Public hearings for the banking royal commission may have wrapped up last month, but another important financial inquiry is about to kick off.
As the Age journalist Adele Ferguson has pointed out, consumer groups are calling it the “Off-Broadway royal commission” because it will focus on troubling elements of the financial industry that avoided the royal commission’s glare: payday lending, buy-now-pay-later firms and credit repair agencies.
The first public hearing is on Wednesday in Melbourne.
“If we think the royal commission unearthed appalling practices, then just dig a bit deeper into payday lenders, rent-to-buy providers, debt agreement brokers, credit repair agencies, all of these businesses, there’s some quite shocking practices,” the chief executive of Financial Counselling Australia, Fiona Guthrie, told Guardian Australia.
“There has been widespread irresponsible lending in the industry, in payday lending and rent-to-buy in particular. Just taking advantage of people’s disadvantage.”
Witnesses on Wednesday will include representatives from Cash Converters, Financial Counselling Australia, the National Credit Providers Association, the Consumer Action Law Centre and Maurice Blackburn Lawyers, among others.
Guthrie said she would reiterate her call for an annual $65m boost in federal and state funding to double the number of financial counsellors in Australia from 500 to 1,000 fulltime equivalent roles, to be funded with a levy on the financial services industry.
The Labor senator Jenny McAllister, the shadow assistant minister for families and communities, said legislation to deal with payday lenders was proposed over a year ago but it stalled under this government.
“Payday lenders and other small credit providers often target people who are already in tough financial situations,” she said. “It is unacceptable that that these providers continue to operate without adequate consumer protections.
“Financial counsellors are telling us that they are struggling to meet the needs of those asking for help. It is essential that Australians in financial hardship have access to support to get them back on their feet.
“This Senate inquiry will lift the lid on the behaviour in this part of the market and assess how best to strengthen protections for financially stressed Australians.”
In its submission to the inquiry, Cash Converters said it hoped MPs understood the importance of allowing companies to extend credit to customers who could not obtain finance from major banks.
“We provide a solution that enables access to credit for this otherwise excluded segment,” it submission said. “We facilitate financial inclusion for a significant customer base and we do this in a socially inclusive, responsible and transparent way.”
It accepted it had not been immune to scrutiny and had some “legacy issues”.
“These issues include the enforceable undertaking (EU) closed out with the Australian Securities and Investments Commission in February 2018, and three class actions relating to personal lending prior to the national consumer credit reforms.
“The seriousness of these issues has acted as a catalyst to transform the business with a sustained focus on a culture of continuous improvement in relation to responsible lending, governance, risk and compliance.”