Pay day lending reforms are needed to protect consumers.
This is the opinion of Choice CEO Alan Kirkland, who said recently that he was satisfied with the rate at which the Government has been implementing the recommendations from the Royal Commission report, but that he also noted that, when it comes to pay day lending, Australian consumer action groups are united in calling for reforms.
“The Government’s commitment to implement the recommendations made in the wake of Hayne’s Royal Commission is a promising step forward. However, the Government roadmap still won’t address the harmful practices of the multi-million-dollar payday lending industry, which fell outside the scope of the Royal Commission,” Consumer Action Law Centre CEO Gerard Brody said, earlier this week.
CALC was just one of the organisations invited to the responsible lending hearings that focused on updating responsible lending guidance. Brody called for the guidance to reflect what the law actually says.
Choice and CALC are just two of 17 consumer action groups that have launched the Stop the Debt Trap Alliance.
The Alliance believes the Australian Government must protect consumers by:
Enacting the recommendations from the Small Amount Credit Contracts review, including the proposal to cap repayments on these products to 10% of a consumer’s net income per pay cycle;
Abolishing the exemption from the 48% cost cap that applies to small- and medium-amount loans, as well as consumer leases; and
Committing to more funding for support services such as financial counselling and legal assistance.
The final version of the Review of the Small Amount Credit Contract Laws (SACC) was released to the public in March 2016. Since then, there has been little impetus from the Government to meet the 24 recommendations in the 120-page report.
The recommendations include:
Affordability: Reduce the cap on all SACC payments from 20 per cent of the consumer gross income to 10 per cent.
Maintain a ban on credit contracts with terms less than 15 days.
Direct debit fees should be incorporated in the existing fee cap.
Ban the unsolicited marketing of consumer goods.
A prohibition on using consumer bank statements for anything other than compliance.
Brody’s statement came on the same day Choice released their own findings, which showed that, while debt worries are easing, they remain high at 42 per cent. Most surveyed households were uncomfortable with their income.
It is yet to be seen whether the Stop the Debt Trap will have any impact on legislation.