Federal Labor has called on the Turnbull Government to be “proactive” regarding payday loans and act on legislation to better protect vulnerable consumers from the effects of high-interest debt.
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Newcastle MP Sharon Claydon was joined by Shadow Assistant Minister for Families and Communities, Louise Pratt, and key industry figures at Civic Park on Monday to push the party’s call to fast-track legislation.
“We’re here today to shine a very big light on the practice of payday lending, which is really a scourge for many vulnerable families in our region,” Ms Claydon said.
“When we have a royal commission shining a big light on very horrific practices that have been undertaken in financial services, it is unconscionable that the government would not implement its own legislation that has been sitting for more than a year, on its tables.”
The Turnbull Government committed to reforms in November, 2016 following a review into small loans and put out a draft consultation bill in October last year, but industry lobbying has led to a standstill. Labor has now introduced a “word-for-word” copy of the bill, said Ms Pratt.
Payday loans are those up to $2,000 which must be repaid between 16 days and one year. They can be obtained with minimal assessment and are usually applied for over the internet.
Lenders can make repayment deductions from a loanee’s weekly pay at 20 per cent of their weekly income and can charge a 200 per cent default fee.
A report from the National Credit Providers Association, the peak body for small loan providers, states there were 619,549 loans approved in Australia in the 2015-16 financial year.
“This is a broken business model that relies completely on the the exploitation of vulnerable people and families,” Ms Claydon said.
Ms Pratt said there has been a “failure to act” from the Turnbull Government on the “terrible loans practices”.
She was “shocked” to realise there are ATM-style machines in the Hunter offering payday loans. One company’s machines are located at Cessnock, Raymond Terrace and Mount Hutton.
“They’re targeting low-income, welfare dependent areas,” Graham Smith, chair of Financial Counsellors Association of NSW said.
“It’s about trapping people, getting people caught up in a system that they find it very difficult to get out of.”
The proposed legislation seeks to reduce the weekly pay deduction rate cap from 20 to 10 per cent, among other changes.
Brad Webb, of Samaritans Newcastle, said payday loans can often leave people in a “spiral of debt” and calling on his organisation seeking food, help to pay bills and to “keep the wolves at the door.”
“When you find yourself in an environment where you’re paying back exorbitant interest rates on debts that those repayments take an increasing proportion of your available income, that means you’re not putting food on the table... you’re going without the family treats and things that make family life valuable, important and rich,” he said.
“Our call is upon the parliament to legislate, to put in place protections that will ensure these people don’t find themselves trapped in a cycle of debt from which it’s difficult to recover.”
Ms Claydon said the meeting on Monday was designed to send a message to the Federal Government.
“It’s a wake-up call to a government who should be learning from the royal commission that they need to be proactive in their attempts to regulate financial services,” she said.
“There are legitimate places for people to access small loans, but it needs to be done with the correct support services and financial counselling support services in place.
“It’s this unfettered, unregulated industry that preys on vulnerable families and communities, like ours, that should not be allowed to continue.”
