Small Loans Boss Slams Qld Minister
Apr 21 2017
Friday 21st April 2017
Small Loans Boss
Slams Qld Minister
There is no such thing as a payday loan (i.e. loans under 16 days) - these were banned under the NCCP Act in 2013, instead small amount credit contracts (SACC) are highly regulated small loans by the federal government.
NCPA Chairman Rob Bryant has hit back at comments by Queensland Minister Shannon Fentiman who yesterday said that small loans providers were ‘shonky’. This part of the finance sector is the most regulated of all types of credit.
Mr Bryant acknowledged that some businesses were still operating in the less regulated part of the market and gave highly regulated lenders a bad name.
Mr Bryant and the NCPA welcomed the opening of the new Good Money branch on the Gold Coast as consumers need more options and choices that suit their personal circumstances.
Mr Bryant said that for many Australian households the luxury of mainstream financial choices were not readily available for quickly getting access to funds in an emergency.
According to Good Shepherd more than 3 million Australians are financially excluded from our economy. These people often don’t qualify for a NILS loan, other assistance or simply have an emergency that requires funds they don’t have.
The provision of financial inclusion options for Australians who don’t want or are unable to access debt through credit cards or from other sources, is often their only credit life-line in difficult times.
A small loan on average is now just $770 over 4.4 months and is limited through the caps set by the NCCP act with the maximum interest rate at 4% per month.
When you compare this to a credit card with a debt of $2,000 at average 20 per cent interest with a 2 per cent required minimum payment; this will take you more than 40 years to repay and cost you over $5,000 in interest.
The way banks calculate their interest on credit cards is also shrouded in secrecy but what we do know is this. If you spend $1000 on your credit card for the billing period, and you pay back $800 by the due date, you should only need to pay interest on the $200. That seems reasonable, because that's the amount that's overdue. But often that's not what happens.
What many customers don't know is that, when they don't repay the full amount on time, many banks charge interest on the full $1000, even though the $800 was paid on time.
NCPA Small Loans members provide an important service that mainstream financial lending institutions don’t provide.
Furthermore, the number of contacts made to lenders for new issues pertaining to SACCs from a consumer representative such as Legal Aid, Financial Counsellors Australia, CALC and the Consumer Credit Law Centre is down from 4 in 10,000 in 2015 to 2 in 10,000 in 2016.
The NCPA supports the federal government’s further regulation and reforms in 23 of the 24 proposed recommendations and supports the exisitng legislation in relation to recommendation 1. The NCPA is fully committed to continue to work with ASIC to improve consumer protections.
For further information, please contact NCPA Chairman Rob Bryant on 0407 292 295.