NCPA Responds To Triple J’s Hack

Sep 02 2016


In response to the Triple J - Hack (ABC) feature What’s all the fuss about payday loans?’, Monday 29 August 2016 by Lucy Sweeney, the National Credit Providers Association (NCPA) – the peak industry body representing ASIC licensed small loan credit providers – would like to provide comment to a number of key areas.

First, the small loans industry, which has become incorrectly tarnished by the ‘payday loan’ label in Australia, is an important and viable option that provides consumers with a highly protected alternative to credit from the banks. Furthermore:

  1. Payday Loans – These were made illegal in March 2013. The payday loan taken out by Caitlin in the article was prior to this date. Since this time the government has created a highly regulated product called a Small Amount Credit Contract (SACC) with significant consumer protections in place.
  2. Debt spiral caps – A borrower who does not pay their loan on time, cannot be charged more than the original borrowed amount in fees and charges. A $1,000 loan will never cost more than $1,000 which means total repayments will only ever be $2,000. This is called a ‘debt-spiral cap’ and is an important protection for SACC borrowers; notably it is not available on any other credit product in Australia, including credit cards.
  3. Interest Rates – No interest is chargeable on a Small Amount Credit Contract, only a Commonwealth Government legislated “fee for service”.
  4. The Review – All legislation must be reviewed at set times and the National Consumer Credit Protection (NCCP) Act had a review scheduled for Small Amount Credit Contracts in 2015. The NCPA has been an active respondent to the Government Review - providing information, data and recommendations for the industry.
  5. APR (Annual Percentage Rate) – APRs don’t work for SACCs and it is misleading and confusing for consumers to use this measurement when calculating the cost of a SACC.
  6. New Research on SACCs - In 2015 NCPA undertook the most comprehensive, up-to-date and independent review of the SACC industry in 2015. Key statistics can be found here: 
    1. Of the 2.4 million SACCs reviewed in the CoreData survey, less than 1% of contracts incurred hardship requests from consumers, far less than most bank products, indicating that assessment of consumers is very strict and working well.
  7. Responsible Borrowing – The NCCP Act has now been established for 6 years, yet there is still no obligation in Australia for consumers to borrow responsibly and/or declare their full and current liabilities to a lender – which is why Australia will move to Comprehensive Credit Reporting.
  8. Lenders – With such tight margins, there is no business case for a SACC lender to provide credit to a consumer who is assessed as incapable of repaying the loan.
  9. Good Shepherd Microfinance offers loans to consumers who are UNABLE to access credit under the NCCP Act due to the strict responsible lending obligations imposed by the government. The statistics quoted by Good Shepherd Microfinance don’t relate to SACCs with all the current consumer protections.

NCPA advises that any consumer who has issues with any credit matter, should immediately contact their credit provider, as the law requires credit providers to offer a range of free options to assist them.

NCPA and its members are committed to working with ASIC in an open and transparent manner to continue improving the performance of the industry and ensuring that where there are legitimate complaints, they are addressed quickly and in favour of the consumer.

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A pdf of the above media release is available at the bottom of this page.