Senator REYNOLDS (Western Australia) (11:09): I rise to support the Social Security (Administration) Amendment (Consumer Lease Exclusion) Bill 2015. The government does not support this private members bill. We all acknowledge on this side and, as those opposite have said in the debate this morning, the minister is absolutely committed to this issue. In fact, the government is already addressing this issue but unlike many of those opposite who have a history of putting forward bills with extremely catchy titles which, if ordinary people were to look at them, would think, ‘That makes a lot of sense,’ the bill fails to deliver what the title says.

 

I can well remember a few months ago those opposite supporting a bill called Defence Amendment (Fair Pay for Members of the ADF) Bill, again another catchy title but, had the bill been implemented, it would have decreased pay and allowances and conditions of service for all defence personnel. Upon having a look at the impacts of this bill, as proposed by Senator Cameron, I believe it is in the exactly the same category. It sounds good, but it does not achieve what the title says it is supposed to achieve.

 

It is helpful first to look at what this bill is designed to do. What is Centrepay? Centrepay is a valuable billpaying service that helps many Centrelink customers manages their ongoing expenses. Centrepay is voluntary and free for the customer. Deductions are made to elected businesses before the customer receives their welfare payment. It is a very important service because it reduces potential bank fees from overdrawn accounts and also repossessions of critically important household goods. Businesses pay a fee for each customer deduction because generally they appreciate how it helps customers to meet their obligations.

 

When a consumer seeks finance and they are excluded from mainstream options, such as credit cards or bank loans, which many of us are able to take advantage of, they can instead take out a small amount credit loan or a consumer lease. Small amount credit loans are loans of up to $2,000 where the contract term is between 16 days and one year. Loans with terms of fewer than 16 days are prohibited. These small loans are often used to finance emergency expenditure, such as an unexpected car repair bill—something critically important for people to get their kids to school and to get themselves to work. A consumer lease enables a customer to lease an item —for example, a fridge or a washing machine—over a specified period, usually between two and four years, with ownership and, therefore, responsibility for maintenance, resting with the provider of the lease. Customers make regular rental payments—usually monthly—until the term of the lease finishes. As ownership remains with the provider, the consumer does not own the goods until the end of the lease. As The National Welfare Rights Network said in their submission to the Independent Review of Centrepay—and this is not the government saying this:

 

People can opt into Centrepay and use it as a tool to help arrange their personal finances. People benefit from its convenience and security and the fact that it does not charge people for a deduction, unlike banks which impose fees for the establishment of a regular deduction to a third party.

 

The National Welfare Rights Network have acknowledged that this is a critically important service for some of the most disadvantaged in the Australian community. Centrepay allows customers to manage their finances by paying bills off in affordable instalments. In the alternative, a customer may be compelled to either obtain a cash advance from Centrelink or use a payday lender in order to pay the quarterly electricity bill. A welfare rights caseworker with over 10 years of experience noted in a submission:

 

For many people doing it tough and who regularly have budgets in the red, Centrepay is a real godsend. It’s better than sliced bread—it is one of the best things that Centrelink has ever done. People really love it and it helps people keep on track financially when so many other things are going on their lives.

 

Remember, that is a quote from a welfare caseworker who has worked in this field for over 10 years with the people who benefit most from this system.

 

When we look at the merits of this bill it is important to note that Centrepay is not a legislated program. The Department of Human Services is the responsible department. I had a look at the bill and the issues that sit behind this. I have categorised why this bill is so bad and, quite frankly, why it is completely unnecessary. Apart from the fact that it is absolutely unnecessary, I found at least four major reasons why this is a bad bill. I am sure there are more, but I will now go through the four main areas I identified.

 

Firstly, it is a bad bill because excluding all consumer leases from Centrepay would interfere unduly with existing means of urgent access to necessary goods, such as fridges, washing machines and other day-to-day appliances needed to support a family, for those who need it the most. The recent changes to Centrepay announced by the Minister for Human Services strike a balance between strengthening protections for customers and not interfering unduly with existing means of facilitating access to the necessary goods.

 

Regulated consumer leases are not being excluded from Centrepay. Welfare recipients are usually unable to access most forms of credit, such as credit cards. Regulated consumer leasing is one of the few ways for those most disadvantaged in our community to obtain essential household goods. There are alternatives to consumer leases—we all know this—such as the no-interest loans scheme operated by Good Shepherd Microfinance and low-interest loans.

 

The government has already taken action to ensure that Centrepay can be expanded to support these options and other microfinance approaches that are responsible. Until these alternatives are available on a much broader and larger scale within the community, many customers—again, those most disadvantaged in our community—will still depend on consumer leases. The use of Centrepay for regulated consumer leases must, therefore, remain open to not disadvantage those in our society who most need it. Not every Centrelink customer is able to access a local no-interest loans scheme provider. For example, as we heard from my colleague from Queensland, in Normanton in Far North Queensland there is no local no-interest loans scheme provider. It is simply not available. There are also differences of scale. In 2013-14 the no-interest loans scheme approved 24,378 loans, with a total value of $22 million. Compare that with the use of Centrepay for household goods. In just six months, from July to December last year, 136,000 low-income customers had a total deduction value of over $148 million. Not all those deductions were for consumer leases but the comparative volume clearly indicates to anyone looking at the statistics that there is a significant demand for basic, everyday household goods. That is the first reason why this is a bad bill.

 

The second reason this bill is unnecessary is that, as the last two speakers, Senator Moore and Senator Carol Brown, have acknowledged, Centrepay is already being improved. The government is already taking a wide range of actions. In fact, major changes to Centrepay were announced in May this year. On a quick review I have found at least 10 comprehensive changes that the government has already implemented. The first thing it did was exclude consumer leases that are not regulated by the National Consumer Credit Protection Act 2009. The second thing the minister did was exclude funeral insurance, although Centrepay is still available for scheduled repayments of funeral expenses and prepaid funeral plans. The third thing the minister did was advise in writing customers who have been using Centrepay for household goods or funeral insurance of these changes. They have also been provided additional information on the alternatives to consumer leases that they can look at. These three changes alone build on at least six other changes following the independent review of Centrepay.

 

The fourth major change that has occurred already is that customer complaint mechanisms have been improved significantly to ensure prompt and relevant responses by the department. The fifth measure was a full review of the Centrepay policy contract framework and assurance and compliance frameworks. Again this is critical to ensure anybody abusing the system and taking advantage of the most vulnerable in our society are identified and stopped. Additional resources have also been provided for assurance reviews of participating businesses.

 

What is the sixth measure the government has already implemented? The Department of Human Services has reviewed and built on the information provided to customers about their Centrepay deductions by developing a customer deduction statement that assists customers to better understand and manage their deductions. It is not a paternalistic approach like that proposed by those opposite but another measure to empower and educate clients on how to best manage their own circumstances. The seventh action the government has already taken is the Department of Human Services has added a link to the ASIC money manager on its website to help raise awareness of good financial management. Again this is another practical measure to educate and further empower individuals.

 

The eighth measure I found was that the department had also strengthened its relationship with ASIC, the ACCC and the Australian Energy Regulator. Agreements with these regulators allow for the exchange of information in relation to entities of mutual interest, including businesses seeking approval to use, or approved to use, Centrepay. Again we are doing much more due diligence up-front to make it less likely that a rogue operator will be able to join the scheme and exploit some of Australia’s most vulnerable. These relationships have already led to the exposing of businesses that may not have the appropriate licensing, are operating illegally and are not complying with Australian consumer law.

 

So, there is more. The ninth measure the government is already taking that I have identified is that the Department of Human Services has established a working group, this time with Treasury, which will consult on options to use Centrepay policy settings to improve disclosure of effective interest rates by Centrepay approved businesses when offering consumer leases. Clearly, with the issues that have been raised and discussed in this chamber today, that alone will make a very significant difference in ensuring that those who go into these arrangements are not exploited with outrageous interest rates.

 

The 10th change that the government has implemented was announced by the Assistant Treasurer, the Hon. Josh Frydenberg, on 7 August 2015 that there will also be a review of the small amount credit contract laws. He also announced that this review will consider whether those laws should be extended to apply to regulated consumer leases. Any changes resulting from this review would potentially apply to consumer leases more generally, not only consumer leases under Centrepay but also under income management arrangements. So that is the second reason. Those are the 10 changes this government has already implemented and that is only the second reason why this is a bad bill.

 

Thirdly, I believe this is a bad and unnecessary bill because the bill as introduced and as discussed by those opposite would not impact on Centrepay, but only on people supported by income management. Again, the bill itself will not realise the intent for which it is being put forward. This is because the Centrepay scheme is not established by the social security law. However, the legislation does allow for Centrepay deductions through section 55 of the Social Security (Administration) Act 1999, which addresses how social security payments are paid into bank accounts.

 

Senator Cameron’s bill amends two sections in the part of the Social Security (Administration) Act concerned with income management. It would prevent expenditure under income management on certain consumer leases, but would not affect payment of deductions under Centrepay. I will say that again because I think that is one of the most critically important points here. Senator Cameron’s bill is concerned with income management, and, if you have a look at the wording of the bill, it would actually prevent expenditure under income management on certain consumer leases but would not affect payment of deductions under Centrepay. So that is the third reason why this is a completely unnecessary bill.

 

Finally, I think that it is a bad bill because excluding rent-to-buy contracts from income management is not supported by the bill. It is clear that if Senator Cameron’s bill was enacted, it would mean that people on income management would not be able to pay for any consumer lease obligations using their income managed money regardless of whether or not they have existing obligations. Think about that. Think about the impact of that on people currently on income management plans. It sounds like a bit of bureaucratic speak and it is, but the practical implications of those currently using income management money would have a significant and quite devastating impact on those people. That is because the purpose of income management is to ensure that the priority needs of welfare recipients are met and that they are protected from the things that would undermine them, their families and their communities—alcohol and gambling and other social issues.

 

Income management was not designed to stop people from getting access to a refrigerator to store food to feed their families, or a washing machine to clean their clothes. If they need to rent these it is because it is the only way they can afford acquire them—or because it is the way they choose to acquire them. The important point, I believe, is that they have access to the information which would help inform their choice. This is why the department’s customer service officers will only set up these deductions following a discussion with the client about possible options. Alternatives include Centrelink advance payments, no- and low-interest loans from community organisations, lay-by or savings accounts for the goods. Customers are also referred to the ASICdeveloped ‘rent versus buy (consumer lease) calculator’ on the department’s website, to assist them themselves to understand the true cost of a possible lease arrangement. The addition of consumer leases to the list of excluded goods for income management is not supported, as many people would have existing obligations of this type at the time they enter the program. For many people—again, for many of our most disadvantaged in Australian society—these types of arrangements continue to be a practicable, and sometimes their only, option for obtaining basic household goods.

 

The changes and the comprehensive suite of measures the government has implemented are not only sensible; they are simply good government. Welfare recipients are usually not able to access most forms of credit such as credit cards, consumer leasing and other arrangements that many of us are able to access in society. There are alternatives to consumer leases, and I am very pleased to see that Centrepay will be expanded to support low-interest loans and no-interest loans. In light of the overwhelming evidence that, yes, there is a problem, this government has not just talked about it—has not just put forward empty bills that will be counterproductive—but has actually taken a comprehensive approach to this and implemented at least 10 very strong recommendations. Instead of a paternalistic approach to protecting people from themselves, our solutions are all about educating and empowering consumers—not protecting them from themselves. We acknowledge the potential abuse, but that is why we have taken the measures that we are taking today. It is for all of these reasons that I cannot support this unnecessary and counterproductive bill.