“Time for the financial harms to stop”: Consumer groups urge Senate to quickly pass reforms on payday loans and consumer leases
Consumer Action is one of 20 community organisations strongly recommending that the consumer credit reforms in the Finance Sector Reform Bill (FSR Bill), relating to Small Amount Credit Contracts (SACC) and consumer leases, be passed by the Senate as a matter of utmost urgency.
Advocates, financial counsellors, and people impacted are presenting their case today in Canberra at a hearing of the Senate Economics Legislation Committee.
“The SACC Review in 2016 recommended these reforms and in the meantime, hundreds of our clients have been caught in the debt spirals and financial distress associated with high-cost credit products,” said Tania Clarke, Director of Policy and Campaigns, Consumer Action.
Lyndall Millburn, a financial counsellor for CARE Financial Counselling who is also giving evidence, advises and assists financially vulnerable people, the majority of whom are on low incomes with numerous payday loans or consumer leases from multiple providers.
” Every day I see the harm caused by these loans, and I know what people need is more support, not more debt,” Ms Millburn said.
“We see people all the time who have been deliberately sold multiple payday loans and consumer leases that they simply can’t afford. Irresponsible lending is rife in the industry. We help families facing the risk of homelessness, because of the excessively expensive consumer leases and aggressively marketed payday loans” Ms Clarke added.
“The Senate needs to pass this Bill without further delay, it’s time for the harms to stop which hurt so many people just trying to get by with the cost-of-living pressures and interest rates rises,” she said.
The FSR Bill implements the reforms recommended in the final report of Treasury’s 2016 SACC Review. This was the last independent expert review of the laws that apply to both these products and its recommendations remain fit for purpose.
“Since the SACC Review and over the past seven years, these products—and the harm caused by them—has not changed. If anything, it has got worse as financially vulnerable people across Australia are experiencing the pressure of rising interest rates and increases to the cost of living,” Ms Clarke said.
“Payday loans can come with fees equating to an annual interest rate of over 200%, and there is currently no limit on what may be charged under a consumer lease – something that this Bill would change. We see clients paying thousands over the retail price for goods that are often substandard, we need financial products that are safer, fairer, and more affordable.
“We strongly support the proposed 10% protected earnings amount cap for both SACCs and consumer leases, which will prevent payday lenders and lessors from signing up people in financial difficulty to multiple credit products who simply can’t afford them. The protected earning amount caps will also reduce irresponsible lending in the industry, which we submit is rife,” she said.
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