Backbenchers accused of helping payday lenders evade scrutiny

The Australian 12:00am March 26, 2018

Michael Roddan

The federal opposition is accusing the so-called “parliamentary friends of payday lenders” group of government backbenchers of working to undermine the financial services royal commission by pushing to exempt the scandal-plagued payday lending sector from the year-long inquiry.

The Australian can reveal the country’s largest payday lender, Cash Converters, has not been included in the royal commission. A spokesman for Cash Converters, which was recently forced to refund $10.8 million to customers and paid a $1.35m fine after an ASIC action, said the company had not been invited to make a submission to Kenneth Hayne’s royal commission and was not expected to give evidence.

However, the first two weeks of royal commission hearings have revealed widespread rorts in the consumer credit sector, including consumers getting bad deals from car dealers, hairdressers and gym managers who have been acting as intermediaries for big bank lenders.

Opposition consumer affairs spokesman Tim Hammond recently introduced into parliament the Turnbull government’s own delayed reforms for companies selling payday loans — known as Small Amount Credit Contracts (SACC) — after the planned legislation fell off the government’s agenda.

“It’s just another example about how those who are most affected by an unregulated sphere in the consumer credit space are being overlooked again,” Mr Hammond told The Australian.

The royal commission has to date narrowed in on the consumer finance sector, with Commonwealth Bank admitting to selling junk credit insurance and ANZ apologising for giving customers loans they couldn’t afford.

“If this is happening in the banking sector — as regulated as it now is — God knows what is happening in the SACC sector, where there is a complete lack of regulatory reform,” Mr Hammond said. Despite previous reports suggesting SACC providers would be included in the royal commission, The Australian can confirm the groups have been exempted from the inquiry, despite the sector continuing to be a concern to the corporate watchdog.

The Treasurer’s office did not respond to multiple requests for comment.

Former small business minister Bruce Billson, who now heads up the Franchise Council of Australia — the lobby group that counts Cash Converters among its numerous members — told The Australian the FCA had not lobbied on behalf of the payday ­lender.

“There’s been no advocacy on their behalf channelled through the FCA,” Mr Billson said. “I understand they’ve been doing stuff with other people.”

The Australian Securities & Investments Commission recently took action against Thorn Group and Radio Rentals, Cash Converters and Nimble. Cash Converters has been planning to wind down its payday lending division since late 2016.

Last month, deputy ASIC chairman Peter Kell said the regulator needed stronger anti-avoidance laws at its disposal to properly tackle the predatory industry, which was skirting a series of previous government reforms.

Both the Greens private member’s bill for a commission of inquiry and National’s Senator Barry O’Sullivan’s proposed inquiry bill included payday lenders in their terms of reference.

However, the Turnbull government’s letters patent for the inquiry focus on lenders with an Australian financial services licence and their intermediaries.

Companies that operate with credit licensees, such as payday lenders, are not included in the royal commission’s definition of “financial services entity”.

The commission on Wednesday released its latest request for information from Treasury, which looked at reforms in the payday lending sector, but said credit licensees “are not within the definition of financial services entities contained in the letters patent”. A spokesman for the commission said the report referenced SACCs because Treasury were asked to give a comprehensive listing of recent reforms in the consumer lending sector.

“The commission will be looking at a range of topics and issues to inform its inquiryand will not be commenting on the specific lines of inquiry,” he said.

Greens Treasury spokesman Senator Peter Whish-Wilson said the government “stuffed up” by not including payday lenders.