Fair Trading Amendment (Cash Loan Machines) Bill 2019
June 06, 2019
Mr ANOULACK CHANTHIVONG (Macquarie Fields) (11:12): I make a contribution to the Fair Trading Amendment (Cash Loan Machines) Bill 2019. Firstly, I thank my colleague the member for Swansea for bringing this important private member's bill to the House. I acknowledge the contributions of all my colleagues who will speak on this bill. This bill is simple and unambiguous in prohibiting the installation of cash machines, which prey on the financial vulnerability of people in our local communities who are already in difficult financial situations. It is about consumer protection and in one sense it is no different from other market prohibitions of consumer goods that Parliament believes require market regulation. Instant cash loan machines are not a financial lifeline: They are a lure to a financial debt trap, which only exacerbates the problems of borrowers who already have limited means to repay the amount lent.
In 2006 Nobel Laureate Muhammad Yunus won the Nobel Prize for his work on the use of microcredit and microfinance to alleviate poverty and support entrepreneurial initiatives, especially for people in poor rural communities, in particular women. I do not think he was envisaging instant cash loan machines targeting vulnerable Australians with lower credit loan amounts, which lead them into debt traps with interest rates of 100 per cent to 400 per cent, and loan establishment fees of up to 20 per cent. This is certainly a perverse extension of his work and produces the exact opposite effect: making people poorer by preying on their vulnerabilities. It is no coincidence that the first tranche of instant cash flow machines has targeted people in lower socio‑economic areas and are located in financially disadvantaged communities.
This targeting is predatory behaviour and shows the imbalance of market power between the buyer and the seller of credit. It is a sad fact that my electorate office is approached on a weekly basis by constituents in dire financial situations. Requests for referrals to community organisations, which can provide emergency relief, financial counselling or food packages, are all too common. Those constituents are the very people the predatory cash machines are targeting—residents desperate to put food on the table or keep the electricity running during winter. This bill is aimed at preventing a problem from getting bigger and protecting consumers who are misled about accessing cheap, easy money with nothing to worry about in terms of interest repayments.
Like all things too good to be true, instant cash loan machines providing fast, easy cash are too good to be true. Regulation and legislation of economic transactions are about creating a fairer marketplace and ensuring that there is a better balance of market power between buyer and seller. In a situation where it is obvious that the seller can have or has greater market power than the buyer, the Parliament has a role, a responsibility and an obligation to create a more efficient and fairer marketplace. That is why we have price regulations on certain industries and anti-monopoly, anti-cartel and anti-competitive pricing legislation. This bill is merely an extension of the principle of fair market transactions and aims to minimise predatory behaviour of sellers who have substantial advantages over their targeted consumers.
The idea that we should treat this as a purely caveat emptor transaction neglects the specific market factors contained in this transaction. In this situation there is an obvious market imbalance, and to neglect these facts and allow the problem to grow in the future is to abrogate our responsibility to our communities. You do not resolve a potential problem by allowing it to fester unimpeded. The consequences for those who are led into taking an easy cash loan without any proper credit assessment of their ability to service that loan, their financial income or obligations, is to take advantage of those who are already disadvantaged. This is the lowest of low doc loans available for those with limited choices.
This is an unfair transaction in an unfair marketplace with an imbalance of market power between the credit buyer and the credit seller. You do not improve a person's financial situation by making them more vulnerable and allowing them to be lured into a debt trap for which they have very few avenues—if any—to escape. Market efficiency and fairness do not improve when we do nothing. Any accusations that this bill is nanny state legislation neglect the facts and circumstances of this particular market transaction. This bill, like many other bills that have passed this Parliament, is aimed at consumer protection, not community paternalism. The Parliament enacts consumer protection laws all the time to protect the broader public interest. There is a broader public interest for consumer protection in prohibiting cash loan machines. I thank the member for Swansea for tabling this bill and commend it to the House.