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Monday, 15 March 2021
Page: 17

Senator GALLACHER (South Australia) (11:52): I listened with great interest to my colleague Senator Brockman's comments. But, fundamentally, this issue is quite distinct from mere politics. I just want to put a couple of pieces of evidence on the record before I get into more substantive issues. The Consumer Action Law Centre noted the lure of these products:

I think people will often act in the most simple, convenient way to deal with the hardship in front of them ... when someone is faced with a stressful situation, when they're experiencing some form of desperation, they'll be attracted to what seems to be the easy option.

I think that that would be generally accepted as a proposition. When people face a calamity, an illness, the loss of a job or the inability to put milk in the fridge because the fridge is blown up, I think people will look for a solution immediately. We do live in a society where you can't not have a TV, fridge and the like. I think that's quite an instructive piece of evidence. It's also important to go back to Commissioner Kenneth Hayne's final report, where he said:

My conclusions about issues relating to the NCCP Act can be summed up as "apply the law as it stands".

Commissioner Hayne made a clear recommendation relating to the NCCP Act:

The NCCP Act should not be amended to alter the obligation to assess unsuitability.

These are very clear pieces of evidence that point us in the right direction. When people get into trouble, they're going to look for the solution, and the solution is a loan. They're not going to read the fine print; they're not going to examine the punitive interest rates; they're going to deal with the immediacy of their situation. I think it is incumbent on the government to take action.

I think Senator Brockman's contribution about the limitations on how much a Centrelink recipient can borrow was very good, and those should be in place. My experience in that area, dealing with a friend of mine, is that, once they get to that stage where they're getting a deduction from Centrelink, they quite often have access to a no-interest loan run by one of the various not-for-profits, which are really good. He has told me ad infinitum that, once people have been through the mill a couple of times and they get to the stage where they have to make decisions about how they afford the normal necessities of life, they become very skilled at it. But it's an inordinate journey to there. Quite often they're under tremendous stress and strain through punitive interest rates and penalties.

I think the royal commission did point to a period where there was substantial redress for people who were given money when it was clearly unsuitable for them and they couldn't repay it. The situation there hasn't really improved much. I don't think that weakening the standards is simply going to improve the lot of people who are very vulnerable to predatory loans. I saw an ad on the TV the other day which said: 'Don't worry about payday. Payday could be today.' I don't know what that's about. Do you hand over your income to a third party and you can just withdraw it early? How does that help you? Payday is Thursday, and you can take your money out on Monday? You're still broke by Saturday. There are all sorts of things going on in this space which I think we should be cautious about.

If we look at the end of JobKeeper—a great program that can't go on forever—it may well be that we're going to see more people moving to JobSeeker, which, although it has had a slight increase, is still a very, very meagre amount. People will borrow when faced with a crisis in their life. I'm not sure that this is the way to go forward with it. The government has been failing to act since 2017, delivering more business to payday lenders and to consumer lease providers, at the expense of ordinary Australians. I don't know what we do in terms of people having access to credit when they desperately need it, other than that we should go and fund the no-interest loan providers to the maximum we possibly can, because there is a proven track record there of people coming to terms with their financial budget, making plans which work and going on to make smart, commercial decisions.

It has been explained to me how they work. A no-interest loans adviser will sit down with the consumer, go through their budget and say: 'Here is the amount that you can spend'—it might be $1,300—'That's the amount that you would qualify for under a no-interest loan. We want you to go out into the consumer world and get a deal. Get three deals, but don't make any commitments until you come back to us, and we'll see how you went.' And people do. They're very proud to go out and get three quotes. What normally happens is that the adviser will say: 'Fine. You've done good work here. This is how the world actually works. But what I want you to do now is go and see this provider, because I'm pretty sure he can beat the three loans you've got.' The lesson learned is: get quotes. Check the market, see what you've been offered and count the cost of the loan. The no-interest loan situation with the Good Guys is a great deal, and invariably they match whatever is available and undercut what's in the marketplace. The consumer—and it's usually a woman, a single mother, who for whatever reason is in a precarious circumstance—will learn through that process to take power and take control of her own budgeting, and grows exponentially during this process. This is what people tell me.

So, rather than making it easy for payday lenders to prey on people, we as a national parliament, and the government particularly, should be helping to increase financial literacy in this sector, where perhaps we don't need so much regulation or legislation. Clearly at the moment it's desperation versus opportunity, desperation versus the need for that fridge or computer and the need to keep the household going. In that environment, people are not making great decisions. I know there are two sides to the story. If the credit provider discloses the terms of the credit and someone takes it, it's not a great decision by the consumer, but often it's driven by desperation. We do know that those who have part-time employment, those who are on the minimum wage and those who are on JobSeeker, disability payments and the like are not in a position to make too many discretionary decisions about expenditure. It's virtually a case of: 'It's happened. I need to fix it. Let's go and do it.'

Some of the things that are currently at odds with what we would call the norm is that payday lenders can charge interest rates equivalent to more than 200 per cent per annum, and there is no cap at all on the costs that can be charged by these lease providers. Lenders continue to sign people up to loans and leases with unaffordable repayments, which causes people to wind up in a debt spiral and leaves struggling families in debt or poverty. Surely the federal government is not in favour of that? Surely the federal government is not in favour of a predatory system where people end up entrenched in debt and poverty?

This bill directly addresses these challenges. It provides for a cap on the total repayments that can be made under a consumer lease. There's better regulation of repayment and of repayment intervals, removal of fees for loans that have been fully paid, prohibition of door-to-door selling, anti-avoidance protections and stronger penalties for wrongdoing. And regarding penalties for wrongdoing, right across the whole financial area I don't see too many penalties being applied. The royal commission pointed to some success, but this bill removes some of that protection. I know Senator Brockman referred to ACFA, but I don't see that there's any particular trail of evidence that they've been the good cop on the beat. I don't see the evidence of that. All we are seeing is evidence of perhaps a lack of protection for people, and this bill would make it better for consumers.

The 2019-20 summer bushfires and the COVID-19 pandemic have increased financial vulnerability and rendered more Australians vulnerable to the promises of small-amount credit contracts and consumer leases. Also, young people are increasingly concerned about their financial security and are more likely to be taking on debt as a means of relieving immediate financial stress. Consumer protections are needed more than ever. I think that's a very important point. Consumer protections are needed now more than ever, as we move into the uncertainty of the post pandemic—if we get vaccinated, if we can start moving around this country again, if people get back to reasonable amounts of employment, if 100,000 people don't drop onto the Centrelink/JobSeeker market. We need to be cautious.

This bill should be supported because it's not doing anything particularly untoward. We know that in certain areas the economy is actually overheating. We know that the housing sector has blown out of the water. It is exponentially overheating. There will be other bills that will come before the parliament with discretionary limitations for the purposes of driving the economy. I'm not sure how we can drive the economy from this point. These are the most vulnerable consumers in the economy. They are those who are going to face stress and immediate problems which are going to require some borrowed money. I'm not sure that we can clearly see that this is going to drive the economy forward. It may well just drive another bubble along the way, which is a bubble of disaster, despair, poverty and debt.

Low-income families are disproportionately going to find themselves in an awkward predicament in the not-too-distant future if the economy doesn't improve and they don't have full employment and slip onto JobSeeker. If they have one of these payday loans, with up to 200 per cent interest and predatory fees, it's going to be tough. They're only one dose of COVID away from disaster. If their income dries up altogether, if they're casual and get sick or if there's an illness or accident in the family, they will wind up with a predatory debt that will push them further down at a time of their most vulnerability.

I support Senator McAllister's efforts here to bring fairness and equity back into this sector and keep prudent regulation in place that would limit the ability of people to prey on the most vulnerable section of our community. I finish up by saying that, if the government wanted to do something smart, it would put a whole lot more money into interest-free loans and not-for-profit groups that administer those schemes so very well across this country, because they improve the financial literacy of the recipients exponentially and will go some way to relieving the need for any of this legislation.