Login
ISCOVER
The Financial Sector Reform Bill 2022 was passed by Parliament today (6 December) to improve national credit laws in regard to payday loans and consumer leases.
The new bill aims to guarantee that payday lenders and consumer lease providers are not able to take more than 10 per cent of a person’s net income for loan repayments along with prohibiting these lenders from charging monthly fees for residual loan terms if the borrower repays early.
In addition, the bill will see the end of predatory marketing and unsolicited communications exhibited by small credit lenders.
Assistant Treasurer and Minister for Financial Services, Stephen Jones MP, stated that this bill delivers on the government’s commitment to “ensure safe and well-regulated consumer markets for credit products” that include consumer leases and small amount credit contracts (payday loans).
The bill will establish a financial services Compensation Scheme of Last Resort (CSLR) to act as a subsidiary of the Australian Financial Complaints Authority (AFCA) designed to provide compensation for consumers who have “received a relevant determination in their favour” by the AFCA.
“These measures give effect to the government’s response to the 2016 review of small amount credit contract laws which identified a number of predatory lending practices that lead to some consumers experiencing financial hardship,” Mr Jones stated.
The reform bill has been welcomed by NAB, which recently conducted research that revealed one in 10 Australians facing financial hardship have accessed a payday loan in Q3 this year.
According to the research, these loans were the third most common type of debt used to manage financial hardship.
NAB head of customer vulnerability, Mike Chambers, said this reform is an “important step in protecting Australians from predatory lenders”.
“It is often in desperate times that people access payday loans as a ‘quick-fix’ to make ends meet, without knowing the hidden costs involved,” Mr Chambers said.
To continue reading the rest of this article, please log in.
Looking for more benefits? Become a Premium Member.
Create free account to get unlimited news articles and more!
Looking for more benefits? Become a Premium Member.
“These debts can often spiral, leading to more long-term debt. It is important regulations are in place to stop this happening.”
Mr Chambers previously recommended organisations such as Good Shepherd (which recently entered a partnership with NAB) for no-interest loan offers for people in need of emergency essentials, cars, or white goods.
The partnership’s purpose was to help low-income earners purchase basics such as home appliances, help with medical bills, and assist with buying cars or computers, with customers only needing to pay back the loan in small, regular payments.
[RELATED: NAB issues warning for ‘quick fix’ payday lending]
JOIN THE DISCUSSION