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Monday, 15 March 2021
Page: 13


Senator AYRES (New South Wales) (11:26): I rise to support the bill before the Senate, the National Consumer Credit Protection Amendment (Small Amount Credit Contract and Consumer Lease Reforms) Bill 2019 (No. 2). While this particular piece of legislation is moved by Senator McAllister, it's very important to understand that this is the government's bill—the bill that it hasn't brought forward to this place. It was commissioned by then Assistant Treasurer Mr Frydenberg in August 2015. It was later developed by then Assistant Treasurer Kelly O'Dwyer. She said at the time:

Legislation will be developed subject to the Government's other legislative priorities, but at this stage is expected to be progressed during 2017.

They were heady days indeed. The legislation she developed imposed a ceiling on the total payments that could be made under rent-to-buy schemes. It restricted the amount rental companies and payday lenders could charge customers.

On 23 October 2017 the then Minister for Small Business, Michael McCormack, released the exposure draft, promising:

The Government will introduce legislation this year to implement the SACC and consumer lease reforms.

More than three years later, here it is—the government's bill, word for word. Disgracefully, it's not part of the government's own legislative agenda.

What has taken the government three years to fail to introduce legislation in this area? There is confusion on the other side about whether they are for the shonks or the chancers or the sleazebags in the payday lending area, whether they are for the interests of the banking industry or whether they are for the interests of the high-fee, low-return retail funds. They are completely confused. The one thing we know is that the people who claim to form the government of Australia are never on the side of ordinary people in the area of finance regulation; they are always on the other side of the ledger.

What has the relevant minister been up to that was too important to do this bill? In December 2017 the member for Deakin, Mr Sukkar, took responsibility for this portfolio, and the new Assistant Treasurer was very busy indeed. If media reports are to be believed, Minister Sukkar's staff had previously taken a very close interest in Minister O'Dwyer's affairs, and the affairs of the Liberal Party, in her seat. There was even a Department of Finance investigation into exactly how interested the electorate offices of Mr Sukkar were in the branch affairs of the Liberal Party. Mr Sukkar is the biggest stacker in Victoria. However, the investigation conducted, indeed, by Mr Sukkar's old firm, ultimately found that he'd done no wrong. One could say that the Morrison government's narrow definition of 'the rule of law' prevailed there too.

Despite the member for Deakin's considerable interest in local Liberal Party affairs, he failed to introduce this legislation to the parliament for ideological reasons. As The Australian reported in December 2018:

… the changes have run into opposition from some Liberal backbenchers, who have raised concerns the crackdown imposes too many restrictions on the operation of the free market.

They weren't alone. The Institute of Public Affairs sent a research note—a generous term—to all parliamentarians, criticising the proposed law as 'just more red tape' and 'based on paternalistic assumptions'. And of course there was all of the lobbying by the appliance rental industry and payday loan providers. And the Treasurer was just too busy. The misery that payday loans have created has simply become more entrenched over that period.

Why was the Liberal government prepared to legislate then but not now? In 2017 ASIC had reported instances where some consumers had been charged lease fees equivalent to an interest rate of 884 per cent per annum. One company, Cigno, was particularly notorious. It used a complex company structure to avoid regulators, it charged up to 1,000 per cent interest on the loans that it wrote and it aggressively marketed loans to vulnerable people: single mothers, Indigenous Australians, welfare recipients. There is an important relationship, indeed, between the failures of our welfare system and the payday lending industry.

For Cigno, one opportunity was the introduction of income maintenance in remote Indigenous communities in Western Australia. A community manager in the remote town of Warburton described how it would work. 'The government gives people these key cards to control how much these people spend of their social security payments, but they're rubbish', she said. 'It's hard to pay the bills with them, and they don't work when they need to. Then suddenly you have someone promising to transfer $200 in a couple of hours. That's powerful. So word gets around.'

Here are examples cited by ASIC when they finally shut Cigno down. First is a borrower who was an unemployed Newstart recipient. The loan began at $120 and became a $263 advance because of handling fees. For some people in this place, that's lunch, but for this person $263 is a very significant amount of money indeed. Repayments were set at four fortnightly payments of $66. The borrower immediately defaulted. The total amount owed became $1,189. Another borrower, a DSP recipient living on $850 a fortnight, got loans of $200 and $150. Combined fortnightly payments were $265—completely unconscionable. When he defaulted, the amount owed jumped to $2,630. When ASIC finally announced that they were cracking down, Cigno rebranded. They are still in business, trading as MyFi, completely brazenly, completely without any action from this government.

Normally, economic distress leads to an increase in payday lending, but so far the pandemic has been bad for payday lending. Some estimates have put Cash Converters at 70 per cent of the Australian market share for payday lending. In 2018 alone, they reported a $104 million revenue stream from their loan books, but the pandemic has slowed those rivers of gold mostly coming out of the pockets of poorer Australians. The CEO of Cash Converters said:

Our loan books, the engine room of the Company, finished a combined 24.2% below 30 June 2019 …

ASIC Commissioner Hughes has speculated:

… the reason for that is that borrowers from payday lenders are accessing support from other avenues such as government support programs.

It turns out that, when you make the welfare system livable, people don't take out payday loans. Mr Hughes then told the COVID committee:

… when we get to what is being referred to colloquially as 'the cliff' at the end of the various support programs, we think there will likely be an increase in utilisation of those payday lending programs.

Of course, the payday lenders are all out there for the cliff. They want to see the end of JobKeeper and JobSeeker, because poverty pays for that industry. And the government is, at best, a bystander.

At the end of this month, the JobSeeker rate will return to below-poverty levels. JobKeeper will end entirely. Not all sectors, industries and communities have been part of the recovery. In December there were still 1½ million workers relying on JobKeeper—10 per cent of the workforce. They are about to be left behind by the Morrison government. The Commonwealth Bank estimates that 110,000 workers will lose their jobs by the end of March; two-thirds will be in what the bank calls high-risk industries: transport, 22,400 job losses; accommodation, 31,000 job losses; arts and recreation, 15,400 job losses. Those workers will now be forced by this government to live on $44 a day and will become victim and prey to exactly the payday lending industry that this government supports and props up.

That economic pain will be concentrated in the regions, which rely on those high-risk sectors for employment. It will be felt in the local businesses that rely on that income being spent in their communities. That means too many Australian families will go back to a position where they cannot afford the basic necessities of life, with no support from this government, no plan for jobs. And, when Australian families are forced to make desperate financial decisions, they will be left at the mercy of an unscrupulous industry that preys upon them. The Morrison government is trapping Australians into poverty.

The Senate inquiry into this bill led to a strange conclusion. Despite the inquiry hearing clear evidence that the current regulation of payday lending is deeply flawed, that the bill's proposed reforms would directly address those challenges and that there are alternatives to consumer leases that allow low-income people to have access to credit at competitive and conscionable rates, government senators advocated not passing the bill, which was written by their own team. It's an extraordinary proposition: the opportunity to help, the opportunity to provide a regulatory framework that supports the interests of low-income Australians, with the only people on the other side of the argument being the payday lenders, and this government chose to support the payday lenders and leave ordinary Australians in poverty and at the mercy of this industry. On a bill they drafted in response to their own inquiry into exploitation, they wrote:

The committee acknowledges the commercial reality that those with higher credit-risk ratings are charged more to access credit. The committee considers it appropriate that regulations are commensurate with this risk and that, at the same time, the regulation is sufficient to ensure consumers are appropriately protected.

What is the 'commercial reality' for the 110,000 additional workers who are going to lose their jobs and be on $44 a day, prey to the payday lending industry? They have the heart of a pea, on the other side, in terms of these issues.

Are the decisions that those families have to make commensurate with the risk they face? There was a brief moment in 2017 when members of the Liberal government—I've lost track of whether it was Abbott, Morrison or Turnbull at the time—were prepared to do the bare minimum to protect vulnerable people: the heady days of 2017 and 2018, when they actually understood what their responsibility in government was. But when Minister Sukkar decided to reverse course, he chose a side alright. He chose to ignore the suffering of Australia's most vulnerable people. He chose to support the worst elements of this industry that profit from the misery of ordinary people.

The government members of the Senate Economics Legislation Committee made the same choice. Government members who failed to stand up for vulnerable Australians in their caucus room are complicit in that choice. Government senators who vote against this bill and do nothing to deliver accountability from what passes for their finance and economics team are complicit in the government's failures in this area.

The simple fact is that people like Minister Sukkar, and plenty of people on the other side of this chamber, simply do not understand the decisions that desperate people have to make because they will never have to make them themselves. They fail to imagine the lives of the poorest Australians, whether they are long-term unemployed people or families or people who have been displaced by the government's failures to deal with the end of the JobKeeper program and the 110,000 additional people who will be thrown onto the ranks of the unemployed. It's the failure of those on the other side of this chamber to imagine those lives that means they will continue to fail in this area; they'll continue to create additional misery and poverty in our communities. It's that kind of failure of leadership and failure of economic capacity that continues to hold this country back.