Labor accuses Coalition of stalling its own reforms to crack down on payday loans

Labor has accused the Coalition of failing to back its own plan to crack down on payday lending by opposing a bill designed to protect vulnerable Australians.

On Monday the Coalition-controlled Senate economics legislation committee called for the small amount credit contract bill to be blocked to give the government time to enact “sensible reform” – despite the fact it originated as a government draft bill.

Labor accused the government of stalling reforms that it first promised in November 2016 only to put them on the backburner after a backbench revolt led by Nationals MP George Christensen.

The bill, first released in October 2017 by the Turnbull government, would impose a ceiling on the total payments that can be made under rent-to-buy schemes and restricts the amount rental companies and payday lenders can charge customers to 10% of their income.

Related: More than 30,000 payday loans targeting the financially vulnerable taken out each week

Christensen opposed the bill on the basis it would send small credit lenders to the wall and leave people with low incomes unable to rent appliances. Labor introduced the bill itself in 2019 as a private member’s bill, and again in the Senate in the new term of parliament with a bill co-sponsored by Stirling Griff.

In December, the assistant treasurer Michael Sukkar told Guardian Australia the government would progress reform early in 2020 – but has never introduced its own payday lending bill into parliament.

In a report, tabled on Monday, the committee chaired by Liberal Slade Brockman acknowledged that short-term leases impose costs that “are often significantly more than mainstream credit products”.

It added that it was concerned that “high-cost consumer leases are causing consumers’ financial harm”.

But the committee called on the government to respond to an earlier inquiry and “build upon” the exposure draft before the bill is considered. The majority said the bill should not be passed.

“The committee notes it is important the government strikes the right balance between enhancing consumer protection, while ensuring these financial products and services can continue to fulfil an important role in the economy.”

In a dissenting report Labor senators Alex Gallacher and Jenny McAllister said the delay of reforms had already delivered “more business to payday lenders and consumer lessors at the expense of ordinary Australians”.

“Payday lenders can charge equivalent interest rates of more than 200% per annum, and there is no cap at all on the costs that can be charged by lease providers,” they said.

“Lenders continue to sign people up to loans or leases with unaffordable repayments, which cause people to wind up in a debt spiral.

“Struggling families are left entrenched in debt or poverty.”

The Labor senators said the bill is more urgent than ever after the summer bushfires and during the Covid-19 recession – particularly with the rate of jobkeeper and jobseeker set to be reduced from 28 September.

The pandemic is likely to make “existing and new cohorts of vulnerable people … susceptible to payday loans and consumer leasing in constrained financial circumstances”, they said.

Data compiled by the Consumer Policy Research Centre suggests more than 300,000 young people took out a consumer lease or payday loan in July 2020.

Labor’s shadow assistant treasurer, Stephen Jones, said: “With nearly a million Australians unemployed, and in the deepest recession in almost 100 years, the need for reform is only greater and more urgent.

“It’s clear that Australians can’t bank on the Morrison government to deliver needed reforms to small amount credit contracts and consumer leases.”