Pressure mounting for payday loan protections
The pressure is mounting on the Federal Government to bring in urgent protections for vulnerable Australians using payday loans and consumer leases.
Yesterday, Centre Alliance Senator Stirling Griff introduced a Private Member’s Bill on payday lending in the Senate, co-sponsored by Labor Senator Jenny McAllister.
The legislation mirrors the National Consumer Credit Protection Amendment (Small Amount Credit Contract and Consumer Lease Reforms) Bill 2019 introduced into the House of Representatives by the Federal Member for Mayo, Rebekha Sharkie, in September.
“Both pieces of legislation actually introduce the protections recommended in the 2016 Independent Small Amount Credit Contract Review into small amount credit contracts and consumer lease law and the Government’s own exposure draft legislation released in October 2017 in response to that Review,” Rebekha said.
“The Government has dropped the ball on these important reforms.
“It’s been more than a 1000 days since the Government accepted the recommendations of the Review and two years since the Government circulated its draft legislation and we’ve been given no satisfactory explanation as to why the Government has failed to act in this space.
“Nobody is seeking to eliminate small amount credit contracts because we recognised there is a place for them.
“However, all Centre Alliance wants, and now Labor has joined the call, is for better protections for people who use payday loans and consumer leases.”
Senator Stirling Griff said Australia’s most vulnerable citizens were paying the price for the Government’s inaction.
“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,” Senator Griff said.
“Worryingly, almost half of these borrowers are single mothers.
“The number of easy-access online loans has also rapidly increased over the last 10 years. By the end of 2019, it is expected that over 85% of payday loans will have originated online.”
Consistent with the Government’s exposure draft legislation, the Private Members’ Bills seek to;
- introduce a cap on the total payments that can be made under a consumer lease;
- require small amount credit contracts to have equal repayments and equal payment intervals;
- remove 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;
- preventing lessors and credit assistance providers from undertaking door-to-door selling of consumer leases at residential homes;
- introduce broad anti-avoidance protections to prevent SACC loan and consumer lease providers from circumventing the rules and protections contained in the Credit Act and the Code; and
- strengthen penalties to increase incentives for SACC providers and lessors to comply with the law.
It is estimated that nearly one million Australian households are using payday loan schemes, leaving many struggling financially due to high fees and interest rates of up to 800 per cent.
Between April 2016 and July 2019 more than 4.7 million payday loans were approved totalling more than $3 billion in new debt.
The number of women using payday loans rose from 177,000 in 2016 to 287,000 in 2019.
Single mothers now account for nearly half of all loan recipients.