Assistant Treasurer Arthur Sinodinos released for consultation this week draft regulations to increase consumer protection for Australians who take out ‘payday’ loans.
Often for small amounts which are supposed to be paid back within a short period of time, such loans can be high risk -with vulnerable people and those on low-incomes often the victims of excessive penalty fees.
“People often borrow money from payday lenders in order to meet short-term commitments but excessive charges can worsen the financial position of the consumer in the long-term,” said Senator Sinodinos.
“The draft regulations are designed to prevent lenders avoiding the cap on costs of payday loans, protecting consumers from excessive fees and promoting a level market.”
From last July there has been a cap on costs for small-amount credit contracts – loans of less than $2,000 – with a maximum term of 12 months, but some lenders have tried to circumvent the cap, and found ways of avoiding licensing and responsible lending requirements.
The draft regulations will clarify the law in an effort to prevent loan companies from avoiding their legal responsibilities.
The new rules will also make clear the boundaries between small-amount and medium-amount credit contracts and ensure that the small-amount lending cap is consistently applied.
