National Consumer Credit Protection Amendment (Small Amount Credit Contract and Consumer Lease Reforms) Bill 2019
This Bill amends the regulatory framework for Small Amount Credit Contracts (SACCs) (commonly known as payday loans) and consumer leases (known as rent-to-buy schemes).
It amends the National Consumer Credit Protection Act 2009 (NCCP Act) and replicates, word for word, the government's exposure draft legislation, which was released in October 2017 but has not progressed further.
The amendments proposed in this Bill improve consumer protections for those who use payday loans and consumer leases. Consistent with the government's exposure draft legislation, this Bill will introduce a cap on the total payments that can be made under a consumer lease and requires SACCs to have equal repayments and equal payment intervals.
The Bill removes the ability for SACC providers to charge monthly fees in respect of the residual term of a loan, where a consumer fully repays the loan early, and would prevent lessors and credit assistance providers from undertaking door-to-door selling of consumer leases at residential homes, which is predatory behaviour.
The Bill will introduce broad anti-avoidance protections to prevent SACC loan and consumer lease providers from circumventing the rules and protections contained in the NCCP Act and the code.
These protections respond to one of the recommendations in the Independent Review of SACC laws, initiated by the government in 2015. This recommendation was again highlighted in the 2019 Senate Economics References Committee inquiry into Credit and financial products targeted at Australians at risk of financial hardship. The report made a number of recommendations for tighter regulation of the non-bank lending sector, including that the law be amended to clamp down on attempts to disguise the nature of existing credit products and capture new and emerging credit-like products.
Furthermore, the Bill contains strengthened penalties with the aim of increasing the incentive for SACC providers and lessors to comply with the law.
The Stop the Debt Trap Alliance's report entitled The Debt Trap, released in November this year, reported that the number of loans and consumer leases taken out each year continues to rise, particularly among women. Worryingly, almost half of these borrowers are single mothers. The number of easy-access online loans has also rapidly increased over the last ten years. By the end of 2019, it is expected that over 85% of payday loans will have originated online.
The federal government has dropped the ball on these important reforms.
However, these reforms have not been progressed since 2017 and we have been given It initiated a statutory review of the existing laws in 2015 and pledged to enact most of the recommendations. In 2016, it undertook significant consultation and, in October 2017, the government released its exposure draft. The only step left was to introduce a bill to make the sensible reforms a reality and ensure vulnerable consumers are afforded appropriate levels of consumer protection while continuing to access SACCS and leases.
However, these reforms have not been progressed since 2017 and we have been given no satisfactory explanation as to why.
The people paying for this reluctance to act are the most vulnerable in our society — people who are struggling financially, whose desperation makes them ripe for financial exploitation and who cannot afford to tumble into a worsening financial predicament.
Time is of the essence and we urgently need to progress these reforms and protect vulnerable Australians.