Lenders Say Caps Could Put Some Out Of Business

Apr 21 2016

SACC lenders say caps could put some out of business

An article by Shaun Drummond in yesterday's (Date: April 20, 2016 - 5:58PM) Sydney Morning Herald, has highlighted how recommendations in the recently released Report on the Review of SACC loans will have the effect of putting some lenders out of business.

 "A government review of so-called small amount credit contracts (SACC) – which the industry says are wrongly called payday loans because these have been banned since 2013 – has recommended only 10 per cent of borrowers' pay can be used to repay SACC loans and consumer leases.

"That recommendation would be unviable for some lenders," said Phil Johns, the head of industry body National Credit Providers Association".

 The article goes ont o say that, "At present, only borrowers who are on government benefits are subject to a cap on the proportion of their income they can spend on SACC loans. The cap is set at 20 per cent and limited to $2000 during 16 weeks. The review has recommended halving the cap and extending it to all borrowers."

NCPA, CEO, Phil Johns comments that, in his opinion, "The panel makes an incorrect assumption. They say lowering this (the cap on the proportion of income spent on SACC loans) will increase financial inclusion."  

The commercial reality, however, is that if SACC loans cannot be provided at a profit for the lender, then this will have the effect of  increasing financial exclusion and not decreasing it as the Panel has suggested.

 

CLICK HERE to read the full article in the Sydney Morning Herald.