Government to Scrap Safe Lending Laws and Turbocharge Predatory Lending

Media release – NILS Network of Tasmania, 19 February 2021

Government to scrap safe lending laws and turbocharge predatory lending

The Senate Economics Committee on Friday 19 February is holding hearings in Canberra into the government’s proposed legislation which will repeal safe lending laws and introduce watered down regulation of predatory pay day lenders and rent to buy schemes. NILS Network of Tasmania cannot believe that in the midst of the pandemic economic recovery and uncertainty the Government are choosing to make lending unsafe and are begging for change.

How unsafe? These laws will make it legal for low income Tasmanians to have up to 40% (FORTY!) of their net income harvested by pay day lenders and rent to buy schemes each fortnight.

The only way to look at how abhorrent this is is to think about the impact on real Tasmanians and how they would play out.

‘William’ is a single man living and working in Burnie, working part time and receiving $1110 a fortnight through a mix of wages and part payment of Job Seeker. He’s renting a unit in Burnie and paying the median rent of $466 a fortnight, and pays the average of $76 a fortnight in power. This leaves him each fortnight just $565. He’s been through some desperate financial hardship as his wages fluctuated during the pandemic and so he turned to pay day lenders and rent to buy schemes and they are now taking $444 in payments EVERY fortnight. (40% of his income). Leaves him $121 every fortnight ($8.64 a day) for food, petrol to work, car rego, car repairs, medical expenses etc. He’s in an impossible situation.

“I am just stunned that the Federal Government can propose legislation that allows pay day lenders and rent to buy schemes to harvest 40% of people’s income! At the very time that there is so much financial stress and uncertainty, and people are in real danger of making dangerous financial decisions to make ends meet, the Government is putting up legislation that allows people to be destroyed financially” John Hooper CEO of NILS Network.

John Hooper added “We see 3000 bank statements a year from our clients as a no interest community lender. We see the harm rent to buy schemes and predatory lenders do to people each day. After four years of waiting for the Government to implement previous recommendations and draft legislation which was supposed to cap the lending at 20% of people’s income – they’ve given the industry what it wanted and DOUBLED THE PREVIOUS RECOMMENDED CAP.”

Remember that a fridge purchased through rent to buy schemes generally costs the customer 200% on average over the retail price already. An $800 fridge costs the customer $2400 over three years. These are the lenders this government legislation is supporting.

Included in this legislation is a repeal of the safe lending laws as well, which is just stunning.

The banking royal commission chaired by Kenneth Hayne had as Recommendation 1.1 “Do not amend the NCCP Act to alter the obligation to assess unsuitability”.

This legislation does the exact opposite despite the banks and the government supporting the recommendations from the Royal Commission.

“Tasmanian Senators and Members, whatever their party must stand up and vote down this legislation. NILS Tasmania, TasCOSS, Neighbourhood Houses Tasmania, financial counsellors and consumer rights groups across Australia have been calling and calling for action on this issue, and the question is whether our Federal representatives can stand up to protect Tasmanians. If they don’t and they watch the inevitable next royal commission and there is Tasmanian story after story of being destroyed financially by unsafe lending, they will have to know they enabled that to happen.” John Hooper, NILS Network of Tasmania CEO