Proposed Reform Will Increase The Cost Of Credit

Nov 22 2016


(A pdf download of the full media release is available at the bottom of this page)


One of the recommendations under the current review of Small Amount Credit Contracts (SACCs) (sometimes incorrectly labelled as ‘payday loans’) will see an increase in the cost of credit for consumers by extending the length of loans. Mandated lower weekly repayments will have the unintended consequence of extending loans over longer periods and costing more in fees.

This goes against one of the fundamental principles in the National Consumer Credit Protection Act, which protects the consumer’s right to payout loans earlier, saving them on the cost of interest and fees.

The proposed recommendation sets a maximum repayment cap of 10% of a borrower’s net income per pay cycle regardless of their capacity to repay more, and is to be applied to all Consumer’s, regardless of income levels from employment or government benefits.

Phil Johns, CEO of the National Credit Providers Association (NCPA), the leading body for Small Loan Providers, says this one-size-fits-all recommendation to repayment caps will not work for consumers or lenders.

The NCPA is concerned that the federal government could make an announcement before the end of the year regarding the legislative review of Small Amount Credit Contracts (SACCs) without a complete understanding of some of the unintended consequences as proposed in the panel review.

 “If some recommendations are implemented as proposed, consumers will pay more for credit without the option to pay off their loan sooner.

“About 64.5%* of consumers who take out a small credit loan are those whose main source of income is employment and don’t need a government legislated limit on how quickly they can pay off their loan,” concluded Mr Johns.

Small amount loans are the most highly regulated form of finance in Australia and represent almost one billion dollars of consumer credit that would otherwise need to be found elsewhere, either   through more credit card debt or less regulated sources to meet market demand.

The NCPA is committed to providing facts and information to consumers, government, media, and the public about small loans. For more information about small loans and the wider industry, please visit  .

*For the first time, new research commissioned by NCPA and completed independently by CoreData has revealed the facts and figures for the small amount lending industry historically known as Pay Day Loans; with nearly two million consumers completing an application for small amount loans between 2014 -2015, the need for this highly regulated small amount financial product remains staggeringly high for everyday Australians.

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Interviews with Phil Johns, CEO of NCPA are welcomed upon request. See contact details on the attached pdf file.