection aids, can utilise Centrepay to provide their family environment with the goods they need to make sure their family functions well. Is it not our commitment to the people of Australia to provide them with the opportunity and balance to enable them to have a normal family?
Regulated consumer leases are not being excluded from Centrepay. Welfare recipients are usually unable to access many forms of credit, including credit cards, bank loans and other types of loans that exist out there. Regulating consumer leasing is one of the few ways of obtaining essential household goods quickly. There are alternatives to consumer leases, such as the no-interest loan scheme operated by Good Shepherd Microfinance and other low-interest loans. Centrepay is being expanded to support those options and other microfinance approaches, but until these alternatives are available on a much broader and much larger scale many customers will depend on consumer leases, and the use of Centrepay for regulated consumer leases should remain open.
The department has strengthened its relationship with ASIC, the Australian Competition and Consumer Commission and the Australian Energy Regulator. Agreements with these regulators allow for the exchange of information in relation to entities of mutual interest, including businesses seeking approval to use, or approved to use, Centrepay. These relationships have led to the exposing of businesses that may not have appropriate licensing, are operating illegally, are not complying with consumer law or are operating unscrupulously towards customers. This step clearly shows that the government has at heart the protection of consumers foremost.
The bill that we are debating today suggests that all operators are shonks—and yes, there are some that are. The government and the minister are aware of this and that is why these relationships with vital regulatory bodies have been enhanced. The goal is simple: allow access to necessities to those who currently struggle and protect them along the way. I agree with previous speakers that we should not take Centrepay away. Social inclusion and pride can be as simple as the kids leaving the house each day with clean, ironed school clothes on their backs and a lunch box full of unspoiled food. Yes, there are shonky dealers, but the majority of credit providers uphold good credit ethics. This bill suggests that credit providers work under the guise of, 'The providers will rip you off and you are not smart enough to know it.'
This is continually the line that those opposite take. They make people feel vulnerable and weak and they profess that they are the only political party that can help. Continually pushing people towards welfare is demeaning to those who have a greater outlook on life. That is why this government will educate those on Centrelink who choose to utilise the Centrepay options. The Department of Human Services has also added a link to the Australian Securities Investments Commission Money Manager website to help raise awareness of good financial management. We as a government believe that people can be responsible in the way they manage their finance. We will continue to educate them, allowing a more adept choice of consumer spend from their resources. Not all families that receive Commonwealth support choose to—nor are they misguided in their choice of how to—utilise this support to best protect themselves.
I am advised that, if Senator Cameron's bill were enacted, it would mean that people on income management would not be able to pay for any consumer lease obligations, regulated or unregulated, using their income managed money, regardless of whether they have existing obligations. The purpose of income management is to ensure that the priority needs of welfare recipients are met and that they are protected from the things that would undermine them, their families and their communities. These are things like alcohol and gambling. Income management was not designed to stop people being able to rent a refrigerator to store their food or a washing machine to clean their clothes if renting is the only way they can acquire them or if renting is the way they choose to acquire such things.
The bill as introduced would not actually have the impact on Centrepay that its proponent purports to want. Instead, it would restrict people who are supported by income management, by adding rent-to-buy contracts to the categories of goods and services excluded for income management purposes; not restrict the use of consumer leases under Centrepay. The change to income management arrangements is not supported. Customers may have existing consumer lease obligations when they enter income management and they may need to continue to meet those obligations. The key point is that people on income management are aware of the alternatives. Departmental officers are providing and will continue to provide such advice to them. The government will continue to support and educate people who enter such agreements and, most importantly, the government will continue to work with stakeholders to weed out dishonest sharks that prey on the weak.
I rise to speak on the Social Security (Administration) Amendment (Consumer Lease Exclusion) Bill. I would like to start by congratulating Senator Cameron for bringing this bill forward and for the work that he has done in formulating this bill and raising awareness of what is happening with people on very limited incomes who use Centrepay. This bill seeks to exclude consumer leases—or what are commonly called rent-to-buy or rent-try-buy agreements—from Centrelink's bill paying service, Centrepay. The intention of this bill is not to limit the choices of Centrelink clients; the purpose of this bill is to stop companies pushing Centrelink customers—many of whom may experience financial difficulties or be particularly vulnerable—into agreements that financially exploit them.
Centrepay was introduced in 1998 to help Centrelink clients budget by paying rent and utility bills through deductions from their fortnightly payments. The central purpose of Centrepay is to act as a budgeting and financial capability tool. Centrepay is undeniably a very useful service which helps people prioritise and meet certain critical expenses. However, the impact of allowing consumer lease providers to access Centrepay is that they are able to be paid as a priority without Centrelink clients being able to allocate money for essentials like food and transport. In fact, while utility bills still account for around a third of Centrepay deductions, household goods leases now account for 14 per cent of all deductions, and this number is only growing.
People turn to these consumer leases because they cannot afford to buy household goods outright or cannot access financing and credit. But, ultimately, these consumer leases are one of the most expensive ways for people to buy household goods, with interest rates far beyond that are usually charged by credit cards and in-store credit arrangements. In Senator Cameron's contribution to this bill he articulated very well for senators the actual rates that are being charged and the outrageous profits that are being made.
A Consumer Action Law Centre report, The hidden cost of rent to own, found consumer leases cost at least twice the normal retail price of most goods—usually three times and often more. I would encourage anyone in this place who is not aware of this issue to contact the Consumer Action Law Centre to hear about the people they have assisted—for example, the grandmother who paid nearly $3,000 over several years for a vacuum cleaner, or the single mother who signed up for a consumer lease and was then inundated with offers until over $120 was being deducted from her income support through Centrepay, leaving her unable to pay other bills.
The common element to all the stories is that people simply do not know that there are other options. People are not choosing this—they do not know that they have a choice, or they are being forced into using Centrepay. Many of the companies are taking advantage of the fact that there is a view that there are limited options for people on low incomes who are wanting to purchase household items. While financing options for low-income earners are undeniably limited, they are not limited to these types of agreements which carry exorbitant interest. There are other options out there, and I would highlight the great work of some organisations—in her contribution, Senator Moore mentioned Good Shepherd and microfinancing providers like the NILS network of Tasmania, in my own home state.
The Good Shepherd microfinance, through its no-interest loan scheme, offers no-interest loans of up to $1,800 for the purchase of essential household goods. The NILS network operates across 609 locations through 257 community based organisations across the country. In comparing the two options, Mr Adam Mooney from Good Shepherd, said:
If you want a fridge that costs $650, for Radio Rentals their average contract will see you pay three times that, around $1,800.
That is from $650 to $1,800 dollars. He continued:
For us, you take out a no interest loan from one of our 600 locations and you pay $650 over 18 months, rather than $1,800 over two, three years. So there are alternatives out there.
There are alternatives out there, and these are the options that should be promoted and supported for people to use. Consumer advocates such as the Consumer Action Law Centre and financial counsellors, including their peak organisation, Financial Counselling Australia, have regularly reported that significant numbers of people are coming to them in financial stress as a result of entering into consumer leases using Centrepay.
There is an ever-increasing number of financial service providers in the market looking to take advantage of and to exploit people who have low incomes and are under some financial pressure. Consumer leases should be excluded from Centrepay for the same reason that payday lenders are. On this point, CEO of the Consumer Action Law Centre, Gerard Brody, has said:
It makes no sense that businesses charging three to five times the retail price of household goods have access to Centrepay. We don't let high cost credit products like payday loans deduct from Centrepay. It's time to end the free ride for consumer lease providers.
As far back as 2007, the Micah Law Centre has noted that consumer leases are not genuine leases, but 'loans in lease clothing'. In a 2013 paper published in the Australian Business Law Review, Melbourne University law school academics found that inconsistency in the regulation of consumer credit and consumer leasing is creating loopholes through which consumer credit contracts can be passed off as consumer leases. The government should not aid or be seen to support arrangements that make a profit from exploiting people in our community who are financially vulnerable.
Some of the companies involved in providing consumer leases have been found to be engaged in a number of questionable practices. Earlier this year Make It Mine, a consumer leasing business that specialises in white goods, computers and other electronics, was found to have breached consumer credit laws by the Federal Court. This is an organisation that was making use of Centrepay. The court found that Make It Mine failed to inquire about whether the rental rates were affordable for more than 20,000 customers between April 2011 and March 2013. This is a pretty basic requirement under responsible lending obligations, but Make It Mine customers only had to sign the leasing contract for the deductions to begin. These customers were not informed about the details of the agreement, they were not told the actual value of the goods that they were leasing and they were not even told how much interest they would be paying. Centrelink recipients make up a significant portion of the customers of organisations like Make It Mine, and a vast number of them use Centrepay to make the payments.
In March of this year an investor report found that another consumer leasing company, Radio Rentals, generates about half of its nearly $200 million revenue through Centrepay deductions. Mr Brody from the Consumer Action Law Centre highlighted how staggering this figure is, and said:
But to see … such a high proportion of their revenue being paid from people who are Centrelink recipients, they are people on welfare payments and this business is sustaining itself on that, is astounding.
Radio Rentals advertisements specifically target people on Centrelink payments. I am sure that many of us here would have seen the Radio Rentals ad where a customer proclaims: 'I'm on benefits and I have got a fair go.' But this is not a fair go—this is a trap. These companies are essentially high-interest lenders for the purchase of consumer goods. Allowing them to access Centrepay deductions gives the mistaken belief that they are supported by the government, allows them to target people who may be financially vulnerable and gives them priority over other essentials that people need to purchase, like food and transport.
I acknowledge here today the steps taken by Senator Payne to address this issue. However, on this side we feel that these fall well short of what is needed and will have negligible results. In May of this year the minister announced that the government would be restricting the type of consumer leases customers can pay for using Centrepay, to 'increase protection for vulnerable Centrelink customers.' This is a step in the right direction, but it will only achieve small protection for vulnerable Australians from the unfair costs and questionable behaviour of consumer leasing. In response to the minister's announcement, Mr Brody from the Consumer Action Law Centre said:
Access to Centrepay simply dulls the incentive for consumer lease providers to lend responsibly— it gives them priority access to people's social security income.
Today's announcement captures the small unregulated sections of the market, but it's business as usual for the providers who cause the majority of the problems.
It simply is not enough. I also welcome the government's review of the credit laws which cover both payday lenders and consumer lease companies. However, this review is not due to report back until the end of 2015. This is simply too long to wait when we have the opportunity to take action on this specific issue now.
If the minister is serious about increasing protection for vulnerable clients, then all consumer leases need to be excluded from Centerpay. Those who oppose this bill might say that this is really a decision of the person entering into the agreement. That it is really the decision of the person choosing to use Centerpay but as I said earlier, that simply is not the evidence we have. This is not what is happening. People are not being given the opportunity to make informed decisions.
This bill will not stop people freely walking into a consumer leasing company and signing up to rental contracts they may not be able to afford. However, it would stop the government, through Centrepay, facilitating the growth of a business that is now clearly preying on financially vulnerable people and creating poverty traps. We should not allow government processes to assist businesses which seek to make such outrageous profits. I urge the Senate to support this bill.
I rise to support the Social Security (Administration) Amendment (Consumer Lease Exclusion) Bill 2015. The government does not support this private members bill. We all acknowledge on this side and, as those opposite have said in the debate this morning, the minister is absolutely committed to this issue. In fact, the government is already addressing this issue but unlike many of those opposite who have a history of putting forward bills with extremely catchy titles which, if ordinary people were to look at them, would think, 'That makes a lot of sense,' the bill fails to deliver what the title says.
I can well remember a few months ago those opposite supporting a bill called Defence Amendment (Fair Pay for Members of the ADF) Bill, again another catchy title but, had the bill been implemented, it would have decreased pay and allowances and conditions of service for all defence personnel. Upon having a look at the impacts of this bill, as proposed by Senator Cameron, I believe it is in the exactly the same category. It sounds good, but it does not achieve what the title says it is supposed to achieve.
It is helpful first to look at what this bill is designed to do. What is Centrepay? Centrepay is a valuable bill-paying service that helps many Centrelink customers manages their ongoing expenses. Centrepay is voluntary and free for the customer. Deductions are made to elected businesses before the customer receives their welfare payment. It is a very important service because it reduces potential bank fees from overdrawn accounts and also repossessions of critically important household goods. Businesses pay a fee for each customer deduction because generally they appreciate how it helps customers to meet their obligations.
When a consumer seeks finance and they are excluded from mainstream options, such as credit cards or bank loans, which many of us are able to take advantage of, they can instead take out a small amount credit loan or a consumer lease. Small amount credit loans are loans of up to $2,000 where the contract term is between 16 days and one year. Loans with terms of fewer than 16 days are prohibited. These small loans are often used to finance emergency expenditure, such as an unexpected car repair bill—something critically important for people to get their kids to school and to get themselves to work. A consumer lease enables a customer to lease an item—for example, a fridge or a washing machine—over a specified period, usually between two and four years, with ownership and, therefore, responsibility for maintenance, resting with the provider of the lease. Customers make regular rental payments—usually monthly—until the term of the lease finishes. As ownership remains with the provider, the consumer does not own the goods until the end of the lease. As The National Welfare Rights Network said in their submission to the Independent Review of Centrepay—and this is not the government saying this:
People can opt into Centrepay and use it as a tool to help arrange their personal finances. People benefit from its convenience and security and the fact that it does not charge people for a deduction, unlike banks which impose fees for the establishment of a regular deduction to a third party.
The National Welfare Rights Network have acknowledged that this is a critically important service for some of the most disadvantaged in the Australian community. Centrepay allows customers to manage their finances by paying bills off in affordable instalments. In the alternative, a customer may be compelled to either obtain a cash advance from Centrelink or use a payday lender in order to pay the quarterly electricity bill. A welfare rights caseworker with over 10 years of experience noted in a submission:
For many people doing it tough and who regularly have budgets in the red, Centrepay is a real godsend. It's better than sliced bread—it is one of the best things that Centrelink has ever done. People really love it and it helps people keep on track financially when so many other things are going on their lives.
Remember, that is a quote from a welfare caseworker who has worked in this field for over 10 years with the people who benefit most from this system.
When we look at the merits of this bill it is important to note that Centrepay is not a legislated program. The Department of Human Services is the responsible department. I had a look at the bill and the issues that sit behind this. I have categorised why this bill is so bad and, quite frankly, why it is completely unnecessary. Apart from the fact that it is absolutely unnecessary, I found at least four major reasons why this is a bad bill. I am sure there are more, but I will now go through the four main areas I identified.
Firstly, it is a bad bill because excluding all consumer leases from Centrepay would interfere unduly with existing means of urgent access to necessary goods, such as fridges, washing machines and other day-to-day appliances needed to support a family, for those who need it the most. The recent changes to Centrepay announced by the Minister for Human Services strike a balance between strengthening protections for customers and not interfering unduly with existing means of facilitating access to the necessary goods.
Regulated consumer leases are not being excluded from Centrepay. Welfare recipients are usually unable to access most forms of credit, such as credit cards. Regulated consumer leasing is one of the few ways for those most disadvantaged in our community to obtain essential household goods. There are alternatives to consumer leases—we all know this—such as the no-interest loans scheme operated by Good Shepherd Microfinance and low-interest loans.
The government has already taken action to ensure that Centrepay can be expanded to support these options and other microfinance approaches that are responsible. Until these alternatives are available on a much broader and larger scale within the community, many customers—again, those most disadvantaged in our community—will still depend on consumer leases. The use of Centrepay for regulated consumer leases must, therefore, remain open to not disadvantage those in our society who most need it. Not every Centrelink customer is able to access a local no-interest loans scheme provider. For example, as we heard from my colleague from Queensland, in Normanton in Far North Queensland there is no local no-interest loans scheme provider. It is simply not available.
There are also differences of scale. In 2013-14 the no-interest loans scheme approved 24,378 loans, with a total value of $22 million. Compare that with the use of Centrepay for household goods. In just six months, from July to December last year, 136,000 low-income customers had a total deduction value of over $148 million. Not all those deductions were for consumer leases but the comparative volume clearly indicates to anyone looking at the statistics that there is a significant demand for basic, everyday household goods. That is the first reason why this is a bad bill.
The second reason this bill is unnecessary is that, as the last two speakers, Senator Moore and Senator Carol Brown, have acknowledged, Centrepay is already being improved. The government is already taking a wide range of actions. In fact, major changes to Centrepay were announced in May this year. On a quick review I have found at least 10 comprehensive changes that the government has already implemented. The first thing it did was exclude consumer leases that are not regulated by the National Consumer Credit Protection Act 2009. The second thing the minister did was exclude funeral insurance, although Centrepay is still available for scheduled repayments of funeral expenses and prepaid funeral plans. The third thing the minister did was advise in writing customers who have been using Centrepay for household goods or funeral insurance of these changes. They have also been provided additional information on the alternatives to consumer leases that they can look at. These three changes alone build on at least six other changes following the independent review of Centrepay.
The fourth major change that has occurred already is that customer complaint mechanisms have been improved significantly to ensure prompt and relevant responses by the department. The fifth measure was a full review of the Centrepay policy contract framework and assurance and compliance frameworks. Again this is critical to ensure anybody abusing the system and taking advantage of the most vulnerable in our society are identified and stopped. Additional resources have also been provided for assurance reviews of participating businesses.
What is the sixth measure the government has already implemented? The Department of Human Services has reviewed and built on the information provided to customers about their Centrepay deductions by developing a customer deduction statement that assists customers to better understand and manage their deductions. It is not a paternalistic approach like that proposed by those opposite but another measure to empower and educate clients on how to best manage their own circumstances. The seventh action the government has already taken is the Department of Human Services has added a link to the ASIC money manager on its website to help raise awareness of good financial management. Again this is another practical measure to educate and further empower individuals.
The eighth measure I found was that the department had also strengthened its relationship with ASIC, the ACCC and the Australian Energy Regulator. Agreements with these regulators allow for the exchange of information in relation to entities of mutual interest, including businesses seeking approval to use, or approved to use, Centrepay. Again we are doing much more due diligence up-front to make it less likely that a rogue operator will be able to join the scheme and exploit some of Australia's most vulnerable. These relationships have already led to the exposing of businesses that may not have the appropriate licensing, are operating illegally and are not complying with Australian consumer law.
So, there is more. The ninth measure the government is already taking that I have identified is that the Department of Human Services has established a working group, this time with Treasury, which will consult on options to use Centrepay policy settings to improve disclosure of effective interest rates by Centrepay approved businesses when offering consumer leases. Clearly, with the issues that have been raised and discussed in this chamber today, that alone will make a very significant difference in ensuring that those who go into these arrangements are not exploited with outrageous interest rates.
The 10th change that the government has implemented was announced by the Assistant Treasurer, the Hon. Josh Frydenberg, on 7 August 2015 that there will also be a review of the small amount credit contract laws. He also announced that this review will consider whether those laws should be extended to apply to regulated consumer leases. Any changes resulting from this review would potentially apply to consumer leases more generally, not only consumer leases under Centrepay but also under income management arrangements. So that is the second reason. Those are the 10 changes this government has already implemented and that is only the second reason why this is a bad bill.
Thirdly, I believe this is a bad and unnecessary bill because the bill as introduced and as discussed by those opposite would not impact on Centrepay, but only on people supported by income management. Again, the bill itself will not realise the intent for which it is being put forward. This is because the Centrepay scheme is not established by the social security law. However, the legislation does allow for Centrepay deductions through section 55 of the Social Security (Administration) Act 1999, which addresses how social security payments are paid into bank accounts.
Senator Cameron's bill amends two sections in the part of the Social Security (Administration) Act concerned with income management. It would prevent expenditure under income management on certain consumer leases, but would not affect payment of deductions under Centrepay. I will say that again because I think that is one of the most critically important points here. Senator Cameron's bill is concerned with income management, and, if you have a look at the wording of the bill, it would actually prevent expenditure under income management on certain consumer leases but would not affect payment of deductions under Centrepay. So that is the third reason why this is a completely unnecessary bill.
Finally, I think that it is a bad bill because excluding rent-to-buy contracts from income management is not supported by the bill. It is clear that if Senator Cameron's bill was enacted, it would mean that people on income management would not be able to pay for any consumer lease obligations using their income managed money regardless of whether or not they have existing obligations. Think about that. Think about the impact of that on people currently on income management plans. It sounds like a bit of bureaucratic speak and it is, but the practical implications of those currently using income management money would have a significant and quite devastating impact on those people. That is because the purpose of income management is to ensure that the priority needs of welfare recipients are met and that they are protected from the things that would undermine them, their families and their communities—alcohol and gambling and other social issues.
Income management was not designed to stop people from getting access to a refrigerator to store food to feed their families, or a washing machine to clean their clothes. If they need to rent these it is because it is the only way they can afford acquire them—or because it is the way they choose to acquire them. The important point, I believe, is that they have access to the information which would help inform their choice. This is why the department's customer service officers will only set up these deductions following a discussion with the client about possible options. Alternatives include Centrelink advance payments, no- and low-interest loans from community organisations, lay-by or savings accounts for the goods. Customers are also referred to the ASIC-developed 'rent versus buy (consumer lease) calculator' on the department's website, to assist them themselves to understand the true cost of a possible lease arrangement. The addition of consumer leases to the list of excluded goods for income management is not supported, as many people would have existing obligations of this type at the time they enter the program. For many people—again, for many of our most disadvantaged in Australian society—these types of arrangements continue to be a practicable, and sometimes their only, option for obtaining basic household goods.
The changes and the comprehensive suite of measures the government has implemented are not only sensible; they are simply good government. Welfare recipients are usually not able to access most forms of credit such as credit cards, consumer leasing and other arrangements that many of us are able to access in society. There are alternatives to consumer leases, and I am very pleased to see that Centrepay will be expanded to support low-interest loans and no-interest loans. In light of the overwhelming evidence that, yes, there is a problem, this government has not just talked about it—has not just put forward empty bills that will be counterproductive—but has actually taken a comprehensive approach to this and implemented at least 10 very strong recommendations. Instead of a paternalistic approach to protecting people from themselves, our solutions are all about educating and empowering consumers—not protecting them from themselves. We acknowledge the potential abuse, but that is why we have taken the measures that we are taking today. It is for all of these reasons that I cannot support this unnecessary and counterproductive bill.
I welcome the opportunity to speak this morning in support of Senator Doug Cameron's bill, the Social Security (Administration) Amendment (Consumer Lease Exclusion) Bill 2015. It is an important bill to provide further protections to those using Centrepay in a rapidly evolving environment of increased choice for the purchase and leasing of products, which we are seeing across the community.
The purpose of the Social Security (Administration) Amendment (Consumer Lease Exclusion) Bill 2015 is to amend subsection 123TI(1) of the Social Security (Administration) Act 1999 to provide that consumer leases are excluded goods for the purposes of part 3B of the act. The bill is needed to remove the potential for Centrelink clients and participants in the income management regime, under part 3B of the act, to suffer financial harm as a result of entering into one or more consumer leases for household goods, which are currently available for people using Centrepay and those participating in income management.
This bill underwent consultation earlier this year with stakeholders and representatives from a number of community organisations with excellent reputations in providing protections for consumers, particularly protection for vulnerable consumers from particular products. These organisations are, for example, the Consumer Action Law Centre, the Financial Rights Legal Centre, the Redfern Legal Centre, the St Vincent de Paul Society National Council, ACOSS, Financial Counselling Australia, UnitingCare Australia, Good Shepherd Microfinance, National Welfare Rights Network and the CPSU. When you see the names of those organisations and the particular expertise that they bring to debates such as this, these are the organisations that are providing the national advocacy on a whole range of supports for those particularly vulnerable Australians who are experiencing financial hardship at the moment. They are also those who work face-to-face every day, day in and day out, with people who are suffering severe financial hardship, either through personal circumstance or indeed through getting themselves involved in contracts or leasing arrangements without fully understanding the ongoing cost for those arrangements. I do not see that, in terms of this bill, being paternalistic in any way. We have a number of laws which are there to provide protections for people, particularly when you see a problem emerging. I think the evidence will show, very clearly, that the prevalence of these types of products being available to people and, in a sense, promoted to people is growing each year.
When you look at information about Centrepay and search what Centrepay is, you can see a very simple outline of what Centrepay does. It is an excellent service and it has done what it was intended to do which was to provide a free service that allows people to allocate payments to certain services, utilities and bills for things that they are engaged in but to pay them over time in an affordable way. When you go to what you can use it for, the instructions are for rent, electricity, gas, water, telecommunications, education fees and expenses, child care, home care services, medical expenses, household goods and services and no-interest loan repayments. Then it goes on to say the bills you cannot pay with Centrepay and they include: credit-card payments and fees; payments to cash lenders, payday lenders, porn brokers or debt collectors; instalments for hampers; vehicle leasing; payments for taxi services; income protection, funeral or life insurance; and unregulated rent or lease arrangements of household goods where the agreement is less than four months or does not have an end date. So there are a range of exemptions and those exemptions exist for good reasons. Senator Cameron's bill simply seeks to add in to that list of exemptions another criteria.
The support is there from stakeholders. The Consumer Action Law Centre summed it up very nicely and said: 'Consumer lease providers should not have access to Centrepay. Centrepay was intended as a budgeting tool to help welfare recipients but got hijacked as a selling point for high-cost products. Rent-try-buy products mean that the poor pay more. These providers should be given priority over the basics like food, transport, rent and utility bills.' The Consumer Action Law Centre welcomes Senator Cameron's bill and would like to see the government take urgent action to keep Centrepay focused to its original purpose. Maintaining the integrity of Centrepay should be a bipartisan issue. The Indigenous Consumer Assistance Network said: 'There is obviously a market need for essential house items in Australia's most disadvantaged homes. Unfortunately high-cost consumer leases just add to the disadvantage and poverty. Government, industry and the community sector need to further develop ethical solutions like no-interest loan schemes to ensure Australia's most disadvantaged have a bed to sleep on, a refrigerator to store their food and a washing machine to clean their clothes.' Both of those comments sum up exactly the intent of Senator Cameron's bill.
It is clear that Labor will not stand by while low-income and vulnerable Australians are able to be exploited through the current arrangements. I think there is acknowledgement that the existing law, as it stands, should protect the poor and the vulnerable and not leave them open to attack from businesses, credit-loaning agencies and leasing agencies. The original intention of Centrepay as a budgeting tool should be maintained. The evidence is that for those clients who use it, it is a very positive service used by over 600,000 Centrelink clients on whose behalf nearly two million deductions are made each month. The annual value of all these deductions is nearly $2 billion.
We also know that, of those clients who use Centrepay, 30 per cent are disability support pensioners; a further 20 per cent are Newstart recipients; and 16 per cent are in receipt of parenting payments. I think the data coming out of Centrepay shows that utility bills have been around a third of all Centrepay deductions. Household goods leases now account for 14 per cent of all deductions, and their share of Centrepay deductions is growing. That is the issue that this bill seeks to progress.
In some of the comments that were made by previous speakers, I think there was a concern about what it would mean for those on existing arrangements. My advice is that the aim of the bill is that Centrepay be prospectively closed to consumer leasing companies for the same reason that other entities such as payday lenders are already excluded, so I think some of the concerns about what it would mean for existing clients on those arrangements could be averted that way.
Protecting vulnerable Australians from getting into arrangements which in the long term cause severe financial hardship and result in poor people often spending two, three, four or five times what it actually costs to lease this equipment is something that the Labor Party have always been strong advocates for. I know that in Canberra we did a whole piece of work around understanding this issue and providing protections to people through targeted assistance to make sure that for people living on low incomes, who are often recipients of Centrelink payments, if an unexpected expense arose, there were ways and means of acquiring funds. No-interest loans are a more common way now of addressing that expense, rather than having no options available and people feeling that they have to enter into these leasing arrangements. Sure, on the surface they look affordable, but over the long term and in the fine print they actually deliver a much worse financial outcome for vulnerable Australians.
This is partly about providing an exemption for these arrangements, but I think we also need to acknowledge and continue the work that is being done across the community sector to provide alternatives for access to cash and credit when it is needed by people who are on fixed and low incomes. There are very good products available, many of them being led by organisations like Good Shepherd Microfinance, but even some of the banks now will offer particular products for people in financially difficult positions. I speak from very close experience of people getting into long-term rental arrangements for products, of how difficult it is to extricate yourself from them and of how much it costs poor people—people who do not actually have the funds to spend—just to enjoy, say, in this example, the household goods that we all rely on to live. Those arrangements are extremely difficult to get out of and extremely costly. People make a lot of money out of those arrangements, and it is not poor people who do well out of them; it is the leasing companies themselves that do very well. The profits that come from these arrangements are substantial.
This bill seeks to ensure that there is not tacit approval by the government of these arrangements. That could be how it is read if you are a person trying to research what you can use Centrepay for. When you look at the list and see that these leasing arrangements for household goods et cetera are allowable under Centrepay and then there is a whole list of things that are not, it does look as if the government has looked at these and believes that they are okay and that they would deliver a good outcome for Centrelink clients. The reality from all the evidence is that they are not. Their being allowed to be included in these arrangements I think sends the wrong message for people about what arrangements they are getting into.
So I am very happy to support Doug Cameron's bill today. I think it makes a lot of sense. For those who are on existing arrangements, those would continue, but for those who are considering it now or in the future, as these products evolve and are encouraged, it would not be seen as an appropriate use of the Centrepay function. I do accept that the government have made a number of changes. I think the fact that they are making a number of changes indicates that there are issues in this space and that they are seeking to address them. But I really think that, in the interests of Centrelink clients, this is something that both the government and the opposition could agree on together. The government have acknowledged that there are issues. This is something that is supported by the stakeholders. There is a lot of work that has been done on it. It is a sensible reform and one which should be supported by the Senate today.
I too rise to speak on the Social Security (Administration) Amendment (Consumer Lease Exclusion) Bill 2015. Hopefully my voice will last long enough to make my contribution, though I apologise if I have to drink a lot of water on the way through! Senator Cameron has introduced this bill, and in his explanatory memorandum he has indicated the reasoning behind his decision to do so. He has explained that the purpose of this particular bill is to provide that consumer leases are 'excluded goods' for the purposes of part 3B of the Social Security (Administration) Act. He has gone further. He says that he believes that there is a need to remove the potential for harm to Centrelink clients—and we underline Centrelink clients—and participants in the income management regime, who in his opinion have a potential to suffer financial harm as a result of entering into a consumer lease for household goods. Consumer leases should no longer be eligible to be applied through the Centrepay system.
I think the first thing that we need to realise is the fact that the Centrepay option provided to people is voluntary. They can choose whether they wish to avail themselves of this particular service. Centrepay has been around, I believe, for 25-plus years. It was put in place as a budgeting and financial capability tool to assist people who are on Centrelink to be able to better manage the payment of the accounts and bills that they choose themselves to enter into. We need to be very clear that there is a difference between a mandatory income-management scheme and what is being offered here by Centrepay. As I said, it was established back in about 1988-89, and I understand that to date more than 600,000 people have availed themselves of this service. But that 600,000 people have made a decision to use this voluntarily and have made a decision as to which goods and services they wish to have paid through this service.
Unfortunately this bill singles out one group of people in our community and makes the decision that they are not able to access the capacity to, over a period of time, purchase goods such as a washing machine, a refrigerator or other such household goods that all of us here take for granted that we are able to have. If they are excluded or precluded from that or even have their capacity to access those sorts of goods diminished, then are we not differentiating between somebody who is on a Centrelink payment and somebody who is not? I think it is very dangerous to treat somebody on Centrelink differently from the way we treat somebody else in the wider community—in a sense lessening our belief in their capacity to make sensible decisions on their own behalf.
Obviously we do not like a situation where we have people preying on those in our community that are less fortunate than others. We do not like people preying on anybody in our community, no matter who they are. But to create a situation where somebody, just because they are on a Centrelink payment, has a greater level of oversight of what they choose to spend their money on, no matter where they get it from, is something that is potentially fraught with danger. In a sense, what we actually inadvertently do is say to those people, 'Okay, we're going to make your decisions for you, so you don't have to do it.' We weaken their understanding of their responsibility to their community to be responsible for themselves and their expenditure.
I would like to think that we could come up with some methods and means by which we can actually increase people's understanding of their financial arrangements and make them better managers of their household budgets. But taking away some of their power to make decisions about themselves and how they spend their money is absolutely fraught with danger. The fact that somebody is on social security or a welfare payment does not preclude them from being able to make decisions for themselves.
If we really want to look at the underlying issue that Senator Cameron is trying to establish—and that is to protect those people who are on lower incomes and have probably got less capacity to absorb an unforeseen additional expense—then we should be looking at protecting everybody in society and making sure that our consumer leasing laws are such that nobody can be scammed in the way that Senator Cameron is suggesting is occurring to the people who are using Centrepay.
I do not think anyone would doubt the benevolent intent of Senator Cameron's bill; I am just not sure that the outcome would be in the best interests of the people he is seeking to look after. On the back of that, Centrepay has been around for 25-plus years, and there is no harm in looking at whether it is actually operating in the way in which it was originally intended to operate. I do not think that anyone in this chamber—on either side or on the cross benches—would say that to review something like this on a regular basis is not a good idea. We find with many pieces of legislation that the original intent is often a very good one but, unfortunately, sometimes in the process of it evolving there are unintended consequences. We are quite happy to look at that. As Senator Reynolds, Senator Lindgren and even those on the other side have acknowledged in their contributions, the actions of this government in seeking to make some changes to Centrepay—to tighten up some areas where things might not have been working quite as well as they might have been and to streamline it so that it provides a better service to the people for which it was designed—are good. We certainly have got an acknowledgement of that.
Centrepay has been particularly well received by the wider community, given how many people have chosen to use it. But some interesting findings came out of a 2012 income management review that was undertaken by Luke Buckmaster, Carol Ey and Michael Klapdor. Included in the findings that came out of the review of the income management scheme as it was operating in Australia was a review of Centrepay. One of the things that was very interesting in the review was that there did not appear to be, to that date, any other programs in developed countries that operate in a reasonably similar way. Some countries do have provisions that allow them to do the same sorts of things as the Centrepay arrangements, but generally they are not available for food, which is quite interesting.
The closest that I could come to finding a system anywhere else in the world that was the same as Centrepay was actually in the United States food program, where welfare recipients and other low-income groups receive vouchers or electronic cards along the lines of the BasicsCard which could be used for the purchase of particular products and specific food items. It was very interesting to see that, despite the obvious and apparent success of this particular program in Australia, it was unique to Australia and nowhere else in the world had actually sought to replicate it.
Whilst the underlying sentiment of Senator Cameron's bill is obviously very noble, there are a number of reasons that I, like the rest of my colleagues on this side of the chamber, will not be supporting the Social Security (Administration) Amendment (Consumer Lease Exclusion) Bill 2015. In summary, the reasons that I cannot support the bill include, firstly, that I believe it would unduly influence and interfere with people's ability to get access to what we would consider in our everyday lives as necessary goods. I do not believe that it should be the role of government to tell somebody that, if they cannot afford to buy a refrigerator or a washing machine because they are unable to fork out the full sum of the purchase price on the day that they purchase it, they should be excluded from being able to get access to such a good simply because the government will not allow them to use Centrepay, which is often the only source of credit that they are able to get. We certainly cannot support that, because it is discriminatory to those people who are on Centrelink payments.
Secondly, as I said, the government is already working on a suite of changes to Centrepay—many have already been implemented—to make sure that we end up with an improved system. A number of major changes were announced in May this year, and I think that we need to give the changes that were made in May the opportunity to take effect. Thirdly, I do not think the bill, as introduced, will impact on Centrepay but it will impact on the people who are supported by income management. If you are going to introduce a bill you need to be very careful that it actually delivers the outcome that you are seeking. I think if you really read the detail of the bill, you will realise that it will possibly not deliver the outcome—that is, to get a better outcome for people on Centrelink—that it is purporting to deliver.