The Government is consulting on draft legislation and explanatory materials to enhance consumer protection for Australians that may have need to borrow small amount 'payday' loans.
From 1 July 2013 there has been a cap on costs for small amount credit contracts, which are loans of less than $2,000 cash in hand to the consumer, with a maximum term of 12 months.
Some lenders have been attempting to circumvent the cap on what can be charged on these loans, as well as the licensing and responsible lending requirements. The draft regulations clarify the law to prevent providers from being able to circumvent the cap on costs and responsible lending obligations.
The draft regulations also clarify the boundaries between the small amount and medium amount credit contracts. Industry is uncertain that the wording of the law gives effect to this, and the amendment will ensure that the small amount lending cap is consistently applied.
The Government is inviting submissions from all interested individuals and organisations.