Consumer advocates have rejected the Federal Government’s proposed changes to laws governing high-cost payday loans and consumer leases, calling for Parliament to vote against the Bill in a submission to the Senate Economics Legislation Committee.
The National Consumer Credit Protection Amendment (Supporting Economic Recovery) Bill 2020 was introduced in the Senate late last year, before being sent to the Senate Economics Legislation Committee for review. Controversially, the Bill also intends to repeal responsible lending laws in a time of unprecedented household debt levels.
“The Government has included new rules for payday lenders and consumer lessors in the same bill, that if passed, will repeal safe lending laws,” said Alycia Gawthorne, Campaigns & Advocacy Adviser for Consumer Action Law Centre.
“Consumer advocates have been calling on the Government to introduce stronger protections against predatory lenders for years. This should’ve been a welcome announcement.
“Unfortunately, it looks like we’ll need to continue fighting, because the reforms in the bill are nowhere near what’s needed to be effective,” she said.
One of the key protections recommended by an independent review of the laws in 2016 was a 10% cap that would limit the proportion a lender could take in repayments from a borrower’s fortnightly income. The cap was recommended to ensure people are left with enough money to cover daily living expenses such as food and rent after making loan repayments.
However, the Government’s bill proposes to double the cap for non-Centrelink recipients to 20% each for payday loans and leases. This would mean someone in employment could still have up to 40% of their net income taken by payday lenders and consumer lease providers.
“The 10% cap was already a compromise from our original call for a 5% cap. To have it doubled to 20% will render the protections completely ineffective in preventing the harm caused by predatory lenders,” said Ms Gawthorne.
“This could’ve been a moment for the Government to take meaningful action to prevent people from getting caught in a debt trap after being preyed upon by reckless lenders — changes the Government has been saying they would implement for the past four years.
“Instead, what we have is a watered-down version of desperately-needed reforms that will do little in stopping the harm. Worse still, the harm that risks being unleashed if responsible lending laws are repealed will overshadow any protections offered by the reforms. It is deeply disappointing.”