Financial stress levels make small loans even more important!

May 15 2017

MEDIA RELEASE

Monday 15th May 2017

 Financial stress levels make small loans even more important!

With growing levels of mortgage stress, weaker retail sales and rental prices out of reach for many Australians on low and middle incomes according to recent media reports, access to small loans is vital to the three million Australians who are unable to access mainstream finance.

This was the theme of the National Credit Providers Association (NCPA) annual conference in Sydney – why small loans are so important to everyday Australians.

Participants from across Australia attended the conference to hear the latest sector trends including an industry focus on the value of responsible lending and the importance of compliance and ongoing professional training for staff.

The NCPA strongly supports continued improvement through education across the small loans sector. Some key findings presented to the conference by Andrew Inwood of Core Data Research and Gregory Mowle, lecturer and researcher from the University of Canberra included that;

  • there are 2.6m Australians living from pay to pay and half of all Australians cannot withstand a shock of ten thousand dollars or greater
  • banks and mainstream financial lenders do not provide access to finance for more than 3 million Australians
  • there is a significant need to provide quality data to governments and regulators on the small amount loan sector
  • in the 2015/16 financial year, there were 119 new Small Amount Credit Contracts (SACC’s) EDR cases in total or less than 1 case for every 10,000 active SACC
    • there were 619,549 new SACC’s written in 2015/16 which further highlights there are an extremely low percentage of customers who feel the need to make a complaint to the ombudsman
    • 98% of persons (SACC loan recipients) would not qualify for a NILS loan meaning there is no viable credit alternative for consumers that cannot access banks and credit cards
    • many consumers that meet the profile of those the government ideally see as accessing a No Interest Loans Scheme (NILS) are reluctant to do so, as they don’t want to access to charity and 86% say they won’t go to a financial counsellor because they already feel marginalised or excluded from society and to suggest they need charity or counselling exacerbates this marginalisation
    • loan approvals for people on government support continues to decline
    • the current National Consumer Credit Protection Act 2009 and regulations are working as intended by government. Recommended changes (particularly Recommendation 1[1]) will restrict a consumer’s access to credit when needed and will create greater levels of financial exclusion
    • people that access a SACC loan are no less financially literate than any other Australian – using a SACC product is not about financial literacy
    • demand for Medium Amount Credit Contracts (MACC’s) is increasing stronger than any other segment of the financial services market
    • loan approval rates for SACCs is falling (65% of people applying for a loan are rejected)
    • return clientele highlights that those consumers who choose small loans do so because it suits their credit needs
    • contact from consumer complaint representative groups on behalf of consumers has continued to decline dropping to only 2 in 10,000 in the 2015/16 financial year.

NCPA Chairman Rob Bryant reaffirmed the NCPA’s commitment to consumer protection and further improvement to regulation, more regulatory clarity around product offerings and better ways to serve consumers that are not serviced by main stream or charitable financial options.

The NCPA conference also focused on new education initiatives that will better service consumers, the sector, governments and regulators.

For further information, please contact NCPA Chairman Rob Bryant on 0407 292 295.



[1] http://www.treasury.gov.au/~/media/Treasury/Consultations%20and%20Reviews/Consultations/2016/SACC%20Final%20Report/Key%20Documents/PDF/SACC-Final-Report.ashx