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moneyIn a recent decision, the Australian Securities and Investment Commission (ASIC) declared that lenders of small amount credit contracts (SACC) or “payday loans” cannot charge consumers additional fees for using third party direct debit agencies.

An interim order made by ASIC in July 2013 stated that lenders of SACCs could charge consumers a fee for payments made through third party direct debit agencies, as long as this is disclosed in the loan contract. This order was designed to be a temporary measure until regulations for payday loans were finalised.

Small amount credit contracts (SACC), sometimes referred to as “Payday Loans”, are short term loans for amounts less than $2000.

In its March 2016 report, an independent review panel established by the government to examine the effectiveness of the laws for payday loans recommended that direct debit fees should be included in the cap on fees for these types of loans.

There are limits on the total amount of fees that consumers can be charged by pay day lenders. The fees include:

a) a monthly fee – 4% of the amount lent;

b) an establishment fee – 20% of the amount lent;

c) Government fees or charges;

d) enforcement expenses;

e) default fees (the lender cannot recover more than 200% of the amount lent).

Based on the recommendations of the review panel, ASIC repealed the July 2013 interim order.

What this means for you

  • If you take out a payday loan after 1 February 2017 the lender will not be able to charge you fees for direct debit transactions
  • Lenders will only be allowed to charge you the fees listed in the National Credit Code
  • However, if you already have a payday loan, or if you take one out prior to 1 February 2017, the lender may still charge a fee for making direct debit payments

http://www.asic.gov.au/about-asic/media-centre/find-a-media-release/2016-releases/16-376mr-consumers-will-no-longer-be-charged-direct-debit-fees-for-payday-loans/

If you have taken out a payday loan and would like to know more information about how this effects you, or if you are having difficulty making repayments, please call our telephone advice line on 08 9221 7066.

 

Image source: http://www.news.com.au/

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