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Monday, 19 October 2015
Page: 11490


Ms MACKLIN (Jagajaga) (10:09): I present the explanatory memorandum to this bill and I move:

That this bill be now read a second time.

The Social Security (Administration) Amendment (Consumer Lease Exclusion) Bill 2015 is a private senator's bill introduced in the other place by my colleague Senator Doug Cameron. I want to thank Senator Cameron for his hard work in bringing this bill to the parliament and for his commitment to vulnerable and disadvantaged people, because this bill is all abut protecting vulnerable and disadvantaged Australians. Labor will not stand by while low-income, vulnerable Australians are exploited or taken advantage of. Nothing goes to the core of our role in this parliament more than ensuring that vulnerable people are protected. I do hope that the government will join us and support this bill today, because it will, in a small but significant way, ensure that vulnerable people cannot be taken advantage of, cannot be exploited.

Let me explain how the bill will work. Centrepay is a free service through which Centrelink clients may pay recurring bills and make other payments by a debit from their welfare payment. It is a useful service when used appropriately. However, in recent years it has become clear that Centrepay is being used as a tool by some companies to exploit low-income and vulnerable people. Consumer leases are defined under the National Credit Code as contracts for the lease of goods under which the hire is for domestic or household purposes. Under consumer leases 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 goods, often by a very large amount. Consumer advocates and financial counsellors regularly encounter significant numbers of Centrelink clients who are under financial stress as a result of entering into one or more consumer leases for household goods. The problem is widespread but particularly acute in Indigenous communities. Of course, those with the lowest incomes or assets are at most risk.

For some time now the Consumer Action Law Centre, ACOSS and Financial Counselling Australia have been campaigning to have consumer leases excluded from Centrepay because of the financial harm caused to financially vulnerable Centrelink clients. It is clear that this is a big problem. The Micah Centre observed in 2007 that consumer leases are not genuine leases but 'loans in lease clothing'. The reality is that consumer leases are fringe credit products offered in the main to financially excluded consumers in the subprime end of the financial services market. Many of the businesses offering consumer leases also operate in the payday lending market and similarly cause significant financial harm to the most financially vulnerable people in the community.

Yet movement by the government has been slow. In May this year the then Minister for Human Services announced that consumer leases that are not regulated by the National Credit Code will be excluded from Centrepay. To the extent that the announced change will exclude any consumer leases from Centrepay, the number is likely to be negligible. In an ASX announcement in response to the minister's announcement, Thorn Group stated that its Radio Rentals business would be unaffected by the change. This is just not good enough. We must do more.

Centrepay is used by over 600,000 Centrelink clients on whose behalf nearly two million deductions are made each month. The annual value of all deductions is nearly $2 billion. Thirty per cent of Centrepay users are disability support pensioners, a further 20 per cent are Newstart recipients and 16 per cent are in receipt of parenting payments. Other users include aged pensioners. And of course none of these people are rich. They struggle to make ends meet as it is. While utility bills still account for a third of Centrepay deductions, household goods leases now account for 14 per cent of all deductions, and their share of Centrepay deductions is growing.

In a March 2015 investor report on Thorn Group, the parent company of Radio Rentals, Credit Suisse found that over $200 million a year is deducted from the Centrelink payments of almost 120,000 clients to pay for consumer leases. The concern is that these leases end up stripping people of more and more of their income. According to the Financial Rights Legal Centre, many of the clients end up paying 5 to 10 times the original value of the appliance by the time their agreement ends, a view confirmed by ASIC Deputy Chair Peter Kell, who noted:

Of particular concern is that the most financially vulnerable consumers in Australia are paying the highest lease prices for basic household goods. For two year leases, half the Centrelink recipients in our study paid more than five times the retail price of the goods …

leaving them without assets and with less income.

Importantly, there is a better way.

Good Shepherd Microfinance, through its No Interest Loans Scheme (NILS) in partnership with NAB, aims to assist large numbers of people who are financially excluded to move away from crisis and hardship and towards financial stability, mainstream economic participation and financial resilience.

As they are a non-profit financial products, the No Interest Loans Scheme loans can be paid off through Centrepay.

Good Shepherd Microfinance offers no interest loans of up to $1,200 to people on low incomes for the purchase of essential household goods.

The data shows the potential benefits of such an approach.

In 2012-13, 22,349 NILS loans valued at $20.8 million were approved.

Ninety-two per cent of borrowers live below the poverty line and 22 per cent were Aboriginal and Torres Strait Islander people.

An evaluation of the NILS loans by the Centre for Social Impact at the University of New South Wales found that around half of NILS borrowers experienced an overall improvement in their financial capacity as a result of taking out a NILS loan, while another quarter achieved a more stable financial position than before they took out the loan.

So there is a different model that we can look to, because the evidence is compelling.

Centrepay and the vulnerable Australians that rely on it are being exploited by consumer leasing companies.

Fortunately, Labor is taking action today.

Senator Cameron has introduced this bill for one reason: to ensure that vulnerable Australians are protected.

This bill will ensure that Centrepay should be prospectively closed to consumer leasing companies, for the same reasons it is closed to payday lenders.

This means low-income people—people on income support—will be protected from predatory behaviour by companies offering consumer leases.

I commend the bill to the House.

Debate adjourned.