PAYDAY LENDERS

The Hon. J.S. LEE (15:01): I seek leave to make a brief explanation before asking the Minister for Consumer Affairs a question about payday lenders.

Leave granted.

The Hon. J.S. LEE: The Consumer Action Law Centre released their new research report on 14 September this year and revealed that the high-cost, short-term lending industry, referred to as payday lenders, has grown almost tenfold during the last decade. The Consumer Action Law Centre media release dated 14 September presented a report called 'Payday Loans: helping hand or quicksand'. Mr Zac Gillam, the author of the report, stated that thousands of people were now repeatedly borrowing small loans at rates equivalent to 400 per cent per year or more.

The main concern, aside from large interest rates, is the rapid rise in unregulated websites offering short-term, high interest loans as part of a growing payday lending industry. Online lending is a very unmonitored environment, and the websites lack information about the cost of the product. The author also stressed that 'essentially they lead you down the path before you even know how much the loan is going to cost'. My questions to the minister are:

1. How will the government protect and educate online consumers about the pitfalls of payday lenders, especially when thousands of South Australians could be affected by the Labor government budget cuts and may be in financial difficulties?

2. Has the government considered the imposition of an interest rate cap such as those in New South Wales, Queensland and the Australian Capital Territory?

The Hon. G.E. GAGO (Minister for State/Local Government Relations, Minister for the Status of Women, Minister for Consumer Affairs, Minister for Government Enterprises, Minister for the City of Adelaide) (15:03): I thank the honourable member for her important questions regarding payday lenders. Indeed, this issue has been caught up in the COAG reforms around the national credit law. The Council of Australian Governments has embarked on a new reform agenda to create a more seamless national economy, and one of the reforms being pursued is a new national regulatory review of credit.

In July 2008 COAG agreed that the commonwealth would assume responsibility for the regulation of mortgage brokering, margin lending and non-deposit lending institutions as well as the remaining areas of consumer credit. The new national credit regime is being implemented in two phases, at least, with the first phase having started on 1 July 2010 with the commencement of the National Consumer Credit Protection Act 2009 as a law of the commonwealth. It sought to implement the national consumer credit code based on the current state-based uniform credit code, the UCCC.

The key elements of that phase were about improving consumer protection in the credit market. It involved the establishment of a national licensing regime to require providers of consumer credit and credit-based brokering services to be licensed; the introduction of general conduct requirements including responsible lending practices to which licence holders must adhere; requiring licence holders to be members of an approved external disputes resolution scheme; and extending the scope of credit products to include consumer mortgages over residential investment properties.

As I said, payday lenders' activities will be included in those activities that the federal government is now taking responsibility for. There is various information available through them and the website that they have available for the public. Our agency makes sure that it keeps its websites up to date with relevant information as new developments come forward.