Joint Consumer Group Submission

Submission to: Treasury
Our organisations have long advocated for BNPL to be regulated as a credit product under the National Consumer Credit Protection Act 2009 (NCCPA), and so we welcome the major step towards achieving this outcome that the Exposure Draft materials (ED Materials) represent. We urge the Government to finalise this legislation as a matter of priority to ensure that the framework is passed this year.

Submission to: Senate Economics Legislation Committee
Joint consumer group submission (led by Consumer Action). The submission strongly supports the passage of Schedule 4 of the Bill which will make consumer credit leases and payday loans safer forms of credit. The key parts of the Bill address the costs of these products which too often trap people in a cycle of debt and cause extensive financial hardship. The Bill would cap the amount of income that a person could spend at 10% of net income for each product (potentially 20% in total). For consumer leases, the Bill would also introduce a monthly cap of 4% on the fees that can be charged. The Bill also includes anti-avoidance provisions.

Joint consumer group submission (led by Choice) about specific components of the Financial Sector Reform Bill. In relation to a compensation scheme of last resort, the submission recommends expanding the scope of the proposed scheme including managed investment schemes, funeral expenses policies and relevant court and tribunal decisions. The compensation cap for the CSLR needs to be the same at that for the Australian Financial Complaints Authority. In relation to the Financial Accountability Regime, the Bill needs to provide for civil penalties, the deferred remuneration obligations need to be strengthened, the scope of the regime should expand to include senior executives and managers and this group should also (as in the UK) be required to treat customers fairly.

Submission to: Senate Economics Legislation Committee
This is a joint submission from the financial counselling sector. The submission includes a number of recent case studies from financial counsellors about the harm clients experience with payday loans and consumer leases. (The financial counselling sector is also part of the joint consumer group submission on this Bill – see other listing).

Submission to: Treasury
Joint submission from the financial counselling sector in response to proposals to move the current licensing exemptions applying to financial counselling agencies from ASIC legislative instruments into the primary law and regulations. The current licensing exemptions exempt financial counselling agencies from having to hold an Australian Financial Services Licence or an Australian Credit Licence, as long as the agency meets certain requirements. We support the policy intent of the proposed rationalisation, but recommend that the wording in the current ASIC instruments is replicated exactly in the new regulations, rather than introducing new terms. The submission also supports the proposal that rural financial counselling agencies are provided with an AFSL exemption.

Submission to: Treasury
Joint consumer group submission (led by Choice) in response to the Quality of Advice Review – Consultation Paper – Proposals for Reform (authored by Michelle Levy). The consumer group submission does not support the key proposals for reform. In particular, we recommend that the requirement for financial advisors to provide advice that is in the best interests of their clients is retained. The safe harbour provisions however could be recast as indicative behaviours of compliance. We also recommend that people the licensing requirements for people providing general advice are retained.

Submission to: Treasury
Joint consumer group submission (led by Financial Rights) into the application of the Consumer Data Right (CDR) to non-bank lenders. Non bank lenders include consumer lease providers, payday lenders, BNPL providers, wage advance companies and others. Extending the CDR to these companies would allow these businesses to circumvent the credit reporting regime and facilitate targeting of high cost finance to people in hardship. We are extremely concerned that the paper does not adequately consider these risks. We recommend a series of reforms including limiting CDR to companies that are part of the comprehensive credit reporting regime and an opt-in consent for jointly held accounts.

Submission to: US Consumer Financial Protection Bureau
Joint submission with Consumer Action, to the United States Consumer Financial Protection Bureau, who like regulators in the United Kingdom, are examining the BNPL industry and the regulatory framework applying to it. BNPL is effectively an Australian invention (via Afterpay) so we are well placed to comment on its impact. The submission makes the point that the Australian Government has so far taken a hands-off approach, relying on industry self-regulation. As a result, a proportion of people are being harmed by the BNPL product. Given that many of the same players operate in both Australia and the US, we recommend that US legislatures introduce adequate safeguards so that BNPL is provided safely.

Submission to: Office of the Australian Information Commissioner
Joint consumer submission (led by Financial Rights Legal Centre) contains numerous recommendations to improve the current code. As currently drafted it is impenetrable and needs to be rewritten in simpler and clearer language. We recommend that it be broken up into principles-based consumer provisions and technical industry-facing provisions. There is so much wrong with the Code, that it is difficult to summarise the over 40 recommendations. They cover statute barred debt, family violence, the code oversight body, better timeframes, free credit reports, improving the corrections process and the perverse situation where shopping around for a credit product adversely affects a credit report.

Submission to: Treasury
This submission from FCA and the State/Territory financial counselling associations supports the removal of digital retail search fees, such as those to access details about a company such as the names of directors. In a digital age, the cost of these searches is extremely low, and the public benefits would outweigh these costs. Financial counsellors are increasingly helping clients who operate small businesses and agencies cannot afford the costs of these searches. Some clients are not sure if they are directors or not and financial counsellors also assist people who have been coerced into becoming a director. If the Government does not decide to make these searches free, we recommend that financial counsellors are exempted from having to pay these costs. There is already a precedent, with journalists for example, having free access.

Submission to: ASIC re Consultation Paper 354
Joint consumer group submission (led by Financial Rights Legal Centre) arguing that ASIC should allow Class Order 14/41 to expire in March 2022. The effect of the class order is that credit providers that agree to vary a contract because a person is experiencing financial hardship do not need to notify the person in writing, as long as the arrangement is for less than 90 days (described as a “simple arrangement”). The submission argues that the continuation of the class order will be confusing because of changes to the credit reporting system that require notification to people about financial hardship reporting as well as changes to industry practice.

Submission to: HM Treasury, UK
Joint submission from the Consumer Action Law Centre and FCA to HM Treasury in the United Kingdom. The purpose is to share our experience of the Australian regulatory environment, where BNPL operates outside the credit laws that apply to other lending products. This is a similar situation to that in the UK. A key difference in Australia is that the industry here has developed a self-regulatory Code of Practice. The submission outlines the deficiencies with the Code and why it is not an substitute for adequate regulation, includes some observations about other aspects of the operation of BNPL in Australia and makes suggestions about the design of proportionate regulation. The submission is informed by the casework experiences of financial counsellors (called debt advisors in the UK) and consumer lawyers who are increasingly seeing clients who are experiencing various forms of harm when using the product.