Labor eyes Hayne gaps
Labor will step up its focus on regulatory oversight on financial hardship particularly around products provided to vulnerable consumers if it is to take government.
The issue did not come under the Royal Commission’s terms of reference but Labor Senator for New South Wales Jenny McAllister said there needs to be regulation to address poor and predatory behaviour of providers and their products to people facing financial hardship.
McAllister acknowledged that this area was not under scrutiny in Hayne’s inquiry but that a Senate inquiry into payday lending and buy-now-pay-later was subsequently referred to in Fairfax papers as the “Off-Broadway royal commission”.
McAllister who helped push for this senate inquiry along with Shadow Minister for Financial Services Claire O’Neil, was speaking at the Labor Economic Society in Sydney on Tuesday evening.
She highlighted that the 3.1 million people who are in in severe financial distress are the target market for these products.
“There are financial products out there charging some of the poorest Australians an effective annual interest rate of 800 percent, which we found in the case of the consumer leasing sector.”
She also took issue with debt management firms who often left people worse off before they began using their services.
McAllister said the focus for Labor if it wins government will increase scrutiny on the sector including getting a buy-in from the banks.
When she explored the issue further it become clear that “the connection between the structural issues in the banking sector and the viability of these grossly predatory products were in fact connected.
“These problems really only exist because the banking sector has chosen not to service this part of the market.”
McAllister understood from a “commercial perspective” it makes sense that the banks can’t provide those sorts of products.
However, credit, banking and insurance remain essential services for people.
“I don't think it is acceptable that there is no service available or there's no affordable service to this sector. One of the other conversations I would love to have with the banking sector is how are we going to address this together. There are some things we can do,” she said.
Labor has already announced a fund to tackle financial counselling, with banks to contribute $160 million dollars a year to support “a massive expansion in financial counselling and a massive expansion of the availability of financial rights lawyers”.
Obviously, she added that there is a role for Government but in terms of supporting the fund McAllister said that “we think the banks ought to contribute as a social obligation to support the poorest people in the community because without credit and without the fair availability of products, they are actually being terribly exploited by some very unscrupulous operators.”