Consumer Action Law Centre (Consumer Action) welcomes the introduction today of legislation in the Senate by Labor and Centre Alliance, in the wake of Government inaction. The Bill is an important measure to protect Australians from financial harm caused by payday loans and consumer leases.
The National Consumer Credit Protection Amendment (Small Amount Credit Contract and Consumer Lease Reforms) Bill 2019 was introduced to the Senate by Labor and Centre Alliance Senators. The Bill mirrors draft legislation developed by the Coalition in 2017 and includes a number of positive reforms such as:
- Banning payday lenders from making unsolicited offers that encourage people to take out more and more payday loans;
- Imposing a cost cap for consumer leases, as well as improved disclosure including requiring providers to inform borrowers about the base price of goods.
- Introducing broad anti-avoidance protections to prevent these lenders from circumventing the rules and protections
The Bill also paves the way for the introduction of a protected earnings cap for both payday loans and consumer leases which would limit repayments on loans and leases to 10% of a borrower’s net income. This cap would leave Australians with money to pay for essentials like rent and groceries each fortnight, as well as being able to pay off the loan.
“This Bill would make payday loans and consumer leases fairer and protect hundreds of thousands of Australians who continue to fall into a debt trap because of these exploitative lenders,” says CEO of Consumer Action, Gerard Brody.
Laws governing payday loans and consumer leases have undergone extensive consultation in recent years starting with a review of the legislation in 2015. That review consulted with industry, service providers and consumer groups and proposed sensible recommendations to make these loans safe – the majority of which the Coalition Government accepted. The Government consulted on its exposure draft legislation in 2017, but it was never introduced to Parliament.
“In the three years that these reforms have stalled, payday lenders have profited to the tune of some $550 million.” Brody said. Recent data from the Stop the Debt Trap Alliance’s report on payday lending uncovered a booming market, projecting that it would reach a staggering $1.7 billion in gross payday lending stock by the end of this year.
“There is a broad consensus across the community that stronger consumer protections for payday loans are needed. Why, then, are Prime Minister Scott Morrison and Treasurer Josh Frydenberg letting payday lenders and consumer lease providers escape legislative reform?”
Consumer Action calls on the Morrison Government to act now and support this Bill in the final parliamentary sitting week of 2019.
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