Reforms to help consumers deal with essential debts

The report Payday loans: helping hand or quicksand? identified the following high priority reforms. Each would make it easier for consumers who are in debt on essential goods and services to manage their finances.

(i) Paying vehicle registration through Centrepay

Some roads authorities allow health care and pensioner concession card holders to pay vehicle registration six-monthly, rather than annually. However, even six-monthly instalments are difficult for people living on a low income who generally budget fortnightly. To overcome this, roads authorities should offer Centrepay for their customers who receive Centrelink income.

(ii) Paying rent through Centrepay

Public housing providers and some private landlords receive rental payments through Centrepay. Rental payments paid via Centrepay ensure payments are made and reduce the likelihood of rental arrears being accumulated. There is further opportunity for Centrepay to be available for landlords who have affordable rental properties.

(iii) Improving operation of hardship policies – best practice

There is need to improve the operation of hardship policies so as to align with best practice principles, as well as undertake promotion and awareness raising of consumers’ rights under hardship policies (including prohibitions against utilities disconnection).

(iv) More funding for NILS and other affordable loans

NILS is now offered in over 1500 postcodes nationally, but with further operational funding and capital, there are opportunities to expand it further. NILS can be used to pay for vehicle repairs so that borrowers can maintain a working vehicle which keeps them connected to employment opportunities, community and social needs, etc

Source: These reforms were identified in the Consumer Action report , Payday loans: helping hand or quicksand?, which found that payday lending was mostly used for essential expenses. The most common reasons for taking out payday loans were:

  • car repairs and registration (22 per cent);
  • utility bills (21 per cent);
  • food and other essentials (17 per cent); and
  • rent and mortgage payments (14 per cent).

See Alternatives to Payday loans for information on how a consumer can deal with these debt types without resorting to high cost payday loans.

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