Source document: https://docs-lawep.s3.us-east-2.amazonaws.com/1697636088059.pdf (Australia)
9 November 2018 Senate Standing Committees on Economics PO Box 6100 Parliament House Canberra ACT 2600 Email: economics.sen@aph.gov.au Dear Committee members, PO Box 4093 Ainslie ACT 2602 T (02) 6230 1775 F (02) 6230 1704 anglicare@anglicare.asn.au www.anglicare.asn.au Re: Inquiry into credit and financial services to Australians at risk of experiencing financial hardship There has long been a need to regulate the financial loan market targeting Australians experiencing financial hardship.
This was highlighted with The Independent Review of the Small Amount Credit Contract Laws, initiated by the Government in 2015, and which our network member Anglicare Sydney made a submission to.

Anglicare Sydney called for further industry reform to protect people on low incomes or with low financial literacy.
They recommended the use of microfinance programs as viable alternatives to payday loans, and collaboration between Federal Government, credit unions and community groups for consumers who are not eligible to access microfinance products.

The review led to an exposure draft for a bill in October 2017 (National Consumer Credit Protection Amendment (Small Amount Credit Contract and Consumer Lease Reforms) Bill 2017).

However, since then the Government has not acted upon its own proposals.
Anglicare Australia’s network members are annually supporting more than 60,000 Australians with emergency relief and over 33,000 Australians with financial support services (for example through financial counselling, the No Interest Loans Scheme, and microfinancing).

Members have an ongoing concern for people in vulnerable financial positions who feel that their only option for immediate and urgent financial assistance is by borrowing from a payday lender or a similar high-cost short-term loan provider.
We are daily witnessing the harm payday loans can cause clients by creating a debt cycle with multiple loans from different lenders operating at the same time.

Many people are using short-term lending to keep the utilities connected.

Some have fully used government initiatives or are not eligible.

Others are not able to get enough Emergency Relief and have had to rely on short-term lending.
Credit and financial services targeted at Australians at risk of financial hardshipSubmission 23 2 Anglicare Australia considers the provision of high-cost, short-term loans to be exploitative of people on low incomes since it is predominantly such households using this kind of borrowing.
There is a substantial need for reform to the current laws that regulate payday lenders and consumer leases, as well as to the type of financial services that are available to people on low incomes or with low financial literacy.

Anglicare Australia supports the draft National Consumer Protection Bill 2017, and we would like it enacted as law.
In particular we support the following reforms, which were put forward as part of the review:  Limiting total ‘small amount credit contract’ repayments to 10 percent of a person's net income (known as a 'protected earnings amount');  Capping the cost of consumer leases to the base price plus 4 percent of the base price  per month for a maximum of 48 months; and Introducing a ‘protected earnings amount’ requirement for consumer lease providers that limits total consumer lease repayments to 10 percent of a person's net income, equivalent but separate to the requirement for ‘small amount credit contracts’.
In addition, Anglicare Australia recommends reform to ensure that Australians experiencing financial hardship are offered alternatives to high-cost short-term loans.

Ideas include:  No Interest Loans Scheme (NILS), StepUP, Centrelink advances and other microfinance programs are preferred options for people on low income requiring short-term, low interest finance.

 Although NILS and microfinance are very good alternatives, the clients most vulnerable would often not be eligible for these products.
Alternative affordable short-term lending needs to be made available.

Anglicare Sydney’s 2015 submission includes examples, such as credit unions in the United States that offer payday loans with an interest rate considerably lower than the Australian interest cap.

 There needs to be more face-to-face education to help people understand financial products, money management and energy consumption.

This would be particularly useful for people who may not be able to use technology.
 Microfinance programs, financial literacy programs, and support services need to be supported with funding to ensure they are available to vulnerable people in the longer term.

 Experience from our network members shows that government needs to address affordable energy while looking at credit and financial services.

The Federal Government needs to increase the options for people on low incomes in the ‘mainstream’ credit market including improving digital inclusion.
Mainstream credit providers, including banks and credit unions, need encouragement to enter the low income credit market, potentially through the introduction of grants or tax incentives.

Ideally these Credit and financial services targeted at Australians at risk of financial hardshipSubmission 23 3 options would be accompanied by initiatives that would enable people to build up their savings, reduce reliance on payday loans, and establish a reliable credit history.
This also needs to be followed by affordable digital communications that are easily accessible to people on low incomes, so that they are not cut off from the increasing number of digitalised services offered by industries and governments.

Anglicare Tasmania has made a detailed submission to the current inquiry outlining their recommendations.

We support their submission and believe that their experience and recommendations reflect the experience and need across states.
This submission is prepared with the input from several network members, such as Anglicare Western Australia, The Samaritans Foundation, Anglicare Sydney and Anglicare Tasmania.

Our network members would be willing to appear in a hearing to elaborate further.

Should you require further information, please contact the Anglicare Australia office on (02) 6230 1775.
Yours sincerely, Kasy Chambers, Executive Director Anglicare Australia Credit and financial services targeted at Australians at risk of financial hardshipSubmission 23