National Consumer Credit Protection Amendment (Small Amount Credit Contract and Consumer Lease Reforms) Bill 2019 (No. 2)

9 November 2020

One of the great privileges of serving in this place is being able to hear the stories and experiences of Australians from all walks of life, in all manner of situations. Some of these stories are inspiring; others are moving reminders of what defines us. Some are stories which challenge us in any number of ways, and some are deeply affecting and stick with you for weeks and months after.

One such story for me was from a witness to the inquiry for this bill, the National Consumer Credit Protection Amendment (Small Amount Credit Contract and Consumer Lease Reforms) Bill 2019 (No. 2). He was a last minute inclusion and, I suspect, was somewhat reluctant to share his story a with a roomful of strangers. I am glad he did. He spoke about his son's hospitalisation, the long hours he spent at hospital, the worry that he felt and the stress as his savings ran down. To make ends meet, he contacted a payday lender. It was clear how effortless the process was. The lender made it so easy to go from an inquiry to an application to finalising a loan. I have no doubt that this is a process intentionally designed to avoid moments of reflection or decision. Sadly, and as happens so often, this one loan became a series of loans and the debt was rolled over again and again, each time requiring a new application with new fees and more interest and each time leaving the borrower in greater debt and distress. This is how a single small loan becomes a financial catastrophe. It can be an extremely easy, rapid transition to the point where a loan is able to ruin a person's finances, their credit and also their relationships. There should be no doubt that these are dangerous financial products and their use requires close regulatory oversight.

This bill was introduced almost a year ago by Senator McAllister and me. We both felt deeply frustrated by the government's inaction on payday lenders. It is a well established fact that many of these lenders are dishonest and exploitative. But, when we heard from them at the inquiry, you'd think that butter wouldn't melt in their mouths. The existing regulatory framework does little to lift the standards in the industry or to protect consumers. So back in 2017 the government at that time decided to act. They drafted a bill that would cap fees, ban door-to-door sales and increase penalties for unscrupulous actions relating to payday loans and consumer leases. It wasn't enough, but it was a step in the right direction. Treasury circulated an exposure draft and the industry lobbying immediately began. The lobbying must have been incredibly effective, because the government soon gave up. They stopped all work on it. They didn't give up on some of the more controversial aspects or water down their proposal; they just gave up on it completely. The government preferred to keep a few lobbyists and loan sharks happy than protect financially vulnerable consumers from exploitation. After years of inaction, Senator McAllister and I introduced the bill in the hope of passing the government's own legislation for them—or shaming them into doing the right thing themselves. It turns out shame doesn't have much effect on this government. In the three years since they walked away from this legislation, thousands of borrowers have been conned into loans they didn't need and couldn't afford. Many of these people could have been protected if the government had acted.

In the last few years, as has become clear, the 2017 proposal was not going to be enough. The restrictions, protections and penalties all need to be stronger. I had hoped this is what the government's new proposal would provide, but, no, they've gone in the other direction. They've actually watered down their proposal when it needs strengthening. It's not hard to see what's going on. They have heard and seen the stories of exploitation by dodgy lenders during the pandemic. They know the community expects the government to protect them from this kind of behaviour. This weak response allows them to claim they are taking action but without delivering any greater protections for consumers and without doing anything to upset the dodgy lenders.

Under normal circumstances, the government would be actively making the case for its legislation. There would be a discussion paper, press releases, dozens of interviews with a minister and an army of Treasury officials out to explain the details, but on payday lending reforms there is silence. It's not surprising. Who would want to front up and defend it? Who would want to face the question: why has the government softened its position on payday lenders in the middle of a recession? Nothing justifies this approach—nothing that the community would find acceptable.

This campaign isn't over. We still have to proceed with this bill, because someone has to change the rules. Someone has to recognise that COVID-19 financial support doesn't reach everyone in the community, and that there are people in desperate financial situations who are vulnerable and are being exploited. Lenders are there who are making a living by preying on that vulnerability. The government has made clear that they are not willing to stop this, so I hope the Senate will support this bill, and I hope members of the coalition in the other place will consider their most vulnerable constituents and their conscience when this bill comes before them.

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