Payday lenders provide small amount loans at short notice. However, often the fees and interest charged put borrowers in a worse financial position.
In order to protect vulnerable consumers the National Consumer Credit Protection Act 2009 has placed caps on the amount lenders can charge for small amount loans.
It also requires that these caps will be reviewed in July 2015 to determine the extent they continue to effectively protect consumers.
ASIC’s review follows a series of enforcement actions against payday lenders, including the recent Cash Store decision which saw penalties of almost $19m handed down by the Federal Court for irresponsible lending and unconscionable conduct.
ASIC Media Release 15-056MR
A recently released report by ASIC into the payday lending industry is therefore most timely.
It concludes that;
Payday lenders in Australia have increasingly found ways around these caps by changing the types of products and services they provide.
Payday lenders have developed a strong internet presence where automated processes provide quick access to loan approval.
Repeated and continued use of payday loans results in consumers entering into multiple contracts and in these cases it has been shown that the ability for the consumer to use this credit to improve their standard of living diminishes.
A copy of the report, Payday lenders and the new small amount lending provisions, March 2015 (Report 426) can be accessed by clicking on the link below.
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