Time for action on payday lending legislation
Posted October 22, 2018
Cathy has called on the government to take action on pay-day lending legislation
Colleagues, while this bill has a very long title, the National Consumer Credit Protection Amendment (Small Amount Credit Contract and Consumer Lease Reforms) Bill, we refer to it as 'the payday lending bill'. It's an effort by us on the cross bench to bring to the attention of the government that we want things done about the many, many people who are being exploited by what we call 'payday lenders'.
This bill replicates word for word the government's draft legislation which was released on 23 October 2017—a year ago. The government has done nothing, so I'm bringing it to parliament today to say, 'We need to act on this very important issue. But it also follows work from the opposition side of parliament, the former member for Perth. He brought it to the parliament and wanted to debate it as well. We've also had a debate in notice of motion, so we know how important this legislation is. But what we need is the government to bring it on and to act on its own legislation.
I will say a few words about what's proposed by this bill. This bill would impose a cap on the total payments that can be made under a consumer lease. Currently, there's no cap on the total amount of payments that can be made, so it requires small-amount credit contracts that are made by payday lenders to have equal repayments and equal payment intervals. It removes the ability of small-amount credit contracts providers—those people who do payday lending—to charge monthly fees in respect of the residual term of the loan when a consumer fully repays the loan early. So, if you've paid it all off, that should be the end of it. It prevents leasers and credit assistance providers from undertaking door-to-door selling of leases at residential homes. Door-to-door selling of leases—how bad is that practice? It introduces broad antiavoidance protections to prevent small-account credit contract loans and consumer lease providers from circumnavigating the rules and protections already in the National Consumer Credit Protection Act and the code, and it strengthens penalties to increase incentives for small-amount credit contract providers and leasers to comply with the law.
This bill would also facilitate the making of regulations establishing a protected earnings account for all consumers of small-account credit contracts and also for consumer leases. There is a number of other aspects of the legislation that I just won't bore you with today.
I want to say: there are hundreds and thousands of vulnerable people who are trapped in a debt cycle as a result of being caught by the endless cycle of payday loans or rent-to-buy schemes. These small-amount credit contracts have significant impact across the whole country. In 2015-16, there were almost 620,000 new payday loans, with almost $500 million advanced. Two in five of these people who entered into a small-account credit contract loan during this period were unemployed, and one in four small-account credit contract loans were given to people receiving more than 50 per cent of their income from Centrelink, and one in six loans was entered into with a customer using an existing loan. So there's a whole lot of reasons why this needs to be fixed up.
So, as we do, we wrote to the Prime Minister saying, 'Prime Minister, we need you to act on it.' And we've written to the Hon. Stuart Robert MP, the Assistant Treasurer. I had a meeting with him and had a letter back from him, which I acknowledge and say thank you. He said: 'Cathy, we're going to wait on this. We're going to wait until the outcome of the royal commission.' While I understand the royal commission into banks is happening, I think this particular bit of legislation is important enough to bring on. We don't need to wait until the royal commission findings are heard until we actually get a result from it. The time is now, the urgency is now, and I call on the government to act. With those comments, I'll now pass over to the member for Mayo, who has seconded this legislation, and invite her to make a few closing comments.