Submission: To the Treasury commenting on the proposed Credit Enhancements Bill

The Treasury sought comments on the Bill.

The Bill proposed to amend the Credit Laws as they affects small amount credit contracts (also known as payday loans) and to introduce a national cap of 48% on the amount of fees, charges and interest that can be applied to other consumer credit contracts. 

Our views in summary

It was our position in this submission that a prohibition on charging fees and charges (other than those specified) and on the refinancing of small amount contracts would assist consumers to better understand the cost of the loan and to avoid becoming trapped in a debt spiral through the refinancing of one credit contract to repay another. This is a common problem in the payday loans market. 

We welcomed improved regulation of payday lenders' websites, and we would like to see a similar requirement to inform consumers of their options with regard to small amount credit contracts imposed on TV, radio and print media advertising and many people find out about payday loans through sources other than the internet. 

We also considered the proposed amendment to introduce Australia's first national cap on the annual cost rate as being an important step forward in maintaining and expanding the NSW cap, which has long been an important protection for credit consumers in NSW.