Australia’s largest short-term lender has launched a nation-wide campaign to have changes proposed under a major overhaul of the National Consumer Credit Protection Act scrapped.
Australia’s largest short-term lender has launched a nation-wide campaign to have changes proposed under a major overhaul of the National Consumer Credit Protection Act scrapped.
Next month, the federal government is expected to review 24 proposed amendments to the Act following a report from the Economics Legislation Committee.
While supportive of the majority of the committee’s recommendations, a proposed change to the Small Amount Credit Contracts rules has raised concerns among those in the short-term lender industry, which has warned that it had the potential to financially cripple borrowers.
Under the current regulations, short-term lenders are required to hold an Australian Credit Licence, are regulated by the Australian Securities and Investments Commission and must meet responsible lending obligations.
Short-term loans of up to $2,000 can be taken out by consumers for a period of 16 days to one year, with fees and charges capped by the National Credit Act.
A key change proposed for the regulations relates to the protected earnings amount cap, the portion of a consumer’s income that can be put towards loan repayments, and would result in a 20 per cent net income cap imposed on Australian workers, regardless of how much they earn.
Under current regulations, there is no repayment cap for employed borrowers.
But for those receiving Centrelink benefits, that cap would drop from 20 per cent of their income to just 10 per cent.
Cash Converters has argued that the recommended amendment would make loans less accessible, more expensive, and take longer to pay: increasing pressure on consumers with limited options.
It is estimated that about 3 million Australians are ineligible for a credit card, a personal loan, a car loan or a mortgage and rely on short-term loans to manage their finances.
In response, the company has launched the 'My Credit. My Choice.' campaign in the hopes the federal government will reconsider implementing the recommendation.
Cash Converters chief executive officer Sam Budiselik said the proposed changes removed choice for Australians and could push people out of a government-regulated credit sector and towards operators that offered no mandated consumer protections.
“The short-term lending industry is incredibly tightly regulated, plays a vital role in the market and has significant protections for consumers already built in,” he said.
“As a licensed short-term lender, we are required to abide by the same responsible lending obligations when issuing a $500 loan as the major banks do when signing off on a $500,000 mortgage.
“In contrast, the growing number of providers offering ‘buy now, pay later’ or ‘early wage access’ services aren’t governed by these regulations and present a very real risk to consumers in terms of accumulating damaging levels of debt.”
