QCOSS submission to the Senate inquiry into credit and financial services targeted at Australians at risk of financial hardship

  • A mum and her small child are walking hand in hand on a footpath.

QCOSS made a submission to the Senate Economics References Committee inquiry into credit and financial services targeted at Australians at risk of financial hardship.

QCOSS representatives Carly Hyde and Rose McGrath also appeared at the public hearing of the Senate Economics References Committee on 22 January 2019. You can read the transcript on the Australian Government website.

Terms of reference of the inquiry

The inquiry will address credit and financial services targeted at Australians at risk of financial hardship, with particular reference to:

    1. the impact on individuals, communities, and the broader financial system of the operations of:
      1. payday lenders and consumer lease providers,
      2. unlicensed financial service providers including ‘buy now, pay later’ providers and short term credit providers, and
      3. debt management firms, debt negotiators, credit repair agencies and personal budgeting services;
    2. whether current regulation of these service providers meets community standards and expectations and whether reform is needed to address harm being caused to consumers;
    3. the present capacity and capability of the financial counselling sector to provide financial counselling services to financially stressed and distressed members of the community; and
    4. any other matters.

QCOSS position

People who are experiencing disadvantage are more likely to be financially excluded and are often more vulnerable to predatory lending or insurance practices. This leads to reduced economic and social wellbeing and increases pressure on community services.

QCOSS has been engaged in cost-of-living issues for some time. Our submission has been informed by our work with the social service sector and the stories we hear directly from people with lived experience. Based on this, the key findings we would like to bring to the attention of the Senate Inquiry are:

  • Financial inclusion is essential to contemporary Australian society. People experiencing social vulnerability need access to safe and affordable products that meet their needs.
  • The impacts of financial exclusion are devastating for individuals, families and communities.
  • The cost of financial exclusion is far reaching – people may have less disposable income to spend in local businesses, difficulty managing payments for essential services, they may be forced to prioritise “bad” debt (such as payday lenders, consumer leases) over “good” debt (such as mortgage repayments, personal loans, credit card), and people may experience health issues because of ongoing financial stress.
  • People experiencing vulnerability are a potentially valuable market segment that is largely ignored by the mainstream banking and financial services sector.
  • There is a large gap in the market between products and services such as those offered by Good Shepherd Microfinance and the mainstream banking and finance sector and this gap leaves people vulnerable to unfair practices.

QCOSS recommendations

To support financial inclusion, particularly for vulnerable Queenslanders, QCOSS recommends:

Recommendation 1: Governments and the financial services sector must increase investment in:

  • Place-based programs like Switched On Communities that build financial literacy in communities that are most at risk of being targeted by credit and financial services targeted at Australians at risk of financial hardship.
  • Financial counsellors and financial resilience workers to help people experiencing social vulnerability to make good financial decisions and prevent (or respond to) the adverse consequences on individuals, families, communities, industry and the broader economy that flow from “bad” debt, better manage their finances on an ongoing basis and build financial resilience.
  • Legal support for people experiencing financial hardship to help people to understand and enforce their rights.

Recommendation 2: The Australian Government, as a matter of priority, pass the National Consumer Credit Protection Amendment (Small Amount Credit Contract and Consumer Lease Reforms) Bill 2018.

Recommendation 3: The mainstream banking sector must ensure that vulnerable people have access to safe and affordable financial products and services to close the gap between safe and affordable products such as those provided by Good Shepherd Microfinance and the mainstream banking and financial services sector.

Recommendation 4: The Australian Government must address the broader structural inequities in our economy including by implementing the fundamental right to affordable housing and to raise the Newstart allowance by $75 per week.

More information

Read our submission here.

For more information about the inquiry, visit the inquiry home page.

Read the transcript from the public hearing here.

13 November 2018 | Focus area: , |Cohort: