The beginning of each year can be a difficult time financially. All the expense of Christmas might be behind us, but for many families the school year brings a whole new set of challenges. The cost of school uniforms, shoes, and backpacks on top of mounting utility bills and rent can feel overwhelming.
 
In this environment, a pay day loan can seem very tempting for some families. They are certainly easy to access. In the past, people had to go out to access payday loan machines and shop-front services. Now people who might never have dreamed of visiting their local pawn shop can agree to the terms of a loan with a single click from their computer at home. An old, grubby product has become a slick, attractive option, often dressed up as financial advice.
 
While payday loans can provide term-short financial relief, they often leave borrowers worse off and scrambling to repay their loans at exorbitant rates of interest.
 
For many families this situation is common. In 2019, around 287,000 Australian households used payday loans or other high cost forms of credit. The lack of readily-available, affordable alternatives means vulnerable consumers taking up a payday loan could be slugged up to 400% per year in fees and charges. The implications are serious for people already doing it tough.
 
For more than two years, the government has sat on legislation that could protect vulnerable consumers from the worst excesses of the small-amount, short-term credit market.
 
In 2015, the government commissioned a review of the laws that govern small amount credit contracts and found significant problems in the market. When releasing draft legislation in response to this review in late 2017, the then-Minister, Michael McCormack, promised to legislate that year. This never happened.
 
In the last sitting week of 2019, I co-sponsored legislation to amend the National Consumer Credit Protection Act (2009). This Bill is currently under committee consideration.
 
The proposed law, which replicates exactly the government’s draft bill of 2017, aims to improve consumer protections for those who use payday loans, prevent loan providers from engaging in predatory behaviour, and strengthen penalties against lenders who break the law.
 
These are simple, sensible changes that protect people who use payday loan providers and, importantly, restore some of the power to them in the consumer relationship.  While the government has dithered for the last two years, hundreds of thousands of people have been exposed to these harmful products.
 
Payday lenders often target people who are already in tough financial situations. They are frequently not properly assessing whether people can afford the loan and associated repayments, and they often take advantage of people by not being transparent about the true cost of the loan.
 
When people reach for financial support, they need to know that the product they’re accessing is safe and won’t make their financial situation worse. People shouldn’t be exploited when they are down on their luck.
 
Many Australian families are doing it tough and struggle to bridge the gap between their income and their basic needs. It should not be beyond us to ensure that when these families reach for credit, it is affordable, and offered on just terms.
 
When parliament returns at the beginning of February, I ask the government to work with me to see that this is a better new year for thousands of families trying to do what we all want to do: set our kids up for their best possible school year. They should be able to do it without risking their financial security, and that of their families into the future.
 
The Government could fix this tomorrow. We have a solution ready and waiting. The only thing missing is political will.
  
This opinion piece was first published in the Canberra Times on Tuesday, 4 February 2020.
 
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