Navigation: Previous Page | Contents | Next Page
Additional Comments by
Senator Hanson-Young
Introduction
1.1
The Australian Greens share the concerns of many in the consumer
protection and advocacy sector regarding payday loans. While we recognise that
in some instances short-term loans play a valuable role in helping consumers
meet unexpected and unusual expenses, the use of these high interest loans to
meet essential living expenses can perpetuate a cycle of debt that has serious
consequences for individual consumers and their families. Given our interest in
consumer protection, we have limited our comments to Chapter Five of the Joint
Committee on Corporations and Financial Services Report, which is concerned
with the introduction of caps and new regulations for certain kinds of credit
contracts.
1.2
The Government should be commended for attempting to address this issue
through its Consumer Credit and Corporations Legislation Amendment
(Enhancements) Bill however we note with concern the limited scope of the
majority report recommendations relating to payday loans. The Committee
recommends that Schedules 3 and 4 relating to caps and regulations for credit
contracts be subject to further review. It is an inevitable consequence of this
recommendation that any meaningful action in relation to payday loans will be
deferred in the short-term.
1.3
The Australian Greens believe a number of provisions could be
strengthened in order to enhance consumer protection and our preference is for
the Committee to recommend the bill proceed with amendment. The areas we have
identified for potential amendment are outlined below.
Small amount credit
contracts
1.4
The Australian Greens strongly support the application of a cap model
for all credit contracts, including short term small amount credit contracts.
This should be aligned with the cap model that operates effectively in the
jurisdictions of Queensland, New South Wales and the Australian Capital
Territory (including interest, fees and charges).
1.5
Rather than imposing a model of a 10 per cent establishment fee plus a 2
per cent monthly fee for short term contracts, the cap of 48 per cent per annum
that has proved successful in capping the costs of high cost, short term credit
in the above jurisdictions should be utilised.
Enforcement expenses under
39B
1.6
The Greens are concerned about the potential for enforcement expenses
that are outside the remit of s39B to undermine the purpose of the provision.
As noted by the Consumer Credit Legal Centre:
Lenders could set up separate entities for the purpose of
pursuing the consumer for payment and then charge these expenses back to the
original entity to be added to the amount recoverable under s39B.
1.7
Enforcement expenses should be defined specifically and limited to only
those allowed by the equivalent small claims jurisdiction in each
State/Territory in Australia. This would ensure that lenders are unable to
circumvent this requirement.
Implementation date
1.8
The bill is due to commence 1 June 2012 but Schedule 4 dealing with
payday loans is being delayed until the following year. This should be brought
forward, in recognition of the pressing need to take action on this issue.
Monetary obligations and
fees and charges
1.9
We share the concerns of consumer advocates that the sections 23A and
31A provide scope for brokers and introducers to charge fees. To guard against
this, we consider that sections 23A and 31A should be amended to prevent fees
incurred with third parties, whether associated with a credit provider or not.
Web-based disclosure
1.10
The provision of information to consumers about alternate assistance and
cheaper sources of credit is considered essential to any effective consumer
regime. The web-based disclosure statements under Schedule 3 could be further
strengthened by the inclusion of a link to financial counselling information.
Conclusion
1.11
The Greens believe that the payday loan industry is one in need of
regulation. While there is potential to strengthen protections for consumers,
the measures proposed in the Government’s Consumer Credit and Corporations
Legislation Amendment (Enhancements) Bill do provide a workable framework. The
inquiry process has been a valuable airing of key issues, but by deferring any
substantive recommendations for reform, the majority report has missed a good
opportunity. The Australian Greens will continue to pressure the Government to
act on these reforms.
Senator Sarah Hanson-Young
Navigation: Previous Page | Contents | Next Page
Top
|