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Monday, 15 March 2021
Page: 19


Senator McDONALD (Queensland) (12:07): I rise to speak against this private senator's bill—the National Consumer Credit Protection Amendment (Small Amount Credit Contract and Consumer Lease Reforms) Bill 2019 (No. 2). I do acknowledge that it has been brought with good intentions, but there's a lack of understanding of both the financial environment and the existing additional changes that are being made by this government. I listened very carefully to Senator Gallacher. He is a very significant contributor to the Senate Economics Legislation Committee. Under the steady hand of the chair, Senator Brockman, we had a very good investigation of the government's proposed changes to SACC lending, so I have a very good understanding of the environment that is in place and the changes proposed by the government and this bill. We heard a great deal of evidence from a huge number of community groups, lenders and consumer representative organisations. So much detail was useful to the committee. I reflect on a number of the things raised today that have already been discussed.

I remind the opposition about the reality in regional Australia, particularly in my part of the world of Far North and western Queensland, where access to small credit is sometimes difficult, particularly given that the large banking institutions are withdrawing from that part of the world. Customer owned banks are so important to the successful financial environment in north and western Queensland. They have a huge amount of regulation, which makes it difficult for them to compete, but they do provide a terrific service.

But as far as other sorts of lending go, it is critical that there be an environment that allows for easier access to finance which still remains well regulated and overseen for people who are in difficult circumstances. Senator Gallagher used the example of the fridge going, and that's a very good example of a requirement for finance where people urgently need access to something that otherwise would be a difficult and long process to go through.

I also want to draw the chamber's attention to AFCA. AFCA is a free, fair and independent authority which manages complaints and claims. We heard evidence from them about the speed and success they have in attending to complaints that consumers have around any poor practice that may exist in the financial industry. I also acknowledge contributions made about the lack of financial literacy in the community. This is something that disturbs me enormously and it's something where I think we would be well served by providing education to young people, particularly as they leave school and start working. I remember that when I started working as an accountant I would receive my pay in cash in a little envelope on Friday afternoons. You can imagine just how difficult a temptation that was, managing not to spend that over the weekend. Fortunately, with the reduction of cash in the economy that's less of a challenge to young people today, who generally receive a direct deposit or other form of payment.

The government is on the record, making its position on these reforms clear: we will not support Labor's—and others'—political pointscoring on this important issue. The purpose of the legislation is to reduce the risk to SACC consumers, who are often on lower incomes and in potentially precarious financial positions, or at risk of becoming unable to fund their basic needs or other necessary commitments as a consequence of entering into a SACC. It will also make it easier, in some respects, to obtain credit, ensuring the sector's viability and allowing people to continue to utilise such lending as a regular part of their lives. The reforms also include providing legislative support for ASIC to prescribe important information to be disclosed by lessors to customers, and a clarification of the penalties for imposing prohibited or excessive fees, charges and interest in breaching cost caps.

Whilst making it easier for Australians to access credit, the Morrison government will not stand for predatory behaviour by small-amount credit lenders and consumer lease providers. The bill amends the National Credit Act to establish a mechanism for restricting the payments that are allowed under a SACC for all consumers and will cap repayments at a maximum of 10 per cent of a customer's net income. There are some terrible stories of people on supported incomes being trapped in a never-ending debt cycle after being lured into unsuitable credit arrangements. Recent news reports highlighted a woman who borrowed $75 but had to pay back $110 with interest and fees. Another woman on Centrelink payments borrowed $250, but her total debt repayment was $880. And another woman claimed that she borrowed $100 to buy food and ended up repaying over a thousand dollars due to late fees and interest. For this very reason, the reforms also include that a person who receives 50 per cent or more of their net income from Centrelink cannot devote more than 20 per cent of that to consumer lease repayments, with no more than 10 per cent of this being allocated towards SACC repayments. Additionally, a person who receives less than 50 per cent of their net income from Centrelink cannot devote more than 20 per cent of their net income to SACCs or consumer leases. These are separate caps. The permitted cap on costs will be equal to the sum of the base price of the goods hired under the lease, permitted delivery fees and permitted installation fees multiplied by four per cent per month, up to a maximum of 48 months. Lessors will additionally be able to charge a one-off establishment fee of 20 per cent of the good's base price.

SACCs and consumer leases are high-cost forms of borrowing and are more typically accessed by some of Australia's most vulnerable consumers. While these products can be useful for consumers as an emergency source of funding, repeat borrowing can lead to repayments consuming a greater portion of income, becoming increasingly unaffordable. This proposal strikes the right balance between protecting consumers and maintaining a viable sector to provide these products.

I think it is also important that we understand the cost of regulation on this industry. This cap of four per cent per month up to 48 months will mean that there will be a number of credit providers who will no longer be able to afford to provide credit in this space. These are people who previously were able to provide credit to customers who were in urgent need of finance, but the cost of regulation will mean that that cap on the interest rate will not allow them to cover the cost of doing business. That is of some concern to me because currently they are providing a service to Australians who, for one reason or another, urgently need to access finance in a regulated market. I think that is the critical part. If we do not provide a regulated market for credit lending then people will be forced to go outside of the market. They will be forced to move outside of the regulated market, where you can have very, very bad outcomes, indeed. I don't need to go further into that. I'm sure we all understand what some of the criminal activity has been in the past. That is why it is important that this government provides a strong, regulated environment and a safe environment for Australians to access credit as they require it.