Transcript: Financial Services Hearing in Brisbane
1.30pm | January 23, 2019
SENATOR JENNY MCALLISTER
SHADOW ASSISTANT MINISTER FOR FAMILIES AND COMMUNITIES
SENATOR FOR NEW SOUTH WALES
MILTON DICK MP
MEMBER FOR OXLEY
TUESDAY, 22 JANUARY 2019
SUBJECT: Senate inquiry into credit and financial services targeted at Australians at risk of financial hardship.
JENNY MCALLISTER, SHADOW ASSISTANT MINISTER FOR FAMILIES AND COMMUNITIES: Thanks everybody for coming out. I wanted to make a few remarks about the significance of today’s inquiry. More than two years ago, the present Government received a report telling them that there was an urgent need for reform around small amount credit. That pay day loans were out of control, that people were experiencing real hardship. In the years since, we’ve seen the banking royal commission expose just how badly things can go when you’re not watching carefully in the financial services industry. Unfortunately, for years, the Government has refused to act on reforms that were proposed for small amount credit contracts. No legislation has been introduced by the Government into the Parliament. And when we ask people who have made representations to this inquiry – who have been having discussions with the Government - they haven’t. No one can explain where this legislation has gone. No one can explain whether a legislative agenda is still on foot. And this is completely unacceptable because, at each hearing, we have heard from representatives for financial counsellors, from community centres, from community legal centres, about the hardship that has been experienced by ordinary Australians who come into contact with products and product providers that are simply not suitable and, in some cases, are just exploitative.
This enquiry is about shining a light on those practices and looking for solutions. But, more than anything, it is about calling for action – asking the Government to do what they said they would do years ago and introduce reforms into this sector to protect consumers. Now I’m joined here today by Milton Dick, the Member for Oxley, who has done an enormous amount of work on this question. Also representatives Carly and Rose from QCOSS and Jillian from the Queensland Financial Counselling Association. I’d like to invite Jillian to make a few remarks about some of the issues she sees on a day-to-day basis with her clients.
JILLIAN McKINLEY: Thank you. Hello everyone, my name is Jill McKinley - I’m with Financial Counsellors Association of Queensland and also a Financial Counsellor with the Salvos Money Care Project. We’ve noticed over the last decade that the number of pay day loans has doubled. And, in fact, the amount of pay day loans has actually trebled. And with the introduction of the buy now pay later products, is another financial product that’s added into the mix, that isn’t currently captured under the National Consumer Credit Code. What this means for someone who’s coming through is that they have an affected interest rate if they’re in hardship of close to a pay day lender. So they’ve got another direct debit coming out of their bank account, which means practically they can’t pay their rent, they can’t pay their power, they can’t pay for food, get their kids to school – it’s a really addictive product and there’s no protections for people to safely purchase the goods that they want, when they want. We’re calling for the Government to urgently pass the new reforms in the credit code, but also to look at the buy now pay later sector. And we request that they have a look at and really get into including them in some sort of framework that will allow consumers to purchase products safely while they’re financial situation is being considered before they make those purchases, and they keep their families housed. Thank you.
MILTON DICK MEMBER FOR OXLEY: Thanks very much. I want to thank the committee and Senator McAllister for coming to Queensland. Queensland is Ground Zero when it comes to the loan sharks and the buy now pay later schemes. Queensland is the Ground Zero when it comes to consumers and customers getting ripped off. 1.8 million Australians are under financial household distress. 800,000 Australians have taken pay day loans. This is a crisis in this country. It’s been over 1,260 days since the Morrison Government was handed a report to deal with this issue. I am sick and tired of residents in my community and electorates right across Australia being ripped off by the loan sharks. My message to Scott Morrison and Stuart Robert is: Listen to what the community is saying - start taking action and protecting consumers. For far too long these loan sharks have been ripping off customers and consumers right across this country. With the committee’s work today, I am confident and I am hopeful that this will be another alarm bell for the Morrison Government to take action to crack down on loan sharks in this state and country.
JOURNALIST: These sort of loan sharks you’re talking about – you’re not talking about Afterpay and those sort of companies? You’re referring to the other sort of –
DICK: Small amount credit loan sharks are predatory and operating right across this country. I’ve heard experiences where consumers are purchasing washing machines or dishwashers or fridges that should cost between $600 and $800, being charged $4,000. 1 in 6 Australians who take out these buy now pay later schemes go into debt. And it’s time we had a framework and regulations to make sure that consumer and customers are protected.
JOURNALIST: Should we tar these people here today with the same brush as loan sharks? [inaudible]
MCALLISTER: In establishing the inquiry I was concerned to look at all of those areas of non-bank lending – and there are new products coming onto the market, particularly in the buy now pay later sector – which we felt were not being regulated at that point in time, they were new products and it was time to have a bit of a look and see whether they were being managed appropriately. I think there’s a quite wide range of behaviour in the buy now pay later sector. I think some of the evidence that we heard this morning suggests that companies like Afterpay and Zip Pay are looking at what they can do to obtain their social license, to behave responsibly. I don’t think that means that there’s no job for regulators or legislators here. The purpose of this inquiry, in relation to those firms buy now pay later, was to have a look at how things are working at the moment, and to try and establish some sort of path forward.
JOURNALIST: What do you think of their argument that they’re sort of like a budgeting tool – or sort of better than a credit card if you like, I mean they do have caps, their fees seem reasonably low, what do you think of that argument that they’re better than a credit card for people?
MCALLISTER: I think whatever line of credit you choose, you need to find a means to manage your finances. I think what you’d hear from lots of the financial counsellors around the place is that there are lots of people who find that really hard and that, whatever product we’re talking about, whether it’s buy now pay later, or an online loan from a small amount credit company, it’s easy to get the credit, and it’s hard to pay it back. And the incentives all run for the consumer in obtaining the credit, but they’re not always clear about really what it’s going to cost them. And they’re not always clear in their own minds about some of the risks that might present to them financially. That’s the story we’re hearing very consistently across the sector and I think it’s as relevant for buy now pay later as it is for some of the other products we’re looking at in this inquiry.
JENNY MCALLISTER AND MILTON DICK’S COMMENT ENDS
22 JANUARY 2019
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